Equity investors, says one leading US fund manager, quoted in a prominent national newspaper this week, are “having a hard time” finding anything fundamental to worry about, given the fact that the Federal Reserve has “made plain that we will have easy money for years to come”. Perhaps I should get out more – or at least spend time with a wider sample of the investment community, as my experience is quite the reverse. Most thoughtful investors I speak to are having a hard time not worrying about the implications of the recently reiterated public policy stance of the 100-year-old US central bank.
I have no inside knowledge on whether Janet Yellen or Larry Summers is most likely to be given the job as the next chairman the Federal Reserve. It is not an exaggeration however to suggest, however, as many commentators have already noted, that this is probably the most important appointment that Mr Obama is likely to make in the course of his second term. If the media reports are to be believed, the White House is pushing the claims of the imperious Mr Summers over those of Mr Bernanke’s deputy, even though the former will face the tougher ride at Senate confirmation hearings.
Has the Sage of Omaha, now 82, lost his touch? In his annual letter to the stockholders of Berkshire Hathaway published last week, Warren Buffett admitted a “subpar” performance in 2012. He acknowledged that his next annual letter may show that, for the first time, his fund had underperformed the S&P index over a five-year period.
Market watchers have reason to be disappointed by last week’s news that Intrade, a popular online betting exchange, is to close the accounts of all its US-based customers. The announcement follows a decision by the Commodity Futures Trading Commission to file a complaint against the company which runs the site, alleging that it has illegally been operating an unregulated options market. Non-US citizens can however continue to use the site, which offers punters the chance to place bets on a variety of political and economic outcomes.
In a complex and inter-related financial world, when so much information is flying across wires, fibre optic cables and satellite channels on a daily basis, the need to rely on heuristics – simple rules that govern your responses to the majority of everyday situations – is becoming ever greater. It is just as well then that research across a range of social sciences continues to provide regular confirmation of how powerful and effective such simple rules can be.
“Thinking, fast and slow” by the Nobel prize-winning psychologist Daniel Kahneman continues to ride high in the business book bestseller lists. I dare say therefore that copies have found their way into the hands of managers of investment firms. But how many of them, I wonder, have reflected on the implications for the businesses in which they are involved – and how many, alternatively, have quietly binned the book as too disturbing to risk leaving lying around the office?