I enjoyed being a guest on Al Zambone’s HistoricallyThinking podcast. Discussed making the transition from Russian history to investment management, dividend investing, and the main arguments in Getting Back to Business. https://historicallythinking.org/episode-146-the-historically-informed-investment-portfolio-or-the-historian-as-financial-analyst/
German money situation then and now…
Germany one hundred years ago: wheelbarrows full of money to buy bread. Germany now: vaults overflowing with cash due to negative interest rates. https://www.bloomberg.com/news/articles/2020-01-31/german-banks-are-hoarding-so-many-euros-they-need-more-vaults As a refresher, the well-told tale by Adam Fergusson, When Money Dies: https://www.amazon.com/gp/product/1586489941
“Go East, Mr. Douglas….”
Bill Douglas needed money. He always needed money. And now, reeling from a very expensive divorce, and with a new wife, he needed even more money. Douglas had come from a modest upbringing, the son of an itinerant preacher who had ended up in the Pacific northwest. He worked his way through a local college—after getting the first year free on a scholarship—and then crossed the country to New York, where he worked his way through law school. Douglas advanced very quickly in the legal profession, but his expenses regularly outstripped his income. He borrowed. He did one-off writing jobs. …
At the intersection of History and Finance…..
Think that Wall Street has nothing to do with the real economy? You are probably not alone in that regard. But it turns out, you are wrong. As William N. Goetzmann demonstrates in his Money Changes Everything: How Finance Made Civilization Possible (Princeton University Press, 2016), the tools of finance were as important for the rise of civilization as were the soldiers, castles and battles. Were it not for property contracts, agreements over imports and exports of grain, how to manage risk in increasingly complex economic ventures, etc we are still living in small agricultural communities eaking out an existence, …
Not rational, not irrational, but “for itself” behavior.
Tired of the mechanical, narrowly rational human behavior of the Chicago school, but not exactly comforted by the emphasis on irrational activity in behavioral economics? So am I. Richard Robb, professor at Columbia and fund manager, offers a third way. In Willful: How We Choose What We Do (Yale University Press, 2019), Robb develops the notion of “for itself” behavior and decision making that can’t be reduced to the algorithms of calculating machines, or even those that are adjusted for human foibles. Willful is not a comprehensive theory of decision making, but an effort to reinsert some element of humanity into explanations of …
The impact of the Chicago model: NBN Interview with Binya Appelbaum
Think economics is the “dismal science” with abstract formulas that have no impact on life as it is actually lived? Think again. In The Economists’ Hour: False Prophets, Free Markets, and the Fracture of Society (Little Brown, 2019), Binyamin Appelbaum–former correspondent and now an editorial board member of the New York Times–brings to life how academic economists rose “from the basement” of banks and universities in the post-war period to have a direct impact on almost every aspect of our lives. The end of the draft, unemployment levels, inflation, deregulation, air transport, phone service, patent law, monopolies and anti-trust activity, …
NBN “interview”: Robert Shiller’s Narrative Economics
Culture matters. And a key element of culture is storytelling. These maxims can be accepted as given, except in modern economics, where the mechanistic framework of modern macroeconomic analysis allows just for formulas. Concerned about the relationship between unemployment levels and inflation? Here’s the formula: gW = gWT – f(U − U*) + λ·gPex It’s called the Phillips Curve. Your personal experience of unemployment or rising costs, the stories that you tell others or hear from them–about globalization, about jobs being exported, about “disintermediation” through technology, etc–these stories play no role in the economics taught in the classroom, but may have a significant impact on the decisions that …
Interview with another dividend guru…
I very much enjoyed having David Bahnsen, CIO of The Bahnsen Group, on the New Books in Finance podcast. David is a fellow dividend practitioner, and a very sharp guy. Hear the interview here: https://newbooksnetwork.com/david-bahnsen-the-case-for-dividend-growth-investing-in-a-post-crisis-world-post-hill-press-2019/
The Economics in Two Lessons NBN inteview
Trying to follow the key macroeconomic debates that are swirling around DC, CNBC, the WSJ and the NYT? If you are but don’t want to go back to graduate school or re-open your college macroeconomics textbook, John Quiggin has a solution. His Economics in Two Lessons: Why Markets Work So Well, and Why They Can Fail So Badly (Princeton University Press, 2019) achieves several goals. First, it frames the current debates, providing a concise, well-written history of macroeconomics and the key twists and turns in economic policy that have brought us to our current state of (general) disagreement on economic policy. Second, he structures …
Big is Beautiful interview: not what you might expect!
