Weekend Reads for Investors: September Headwinds

Escalating tensions in the Middle East and concerns about rising interest rates dampened the mood for equity investors in August, causing most global stock markets to lose ground during the month. In the month ahead, there will likely be no shortage of market-moving headlines. Besides the risk of military conflict in Syria, elections in Germany, and budget battles in the United States, investors are sure to be focused on the health of the economy and central bank policy. With September historically the worst month for equities, the resiliency of the market could very well be tested.

Here are some end of summer stories that are worth a look.

Strategic Thinking

• Legg Mason’s Robert Hagstrom, CFA, on what Warren Buffett believes but can’t prove. (Inside Investing)
• Hot Potato: Momentum as an investment strategy. (Research Affiliates)
• Vanguard’s Jack Bogle presents the “cost matters hypothesis.” (Financial Times, paid subscription)
• AQR’s Cliff Asness thinks the big danger for investors is an overreliance on stocks. (Barrons, paid subscription)
• On baseball, active management and the willingness to be wrong. (Aristotle Capital Management, PDF)

Emerging (and Pre-Emerging) Markets

• Investing in Emerging Markets 3.0. (Context)
• The world’s most interesting billionaire may not be Warren Buffett. (Bloomberg Businessweek)
• Focusing on frontier markets. (Enterprising Investor)
• Low-frequency trading? In Zimbabwe, they trade equities the old fashioned way. (The Economist)

India in Focus

• Understanding India’s vulnerability to the emerging market turmoil. (The Economist)
• Some sound advice on avoiding landmines in the Indian stock market. (Beyond Proxy)

Tesla Mania

• Potential roadblock? Tesla’s Chinese wall. (The Economic Observer)
• Valuation guru Aswath Damodaran takes a look at Tesla. (Musings on Markets)

Valuation Matters

• Indentifying firms that are likely to go private. (Liberty Street Economics)
• FT columnist John Authers thinks the Shiller P/E multiple is growing inconvenient for the brokerage community (Financial Times, paid subscription), but economist Brian Wesbury thinks concerns about an elevated Shiller P/E are misplaced. (First Trust, PDF)
• Jeremy Siegel explains why the Shiller P/E is biased and he’s bullish (Financial Times, paid subscription), and in response, Mebane Faber points out what Siegel is missing. (Mebane Faber Research)

Shareholder Values

• Has the maximization of shareholder value gone too far? (The Washington Post)
• Why stock splits have lost their allure. (Bloomberg Businessweek)
• Investors can’t seem to avoid the seven deadly sins of investing. (The Wall Street Journal, paid subscription)
• A look at investors’ average holding periods for stocks through the decades is telling, if not surprising. (BeyondProxy)

Profiteering

• Jeff Matthews on the “bastardization” of GAAP earnings. (Jeff Matthews Is Not Making this Up)

Goldman Sachs Under Siege

• In an excerpt from his recently published book, What It Takes: Seven Secrets of Success from the World’s Greatest Professional Firms, Charley Ellis says the “recent crises at Goldman Sachs were at least several decades in the making.” (Institutional Investor)

Speaking of Hedge Funds

• Gillian Tett thinks hedge funds have a succession problem. (Financial Times)
• Mistakes were made . . . Pershing Square’s second-quarter letter to investors. (Scribd)
• William D. Cohan in defense of Bill Ackman. (Bloomberg)

From the Archives

• Michael Burry (of The Big Short fame) talking strategy. (csinvesting, PDF)

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