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Inside Edge is dedicated to providing a collection of investment-related charts, articles and musings that have hit our desks or inboxes. Once in a while we will post materials we’ve created and glimpses of EdgePointers’ lives.

A focus on Canadian energy

Canadian Energy - Solutions for the industry
A great new talk from Chris Slubicki, CEO of Modern Resources. Nationwide discussions regarding energy and the environment in Canada have become increasingly heated and divisive. 

In this talk, Chris explores some of the serious unintended consequences of our current regulatory environment. He then outlines some solutions and a new path forward to economic prosperity, environmental sustainability, and a more cohesive Canada.

We Have Met the Carbon Enemy and He is Us
Your smartphone has enabled enormous hydrocarbon-based energy demand growth - and will continue to. The virtual world has shown a funny way of triggering real-world activity, nearly all of which requires energy - and in turn, causes CO2 emissions.

Decreasing oil and gas investment amid growing global energy demand driven by population growth, coincidental with increasing disposable income enabled by technology and industrialization in developing countries, has a real shot at spiking medium-term oil and natural gas prices to previously unseen levels. Sadly for Canada, our collective response to this astounding global opportunity appears to be self-flagellation, continuous delay and an ever-increasing regulatory burden, rather than building great, well-thought-out projects, of which Canada could have many. 

How best to help save the world from carbon while being honest with yourself? Begin by putting down your phone. Travel locally and walk or bike when you can. Deny yourself the instant gratification of online ordering. Grow more unfertilized food yourself. Sounds a bit rough, doesn't it?

For your remaining energy use, recognize that Canada is a global leader in environmental stewardship and support the energy companies of this country. They are competing internationally under significantly more stringent domestic rules and practices while ranking 2nd (behind Norway) on environmental and social performance against other energy-rich nations.  The world is moving ahead on energy demand of all types, with or without Canada. We shouldn't impoverish ourselves to no purpose.

How about some unity?
The world is making the transition to cleaner energy, so why not be a leader? Why not develop Canadian expertise, deploy these technologies and share them with the rest of the world? We believe cleantech will be a $2.5-trillion global market by 2022.

Many Canadian energy companies have already made great progress in prioritizing the environment. Some of us in the industry are committed to bold steps - to being not just cleaner, but to be clean. Net-zero emitters. If the Canadian industry is going to brand itself as an ethical alternative, that's a must.

Hypocrisy
South Africa, India, the Philippines, South Korea, Japan and China, all signatories to the Paris climate accord, are building a combined 1,800 new coal-fired power plants. Coal plants emit twice as much CO2 as natural gas plants. Meanwhile, international environmental groups campaign against sending Canadian LNG to those countries.

Exporting our cleaner natural gas to global markets would benefit global emissions


November 1, 2019

Value and Growth
Over the past decade, investors holding U.S. value stocks have produced an annualized return of 12.9% compared to a 16.3% annualized return for growth stocks. This difference between value and growth makes many people wonder what's wrong with value and then try to offer simple explanations for why value has underperformed growth.

Taking a closer look at the data a study found that it's not the performance of value stocks that have been out of whack - rather, the performance of growth stocks has been abnormally high relative to historical levels.

Over the last decade,  value has been more or less in line with its historical returns dating back to 1929.

Growth, on the other hand, has diverged greatly over the last decade compared to its historical average.  Over the 10-year period ending June 2019, growth produced an annualized return of 16.3%, much higher than its 9.7% return since July 1926.

History has also shown that these trends can quickly turn. Some of the weakest periods for value stocks when compared to growth stocks have been followed by some of the strongest. One example in history is during the dot-com era. On March 31, 2000, growth stocks had outperformed value stocks in the US over 1-year, 5-year, 10-year, and 15-year periods. Fast forward one year to March 31, 2001, value stocks had regained the advantage over every one of those periods.

