Chart of the Day: Inflation Expectations and S&P 500

From Marcus Nunes we get this figure which helps shed some light on the recent upswing in the stock market. It shows that as inflationary expectations improve so does the stock market.     The easiest way to interpret this relationship is that when inflationary expectations rise, the market is effectively saying it expects higher […]

Has the Fed Learned Its Lesson?

I have been pretty critical of the Fed throughout the crisis. I still don’t think policy is aggressive enough, and the Fed has been behind the developments in the economy due to its propensity to see green shoots that aren’t actually there. But at least it’s leaning in the right direction: Has the Fed Learned […]

The Case for a Managed Float Under Inflation Targeting

The global financial crisis has reminded emerging market economies, if they needed reminding, that capital flows can be highly volatile and that crises need not be home grown. Emerging markets have been affected in a variety of ways, not least by the sharp ups and downs in exchange rates that volatile capital flows engender. These […]

Time to Add the VIX to Your Equity Portfolio?

The interim solving of the debt crisis in Greece has restored calm in the markets, with the CBOE S&P 500 Volatility Index (VIX) settling at 17.3 compared to its long-term average of 20.0. The big question now is whether the VIX will return to the low levels of 1991-1996 and 2004-2006. Sources: CBOE; Plexus Holdings. […]

Why Chinese FDI Remains Marginal in the United States

China needs technology and know-how. America needs jobs and capital. Why don’t demand and supply meet? Before the visit of Chinese Vice President Li Jinping in mid-February, U.S. Council on Foreign Relations released an important memorandum on “Fostering Greater Chinese Investment in the United States.” Authored by David Marchick, managing director at the Carlyle Group, […]

The Impact of Bias: Investors, Economists & Analysts

One of the more difficult things you human investors have to deal with is how your own heuristics, biases and cognitive deficits impact your views. It is how you are wired, a flaw in your wetware, and it consistently trips up your results. I am not referring to the obvious sentiment extremes — greedily buying […]

Executive Compensation: Some Things Never Change

That picture is average total annual compensation for top-five named executive officers at U.S. public companies from 2008 to 2010. (It’s from a blog post by Carol Bowie of MSCI, which used to be called Morgan Stanley Capital International.) Over those two years, total annual compensation increased by 37% for all companies and by 54% […]

Opportunistic Disinflation?

Ryan Avent responding to Brad DeLong’s interpretation of the most recent FOMC statement, comes down easy on the Fed: …a strict reading of the Fed statement suggests that the central bank is planning to keep rates low because the economy is likely to remain weak. In that case, the rate forecast wouldn’t be expected to […]

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