By Robert Shuler
Copyright © 2013, All Rights Reserved
This list is only for the personal use of owners of this book.
1 Zheng, L., "A Survey of the Empirical Difficulties of the Consumption Capital Asset Pricing Models," J. Mod. Econ. Manag., vol. 2, no. 1 (2013).
2 Welch, I., Goyal, A., "A Comprehensive Look at the Empirical Performance of Equity Premium Prediction," The Review of Financial Studies, v. 21 n. 4, 2008
3 At least this is the theoretical view of economists. For example, see Zheng, L., "A Survey of the Empirical Difficulties of the Consumption Capital Asset Pricing Models," Journal of Modern Economy & Management, vol. 2, no. 1 (2013) available open access at http://scik.org/index.php/jmem/article/view/665
4 Mehra, R. and Prescott, E., "The Equity Premium A Puzzle," Journal of Monetary Economics, North-Holland, 15, 145-161 (1985)
5 Weil, P., "The equity premium puzzle and the risk-free rate puzzle," Journal of Monetary Economics, 24 (3), 401-42 (1989) available from Weil’s website at http://www.philippeweil.com/research/riskfree%20rate%20puzzle.pdf
6 Physsis Borzi, Asst. Secy. Of Labor testimony to Congress, “From 1998 to 2007 the average annual returns for IRAs were 4.5%,” posted by Steve Beck at
7 New Facts in Finance, June 1999,
8 Eugene F. Fama. Efficient capital markets: A review of theory and empirical work. Journal of Finance, 25:383-423, 1970.
9 Data sources: CPI from Bureau of Labor Statistics, Gold prices from http://www.measuringworth.com/datasets/gold/result.php
10 Lo, Andrew W., “The Adaptive Markets Hypothesis: Market Efficiency from an Evolutionary Perspective,” Journal of Portfolio Management, Forthcoming. Available at SSRN: http://ssrn.com/abstract=602222
11 Mehra, R. and Prescott E., "The equity premium in retrospect," in: G.M. Constantinides & M. Harris & R. M. Stulz (ed.), Handbook of the Economics of Finance, edition 1, volume 1, chapter 14, pages 889-938, Elsevier (2003).
12 Constantinides, G., Donaldson, J., Mehra, R., “Junior Can’t Borrow: A New Perspective on the Equity Premium Puzzle,” The Quarterly Journal of Economics, February (2002).
13 Shuler, R., “On dynamics in a quasi-measurement field,” Journal of Modern Physics, 4 (1) pp. 113-129 (2013). Available at http://www.scirp.org/journal/jmp/
14 The 1999 Iranian film “Children of Heaven” illustrates use of barter and salt-based transactions in an urban setting.
15 Paul Millett proposed in Lending and Borrowing in Ancient Athens that lending did begin as neighborly reciprocation in rural societies.
16 A detailed theory of the co-development of money and writing has been put forward by Denise Schmandt-Besserat in Before Writing, and How Writing Came About. You can also find a concise summary in Harriet Crawford’s Sumer and the Sumerians in the chapter on writing and the arts, or online in the first chapter of William Goetzmann’s Financing Civilization. See http://viking.som.yale.edu/will/finciv/chapter1.htm
17 See A History of Interest Rates by Sidney Homer & Richard Sylla, 3rd ed. revised 1996, pgs. 19-20.
18 Millet [see earlier footnote] also confirms that profit-oriented interest developed later, in connection with explicit contracts and urbanization.
19 Theories of the development of money (see earlier footnote) deal with a period well after intensive agriculture and animal husbandry, which both originated 10,000 years ago at the end of the last ice age. My statement about some idea of money likely being older is conjecture based on the observation that pre-agricultural hunter-gatherer cultures are known to use beads or tokens as an exchange medium.
20 See William Goetzmann’s Financing Civilization,
21 In the Hammurabi law code, circa 1800 BCE, loans of silver were regulated at 20% and loans of grain at 33 1/3%, repayable in kind. A History of Interest Rates by Sidney Homer & Richard Sylla, 3rd ed. revised 1996, pg. 3.
