Looking back over the past two years, one word comes to mind: extreme. It’s been a period of extremes in the market and in the economy. Many have benefitted, but we’ve also seen excesses that aren’t necessarily healthy—from the rise in NFTs to the craze in SPACs to the boom in day trading. That’s [...]
The pinball machine
Last week I referred to the stock market as a hall of mirrors. That was perhaps too kind. With its erratic and often illogical movements, the market also has elements of a pinball machine, a rollercoaster, and maybe a clown car. This has always been the case, but it feels especially true this year. [...]
Hall of mirrors
On Wednesday of this week, the Federal Reserve’s policymaking committee concluded its quarterly meeting and made two big announcements. First, the Fed is going to scale back its monthly purchases of Treasury securities. Because these multi-billion-dollar purchases have helped keep interest rates [...]
One step at a time
A few weeks back, I talked about the good-is-better-than-perfect principle. A close corollary is to approach financial decisions incrementally. What do I mean by that? An example is dollar cost averaging, whereby a sum of money is invested in regular increments rather than all at once. Does [...]
Intersections
Back in the 1950s, economists Franco Modigliani and Merton Miller developed a theory that, even today, is taught in virtually every finance class. To understand this theory, suppose you’re running a company and want to build a new factory. To raise money for this project, you generally have two [...]
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