Putting buy and hold to the ultimate test: the crash of 1929

To this day, no one is really sure why stocks crashed in 1929 and no one foresaw how long and terrible the bear market would be. As usual newspapers and economists tried to predict the bottom, but their efforts were in vain. The Dow didn't surpass its 1929 high until Nov. 23, 1954, a quarter-century later.
Investors fled the stock markets and not many stuck around long enough to break even. A 1954 survey by the Federal Reserve found that only 7% of middle-class households said they preferred to invest in stocks over savings bonds, bank accounts or real estate. 

Investors should always regard the stock market as sailors regard the sea-a means to an end, usually benign, but potentially lethal.

To be a long-term investor in stocks, you have to be prepared to lose more money for longer than seems possible. Anyone who takes that risk lightly is likely to sell out, in the next crash, near the bottom.

Interview with Bernard Arnault of LVMH
The LVMH process has one goal: star brands. According to Arnault, star brands are born only when a company manages to make products that "speak to the ages" but feel intensely modern. Such products sell fast and furiously, all while raking in profits. "Mastering the paradox of star brands is very difficult and rare," Arnault notes dryly, "fortunately."

"Our philosophy is quite simple, really. If you look over a creative person's shoulder, he will stop doing great work. Wouldn't you, if some manager were watching your every move, clutching a calculator in his hand? That is why LVMH is, as a company, so decentralized. Each brand very much runs itself, headed by its own artistic director. Central headquarters in Paris are very small, especially for a company with 54,000 employees and 1,300 stores around the world. There are only 250 of us, and I assure you, we do not lurk around every corner, questioning every creative decision."

"I would say that there are four characteristics required. A star brand is timeless, modern, fast-growing, and highly profitable. The problem is that the quality of timelessness takes years to develop, even decades. You cannot just decree it. A brand has to pay its dues-it has to come to stand for something in the eyes of the world. But you can, as a manager, enhance timelessness-that is, create the impression of timelessness sooner rather than later. And you do that with uncompromising quality."

Interview with Dani Reiss of Canada Goose
"During the IPO roadshow, we fielded questions about whether Canada Goose was a fad and whether we were worried about becoming too popular. I've heard such questions probably every year I've been at the company, yet they still make me smile. Our brand is 60+ years old, and we've been growing every year for at least the past 15 years, but in so many ways we're just getting started."

"I hear stories regularly from people who are only now discovering us about how much they love our products. Young, old, local, international, outdoor explorers or fashionistas, they all respond to our commitment to quality, authenticity, and staying true to our DNA. That's how we remain relevant as we grow and build an enduring brand."

"And as we do, I've made it clear that one aspect of our business is non-negotiable. Canada Goose will forever be a champion for "Made in Canada." There is simply no better way for us to remain timeless. Our Canadian heritage and commitment to manufacturing our parkas domestically are at the heart of our business and brand. Many companies in our industry outsource to offshore manufacturers, but we will keep aggressively investing in producing premium products in Canada. "

Trick or Treat!
EdgePointers had some fun with costumes







October 26, 2019

Staying the course: Even stars are underdogs at times
Active portfolio management can be like riding a roller coaster at times. Even highly successful active managers often underperform over periods of time.

The chart below shows the performance of active managers over a 15-year period. As you can see most active managers did not even survive and only 14% of them survived and outperformed over the 15-year period. However, if we take a closer look at these most successful managers that outperformed over the 15-year period, we find that 72% of them experienced at least one three-year period of underperformance.

More than one study has shown that the vast majority of successful managers have at times failed to exceed their benchmarks or their peers, particularly over periods of three years or less. And they've sometimes lagged by a wide margin, Of course, it's easy to lose confidence in an investment after suffering through a negative period but selling (or buying) purely based on short-term numbers is one of the worst things you can do as an investor.

Do yourself a favour - after picking the right investment for you, stay loyal. After all, the longer you stay in the game, the greater your chances of coming out ahead. Don't replace one fund with another simply because it has underperformed lately. Invest in a fund because you believe in the investment approach and understand how it can help you in the long term.

