In a paper called "Facts and Fantasies about Commodity Futures" (Yale, 2004), Gorton and Rouwenhorst came to the following conclusion after studying 45 years of data on a wide array of commodities:
- "commodities that have been more backwardated (by the second definition) have not earned larger historical returns"
- "During our sample period, this commodity futures risk premium has been equal in size to the historical risk premium of stocks (the equity premium), and has exceeded the risk premium of bonds."
"The other thing is, commodities are an artifact of futures, so they appear to have more volatility in the front month than in the back. Volatility is not the friend of a long-term index-type investor. So an index that avoids the front month is ideal."
There are some commodity ETFs that are not suitable for long term investors though. UNG, which tracks US Natural Gas, generally have bad returns. This is mostly due to the frequent turnover, since it holds the front month futures.
"But Cerf offered Rand an alternative: if she gave up 7 cents per copy in royalties, she could have the extra paper needed to print Galt’s oration. That she agreed is a sign of the great contradiction that haunts her writing and especially her life."
On the contrary, actually. The idea of artistic integrity is a _very_ central point of her preceding novel, The Fountainhead. The book's main protagonist, Howard Roark, is constantly refusing to compromise with his artistic vision.
By the same argument, you could basically claim that reducing the carbon emissions to _zero_ would improve the economy. The value that you attach to green policies are not quantifiable in a non-arbitrary way. (In the same way that religious artifacts like Pyramids does not represent a measurable economic value.)
These "tons of highly intelligent and competent people" will probably not sit down and roll their fingers in either case. Rather, programs like this drains brain power from other sectors of the economy. There is an alternative usage for most resources! ANY new program would not increase our wealth. Building pyramids, for example, is just a waste of resources. Even if it would "create" a great deal of jobs for construction engineers, it would take away resources from _useful_ production.
The increased demand for carbon licenses does not come out of thin air. Someone does pay for it - while reducing other expenses!
Maybe it's built in "pyramid" like this because:
1. Knowledge is hierarchical
2. Calculus has a longer list of skills that needs to be mastered before learning the subject.
3. Historically, calculus came around first (am I right?). This might not be a coincidence.
Well, you could explain _how_ this will happen. Many of us, including me, simply don't get the argument. What differs this from assigning a monetary value to, let's say, _any_ new government license? (e.g. for opening a restaurant, or virtually anything)
"Thus lowering interest rates increases investment — it reduces the cost of getting money, which reduces the cost of making stuff, which means more things can make a profit."
The problem with this reasoning is that Keynes only considers the demand side for capital. What about the supply side? Will lower interest rates encourage savings?
Big crashes will always occur, but I would not blame the recent crash on the gaussian models. I'd rather say that (almost) everyone underappreciated the risks connected to the real estate prices.
Taleb pushes for a strategy that consists of buying a lot of very safe assets and blending them with bets on "extreme events" (like buying far out-of-the-money put options). Is that a viable long-term strategy? I have my doubts, since there are no evidence suggesting that 'uncertain' strategies have greater returns that more quantified ones.
"Half of my 1964 Ph.D. thesis is tests of market efficiency, and the other half is a detailed examination of the distribution of stock returns. Mandelbrot is right. The distribution is fat-tailed relative to the normal distribution. In other words, extreme returns occur much more often than would be expected if returns were normal. There was lots of interest in this issue for about ten years. Then academics lost interest. The reason is that most of what we do in terms of portfolio theory and models of risk and expected return works for Mandelbrot's stable distribution class, as well as for the normal distribution (which is in fact a member of the stable class)."
In a paper called "Facts and Fantasies about Commodity Futures" (Yale, 2004), Gorton and Rouwenhorst came to the following conclusion after studying 45 years of data on a wide array of commodities:
- "commodities that have been more backwardated (by the second definition) have not earned larger historical returns"
- "During our sample period, this commodity futures risk premium has been equal in size to the historical risk premium of stocks (the equity premium), and has exceeded the risk premium of bonds."
George Rahal wrote a paper recently that also showed that contango/backwardation did not have any affect on commoditiy returns: http://www.hardassetsinvestor.com/features-and-interviews/1/...
"The other thing is, commodities are an artifact of futures, so they appear to have more volatility in the front month than in the back. Volatility is not the friend of a long-term index-type investor. So an index that avoids the front month is ideal."
There are some commodity ETFs that are not suitable for long term investors though. UNG, which tracks US Natural Gas, generally have bad returns. This is mostly due to the frequent turnover, since it holds the front month futures.