22 At one time it was thought the Temple owned all the land in a Sumerian city state, but this has been shown to be incorrect, a result of not having a full estimate of the size of the city state.
23 Deuteronomy 15:1 “At the end of every seven years there is to be a general forgiveness of debt.
24 Deuteronomy 15: “2 This is how it is to be done: every creditor is to give up his right to whatever he has let his neighbor have; he is not to make his neighbor, his countryman, give it back; because a general forgiveness has been ordered by the Lord. 3 A man of another nation may be forced to make payment of his debt, but if your brother has anything of yours, let it go;”
25 Leviticus 25:10 “And let this fiftieth year be kept holy, and say publicly that everyone in the land is free from debt: it is the Jubilee, and every man may go back to his heritage and to his family.”
26 Leviticus 25: “29 And if a man gives his house in a walled town for money, he has the right to get it back for the space of a full year after he has given it up.
30 And if he does not get it back by the end of the year, then the house in the town will become the property of him who gave the money for it, and of his children for ever; it will not go from him in the year of Jubilee.”
27 Proverbs 6: “1 My child, if you co-sign a loan for a friend or guarantee the debt of someone you hardly know – 2 if you have trapped yourself by your agreement and are caught by what you said – 3 quick, get out of it if you possibly can! You have placed yourself at your friend's mercy. Now swallow your pride; go and beg to have your name erased. 4 Don't put it off. Do it now! Don't rest until you do. 5 Save yourself like a deer escaping from a hunter, like a bird fleeing from a net.”
28 Proverbs 20:16 “Be sure to get collateral from anyone who guarantees the debt of a stranger. Get a deposit if someone guarantees the debt of a foreigner.”
29 Exodus 22:3 “A thief who is caught must pay in full for everything that was stolen. If payment is not made, the thief must be sold as a slave to pay the debt.”
30 Amos 8:6 “And you mix the wheat you sell with chaff swept from the floor! Then you enslave poor people for a debt of one piece of silver or a pair of sandals. “
31 1 Samuel 22:2 “Then all the people in distress, in debt or embittered began gathering around [David], and he became their leader; there were about four hundred with him.”
32 The classical history of Greece began with the laws of Solon in 600 BCE, drastic reforms necessitated in part by widespread debt and personal slavery for debt. Limits to interest were abolished, but so was personal slavery for debt. Rome’s legal history began with regulation of debt, in about 450 BCE, also precipitated by excessive debt. Interest was limited to 8 1/3%. Personal slavery for debt was allowed but physical well being protected. A History of Interest Rates by Sidney Homer & Richard Sylla, 3rd ed. Revised 1996, pg. 3.
33 Luke 7: 41 "A certain creditor had two debtors; one owed five hundred denarii, and the other fifty. 42 When they could not pay, he canceled the debts for both of them. Now which of them will love him more?" 43 Simon answered, "I suppose the one for whom he canceled the greater debt." And Jesus said to him, "You have judged rightly."
34 1 Timothy 5: “3 Show respect to widows who are really in need. 4 But if a widow has children or grandchildren, first let them learn to do their religious duty to their own family and thus repay some of the debt they owe their forebears, for this is what is acceptable in the sight of God.”
35 Matthew 18: “24 When he began the reckoning, one who owed him ten thousand talents was brought to him; 25 and, as he could not pay, his lord ordered him to be sold, together with his wife and children and all his possessions, and payment to be made. 26 So the slave fell on his knees before him, saying, "Have patience with me, and I will pay you everything.' 27 And out of pity for him, the lord of that slave released him and forgave him the debt. 28 But that same slave, as he went out, came upon one of his fellow slaves who owed him a hundred denarii; and seizing him by the throat, he said, "Pay what you owe.' 29 Then his fellow slave fell down and pleaded with him, "Have patience with me, and I will pay you.' 30 But he refused; then he went and threw him into prison until he would pay the debt. 31 When his fellow slaves saw what had happened, they were greatly distressed, and they went and reported to their lord all that had taken place. 32 Then his lord summoned him and said to him, "You wicked slave! I forgave you all that debt because you pleaded with me. 33 Should you not have had mercy on your fellow slave, as I had mercy on you?' 34 And in anger his lord handed him over to be tortured until he would pay his entire debt.”
