What Ten Geopolitical Trends Are Shaping Tomorrow’s Markets? With William Megginson

What do financial economists make of the current geopolitical landscape? Hosts Kate Holland and Veljko Fotak, along with today's guest Bill Megginson, talk about the current state of geopolitics. They discuss tariffs, climate change politics, the internal political dynamics of China, Canada, and Russia, as well as newly emerging peace in the Middle East. And more, spanning the rearmament of the West, the increasing role of state ownership, the burgeoning space economy, and the projected impact of AI on global finance. Concluding with demographic trends and their potential to reshape the global economic landscape, this episode provides an overview of the most pressing geopolitical trends investors should be aware of.

Timeline:

00:00 Welcome to Questions in Finance

00:37 Introductions

10:17 Trend One. A New Tariff Regime

15:48 Trend Two. Climate Politics

21:02 Trend Three. Political Change in Canada, Russia, China, Israel

42:00 Trend Four. Peace in the Middle East!

50:06 Trend Five. Re-armament of the West

58:35 Trend Six. Europe's Ghosts

01:00:57 Trend Seven. The Re-emergence of State Capitalism

01:05:41 Trend Eight. The Space Economy

01:11:57 Trend Nine. AI is Taking Over the World

01:23:54 Trend Ten. Demographics Destiny?

01:31:34 Kate's Fear, Airborne Viruses and Pandemics

01:35:17 The Short Version...

Soundtrack:

The soundtrack is based on "Walk on a Funky Street" by MondayHopes. Thanks for the music and keep up the good work! Use is under the Pixabay Content License.

How Does Policy Uncertainty Affect Investments?

In this episode, university professors Kate Holland and Veljko Fotak explore academic research on the impact of policy uncertainty on investment decisions, markets, and firms. The episode underscores that high levels of policy uncertainty tend to depress corporate investment, hiring, and economic growth, as firms delay major expenditures. The conversation spans equity markets and higher risk premia, as well as 'flight to safety' effects in bond markets and the crucial question: Why are markets seemingly not reacting to the high levels of uncertainty in the summer of 2025?

Timeline:

00:00 How Does Policy Uncertainty Affect Investments?

06:01 Welcome to Questions in Finance

06:39 Defining and Measuring Policy Uncertainty

07:45 Economic Policy Uncertainty Index (EPU)

11:53 Historical Context and Validation of the EPU

16:47 Corporate Reactions to Policy Uncertainty

24:08 Impact on Mergers and Acquisitions

26:14 Research and Development During Uncertainty

30:14 Policy Uncertainty and Equity Markets

38:00 What is NOT Happening in 2025

47:42 Uncertainty and Bond Markets

49:39 Flight to Safety Mechanism

58:10 Political Uncertainty and Option Markets

59:06 Summary and Final Thoughts

Bibliography:

Atanassov, Julian, Brandon Julio, and Tiecheng Leng. "The bright side of political uncertainty: The case of R&D." The Review of Financial Studies 37, no. 10 (2024): 2937-2970.

Azzimonti, Marina. "Partisan conflict and private investment." Journal of Monetary Economics 93 (2018): 114-131.

Baker, Scott R., Nicholas Bloom, and Steven J. Davis. "Measuring economic policy uncertainty." The Quarterly Journal of Economics 131, no. 4 (2016): 1593-1636.

Bianconi, Marcelo, Federico Esposito, and Marco Sammon. "Trade policy uncertainty and stock returns." Journal of International Money and Finance 119 (2021): 102492.

Bonaime, Alice, Huseyin Gulen, and Mihai Ion. "Does policy uncertainty affect mergers and acquisitions?." Journal of Financial Economics 129, no. 3 (2018): 531-558.

Boutchkova, Maria, Hitesh Doshi, Art Durnev, and Alexander Molchanov. "Precarious politics and return volatility." The Review of Financial Studies 25, no. 4 (2012): 1111-1154.

Brogaard, Jonathan, and Andrew Detzel. "The asset-pricing implications of government economic policy uncertainty." Management science 61, no. 1 (2015): 3-18.

Gulen, Huseyin, and Mihai Ion. "Policy uncertainty and corporate investment." The Review of Financial Studies 29, no. 3 (2016): 523-564.