The Ongoing Battle for Pipeline Projects in Canada
Canada has the world's 3rd largest oil reserves and is currently the 7th largest producer of crude oil.  Canada's crude oil production has increased from 2.3M barrels/day in 2005 to 4.6M in 2018. With the proper infrastructure built, the National Energy Board estimates the production will grow to 6M barrels/day by 2030. The critical question facing Canada's oil and gas industry is whether the necessary infrastructure will be built.

Over the last decade, many of the proposed pipeline projects have been cancelled or delayed as a result of regulatory challenges or political decisions. If all of the export pipelines applied for since 2012, which have now been canceled or delayed, were instead approved and completed as per their original proposed in-service dates, 3.4M barrels/day of additional capacity would have been added by 2019. Instead, between 2013 and 2016, only 1M barrels/day in additional capacity was added, and since 2016 no additional capacity has been added. This has contributed to a widening price differential for Western Canadian Select (WCS) compared to Western Texas Intermediate (WTI).

For a review of some of the most high-profile pipeline projects in Canada in recent history click here.

High flying
The combined value of the five biggest companies in the S&P 500 -Apple, Microsoft, Amazon, Alphabet, and Facebook -- has reached 17% of the index's total market cap. That's the highest for the top five companies in any week since the burst of the dotcom bubble at the turn of the century.







Unprofitable IPOs

The percentage of companies going public that have yet to generate positive earnings has reached 70%. This is the highest since the peak of tech-industry excess roughly 20 years ago.

Friday Funnies


October 19, 2019

What's your vintage year?

When did you become an EdgePoint partner? Let's take a walk down memory lane as we recall the major events and fun facts from your vintage year.

Focusing on best ideas


CFA Institute recently released a blog post looking at active managers' returns by position sizing relative to benchmark. Looks like there's a relation between best ideas and performance. Another reason it makes sense to run concentrated portfolios of high conviction ideas. 
Negative interest rates are nothing short of a mystery

Negative interest rates are likely to throw off whatever we knew about the financial world and how things worked in the past. Howard Marks discusses why negative rates have become prevalent, what implications they might have, whether they will reach the U.S., and what investors can do as they navigate these uncharted waters.

Why would anyone want to buy a negative-yield bond?
Fear about the future that causes investors to engage in a flight to safety in which they elect to lock in a sure but limited loss
A belief that interest rates will go even more negative providing a profit on bonds when they do (as bonds appreciate in price as they would with any decline in rates)
An expectation of deflation causing the purchasing power of the repaid principal to rise
Speculation that the currency underlying the bond will appreciate by more than the interest rate

What is there to do?
The most reliable solution lies in buying things with durable and hopefully growing cash flows. Investments with the likelihood of producing steady earnings or distributions that reflect a substantial yield on cost seem like reasonable responses in times of negative yields. The challenge lies in accurately predicting the durability and growth of cash flows and making sure the price you pay allows for a good return. In today's environment, assets with predictability are often priced too high and investors are unusually willing to extrapolate growth far into the future. While simple in concept, investing is far from easy, especially today.

Leveraged Loans

Barely noticed in a corner of the financial markets, leveraged loans originally worth about $40 billion are staging their own private meltdown.

Loans tied to more than 50 companies have lost at least 10% of face value in just three months. Some have dropped a lot more, with lenders lucky to get back just two-thirds of their investment if they tried to sell.


Morgan Housel on behavioral biases and pitfalls

In January this year Morgan Housel- Partner, Collaborative Fund- gave a presentation on behavioural biases and pitfalls faced by ordinary investors at the India Investment Conference. Through five stories and various examples, he conveys that investing is not just about what you know but also about how you behave and that stocks become less risky the longer one holds them.

"The goal of investing is not to minimize boredom, it is to maximize returns! If you want clients to stick around, then do things simply."

October 12, 2019

Our Q3 commentaries are available now

This quarter, portfolio manager Geoff MacDonald explains why it's important to invest like a rational business owner, while fixed-income analyst Derek Skomorowski discusses why relying on others to do your credit work doesn't pay off.

