The Awesome Science of Chinonomics

Being called a chicken is never a good thing. You get called that in the schoolyard and the most likely thing to happen next is to hear humiliating laughs of the other mean kids. A movie character loses a game of “chicken”, and he is most likely losing the girl. That game has even been studied by game and signaling theory.    The whole mess in Europe could be reduced to a game of chicken. Here, there are two cars being driven against each other, challenging each other not to veer to the side. One car is driven by Mario Draghi, the other one by the bond vigilantes (or speculators, as Europe’s politicians like to call them). Signaling is paramount. Mario Draghi resists to monetize, and signals that the ECB will not openly use its balance sheet without restrictions to push sovereign rates down. The reason? The ECB –always mindful of its standing as a hawkish institution known as protector of the value of the Euro - risks denting its reputation of independence, which for...

Giving birth is supposed to hurt, and with nations it is no different. The labor pains of a nation's birth do not end, however, with the toppling of the dictator, the expulsion of the invaders/conquerors, or the signature of an armistice treaty. The next step in a nation's life is the most crucial one: The Foundation of the State. Europe is currently in the labor pains stage. Its current travails show a marked parallel with the origins of the United States as a Nation : Jefferson (read Merkel) did not want the U.S. to assume the debts of some profligate former colonies (read Greece/Ireland/Portugal/Spain/Italy) and issue U.S. Federal Bonds (read Pan-European Bonds). Hamilton (read Barroso, and to some degree Sarkozy) pushed for the single issue and fiscal integration. The result: Jefferson ceded and the U.S. assumed the debts of less frugal states in exchange for picking a location for the new nation's capital near his home state of Virginia. Integration triumphed. The baby...

Trying to make sense of this financial world through traditional stock fundamental measures is futile these days. Playing the money game has become a binary flip of a coin on the last dollar: either you invest in assets (all in) or in cash (all out). This duality simplifies the plethora of alternatives that normally overwhelm the investor. "Correlation-One" Markets that rise and fall at unison. The value of your investments is determined by the latest decision of a policy figure. Take the value of your money, for example. The value of your money measured in assets (or how many barrels of oil, bars of gold, pairs of Nike shoes or heads of lettuce can you buy with a fixed amount of green stamps called "money") is established by its relative abundance (or at least its perceived abundance), which in normal times is determined by the decision of a counsel of elders in which we have trusted our savings (the central bank). We never think of it this way, but our wealth is...

Humans are unpredictably predictable. When circumstances surrounding us are overwhelming and pressing, we try to change them. Sometimes aggressively (with revolutions) some other times more passively (quitting your job). Interestingly, this also applies to love life: after a long run of dating people with characteristic "X", the next person you look for is someone with the opposite characteristic, because you now know the disadvantages of that personal trait. The pendulum metaphor is at work. In societies, the metaphor applies to politics, and of course also to matters of economic policy. Totalitarian societies (like Pinochet's Chile or Franco's Spain) topple regimes looking for the longed freedom they did not have before. Societies that reach economic freedom (the U.S.A.) realize that opening their borders to trade allows other nations to get in and "steal" profits from domestic businesses via price undercutting and fierce competition and look to revert th...

El humano es impredeciblemente predecible. Cuando el conjunto de circunstancias que lo rodean lo agobia, busca cambiarlas. Algunas veces agresivamente (revoluciones) otras de manera pasiva (renunciando a tu trabajo). Se da hasta cuando uno busca pareja: después de que tuviste una serie de parejas de "X" característica, la siguiente la buscas con la característica opuesta porque conociste de cerca las desventajas de esa característica "X". Siempre aplica la metáfora del péndulo. En sociedades esto se da en materia de ideología política, y por supuesto que también en materia de política económica. Las sociedades tienden a zigzaguear de un extremo político al opuesto cuando sienten que la primera alternativa no les dio resultados. Sociedades que eran totalitarias (como Chile, España) derrocan regímenes buscando la ansiada libertad que no tenían. Sociedades que alcanzan la libertad económica (EEUU) se dan cuenta que el abrir sus fronteras permite a otros llevarse el pas...

He visto en muchos lados este blog post, en el cual un Chilango describe desde su visión la grandeza de Monterrey y su tristeza de dejarlo . Quisiera compartir mi sentir despues de leer ese artículo. El artículo es un homenaje que hace sentir especial a todos los que son de Monterrey, sin duda. Pero es un homenaje desafortunadamente hueco que no hace más que consolar y decir “no se preocupen, Monterrey va a salir adelante”… ¿cómo? Quién sabe. Sentirse especial y orgulloso de dónde eres es claramente algo bueno, pero es realmente virtuoso cuando eres parte activa y constructiva de tu entorno. Cuando lo enriqueces con tus acciones, por pequeñas y rutinarias que parezcan. Ser “orgullosamente regio” porque eres Rayado/Tigre a morir, porque tienes todos los discos de los Invasores de N.L. o porque te encanta el machacado con huevo y la carne de la Ramos, o porque hablas con el acento “inimitable” de Monterrey es, francamente, algo superficial que no ayuda en mucho a sacar a la ciudad de l...

Two days ago I was having a couple of drinks with some friends. Among the many topics over which we blew off steam, someone mentioned an article about clean energy on the NY Times by Robert Bryce stating that Gas is Greener . Since I am someone concerned with the state of the planet (we pay for wind energy , we recycle glass/paper/cans, we even use biodegradable diapers for our toddler) I was intrigued by that statement. I mean, I am open-minded. Al Gore could be all wrong and all the over-priced eco-friendly services and eco-friendly diapers we use could make no difference to improve the world we live in (although to be honest the current heat wave in the US is a nagging reminder that he might not be that crazy after all) or even worse: these so called eco-friendly energy sources could, the NYT article stated, be actually more harmful to the environment than the traditional non-eco-friendly ones. If you have not (or do not intend to) read the above mentio...