Gold as Good as it Ever Was
It’s hard for many so-called “elite” economists to think about gold as an asset, probably because they’ve devoted so much of their careers to trying to justify fiat money systems. But N. Gregory Mankiw, a somewhat famous Harvard professor and the author of some very popular economics textbooks, grudgingly acknowledged the logic of holding gold in an investment portfolio. In a New York Times editorial, Mankiw wrote of the benefits of gold as a portfolio counterbalance. An important element of an investment portfolio is diversification, and here is where gold really shines — pun intended — … [Read more...]
After Disrupting Publishing, Internet sets its Sights on Education
The most disruptive force in economics over the last two decades has obviously been the internet. But the revolutions created by the web are not yet complete. After newspapers, correspondence, photography and music have been revolutionized by the net, education looks to be next. The Economist explains the rapidly evolving online market for education. DOTCOM mania was slow in coming to higher education, but now it has the venerable industry firmly in its grip. Since the launch early last year of Udacity and Coursera, two Silicon Valley start-ups offering free education through MOOCs, massive … [Read more...]
American Heart Surgery: 67 Times More Expensive than in India
Health care costs are extreme in America, without cost cutting like Devi Shetty is doing with his chain of hospitals in India, it looks like health care costs in America will remain high. Bloomberg’s Ketaki Gokhale explains. Devi Shetty is obsessed with making heart surgery affordable for millions of Indians. On his office desk are photographs of two of his heroes: Mother Teresa and Mahatma Gandhi. Shetty is not a public health official motivated by charity. He’s a heart surgeon turned businessman who has started a chain of 21 medical centers around India. By trimming costs with such … [Read more...]
Profits Looking Toppy: Will Margins Crumble?
We've been pointing out for some time that after tax corporate profits as a percentage of GDP were much higher than their historical average, and that a mean reversion should be in the works. It does appear as though they're peaked out, as can be seen on our chart below. Justin Lahart says in The Wall Street Journal that, based on analysis by Brett Gallagher, the Fed’s artificially low interest rates are to blame for the run up in profit margins. He says that as rates rise, there could be winners and losers. But an analysis conducted by independent strategist Brett Gallagher shows that … [Read more...]
Summers: Best of the Bad Choices
The top two candidates to replace the money printer in chief (Federal Reserve Chairman Ben Bernanke) next January are former Treasury Secretary Larry Summers and Fed Vice Chair Janet Yellen. Both would of course be low on our list, but all indications in our view are that the less bad and less dovish option is Larry Summers. Some quotes from Summers: “QE in my view is less efficacious for the real economy than most people suppose,” “If we have slow growth, we are not going to keep thinking that 5.5 per cent unemployment is normal. We are going to decide rightly or wrongly that the … [Read more...]
Pros vs. Joes Investing
Are you a bearish pro or a bullish Joe? Last week we showed you a chart from BlackRock displaying just how poorly the average (Joe) investor's performance is. This week, as though to confirm that sad discovery, Bank of America Merrill Lynch has put out a chart showing that the bullish activity in stocks is being driven by average Joes. Meanwhile, the pros are heading for the exits in rapid fashion. Chart via Zero Hedge … [Read more...]
Regulation Doesn’t Prevent Bubbles
For years Federal Reserve Chairman Ben Bernanke has been telling Americans that regulation can stem the growth of bubbles in an economy. China’s real-estate sector looks to be disproving that theory in real time. Just one more item on the long list of those about which Dr. Bernanke is wrong. China's real-estate sector showed strength in the first half of the year amid solid housing demand, despite government controls on the market and slowing economic growth. While the buoyancy in the housing market could lead to tighter market curbs in the months ahead, analysts said that for now, growth … [Read more...]
Average Investors Prone to Bad Decisions
Current market volatility is creating a moment ripe for bad decision making on the part of the average investor. An interesting chart (below) published by BlackRock at the end of 2012, but no less pertinent today, shows that the average investor didn't even keep up with inflation from 1992-2011. Rash decision making is likely at fault. … [Read more...]
Bhidé and Phelps: Benefits of QE Doubtful
Economists Amar Bhidé and Edmund Phelps excoriate the Fed for its handling of the recovery in a recent Wall Street Journal editorial. Bhidé and Phelps say that neither of the Fed's intended goals of boosting wealth or confidence have likely been achieved. [I]n late 2008 the Fed began its policy of "quantitative easing"—repeated purchases of billions in Treasury debt—aimed at speeding recovery. "QE2" followed in late 2010 and "QE3" in autumn 2012. Fed Chairman Ben Bernanke said in November 2010 that this unprecedented program of sustained monetary easing would lead to "higher stock prices" … [Read more...]
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