America's middle class can't afford its cars


Car loans that are increasingly stretched out are a pronounced sign that some American middle-class buyers can't afford a middle-class lifestyle. For many, the availability of loans with longer terms has created an illusion of affordability. It has helped fuel car purchases that would have been out of reach with three-, five- or even six-year loans. Low rates in effect served as a bailout for the auto industry over the last decade. 

A growing share of car buyers won't pay off the debt before they trade in their cars for new ones, either because the car is in need of repairs or because they want a newer model. A third of new-car buyers who trade in their cars roll debt from old vehicles into their new loans. 

    Americans have been borrowing to buy their cars for decades, but auto debt has swelled since the financial crisis. U.S. consumers held a record $1.3 trillion of debt tied to their cars at the end of June.

    So far this year, dealerships made an average of $982 per new vehicle on finance and insurance versus $381 on the actual sale. 



    Momentum. After one year of outperformance, the next 9 are usually bad
    Momentum strategies show a tendency towards long-term reversal. Starting from around the one year point onward, they underperform. The green column shows the initial one-year annual excess returns of Winner portfolios over Loser portfolios. The blue column shows the excess returns of those same portfolios from the end of the 1st year to the end of the 10th year. 





    Free cash flow as a % of GDP is at a record high in the U.S.

    There have NOT been big investments by either households or businesses that create misallocations of capital.  Misallocations usually precede/cause a recession.


    Source: Empirical Research Partners

    Paying for stability

    Stable stocks have been more expensive only 4% of the time since 1976. Bank stocks have been less expensive only 5% of the time since 1976.


    Source: Empirical Research Partners


    Demographics

    Artist Profit Sharing


    Don't go chasing waterfalls...

    …unless you can take a photo of it like this spectacular shot. Our Q3 Photo Contest winner is Ted Chisholm.


    October 5, 2019

    Warren Buffett's first television interview

    Invaluable lessons about investing that haven't changed to this day. 


    Paying for stability


    The valuation gap between stocks with stable growth and volatile growth is larger today than at any time in at least the last 35 years. The 20% of S&P 500 stocks with the most stable EBITDA growth during the past 40 quarters currently trade at a median forward P/E of 21x. This represents a 23% premium to the median S&P 500 stock's multiple of 17x. Since 1985, this premium was only exceeded in early 2000 at the peak of the Tech Bubble. The 25% discount carried by the stocks with the most volatile earnings growth (13x vs. 17x) has been deepening for a decade and is now the largest on record.

    BUT…
    While the valuations of stable growth and volatile growth companies look extreme relative to history, valuations have generally not been a useful signal for predicting the forward returns of these stocks in the past. Exhibit 14 below shows the weak historical relationship between the valuations of stable growth stocks and their forward 12-month returns relative to volatile growth stocks. In the past, large valuation spreads have not indicated above-average risk of a reversal in valuations and performance. In fact, the times in the past when stable growers carried the largest valuation premia relative to volatile growth stocks were often been followed by further stable growth stock outperformance. 


    Ever seen a 0.00% R squared before?*
    *R-squared is a statistical measure that explains to what extent the variance of one variable (valuation premium in this case) explains the variance of the second variable (forward 12-month excess returns in this case).  

    Bond and dividend yields since 2005







    Tech IPOs aren't working for the masses
    Many of the seemingly hot debuts this year have been much less so for most ordinary investors. Most big new tech issues from this year are trading below their opening prices from their first day of trading. For most new tech issues, the biggest gains come upfront. Relatively few investors get access to new shares at the listing price. But for the majority of investors who have to wait for trades to open, the returns aren't so glamorous. 