Hassan, Tarek A., Stephan Hollander, Laurence Van Lent, and Ahmed Tahoun. "Firm-level political risk: Measurement and effects." The quarterly journal of economics 134, no. 4 (2019): 2135-2202.

Julio, Brandon, and Youngsuk Yook. "Political uncertainty and corporate investment cycles." The Journal of Finance 67, no. 1 (2012): 45-83.

Kelly, Bryan, Ľuboš Pástor, and Pietro Veronesi. "The price of political uncertainty: Theory and evidence from the option market." The Journal of Finance 71, no. 5 (2016): 2417-2480.

Leippold, Markus, and Felix Matthys. "Economic policy uncertainty and the yield curve." Review of Finance 26, no. 4 (2022): 751-797.

Nguyen, Nam H., and Hieu V. Phan. "Policy uncertainty and mergers and acquisitions." Journal of Financial and Quantitative Analysis 52, no. 2 (2017): 613-644.

Pastor, Lubos, and Pietro Veronesi. "Uncertainty about government policy and stock prices." The Journal of Finance 67, no. 4 (2012): 1219-1264.

Pástor, Ľuboš, and Pietro Veronesi. "Political uncertainty and risk premia." Journal of Financial Economics 110, no. 3 (2013): 520-545.

Wang, Junbo, Chunchi Wu, Xiaoguang Yang, and Ye Zhou. "Policy uncertainty and corporate bond issuance costs." Review of Quantitative Finance and Accounting (2025): 1-42.

Soundtrack:

The soundtrack is based on "Walk on a Funky Street" by MondayHopes. Thanks for the music and keep up the good work! Use is under the Pixabay Content License.

Can You Invest Like Warren Buffett?

In this episode of 'Questions in Finance,' hosts Kate Holland and Veljko Fotak chat about the life and investment philosophy of Warren Buffett, exploring his journey from a young investor to the sixth richest man in the world. The discussion covers his unique approach to investing, the four pillars of his success, and the lessons learned from both his hits and misses in the investment world. Kate and Veljko also reflect on what makes Buffett special and whether his investment strategies can be replicated.

Timeline:

00:00 Can You Invest Like Warren Buffett?

03:13 Welcome To Questions in Finance

09:32 The Four Pillars: Buffett's Main Investments

14:24 Public vs. Private Holdings: A Financial Overview

21:00 Buffett's Investment Hits and Misses

27:53 Buffett's Political and Financial Maneuvering

30:55 The Williams Energy Rescue

37:40 Cash Reserves and Market Outlook

46:14 Characteristics of Buffett, a Successful Investor

52:12 Journalists' Take on Buffett

54:04 What Makes Warren Buffett Special?

01:00:17 Warren Buffett's Quotes

01:06:42 Let's Summarize Our Warren Buffett Discussion

01:11:27 Buffett is Passing on the Reins to Greg Abel

Soundtrack:

The soundtrack is based on "Walk on a Funky Street" by MondayHopes. Thanks for the music and keep up the good work! Use is under the Pixabay Content License.

Should Space Be Privatized? With William Megginson

In this episode of 'Questions in Finance,' Kate and Veljko explore the space economy with Bill Megginson, Professor and Price Chair in Finance at the University of Oklahoma. They discuss the history, financing, and future prospects of space exploration, focusing on the pivotal roles played by private enterprises like SpaceX and government entities such as NASA. The conversation highlights the dramatic reduction in launch costs, the rise of satellite technology, and the competition between the US and China. They delve into the financing challenges of space ventures, the impact of venture capital, and the broader economic implications, touching on topics from military applications to the pursuit of knowledge and technological spinoffs. The episode concludes with insights into the future roles of commercial and government sectors in space activities.

Timeline:

00:00 16 Psyche and Quadrillions of Dollars

07:44 Spaceflight Economics

10:19 Today's Guest, Bill Megginson

11:03 Should the Spaceflight Economy be Privatized?

15:02 Dogs. And Cats.

16:17 Basics and Stats of the Space Economy

21:23 A Bit of History

27:17 Costs and Benefits

35:06 Private-sector Efficiency, SpaceX

45:08 From the Outer Space Treaty to Artemis

49:13 The Race to Mars

53:58 Space Force!

