In a recent essay (“Investment Advice for Ray Kurzweil”), I extolled the benefits of the “1% Ratchet Rule” under which a family would spend each year 1% of the high-water mark of family wealth.  The rationale for this rule is simply that it works for someone who plans to live forever, like Ray, or for… Read more

The Financial Analyst Journal (FAJ) is a terrific publication put out by the CFA Institute.  This group also sponsors the Chartered Financial Analyst (CFA) designation.  In a recent issue (September/October 2016), a panel of leading financial experts (Professors Andrew Lo, Robert Merton, Stephen Ross, and Jeremy Siegal) discuss the future of finance and how it… Read more

Ray Kurzweil is a brilliant inventor and author and is currently Chief Scientist at Google.  He is known for many things, but perhaps most notably for the idea of the “Singularity.”  This is a time in the fairly near future, according to him anyway, when processing power of computers will have developed to the point… Read more

In 1693, as related by economist Moshe Milevsky in his book King William’s Tontine, King William of England (actually a Dutchman and formerly William of Orange) sold to investors an interesting financial product.  Each buyer was a member of a pool of buyers that immediately received a “dividend” on their investment of 10% per year. … Read more

Let’s think about the structure of the perfect retirement investment vehicle.  The perfect vehicle would have annual payouts that exceed what could be achieved by buying bonds or other asset classes.  The perfect vehicle would hedge against so-called “longevity risk” which is the risk of outliving your money.  The perfect vehicle would have annual payments… Read more

William Goetzmann has written a masterful book (Money Changes Everything) on the role of finance in world history.  The basic message is that financial development has played an enormous role in the advancement of civilization.  This is in spite of various financial debacles that have come along periodically.  Goetzmann suggests that there are four major… Read more

Interest rates are historically low and so is the return on savings.  People commonly talk about low interest rates being an inducement to increase spending and reduce saving.  In fact, this is one of the “transmission mechanisms” by which expansionary monetary policy is presumed to stimulate the economy.  In economic theory, consumption spending is modeled… Read more

In his book The End of Alchemy, former Bank of England Chairman Mervyn King has presented a riveting treatise on banking, monetary policy, financial crises and financial regulation.   The title of the book refers to what King calls the “alchemy” of banking, whereby liquid and safe deposits are transformed into illiquid, risky loans and securities. … Read more

Like the Orcas at Sea World, the mortgage market has been coddled by government support for more than half a century.  Having decided Orcas would be better off in the wild, Sea World has announced that it will no longer seek to capture Orcas or to breed them in the park.  However, due to concern… Read more

When talking about the national debt, people tend to use absolute metrics like the size of the outstanding federal debt ($19 trillion total, $14 trillion held by the public) or ratios like the ratio the outstanding debt to GDP.  Instead of trying to fathom the raw numbers, it is a good idea to scale by… Read more