Huge, sprawling article on Business Insider about Groupon since the early beginnings. It’s telling when an article about the big article is 3 pages long. Normally we would recommend reading the summary for conciseness – and because the day only has 24h – but the big article is a keeper. They got almost all of it right, except for the culture change part. It is more important, and far more disruptive, than they make it seem.
Three recent stories with one theme in common: the rise of the middle class and the availability of credit. Looking at banks or diversified financials top-down is not our specialty and, as we’ve said in our Q3 2011 report, “is only of interest to us in order to gauge an important part of the risks”. Keeping this in mind, one of the articles is bullish and points to recent reports showing that credit here has actually accelerated in September, despite talks of banks – and financial authorities – reining in loan growth. The other two articles are also bullish but still reflect, in a way, the difficulties of sustaining such growth.
Amazing how governments, agencies and especially politicians in Brazil have still not realized that the cost of doing business in Brazil must go down. In fact, says the World Bank, Brazil is actually getting worse in this aspect. What kind of sustainable growth can we reasonably expect when only the private sector gets to worry about productivity, especially when the government is actually increasing in size? Governance systems… incentives… Almost one year ago to this date, we published “The amazing sausage factory”, going into these issues. Apparently this will become a (sad) annual feature here, but we won’t let go.
The UN expects “Earthling #7 Billion” to be born this week – the report will be released on Tuesday, Oct. 26th 2011. Yet it’s just a symbol to spark a stream of articles about overpopulation – demographics, at this level, is open to much debate. Clive Cookson in the Financial Times had a short piece with a brilliant infographic, and the New York Times today has an entire debate series about it. We link to other sources. Not being able to reach a conclusion is no excuse not to think about it.
A few notes about Day One (Monday, Oct. 17th) in the 2011 Value Investing Congress. You can follow their own live updates on Facebook or Twitter. We start with David Einhorn – he wasn’t the first speaker of the day, but things started to get interesting when he came onto the stage. Having attended both, the Ira Sohn Investment Conference is a better event: shorter in length, better attended and with better speakers, more focused and, we dare say, with more committed speakers.
After depicting both sides of the Eurozone crisis – Greece on the one hand and Germany on the other – Michael Lewis now turns his attention to the USA and to where he might find trouble. That he does, and plenty of it, in California. Our usual cautionary notes – about great writers sometimes skimping over a bit too much evidence for the sake of an argument – apply.
A New Yorker article called “The Mark of a Masterpiece” is quite an enjoyable reading, particularly after watching “Who the #$&% Is Jackson Pollock?”. While 99.9% of the articles written on this subject will basically repeat the same story, the author goes a few steps beyond and provides a great example of what investigative work is. The similarities between the job description of an analyst and that of an investigative reporter have always caught our attention. Quotes, comments and links inside.
We’ve been arguing that “to finish first, first you must finish” for over twenty years. We’ve also recently argued for cash as a strategic weapon with both defensive and offensive features: it is as much “cushion” as it is “cannon”. Nicholas Nassim Taleb has given a lecture recently and the main takeaway is this: “(…) you live long by not dying, you win in chess by not losing—by letting the other person lose. So negative investment is not a sissy strategy. It is an active one.” He also highlighted the planning fallacy, something David Brooks wrote about even more recently, so we’re taking the opportunity to post both together.
Roger Lowenstein (author of “When Genius Failed”) wrote a very favorable review of Sylvia Nasar’s “Grand Pursuit: The Story of Economic Genius” book. Now Booz & Co’s Strategy & Business magazine has published a “Thought Leader” interview with her, 10 pages strong. Sylvia Nasar is famous for her book on John Nash, “A Beautiful Mind” (yes, the one made into a blockbuster movie). We haven’t read the book yet and suspect both “heroes” in general (interestingly, each reviewer had a list of ‘heroes’ missing from the book!) and the ascribing of too much importance to Economics – and risk it looking like a “hard” science. We respect it and it belongs to our mental models/ toolkits, but we prefer to seek the high quality companies and business models, with great and aligned managers and controlling shareholders, trading at a price that allows for significant margin of safety.
Many dimensions to this Op-Ed by Robert Shiller about “the surge in stock market volatility” in August. A few days later, another article argued that “market swings are becoming new standard”. The first question to ask is whether the short-term reality of higher volatility isn’t simply being taken for granted and extrapolated into the future, but the second runs deeper: would it really be so bad for long-term value investors?
