What we’re reading (12/16)
“The Big Story On The Market Downturn: The Wealth Bubble Is Popping” (The Hill). “Before 1990 in the U.S., asset price inflation and income followed similar trajectories. The aggregate value of all households’ net assets, including homes and retirement accounts, grew in line with economic output. That connection was long ago broken through a combination of loose fiscal and monetary policy and a worldwide glut of savings. In the 1947 to 1990 period, the net worth of all households and nonprofit institutions on average equaled about four times the annual economic output; at the end of 2021, the ratio equaled about six and a half times an output of $23 trillion.”
“Quant Hedge Funds Post Historic Returns In Ugly Year For Wall Street” (Bloomberg). “The math wizards of Wall Street are notching dream returns in this nightmare year for global markets. Famous quant firms like AQR Capital Management, Man Group and Aspect Capital are riding high as inflation-fueled turmoil trashes many of their human counterparts in the stock and bond world.”
“Quant Hedge Funds Are Back. Here’s Why.” (Institutional Investor). “Hedge funds that use quantitative techniques to spot opportunities, even those focused on equities, have generated some envious returns in a year marked by huge losses in both stocks and bonds. Take equity quant strategies, which are up 5.1 percent year-to-date through November, according to PivotalPath’s index tracking these funds. ‘Anything touching equities being up at all — and up more than 5 percent — is going to feel pretty good for investors,’ said Jon Caplis, CEO of PivotalPath.”
“Goldman Sachs Plans Thousands Of Layoffs, Expects To Eliminate Some Bonuses” (Wall Street Journal). “Like other Wall Street banks, Goldman hired aggressively throughout 2020 and 2021, bringing in new employees to help it keep up with an M&A boom. This year was a different story: An economic slowdown, war in Europe and rising interest rates triggered a bear market for stocks and a slump in deal making. Morgan Stanley also laid off workers this month, and similar cutbacks have swept through American companies.”
“Who Gains And Loses From The New AI?” (Marginal Revolution). “One striking feature of the new AI systems is that you have to sit down to use them. Think of ChatGPT, Stable Diffusion, and related services as individualized tutors, among their other functions. They can teach you mathematics, history, how to write better and much more. But none of this knowledge is imparted automatically. There is a relative gain for people who are good at sitting down in the chair and staying focused on something. Initiative will become more important as a quality behind success.”
