Hottest Links: BNSF, Japan’s Real Challenge, Vanguard Goes Active

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Hottest links for Tuesday October 1st, 2013 (see prior edition of hottest links here), the late edition (again). Make sure to sign up by email and never miss a single edition here.

Top stories for today include; An indepth look at the competitive advantages of BNSF owned by Berkshire Hathaway; Are the greatest threats to Japan not the widely discussed VAT tax but higher energy prices due to a depreciating yen? Companies have a LOT of cash, but what exactly will they be doing with that money? Richard Bernstein has a fantastic article on investing in emerging markets (the bear case); A look at the roster for Institutional Investor’s Alpha Hedge Fund Hall of Fame, who made the cut? Vanguard goes activist with its ETFs, see the strange story below; How investment advisors are using social media these days; A really funny (and still insightful) guide on how to be a good investor; The eight principles of value investing; Jay-Z’s life was changed by his drug dealer (or something like that); That and much more below.

Hottest Links: BNSF, Japan's Real Challenge, Vanguard Goes Active

Hottest Links: Stories

China’s Rebalancing Creates Huge Opportunities For Investors

The rebalancing in China and the accompanying slow-down has been one of the most important themes in the financial markets over the last year. [Anders Lund Larsen, Finalternatives]

A Stronger Network, With More Capacity

There can be a distinct advantage to having only one shareholder. For BNSF Railway chief executive Matt Rose, answering to Warren Buffett—who put his faith in the freight rail industry and BNSF management when he acquired the railroad in 2009 (“It’s going to be around for the next 100 or 200 years, and you can’t move it to China or India,” he said at the time). [William C. Vantuono, RailwayAge]

Import Price Pressures, Not Vat the Greatest Threat to Abenomics

At first glance, Japan appears to have set out on a path that will see it escape from deflation. Headline CPI inflation was 0.9% in the twelve-months to August, the strongest reading since….. [Fathom Consulting, AlphaNow]

Kid’s Invitation To Steve Cohen’s Was Non-Transferable

Indeed, Cohen’s private ways are a frequent topic of conversation in Greenwich, Conn., where he resides with his second wife, Alexandra. One famous story among the parents of students at the Convent of the Sacred Heart, where the Cohens’ twin daughters attended school, involves a big party the Cohens threw for the twins’ classmates years ago, complete with a bouncing castle. [Bess Levin, DealBreaker]

Companies Holding Lots More Cash

U.S. nonfinancial companies has $1.8 trillion in cash on their books at the end of the second quarter, according to the Federal Reserve’s quarterly “flow of funds” report (now known formally as the “Financial Accounts of the United States”). [Ben Casselman, Wall Street Journal]

The Ongoing Global Market Sea Change

Our long-standing theme has been that the US stock market is again a growth market. Whereas investors generally still believe that the emerging markets are a growth story, the data increasingly suggest that growth is now predominantly in the developed markets. When it comes to quality, transparency, and consistency of growth, the US seems to stand above other markets. [Richard Bernstein, Business Insider]

How I botched it on CNBC

I was on to be one side of an argument about Jamie Dimon, the chairman, president and chief executive officer of JPMorgan Chase & Co (NYSE:JPM). I was arguing “against.” I was up against business reporter Duff McDonald, arguing “for.” [Alex Pareene, Salon]

Are Broker-dealers About To Turn The Tables On Social Media?

Although some have suggested that this is due to the differences in SEC vs FINRA regulation of social media, the reality is that ultimately both regulators require the same key points: compliance pre-approval of advertising; archiving and monitoring of client communication; a clear policy for advisers about which social media channels can be used and in what ways….. [Michael Kitces, Investment News]

Vanguard’s First Active ETF In Sight

Vanguard—successful as its exchange-traded funds now are—hasn’t exactly been a trailblazer in the world of ETFs. Moreover, it’s known as an indexing shop more than an active manager. The segment has garnered more than $10 billion in assets under management in such funds as the $4.3 billion PowerShares Exchange-Traded Fund Trust II (NYSEARCA:SPLV) and the $2 billion iShares Trust (NYSEARCA:USMV). [Olly Ludwig, IndexUniverse]

The Unofficial Guide To Being An Investor

Investing advice seems to be filled with the same old adages and sayings that have been overused and diluted as time progresses. Since we live in a world dominated by technology and its rapid growth rate, what it means to be an investor today is a lot different than just a few decades ago. [Jared Cummans,]

