The last 6 months have been a boon for credit cycle investors who avoided significant losses arising from the fall in bond prices. The data has been clear for some time, however, that the market was mispricing bonds. See here and here. The market has now realised its...

A recent Odd Lots discussion with Austan Goolsbee, president of the Federal Reserve Bank of Chicago, raised an important philosophical question about the nature and level of interest rates. As Joe put it, why do we have to put up with mortgage rates at 8% if inflation...

Federal Reserve Chair Jerome Powell throughout 2023 has been hawkish on inflation and the need to increase and maintain higher levels of interest rates. The market reaction during the first half of 2023 was that this would trigger a recession, given the view that...

Markets on the whole do a decent job of synthesizing information at the micro level, but they often get the macro signals wrong as was noted by Paul Samuelson. In his 1998 paper, Samuelson argued that there is no persuasive evidence that macro market inefficiency is...

The late economist Axel Leijonhufvud noted in a 1979 essay that the theory of the interest rate mechanism remains at the centre of the confusion in modern macroeconomics. All the inconclusive quarrels, he argued, largely stem from this source. While financial market...

Investors often fail to distinguish between uncertainty and risk. This is partly because there is an army of strategists advising investors how to manage risk through market narratives. These narratives attempt to explain away the complexity of the world we live in,...