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.
In Wired, Bill Gates talks progress:
Wired: Peter Thiel, expressing his dissatisfaction with technology's progress, recently noted, "We wanted flying cars, instead we got 140 characters." Do you agree with him?
Bill Gates: I feel sorry for Peter Thiel. Did he really want flying cars? Flying cars are not a very efficient way to move things from one point to another. On the other hand, 20 years ago we had the idea that information could become available at your fingertips. We got that done. Now everyone takes it for granted that you can look up movie reviews, track locations, and order stuff online. I wish there was a way we could take it away from people for a day so they could remember what it was like without it.
Ruchir Sharma of Morgan Stanley writes about a shift in global commodity markets:
If the historical pattern holds, we are now entering a long period of falling commodity prices, which could last two decades. That is good for importers such as the U.S., as was the case in the 1980s and 1990s when commodity prices were falling. The current fall in retail gasoline prices should increase the purchasing power of the American consumer and offset the fiscal drag from the government sequestration cuts.
Never let a good crisis go to waste
CNNMoney writes about the lawyer and consultant fees extracted from the Bernie Madoff Ponzi scheme debacle:
It really does take money to make money. So far, lawyers and other consultants have racked up $701 million in fees as they work to recover the $17.5 billion lost to Bernard Madoff's Ponzi scheme.
For the curious, that works out to about $430,000 per day.
The findings appeared to show that people do more searches on terms such as "stocks", "portfolio" and "economics" when they are worried about the state of the markets, said Tobias Preis, associate professor of behavioural science and finance at Warwick Business School.
Rises in search volumes for such terms are generally followed by stock market declines, according to the research published in the journal Scientific Reports. By contrast, a fall in financial searches often points to greater optimism among investors, leading to a rising market.
I will add: Please don't try this at home.
Leave it to the pros
Every year, some of the world's smartest investors gather to pitch their best ideas at the Ira Sohn Investment conference in New York. Dan McCrum tallies last year's score card:
An investor who followed every top idea from the 12 speakers last year would have made 19 per cent, less than the 22 per cent gain available from a passive index fund tracking the U.S. stock market.
Statistician superstar Nate Silver talks about predictions with Index Universe:
IU: What do you see as the common theme among bad predictions? What most often leads people astray?
Silver: A lot of it is overconfidence. People tend to underestimate what the uncertainty that is intrinsic to a problem actually is. If you have someone estimate what they think a confidence interval is that's supposed to cover 90 percent of all outcomes, it usually only covers 50 percent. You have upside outcomes and downside outcomes in the market certainly more often than people realize.
Conspiracy theorists who can't let go of the fact that one of the world's richest men probably has some advantages and influence that others don't have. To which I say grow ... up, this is how the world works, read a book about the Roman Empire or the Renaissance or even the elitist philosophy of Confucianism circa 500 BC. Did not Nathan Mayer Rothschild have runners and messengers in boats speeding word to him of Napoleon's defeat at Waterloo? And did he not engineer a panic on the London bond market, first dumping consols and then scooping up everyone else's before the official news arrived at the marketplace? Did Buffett's viewpoint on rescuing the banks weigh on the TARP vote? Probably. Maybe. But it's not like Warren made it a secret that he was expecting this outcome. The New York Times op-eds about betting on America might have been your first clue, Sherlock.
The purveyors of complex investing products, sophisticated (read: expensive) strategies and short-term trading proponents who thrive on transactions and get paid when people turn greedy and fearful, buying and selling while generating turnover and commissions To them, the folksy, slow-money, common-sense approach that Buffett and Berkshire stand for are a constant obstacle in their never-ending quest to dazzle the public and, by extension, extract fees from them.
Value investor Guy Spier discusses why he avoids retail investments:
Enjoy your weekend.