Happy July 4th weekend everyone!
I have some good articles, but I will set them to post next week because everyone is in the Hamptons, and I am taking it slow today. I will try to have a new post every day through Monday, but cannot guarantee it. On Tuesday, I will post some articles that I have not gotten to yet.
I will announce the winner of the Microsoft contest next week-https://www.valuewalk.com/contests/june-contest-microsoft/
The ACAP Strategic Fund's managers see a "significant scarcity of attractive asset allocation choices globally," but also a strong environment for fundamental stock picking. Q2 2021 hedge fund letters, conferences and more According to a copy of the fund's second-quarter investor update, which ValueWalk has been able to review, its managers currently hold a balanced Read More
Here are some interesting mussings my friends sends me from time to time. He doesn’t have a blog just an email list:
Facts and Figures
- The U.S. homeownership rate in 2010 fell to 65.1%, the lowest since the mid-1990s. Adjusted for demographic trends (i.e., the population is much older now), you could argue that homeownership rates are lower now than they were in 1990. So much for Fannie/Freddie and all the pro-housing initiatives of the past two decades (not to mention the hundreds of billions of public and private dollars that were wasted on them). (Source: U.S. Census Bureau)
- $26,172 — Amount of debt the average U.S. household would need to cut to bring balance sheets back to 1990s levels. To regain the 14-15% level of debt/assets last seen more than a decade ago, households would have to shed $2.9 trillion in debt, or increase asset values by $20 trillion.(See also attached; would be great to see this analysis extended past 1990…) (Source: WSJ 6-11-11)
- 40% — the share of the total return of the S&P 500 owing to dividends, since 1926 (source: WSJ)
- the dividend yield on the S&P 500 is currently about 2%, but 11 of the 30 DJIA companies yield more than 10 year U.S. Treasury bonds
- In 2002, China represented 24% of global iron ore imports, but by 2010, China was 62% (source: MS)
- Sidenote: 60-70% of China’s GDP is investment/infrastructure/construction, and a large and growing share of that is being devoted to figurative or literal bridges to nowhere. In 2010 China was ~13% of world GDP but was ~50% of world iron ore consumption
- Sidenote II: Iron ore comprises more than 30% of global dry-bulk seaborne trade
- Gretchen Morgenson and Joshua Rosner have a new book “Reckless Endangerment” that looks good and might even shed some light on the underbelly of the beast (Fannie Mae) over the past few decades. A review is here.
- A broad and general overview of the optimism bias, excerpted from a new book of the same name.
- “Swing for the Fences” — a good review (actually, mostly a criticism) of Scorecasting. The are problems on both sides, but I do agree that many of the Gladwell/Freakonomics/Scorecasting crowd tend to lose the forest for the trees at times. “[Legendary soccer coach Mourinho] knows something the freakonomists don’t: you can’t always trust the numbers.”
- Boombustology: Spotting Financial Bubbles Before They Burst by Vikram Mansharamani. I haven’t read this yet, but it looks like a good one and a potential addition to my “Top 100” (see below). Also, see the bottom of this email for an excellent interview with the author on the topic of the China bubble — don’t miss this one.
- “Top 100” Reading List — a friend recently asked me about my favorite investing books. That quickly turned into a longer discussion about all the books, articles, and letters that have shaped my views on investing and on business topics more generally. This isn’t an exhaustive list — there are plenty of excellent choices I excluded — but it’s my attempt at a”Top 100″ list (actually, it’s only the Top 94 for now). If you see any typos or, better yet, can suggest something that’s not on the list and should be, please let me know.
- “Gamed” — an interesting article from Dan Ariely. “How online companies trick you into sharing more, joining more, and spending more.” Amazon, Zynga, Netflix, Groupon, Facebook, and Apple are profiled.
- Interview with Bill Gates — discussing his career and philanthropic efforts.
- “How We Know You’re Lying” — some interesting stuff from a leading psychologist who studies deception.
- “Bob Rodriguez — The Man Who Sees Another Crash” — a very good profile in Fortune.
