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Finally the day has come that your Ivy League (please note that the spell checker capitalized that, not me) education and hard work are paying off: Congratulations, you were just appointed Global CIO.   You are now responsible for investing all of the world’s financial assets and, given your history as a highly educated CIO, steeped in finance and highly experienced managing other pools of capital your goal is to create a diversified portfolio with uncorrelated assets. On the first day of work you decided to use a three step process in setting up the portfolio 1) see what you have, 2) determine what you want to have and 3) make changes to create the desired portfolio. The first thing you do is send your star analyst to give you a rundown of what is in the portfolio you inherited. S/he starts out with collating and aggregating the portfolio which consists of stocks, bonds, and a number of derivatives such as futures, options and credit default swaps as well as a number of hedg

Awareness of boundary issues and scope of analysis is essential in critical thinking. Let’s take a look at energy. We tend to bucket energy sources in buckets like renewable, fossil fuels and nuclear, but what does that really mean? On the face of it fossil fuels and energy sources like solar, wind and hydro have nothing in common and are seem contradictory.   Solar energy obviously is energy captured from the sun and as wind is also a phenomena caused by solar heat it too is a solar derivative.   With respect to hydro, the sun heats water which, with the help of wind evaporates, forms clouds and then rains down in mountains where we can use the water to run turbines and capture kinetic energy. Therefore hydro is also a solar derivative. Fossil fuels are the product of organic remnants of primarily plants which lived a long time ago, died and were transformed under heat and pressure into various forms of fuels like coal, oil and natural gas. Those source plants however wer