10 Terms Investment Pros Use to Raise Money

Using hundred-dollar words where a five-dollar word will do is a time-honored, traditional selling tactic on Wall Street and in the hedge fund / asset management world as well. [Joshua M Brown, The Reformed Broker]

Reversing the Brain Drain

Wang found that many developing countries were among the least friendly and successful at welcoming returnees back. Brazil, China, and Russia, for example, while quickly developing infrastructure to support international business, have not yet developed a global perspective that would be more welcoming to returnee knowledge. In contrast, European nations tend to benefit from returnee knowledge transfer because Europe is culturally and institutionally more similar to the United States. [Dan J. Wang, Columbia Business School]

Kickstarter for Hedge-funders

When Wall Street isn’t lending, it ­creates an opportunity for others to step in—and five years after the financial crisis, with banks still chastened and technology start-ups more flush with cash than ever, sleek new online shops are predictably filling the consumer-lending gap where the banks used to be. [Felix Salmon, NYMAG]

Go Shop or No Shop?

Everybody likes to get the best deal possible and shareholders of public companies are no exception. Under US law, when the shareholders of a public company are “cashed out” of their interests as a result of a sale, its board is charged with getting the best price for the company. As a result, the board may negotiate to obtain the option to “shop” the merger agreement to other potential buyers for a brief period of time, usually between 30 and 50 days. [Charles Calomiris and Donna Hitscherich, Columbia Business School]

The Eight Principles of Value Investing

If anything, a lack of volatility presents a serious risk, as it indicates a degree of complacency that can magnify the reaction of a market or specific security to adverse developments. As an example, consider the long stretch of price stability that characterized the equity market just before the onset of the 2008 recession. On average, the S&P 500 (INDEXSP:.INX) moves by more than 2% in either direction on about 25 days a year. But from 2004 through 2006 – a three-year period – the market only had two such days. [Scott Clemons and Michael Kim, Advisor Perspectives]

Take MoneyBeat’s S&P 500 Challenge

U.S. stocks have had a great 2013. They’ve also been flat since May. The Fed kept QE3 running full blast. But Congress’s budget spats threaten to shut down the government and deliver a blow to a fragile economy. Have stocks already hit their highs for the year? Can the market surge through the holidays? [Paul Vigna, MoneyBeat]

The Market is Fairly Valued!

Since the S&P 500 index is too big and unwieldy and I don’t have access to data, I just decided to take a look at the Dow.  Last time I looked at margins (to see if margins are too high and unsustainable), I picked a bunch of big, blue chip names that popped into my head. So I calculated the simple average of the P/E ratios of each component stocks such as American Express Company (NYSE:AXP), AT&T Inc. (NYSE:T), The Boeing Company (NYSE:BA), Caterpillar Inc. (NYSE:CAT), Chevron Corporation (NYSE:CVX), Cisco Systems, Inc. (NASDAQ:CSCO), The Coca-Cola Company (NYSE:KO), The Walt Disney Company (NYSE:DIS), E I Du Pont De Nemours And Co (NYSE:DD) and Exxon Mobil Corporation (NYSE:XOM). [kk, THe Brooklyn Investor]

The High Price of Digging Up Dirt in China

Canadian stock analyst Kun Huang has been locked in a Luoyang, China, jail for more than a year, charged with defaming a Canadian company whose shares trade on the New York and Toronto exchanges. In 2011, a report circulated by Huang’s hedge-fund employer alleged that ore samples from a mine run by Silvercorp Metals Inc. (NYSE:SVM) (TSE:SVM) tested low for silver content. [Bill Alpert and Leslie P. Norton, barron’s]

Rush Hour Traffic In DC

Spot the ‘essential’ government worker… [Tyler Durden, Zerro Hedge]

Hedge Fund Crime Climbs in September

The SEC charges that Jawed’s marketing materials claimed the Grifphon funds posteed double-digits returns “year after year” even as the S&P 500 (INDEXSP:.INX) declined. [Stephen Taub, Institutional Investor’s Alpha]

The Alpha Hedge Hall of Fame

This year also marks the fifth anniversary of the Institutional Investor’s Alpha Hedge Fund Hall of Fame, which we inaugurated in June 2008 with 14 legendary investors, including Julian Robertson Jr., James Simons and George Sorors. [Institutional Investor’s Alpha]

Hottest links: Not the Onion

Jay Z Credits Drug Dealer

Last month Jay Z sold his small interest in the NBA’s Brooklyn Nets.  The National Basketball Players Association (NBPA) granted Jay Z certification to represent basketball players in contractual negotiations with NBA teams upon receiving confirmation of the sale. [Darren Heitner, Forbes]

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