Small is beautiful, right? Isn’t that what we’ve all been taught? From Jeffersonian politics to the hallowed family farm, from craft breweries to tech start ups in the garage. Small business is the engine and the soul and the driver of the American system. That’s the dominant narrative. And according to Robert Atkinson and Michael Lind, it is really wrong. In their new book, Big is Beautiful: Debunking the Myth of Small Business (MIT Press, 2018), the authors review the empirical evidence and conclude that large businesses create more, generate more intellectual capital, pay better, pollute less, are more diverse, and score higher on pretty …
New Books in Finance interview: The machines versus the humans…..
The machines have taken over…. For many operating in investment management, it can certainly seem that way: factor investing, algorithmic investing, dynamic hedging instruments, risk management derivatives driven by changes in market prices, etc. dominate much of the investment narrative. And now and again these supposedly superior investment approaches get blamed for causing big blow ups. If portfolio insurance led to a wave of computer selling in 1987, then the chaos generated by the models in 2008-2009 was incomparably larger. So say the critics. But in Financial Models and Society: Villains or Scapegoats (Elgar, 2018), Ekaterina Svetlova begs to differ. She looks at how …
Two seashells found on the Internet beach…. about Strategic Dividend Investor (2011)
https://app.fortunechina.com/mobile/article/99167.htm https://personalfinance.bondeconomics.com/2014/08/book-review-strategic-dividend-investor.html?m=1 [personalfinance.bondeconomics.com]
The key is private sector debt……
Richard Vague really really cares about private-sector debt. And he thinks you should too. In A Brief History of Doom: Two Hundred Years of Financial Crises(University of Pennsylvania Press, 2019), Vague sees the rise and fall of private sector debt as the key factor explaining the cycle of economic crises experienced by developed and major developing economies over the past two centuries. The early stages of a lending cycle look and feel good. Everyone is happy, the lenders think they are smart, the borrowers feel they have everything under control. Then the lenders and borrowers take it to another level, and then …
New Books in Finance Podcast: Banking on Freedom
Think running an insurance company or a bank is hard? Try doing it as an African-American woman in the Jim Crow South. Shennette Garrett-Scott‘s new book, Banking on Freedom: Black Women in U.S. Finance Before the New Deal (Columbia University Press, 2019) tells the fascinating story of just such an endeavor, first the Independent Order of St. Luke, and then the St. Luke Penny Savings Bank, founded in Richmond in 1903. Along the way, she tells the tale of force-of-nature strong women, particularly Maggie Lena Walker, who wouldn’t take no for an answer as she built up a culture of business and entrepreneurship …
Brief Barron’s Interview on dividend investing.
https://www.barrons.com/articles/dividend-fund-manager-daniel-peris-51557706862
Crime and culture: a review of Heinzen’s The Art of the Bribe (2016)
Complex societies require rules. No rules, no complex societies. It’s that simple. Or is it? In the case of state-oriented societies, like late Tsarist Russia or the Soviet Union, a visible and important subset of those rules concern proper behavior towards and by government officials. The historical concentration of resources and power in the hands of the government created the nearly inevitable risk of people falling short of ideal impartiality or ideological rectitude. Hence the rules, particularly concerning the giving and taking of bribes by government officials. The challenge in Russia has been all the greater because for significant periods …
An argument for higher rates…..
In a recent column, Bloomberg columnist John Authers asked “Wherefore the lack of inflationary pressure? The most coherent explanation stems from the effect low rates have in dampening the capitalist process of creative destruction. Simply put, low rates allow those companies that would normally fail to survive and stay in business. That means that capital is wasted and growth remains far below what it ought to be otherwise.” By day, I manage a portfolio of dividend-paying, dividend-growing companies that are supposed to get killed by raising rates. While that has not happened, I actually want to see long rates rise, …
Risk, Damned Risk, and Alpha, 2.0 (sounds like Lies, Damned Lies, and Statistics)
Over the past few days, Bloomberg columnist John Authers has been hosting an online discussion of Peter Bernstein’s Capital Ideas from 1996. Much of the back and forth has been about using volatility (standard deviation of mostly shareprice-based returns) as the measure of risk in investing. That’s the preferred approach in Modern Portfolio Theory. In recent years, I have made a cottage industry of bashing MPT’s definition of risk. I’ve also likened alpha (the excess or deficit of return after adjustment for risk or specific factor exposure) to Santa Claus: He may or may not exist, but it makes a …
Bloomberg Discussion of Bernstein’s Capital Ideas
(The full version of my contribution to an online discussion organized by John Authers/Bloomberg. An edited version appeared on the Bloomberg website.) When assessing Capital Ideas, it is critical to distinguish between the messenger and the message. Through the Journal of Portfolio Management (starting in 1974), and then in Capital Ideas (1992), Peter Bernstein clearly succeeded in achieving his goal of bringing gown to town, as well as explaining to a broader audience in Capital Ideas what the complex and rather dry Journal of Finance articles actually meant. His enthusiasm and wit and wisdom emerge on almost every page. He …
New Books in Finance podcast…
I’m pleased to announce that I have become the host of the New Books in Finance podcast, now a dedicated channel on the New Books Network. (My previous NBN interviews fell under the more general Economics rubric.) I look forward to interviewing authors on a variety of finance and investment-related topics (and the occasional work on Russian history or aviation!). Please get in touch if you have a book coming out, or if you’d like to join me as a co-host. I am looking for both. Previous interviews can be seen at https://newbooksnetwork.com/category/politics-society/finance/
NewBooksNetwork interview with the author of The Enlightened Capitalists.
