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Advising investors not to believe in active investment strategies

Some of the fees charged by local investment advisors, such as local accountants, seem more than hefty. Particularly when investments are in equities. Often there is a fixed fee of around $300 per month or $3600 per year. There is also often a trailing fee of 1% of the value of the portfolio. Thus […]

Internationally diversifying your share portfolio

The case for diversifying your equity portfolio internationally is obvious given that Australian equities are such a small component on the overall international equity market and given the strong growth potential in many newly emerging markets. One way of doing this – that I have in the past thought was a sound idea is to […]

What will happen to Australian asset prices?

Low interest rates that are unlikely to increase any time soon and property as well as equity markets that are growing strongly, both in Australia and overseas, create the basis for gearing up and taking high levels of risk. People ask me – as an economist – how it will all end. I confidently predict […]

Does high public debt reduce growth?

I feel dislocated from much contemporary macroeconomics because I think much of it is measurement without theory. There are not credible theoretical stories to unambiguously back up many modern macroeconomic claims. Reinhart and Rogoff two of the big name deficit-hawks in macroeconomics got a huge amount of macroeconomic data covering many countries – emerging and […]

Real option and insurance approaches to infrastructure investment with climate risk

I attended the Risk Management and Climate Change think Tank meeting at the Australian Centre for Financial Studies in Melbourne yesterday. As background I prepared the following notes that are intended to provide a non-technical guide to some technical economics.

Abstract: The real options and insurance literatures alter the way planners think about evaluating […]

Investing in infrastructure with the possibility of severe future climate change

Suppose government is thinking of building a desalination plant to deal with future possible severe climate change. Despite the current sound water supply situation over the next 10 years or so this is a reasonable supposition. Suppose further that the expected future discounted benefits of such a project are B(t) and the expected construction and […]

Smart dumb investing

For decades I have been arguing against the worthless fee-based advice of the activist investment industry and argued instead that Aussies without a lot of financial market expertise should, in the main, invest in close to no-load mutual funds such as Argo Investments, Australian Foundation Investment Company and Milton Corporation. Management fees are close to […]

Gloom in the markets

The extraordinary massacre on US equity markets continued Thursday with a 4% decline to levels not seen for 11 years. The Aussi market (above) declined 1.4% today. It is still inaccurate to call the current dip in the US the worst recession since the Great Depression – 1982 was worse – but the adjusted unemployment […]

Bubbling Chinese equities

One of the core truths about every equity market is that eventually prices in it will decline. Indeed, paradoxically, the stronger the apparent basis for the market’s positive growth the more certain it is that the decline will be severe. Why? Investors are a greedy lot and cannot resist the temptation of an apparently easy […]

Stockmarket investing in 2007

When I started my blog one of the things I wanted to do was develop my interest in making money on the stockmarket into something I could post on. I envisaged initially maintaing a hypothetical portfolio online with some racy tips that would stir the interest of thousands of greedy punters in the blogosphere who […]