“Based on current trends China’s economy will overtake America’s in purchasing power terms within the next few years. The US is now no longer the world’s sole economic superpower and indeed its share of world output (on a PPP basis) has slipped below the 20% level which we have seen was a useful sign historically of a single dominant economic superpower. In economic terms we already live in a bi-polar world. Between them the US and China today control over a third of world output (on a PPP basis).”
I’ve learned that changing your mind is one of the most difficult things we do. It is far easier to fool yourself into believing a falsehood than admit a mistake.
I’ve learned that people are terrible at predicting their own emotions. You will be more fearful when the market is crashing and more greedy when it is surging than you think.
I’ve learned that strong political beliefs in either direction limit your ability to make rational decisions more than almost anything else.
I’ve learned that short-term thinking is at the root of most of our problems, whether it’s in business, politics, investing, or work.
I’ve learned that debt can cause more social problems than some drugs, yet drugs are illegal and debt is tax deductible.
I’ve learned that finance is actually very simple, but it’s made to look complicated to justify fees.
I’ve learned that self-interest is the most powerful force in the world. People in unethical, predatory, and nonsense jobs will do mental gymnastics to convince themselves they’re doing the right thing. Those who criticize the behavior of “greedy Wall Street bankers” underestimate their tendency to do the same thing if offered an eight-figure salary.
I’ve learned that people are twice as biased as they think they are, which is precisely why biases are dangerous.
I’ve learned that unsustainable things can last years, even decades, longer than people think.
I’ve learned that journalists’ need to write far exceeds the number of things that need to be written. No writer can say to their boss, “There’s nothing important to write about today,” although it is the truth most days. Read more »
“This paper is based on two and a half years of experience being exposed to Russian management through lecturing, consulting or conversing. The paper does not claim to be scientifically proven; it could be biased; the data source is limited. I have identified twelve characteristics of Russian managerial practices that impact the Russian managerial effectiveness.
1. Russian culture lacks systematization. It starts with the amorphic language structure. There are multiple ways, all legitimate, how to structure a sentence like: “I love you.” You can say it four different ways: I love you, you love I, you I love, love I you and love you I. And they all mean the same. There is no one-way to structure it right. If one watches how Russians drive, it is how they structure the sentence: Anything goes. No rules that are really adhered to. In Adizes language, it is lack of (A) reflected in no discipline.
2. Lack of Discipline: Watch how people drive. How they park. How they handle their garbage. There is no discipline, no rules that get adhered to. As if people do not take rules seriously unless there is a serious repercussion to their deviation from the rule. As a result, managers have to overuse power to get discipline. Serious punishments. Levying penalties. Heavy ones. Mild ones do not work. It seems as if the populations has been so heavily punished that they are immune to mild punishments. (The more power is used, even more has to be used to get the same results; on the margin, power has a declining effectiveness.) Read more »
Nobel Prize-winning economist Robert Shiller made a name for himself when he predicted the dotcom bubble using his now-famous CAPE ratio. CAPE is short for cyclically-adjusted price-earnings ratio. It’s calculated by taking the S&P 500 and dividing it by the average of ten years worth of earnings. If the ratio is above the long-term average of around 16, the stock market is considered expensive. Shiller has argued that the CAPE is remarkably good at predicting returns over the period of several years.
As the stock market has drifted to all-time highs, prices have outpaced earnings growth and the CAPE his risen to a notable 24 times. Some folks warn that that this means the odds of a crash have risen significantly. Check it out:
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An obsession with growth has eclipsed our concern for sustainability, justice and human dignity. But people are not disposable – the value of life lies outside economic development. Limitless growth is the fantasy of economists, businesses and politicians. It is seen as a measure of progress. As a result, gross domestic product (GDP), which is supposed to measure the wealth of nations, has emerged as both the most powerful number and dominant concept in our times. However, economic growth hides the poverty it creates through the destruction of nature, which in turn leads to communities lacking the capacity to provide for themselves.
The concept of growth was put forward as a measure to mobilise resources during the second world war. GDP is based on creating an artificial and fictitious boundary, assuming that if you produce what you consume, you do not produce. In effect , “growth” measures the conversion of nature into cash, and commons into commodities.
Thus nature’s amazing cycles of renewal of water and nutrients are defined into nonproduction. The peasants of the world,who provide 72% of the food, do not produce; women who farm or do most of the housework do not fit this paradigm of growth either. A living forest does not contribute to growth, but when trees are cut down and sold as timber, we have growth. Healthy societies and communities do not contribute to growth, but disease creates growth through, for example, the sale of patented medicine.
Water available as a commons shared freely and protected by all provides for all. However, it does not create growth. But when Coca-Cola sets up a plant, mines the water and fills plastic bottles with it, the economy grows. Read more »
The field of Behavioral Finance has helped us gain valuable knowledge into how human behavior can influence investment returns. Myopic loss aversion is one of the most important concepts to understand in order to keep you on a path to investing successfully. Until you understand it, you could end up making poor investment decisions that lead to poor returns. What is Myopic Loss Aversion? The concept of myopic loss aversion was first introduced by Daniel Kahneman and Amos Tversky in 1979. Myopia refers to a narrowing of a view – focusing on the most recent short-term results, even if the investment time horizon is 20-30 years.
Humans have a natural aversion to losing money, property or anything else they find value in. This helps us avoid scams, keeps us from over-spending and helps us save for a rainy day. Myopic loss aversion is different. It happens when we temporarily lose sight of the bigger picture and focus on what is immediately in front of us. For investors, this usually leads to panic selling during steep market declines such as normal, healthy corrections. Read more »
The recent U.S. stock exchange rally set the record in positively closed sessions and set us thinking whether current economic indexes justify the investors’ behavior and, more importantly, what comes next? Let us consider the fundamental market growth and earning fixation factors to conclude what can be expected in the last 4 months of 2012.
Below we will mainly talk about the American market. I will also present our global stock markets movement correlation estimates in breakdown to regional markets. Since the early 90’s correlation tendencies, pointed out by Gerhard, Poon and Khillion in their research works, show that by the end of the 20th century, the correlation between global industries decreases while the correlation between countries grows. Read more »