Weekend Reads for Investors: Night and Day Edition

I find the current season a fitting backdrop for the activity in global financial markets.

Specifically, we are in the dead center of one of the equinox seasons: fall in the northern hemisphere and spring in the southern hemisphere. Of course, an equinox is a time of roughly equal day and night.

I think you likely agree with me that investors find themselves experiencing equal parts light and dark, yes? For example, in the United States, the US Federal Reserve has not raised interest rates but still insists it will. Equity prices seem to rise dramatically one week and then fall dramatically the next. In short, prices seem stuck in a range. Interest rates, too, seem stuck within rises and falls. And so on for other important investor variables, too.

Here are the Weekend Reads for Investors that have caught my eye this equinox.

Night Stories

• Regarding the limits of central bankers and their monetary policies, this piece argues that the European Central Bank (ECB) is nearly out of options going forward due to the extraordinary nature of its actions taken since the Great Recession. (Wall Street Journal)
• No less an authority than the International Monetary Fund (IMF) warned recently that financial markets are becoming less liquid, not more so, once aggressive central bank actions are properly accounted for. (Financial Times)
• In a sign of the odd moment we find ourselves in, my fellow investors, swaps dealers here in the United States are again issuing negative quotes for benchmark swaps over Treasury yields. For those of you not in the know, the swaps market frequently presages real market activity, and in this case it certainly did. (Financial Times)
• In my estimation, a lack of attention paid to demographics is an all too common error in our business. I just moderated a panel discussion recently where future investment trends were discussed. Sadly, demographics were hardly mentioned. Yet, demographics remain one of the easiest things to predict, and hence to discount. One of my favorite journalists, James Saft, points out the obviousness of certain forthcoming trends. His tea leaf source? Demographics. (Reuters)

Day Stories

• We all may disagree about the causes of growing income inequality across the globe, but hopefully we agree it is an important issue. In a genuinely hopeful sign, the media is beginning to get creative in its examination of the issue. For example, this article considers what would happen if the richest person in every country gave their money to the poor. (Bloomberg)
• To me there is a preponderance of stories excitedly calling for an end of the human and the rise of the machine. I consider this ridiculous. I am a big believer in the human being, especially when compared with our own creations: computers. This article discusses how people can win the race against machines. (Wall Street Journal)
• One of my pet peeves is the misuse of data to support what are actually preferences. John Kay, he of the famous UK commission that explored the Great Recession, criticizes what he calls “mathiness” in this excellent article. Lost in the discussion is that math, science, and rationality dominate our world view to such an extent that it leads to a delegitimizing of opinions based on experience and the wisdom so gained. (Financial Times)
• Another encouraging trend is the open discussions beginning to take place about the importance of conversations with the management of businesses (Wall Street Journal). In my portfolio management days I considered my phone conversations, conference call questions, conference questions, and in-person interviews critical to my success. Yet this space was largely a black box, until now. Also, check out some of my materials on lie detection. (Enterprising Investor)
• Last, I am not sure of your politics, but mine usually take a backseat to people being better able to exercise their free will and to improve their lives. So I am enthused by the idea that Iran is returning to the Treasury bill market. I am no Neville Chamberlain apologist, just a fan of economic power over military power. (Financial Times)

Now for Something Completely Different

• Quantum computing promises to change the world, yet until recently much of the quantum computing world existed only in the realm of white papers and propositions for how such a device could be built. A recent discovery, how to build a two-qubit logic gate, massively improves the chances that quantum computing will become reality. (R&D)

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All posts are the opinion of the author. As such, they should not be construed as investment advice, nor do the opinions expressed necessarily reflect the views of CFA Institute or the author’s employer.

Image credit: iStockphoto.com/JLGutierrez