Corporate Finance

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Weekend Reads for Investors: Montier, Musk, and Mauboussin

Weekend Reads for Investors: Montier, Musk, and Mauboussin

Central bankers in the US have long fixated on the equilibrium real interest rate (ERIR) as their lodestar, an obsession that GMO’s James Montier, in The Idolatry of Interest Rates, bemoans as “a massive exercise in navel gazing.” According to Montier, the broad acceptance of the theoretically dubious ERIR — the real interest rate consistent with full employment of labor and capital resources—is not an example of the wisdom of crowds, but rather “groupthink extraordinaire.” Further, investors’ collective preoccupation with interest rates as an economic “cure-all” and their “deification of central bankers” are equally misguided, says Montier. Read more

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Weekend Reads for Investors: Greece, Currencies, and Earnings

Weekend Reads for Investors: Greece, Currencies, and Earnings

It’s been an eventful week for most investors, if not a profitable one. In Greece, the leftist Syriza party, which pledged to end austerity, won national elections, and Greek stocks responded by falling 15% over the next three days. Greece’s bailout program expires at the end of February, and their anti-austerity stance and ongoing need for cash sets the stage for a showdown with the so-called “Troika” of the European Union, the European Central Bank (ECB), and the International Monetary Fund (IMF). Expect plenty of political posturing in the coming weeks. Read more

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