“Philosophically, the edifice of world regulation was built on two building blocks. One is the idea of the rational man and the other is that there is a reasonable level of conduct in the sales channel. Both of those building blocks broke down to some extent.” — Martin Wheatley, new head of Britain’s Financial Conduct Authority
Facts & Figures
- At a market cap of $550 billion (down from a recent high of $600 billion), Apple Inc. (NASDAQ:AAPL) is worth more than all of the retail companies in the S&P 500 combined.
- Apple Inc. (NASDAQ:AAPL) has increased in value by approximately $170 billion year-to-date, and that $170 billion increase is compares to the total market caps of The Procter & Gamble Company (NYSE:PG) ($184 billion), AT&T Inc. (NYSE:T) ($182), Wells Fargo &Company (NYSE:WFC) ($176), Johnson & Johnson (NYSE:JNJ) ($173), The Coca-Cola Company (NYSE:KO) ($167), and JP Morgan Chase & Co. (NYSE:JPM) ($165).
- In December 2011, Americans drove 1.3% more miles than they did in December 2010 but used 2.5% less gas and diesel to do so. (Source: DOT)
- In 1950, total U.S. credit market debt stood at $541 billion, or about 145% of GDP. In 2005, it was $38.8 trillion, or 320%.
- The peak was above 380% (on debts over $53 trillion) in late 2008 and early 2009.
- As of 4Q11 the total had grown to more than $54 trillion, but thankfully GDP has expanded a bit, bringing the ratio down below 355%. (Source: Fed)
- Companies in the S&P 500 (INDEXSP:.INX) generated $420,000 in revenue per employee in 2011, up more than 11% from 2007. Total revenue was up more than 17%, though, as employee headcount only increased 5.1%. Net income rose 22.7% and capital spending rose 16.3%. (Source: WSJ.)
- The Pennsylvania State Employees’ Retirement System has $23.6 billion in assets and paid $1.35 billion in management fees over the past five years while earning a five-year annualized return of 3.6%. Georgia’s municipal retirement system, which is forbidden by state law from using alternative asset managers, has $14.4 billion in assets and paid $54 million in total fees over the same period while earning 5.3% annually. (Note that these are extreme examples, but also note that an even bigger problem is that neither fund earned anything close to its required return. The mean public pension return over the last five years was 4.9% against assumptions/discount rates generally in the 8% range.) (Source: NYT)
- Fees and return expectations certainly aren’t the only problem: see this article about how the largest U.S. corporate pension funds are facing record-high funding deficits, and yet choosing to allocate away from equities in favor of fixed income (despite puny yields and spreads, or “return-free risk”) because the recent equity market volatility has made them want to “de-risk.”
- On a related but contrary note, this is a good article about Yale’s David Swensen and the Yale investment policy, which is apparently out of favor (for reasons mentioned above). Another article, “The Curse of the Yale Model,” is highly critical — most of it is warranted, but I also disagreed with parts of it. See here for the transcript of a great talk Swensen gave to MBA students in 2008.
- Peter Bevelin of Seeking Wisdom fame is releasing a new book at the upcoming Berkshire annual meeting. A Few Lessons for Investors and Managers from Warren E. Buffett will feature a “selection of useful and timeless wisdom where Warren Buffett in his own words tells us how to think about business valuation, what is a good and bad business, acquisitions and their traps, yardsticks, compensation issues, how to reduce risk, corporate governance, the importance of trust and the right culture, learning from mistakes, and more.”
- Greg Speicher runs a great blog (“Ideas for Intelligent Investing“) and is out with a new book: How to Become a Better Investor: 10 Ways to Improve Your Investment Process. I just read it, and much like his “100 Ways to Beat the Market” series and recent post his recent post “A Blueprint for Being a Lousy Investor“, this is a good read. (It’s also more of an article than a book — it’s what the kids call an “e-book.”) In a nice coincidence, another great blog/newsletter is giving it away free.
- Jonah Lehrer on Decision-Making (FiveBooks Interviews) — a very interesting interview, and you can’t do much better than these five books. They’re all excellent.
- “How to Prevent Other Financial Crises” — a prescriptive analysis of the financial crisis by Nassim Taleb and George Martin. I don’t agree with all of it, but I’m hugely in favor of the “skin in the game” idea. Implementing that, of course, would be a little trickier…
- “Tape and Band-Aids Shape the New Investment Framework” — a talk given by Daniel Arbess of Xerion last month. I read it then and didn’t think to include it my last email, but I just reread it and I think that there are plenty of worthwhile thoughts in here, even though I disagree with parts.
- “The Money Report” — a special offering from The Atlantic that is highly recommended. “Economics is so often the economist-eye view of the world. We’re out to recreate the consumer-eye view of the world. We’re interested in what things costs, why they cost that much, and why they’re getting more expensive and less expensive.” Part of it is derived from a BLS study, “100 Years of Consumer Spending.” Some particularly good articles, all of which are fairly brief:
- “Prices are People: A Short History of Working and Spending Money“
- “How America Spends Money: The 100 year story of how a nation that feels poor got rich” — spending on food and clothing in 1900 went from one-half of family budgets to less than one-fifth in 2003.
- “Food is Cheap” — “In 1950, the average farmer fed 20 people. In 2000, he fed more than 120.”
- “The 100-Year March of Technology in One Graph“ — amazing data/chart on technology adoption.
- “Why Some Countries and Cities Are So Much More Expensive Than Others” — the tale of the NYC nanny making $200,000.
- “Gray Nation: The Very Real Economic Dangers of an Aging America” — an important look at the power of demographics and the likelihood of lower growth in the future.
- “John Maynard Keynes Was the Warren Buffett of His Day” — beyond the inept comparison in the title, some worthwhile related thoughts on Keynes in The Atlantic.
- “The Alternative Warren Buffett” — a stark reminder of the power of compound interest. The original John Kay columns are here and here.
- “Warren Buffett’s $50 Billion Decision” — Buffett wrote this mini-biography about his early days. Worth a quick read in case you missed it.
- “Financial Sleuth Finds World of Abuses” — forensic accountant extraordinaire Howard Schilit is back at it with a new consulting firm. His book “Financial Shenanigans,” which ran a third edition in 2010, is a classic.