59:44 Venture Capital in Space

01:10:55 Space Mining, Technology Transfer

01:19:16 Space Jobs

01:34:00 The Geopolitics of Space

01:41:26 Summarizing

Bibliography:

Megginson, William L. "The Financial Economics of Spaceflight." Available at SSRN 4901992 (2024).

Weinzierl, Matthew. "Space, the final economic frontier." Journal of Economic Perspectives 32, no. 2 (2018): 173-192.

Other Sources:

Bureau of Economic Analysis data on the Space Economy: https://www.bea.gov/data/special-topics/space-economy

Soundtrack:

The soundtrack is based on "Walk on a Funky Street" by MondayHopes. Thanks for the music and keep up the good work! Use is under the Pixabay Content License.

Who Paid for the 2018 Trade Tariffs?

In this episode of 'Questions in Finance,' Professors Kate Holland and Veljko Fotak discuss the academic research on the impact of the 2018 US trade tariffs. The conversation revolves around who ultimately paid for these tariffs—US consumers and importers—and the nuanced effects on retail prices. The discussion covers the impact of retaliatory tariffs on US exporters, before focusing on the winners—select US producers and the government, raising more revenue. The episode also explores the political implications, revealing how tariffs were strategically used to gain votes in battleground states and the broader economic consequences, including substantial redistribution of wealth and small net losses for the aggregate US economy. The episode concludes with a mapping of lessons from the past to the trade war emerging in 2025.

Timeline:

00:00 Who Paid for the 2018 Trade Tariffs?

00:52 Welcome to Questions in Finance

01:31 The Three Papers

05:24 A Bit of Recent History

12:36 So... Who Pays?

16:03 Currency Adjustments

18:06 Retaliatory Tariffs

24:35 Import Prices Vs. Retail Prices

32:09 Quantifying the Impact of Tariffs

45:30 Summary of the Main Findings

49:31 The Political Effects

57:19 Future Episodes

58:01 Mapping What We Learned onto the Present

01:05:32 Concluding Remarks

Bibliography:

Amiti, Mary, Stephen J. Redding, and David E. Weinstein. "The impact of the 2018 tariffs on prices and welfare." Journal of Economic Perspectives 33, no. 4 (2019): 187-210.

Cavallo, Alberto, Gita Gopinath, Brent Neiman, and Jenny Tang. "Tariff pass-through at the border and at the store: Evidence from us trade policy." American Economic Review: Insights 3, no. 1 (2021): 19-34.

Fajgelbaum, Pablo D., Pinelopi K. Goldberg, Patrick J. Kennedy, and Amit K. Khandelwal. "The return to protectionism." The Quarterly Journal of Economics 135, no. 1 (2020): 1-55.

Feng, Chaonan, Liyan Han, and Lei Li. "Who pays for the tariffs and why? A tale of two countries." (2023). SSRN Working Paper: https://papers.ssrn.com/sol3/papers.cfm?abstract_id=4477985

Soundtrack:

The soundtrack is based on "Walk on a Funky Street" by MondayHopes. Thanks for the music and keep up the good work! Use is under the Pixabay Content License.

Is a U.S. Sovereign Wealth Fund a Good Idea?

In this episode of 'Questions in Finance,' hosts Kate Holland and Veljko Fotak are joined by guest expert William Megginson, Professor and Price Chair in Finance at the University of Oklahoma, to discuss the concept of Sovereign Wealth Funds (SWFs). The conversation centers around a recent proposal for the creation of an American Sovereign Wealth Fund, initiated by an executive order from Donald J. Trump. Bill Megginson provides an in-depth exploration of what SWFs are, why countries establish them, and the various types that exist. The episode also debates whether a U.S. SWF is a good idea, considering both potential benefits and significant drawbacks. The discussion includes historical performance of SWFs, potential political interference, and alternative ways the U.S. could use its resources for economic and strategic purposes.

Timeline:

00:00 Is a U.S. Sovereign Wealth Fund a Good Idea?

