Skidelsky provides a readable book on money and government

Money and Government: The Past and Futures of Economics by Robert Skidelsky is a very readable review and critique of monetary economics and Keynesian policy that can be enjoyed by a non-technical reader. Skidelsky is famous for his biography of Keynes, but this book shows his skill and confidence at explaining monetary economics and what have been the policy mistakes over the last 100 years. Even if you think you know macroeconomics well, there are plenty of useful insights that will improve your understanding in historical context. While Skidelsky is a Keynesian, his presentation is even-handed, and he describes both what Keynes got right as well as what could be improved. We need to place more emphasis on radical uncertainty and the difficulties with implementing policies.

Skidelsky shows that a gifted writer with a strong grasp of theory can provide insightful narrative on many of the vexing macro problems of the past and future. 

Ages of American Capitalism - A great economic history

 

I just finished the long but comprehensive economic history of the United States by Jonathan Levy, Ages of American Capitalism. If you want a review of economic history in the Unites States, this is the one book that should be on your reading list. I may have some issues with the interpretation of events by Levy especially since the 1920's where I have spent more time reviewing the history, but the depth of this work cannot be denied. The work breaks US economic history into four parts or ages. It stops with the 2008 Great Financial Crisis, but we can say that the Age of Chaos continues as we feel our way through deciding what is the proper level of regulation, innovation and change for the current era. The four ages are:

The Age of Commerce spans the colonial era through the outbreak of the Civil War and describes how the US moved from a colony to growing emerging country.

The Age of Capital traces the impact of the industrial revolution as it shapes the US economy. The volatility of the Age of Capital with labor strife, recessions and the growth of big business ultimately led to the Great Depression.

The Age of Control as a response to the Great Depression during which the government took on a more active role in the economy to solve the Depression and respond to WWII. 

The Age of Chaos came upon the US as deregulation and the growth of the finance industry created a booming economy for those in finance but also significant inequalities and a lack of oversight that created the environment for the crash of 2008.

This book provides a good a good framework for thinking about US economic development and should serve as a background for thinking about business history.

Private versus public markets - the new blending

 

There has been a flood of funds into private equity markets under the belief that there is some special investment magic with these firms and the managers who build these portfolios. The recent data suggests that this is not the case. The rationale for private equity is simple. Buy new quality firms vetted by managers who will engage with these firms to turn them into successful investments that can then be IPO'ed as an exit strategy. Investing in a private equity portfolio will have an illiquidity premium, you will be paid for your patience and inability access your money. Some of the latest evidence provided by Macro Hive suggests that the key assumptions do not work.  

Investors are not receiving the returns expected relative to public investments which would not be troubling in the short run if you were getting your money back. Unfortunately, are seeing long holding times because there are no exits. 

Perhaps holding liquid strategies may not as some have thought. Yes, you face mark-to-market risk, but if you are unhappy with returns, you can get your money back. 

Trend-following and equity markets - control the costs

 

There is money to be made trading long-only trends in equities but like all trading it is not easy and driven significantly by cost assumptions. In fact, it is the cost control that may be the most important alpha producer. Take what may seem like a good model without transaction costs and then add realistic slippage and trading costs and you will see significant alpha deterioration. Redo the analysis but then add a set of rules that account for turnover and costs to reduce the number of trades, and you can add back alpha. Of course, you will never get back to the original theoretical performance without any trading costs, but the number may still look attractive. There is no free lunch and there is no hidden lunch. Perhaps the easiest place to find alpha is through optimizing for costs. 

While cost analysis was not the main goal of the paper, "Does Trend Following Still Work on Stocks" it may be the key takeaway. The model is simply based on looking for new highs for stocks with an ATR stop exit strategy. There are no special features, but it does work until we add reasonable cost assumptions. Nevertheless, simple rule changes can get the strategy back on the right track through minimizing turn-over. Along with entry and exit signals, place turnover constraints into the model.