Practical analysis for investment professionals
05 August 2016

Weekend Reads for Investors: Summer Reading Edition

Posted In: Weekend Reads

Weekend Reads for Investors: Summer Reading Edition

This edition of Weekend Reads features mostly lighthearted material. I chalk this up to the typical lull in summertime news in the investment community.

Of course, there are some exceptions, including a very thoughtful story about Janus’s Bill Gross — still feels awkward to say that, by the way — and his view of the global economy. In short, he is dubious about it. My own view is that central banks around the world may have “saved” the global economy in 2009, but that by perpetuating variations of stimulus they are massively distorting the market mechanism. (Business Insider)

A possible crack in the architecture of central bank stimulus: The Bank of Tokyo no longer wants to serve as a primary dealer for Japanese government bonds (JGBs). This is extremely noteworthy and a classic example of an important story receiving too little attention. Think about what this means: A bank that has intimately helped finance its government — and, by extension, its regulator — is so upset that it bows out of the arrangement. If you need a deeper dive analysis on this subject, Voya Financial’s Karyn Cavanaugh participated in an interesting interview on the JGB “dirt sandwich.” (Financial Times, Bloomberg)

Another piece that is more storm cloud than sunshine is an analysis of China’s maritime disputes with the Philippines and other nations in Southeast Asia. I first wrote about the potential for conflict in this area several years ago. Even though the United Nations (UN) ruled against China, I doubt this is the last we will hear about the issue. Why? Because China’s unrequited thirst for oil must be quenched through these narrow straits. Choke them off, and China has big problems. (Council on Foreign Relations, CFA Magazine)

Mercifully, we now turn to lighter fare. Speaking of sunshine, an examination of the California solar energy market is well worth your time. Back in the late 1990s and early 2000s, many in the energy community thought California was foolhardy for investing so much capital in alternative energy. Now the state is having a laugh at the expense of its critics. Here is what other states could learn about solar energy by following California’s example. (R&D Magazine)

My wife and I love to travel around the world. Frequently this takes us to places that our friends perceive as dangerous. Imagine my gratitude in coming across this lovely piece: an examination of the level of violent crime in nations across the globe. Why is this “lighthearted”? Because, the overwhelming majority of countries on the map have very low levels of violent crime. This story does not get out enough. Yes, I have experienced several hair-raising incidents in my travels, no doubt. But to watch the evening news, you would think we are in the midst of World War III. I acknowledge terrorism as a threat, certainly, but I am more likely to be struck by lightning than to die in a terrorist attack. (Der Spiegel)

This next story deals with one of the leakages of capitalism: the moral “free rider” who benefits from an arrangement yet does not experience the costs associated with it. How to correct this has long puzzled economists and philosophers. Researchers conducted a study using game theory and believe that they have a solution to the problem. Fascinating stuff. But we are not done. A similar story from the same publication demonstrates that the stock market behaves very similarly to a light bulb at the physical level. I am not sure how much I believe this because I am always leery when hard sciences intrude on soft sciences. But you never know. Perhaps these folks have cracked the code of how to model market structure and future returns. Much more likely is it’s just a spurious correlation, as is hilariously illustrated in this fine piece of data mining. Thanks to my colleague, Lauren Foster, also a Weekend Reads author, for sharing this story with me and, by extension, you. (R&D Magazine, tylervigen.com)

Our remaining reads are all of the “gee whiz” variety: They explore scientific discoveries not immediately applicable to our daily work as investment pros but that nonetheless keep our minds sharp. For example, researchers now believe that our immune systems play a direct role in how we choose to interact socially. In other words, behavior may not just be a choice or a brain-related phenomenon. Speaking of the brain, scientists have finally examined and visualized the activity of synapses and its complex vastness with a high degree of precision. My own view is that the brain is an organ that merges the quantum world with the Newtonian world, and that there are quantum effects at the synapse level. Put another way: The brain allows minds to collapse wave phenomena into particles. You might be right in thinking I am crazy for believing this, but researchers are beginning to notice quantum effects in strange places, including in photosynthesis. So this is another biology-meets-physics story. (R&D Magazine, Blanpied Lab, BBC)

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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/Mike_Sheridan

About the Author(s)
Jason Voss, CFA

Jason Voss, CFA, tirelessly focuses on improving the ability of investors to better serve end clients. He is the author of the Foreword Reviews Business Book of the Year Finalist, The Intuitive Investor and the CEO of Active Investment Management (AIM) Consulting. Voss also sub-contracts for the well known firm, Focus Consulting Group. Previously, he was a portfolio manager at Davis Selected Advisers, L.P., where he co-managed the Davis Appreciation and Income Fund to noteworthy returns. Voss holds a BA in economics and an MBA in finance and accounting from the University of Colorado.

Ethics Statement

My statement of ethics is very simple, really: I treat others as I would like to be treated. In my opinion, all systems of ethics distill to this simple statement. If you believe I have deviated from this standard, I would love to hear from you: [email protected]

5 thoughts on “Weekend Reads for Investors: Summer Reading Edition”

  1. Tom Cleveland says:

    Thanks, especially for the science related articles. As a chemical engineer that wandered into finance and then made a career out of it, I still have a fond love for physics, biology, and anything to do with other sciences. If by making a comment, I have departed the ranks of those “moral free-riders” that you warned us against, then so be it. Thanks again for your varied reading habits! They are much appreciated!

    1. Hi Tom,

      You are so welcome! You are definitely not a free-rider : ) We are happy to have you as a reader on the Enterprising Investor!

      Yours, in service,

      Jason

  2. Andrew Berselli says:

    Thanks for the post

    1. Hi Andrew,

      You are welcome!

      With smiles,

      Jason

  3. STE says:

    Thanks ! Great post , I like the story from Bill Gross about the game of “Monopoly ” ,, yes ,, stimulus without target will create ” bubble in some asset class,,, and sifting from one to the other ,,, credit creation need to target for more productivity and job creation ,,, cheers .

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