8 Fascinating Reads

Happy Friday! There are more good news articles, commentaries, and analyst reports on the Web every week than anyone could read in a month. Here are eight fascinating ones I read this week.

Welcome back
Companies are now buying back a record amount of their own stock, writes Birinyi Associates. This is typically a bad sign, as companies have an abysmal history of timing buybacks. Enjoy it while it lasts:

We recorded $117.8 billion in buyback authorizations during the month of February, representing a 103% gain over the same period in 2012 ($118 bln vs. $68 bln). February was the largest month, in dollar terms, on record.

We are currently on a run-rate to log $827 bln of authorizations in 2013 vs $477 bln in 2012. 2007 was the only year in our database where we recorded more ($863 bln).

Good news if you're worried about the budget
The decline in health care cost growth appears to be alive and well, writes The Wall Street Journal:

The latest numbers from St. Louis-based Express Scripts Holdings (NASDAQ: ESRX  ) show that the pharmacy-benefit company saw spending on traditional drugs among commercially insured members slip 1.5% last year -- the first-ever decline in two decades of tracking data.

The U.S. will continue to dominate oil
As a result of America's ongoing oil boom, the U.S. overtook Saudi Arabia as the world's largest oil-producer in November. The International Energy Agency predicts that this will be true on an annual basis within a decade (via the American Enterprise Institute):

The new normal of retail
Financial blogger Josh Brown shares a chart from The Atlantic showing the decline in brick-and-mortar retail jobs since 2001:

Never gets old
Barry Ritholtz dug up a BusinessWeek story from February 2000. We now know that this was the prevailing view about a month before stocks and the economy peaked:

Time to celebrate. This month, the current economic expansion became the longest in U.S. history. The boom has done more than create millions of new jobholders and stock owners. It has also restored the public's confidence and given more people than ever a shot at the American Dream. We tell the story.

Greenbackd found an old speech by Dean Williams of Batterymarch Financial Management packed with timeless insight:

Prediction: Most of us spend a lot of our time doing something that human beings just don't do very well. Predicting things.

Forecasting: Confidence in a forecast rises with the amount of information that goes into it. But the accuracy of the forecast stays the same. 

The importance of mean reversion: If there is a reliable and helpful principle at works in our markets, my choice would be the ones the statisticians call "regression to the mean". The tendency toward average profitability is a fundamental, if not the fundamental principle of competitive markets.

How to win at investing
Bankers Anonymous shares the wisdom of the book Simple Wealth, Inevitable Wealth by Nick Murray:

Timing the market is a fool's game, whereas time in the market will be your greatest natural advantage.

The highest value of an investment advisor is often to tell you to not do anything. This sounds a lot like advice from Benjamin Graham.

For the individual investor, bonds are an "anxiety-management tool" but not a wealth-building tool. Unfortunately -- given current interest rates -- this is truer now than it was when Murray first published his book in 1999. At this time, fiduciaries who depend on managing money in perpetuity cannot afford to be in bonds, a big, under-recognized problem -- in my opinion.

Jeff Miller wonders why we treat the analysis of individual stocks differently from the analysis of the market as a whole. There's too much to quote from, so just read the whole thing here. It's good.

Enjoy your weekend.


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  • Report this Comment On March 09, 2013, at 11:28 PM, TMFDiogenes wrote:

    Yeah that last post was fascinating. It's not necessarily true that bad predictors of parts bad predictors of wholes, but he raises an awesome point.

    I'm not convinced his idea that you can get at signals that have micro foundations works. Internet bubble, housing boom, both only had troubling signs for one sector -- most companies are oblivious to problems in other sectors. Plus lots of people (esp. in the former case) had trouble predicting problems for individual stocks and industries during a bull market -- much less generalizing to the macro situation.

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