Finance & Economics

✒ Conclusion by The Economist: Most countries are not as exposed as South Korea. But some, including Australia, Canada, the Netherlands, Norway and Sweden, share the same mix of high household debt and frothy property prices. All began raising rates after South Korea, and have further to go before the pressure feeds through. They are … Read More

✒ Conclusion by the author: Investors should beware when considering investing in specialised ETFs. They risk losing along three dimensions: they sacrifice portfolio diversification, they are likely to invest in overvalued assets and they pay higher fees.

✒ Shadow work was defined by Craig Lambert (former Harvard magazine editor) in the 2015 book Shadow Work as: The Unpaid, Unseen Jobs That Fill Your Day. These are the tasks that used to be done by other people, which most of us now do for ourselves, usually with the help of digital devices. Such … Read More

✒ Pick your poison: (1) #MintTheCoin; (2) Ultra-high-interest bonds; (3) In defiance of the debt ceiling in a legalistic way (the validity of American public debt “shall not be questioned”).

✒ Employees aren’t treated as assets; benefits are seen as liabilities.; GAAP rules are fueling a shift to non-employees.

✒ “So-called shrinkage, an industry term that measures inventory losses related to such factors as theft, fraud or damage, represented about 1.4 per cent of US retail revenue, or roughly $94.5bn, in 2021, according to the National Retail Federation (NRF), an industry trade group. NRF’s survey showed that in 2021 about 37 per cent of … Read More

✒ TL;DR for avoiding thematic funds and going for sector instead: “Buy when no one is talking about a theme and sell once everyone is. Easier said than done as most funds are launched only when a theme is exciting enough, and by that time it’s too late.”

✒ As Tim Harford mentioned in another article, gift-givers tend to focus too much on the moment that the gift is unwrapped, while for recipients that moment is merely the start of the gift’s story. He suggested that we focus on what the recipient will actually do with the gift, rather than aiming for effect … Read More

✒ Penny Pinch, a Chicago street artist, is launching the first Dutch auction for new art. Each of his 15 paints will start at a price of $3,000, which will be cut by $100 every hour until a buyer emerges. The reason why Mr. Pinch likes Dutch auctions: “At a regular auction, a potential buyer … Read More

✒ For the Americans, without a score from one of the big three nationwide credit bureaus (Experian, Equifax and TransUnion), people often either can’t get consumer, mortgage or business loans. Even if some could, they are unable to secure credit at mainstream rates because they are either credit invisible or unscorable by traditional methods, leading … Read More

✒ When accounting policy matters — Walmart flagged that it expected LIFO (last in first out, an accounting assumption used in the calculation of cost of goods sold) charges to shave $1 billion off its gross profit for next year. Earlier this year Kroger made similar announcement (link).

✒ Factors based on an EY-Parthenon analysis of quarterly data from thousands of companies in hundreds of industries over a period of 20 years: Weighted forecasts of growth in company revenue Weighted forecasts of growth in company margin Patterns of cash returned to shareholders Changes in the company’s debt-to-equity ratio The economic conditions in the … Read More

✒ A “diversified” view on diversification.

✒ The footnote of its annual statement contains a link that explains the expected shortfall down the road. The underlying message: if Congress does not act in the next decade, the government’s pension promises will be subject to a partial default.

✒ A short history lesson of how the system of pensions came about.

✒ The “easy money” since 1970s faded the cleansing effect of defaults and downturns, and thus entrepreneurial dynamism. New business creation plummeted, leaving behind a smaller group of really big companies and a bunch of zombies that survive on cheap debt. The return of inflation (possibly ending the era of easy money) may spark a … Read More

✒ The use of last-in, first-out (LIFO) accounting is permitted under US GAAP but not under IFRS. LIFO is a cost assumption companies make on financial statements, but doesn’t reflect the actual flow of inventory in their operations. According to Credit Suisse, in 2021 ~15% of companies in the S&P 500 used LIFO as their … Read More

✒ Private valuations of firms signed off by large professional services firms and not made public are under growing scrutiny. These valuations often come with a disclaimer indicating that the complicated financial modelling would typically be just desktop valuation — i.e. the estimate of business value would be made without visiting the company or verifying … Read More

✒ “The truth is, what’s in the textbooks never really mattered that much; what mattered was the stamina and character that passing the exams demonstrated. But the world is changing. That kind of endurance is less likely to be openly celebrated, and is far less likely to attract the millennials who are pushing their employers … Read More

✒ Accounting restatements nearly quadrupled in the US last year, with SPACs accounted for 77% of the 1,470 restatements reported to the SEC. These restatements were mainly driven by SEC’s two concerns about how certain warrants (giving rights to investors to buy additional shares) and redeemable shares should be accounted for. Not only were there … Read More