Where would the best invest?

The BBC asks where the "best" finance brains would invest. Quite interesting.

The article does note that last year the recommendation was to go to cash which turned out not to be a such a brilliant move.

I'll stick with index funds and TIPS.

How Buffet values mergers

Warren Buffet is the largest shareholder of Kraft and he's not happy that Kraft is buying the UK chocolate manufacturer, Cadbury. He thinks Kraft is paying too much.

A couple of bloggers have posted his comments and tried to analyze them. As usual with Buffet, he doesn't do rocket science. Well worth a read.

Check the links here, here.

The Economist's take on the Obama bank plan

Here's a nice summary of the President's plan for the banking industry.

The quants...

A new book on how quant traders contributed to the 2007 meltdown. Might be worth a read...

What is a good hedge against inflation?

TIPs are good. But there is the uncertainty about the real rate.

Fama and French discuss the pros and cons.

So how is the first time home buyer's credit working out?

Not that good. As soon as it expired, sales plunged, just as most predicted, all the credit served to do was borrow demand from the future.

Expected inflation

It is possible to estimate expected inflation by looking at the spread between TIPS and T Bonds. Here is a link that presents the data in a pretty clear way.

HT: Craig Newmark

CNBC

I don't watch CNBC, and I don't really understand why any professional money manager would watch it either. This quote sums it up.:

“Isn’t it funny when you walk into a investment firm, and you see all of the financial advisors watching CNBC — that gives me the same feeling of confidence I would have if I walked into the Mayo-clinic or Sloan Kettering and all the medical (staff) were watching General Hospital…”

-Senior portfolio manager, UBS

HT: Felix Salmon's blog

Winners and loosers in banking

New banking regulations are in the mix. Pres Obama has been talking about limiting the activities of banks - in essence going back to the Glass-Steagel days when banks weren't allowed to get into investment banking. As usual the market has reacted predictably - regional bank stocks are doing well and big bank stocks are doing not so well. This graph captures the two beautifully.

Is high inflation around the corner?

Probably not. We talked about the spread between TIPS and Long Government bonds in class this week and in particular how this spread is only about 250 basis points. This spread represents the market's expectation of inflation embedded in bond prices.

Greg Mankiw makes the same point in his article tomorrow (Sunday) in the New York Times. You can read it here.

Bank Tax

In class this week we talked a bit about a bank tax to prevent banks getting too big to fail. Greg Mankiw (a Havard economist) weighs in the on the debate. He agrees with the idea of the tax.

Haiti

If you're thinking of donating to help the Haiti earthquake here is a nice site that evaluates charities...

http://www.charitynavigator.org/

Bernanke: poor regulation was to blame...

Ben Bernanke at the AEA meetings in Atlanta blamed the financial crisis on weak regulatory oversight, and not low interest rates.

I don't know that weak regulations were the root of the problem alone - bad regulations and policies played a big role also.

Low interest rates also certainly helped keep the bubble going.

Mint's best financial graphics of 2009

Mint.com's picks of their best financial graphics for 2009. Some of these are quite good.

Best performing stocks of the decade

Mint.com has nice profiles of the best performing stocks of the decade here. MED, a maker low carb diets returned 9244% apparently over the 2000-2009 period. Of course this is only useful information if you happen to own a time machine...

Should lecture notes be open source?

This article appeared a couple of weeks ago and Greg Mankiw linked to it.

The basic question is whether lecture notes should be available to anyone with an internet connection. Some big players are already well established, notably MIT's open courseware.

My 2 cents - I don't think that I am ready to embrace it quite yet....too many unresolved issues such as intellectual property ownership and whether the materials can be redistributed in a different form and by whom.

The lost decade

A great link showing how, as far as stocks are concerned, we gained pretty much nothing over the past decade. The last graph on PE ratios is worth a look if you don't read the whole article.

Spring semester is almost upon us...

Blogging has been light for the past few weeks because of the holidays. But now that the spring semester is almost here, its time to get back to it.

Right now in Atlanta the American Finance Association is having its annual meeting. I'm not attending this year, but the meetings have gotten a fair amount of media attention because they also include the American Economics Association.

The Wall Street Journal discusses why the meetings are held in early January, frequently in a location that is cold. Turns out, economists are cheap. However, economists do have a sense of humor. Well at least they have a "humor session". HT: Greg Maknkiw

Finally, my colleague, Craig Newmark posts a link in which a journalist asks "why do we still pay attention to economists?" In Craig's usual style he makes short order of the journalist, but I think the best come back comes from a commenter who says "I'm pretty amazed, given the past 30 years or so, that anyone is still paying attention to journalists."