    Shale boom is slowing












    September 28, 2019

    EdgePoint Partners' back to school reading list
    Over the past few weeks, we have been collecting some of the reads that have caught your attention lately. The results are in! Here are some of the books that come highly recommended by EdgePoint partners: 


    S&P 500 Return: Earnings Growth vs. Multiple Expansion




    During the dot-com bubble, investors flocked to bet on the purported next big thing. A similar theme can be spotted in today's IPO market, with some companies asking buyers to bet on unproven technology and untested revenue models. Many winners have emerged, but this deluge of disruptors has also laid down a minefield.


    Historical market returns vs. ISM manufacturing index
    The left chart shows the correlation between ISM manufacturing index and 10-year Treasury yields since 2010.  A PMI index above 50% indicates that the manufacturing economy is expanding, and a PMI index below 50% indicates that the manufacturing economy is declining.  The right chart shows the correlation between S&P 500 returns and ISM readings over or under 50.

    Mixed signals from bond yields 
    According to government bond yields, we are making a bee-line for Armageddon. According to credit spreads, clear skies on the horizon.
    Stock market returns are inconsistent.
    Maybe the best and worst part about the markets is the fact that two investors can look at the same exact data and come to completely different conclusions. Looking at the two stats below many might say that "buy & hold doesn't work" or "this is why I time the market".

    $10k invested in the S&P 500 in Jan 2000 would be worth $29,181 by the end of Aug 2019

    $10k invested in the S&P 500 in Jan 2010 would be worth $32,100 by the end of Aug 2019

    The first situation invested at the height of the dot-com bubble which might have been the worst entry point in U.S. stock market history. The dot-com bubble soon burst leading the S&P 500  to fall by 45%; 10 years later the financial crisis hit and the S&P 500 fell again, but this time by 51%. Despite this, the investors still managed to triple their money and earn 5.9% annually as of August 2019. How many investors would sign up for 5.9% annual returns today for the next 20 years?

    Stock market returns are inconsistent. Sometimes returns are front-loaded, sometimes they're back-loaded and sometimes they're not great, even over longer time frames. One period of inconsistent or poor returns isn't a reason to give up on the stock market. That's how it works.

    September 21, 2019

    Earlier in the summer, we presented our Investment team's top literary picks for the season. We hope you enjoyed them! Now, in the spirit of sharing interests, we'd love to hear which books and podcasts have caught your attention lately. Share your recommendations HERE and we may feature them in an upcoming edition of Inside Edge! 

    Video: An investor's journey with EdgePoint

    We're proud of how we've been able to help our partners and end clients by building their wealth during the first 10 years of our existence. To help build for EdgePoint's second decade, we've made a video to remind people that the first one wasn't always a smooth ride but that it paid to be patient during the tough times. Volatility is a constant in the market, how our clients react to it however will determine if they can get to their Point B. 

    More on negative-yielding bonds

    According to Jeff Gundlach: "79% of all negative-yielding bonds are held by central banks."

    With $14 trillion in negative-yielding debt globally, that means that $3 trillion was bought by actual investors.



    Saudi oil reserves

    Members of the International Energy Agency are required to hold emergency stocks of oil that could cover 90 days' worth of lost imports. They can deploy these reserves in unison to avoid an oil shock, as in June 2011, when the U.S. and 27 other countries acted to release 60 million barrels of oil from strategic reserves to drive down prices during the disruption caused by the civil war in Libya. The U.S. holds around 600 million barrels of oil in reserve and other governments have a further 1.2 billion.

    Saudi Arabia's own oil reserves have fallen in recent years, but remain sufficient to ensure the kingdom's customers don't experience shortages. The only stipulation is that the disruption must be short-lived. The nation holds enough to cover the country's exports for around 35 days.

    A look at what countries are dependent on Saudi oil.

    The chart on the left shows total crude exports from Saudi Arabia by destination country with Japan, China, US, South Korea & India making up the bulk of their exports. The chart on the right shows Saudi Arabia's share of each nation's crude petroleum imports with Japan and South Korea being the most dependent.



