Category Finance
Does inflation mean the earnings yield on stocks is seriously understated relative to bonds?
That's a question, and not a rhetorical one. I can think of a reason why it would be understated. But I lack the practical knowledge of corporate accounting to know if my reasoning is correct in practice, or if there's some offsetting effect I'm ignoring, and if the effect I'm talking about is big enough […]
Does the equity premium still exist? And, if not, so what?
Allegedly, stocks generate, on average, higher real returns than bonds, that is, there is an equity premium. The equity premium can be observed over certain time periods. For example, during the 1950s stocks outperformed bonds by 19 percent. But I've never understood why there should be a large premium on equities.
US AAA: bleg and random thoughts
First the Bleg: since I'm so useless at questions like this, what is Canada's own history of bond ratings? Have Canada's federal bonds been upgraded or downgraded often in the past? What were the circumstances? Did it make much difference to anything? (Or any other countries, other than Canada and the US, for that matter, […]
Can the buck “break the buck”?
Obviously not, in any literal sense. But this might be a metaphor worth exploring. Are central banks like money market mutual funds? What happens to the value of the US Dollar, or the Euro, if the risk of sovereign default causes the value of a central bank's assets to fall below the value of its […]
Why does stuff take so long to happen?
For example, the Eurozone crisis. A couple of decades back, I noticed that things often seemed to happen the way economists thought they would happen, but that they always seemed to take about ten times longer to happen than you would have thought they would. We go from one equilibrium to another equilibrium in a […]
A Longer Term View of U.S. Public Debt
With the August 2nd deadline for raising the United States public debt ceiling looming, it might be useful to take a longer-term view on exactly how bad the US debt situation is at least with respect to the past.
How do we get from here to Armageddon?
This is essentially a rerun of this earlier post, which produced no answers I found convincing. It's provoked by Livio's recent post, which produced comments raising questions similar to one that I've been asking for many months now. The question is: what are the mechanics behind "there's a housing bubble in Vancouver" (it's always Vancouver) […]
Debt and bi-modal demographics
Young people borrow, to finance school, house, car, and kids. Their debt reaches a maximum, somewhere around age 35. Then they start to pay off their debt, and save for retirement, and so reach a maximum stock of savings somewhere around age 65. So, if there were a big bulge in the population at around […]
This is what a balance-sheet recession looks like, and it’s not pretty
I had never heard the expression "balance-sheet recession" before this recent episode, and it's time I got around to a comparison of the household balance sheets of the US and Canada. Of all my "Canada is not the US" posts, this is the one that makes me most grateful.
Foreign ownership and foreign control
Friday's release of Canada's international investment position for 2011Q1 shows that Canada is a net debtor nation, as it has been for its entire history – with the notable exception of a fleeting moment that was subsequently revised away. But we're not net debtors in all asset classes: Canadian direct holding of assets abroad are […]
Worthwhile Canadian Initiative 
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