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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No, Virginia, a dividend and a harvested capital gain are not the same……..

12pm Feb 21, 2021 update: Got some thoughtful pushback from KPA on the assertion that selling shares can still be viewed as a business-owner action and contingent variable in the overall assertion. My answers: 1. Investors have the option of taking cash or reinvesting the dividend. There is a very modest cost to doing the latter, but there is a cost, so it drives academics nuts. You could say that the business owner who does not need the cash now is forced to take it and/or incur the minor hassle of dividend reinvest. 2. Clientele effects. People who want dividends …

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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. The attachment is a PDF of the revised narrative.  

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