36 Matthew 18: “15 "To one he gave five talents, to another, two, and to another, one, each according to his own ability; and he went on his journey. 16 "Immediately the one who had received the five talents went and traded with them, and gained five more talents. 17 "In the same manner the one who had received the two talents gained two more. 18 "But he who received the one talent went away, and dug a hole in the ground and hid his master's money. ... 24 "And the one also who had received the one talent came up and said, `Master, I knew you to be a hard man, reaping where you did not sow and gathering where you scattered no seed. 25 `And I was afraid, and went away and hid your talent in the ground. See, you have what is yours.' 26 "But his master answered and said to him, `You wicked, lazy slave, you knew that I reap where I did not sow and gather where I scattered no seed. 27 `Then you ought to have put my money in the bank, and on my arrival I would have received my money back with interest. 28 `Therefore take away the talent from him, and give it to the one who has the ten talents.' ”
37 Luke 6:35 “But love your enemies, and do good, and lend expecting nothing in return; and your reward will be great and you will be sons of the Most High; for He Himself is kind to ungrateful and evil men. ”
38 Rubenstein, M., “Rational Markets: Yes or No? The Affirmative Case,” Financial Analysts Journal, vol. 57 no. 3, May/June 2001.
39 Shiller, R. 1981. “Do Stock Prices Move Too Much to Be Justified by Subsequent Changes in Dividends?” American Economic Review, vol. 71, no. 3 (July):421–436.
42 Ivkovic, Z., Sialm, C., Weisbenner, S., “Portfolio Concentration and the Performance of Individual Investors,” Journal of Financial and Quantitative Analysis, vol. 43, no. 3, Sept. 2008, pp. 613-656.
44 St. Louis Fed http://research.stlouisfed.org/fred2/series/USSTHPI/
45 Natl. Assoc. of Homebuilders via http://www.infoplease.com/askeds/us-home-size.html
48 Savage, L. J., The Foundations of Statistics, John Wiley & Sons, NY 1954.
50 Data from St. Louis Fed,
51 Penguin Press, 2012
52 Harry Markowitz won the Nobel prize in 1990, see http://en.wikipedia.org/wiki/Modern_portfolio_theory
54 e.g. Diana Container Shipping (DCIX) midyear 2013
55 Quotation: “Clearly, sustained low inflation implies less uncertainty about the future, and lower risk premiums imply higher prices of stocks and other earning assets. We can see that in the inverse relationship exhibited by price/earnings ratios and the rate of inflation in the past. But how do we know when irrational exuberance has unduly escalated asset values, which then become subject to unexpected and prolonged contractions as they have in Japan over the past decade?” source: http://en.wikipedia.org/wiki/Irrational_exuberance
56 Zheng, L., "A Survey of the Empirical Difficulties of the Consumption Capital Asset Pricing Models," J. Mod. Econ. Manag., vol. 2, no. 1 (2013)
57 Victor Modugno, "Equity Risk Premiums," Society of Actuaries, Pension Section News, no. 80, May 2013. http://www.soa.org/News-and-Publications/Newsletters/Pension-Section-News/2013/may/Equity-Risk-Premiums.aspx
60 Jerry Gordon, "Why Does China Owe Americans $1 Trillion?" New English Review, June 2012, interview with Jonna Bianco of the Am. Bondholder Fd., http://www.newenglishreview.org/print.cfm?pg=custpage&frm=116983&sec_id=116983
62 Bansal, R., Coleman, W., "A Monetary Explanation of the Equity Premium, Term Premium, and Risk-Free Rate Puzzles," JPE, v. 104 n. 6, Dec. 1996 https://faculty.fuqua.duke.edu/~rb7/bio/Bansal_Coleman_JPE.pdf
63 Pembina Consolidated Silver Mining Co. v. Pennsylvania, 125 U.S. 394 (1886). Via: https://en.wikipedia.org/wiki/Corporate_personhood
64 S&P via USA Today, http://i.usatoday.net/money/_pdfs/11-0615-centurions.pdf
67 According to http://en.wikipedia.org/wiki/Nifty_Fifty the 50 lagged for many years but by the late 1990’s most of the companies returned to “correct valuations” - a period of greater than 20 years – but without the failed members
68 Foster, R., “Creative Destruction Whips Through Corporate America,” Strategy & Innovation, vol. 10, no. 1, Innosight, Lexington, MA, 2012 http://www.innosight.com/innovation-resources/strategy-innovation/creative-destruction-whips-through-corporate-america.cfm
70 Capitalization, loosely, is just the number of outstanding shares times the share price, or what it would theoretically take to buy the company at today’s market price.
