The Cranky Finance Prof Spouts Off

This is a mixed bag of economics, finance, and political philosophy.
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  • Jeff Oxman

Does a Low VIX Tell Us Anything About a Market Crash? Dec 18, 2014

You have been misled! The VIX is often referred to as a volatility index, or sometimes even a 'fear' index. This implies it is used as a gauge of Mr. Market's perception of the likelihood of a stock market crash. This is not the case, however. First, what is the VIX? Not to get too technical, but first we need a little option pricing tutorial. The price of an option, be it a put or call, is a function of five factors: the price of the underlying asset, the exercise price of the option, the risk-free rate of return, the...

By Jeff Oxman Vote2 2

Why Honesty is Dangerous Dec 16, 2014

The honest person is feared by the dishonest person. Those who have gained political power have almost universally done so through dishonest means, and maintain it thus. The honest person holds her personal integrity as the single inviolable feature of herself. This is a person who remains incorruptible and is therefore not understood by the dishonest. The dishonest seek to control and exert power over others, to protect themselves and enrich their own material wealth; perhaps simply because the dishonest desire power over others. The honest person is immune to the dishonest person's entreaties, and will not be swayed under...

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On the Pursuit of Happiness Dec 14, 2014

Don't try to be happy. While the freedom to pursue happiness is guaranteed by the Declaration of Independence, the goal of actually being happy is a destructive end. There are two reasons pursuing happiness is destructive: a. As humans, we overweight the short-run and underweight the long-run. This can lead us to clearly destructive behavior like overindulgence in alcohol, drugs, food, and other vices. b. It can cause us to think that we should be happy all the time. That means we discount the value of pain, discomfort, assorted difficulties, and even periods of calmness where we aren't really happy...

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Self-reliance Dec 7, 2014

I'm guilty. I am a thief. I stole this title from Ralph W. Emerson. I am going to dwell on what his main theme in the essay "Self-reliance" means in today's American culture. I read the essay as part of a seven-year plan to read the Gateway to the Great Books (of the Western World) and The Great Books of Western World. I'm following the plan laid out here, by Dr. J of Faulkner University. I'm about 2.5 years behind, so I just read Self-reliance this past week. The theme, as I understand the essay, is that a person should...

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Not if but when investing Nov 29, 2014

Predicting the timing of a financial crisis, be it stock, bond, or currency, is a mug's game. The best neoclassical models available show more false positives than Keynesian economists have wrong policies. Using ABCT doesn't really help us with timing, either. What's good about ABCT, more than real business cycle models and their ilk, is that it tells us when conditions are ripe for a crisis. Low central bank rates for a while now? Check. Lots of monetary 'stimulus?' Check. But we've had these conditions for a few years now. It's hard to know when the crisis & crash will...

By Jeff Oxman Vote1 1

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