Justin, love your work. As a retired CIO I am amazed at the lack of discussion in the media of a historical blowout in US bond yields. The affordability hoax is in part due to the 30 year treasury (reference for mortgages) going from 4.8 pre-inauguration to 5.2% at the end of July. The US 10 year provides a yield premium of 106 bps over the equivalent Canadas. What really startled me was Vietnam yields are lower than treasuries. Greece trades at 85 bps below the US.
There is nothing Handsome Kevin can do to solve the problem of a President who insists on lower interest rates and a country that cannot finance it's deficits internally.
Two unusual market actions recently. In late May and early June Amazon and Alphabet financed 30 year bonds in the Maple (CAD denominated) market. They were priced at 106 bps over the 30 year Canada. At the time US 30 year treasury bonds were 106 over the equivalent Canadas. Very unusual for Corporates to be priced flat to their sovereign The other was last week's US intervention into currency markets. In 2007/8 one of the harbingers of equity market moves was the Yen:Euro cross. Is something up in the Yen:USD cross?
Having dealt with said committees I fully agree with your points. I always struggled with empowering unqualified individuals to make financial decisions on behalf of fund participants who spent no effort to understand the issues the committee was dealing with.
I dealt with small institutions and rich families for almost 25 years. Was fired by my largest client for selling Nortel in March 25. A very successful real estate family that should have understood the rule of 72. At a PE of 125xs NTL's value would double in 96 years based on compounding earnings without internal growth. It's been around 26 years since I did the calculations but if you applied NTL's smoothed growth rate of around 10% and the multiple declined to a close to market multiple I think the doubling was around 36 years. Unfortunately it didn't survive long enough to test my assumptions. For the tech darling survivors it took from (as I recall) 7 to 13 years for most of them to recover to their March 2000 values. I decided at that time to stop dealing with the clients directly and manufacture investment solutions designed specifically for the demographic that had capital and needed that capital to outlive them. Benchmarks had little relevance in manufacturing those solutions.
In my prior life it was always fun to do the on-boarding. It was discretionary management so we had to establish a level of trust. Usually as the meeting was ending, one of the clients would turn to me (usually the wife) and say: " Whatever you do just don't lose our money."
I was in the institutional retirement plan investment field with several large players (i.e., Fidelity Investments) for decades.
Two observations ---
1. At quarterly reviews for corporate plan(s) [might be both defined benefit and defined contribution plans], administrators blew by the portfolio manager's market analysis, jumping to the growth/loss of the portfolio(s). They were concerned with how they needed to present (or spin) to senior management.
2. At quarterly reviews for union defined benefit plans, the pension administrators carefully went over the economic/market analysis and not only the growth/loss of the portfolio, which led them to the why/when certain trades were made.
This was a great listen and setting! Not with the usual economics journalist--nothing wrong with that by the way--but instead a sit-down with another economist.
I was a lawyer for many years, and I was a stay-at-home-mom for many years. In both roles I helped people--as a lawyer I helped people with divorce and custody problems, criminal law problems and accident/damage problems. As a SAHM, I took care of my children and many other children, I volunteered in My Children's Schools and participated in neighborhood groups whose purpose was the improvement in lives of the children in the neighborhood. I want you to be engaged in helping with the economic issues I'm wrestling with, as I was engaged in helping with legal and child care issues.
Are there are negatives if you decide to give advice? I know of two. There might be more.
First, even your knowledge is limited. For instance, if you give ice cream advice, will you discuss its ingredients? This turns out to be a real-world issue. In the grocery store I go to, in its ice cream section, less than half of the ice cream-looking things are labeled “Ice Cream". The rest don’t say. I assume the “Ice Cream” ones meet certain criteria for ingredients, which the others don’t.
For life insurance advice, are you going to get into the finances of life insurance companies? I don't know, but having life insurance through a company that goes bankrupt is probably not good. Many insurance companies are owned by private equity. Companies might have too much debt, insufficient reserves, offshore liabilities, and risky reinsurance agreements.
Second, you could get punched in the mouth. For example, I was jogging one day in a steady rain. Which I like to do. I met a family, a man, a woman, and two girls, each on a bicycle. They all looked miserable in the rain. Even the bicycles. The man said, “Look, I paid good money to rent these bikes. We’re going to have fun.” I could have said, “Let me explain sunk costs to you. Knowing what sunk costs are will make things better for you.” Or, I could have chickened out, worried I’d get punched or whatever. I chickened out.
I was an ag econ Extension educator with the University of Minnesota and University of Wisconsin following the big farm crash of the early '80s. Our role was to help farmers assess their current status and chart, when possible, two or three potential paths forward. Typically they were: 1. Do nothing and see what happens. 2: Make changes, when possible, to improve profitability. 3. Throw in the towel and protect what equity remained.
