If it sounds too good to be true….

If it sounds too good to be true, ….  Big takedown of the Private Equity industry by former PE manager  Jeff Hooke (now of JHU-Carey).  His new The Myth of Private Equity  (Columbia Business School Publishing, 2021) highlights the sky-high costs, poor returns, & very low visibility. And yet, the industry persists… Hooke’s expose is a latter day “Where are the Customers’ Yachts?” The New Books Network interview.

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Seeing the right Navalny.

Everyone has heard of Alexei Navalny, the leader of Russia’s opposition to Putin’s rule. But what do we really know of him? Navalny: Putin’s Nemesis, Russia’s Future? (Oxford, 2021) provides the first detailed political biography of Navalny.  Most importantly, Ben Noble, Morvan Lallouet, and Jan Matti Dollbaum turn the one-dimensional, cartoon-like image of Navalny in the West into a nuanced portrait, properly situated in the context of modern Russian politics.  The New Books Network interview is here.  

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Episode 19: Kristy Ironside, “The Full Value Ruble” & current debates on currency, inflation, & monetary policy.

Thinking about the dollar, crypto, fiat currency, MMT? Get some perspective on the purpose of currency, managing money supply, inflation, wage pressures and all the currently popular financial issues……from a review of how Soviet bureaucrats grappled with similar challenges in the 1950s. Yes, Soviet bureaucrats. Seem remote? Of course, on one obvious level it is. On many other levels, however, the challenges were quite similar. Professor Kristy Ironside from McGill University joins me on the show to discuss her just published Full Value Ruble: The Promise of Prosperity in the Postwar Soviet Union (Harvard University Press, 2021).

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How big is your platform? or “What color is your parachute?” 50 years later.

I recently got this very positive email mail through a professional social media platform: “:) .. your web site is treasure of great insights – I’m in my year two of my MBA journey and more and more I found myself checking historical and geopolitical “whereabouts” when reading the cases the profs. thrown on us .. I think it’s a/THE key  to fully understand what is happening “behind the scenes” of all/most they want us to do (evaluate equities or M&A deals, making recommendations, etc. etc. ) unfortunately it’s mostly omitted…” I was touched. The thing is, nobody goes to …

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Episode 18: Big user of index funds/ETFs? Better look under the hood.

The brilliant Adriana Robertson, professor of law and finance at the University of Toronto, joins me to discuss what’s really going on behind the scenes at “passive” ETFs and index funds. You might be surprised to learn that they are nowhere near as passive as you think.  Investing is about making decisions under conditions of uncertainty. Modern finance, including the mountain of marketing and academic literature behind index products, seems to offer a way around that fundamental human challenge. Not so. Hear why.

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It’s time to retire “Left” and “Right”.

George Orwell’s famous 1946 essay, “Politics and the English Language,” lamented how ideologues were wreaking havoc not only on their societies, but also on the language of politics itself.  He condemned the “staleness of imagery” and the “lack of precision” in the political writing of his day.  During the past 75 years, little has changed. The labels and personalities may be different, but the abuse on and by words is much the same. We can all agree that the United States has become politically polarized, especially so in the past half-dozen years. In better times, Yeat’s middle translated into a …

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NBN Interview with Jon Lukomnik on his Moving Beyond Modern Portfolio Theory

Jon Lukomnik thinks outside the box, specifically the Modern Portfolio Theory box. Rather than trying to pick up a few basis points here or there by operating within a flawed system, Lukomnik argues in favor of looking for factors which affect overall systemic risk and reward.  That is, he looks at what factors will influence the health and levels of the overall capital markets. This is an important work for all market participants. Listen to the NBN interview here.

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Episode 15: The Descent of Growth (with apologies to Charles Darwin)

Where did all the dividends go? In this episode, I explain how dividend-free growth investing became the norm in the US stock market. For dividend-focused investors, how we got to this state of affairs should be of some interest. And they make take some comfort in the realization that cashless investment is to a great extent a historical, and I would argue, a logical anomaly. For growth investors content with the current situation, knowing whence they came serves at least some utility, even if I do not believe that those conditions will persist.

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Episode #14: Jeff Brown the Grocer joins me to discuss how to operate in a very tough business.

Treat your investments like holdings in actual businesses is a common invocation on this podcast. To that end, today I talk to an entrepreneur on the front lines of business ownership. My high school classmate, Jeff Brown, is the owner of 12 grocery stores in Philadelphia. How does he survive in a brutally competitive low-margin environment? How did he respond to the additional challenges of Covid? How does he make being in food deserts work?   It turns out there is an answer, and it’s not on the University of Chicago MBA curriculum: community involvement. Listen to the very end. There …

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Episode #13: Zachary Karabell joins me to discuss “Inside Money.”

In his new book Inside Money: Brown Brothers Harriman and the American Way of Power, the prolific Zachary Karabell uses the history of Brown Brothers Harriman to follow the arc of American political economy, from the muscular capitalism of the early generations of the Brown family in the 19th century, to their maturation as genteel private bankers in the 20th century, to the sense of service of the BBH partners when they were regularly called to Washington from the 1930s through the 1960s. It is a (mostly) positive tale about American history, American finance, American economic growth and innovation.  That makes it …

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NBN Interview with Timothy Frye on his Weak Strongman

Vladimir Putin is not the unconstrained, all-powerful boogeyman he is made out to be in the popular Western media. So says Timothy Frye, Professor of Political Science at Columbia University in his new book, Weak Strongman: The Limits of Power in Putin’s Russia (Princeton UP, 2021). Drawing on more than three decades of research, and reams of data from within Russia itself, Frye depicts a “personal autocrat”, but one subject to numerous constraints and trade offs. And the shows of force we have seen in recent years, from his treatment of opposition figures to the planning for the upcoming election, …

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Equity duration: now is the “time.”

