Can Turtles Fly?

Not in any order, here are some articles I ran across recently that you may find interesting... I often link to old articles so if there are stock suggestions or macro speculations, pay attention to the date (thesis may have changed by now). The Oscars of Paper Currency (James Tarmy for Bloomberg Businessweek, Dec 1, 2016): Didn't know some entity actually gave out award for best currency design. Kind of fun to see the artistic style of various currencies. Horizon Kinetics presentation on indexation and ETF problems (Steven Bregman, Horizon Kinetics, for Grant's Fall 2016 Conference - Oct 4 2016): Pretty good presentation on some issues with ETFs and indexation. If you invest in ETFs, check it out. Bear case presentation on Home Capital Group (Marc Cohodes for Grant's Fall 2016 Conference - Oct 4 2016): Bearish thesis on Canadian mortgage lender. If the Canadian housing market falls, HCG might be one of the first ones to get hit badly. Contender for the worst t...

I'm back to blogging--I think. Anyway, I was reading this Bloomberg interview with private equity pioneer, Henry Kravis , and found it interesting. I don't follow private equity and don't really have much in common but it's remarkable how their thoughts and approaches apply to small investors as well (obviously everything doesn't apply so one can't apply everything). It's a pretty good interview so do check it out if you have some time to kill. (As long-time readers may be familiar, anything in square brackets is by me and bolds are typically mine.) (Photograph by Daniel Shea for Bloomberg Markets, June 13 2016) JK [Jason Kelly, Bloomberg journalist]: What’s changed in those 40 years [since KKR was founded]? HK [Henry Kravis]: There’s money everywhere today. There’s almost no institution in the world—whether it’s a sovereign fund, a foundation, an insurance company, banks, pensions funds—that doesn’t do something in the private equity sector. I...

(Image by boston.com. Downloaded from jamieflinchbaugh.com ) In his latest for The New Yorker , James Surowiecki points out two major flaws with private equity as it currently operates. In particular, he raises the carried interest controversy and the notion that private equity uses debt to extract profits, while, at times, running the company into the ground. Should the government scrutinize how private equity is allowed to operate in America?

Some people are on holidays; others have light loads—assuming you aren't one of those airport workers stuck trying to clean up from the snowstorms ;) Here is some reading material to keep you busy... (Recommended) Potential actions by regulators to control the too-big-to-fail banks (Reuters Breakingviews via Financial Post): Regulators and government officials created huge moral hazard by creating the oxymoronically-named too-big-to-fail banks. Now they are trying to figure out how to regulate them and, ultimately, prevent the banks from turning into too-big-to-save (i.e. banks that will threaten sovereign solvency). This is a good article that presents several solutions and the ones likely to be followed by the government officials and regulators in the near to medium term... As I have mentioned in the past, the "proper" solution in a capitalist society is to punish the financiers who enable all the risk-taking. In this case, the bondholders have been spared (except f...

The Globe & Mail has a brief story on the high expectations of private equity investors (refer to the article for the link to the study): With returns in other asset classes depressed, almost two-thirds of investors surveyed by research firm Preqin say they expect private equity managers to post returns that trump public markets by at least 4.1 percentage points. Three years ago, that number was 17 per cent. A further 23 per cent in the latest survey said they expected at least 2.1 percentage points over public markets returns. Given what some studies have shown, that seems a lot to ask. A recent study by London Business School Professor Chris Higson concluded that investors get "at best a market return." Mr. Higson looked at returns from 1980 to 2005. His conclusion was that only about a quarter of funds outperformed, while the rest underperformed. The survey appears to have sampled over 100 private equity investors—sample size is reasonable—and it seems many h...