The “New Normal” is a phrase coined a few years ago by the Pacific Investment Management Company (PIMCO), or at least that’s what they claim. It referred to a lengthy period of slow economic growth that they expected to persist as people recovered from the financial crisis. In view of the very modest economic growth… Read more

In 1873, Karl Marx published the first volume of his magnum opus Das Kapital (“Capital”, in English) which purported to describe the dynamics of a capitalist economy.  Although I have never studied Capital sufficiently closely to do justice to the work, the basic idea was that ownership of the means of production (capital) becomes increasingly… Read more

Yale University boasts one of the most successful endowment funds in the country, and maybe the world.  The Yale fund (“the fund”) has outperformed 99% of like funds for the past two decades.  The manager of the fund, David Swensen, is a superstar in the investment management industry.  I recently perused the 2013 Yale Endowment… Read more

The bankruptcy rate for professional athletes just a few years from retirement is extremely high.  To take one example, 60% of NBA players are reported to become bankrupt within five years of retirement from the league.  This is a league with average compensation $5 million per year.  I am interested in applying my Sustainable Wealth… Read more

I have suggested that people would be better off if they massively increased their savings rates.  The aggregate Personal Savings Rate (PSR) is defined as the difference between disposable (after-tax) income and consumption spending.  It is reported each month by the Department of Commerce and has recently been running around 4%, compared to a 50-year… Read more

Declining underwriting standards for mortgage loans played a major role in the housing boom and bust that culminated in the financial crisis of 2007-2009.  During the housing boom in the years preceding the crisis, housing prices were rising rapidly and nearly all loans, irrespective of underwriting standards, performed well.  In part due to this strong… Read more

Winners of the 2013 Nobel Prize in Economics are three professors – Eugene Fama, Robert Shiller and Lars Peter Hansen – who collectively pushed forward economists’ understanding of asset prices.  Fama invented the efficient market hypothesis (EMH) which says that liquid asset markets like stock markets are efficient in the sense that relevant information is… Read more

The key to sustainable wealth is to tie your level of consumption spending to the product of your total wealth (including financial wealth and human capital, or the present value of future net income) and the after-tax real rate of return.  If you do this, the affluence that you enjoy in your youth, due to… Read more

One of the major components of the 2010 Dodd-Frank financial reform bill (The Dodd-Frank Act) is the Volcker Rule that is designed to prevent banks from engaging in proprietary (or “prop”) trading, or in acquiring or sponsoring a hedge fund or private equity fund.  Prop trading has been defined to be “engaging as a principal… Read more

My favorite economics chart shows income divided by population (this is income per person) on the vertical axis and time on the horizontal axis.  The time line runs from prehistoric times to the modern era (from, say 1000 BC to 2000).  The line in the chart is basically flat at an income per person of… Read more