We (my colleagues and I) never prescribed a choice. Our job was to present the facts and step back.
I suppose part of that positioning was to cover our butt but most importantly, to me anyway, was that we could never fully grasp the many factors, especially the family and personal fears and motivations, that were at stake.
We helped a lot of farm families find positive outcomes. It was the best work I ever did.
So your prescription idea is a good one IF presented in a context the audience can understand and as an array of choices.
Favorite. Very thoughtful conversation. More like this please. Any chance of you and your better half teaching Principles of Economics? Live Zoom-type class, guest lecturers?, limit the students, if I get an “A” next year is free? 12-14 weeks with real feedback, tests, $1000?
First of all, the best ice cream flavor is jamoca, or maybe jamoca almond fudge. Second, it's really hard to watch with all those ads on YouTube. I much prefer Substack. Third, I am about as good at economics as I am at chess, which I'm attempting to learn on Duolingo but am pathetic at. However, from my flawed perspective, I would say no, economists should not become prescriptive, and I say that for a couple of reasons. First, things change dramatically and abruptly these days due to various factors including a swarm of black swans that has been circling the earth. Second, everyone is different and money is a very emotional issue. What's right for one person is not necessarily right for another one. You can't measure everything by the amount of money a person has and what things cost. Emotional satisfaction, personal needs positive and negative, goals, and attitudes all factor in, and how is the advisor supposed to understand them. Also, people are incredibly stubborn and probably won't listen anyway. So I think you should just keep doing the excellent work you're doing and forget about trying to turn yourselves into something else. But if you like coffee, please do try the jamoca.
First, I checked out Gary Becker's bio. Holy shit, check out the big brain on Gary. Forward thinker...way forward in his time. I see why he matters.
I think we need economists that describe and economists that prescribe...not either/or. Somebody can be good at knowing what data is necessary while another is good at knowing what to do with it.
I can only say how it works for me...when you fully describe the situation to me, and give me the tools I need to work through the process on my own (with a little help from my friends), and then arrive at the "prescribe" level...what I learn along the way tends to stick with me and is more useful to me...than just being told the end game. I guess that's where the toolkit comes in handy. Platypus Economics is a tool I value almost as much as my Shopsmith Mark 5.
Justin, love your work. As a retired CIO I am amazed at the lack of discussion in the media of a historical blowout in US bond yields. The affordability hoax is in part due to the 30 year treasury (reference for mortgages) going from 4.8 pre-inauguration to 5.2% at the end of July. The US 10 year provides a yield premium of 106 bps over the equivalent Canadas. What really startled me was Vietnam yields are lower than treasuries. Greece trades at 85 bps below the US.
There is nothing Handsome Kevin can do to solve the problem of a President who insists on lower interest rates and a country that cannot finance it's deficits internally.
Two unusual market actions recently. In late May and early June Amazon and Alphabet financed 30 year bonds in the Maple (CAD denominated) market. They were priced at 106 bps over the 30 year Canada. At the time US 30 year treasury bonds were 106 over the equivalent Canadas. Very unusual for Corporates to be priced flat to their sovereign The other was last week's US intervention into currency markets. In 2007/8 one of the harbingers of equity market moves was the Yen:Euro cross. Is something up in the Yen:USD cross?
Having dealt with said committees I fully agree with your points. I always struggled with empowering unqualified individuals to make financial decisions on behalf of fund participants who spent no effort to understand the issues the committee was dealing with.
I dealt with small institutions and rich families for almost 25 years. Was fired by my largest client for selling Nortel in March 25. A very successful real estate family that should have understood the rule of 72. At a PE of 125xs NTL's value would double in 96 years based on compounding earnings without internal growth. It's been around 26 years since I did the calculations but if you applied NTL's smoothed growth rate of around 10% and the multiple declined to a close to market multiple I think the doubling was around 36 years. Unfortunately it didn't survive long enough to test my assumptions. For the tech darling survivors it took from (as I recall) 7 to 13 years for most of them to recover to their March 2000 values. I decided at that time to stop dealing with the clients directly and manufacture investment solutions designed specifically for the demographic that had capital and needed that capital to outlive them. Benchmarks had little relevance in manufacturing those solutions.
In my prior life it was always fun to do the on-boarding. It was discretionary management so we had to establish a level of trust. Usually as the meeting was ending, one of the clients would turn to me (usually the wife) and say: " Whatever you do just don't lose our money."
Sandy,
So appreciate your points.
I was in the institutional retirement plan investment field with several large players (i.e., Fidelity Investments) for decades.
Two observations ---
1. At quarterly reviews for corporate plan(s) [might be both defined benefit and defined contribution plans], administrators blew by the portfolio manager's market analysis, jumping to the growth/loss of the portfolio(s). They were concerned with how they needed to present (or spin) to senior management.