01:36 Welcome to Questions in Finance

02:14 Introducing Today's Guest, Bill Megginson

08:03 A U.S. SWF? 3 out of 10!

09:08 SWF Definition and Purpose

22:11 SWFs, Strategic Funds, Stabilization Funds

27:22 SWF Underperformance

29:37 Political Distortions and Intergenerational Wealth

40:38 Industrial Policy

45:31 A U.S. SWF? How?

58:31 Issuing Bonds to Fund a SWF?

01:05:43 Government-Owned Venture Capital

01:15:46 Autocrats, Democrats, and SWFs

01:16:52 Space Economics!

01:18:29 Summary

Bibliography:

Bortolotti, Bernardo, Veljko Fotak, and William L. Megginson. "The Sovereign Wealth Fund discount: Evidence from public equity investments." The Review of Financial Studies 28, no. 11 (2015): 2993-3035.

Holland, Kateryna. "Government investment in publicly traded firms." Journal of Corporate Finance 56 (2019): 319-342.

Megginson, William L., Xin Yue Zhou, and Robert L. Gholson. "The case against a U.S. Sovereign Wealth Fund." Financial Review 60, no. 1 (2025): 5-12.

Other Sources:

Stephen Jen in the Financial Times, February 17, 2025, "Don’t dismiss Donald Trump’s idea of a Maga SWF"

https://www.ft.com/content/de289862-d5eb-4376-9c4a-d6e08b6b324b

White House SWF Order:

https://www.whitehouse.gov/presidential-actions/2025/02/a-plan-for-establishing-a-united-states-sovereign-wealth-fund/

Soundtrack:

The soundtrack is based on "Walk on a Funky Street" by MondayHopes. Thanks for the music and keep up the good work! Use is under the Pixabay Content License.

Do Pension Bailouts Create Moral Hazard? With Michael Dambra

In this episode of 'Questions in Finance,' host Veljko Fotak dives into the complex world of moral hazard and pension bailouts with guest Michael Dambra, the Kenneth Colwell Chair of Accounting and Law at the University at Buffalo. They discuss the concept of moral hazard, its historical context, and its implications in modern economics, particularly focusing on recent pension bailouts under the American Rescue Plan (ARP). The conversation sheds light on how bailout expectations can alter financial behavior and risk-taking in the pension fund sector. Mike and Veljko discuss potential alternatives, but also political implications: why this plan was such an ineffective vote-buying scheme, and why taxpayers are the big losers.

Timeline:

00:00 Minus Kate, plus Mike

01:16 Understanding Moral Hazard

02:56 Historical Context of Moral Hazard

06:41 Welcome to Questions in Finance!

07:22 Mike Dambra's Background and Research

08:43 The Crisis in Pension Funding

18:18 The American Rescue Plan and the Butch Lewis Act

24:26 Research Design and Findings

35:01 Which Funds Get Bailouts?

38:30 Behavior of Plans Receiving Bailouts

41:06 Assessment and Alternatives

43:15 Comparing Pension and Banking Sectors

47:37 More on Alternatives

49:11 Bailouts, Politics, and Spin

51:36 Winners and Losers of the Bailout

54:42 Political Bias in Research

01:00:54 Who Cares?

01:05:41 Can Bailouts Impose Discipline?

01:08:58 How about a National Pension System?

01:09:49 Defined Benefits vs. Defined Contributions

01:11:11 Final Thoughts and Future Plans

Bibliography:

Arrow, Kenneth J. "Uncertainty and the welfare economics of medical care." American Economic Review 53, no. 5 (1963): 941-973.

Dambra, Michael, Phillip J. Quinn, and John Wertz. "Economic consequences of pension bailouts: Evidence from the American Rescue Plan." Available at SSRN 4406502 (2023).

Novy‐Marx, Robert, and Joshua Rauh. "Public pension promises: How big are they and what are they worth?." The Journal of Finance 66, no. 4 (2011): 1211-1249.

Online Sources:

Department of Labor Report Links:

http://www.dol.gov/newsroom/releases/ebsa/ebsa2024

Soundtrack:

The soundtrack is based on "Walk on a Funky Street" by MondayHopes. Thanks for the music and keep up the good work! Use is under the Pixabay Content License.