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Robert A. Weigand, Ph.D.
is the principal partner of Financial Analytics, LLC. Dr. Weigand has been a faculty member at Texas A&M University, the University of Colorado, and the University of South Florida. He is the author of over 45 scholarly articles and book chapters. His research has supported various innovations in the field of asset management, including Russell Investment’s CrossVol(TM) Volatility Indexes. He is also the author of Applied Equity Analysis and Portfolio Management, John Wiley and Sons, 2014. Dr. Weigand earned his Ph.D. in Financial Economics from the University of Arizona in 1993.
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The Market’s Recent Volatility According to Keynes
Keynes’ General Theory of Employment, Interest and Money remains a timeless classic from which all investors can learn much. For the reader who is in a hurry, skip forward to Chapter 12, “The State of Long-Term Expectation” — it’s a solid standalone read. Keynes explains much of what an investor needs to know regarding how markets work, especially whether or not those with the greatest influence on prices are concerned with short-term speculation or long-term intrinsic value. (Take a wild guess on what he concludes.)
Given the market’s up-and-down 1-2% per day behavior for almost the past trading month, I thought readers might enjoy the following classic snippet of wisdom from Chapter 12:
Which means, in short, that the market’s ridiculous volatility is a sure sign that there’s not a single swinging talking head out there that knows what 2010 will bring — but this doesn’t stop them from queuing up for their 5 minute blabfest on CNBC so that each “expert” can, in succession, contradict the opinion of the one who spoke before.
Special Bonus: For those of you whose minds roil with virulence at the very mention of Keynes’ name, here’s another quote to help you better understand your agitation, courtesy of Jonathan Swift:
If you’re motivated to learn more about Keynes’ contribution to economics, I recommend Bob McTeer’s excellent article from December 2009 “Why Fear Keynes?” Among his many career accomplishments, McTeer spent 14 years as the President of the Dallas Fed and was a member of the Fed’s Open Market Committee. He knows his stuff, and his blog articles are excellent.
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