    How Buffett's Brain Works

    Here are some key factors Warren Buffett considers when looking at potential opportunities:

    Simplicity - Is the business easy to understand?
    Operating History  - Has the business been around for a long time, with a consistent operating history?
    Long-Term Prospects - Is there reason to believe that the business will be able to sustain success in the long-term?
    Rational Decisions - Is management wise when it comes to reinvesting earnings or returning profits to shareholders as dividends?
    Candidness - Does the management team admit mistakes? Are they honest with shareholders?
    Margin of Safety - What's the chance you'll lose money on the stock, in the long run, if you buy it at today's price?

    September 14, 2019

    Earlier in the summer, we presented our Investment team's top literary picks for the season. We hope you enjoyed them! Now, in the spirit of sharing interests, we'd love to hear which books and podcasts have caught your attention lately. Share your recommendations HERE and we may feature them in an upcoming edition of Inside Edge! 

    The worst day for momentum since 2009

    Earlier this week many growth stocks (generally companies that are seeing rapid profit increases) took a dramatic turn downward as measured by Bloomberg's Pure Growth Portfolio. In essence, many of 2019's hottest stocks took a large hit, while the year's most unloved stocks have enjoyed a rally.


    This sudden reversal is what drove US momentum to have its worst single-day decline since 2009.

    Can you stomach the next big market swing?

    The quiz that your financial adviser may have given you isn't really a good way of understanding your tolerance for risk.

    If I ask you in a questionnaire whether you are afraid of snakes, you might say no. If I throw a live snake in your lap and then ask if you're afraid of snakes, you'll probably say yes-if you ever talk to me again.

    Investing is like that: on a bland, hypothetical quiz, it's easy to say you'd buy more stocks if the market fell 10%, 20% or more. In a real market crash, it's a lot harder to step up and buy when every stock price is turning blood-red and your family is begging you not to throw more money into the flames.

    This is why financial advisors use risk tolerance questionnaires to help determine how much risk their clients should be exposed to. Unfortunately, imagining your future behavior or accessing that behavior from a risk questionnaire isn't as easy. New research shows financial advisers create drastically different portfolios even when clients appear to have the same tolerance for taking the risk.

    Professionals in many fields are vulnerable to what the Nobel prize-winning psychologist Daniel Kahneman calls "noise," or variation in judgment driven by such irrelevant factors as emotion, time of day or the weather.

    To do better, think about how your past experiences might shape your future expectations. Did you buy your first stock at the beginning of a bull market? That could skew you toward taking more risk. Did you start a business during a recession? That could make you more gung-ho if it thrived or gun-shy if it failed.

    One researcher suggests that the best guide to whether you will dump stocks in the next financial crisis is whether you did in the last one.

    Your perceptions of risk are only part of the puzzle. At least as important is your risk capacity. Think of your spending habits, your non-financial assets and how easily you could sell them in a pinch. Also vital are your goals. You can't know how much risk to take until you estimate when and how much you'll need to spend in the future.

    Ultimately any good adviser should devote more time to your risk capacity and your goals than to your risk tolerance.

    A behavioral prescription

    There have been 17 separate 5% pullbacks since stocks bottomed in 2009. Each one of them felt like the top. The chart below shows some of the headlines and quotes you might have read during these market declines. 



    It's hard to see headlines like this and not act on them. We know now that our worst fears did not come to pass, but there was no way to know at the time that each and every one of these pullbacks would resolve themselves to the upside.

    One of the worst things that investors can do is overreact to market volatility. It's perfectly normal to feel something, but adopting an all in or all out mentality when the market goes up and down is destined to fail.

    How the invention of spreadsheet software unleashed Wall Street on the world

    At one point or another many of us have had to use spreadsheets for school, work, or personal use. This article points to some interesting correlations between Wall Street and the rise of the spreadsheet.

    In 2010, a pair of researchers published a controversial economics paper. It was cited by UK politicians to justify austerity measures that sparked economic and employment crises, and anti-austerity protests-measures that the UN later called "punitive, mean-spirited, and often callous" inflicting "great misery." In 2013, however, this widely influential paper was found to have been substantially off in its estimates, thanks in part to a simple spreadsheet error: specifically, "a few rows left out of an equation to average the values in a column," the Guardian wrote at the time.