2. At quarterly reviews for union defined benefit plans, the pension administrators carefully went over the economic/market analysis and not only the growth/loss of the portfolio, which led them to the why/when certain trades were made.
Just sayin'
C.
This was a great listen and setting! Not with the usual economics journalist--nothing wrong with that by the way--but instead a sit-down with another economist.
I was a lawyer for many years, and I was a stay-at-home-mom for many years. In both roles I helped people--as a lawyer I helped people with divorce and custody problems, criminal law problems and accident/damage problems. As a SAHM, I took care of my children and many other children, I volunteered in My Children's Schools and participated in neighborhood groups whose purpose was the improvement in lives of the children in the neighborhood. I want you to be engaged in helping with the economic issues I'm wrestling with, as I was engaged in helping with legal and child care issues.
We need extra help deciphering the complex economic structure we are living under. It is personal to me.
Are there are negatives if you decide to give advice? I know of two. There might be more.
First, even your knowledge is limited. For instance, if you give ice cream advice, will you discuss its ingredients? This turns out to be a real-world issue. In the grocery store I go to, in its ice cream section, less than half of the ice cream-looking things are labeled “Ice Cream". The rest don’t say. I assume the “Ice Cream” ones meet certain criteria for ingredients, which the others don’t.
For life insurance advice, are you going to get into the finances of life insurance companies? I don't know, but having life insurance through a company that goes bankrupt is probably not good. Many insurance companies are owned by private equity. Companies might have too much debt, insufficient reserves, offshore liabilities, and risky reinsurance agreements.
Second, you could get punched in the mouth. For example, I was jogging one day in a steady rain. Which I like to do. I met a family, a man, a woman, and two girls, each on a bicycle. They all looked miserable in the rain. Even the bicycles. The man said, “Look, I paid good money to rent these bikes. We’re going to have fun.” I could have said, “Let me explain sunk costs to you. Knowing what sunk costs are will make things better for you.” Or, I could have chickened out, worried I’d get punched or whatever. I chickened out.
Love your "Platypus Economics."
--
Brad Evans
"should economists stop simply describing people’s decisions and start prescribing them?"
I was an ag econ Extension educator with the University of Minnesota and University of Wisconsin following the big farm crash of the early '80s. Our role was to help farmers assess their current status and chart, when possible, two or three potential paths forward. Typically they were: 1. Do nothing and see what happens. 2: Make changes, when possible, to improve profitability. 3. Throw in the towel and protect what equity remained.
We (my colleagues and I) never prescribed a choice. Our job was to present the facts and step back.
I suppose part of that positioning was to cover our butt but most importantly, to me anyway, was that we could never fully grasp the many factors, especially the family and personal fears and motivations, that were at stake.
We helped a lot of farm families find positive outcomes. It was the best work I ever did.
So your prescription idea is a good one IF presented in a context the audience can understand and as an array of choices.
Favorite. Very thoughtful conversation. More like this please. Any chance of you and your better half teaching Principles of Economics? Live Zoom-type class, guest lecturers?, limit the students, if I get an “A” next year is free? 12-14 weeks with real feedback, tests, $1000?
First of all, the best ice cream flavor is jamoca, or maybe jamoca almond fudge. Second, it's really hard to watch with all those ads on YouTube. I much prefer Substack. Third, I am about as good at economics as I am at chess, which I'm attempting to learn on Duolingo but am pathetic at. However, from my flawed perspective, I would say no, economists should not become prescriptive, and I say that for a couple of reasons. First, things change dramatically and abruptly these days due to various factors including a swarm of black swans that has been circling the earth. Second, everyone is different and money is a very emotional issue. What's right for one person is not necessarily right for another one. You can't measure everything by the amount of money a person has and what things cost. Emotional satisfaction, personal needs positive and negative, goals, and attitudes all factor in, and how is the advisor supposed to understand them. Also, people are incredibly stubborn and probably won't listen anyway. So I think you should just keep doing the excellent work you're doing and forget about trying to turn yourselves into something else. But if you like coffee, please do try the jamoca.
First, I checked out Gary Becker's bio. Holy shit, check out the big brain on Gary. Forward thinker...way forward in his time. I see why he matters.
I think we need economists that describe and economists that prescribe...not either/or. Somebody can be good at knowing what data is necessary while another is good at knowing what to do with it.
I can only say how it works for me...when you fully describe the situation to me, and give me the tools I need to work through the process on my own (with a little help from my friends), and then arrive at the "prescribe" level...what I learn along the way tends to stick with me and is more useful to me...than just being told the end game. I guess that's where the toolkit comes in handy. Platypus Economics is a tool I value almost as much as my Shopsmith Mark 5.