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.

Golden years
BlackRock CEO Larry Fink talks retirement:

So if I'm speaking to those who are, let's say, 45 and older, I would say if you don't start thinking about how longevity is going to change your future, you most probably will have to work much longer than you ever dreamed of doing. Or you'd better start becoming very nice and very good to your children, because most probably you'll be living with them.

Growing out of your problems
Jeff Bezos, who recently purchased The Washington Post, talks about how to break a slump: 

Continuing to contract by cutting the staff would lead to extinction, he said, "or, at best, irrelevance." He told a group of reporters and editors Wednesday morning that "making money isn't enough. It also has to be growing."

"What has been happening over the last few years can't continue to happen," Bezos said.

"All businesses need to be young forever. If your customer base ages with you, you're Woolworth's," 

More complicated than it looks
Analyst Eddy Elfenbein writes on the limits of fundamental analysis, using Tesla (NASDAQ: TSLA  ) and Amazon (NASDAQ: AMZN  ) as examples: 

I'd say there's about 10% of stocks, maybe even just 5%, where fundamental analysis is totally useless. Take Tesla for example. By any conventional metric, the stock is absurdly overvalued. Unfortunately, I'm not considered a genius for pointing that out. Everyone knows that. The reason is that conventional metrics don't work on unconventional stocks. If a technology comes along which changes the entire ballgame, all those ratios go out the window.

Consider the case of At its peak during the tech bubble, the stock was going for a ridiculous valuation. As it turns out, the stock was actually cheap. Since the turn of the century, Amazon has greatly outperformed the S&P 500. AMZN has more than tripled while the S&P 500 has had meager returns. The reason is that Amazon was a new business that changed the marketplace. Valuation didn't tell you that.

C Suite
A study from the Rotman School of Management talks about the differences between private and public companies:

Family owned businesses perform poorly on most accepted 'best practices' of good corporate governance, from majority voting to independent chairs. Could it be possible that they have an important lesson to teach publicly held companies? Yes, say the authors, who discuss their latest research, which indicates that family owned businesses are not only outperforming publicly held businesses over time, but they are also leading the way on perhaps the most important best practice of them all: long-term thinking.

American students tend to do poorly on international education tests. But Massachusetts dominates, writes The New York Times

If Massachusetts were a country, its eighth graders would rank second in the world in science, behind only Singapore, according to Timss -- the Trends in International Mathematics and Science Study, which surveys knowledge and skills of fourth and eighth graders around the world. (The most recent version, in 2011, tested more than 600,000 students in 63 nations.)

Massachusetts eighth graders also did well in mathematics, coming in sixth, behind Korea, Singapore, Taiwan, Hong Kong and Japan. The United States as a whole came in 10th in science and 9th in math, with scores that were above the international average.

Economist Ronald Coase, who died this week at age 102, talked to NPR last year about China: 

Coase is a legend in economics. He won the Nobel prize. He has a theorem named after him. But China's rapid emergence as a global economic power -- one of the most important developments of the past generation -- took him completely by surprise.

"I thought it would take 100 years, if not more," Coase said.

It seemed striking that an economic legend could be so wrong about such an important subject. I asked Coase what he made of this.

"I've been wrong so often I don't find it extraordinary at all," he said.

Americans are back to having babies, writes The Wall Street Journal:

America's baby bust may be over.

The nation's fertility rate stabilized last year for the first time in five years, according to early data from the Centers for Disease Control and Prevention. That follows four years of big declines during the economic downturn that pushed the rate—the number of births per 1,000 women aged 15 to 44 -- to the lowest levels on record.

James Suroweicki writes about Nokia's decline:

It wasn't just that Nokia failed to recognize the increasing importance of software, though. It also underestimated how important the transition to smartphones would be. And this was, in retrospect, a classic case of a company being enthralled (and, in a way, imprisoned) by its past success. Nokia was, after all, earning more than fifty per cent of all the profits in the mobile-phone industry in 2007, and most of those profits were not coming from smartphones. Diverting a lot of resources into a high-end, low-volume business (which is what the touch-screen smartphone business was in 2007) would have looked risky. In that sense, Nokia's failure resulted at least in part from an institutional reluctance to transition into a new era.

Enjoy your weekend. 

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  • Report this Comment On September 06, 2013, at 12:25 PM, MartyTheCanuck wrote:

    Thanks for the Eddy Elfenbein link. I've always stayed away from high-growth stocks because they are difficult to value, and always look overvalued by traditional metrics. But I'm trying to improve ( the Rule Breakers newsletter helps a lot ) and I'm invested in Tesla.

  • Report this Comment On September 07, 2013, at 10:55 AM, constructive wrote:

    "But China's rapid emergence as a global economic power -- one of the most important developments of the past generation -- took [Coase] completely by surprise."

    On the other hand:

    "It is likely that America will be more important during the next century or two, but after that it may well be the turn of China."

    Bertrand Russell, 1930

  • Report this Comment On September 08, 2013, at 12:38 PM, cattywampus wrote:

    Ruling Your World -Sakyong Mipham Rinpoche

    This can help you control the emotional content of your investing beast.

  • Report this Comment On September 08, 2013, at 1:09 PM, cattywampus wrote:

    If you don't want to buy the book check him out on YouTube. Ruling Your World -Sakyong Mipham Rinpoche

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