Author: Colby Davis

Profiting from the Recklessness of Others

Profiting from the Recklessness of Others

A couple months ago, I wrote about the dangers of levered ETFs, showing how these products designed to juice investor’s returns end up eroding capital due to the subtle mathematical logic of compounding. In my last post, I followed up on the topic by describing the Kelly Criterion, a mathematical framework that can tell investors […]

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The Line Between Aggressive and Crazy

The Line Between Aggressive and Crazy

Suppose I offer you a bet. Flip a coin, heads you lose your entire bet, tails you win it back plus one and a half times, so a ten dollar bet becomes $25. And furthermore I’ll let you keep making this bet as many times as you like over the next hour, say. This is […]

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“Make it a Quadruple”

“Make it a Quadruple”

This month, the financial press has been abuzz with the latest case study in Wall Street’s storied history of feeding speculative frenzies: the quadruple-levered ETF. On May 2 the SEC approved a request to list two ETFs, the ForceShares Daily 4X US Market Futures Long Fund under the ticker UP, and the ForceShares Daily 4X US […]

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A Permanent Bear Market in Fossil Fuels?

A Permanent Bear Market in Fossil Fuels?

In my last post I wrote about how the financial industry, led in particular by asset manager BlackRock, may begin putting pressure on the private sector to reduce carbon emissions and otherwise adopt more environmentally friendly practices, for entirely self-interested, profit-motivated reasons. Since then, I’ve been thinking a lot about the future of energy production, […]

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BlackRock Goes Green

BlackRock Goes Green

When it comes to the financial markets, I am a perennial optimist. Investing not only makes us richer in the long run, it makes the world healthier, happier, and better in almost every dimension. My optimism extends even to the ability of financial markets to solve what economists call coordination problems, an excellent and timely example […]

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Snap and Sucker Bets

Snap and Sucker Bets

Imagine I offer you the following deal: I will sell you a promissory note so I can expand my business. The note will be subject to the following conditions: I will not begin paying you back anytime soon I am under no obligation to ever pay you back, even in part You have no legal right […]

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Culture, Investor Behavior, and the Market

Culture, Investor Behavior, and the Market

Investors, being human, are not always perfectly rational, but sometimes make decisions that are influenced by their emotions or cognitive biases, which can effect market prices in interesting and predictable ways. Such is the one sentence summary and motivating principle behind behavioral finance, a topic I’ve written about quite a bit here myself. But how […]

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Party Like it’s 1929

Party Like it’s 1929

The S&P 500 finished the year up 11.96% for 2016, marking the eighth straight year in a row the US stock market has posted a gain in what is now the 2nd longest bull market in history. And if this keeps up through March it will become the number one longest bull market in US […]

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Postmodern Finance Part 8: Peace, Love, Happiness, and Arbitrage

Postmodern Finance Part 8: Peace, Love, Happiness, and Arbitrage

Imagine an alien race with no concept of money was observing the earth from afar, trying to understand us humans. What might they say about our civilization? I imagine their reports might sound something like this: The humans are unparalleled in their propensity to cooperate in order to achieve their common good. Most people do […]

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Trump and Capitalism’s Wild Week

Trump and Capitalism’s Wild Week

Last Tuesday, 18.9% of Americans made their voices heard and elected Donald Trump as 45th president of the United States.[1] What immediately preceded and followed the surprise turnout was perhaps one of the strangest handful of days in market history. The Nonpartisan Market? I have had to eat my words in the wake of this election. […]

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