As a cashflow-oriented investor, I’ve been focused on equity duration for a while. Now others are beginning to catch on as well. Zero-Hedge may not be your cup of political tea, but it does have serious investing content, in this case a piece from data shop called VariantPerception. Their brief piece on equity duration can be seen here.  My case for using equity duration begins at the 22 minute mark of the Keep Calm and Carry On episode that dropped yesterday.

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Episode #12: Rising rates and the dividend investor. Fear not.

After four decades of declining interest rates, and widespread meddling in the risk-signaling mechanism of the US 10-Year Treasury Note, stock investors are justifiably confused by the prospect of rising rates. What’s it mean, particularly for income-oriented stock investors? In this episode, I try to clear the air and simplify the confusing narrative about rising rates and dividend-paying stocks.

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The power of narrative economics….

A recent New Yorker article by Charles Duhigg ties together nicely several threads of emerging finance that are worthy of notice. The first is the power of narrative economics (and finance) championed by Robert Shiller. My review of his 2019 book by that name appeared on the New Books Network. Shiller’s argument stands in stark contrast to the orthodox model of classical economics. The second is that investment bubbles of the type we are now seeing with SPACs can and have in the past left behind substantial technological and financial innovation after the bubble has burst and much money lost. …

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NBN Interview with William Nordhaus

Can classical economics help figure out climate change and support policies that slow global warming?  Yale Sterling Professor of Economics William Nordhaus thinks so. In his new book, The Spirit of Green: The Economics of Collisions and Contagions in a Crowded World (Princeton UP, 2021), Nordhaus tackles the “externality” that is pollution and carbon emissions. By making several adjustments to how we treat this externality in economic terms, it can be brought back into the “system” whereby sensible regulation, market relations, and innovation can lead to markedly lower levels of pollution and greenhouse gas emissions. The most important of those adjustments is getting the price of …

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NBN Interview with Louis Nelson

Louis Nelson’s Mosaic: War, Monument, Mystery weaves together a personal memoir, a history of the Korean War and its aftermath, and the tale of how the Korean War Veterans Memorial in Washington DC came to be. The result is a fascinating portrait of one of the late 20th century’s most important designers. Listen to the New Books Network interview here.

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Equity duration, revisited for an even lower market yield.

Updating a post from late 2018 on equity duration. The yield of the market is now down to around 1.5% and inflation expectations are much higher than they were at that time. Hence it is worth revisiting the math of valuing cashflows in a rising rate environment, or at least one in which rates are not relentlessly declining. Updated table below.  The conclusion has not changed. If you have a choice of distributable cashflow options, get paid up front. Those distant cashflows take a real beating in any reasonable discounting exercise.  In that regard the S&P 500 Index is an …

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A thoughtful and optimistic rebuttal to my post on Russian political culture.

A friend responded to my post of April 22….. “One thing I was concerned about with your essay is that some readers might walk away with the impression that Russia hasn’t really changed and won’t change.  I’m not even sure that’s what you intended to say.  There are clearly many Russians who would like things to change—and a number who are quite content with how they are.  There is also a certain type of non-Russian client I’ve had before who like to take they view that Russia is fundamentally different and incapable of being more liberal—and then use this as …

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Using the great 19th century realist novels to bridge what divides us….

Two very thoughtful oddfellows–a labor economist and a Russian literature scholar–take on the world’s problems in their newest collaboration, Minds Wide Shut How the New Fundamentalisms Divide Us (Princeton University Press, 2021). Gary Saul Morson and Morton Schapiro bring to bear the remarkably powerful tool of great 19th century Realist literature (and other parts of the Western canon) to define and counter the all-or-nothing fundamentalisms that have come to divide us in recent years. They touch upon politics, religion and economics, as well as great literature itself, and advocate bridging the divides with assertion and dialogue rather than the crude dismissal of opponents based upon absolute, unyielding …

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Russia & the West, again…..

Making the same mistake repeatedly and expecting a different outcome is a popular definition of insanity.  Can the condition apply to an entire professional group? In the most recent issue of Kritika: Explorations in Russian and Eurasion History, I highlight how many prominent US thinkers about Russia have maintained a naivete in regard to Russia’s ultimate political development for much of the past 70 years. Even during the height of the Cold War, leading members of the US establishment assumed that Russia would ultimately adopt classical liberalism and join the Western community of nations as a fully paid-up member.  It …

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If it looks like a bubble, walks like a bubble, & talks like a bubble, is it a bubble?

History matters, no less so for your retirement account. Are we in a normal investing environment or is something “not quite right”? The asset bubble doctors are in and will see you now.   Join me for a conversation with Will Quinn, co-author along with John Turner, of the new and highly acclaimed, Boom & Bust: A Global History of Financial Bubbles (2020). The NBN podcast can be accessed here.

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Uninvestable, due to government overreach…

I was alarmed yesterday to see a sitting US senator assume that the Fed Chairman would naturally prohibit banks from paying dividends (or buybacks) under the new administration. The Fed Chair wisely deflected the question and the assertion behind it.  For folks unaware of how the stock market works, and specifically bank accounting, let me say that that was a “doozy” moment. Yes, it is true that the vast majority of quantitative easing and Federal Reserve activity over the past 13 years (since the GFC) has gone into the financial markets rather than the real economy. That is not because …

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Episode #9: Fallacy or Philosophy? Finance’s Sixty-year Dividend Debate. (Part 2)

This is a special two-part episode of Keep Calm and Carry On Investing that focuses on the academy’s treatment of dividend investing over the past sixty years.  This first part highlights the dominant negative view; the second part is an overview of that less visible but equally important academic literature that positions dividend investing in the context of reasonable business ownership.  

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