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.
First reader-suggested story in a while and we love to publish those, so keep’em coming! Harry Markopolos (the Bernie Madoff whistle-blower we posted about on March of last year) is back at it with a quick and scathing article on Business Week. Many ways to look at it, but we highlight three in our post. We also like that he doesn’t deny that genius exists, it’s just that he assumes fraud “until genius is proven” and advocates thorough investigation.
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?
We thought we had stumbled upon an older article when we saw this piece in the Financial Times a few days ago: “Get used to world without a risk-free rate”. We had published a Financial Times video pretty much on the same subject and using the same arguments – but yes, it’s a new article altogether. Given the timeless importance of the subject, let this be an excuse to bring it back to our attention.
Steve Jobs resigned as Apple CEO yesterday, intends to stay on as Chairman. Sad news and nothing much to comment – the praise has been doled out before here. We only wish him the best and highlight a few links with amazing, heartfelt reaction around the web.
Our article in the August 2011 edition of the Valor Investe magazine, discussing the financial education of Warren Buffett. The entire section on Financial Education in this edition is worth the time and couldn’t be more vital today – with the mess in Europe, the US debt/ global banking system imbroglios and general volatility. In a country like Brazil, the lack of concern with financial education is even more worrying. Initiatives such as this one are very important.
Sure there must be incentives for Directors to act on their fiduciary duties, and one possible line to follow is to increase the liability, as argued in this Deal Professor article – but then again “Directors and Officers Liability insurance” is usually part of the benefits package. The larger issue is that this is very hard to judge and there are no rules to ensure a good Board of Directors. Getting to understand the “people” aspect of a company is a case-by-case, long, investigative effort and there’s no substitute for time/experience and hard work.
After such a strong sell-off in global markets, there’s one vital thing that can be said to investors (as per the Graham differentiation between investors and speculators): “don’t panic”. We’ll offer more: “Think long-term”. “Buy when you hear cannons, sell when you hear violins”. Any investor has read this before. Well, it’s still true. We take a look at the downgrade of the US debt and try to provide, through several stories, some perspective.
