Almost Classical

When Genius Failed (Photo credit: Wikipedia ) No, Wall Street isn't Las Vegas. Investing is not gambling. Notice I use the word investing, not speculating. NOTE: I am not an investment adviser or broker and this blog post is meant only as an overview of basic investment research and theory within the academic discipline of economics. If you want investment advice, talk to a financial professional and your retirement planning specialist.  In 1973, Burton Malkiel published the seminal work on efficient market theory , A Random Walk down Wall Street . If you had invested $100,000 that year in a broad, large-cap index fund and held it for the next 30 to 40 years, you would have earned better returns than if you had invested with more than 85 percent of active fund managers. Not by just a little bit, either. According to Charles Wheelan's Naked Economics , you could have outpaced the "stock pickers" by $140,000 with a simple S&P 500 index fund. In a ...

On April 18, 2014, the city of Providence, R.I. , added to the growing list of lawsuits against exchanges, brokers, and HFT specialists. This demonstrates the power of narrative. The Lewis book,  Flash Boys: A Wall Street Revolt , contains nothing new, no breaking story or previously unpublished information. But, Lewis' ability to tell a story and tell it well compels politicians to respond. Remember, state attorneys general run for office; public officials remain politicians, not mere lawyers. As the media and voting public demand action, the financial industry faces growing pressures. This happened with tech stocks (how VC were taxed), the home lending industry, and now HFT. Laws pass on emotion, seldom offering good solutions to perceived problems. The lawsuits relating to HFT will culminate in regulatory changes, if not outright wins in court. http://www.reuters.com/article/2014/04/18/highspeed-classaction-idUSL2N0NA0XC20140418 (Reuters) - Dozens of the largest U.S. stoc...

I agree with this analysis, which was featured on CNBC. The stock market is in a bubble. Witness the differences between Apple and Amazon: Apple beats projections and the stock falls, Amazon misses earnings targets and by some strange logic of "improving margins" rises. We are witnessing institutional investors moving from bonds globally into equities (stocks). The casual investor ("retail investor") is also moving back into the market. Sounds a lot like 1999 and 2007. In the period from 1999 to 2003 or so, the Fed lowered rates and created liquidity. That masked some underlying issues -- not the least of which is governmental debts at the local, state, and federal level. Investors seek returns, and money in a low-interest economy moves to either bond price gaming or equities. Stocks and commodities rise as the dollar falls: inflationary, in Austrian/Chicago terms, not the same as consumer inflation (a point I've made several times, since Paul Krugman and othe...