I mentioned in my last post that it's striking how a conservative economist like Scott Sumner who's all about the free market really implicitly argues that it's a waste of time to play say the stock market-as the EMH dictates that any gains you get are likely to be short-lived and due to dumb luck.
Most conservative economists like him probably tend to be like this-they would never play the market themselves.
On the other hand, you have a lot of the MMTer types who always regale us with stories about how well they do in the market-Cullen Roche and Warren Mosler.
"I find this paradoxical as Sumner is supposed the be the free market guy, while Mosler is the one who thinks the market suffers from acute inefficiencies that require a comprehensive response from the govt. It's interesting that Keynes too had some very definite views and theories of the market and as is well known, was a very successful investor."
http://diaryofarepublicanhater.blogspot.com/2015/03/scott-sumner-and-warren-mosler-as.html
Yet even comparing say Mosler to Keynes, there's a striking difference. Keynes by his own admission was never successful when he tried to bring his own macro insights and knowledge to investing.
You might think that a brilliant macroecomomist would have have an advantage in the market-Keynes in particular would seem to have inside knowledge with the policy circles he rode in. This was someone who worked for the British Treasury and the Exchequer in the 1910s and had the ear of treasury secretaries and central banks the world. over. Yet he himself concluded neither his ability as an economist or his knowledge of events helped much in the currency markets, etc.
He only became successful when he went to more of a micro approach. This is something that Jim Cramer always says: you shouldn't trade the market as if there is just 1 stock.
Mosler though definietly claims that he had an epiphany about how the Fed and Treasury work in the early 90s and this lead him to realize huge gains in the Italian government bond market.
"A few days later when talking to our research analyst, Tom Shulke, it came to me. I said, “Tom, if we buy securities from the Fed or Treasury, functionally there is no difference. We send the funds to the same place (the Federal Reserve) and we own the same thing, a Treasury security, which is nothing more than account at the Fed that pays interest.”
"Many of my colleagues in the world of hedge fund management were intrigued by the profit potential that might exist in the 2% free lunch that the Government of Italy was offering us. Maurice Samuels, then a portfolio manager at Harvard Management, immediately got on board, and set up meetings for us in Rome with officials of the Italian government to discuss these issues
http://moslereconomics.com/wp-content/powerpoints/7DIF.pdf
Again, this is according to conventional wisdom pretty surprising. Even if you do have the best understanding of the macroeconomy that's not supposed to give you any advantage in the market according to things like EMH.
UPDATE: I forgot to add Mosler;s conclusion of his 'Italian Epiphany.'
"Italy did not default, nor was there ever any solvency risk. Insolvency is never an issue with nonconvertible currency and floating exchange rates. We knew that, and now the Italian Government also understood this and was unlikely to “do something stupid,” such as proclaiming a default when there was no actual financial reason to do so. Over the next few years, our funds and happy clients made well over $100 million in profits on these transactions, and we may have saved the Italian Government as well. The awareness of how currencies function operationally inspired this book and hopefully will soon save the world from itself."
Most conservative economists like him probably tend to be like this-they would never play the market themselves.
On the other hand, you have a lot of the MMTer types who always regale us with stories about how well they do in the market-Cullen Roche and Warren Mosler.
"I find this paradoxical as Sumner is supposed the be the free market guy, while Mosler is the one who thinks the market suffers from acute inefficiencies that require a comprehensive response from the govt. It's interesting that Keynes too had some very definite views and theories of the market and as is well known, was a very successful investor."
http://diaryofarepublicanhater.blogspot.com/2015/03/scott-sumner-and-warren-mosler-as.html
Yet even comparing say Mosler to Keynes, there's a striking difference. Keynes by his own admission was never successful when he tried to bring his own macro insights and knowledge to investing.
You might think that a brilliant macroecomomist would have have an advantage in the market-Keynes in particular would seem to have inside knowledge with the policy circles he rode in. This was someone who worked for the British Treasury and the Exchequer in the 1910s and had the ear of treasury secretaries and central banks the world. over. Yet he himself concluded neither his ability as an economist or his knowledge of events helped much in the currency markets, etc.
He only became successful when he went to more of a micro approach. This is something that Jim Cramer always says: you shouldn't trade the market as if there is just 1 stock.
Mosler though definietly claims that he had an epiphany about how the Fed and Treasury work in the early 90s and this lead him to realize huge gains in the Italian government bond market.
"A few days later when talking to our research analyst, Tom Shulke, it came to me. I said, “Tom, if we buy securities from the Fed or Treasury, functionally there is no difference. We send the funds to the same place (the Federal Reserve) and we own the same thing, a Treasury security, which is nothing more than account at the Fed that pays interest.”
"Many of my colleagues in the world of hedge fund management were intrigued by the profit potential that might exist in the 2% free lunch that the Government of Italy was offering us. Maurice Samuels, then a portfolio manager at Harvard Management, immediately got on board, and set up meetings for us in Rome with officials of the Italian government to discuss these issues
http://moslereconomics.com/wp-content/powerpoints/7DIF.pdf
Again, this is according to conventional wisdom pretty surprising. Even if you do have the best understanding of the macroeconomy that's not supposed to give you any advantage in the market according to things like EMH.
UPDATE: I forgot to add Mosler;s conclusion of his 'Italian Epiphany.'
"Italy did not default, nor was there ever any solvency risk. Insolvency is never an issue with nonconvertible currency and floating exchange rates. We knew that, and now the Italian Government also understood this and was unlikely to “do something stupid,” such as proclaiming a default when there was no actual financial reason to do so. Over the next few years, our funds and happy clients made well over $100 million in profits on these transactions, and we may have saved the Italian Government as well. The awareness of how currencies function operationally inspired this book and hopefully will soon save the world from itself."
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