    This famous foul-up is just one of many instances when digital predictions have let us down, creating a sharp contrast between the reality of things and what the numbers foretold.

    Rock-bottom bond yields spread from Japan to the rest of the world

    When the Bank of Japan's board meets on September 19th, it is not expected to reduce its main interest rate, currently at -0.1%. But any increase in interest rates seems a long way off. And as long as rates are at rock-bottom in Japan, it is hard for them to be raised in other places. Bond-buying by desperate Japanese banks and insurance companies is a big part of what keeps a lid on yields elsewhere.

    Japan is already the world's biggest creditor with its net foreign assets (Japans assets minus what they owe to foreigners) at around $3 trillion, or 60% of its annual GDP. This chart shows how since 2012 both sides of its national balance-sheet have grown rapidly as Japanese investors borrowed abroad to buy more and more assets.


    Globally, Japan's impact is felt most keenly in corporate-credit markets in America and Europe. Japan's pension and insurance firms are in a pinch to make regular payments to retirees so they look abroad for yield. Some see Japan as a template: its path of ever-lower interest rates is one that other rich, debt-ridden economies have been destined to follow and will now struggle to escape.

    September 6, 2019

    EDGE-ucation camp
    Since 2013, EdgePoint has been organizing EDGE-ucation camps for the children of our partners. These one-day events are aimed at kids ages 13 to 18 and cover the foundations and importance of investing and building long-term wealth. 


    The camp has grown every year. As more kids attend these events, we've been adding more camps in more cities. 

    Over the last 2 years, EdgePoint partners have visited 13 cities across Canada to share their knowledge and experience about things that can hurt savings and what people can do to reach their financial goals. Our hope is that with this program we can teach future generations about investing and other concepts that will help foster good future decision-making, financial independence, and self-confidence.

    We sent out a survey to see how these lessons have impacted the attendees of the camp. Here are the results.

    We were excited to see two campers select "Other" because it means they took the lessons to heart and looked for new ways to apply them. The answers were:
    • Opened a savings builder account with a higher interest rate
    • Want to buy a stock

    Is Your Stock Portfolio A Museum or A Warehouse?

    You don't make a great museum by putting all the art in the world into a single room. That's a warehouse. What makes a museum great is the stuff that's not on the walls. Many items don't make it to the walls so there is an editing process. There's a lot more stuff off the walls than on the walls. The stuff on the walls is the best sub-subset of all the possibilities.

    When you apply this crucial lesson to building your stock portfolio, it means that you are likely to succeed as an investor not just by the stocks you own, but also by the ones you don't.

    People buy stocks for all kind of reasons - they like them, their neighbours like them, their friends are making money on them, someone on Twitter is shouting about them, their prices have risen sharply in past few months, someone recommended them on TV, someone wrote about them on online forums, someone is boasting about them on WhatsApp groups, etc.

    Often, we end up building warehouses of our portfolios, not curated museums. Some people even maintain multiple portfolios, and each looks like a zoo of mismanaged, rowdy animals. You will do yourself a world of good by saying no to most things and not adding a lot of unwanted stocks to your portfolios. In other words, be a curator of stocks, not a warehouse manager.

    Skin in the game matters, especially for riskier, leveraged investment approaches

    In Norway, tax returns are publicly available making it possible to collect data on asset managers' taxable wealth.

    Three researchers conducted a study on 120 private equity professionals in Norway. The main objective was to test whether or not co-investment had a meaningful impact on manager choices. The researchers found that managers with more skin in the game tend to select investments with less risky cashflows and took on more debt to finance purchases as their purchases were generally of lower risk. The research suggests that outside investors in private equity funds could incentivize their managers to take less risk by requiring them to invest their own capital.


    Over $1 trillion in negative yielding corporates outstanding

























    Maybe everyone is buying negative yielding bonds because some of them are up 35% YTD...

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