Finance & Economics

✒ Investing in the intangibles.

✒ Inflation –> Shrinkflation + Swapflation = Sneakflation

✒ “Around the world, individuals will increasingly be asked to take responsibility for their own retirement planning, including making decisions that few are equipped for, on issues such as compound interest and considering the impact of inflation. They are being burdened with three complex, interconnected decisions: how much to save, how to invest (with many … Read More

✒ By diversifying across a broad range of assets an investor can reduce both risk and volatility. However, everything in life is a trade: reduced volatility means that while downside is protected, upside is diluted. The author argues that for retail investors, investing in 10 well-researched and uncorrelated stocks is well diversified and allows a … Read More

✒ To address the potential distortion to the Total Shareholder Return (TSR) due to share buybacks and dividend distributions, the authors propose a new metric — core operating shareholder returns — that emphasises operational performance.

✒ Another brilliant piece by Howard Marks.

✒ Beware of “p-hacking”, the trick how researchers twist the data to find a superficially compelling but ultimately spurious relationship between variables (in statistics, a p-value is the probability of whether a finding could be because of pure chance). Just because something is narrowly statistically significant, does not mean that it is actually meaningful. Campbell … Read More

✒ “Duration” is a measure of a bond’s lifespan taking into consideration the timing/amount of coupon payments. The longer the duration, the longer you have to wait for the coupon and principal payments, and the more sensitive the bond price will be to the changes in interest rates. In equity investments, the P/E ratio can … Read More

✒ The trick is that if the value of the purchased cryptocurrencies fall, they will be sold automatically to generate a taxable loss that can be used to offset other investment gains. The accounts can then buy the coins back in a short time for around the same price or even less. Investors can do … Read More

✒ The effect of hyperinflation, and the irony of naming the new currency. The new banknotes come with a name change. This is now the “digital bolívar”, although it is no more digital than any other currency. The previous incarnation was the “sovereign bolívar” and the one before that the “strong bolívar”.

✒ When a central bank digital currency-based monetary system is hacked, is it not just about what the central bank can do to reverse these transactions but also what and how to compensate the victims. Option 1: suspend and reverse all transactions that have not yet escaped the system; Option 2: offer direct compensation to … Read More

✒ Benjamin Graham wrote in “The Intelligent Investor”: “Outright speculation is neither illegal, immoral, nor (for most people) fattening to the pocketbook.” However, he warned that it creates three dangers: “(1) speculating when you think you are investing; (2) speculating seriously instead of as a pastime, when you lack proper knowledge and skill for it; … Read More

✒ Investing in losing companies, as long as you know which ones to choose, is very lucrative. A reminder though: losing companies could still be good companies to invest in, but good companies are not necessarily loss-making.

✒ What does it take to be a valuation practitioner? My previous boss Spencer Tse sums it up nicely: “While some people will say valuation is an art rather than a science, to do a proper valuation, valuation practitioners need to have financial and accounting knowledge, a fair understanding of the business being valued, a … Read More

✒ The short-seller’s view on “stonk” bubble.

✒ Elon Musk is uniting two of the most popular investment themes under one roof. Appealing though it is, it is now even more risky to own the stock, which is one of the most speculative stocks of the current bull market. According to Tesla’s SEC filing: “In January 2021, we updated our investment policy … Read More

✒ China’s “IPO pop” is returning. The average market-adjusted cumulative return during first 240 trading days is significantly higher than the past 1.5 decades since 2014. The China Securities Regulatory Commission in 2014 in effect imposed a limit that meant most companies could only list their stock at a maximum value of 23 times earnings … Read More

✒ A succinct summary of the concept of goodwill — the bookkeeping legacy from takeover deals — and the evolution of accounting treatment for recording such on the balance sheet. Despite some might favor amortisation for it provides certainty of expenses thus less volatile earnings, amortisation of goodwill may be proven artificial and provides no … Read More

✒ As companies went on a borrowing binge in 2020, stockpiling cash to outlast deep declines in turnover caused by the pandemic, Howard Marks warns on possible shift from liquidity to insolvency phase, pointing out that “even borrowers that eventually are profitable may find themselves over-levered after the pandemic and struggle to service their debt.” … Read More

✒ TL;DR: the value of a firm to its shareholders, is the present value of the firms future’s cash flow — meaning share price is sensitive not only to changing expectation of future profits, but also the discount rate used to calculate what those are worth today. Robert Shiller published the “excess CAPE yield” numbers … Read More