Are Index / Passive Funds the New Subprime CDOs?

(image via the Federal Reserve Economic Data) Someone on Quora asked if index/passive funds are the new subprime CDOs, perhaps implying that there could be an index fund asset bubble. My answer? Absolutely not. CDOs (collateralized debt obligation) are rather opaque, whereas index funds are much more transparent, particularly exchange-traded funds (ETFs). (image via MoneyControl)… Continue reading Are Index / Passive Funds the New Subprime CDOs?

Review of All the Devils Are Here

Image from I consider All the Devils Are Here to be the best book on the financial crisis I have read so far, edging out Nouriel Roubini's Crisis Economics and significantly better than Michael Lewis's excellent Big Short. Roubini excels more at explaining more of the economics in systemic big-picture terms and also laying… Continue reading Review of All the Devils Are Here

The Economics Behind the Individual Mandate

In regards to the big Supreme Court decision on Romneycare Obamacare, there's been much hand-wringing on how this is a tax on doing nothing. This does seem odd, until you realize that a penalty or tax on one group but not on a second group is economically identical to having no penalty or tax on the first group but a tax credit… Continue reading The Economics Behind the Individual Mandate