May 30, 2012

Indoctrination: Funny Money, CAPM and EMT

It seems,

E(Ra) = Rf + β.(Rm - Rf), where:

E(Ra) is the expected/speculated return from the asset in consideration
β is the measure of correlation/dependence of the asset to movement of the aggregate market
Rf is the Risk Free rate available from Govt Treasury Debt
Rmis the return expected from buying the whole or representative market of all risky assets

Apparently, you can get paid astronomical sums of money for calculating that putting one's money in an asset that is its own self (i.e. does not fluctuate in value merely because the Dow is gyrating), is the same thing as buying US Treasuries! as far as the returns are concerned!!! The asset's own, intrinsic capability has no meaning at all, what matters is how much QE and low interest rates are able to sway the entire 'market' for stocks upwards.

So, the next time you are thinking of opening a barber's shop, or a grocery store for that matter, you should banish the thought, for you will receive no better returns than being a passive Treasury buyer! Because that's all you (are supposed to) get for a real investment for which you do not need to buy '''expertise''' from Wall Street.

EPILOGUE: The same source goes further on its junk...."The CAPM offers powerful and !intuitively appealing! predictions between risk and return. It is not only important from a theoretical perspective but is also used extensively in practice"....God Help!!!


  1. This comment has been removed by the author.

  2. If there isn't enough, I would like to have systems in place that promote that an abundance is created. And I would like this to happen naturally and voluntarily, without a need for an oppressive system that forces people to do it like that.