Weekend Reading for Equity Investors: Dividends, Buybacks, and an Ill-Fated Acquisition

The stock market has been nothing if not resilient as of late. Rising tensions in the Middle East, a contentious election in the United States, disappointing corporate earnings, and equally glum year-ahead outlooks are just some of the headwinds equity investors have faced over the past month, not to mention Europe’s still-reeling economy and the US fiscal cliff, which looms large as a significant threat to the American economy. Even so, most major stock markets — the exception being China’s — have held steady.

Is this burst of optimism enduring, or will it to be tested? To help illuminate the issues, here are some of the stories worth adding to your weekend reading list:

Dissecting the Markets

• Howard Mark’s latest memo includes a US election postmortem and plea for a fresh start in Washington. (Oaktree Capital Management, PDF)
• Mutual fund pioneer Jack Bogle opines about the state of the industry. (WealthTrack)
• Legg Mason’s Michael Mauboussin on the science of success. (Wired)
• Black Swan author Nassim Nicholas Taleb on learning to love volatility. (The Wall Street Journal)

Is the Economy Approaching Stall Speed?

• GMO’s Jeremy Grantham’s “On the Road to Zero Growth” and his recent piece on the looming resource crisis are enough to make you run for cover. (GMO and Nature)
• Robert J. Gordon also sees the US facing significant economic headwinds. (National Bureau of Economic Research)
• Christopher Brightman is comparatively bullish, asking if 1% is the new normal growth rate. (Research Affiliates)
• Laurence B. Siegel offers a dose of optimism in his rebuttal to Grantham and Gordon. (Advisor Perspectives, PDF)

Valuation Matters

• Cliff Asness revisits an old friend in the stock market’s Shiller P/E. (AQR Capital Management)
• Executives need to understand why bad multiples happen to good companies. (McKinsey Quarterly)

Divergent Views on Japan

• Kyle Bass’s recent interview makes clear that he’s as bearish as ever on Japan. (YouTube, University of Virginia Darden School of Business)
• Others see a contrarian case for Japanese stocks. (BloombergBusinessweek)

Risk and Emerging Markets

• Some sobering analysis from Ian Bremmer, who presciently warns of the return of emerging market political risk. (Harvard Business Review)
• The power grab by Egyptian President Morsi becomes exhibit A. (Financial Times)

Money to Burn

• Large corporate cash balances support a growing dividend culture. (Legg Mason)
• Stock buybacks are expected to be on the rise. (New York Times)
• What are the most and least effective stock buyback programs? (Institutional Investor)
• Tom Brakke, CFA sees cash as a weapon. (Inside Investing)

The Hewlett-Packard Blame Game

• Aswath Damodaran on HP’s deal from Hell. (Musings on Markets)

For more news and trends, visit the Equity Investments Community of Practice.

Please note that the content of this site should not be construed as investment advice, nor do the opinions expressed necessarily reflect the views of CFA Institute.

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