Archive for August 17th, 2017

Ladies of the Ticker: Pioneering Women Stockbrokers from the 1880s to the 1920s in New York..

August 17, 2017

George Robb (Prof of History at William Paterson University of New Jersey) has a nice piece:

During the late 19th century, a growing number of women were finding employment in banking and insurance, but not on Wall Street. Probably no area of American finance offered fewer job opportunities to women than stock broking. In her 1863 survey, The Employments of Women, Virginia Penny, who was usually eager to promote new fields of employment for women, noted with approval that there were no women stockbrokers in the United States. Penny argued that “women could not very well conduct the business without having to mix promiscuously with men on the street, and stop and talk to them in the most public places; and the delicacy of woman would forbid that.”

The radical feminist Victoria Woodhull did not let delicacy stand in her way when she and her sister opened a brokerage house near Wall Street in 1870, but she paid a heavy price for her audacity. The scandals which eventually drove Woodhull out of business and out of the country cast a long shadow over other women’s careers as brokers.

Histories of Wall Street rarely mention women brokers at all. They might note Victoria Woodhull’s distinction as the nation’s first female stockbroker, but they don’t discuss the subject again until they reach the 1960s. This neglect is unfortunate, as it has left generations of pioneering Wall Street women hidden from history. These extraordinary women struggled to establish themselves professionally and to overcome chauvinistic prejudice that a career in finance was unfeminine.


The first generation of women stockbrokers faced great resistance, but they chipped away at the old boys’ network on Wall Street that sought to exclude
and marginalize them. They carved out a niche for themselves as advisers and liaisons to women investors. They helped break barriers to women’s employment in brokerage firms, and they made it possible for women today to have greater financial opportunities.


What about women stock brokers in India? Is there any such history?

Sunk cost lessons from Ajay Devgn..

August 17, 2017

Amit Varma’s latest article on Housefull Economics:

‘Maine pyaar tumhi se kiya hai/ Maine dil bhi tumhi ko diya hai/ Ab chaahe jo ho jaaye/ Main duniya se ab na daroon/ Tumhi se main pyaar karoon.’ — Ajay Devgan in Phool Aur Kaante

Many years ago, at the tender age of 17, I went to watch the first-day-first show of Phool Aur Kaante in a theatre in Pune. We couldn’t get balcony tickets — who remembers ‘balcony’ in this age of the multiplex? — and had to settle for front-row seats in the stalls. It was horrendous — our necks would jerk from side to side during the fight sequences, and the film itself was awful. At the interval, my friend and I considered leaving. But we figured that we had paid for the tickets, watched half the film, and that effort would be wasted if we left now.

We did not know it then, but we were making the same mistake that Ajay Devgan made in the film.

In the song above, Devgan sings: I have loved only you/ I have given my heart to only you/ Now whatever happens/ I will not be scared of the world/ I will love only you. This is equal parts sweet, naive, and downright creepy in that typical Bollywood stalking sense. Devgan is saying that now that he has made the effort of giving his heart to the lady in question, he will stick with it and go all the way. He has committed the Sunk Cost Fallacy.

A sunk cost, in economics, can be defined as “a cost that has already been incurred and cannot be recovered.” We commit the Sunk Cost Fallacy when, by one definition, we “continue a behavior or endeavor as a result of previously invested resources (time, money or effort).” For example, the time, effort and money that my friend and I had spent in watching Phool Aur Kaante until the interval was a sunk cost. It was already gone. The only factor in our decision-making should have been whether we’d have a better time sitting through the rest of the film or going off and doing something else. (The good time we could have had elsewhere was, in fact, the Opportunity Cost of finishing the film.)

The Sunk Cost Fallacy is everywhere in our lives.

Superb as always…

What economists study: A guide for the curious

August 17, 2017
Christopher Snyder of Dartmouth College provides a guide:

When you meet someone at a cocktail party who learns you are an economist, the inevitable question follows, “What’s the stock market going to do?” That’s an excellent question. If, on the day I was born, my parents had invested $100 for me in Altria, the top-performing stock since then, I would be a millionaire.

Of course, most of us economists do not spend our time thinking about the stock market.

The press has its own view of what we do, not always positive, whether criticizing our inability to predict the future (Harford 2014), our lack of engagement with the real world (The Guardian 2017), or our preference for mathematics over people (Smith 2015). How do we, as economists, combat these negative stereotypes? Perhaps by explaining better the broader set of issues economists think about and how we think about them. I recently attempted this in a chapter (Snyder 2017) published in What Are the Arts and Sciences? A Guide for the Curious.

One short answer is that economics is the social science focusing on people’s material well-being, the ‘business side’ of life. How do people earn a living? What do they buy with the money they earn? What spurs the overall economy to grow?

