Weekend Reads for Investors: Post-Election Pick-Me-Up

Categories: Behavioral Finance, Economics, Investment Topics, Linkfest, Quantitative Methods
Weekend Reads for Investors: Post-Election Pick-Me-Up

Just when I thought there was no hope of finding a density of quality information to share with you, humanity delivered! For two of my editions of Weekend Reads in a row, there is so much to share. Why clog it up with a big preamble?

A comment though: I am grateful for many things, but especially that the US election cycle has ended. I am exhausted. Unlike most, I do not think of this election as a harbinger of the failure of democracy, but instead it represents the tectonic collision of an ascending power — the individual empowered by media — colliding with declining political power. Check out the Investment Idea Generation Guide for more on this subject, but people power is, dare I say it, trumping political power.

Also, I believe that there are ways to navigate toward unity, rather than disunity, but it does require that we change how we interact with the world and ourselves. To this end, I highly recommend the work of Marshall Rosenberg and his principles of non-violent communication.

Now, on to the Weekend Reads.

Investing

Among the stories of the year so far is this commentary by Angel Gurría, secretary general of the Organization for Economic Cooperation and Development (OECD) — not exactly a lightweight organization. He points out that it is time to stop pretending that an economy can be controlled. This has many ramifications. In the context of a presidential election, does a leader really deserve credit or debit for economic performance? Probably not. But our preference for singular vehicles of responsibility — the king, the president — seems to ensure this mistaken line of thinking will continue. (NewCo Shift)

Speaking of which, have you wondered why we have more innovation, but less growth? Rick Rieder, managing director and global CIO of fixed income at BlackRock, had a fascinating statistic he featured last year that I have selfishly kept mum about due to its value: The global economy is growing like gangbusters on a unit basis, but is shrinking on price basis. In other words, revenues = price x quantity, but due to the huge reductions in costs, it looks like economic growth is slow. Wow! (Vox)

Calcbench is among my favorite sources for financial data. This Calcbench study looks at how long it takes for quarterly earnings to be released and what that implies for investors. I assure you this is more interesting than it sounds on initial approach. (Calcbench)

Last up in this category is this excellent, cut-to-the-chase, take-no-prisoners editorial by Avni Patel Thompson, a woman entrepreneur, about why there are not more female start-up founders. Best of all is her practical advice for how women can make their start-ups successful. (VentureBeat)

Behavioral Finance

This story’s headline says it all: “What Happens Inside Our Brain When We Respond to Choices?” This research points out the impossibility of making a purely objective and unemotional decision. Improving your response to bias, therefore, is not about becoming less emotional, but becoming more aware. (R&D Magazine)

Check out this outstanding “Cognitive Bias Cheat Sheet” I saw on LinkedIn courtesy of Daniel Crosby, author of The Laws of Wealth, which I intend to read very soon. Another of my favorite financial data sources is Essentia Analytics, a software company whose engine examines your trading behavior to gain insight into your decision making. From their ace blog comes this piece about “5 Easy Ways to Improve Your Process Using Behavioral Science.” (Better Humans, WealthManagement.com, Essentia Analytics)

On a totally different subject, many of you know that along with leading criminal justice professionals, I helped develop a lie detection guide for the benefit of CFA Institute members. Look for it to be released in 2017. This related piece highlights how little lies can very quickly become big lies. (MSN)

Quantitative Methods

This category has not made an appearance in any Weekend Reads for a while, and for that I apologize. However, the US presidential election drove a lot of content examining the limitations of polling. Among these limitations: Polls are approximations of reality and have inherent flaws, usually owing to methodology. This fascinating story details how one man single-handedly skewed a national presidential poll. Another, more-pernicious version of the preceding is when polls reflect the unconscious biases of their creators. (The New York Times, ProPublica)

I love this critique of the central bank wonks and their models that don’t reflect reality. Hint: Central banks need friction in their models. (Financial Times)

Did you know that there is an active and heated discussion among statisticians about the dangers of p-values? Heated might be too strong a word. Maybe I should describe it as skewing left-tail? (Aeon)

I have said for years that quantitative methods need to be coupled with qualitative methods. Both Brexit and the Trump victory demonstrate that all statistical methods have profound shortcomings. That’s something to think about as the big-data-meets-artificial-intelligence-(AI)-meets-robo-advisers-meets-Skynet conversation is advanced by those so confident in the demise of human thinking.

Technology

What Do People — Not Techies, Not Companies — Think about Artificial Intelligence?” I expected the answer would be fear and any number of scary images from science fiction movies, but people’s wisdom seemed to prevail. For the record, I am neither a blind advocate nor detractor of AI. Instead, I argue that, as with any powerful tool, we should be circumspect about its possibilities. (Harvard Business Review)

Environmental, Social, and Governance (ESG)

I was a panelist at a recent Columbia University event about investing in natural capital. Many of my preparatory comments are coming to you in a series of five articles, tentatively titled Ways Markets Leak. The following articles document profound changes:

Fun Stuff

I consider myself a highly productive employee, accomplishing in hours what would otherwise take several days. This is not because I am smarter, but because I am wiser. The are complex reasons for this, but it is not a gift. Instead it is something I worked hard to achieve.

One way to capture a productivity dividend is to work only the number of hours necessary to fulfill your job functions. Hah! Fat chance! Our manufacturing model of organizing economies demands eight-hour work days regardless of productivity. Even worse, social media and smart technology mean you can work every moment of every day if you so choose. Hopefully your salary reflects such sacrifices, your health surely will. Rare is the company that insists its employees take a break. . . . Way to go Unicharm! (Japan Times)

From the “Wow, This Is Amazing File”: scientists have created the first-ever time crystal. I cannot possibly claim to understand exactly what is going on here, but lest you think the opening paragraph to this section finds me lacking in humility, look at this insanely genius thing! (R&D Magazine)

The following are essays on my very favorite topic, other than Ancient Egypt: consciousness. What is it? How do we cultivate more of it? Why is it important? Here are two theories:

By the way, it is because of my deep interest in consciousness that I am so productive. I would love to hear your thoughts on these last two stories in particular. Use the comments section below.

Playlist

Last, an experiment: I always write with music on. It’s really important to me. Here are the artists I listened to as I authored this post:

Beastie Boys, The Verve, The Black Keys, Sonic Youth, Ebn Ozn, The Rolling Stones, The Chemical Brothers, Love and Rockets, Adam Ant, U2, Al Green, The Dandy Warhols, Goldfrapp, Smashing Pumpkins, Bryan Ferry, Duke Ellington, Van Halen, The Gladiators, INXS, Hamsa Lila, Alberta Hunter, Simple Minds, The Hippy Boys, Evil Superstars, Peter Sarstedt, The Fixx, Sly and the Family Stone, Dexys Midnight Runners, and the Greenskeepers.

Am I showing too much of my youth in this list?

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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/Christian Mueller

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