72 John Wiley & Sons, 2012
73 Fisher, K., Hoffmans, L., The Little Book of Market Myths, Wiley & Sons, Hoboken NJ, p. 15 (2013).
76 Baker, M., Wurgler, J., “The Equity Share in New Issues and Aggregate Stock Returns,” Journal of Finance, v. LV n. 5, Oct 2000.
77 Research Foundation Publications, vol. 2011 no. 4 (2011), http://www.cfainstitute.org/learning/products/publications/rf/Pages/rf.v2011.n4.5.aspx or full text PDF at
80 Mehra, R. and Prescott E., "The equity premium in retrospect," in: G.M. Constantinides & M. Harris & R. M. Stulz (ed.), Handbook of the Economics of Finance, edition 1, volume 1, chapter 14, pages 889-938, Elsevier (2003).
88 I have not added funds either, making the computation straightforward.
92 Figuratively speaking. I’m sure records are available. However, note that “conglomerates” are not as favored as they once were and corporations may somewhat serialize their ventures, or start entirely separate companies like for example Jobs’ Pixar.
93 Foster, R., “Creative Destruction Whips Through Corporate America,” Strategy & Innovation, vol. 10, no. 1, Innosight, Lexington, MA, 2012 http://www.innosight.com/innovation-resources/strategy-innovation/creative-destruction-whips-through-corporate-america.cfm
94 Victor Modugno, "Equity Risk Premiums," Society of Actuaries, Pension Section News, no. 80, May 2013
96 When buying dollars, the Fed must use some other currency, which it cannot create. The dollars purchased are effectively destroyed, decreasing the money supply and thus raising or as the term is often used “defending” its value.
97 The Fed usually does make a profit, but incoming funds are for all practical purposes destroyed since newly created dollars could as easily be created.
101 Smith, A., An Inquiry into the Nature and Causes of the Wealth of Nations, first published in 1776, coincidentally the date of the Declaration of Independence. See http://en.wikipedia.org/wiki/The_Wealth_of_Nations
102 Popular online discussions are superficial and confuse risk compensation with risk homeostasis, e.g. http://en.wikipedia.org/wiki/Risk_compensation . For a good list of references and a mathematical analysis of the inevitability of corporate risk compensation, see the author’s paper “A Quantitative Model of Corporate Risk Compensation,” currently under review at a leading journal but also available at the author’s website http://mc1soft.com/papers/
103 In a 2002 speech, following concerns in the financial press about deflation, Ben Bernanke referred to a statement made by Milton Friedman about using a “helicopter drop” of printed money to fight deflation. This earned him the nickname of “Helicopter Ben.” But the Fed’s response to 2008-9 deflation was to buy up risky debt and to buy new debt (i.e. to make loans) at low rates. See http://en.wikipedia.org/wiki/Ben_Bernanke
106 Crook, M., Brian, N., “Bear markets in bonds: separating fact from fantasy,” Wealth Management Research, UBS AG, NY-Zurich, Feb. 25, 2013
107 Easterling, E. “The 60/50 Rule,” Crestmont Research, Dec. 28, 2012, http://www.crestmontresearch.com/interest-rates/
108 Prior to 1960 the relation between inflation and interest rates was not as clear as it was after that time. See http://www.crestmontresearch.com/docs/i-rate-relationship.pdf Crestmont Research, “INTEREST RATES & INFLATION: 1900 – 2012”
109 Gilbert Cette, Yusuf Kocoglu, and Jacques Mairesse, "Productivity Growth and Levels in France, Japan, the United Kingdom and the United States in the Twentieth Century," NBER Working Paper No. 15577, Dec. 2009 http://www.nber.org/papers/w15577
111 Okina, K., Shirakawa, M., Shiratsuka, S., “The Asset Price Bubble and Monetary Policy: Japan’s Experience in the Late 1980s and the Lessons,” Monetary and Economic Studies (Special Edition), Feb., 2001. Online: http://www.quartetfest.ca/documents/4743/jap_bubble.pdf
113 U. S. Census Bureau, “2012 Statistical Abstract - 1201 - Equities, Corporate Bonds, and Treasury Securities--Holdings and Net Purchases, by Type of Investor,” The National Data Book, Washington, DC (2012). http://www.census.gov/compendia/statab/cats/banking_finance_insurance/stocks_and_bonds_equity_ownership.html
114 The information on the motivations of foreign accountholders while not the result of systematic study was provided by a colleague at an international bank based on his experiences with clients, and those of his own colleagues.
