Historically, stock valuations have been an important predictive factor of future returns. A standard practice is to measure value by comparing stock prices to fundamental measures such as trailing earnings, projected earnings, dividends, and book value. I am increasingly questioning the usefulness of these measures however. While an enormous body of research has shown that … Continue reading Do stock valuations matter anymore?
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Does COVID-19 change the rules of personal finance?
While experts have been warning about the potential for global pandemics for years, the emergence and spread of COVID-19 has been an enormous shock to societal systems. Along with the risk to life and health, many families have have been thrown into economic turmoil. In a world with the potential for social and economic shocks … Continue reading Does COVID-19 change the rules of personal finance?
Building ‘real options’ in financial planning
In finance, the term "real option" refers to having the ability to make an economically-valuable choice (see here for quantitative explanation). There is considerable literature on real options in many areas of finance, but I have yet to see a discussion of how this concept applies to personal finance. I have come to believe that … Continue reading Building ‘real options’ in financial planning
Economic implications of COVID-19
The long-term economic impacts of COVID-19 will be enormous, but most of the discussion that I'm reading focuses on the more immediate priorities. This makes sense because of the urgency of skyrocketing unemployment, overwhelmed hospitals, and the tolls in life and health. Even as we deal with the immediate issues, we should also start to … Continue reading Economic implications of COVID-19
Market-based solutions to social problems
I am in the midst of reading a very interesting book, Winners Take All: The Elite Charade of Changing the World, by Anand Giridharadas. The premise of the book is that market-based solutions to social problems (aka doing well by doing good) have been vastly oversold and are displacing meaningful dialog about the need for … Continue reading Market-based solutions to social problems
Thoughts on the 2020 bear market – March 14
The last couple of weeks have been chaotic in the stock market. Thursday produced a 10% decline in major U.S. indexes, the 5th worst single day drop in history. Friday saw the market gain 9.3%. On Thursday, VIX closed above 75, the highest close in its history. The maximum closing value of VIX in 2008 … Continue reading Thoughts on the 2020 bear market – March 14
Understanding spatial variability in longevity
One of the notable findings from analysis of longevity data is extreme spatial heterogeneity. Looking at variations in life expectancy at small scales is startling (see map below). As the linked article notes, there are two census tracts that are less than ten miles apart in Washington DC yet have average life expectancy differing by … Continue reading Understanding spatial variability in longevity
Trend analysis for the S&P 500 and NASDAQ 100 in February 2020
Trend following in stock and index prices has a long and well-established history. I reviewed some of the background in a past article on this topic. For additional examples see this article. As explained in these pieces, trend following is all about separating the low-frequency persistent part of price variability from the high-frequency part, which … Continue reading Trend analysis for the S&P 500 and NASDAQ 100 in February 2020
The problem with carbon credits
There is little question that humanity must reduce emissions of Carbon Dioxide and other greenhouse gases (GHG's). To meet this need, there is a growing trend for consumers and companies to purchase carbon credits that "offset" the emissions generated by airline travel and other high-emission activities. JetBlue, for example, is pledging that all U.S. flights … Continue reading The problem with carbon credits
Misleading statistics on college debt forgiveness
Bernie Sanders and Elizabeth Warren are promising massive cancellation of student debt. There is around $1.5 Trillion in outstanding educational debt and 1-in-8 Americans are currently paying off educational loans. These loan forgiveness plans are promoted in the name of fairness, broader opportunity for the middle class and working class, and reducing inequality. The costs … Continue reading Misleading statistics on college debt forgiveness
Geoff Considine on Finance and Economics 