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. And posts from May 12, 2021, November 29, 2018, and November 1, 2018.

Continue Reading

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.

Continue Reading

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. …

Continue Reading

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 …

Continue Reading

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.

Continue Reading

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 …

Continue Reading

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 …

Continue Reading