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.
Careful what you wish for
From the blog Farnam Street, Charlie Munger says we shouldn't wish for energy independence:
If energy independence was such a good thing, let's just imagine that we go back to 1930 or something like that and we were hell bent to have total energy independence from all the foreigners. And we just drill and use every technique we can and we produce our hydrocarbon reserves which are absolutely certain to be limited.
Well, by now have way less in reserve and are way less energy independent. In trying to get energy independence we would have destroyed our safety stock of oil within our own borders.
Oil and gas are absolutely certain to become incredibly short and very high priced. And of course the United States has a problem and China has a worse problem.
And China has the correct solution. Imported oil is not your enemy it's your friend. Every barrel that you use up that comes from somebody else is a barrel of your precious oil which you're going to need to feed your people and maintain your civilization
As home prices rise, the number of homeowners underwater on their mortgages is plunging, writes The Wall Street Journal:
At the end of the first quarter, 20.6% of homes with jumbo mortgages were underwater, meaning the owners owed more on the mortgage than the home was worth. That's compared with 32.3% a year ago, according to real-estate website Zillow.com.
A group of economists shows that public companies invest far differently than private ones:
We document sizable and surprising differences in investment behavior between stock market listed and privately held firms in the U.S. using a rich new data source on private firms. Listed firms invest substantially less and are less responsive to changes in investment opportunities compared to matched private firms, even during the recent financial crisis. These differences do not reflect observable economic differences between public and private firms (such as lifecycle differences) and instead appear to be driven by a propensity for public firms to suffer greater agency costs. Evidence showing that investment behavior diverges most strongly in industries in which stock prices are particularly sensitive to current earnings suggests public firms may suffer from managerial myopia.
I care very much about our share owners, and so I care very much about our long term share price. I do not follow the stock on a daily basis, and I don't think there's any information in it. Benjamin Graham said, "In the short term, the stock market is a voting machine. In the long term, it's a weighing machine." And we try to build a company that wants to be weighed and not voted upon.
Barry Ritholtz writes a great piece on how investors go astray by telling themselves stories:
It's clear when emotional storytelling gets in the way of intelligent investing. We can see strategists come up short in their forecasts, and then offer a series of excuses for why. We all have witnessed the investor rationalizing why he was right and the markets were all wrong. How many traders have you seen doubling down on a losing trade, despite the obvious failure of the original thesis, rather than admit the error?
All of this is based on sticking to a story no matter which facts present themselves. "Who you gonna believe -- me or your lyin' eyes?"
I call this the triumph of the narrative over data, ideology over intelligence, politics over facts, emotion over planning.
The Economist writes about a worldwide fall in crime:
In 1990 some 147,000 cars were stolen in New York. Last year fewer than 10,000 were. In the Netherlands and Switzerland street dealers and hustlers have been driven out of city centres; addicts there are now elderly men, often alcoholics, living in state hostels. In countries such as Lithuania and Poland the gangsters who trafficked people and drugs in the 1990s have moved into less violent activities such as fraud
One of the things I watch most closely is the quality of our ads and peoples' sentiment around them. Right now ads on average make up about 5% or 1 in 20 stories in News Feed. We haven't measured a meaningful drop in satisfaction when we ask people about their experience with Facebook. We're comparing that to the result we get when we ask the same question to people using a version of Facebook with no feed ads at all.
Check out this crazy video of rush hour traffic in Beijing:
Enjoy your weekend.