While a starting point, the domain of economics has continued to expand, blurring any distinctions between it and other social sciences. For example, crime was once exclusively a matter for sociologists and corruption for political scientists. But economists realised that these social problems might respond to economic incentives, and left untreated could destroy a productive economy. In this way, the issues have become part of mainstream economics.

Nice bit..

Though he does answer the stock market question at the end:

Having patiently listened to your description of what you do, your audience may still expect an answer to the million-dollar question, “What’s the stock market going to do?” Recall the stock that could have made me a millionaire by now, Altria, the top-performer over the last several decades according to Siegel (2005). Are you curious what Altria makes? A good guess might be something high-tech, perhaps computers or pharmaceuticals.

Altria makes cigarettes. Until a recent spinoff, Altria was the parent company of Phillip Morris, manufacturer of Marlboro and other cigarette brands. With smoking on the decline in rich countries due to high taxes and restrictions, it is hard to believe cigarette manufacturing would be a good investment.

The surprising performance of cigarettes provides a useful economic insight into stock prices. It is tempting for average investors to think they can beat the market, but study after study shows this is generally not true. They are better off diversifying across many stocks and holding these stocks over the long term.


If Indian economy is indeed weak and needs deep rate cuts, why all growth projections show high accelerated growth?

August 17, 2017

Yesterday released MPC minutes were full of contradicting views. Some members believed that 7th Pay commission will lead to higher inflation, but one member said it will just be transient. Some expected farm Loan Waivers to have higher fiscal slippage but the same member said worries are overstated.

However, this one from Michael Patra who votes for Status quo summed up much of the ironies in projection industry of Indian economy:

44. I have consistently maintained that an inflation targeting framework has to be forward-looking. Setting monetary policy by looking over the shoulder at inflation prints of the recent past runs the risk of time inconsistency with respect to the target. A good example of forward-looking time-consistent monetary policy is the monetary policy committee’s (MPC) first decision in October 2016. In its resolution, the MPC presciently gave forward guidance: “It (the MPC) notes that the sharp drop in inflation reflects a downward shift in the momentum of food inflation – which holds the key to future inflation outcomes…”. Correctly anticipating recent inflation developments back in October 2016, the MPC took monetary policy action that was consistent. To reduce the policy rate now – when inflation is set to rise in a couple of months – will be inconsistent and will undermine credibility.

45. Households’ inflation expectations three months ahead and a year ahead have gone up! More than 70 percent of respondents expect prices to increase, with the sharpest rise expected in prices of household durable goods, followed by prices of services. It seems to me that households have completely discounted CPI inflation’s historic low. Professional forecasters, who are regarded as forward-looking, also see inflation rising over the rest of the year. In this context, I have also consistently held that in reading forecasts, it is the direction rather than the level that matters.

46. There are many moving parts in inflation’s near term path that need to settle. First, the increase of 106 per cent in house rent allowance for central government employees will feed into the CPI cumulatively – starting from July, it will likely reach its maximum effect in December. Given this incremental pattern of build-up, it could potentially stir up second order effects even as the first order impact is getting complete. Second, there is uncertainty around the inflationary impact of the roll-out of the GST – the release of pending price revisions; restocking after clearance sales; unwinding of arrangements that were made to prepare for initial difficulties in pass through of tax credits. My sense is that one-off inflation effects could emerge in the near months. Third, base effects will reverse and turn unfavourable from August – this should go to the top of the hierarchy of moving parts. Fourth, seasonal spikes in inflation-sensitive food prices are already in evidence. The question is: will there be spillovers that induce generalisation of the inflation momentum?

47. All these factors could come together in CPI readings from August. If that turns out to be the case, why not stay on hold now, watch the shape and slope of the upturn and if it is benign, deliver credible monetary policy that supports the economy? In the context of the latter, it is paradoxical that weak aspects of economic activity are widely cited, but every projection of growth – official; multilateral; independent – shows that it is expected to accelerate in 2017-18!


Reading recent MPC minutes: Does RBI follow lexicographic flexible inflation targeting?

August 17, 2017

RBI released the MPC minutes for its August 2017 meeting yesterday.

One of the members Prof Chetan Ghate first said though there are risks that inflation could again rise, subdued growth is a bigger concern. In the process, he remarked  something which caught my attention:

29. A lexicographic flexible inflation-targeting mandate requires monetary policy to now accommodate the objective of growth.

Lexicographic? It means the process of writing dictionaries where you move in hierarchy to compile the different words. So you follow the alphabetical order from A to B and so on to organise the different words.

This idea was used in economics to order preferences. So if you prefer A to B, you will always prefer a choice which offers more A even if the alternate choice has more items in total. So if bundle 1 has (5,6) of goods and bundle 2 has (4, 8) of goods, you prefer bundle 1 as it has more A despite Bundle B having more goods in total.

In terms of inflation targeting, we broadly had two types:


The 70 companies operating in India since before 1947

August 17, 2017

Another interesting compilation in Mint.

It lists 70 existing Indian companies that had their roots before 1947.


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