After the market close last Thursday, JP Morgan Chase (JPM) announced that it had incurred a large loss in a “hedge” position.  The loss is rumored to be approximately $2.3 billion.  If it was truly a hedge position then there presumably is a gain on the item being hedged.  I did not see any mention… Read more

The two candidates for president in this fall’s election had very different perspectives on last Friday’s jobs report.  President Obama pointed to the 26th month in a row of private sector job gains and the  cumulative four million job gain over this period.  On the other hand, putative Republican nominee Romney assailed the paltry 115,000… Read more

Some financial innovations are good ideas and make large contributions to economic growth and prosperity.  Others are not so good and can lead to bad outcomes including excessive leverage, financial fragility and even financial crises.  Economists Posner and Weyl1 suggest that it is possible to assess the potential benefits and costs for new financial products… Read more

Student loans now total over $1 trillion and delinquency rates are rising.  Many young people are burdened in their 20’s with tens of thousands of dollars of student debt.  Some commentators have pointed to student loans as the “next subprime.”  What does this mean?  Does it mean that student loan defaults are expected to cause… Read more

Last month the Federal Reserve released minutes from the March 13 FOMC meeting.  These minutes suggest that the members perceived the economy to be improving.  The knee jerk reaction of market observers was to conclude that Fed easing policy was closer to being over than they thought before the release of the minutes.  Treasury yields… Read more

The Fed’s Flow of Funds (FOF) report shows that household sector net worth is approximately $60 trillion.  This wealth in concentrated in households headed by people aged 50 or older.  After all, for most people it takes time to build up wealth in the form of stocks, bonds, real estate and other tangible assets.  The… Read more

A couple weeks ago the Federal Reserve announced results of the latest Comprehensive Capital Analysis and Review (CCAR), aka stress test, for large banks.  The stress scenario included 13% unemployment, a 50% drop in stock prices and a further 20% drop in housing prices.  Basically, the scenario is a severe double dip recession.  In order… Read more

Last week the Federal Reserve released the Flow of Funds (FOF) report for the quarter ended December 31, 2012.  The report showed that household sector net worth increased by $1.2 trillion during the quarter to $58.5 trillion.  The financial crisis and subsequent recession has been marked by an enormous decline in household net worth, due… Read more

One of the more revered rules of thumb in retirement planning is that retirees can be comfortable in spending 4% per year of their accumulated net worth.  While the origin of this rule is not certain, it has been popularized by financial planning expert William Bengen in a series of articles dating back to the… Read more

Economists assume that people attempt to smooth consumption over time.  The data are consistent with this assumption.  If you follow a cohort of people over a number of years, you will observe that their income will fluctuate a lot more than does their consumption.  Income generally rises sharply early in peoples’ careers, peaks out in… Read more