Weekend Reads for Investors: The Rising Influence of Activists, Africa, and Twitter
Accommodative central bank monetary policy trumped mostly sluggish economic news and uninspiring first quarter earnings reports in April, pushing most major global equity markets higher. The MSCI World Index gained 2.9% for the month, highlighted by a 12% surge for Japanese stocks. Without a meaningful upturn in economic activity, the resilience of global stock markets will be challenged in the months ahead, as weak top line growth and profit margins that already stand at record highs are certain to leave companies hard pressed to continue to deliver on the earnings front.
Here are some stories to add to your weekend reading list.
Investing Strategies, Theories, and Missteps
- In “A Funny Thing Happened on the Way to Equilibrium,” Ben Inker ponders persistently high profit margins in a mean-reverting world. (GMO, PDF)
- Does momentum investing work? In a word, yes. (Morningstar, log in required)
- The auto industry as a case study in contrarian investing. (AllianceBernstein)
- Bob Seawright explains the value premium. (Above the Market)
- In “An Opening of Minds,” Rob Arnott addresses misconceptions about the equity risk premium, saying, “a cult of equities is worshipping a false idol.” (CFA Magazine)
- Stating the case for indexing. (Vanguard, PDF)
- New evidence that fund managers trade too much. (Financial Analysts Journal)
Outlook for Markets and Humanity
- In “The Endgame is Forced Liquidation,” John Hussman advises, “When the cover of a major financial magazine features a cartoon of a bull leaping through the air on a pogo stick, it’s probably about time to cash in the chips.” (Hussman Funds)
- Aswath Damodaran offers a balanced assessment of US equities. (Musings on Markets)
- In “The Race of Our Lives,” Jeremy Grantham sees civilization’s fate resting on fertility rates and alternative energy. (GMO, PDF)
Regarding Hedge Funds
- Beware the lure of hedge funds. (Research Affiliates)
- Making the case for inclusion of a long-short equity allocation. (Blackstone, PDF)
- A market veteran considers the future of long-short equity. (Inside Investing)
Barbarians at the Gate
- This proxy season, activists are taking aim at bigger targets. (New York Times)
- Short-termism and the dark side of shareholder activism. (Reuters)
- Activists’ interests were buoyed by a recent study on disclosure requirements. (Social Science Research Network)
Bad Behavior on Wall Street
- Columbia’s Jeffrey Sachs tells a Philadelphia Fed audience that Wall Street is full of “crooks.” (The Independent)
- Troubling evidence of the conflicts Wall Street analysts still face and the choices they make. (Enterprising Investor)
- Risks and all, financial markets are embracing Twitter. (Mardle Capital)
- Gillian Tett presciently advised investors to wake up to the Twitter effect on markets (Financial Times), just days before a Twitter hoax sparked a sell-off in stocks. (Wall Street Journal)
- A look inside Bloomberg’s Twitter a-list. (Enterprising Investor)
Apple
- An Apple bear remains skeptical (The Brooklyn Investor), while a self-described “reformed Apple short” sees value. (Inside Investing)
Frontier Markets
- Mohamed El-Erian says, “Believe the hype. Africa’s rise is real.” (Foreign Policy)
- Poor, often corrupt, and politically unstable. What’s not to like about frontier markets? (CFA Magazine)
The Lighter Side
- Buffoon or genius? You make the call after reading William Cohan’s “What Exactly Is Donald Trump’s Deal?” (The Atlantic)
- Andrew Ross Sorkin on ousted Barclay’s CEO Bob Diamond. (New York Times)
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.
Photo credit: ©iStockphoto.com/JLGutierrez
