Business & Investment

Weekly Roundup, November 30, 2020

Today’s Weekly Roundup begins with analyst recommendations.

Analyst recommendations

Joachim Klement, probably on the CFA Institute’s Enterprising Investor blog Analyst recommendations add value After all.

  • With the exception of the United States, the most beloved 20% of stocks outnumber the most hated 20%, according to a new survey.

Here in the UK, the out performance is only 4.9% pa, which is better than nothing.

Analyst Recommended Performance by Country

The survey covers 45 countries from 1994 to 2019 and covers two major market crashes.

  • As a result, the author was able to compare the performance of analysts in the bull and bear markets.

In low sentiment phases such as bear markets and financial crises, analysts recommend better performance than periods of bullish high sentiment.

Joachim warns that there are two possible explanations.

Analysts have deeper insights than most investors, so can we sift through the rubble of the crisis and choose really good stocks?Alternatively, investors ask analysts for guidance and their Do you recommend more closely during the crisis?

In any case, it is something that individual investors can potentially abuse.


Pathogens and individualism

Another article by Joachim The effect of the historical prevalence of pathogens on the degree to which society is individualistic..

  • The next time we write about the coronavirus, we’ll talk more about it.

This article also included an interesting observation of attitudes towards redistribution.

  • It turns out that strong (rich) men are more opposed to redistribution than (weak) rich men.

This makes sense from an evolutionary point of view.

  • Strong men would historically not hand over assets to men of the week.

Interestingly, strong poor men are more enthusiastic about redistribution than weak poor men.

  • They would have stolen assets from the historically weak rich.

In summary, strong men can, so they act more selfishly.

It makes sense to me.

Great reset

In his weekly newsletter, John Mauldin wrote in his version of “Great reset“.

  • This phrase was recently adopted by the World Economic Forum (Davos Gang) in a very different way.

To achieve better results, the world must act jointly and swiftly to reinvent every aspect of our society and economy, from education to social contracts and working conditions. Every country, from the United States to China, must participate, and every industry, from oil and gas to technology, must be transformed. In short, we need a “great reset” of capitalism – Klaus Schwab, WEF.

I’m worried enough in itself.

For John, the problem is “too many elites.” He cites zoologist Peter Turchin, who applied the theory of how beetle populations work in human society.

One way for the ruling class to grow is biological. Think about Saudi Arabia. Where princes and princesses are born earlier than the role of the royal family Created for them.In the United States, the elite are overproducing themselves Through economic and educational upward liquidity: Increasingly People get richer and more educated.

The problem begins when the money and Harvard degree becomes like the title of the Saudi Arabian royal family.If many people have them, but Only some have real power, and those who do not have power eventually turn on those who do.

The work of the elite does not grow as fast as the elite.

The final game is state bankruptcy, but the penultimate and penultimate steps are handouts and giveaways to calm the population, and crackdowns on police opposition.

  • Judging from the world politics of the last 10 years and the response to Covid-19, it seems that we have reached the prize stage.

Which one has to build up the debt and eventually deal with it.

Turtin identifies a 50-year cycle of social instability. This corresponds to John changing the human generation.

  • And the youth bulge of the 2020s can be a catalyst (as the Boomer bulge was in the 1970s).

Returning to debt, John cites Bildadley on four ways to handle it.

One: households, businesses and governments try to save more to pay off their debts. This leads to Keynes’s paradox of thrift, where the economy collapses.

two: You can find a way out of insolvency, but insolvency hinders actual economic growth.

This leaves the other two ways: higher nominal growth-ie higher inflation-or restructuring [write-off]..

So inflation and / or amortization seems plausible, no matter who knows when.

Multi-factor fund

Steve johnson

At the FT, Steve Johnson reported: Multi-factor fund has lost support..

  • Since the sector was created 17 years ago, more have been closed than it was in 2020, the first year this happened.

Fund assets, which account for 4% to 6% of the smart beta sector, fell from $ 69.3 billion to $ 65 billion.

  • In the five years to August 2015, only 16% of funds have exceeded the benchmark.

Multi-factor flow

The poor performance of multi-factor funds is most often due to a decade of poor performance of value investments, with the worst results in 200 years.

  • Small caps also perform poorly compared to giant technology growth leaders.

Number of multi-factor funds

The contraction is concentrated in the United States and may have reached a saturation point.

  • New markets like China are still showing strong growth.

There is also a gap between less popular individual investors and enthusiastic institutional investors.

asset Management

Asset manager

Economists featured an eight-part special report asset Management..

It is a business unlike any other. The manager charges a fixed fee for the assets it manages, but ultimately the customer bears the full cost of the investment.

Due to all the talk of pressure on fees, the typical operating margin is well over 30%. But despite the recent integration Assets Management is a fragmented industry and there is no obvious use of market power.

Companies are competing for marketing, new product dreams, and above all, the skills to select high-value securities.

Top 500 managers

This is a fact that has been known since 1968, despite the fact that active funds are underperforming as a whole.

It’s hard to find a positive link between high prices and performance. According to one survey, the poorest performing funds charge the most.

This is not surprising, as the average performance must be the benchmark minus the average price.

Assets by region

One explanation is that funds are “credit goods” – consumers choose “hot” funds because consumers can’t tell the difference between good and bad.

  • Once collected, the asset is sticky and slowly wears out due to poor performance.

A [2015] The paper claimed that the fund manager would act as a “money doctor.” Most people think little about how to invest, just as they think little about how to treat health problems. Much of the advice given by doctors is general and self-serving, but patients still appreciate it.

Money doctors are in the same business on hand. Their job is to give people the confidence to take investment risk.

Fair enough, but if they can develop their confidence on their own, they will save a lot of money.

  • The move to passive funds suggests that they, especially young investors, are finally receiving the message.

Active flow and passive flow

The topics covered by the report are:

  1. How indexing is shaping the industry
  2. The issue of agencies delegating investment options
  3. Lack of oversight of investors and company managers Assets The manager simply keeps track of the index
  4. Private Market-Niche, Liquidity, High Fees
  5. Venture Capital – More Money Chasing Less Ideas
  6. Assets Management in China
  7. Future Assets management.

Private Equity Market Capitalization

Quick link

There are only two this week.

  1. Jesse Felder explained: Emotions are now more euphoric than the peak of dot-com mania
  2. The economist wondered Whether big companies will benefit from covid crunch..

Until next time.

Weekly Roundup, November 30, 2020 Weekly Roundup, November 30, 2020

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