Weekend Reads for Investors: Equinox Edition
The equinox is super interesting to me. Twice per year, everyone everywhere on the face of the planet experiences exactly the same amount of sunlight and axis tilt relative to the ecliptic. Ecosystems in balance also are demonstrated to be richer and more robust. Of course, in finance, does anyone disagree with the logic of diversification? I see these phenomena, among many other signs, as nature’s way of communicating to us the need for balance in all things.
Of course the big story — as in the very big story, the continuing story — is the willingness of central bankers globally to underwrite an equity market put option. Consequent to recent moves by the European Central Bank (ECB), global equity markets have taken off. That, coupled with the seeming connection of many trades tied to moves in commodities, resulted in stock markets that are feather light. Will the wind stay beneath these wings? Who knows really? But my own view is that occasionally bears eat birds.
The topsy turvy state of investing since the Great Recession makes me want to retreat back to my home in Santa Fe, New Mexico, for some rejuvenation. Turns out that I am not the only one who pines for the clarity of the desert as the story about this quant who moved his investment shop to Las Cruces, New Mexico proves — and he isn’t the only one looking for better work-life balance! (Bloomberg)
As Asian economies mature, they are attempting to strike the right balance between opportunity and safety (i.e., regulation). In particular, some believe that India needs a bad debt agency, while China needs a super watchdog. (Finance Asia)
Speaking of balance, how do you balance the strengths of mutual funds with those of exchange-traded funds (ETFs)? If you have longed for such a product, then you may be interested in Eaton Vance’s NextShares, which are open to firms not named Eaton Vance. I think this product is likely to be a big success. (Reuters)
There are other risks in financial markets besides the huge shot of monetary stimulus dating back to the Alan Greenspan era of the mid-1990s. One that often gets short shrift is how whacky financial engineering has increased the complexity of our financial system. Don’t believe me? Just ask those whose fortunes are connected to SunEdison, where financial engineering was taken out of balance. (The New York Times)
Environmental, Social, and Governance (ESG)
Normally I have an extended ESG section because the excess returns and the more comprehensive framing of risks is worth paying attention to. But this month there were surprisingly few stories of note. One exception is the interesting work done by researchers who found a way to turn carbon dioxide into sustainable concrete. (R&D Magazine)
We are at an interesting moment in human history when it comes to the intelligence conversation. Sadly, in investing, the intelligence that receives the most attention is “artificial intelligence.” I understand why since algorithms running on AI backbones lead to alpha and to greater market liquidity in some cases. Yet we are also at a precipice when it comes to “natural intelligence.” Neuroscientists, biochemists, and psychologists are day-by-day learning more about how our minds work. Since “natural intelligence” creates “artificial intelligence,” these developments should interest all of us.
Best of all worlds? A balance between artificial and natural intelligence development, as represented by this piece about learning to fly a plane via expert pilot brainwave patterns. (R&D Magazine)
A critical read is this generally excellent article on the enormous power of the unconscious brain. One fundamental quibble I have with the piece is the equation of brain equals mind. My understanding of quantum physics leads me to believe that consciousness is non-local. This makes the brain a kind of radio set, or tuner, for the mind. In any case, this is a fascinating story. (BBC)
Here is an interesting podcast about “One Professor’s Discovery about Speaking Truth to Power” and its effect on your workplace. (ProPublica)
Lastly, one of my favorite television shows of all-time is MythBusters. I think the show frequently draws overly stringent conclusions, but nonetheless its heart seems in the right place to me. In a similar vein, here are 25 facts that are not true. (Salon)
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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.
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