- Early nominations for the “You Can’t Make This Up” Hall of Fame: Barney Frank once got his lover a six-figure job at Fannie Mae. (Incidentally, Barney Frank once had a lover legally named “Hot Bottom”…not kidding).Separately, the GSEs’ regulator/conservator doesn’t think the GSEs should be subjected to the Freedom of Information Act because it would be too expensive…also not kidding.
- “Anyone — Even the Little Guy — Can Beat the Market” — a great article from the legend himself, Joel Greenblatt, about the problems faced and mistakes made by investors in choosing investment advisers.
Is The Chinese Bubble Ready To Burst?
June 29, 2011 • Andrew Barber
The discussion of whether or not the Chinese economy is a bubble destined to collapse, or if the recent rash of media over empty cities and spiraling food costs are merely sensationalistic hype masking an unstoppable growth story, has become a favorite Wall Street parlor game over the past year.
May trade data from China released earlier this month registered stronger growth in imports than consensus forecasts, suggesting that demand in the Middle Kingdom is remaining resilient despite the steady rounds of tightening that the People’s Bank of China policy makers began in the fourth quarter of last year. With interest rate and reserve ratio increases still failing to tame rising prices completely, some economists anticipate that currency appreciation against the dollar peg is remains a possibility. Simply put, the longer view of the situation facing Beijing is still very much a matter of debate.
One strong voice in this debate is Vikram Mansharamani, a Managing Director at Boston-based SDK Capital and a lecturer at Yale where he teaches a seminar on economic boom and bust cycles that served as the basis for his book ‘Boombustology: Spotting Financial Bubbles Before They Burstthat was published earlier this year.
Mansharamani, who holds a PhD and two master’s degrees from MIT, helps oversee a long/short global equity portfolio. “I skin the cat thematically – what I look for structural long term trends on which I can bank for longs, and on the short side I look for things that fit my framework of bubbly conditions.”
One example Mansharamani gives as a potential developing bubble is base metals. “The steel industry in China boomed from 5 percent of global steel production in the late 70s to almost 50 percent today; on the back of that surge was a voracious appetite for iron ore” he says. “Anticipating that Chinese growth will continue and extrapolating on past trends, the iron ore industry is now planning expansions equating to over 100 percent capacity growth in the next ten years. Well, hold on a moment: if China continues to grow at past rates, China becomes more than 90 percent of the entire global steel market – which is unlikely, and so it seems likely that the iron ore capacity may be rising just as slowing capital investments in China cools demand.”
A native of western New Jersey, Mansharamani had an unlikely path to high finance. The son of an auto service technician and a dietician, he won a scholarship funded by Jack Bogle to attend Blair Academy, a private, co-ed boarding school in north-western New Jersey. Starting at the age of sixteen, Mansharamani began an unusual (for high school students) series of summers interning on the institutional equity sales and trading desk at Bear Stearns, where he reported to Mitch Jennings, a Blair alumnus, and Ricky Greenfield. After high school (and three summers at Bear), he entered Yale where he spent his summers very differently – working at the American Enterprise institute where he assisted the legendary Sinologist and diplomat James Lilley. The experience at AEI led to fieldwork in Asia (including a summer at the US Embassy in Beijing) that ultimately sealed his fate as a China focused investor.
Mansharamani recently spoke to InstitionalInvestor.com contributing editor Andrew Barber about the factors he considers when evaluating boom and bust cycles and how these stack up for China.
Institutional Investor: Your book is based on a course that you teach at Yale. Can you tell us a bit about the course and your approach?
Vikram Mansharamani: The book is based on a seminar called ‘Financial Booms and Busts’ which I have taught to undergraduates for the past two years. Because the course has been so oversubscribed, I have the opportunity to select students from differing majors. In the past, I have had students from history, psychology, biology, molecular biochemistry and biophysics, physics, American Studies, art history, East Asian studies, as well as the more expected economics and political science students. One of the reasons I proactively compose the class with students from different backgrounds is that I believe firmly that a multidisciplinary approach is essential for understanding booms and busts. I also sprinkle in students from all over the world to add a cultural dimension to the discussions.
The rest of the article can be found at the following link-http://www.institutionalinvestor.com/Article/2856797/Is-The-Chinese-Bubble-Ready-To-Burst.html