Financial Economics

Archive for Financial Economics

Notes on Black-Scholes (From 2003)

The eclectic von Pepe asked me to dig these up… I haven’t reviewed them, but 2003 Bob knew this stuff better than 2016 Bob so let’s hope he didn’t screw up. * * * Notes on Black-Scholes Robert P. Murphy July 2003 A friend from the finance world asked me to review the original Black-Scholes […]

Am I Just a Permabear?

In the comments of this post, Gene Callahan doesn’t shirk his duty of constantly assuming I started reading financial economics last Tuesday: But Bob, weren’t you predicting market disaster when the Dow was at 6000? (I was buying at that point, fwiw.) Weren’t you predicting it through the whole rise of the last seven years? […]

Slow Motion Train Wreck

Long-time readers know that I have been warning for years that the U.S. stock market was being driven by Fed policy. Last summer (in 2015) my co-author Carlos Lara and I began a three-part financial/economics seminar on “The Coming Storms” to Paige McKechnie of CCC Corporation in Nashville. We had already done the first one […]

The Connection Between the Stock Market and the Fed

I notice that Roger Farmer has been following this. The below is the chart I put into my article in the September 2015 issue of the Lara-Murphy Report. I was pointing out how the S&P500 had big drops whenever a round of QE ended, and then again in August when (at that point) people were […]

Everyone Relax: Largest Hedge Fund Says No Bubble

A CNBC story tells us that Bridgewater Associates–a hedge fund overseeing $169 billion in assets–recently sent a note to clients arguing that the U.S. economy was not in a bubble. The story summarizes the note’s main points: Factors arguing against a bubble are, according to the authors: Prices have increased quickly, but not as fast as other […]

Yellen and the End of QE3

Although it has been dubbed “surprisingly hawkish” by the financial press, the Fed’s announcement today fulfilled its original plan to wind up QE3 asset purchases this month. Going forward, the Fed will continue to reinvest the principal on its maturing bonds, but it won’t add assets on net to its balance sheet. In my view, […]

Emanuel Derman FTW

Tyler Cowen linked to this symposium in the Guardian on Piketty’s success. Emanuel Derman’s response is awesome; here’s the latter half: [Economists] can’t agree on the efficacy of money printing or austerity. They keep changing their minds every few years about conventional wisdom while at every instant appearing to be certain that they are right. […]

If You’re Not Outraged, You Haven’t Been Reading Scott Sumner’s Blog

This post title is misleading, but I couldn’t think of anything wittier. Scott Sumner calmly discusses reflections from Miles Kimball and says this: In another paper, Kimball spells out the credit policy in more detail. It might involve the government giving each American a credit card with a $2000 credit limit. This is certainly better […]