115 Gordon, J.S., “The High Cost of War,” Barron's, NY, April 9, 2011. http://online.barrons.com/article/SB50001424052970203990104576191061207786514.html
116 Hartman, Thom, Unequal Protection – The Rise of Corporate Dominance and the Theft of Human Rights, Rodale, Emmaus PA, 2004, ISBN-10 1579549551
119 "FORD SEES WEALTH IN MUSCLE SHOALS," The New York Times, December 6, 1921. Retrieved February 24, 2013. http://query.nytimes.com/mem/archive-free/pdf?_r=1&res=9C04E0D7103EEE3ABC4E53DFB467838A639EDE via: http://en.wikipedia.org/wiki/Thomas_Edison
120 Armstrong, M. A., “A Brief History of World Credit & Interest Rates,” http://armstrongeconomics.com/
121 U.S. Census Bureau, Population Estimates Historical Data, http://www.census.gov/popest/data/historical/index.html Via: http://www.multpl.com/us-population-growth-rate/table/by-year or via: Wikipedia, Demographics of the United States, http://en.wikipedia.org/wiki/Demographics_of_the_United_States
122 Shackleton, R., “Total Factor Productivity Growth in Historical Perspective,” Congressional Budget Office working paper 2013-01, March 2013
123 Bureau of Labor Statistics, “Productivity and Costs First Quarter 2013, Revised,” U.S. Department of Labor, USDL 13-1101, June 5, 2013
124 Bureau of Economic Analysis, National Economic Accounts, U.S. Department of Commerce, online data tables revised as of 1st quarter 2013, via http://www.bea.gov/national/index.htm
125 Fisher, K., Hoffmans, L., The Little Book of Market Myths, Wiley & Sons, Hoboken NJ, p. 15 (2013)
126 Shiller, R., Irrational Exuberance, Princeton University Press 2000, Broadway Books 2001, 2nd ed. 2005, updated data via http://www.econ.yale.edu/~shiller/data.htm
127 Stephen Evans, “German call to 'undo' energy privatisation amid Berlin vote,” BBC News, Berlin, Nov. 3, 2013, http://www.bbc.co.uk/news/world-europe-24763311
128 Frank Dohmen and Gerald Traufetter, “Politician Calls for Nationalization of Electricity Grid,” Spiegel Online International, January 16, 2013, http://www.spiegel.de/international/business/member-of-merkel-cabinet-calls-for-nationalization-of-german-power-grid-a-877576.html
129 Sunita Kikeri and Aishetu Kilo, Privatization : Trends And Recent Developments, World Bank, November 2005, http://elibrary.worldbank.org/doi/book/10.1596/1813-9450-3765
131 Zheng, L., "A Survey of the Empirical Difficulties of the Consumption Capital Asset Pricing Models," J. Mod. Econ. Manag., vol. 2, no. 1 (2013)
134 J. Altucher, Choose Yourself, no publisher or date listed, downloaded 2013
137 Consumer Price Index, All Urban Consumers, U.S. Department of Labor: Bureau of Labor Statistics, http://www.bls.gov/opub/hom/pdf/homch17.pdf