Good Reading -- February 2016
Apologies for the choppy and uneven formatting -- my website editor is apparently having some issues. -- Phil
The Rise and Fall of American Growth: The U.S. Standard of Living Since the Civil War. Bob Gordon has a new book out that continues the stagnation/low-growth vs. technology/progress debate that has been mentioned here in the past. The book itself is massive, running nearly 800 pages. I did not read every word but it is an interesting book and worth some consideration. It is packed with data and charts so you can ponder the arguments even if you disagree with the author's conclusions. And despite being an academic economist's book it is aimed at a popular audience and it is more readable than you might think.
Foreign Affairs covered this topic in the current issue, including a review of the book by Tyler Cowen and an article by Larry Summers about the "age of secular stagnation" ($ -- one article free with registration)
Greg Ip discusses the book and Thomas Piketty's book in the context of today's economy
"If you read the newspapers, sometimes it feels like [the 2008 global financial crisis] could happen again, and from where I sit, that’s just not true. The regulators learned the hard way they were wrong, and they’ve done a lot to correct a lot of the problems. In 2001, Citigroup was levered 22 to 1. In mid-2007, it was levered 33 to 1. Today, it’s levered 10 to 1. The banking system probably hasn’t been this safe in my lifetime." -- Steve Eisman
“This is an exciting time. Bank balance sheets are as strong as they’ve been in decades, and stock prices resemble recession troughs. Earnings are more stable than they have been in decades, and capital ratios are at the highest levels in 80 years.” -- CLSA banking analyst Mike Mayo
[Note: These are not investment ideas or recommendations -- just a couple of interesting thoughts from people known for their bearishness or skepticism. -- Ed.]
The Last Days of Target: The untold tale of Target Canada's difficult birth, tough life and brutal death -- Target lost $7 billion on its Canadian endeavor, and I'm convincned that this would make an updated version of Charlie Munger's "Psychology of Human Misjudgment." Almost every bias-causing factor on that list is present in this behind-the-curtain look at how Target's decisions were made.
The Agony of High Returns -- Morgan Housel has it mostly right in this article. I would change some of the language (owning these investments wasn't often a "nightmare" although the volatility was "gut-wrenching" at times). As usual, Munger put it best -- if you can't be philosophical about market fluctuations, and stomach a 50% quotational loss, you shouldn't have owned individual shares in the first place. And either way the point remains that it takes unusual insights and fortitude to continuously own the tiny handful of investments who produce these types of returns over two decades.
The First Person to Hack an iPhone Built a Self-Driving Car. In His Garage. -- A remarkable article looking at George Hotz and his work in Artificial Intelligence.
An interview with Ronald Olson -- Insightful comments from Ronald Olson, partner at Munger, Tolles & Olson and director of Berkshire Hathaway. (Thanks to Sanjay Bakshi)
What I Learned From Losing $200 million -- A derivatives trader discusses his experience in 2008 and "the illusion of control." (Thanks to Jordan for sending this!)
Fintech: Search for a super-aglo -- A look at the evolving arms race in computer science for investing. "Investment groups race to create a thinking, trading computer. But will AI machines become the Warren Buffetts of the future?"
Top U.S. financial groups hold secret summits on long-termism -- Pretty interesting to see Jamie Dimon and Warren Buffett get Fidelity, Vanguard, Blackrock and others all in the same room to talk about corporate governance and capital markets.
Credit Suisse Global Investment Returns Yearbook 2016 -- I always find something interesting in here.
Hack Attack: I dared two expert hackers to destroy my life. Here's what happened. -- There are some fascinating psychological tricks and other implications of this article/experiment, if you can resist the urge to become an off-the-grid hermit...
Why Donald Trump is Wrong about How the Economy Works -- At the risk of venturing into politics, this Roger Lowenstein column is a much needed dose of reality.