Practical analysis for investment professionals
26 May 2017

Weekend Reads for Investors: Super-Mega High-Quality Edition

Posted In: Weekend Reads

I have many stories this month so there won’t be much of a preamble from me. I will only say that this edition of Weekend Reads for Investors features some of the most interesting content I have encountered in the last several years. One of the pieces here is likely to be my pick for story of the year when 2017 concludes.

Investing

Why make you wait for it? One of the most intriguing articles I have read in a long time is this presentation from last fall’s Grant’s Interest Rate Observer conference by Steven Bregman that highlights some of the frightening bizarreness of exchange-traded funds (ETFs). No matter where you stand on the active vs. passive investing divide — and you should all know where I stand — you have to watch this video. Thank you, Chris Scibelli, for sending it to me. (Grant’s Interest Rate Observer)

Something I muse about frequently is how the US economy can barely be growing, yet earnings from big business are doing well. Hint: overseas earnings and also share buybacks. But note: When you do a share buyback in a rising market, you are most likely not paying a fair price. (Bloomberg)

Speaking of peculiar capital investment choices, what is up with Silicon Valley? By that I mean, what has it funded lately — other than Uber — that has improved your life? Also, I smell something rotten in San Jose, California, from the treatment of women to the funding of businesses based on hype rather than viable profitability. Turns out insiders are starting to say the same things. Specifically, they are asking “Is This the End of Venture Capital as We Know it?” (VentureBeat)

Ever wondered why the US government, no stranger to indebtedness, would not issue very long-dated bonds when interest rates are at (seriously) millennial lows? I have a sneaking suspicion that it’s all about the demand. Still, it is interesting to see the dance among the US Treasury, the Trump administration, and investors. (Financial Times)

Investment taxonomy: Asleep, yet? I know that the following story is probably only fascinating to a borderline academic like myself, but remember, I did at one point manage money. How do you properly define an “emerging market“? There are big ramifications for these kinds of decisions. (Financial Times)

A question on the minds of many: “What Happens when Central Banks Stop Buying Bonds?” This piece considers most of the possible angles. The psychological points are especially interesting. If central banks do a poor job of playing/selling their hand, there are downsides. Whether they can unwind QE without big unintended consequences is an open question. (Wall Street Journal)

Economics

I occasionally comment on how productivity is a truer measure of economic growth than GDP. Why? GDP just gauges output. It rewards short-term behavior because anyone can rev up output. I know what you are thinking: But people still have to buy the goods for them to be registered as sold. Ever hear of no-money-down financing with very low short-term variable interest rates? One of my 2016 stories of the year was that US productivity declined for the first time since World War II. Thus, “Reviving Productivity Is a Moral Imperative.” (Bloomberg)

Again, if you have read my articles, you know that I think shareholder value is a disaster. Successful businesses manage all of their constituencies well. Remember the income statement? It records how well a business manages its relationships with its stakeholders. I just had a conversation with one of the chief critics of the shareholder value colossus. This person’s conclusion, much to my surprise, was that the philosophical debate is now over. This writer agreed that the shareholder value idol has been toppled . . . Interesting times. (Bloomberg)

This graph charts the success or failure of India’s government achieving its oft-stated goal of divestment. (Finance Asia)

Behavioral Finance

Only one story here, but it is a doozy! This is another candidate for most interesting content I have encountered in a long while. I am a critic of artificial intelligence (AI) bulls and natural intelligence nulls. The World Economic Forum (WEF) strongly states that we are heading down the wrong path in understanding the human brain. I could not agree more. (World Economic Forum)

Technology

The best story on AI that I have ever read was sent to me by a man who worked in that field for over 30 years. It questions the myth of a superhuman AI. What I like are the explanations of the criteria that need to be met for AI to achieve the lofty heights of natural intelligence. (Backchannel)

I believe that in the future wise private wealth advisers will measure their clients’ brain waves to learn more precisely about their return, risk, and dream appetites. Though this story is about brain-scanning headsets in health care, the technology is just a piece of software away from being applicable to our business. Similarly, technology is a route to developing mental superpowers via biofeedback. (VentureBeat, BBC)

Rarely does Silicon Valley weigh in on the investment business, but here is a pretty interesting piece on AI-powered trading. (VentureBeat)

Music I listened to that inspired this article: deadmau5 and his phenomenal Random Album Title. The killer tracks: “I Remember” and the unbelievable sequence of “Not Exactly,” “Arguru,” and “So There I Was.” Heavy rotation worthy.

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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: ©Getty Images/domin_domin

About the Author(s)
Jason Voss, CFA

Jason Voss, CFA, is a content director at CFA Institute, where he 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. Jason also ran a successful blog titled What My Intuition Tells Me Now. Previously, Voss was a portfolio manager at Davis Selected Advisers, L.P., where he co-managed the Davis Appreciation and Income Fund. He 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: jason.voss@cfainstitute.org

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