Debate: The Great American Savings Myth

Please note that an “articles by category” section has been added to the sidebar so that you can quickly access the blog entries you wish to read. The Ivory Tower category features academic debate on issues related to trading, investing, capital markets, and economics.
Let’s kick it off with Gene Epstein’s May 28, 2007 article in Barron’s called The Great American Savings Myth. Epstein has been Barron’s Economics Editor since 1993, writes a column called Economic Beat, and is the author of ECONOSPINNING: How to Read Between the Lines When the Media Manipulate the Numbers.
The rebuttal comes from Paul L. Kasriel, Senior Vice President & Director of Economic Research, The Northern Trust Company and the recipient of the 2006 Lawrence R. Klein Award for Blue Chip Forecasting Accuracy.
Additional food for thought is provided by Edward C. Prescott, senior monetary adviser at the Federal Reserve Bank of Minneapolis and professor of economics at the W.P. Carey School of Business at Arizona State University. He is a co-recipient of the 2004 Nobel Prize in economics.

Shooting Stars in the ETF Universe?

Yesterday, I provided the components of the model portfolio.
At first glance, you might expect to see more than 12 ETFs, but there are many good reasons to limit the number to only those necessary to fill the slots in the four major asset classes, i.e., achieve diversification. 1. Each ETF already represents a large number of stocks. 2. Management fees for large, generic ETFs are much, much lower than the niche players, sometimes by orders of magnitude. 3. Transaction fees are killer. Commissions drag on returns big time. And of course, there is also the liquidity issue.

Paradigm Shift

In the world of corporate governance (and maybe in life), being good is necessary, but often, it is even more important to appear to be good. Perception is everything, and it pays to know when market participants view a glass as half-full or half-empty and do your best to detect the moment of paradigm shift,

Hindenburg Omen

The market signal, named for a German airship that caught fire and crashed 69 years ago in New Jersey, appeared in April when unusually large numbers of stocks reached both one- year highs and lows as prices climbed. Since then, the Standard & Poor’s 500 has fallen 2.2 percent, including a 1.9 percent loss last

The Sentiment Cycle

You might be wondering why we need to take a detour to discuss The Sentiment Cycle. Surely mechanical trading is designed to do away with emotions, right? Yes, a good trading system helps us stay the course and do the right thing. It prevents us from chasing performance, from loading the boat at the top.

The Bond Crash: Who, Me Worry?

I don’t ever recall a plunge of this magnitude in such a small duration. Any word other than crash does not do it justice. Look at the bar for this month. Now there’s a new definition for confirmation after the harami spike pattern that formed in May and June! The only comparable chart is the