The chorus of criticisms about our basic capitalist system grows louder and louder, now from leading capitalists themselves. (https://tinyurl.com/y293eabx) While other leading practitioners defend a market-based system against government-led systems, they too acknowledge that the market approach is leaving too many people behind. (https://tinyurl.com/y3ed32dy) It doesn’t have to be this way. In his new book, James O’Toole, emeritus professor of business ethics at USC, highlights the history and potential of ethical capitalism. In The Enlightened Capitalists: Cautionary Tales of Business Pioneers Who Tried to Do Well by Doing Good (HarperBusiness, 2019), O’Toole tells the tale of two dozen entrepreneurs who resisted …
Capitalism
Capitalism is under attack, in the US, in France, pretty much any where you look. Whether for reasons of income or wealth inequality or the damage being done to the planet, a lot of people are blaming the system. My question is, “Which capitalism?” Is it the stick-figure University of Chicago version reflected in the orthodox finance model and in your MBA program and CFA curriculum? The damage it has done to investors in the stock market is the topic of Getting Back to Business, but it is too much to say it is responsible for all the ills of …
Adam Smith, redux
A decade ago or so ago, one of the jokes making the rounds in Hollywood was that the hottest screenwriter in town was Jane Austen. Now one of her contemporaries—albeit a generation earlier—is crushing it in finance. Adam Smith passed away in 1790, but he is making a big-time come back. And it is not for his undergraduate standard, The Wealth of Nations (published in 1776 and expanded in 1784), but for his earlier and broader The Theory of Moral Sentiments (published in 1759 and revised nearly continuously until he died). Smith considered this his magnum opus, with Wealth of Nations serving as a specific application …
CFA Institute Review
An even-handed review of Getting Back to Business by @MartinFridson from the @CFAInstitute, on their @Enterprising Investor site. Given my take on the state of the profession, I am pleasantly surprised. https://blogs.cfainstitute.org/investor/2019/03/15/book-review-getting-back-to-business/
The source of the problem…..
How did the abstract theories of the great classical economists become specific and rigid policy prescriptions for modern life, including MPT? Here’s how. Listen to David Colander explain how the “Chicago” school changed the rules. https://newbooksnetwork.com/david-colander-and-craig-freedman-where-economics-went-wrong-chicagos-abandonment-of-classical-liberalism-princeton-up-2018/
It works on the way down too.
The notion that the value of an asset would rise with the sustainable increase in distributable cashflows from said asset is not a controversial notion in the business world. It is, however, not the accepted wisdom in the US stock market where the rules have been different for several decades, and where paying a dividend—even a rising one—is derided as giving up on growth. Despite that adverse environment, most US stocks when measured over long periods still observe the basic rules of business. In other words, stocks go up because dividends go up. That’s the recurrent theme in The Strategic …
At the intersection of three lifelong interests: history, Russia, and aviation.
10 полузабытых деревянных аэропортов России, куда еще можно слетать
Share buybacks and the race for dogcatcher, 2020.
Wall Street’s reputation, already quite bad on Main Street, has turned …. esoteric. To the surprise of many, an “inside-baseball” stock market practice, the share buyback, has become an early issue in the 2020 presidential campaign. Go figure. The first salvo was fired in the New York Times by two prominent Democrats, one of whom has run for President before and might again. A high-profile Republican senator, also a former White House contender and probable future one, could not resist temptation and chimed in with his view and proposal. The back and forth has led the financial chattering class to …
Interviewed on Hidden Forces….
Enjoyed discussing the book with Demetri Kofinas of the Hidden Forces podcast. You can listen in at https://www.hiddenforces.io/podcast/show/daniel-peris-financial-theory-history …. Note, the final part of the interview is behind a paywall.
Bankers and Bolsheviks…..
Just had a chance to catch up on the intersection of finance and the Bolshevik Revolution. Yes, there was an intersection, and it is ably documented in Hassan Malik’s new book. Catch the New Books Network interview here: https://tinyurl.com/y9cgscaa