8 Fascinating Reads

Happy Friday! There are more good news articles on the Web every week than anyone could read in a month. Here are eight fascinating pieces I read this week.

Sad because it's true
The blog Interfluidity gives an honest assessment of modern finance:

Finance has always been complex. More precisely it has always been opaque, and complexity is a means of rationalizing opacity in societies that pretend to transparency. Opacity is absolutely essential to modern finance. It is a feature not a bug until we radically change the way we mobilize economic risk-bearing. The core purpose of status quo finance is to coax people into accepting risks that they would not, if fully informed, consent to bear.

Payback
Fannie Mae and Freddie Mac have now paid back all of their government bailouts and then some, leaving taxpayers with a profit:

U.S. taxpayers have recouped all of the $187 billion they gave mortgage giants Fannie Mae and Freddie Mac in one of the most expensive bailouts of the financial crisis.

The milestone was reached after Fannie Mae reported Friday it will pay Treasury an additional $7 billion in profit from the end of last year.Beginning in late 2008, the federal government bailed out the two firms that had become nearly the only source of loans for American home owners. With the payment announced Friday, the payments from the two firms now comes to $192 billion.

Nice work if you can get it
The Financial Times outlines the outrageous fees some U.K. investors pay advisors: 

Barclays Wealth and St James's Place have the highest 12-month charges, of 6.55 per cent and 7.48 per cent respectively, inclusive of all fund management fees, if a client only stays with the firm for one year.

Worrying yourself broke
This is fascinating:

The stress that financial traders suffer during periods of high volatility in the markets reduces their appetite for risk, according to a study led by Cambridge university neuroscientist and former Wall Street trader John Coates. This may prolong financial crises.

Wisdom
I like this parable, from jlcollinsnh:

Two close boyhood friends grow up and go their separate ways.  One becomes a humble monk, the other a rich and powerful minister to the king.

Years later they meet. As they catch up, the minister (in his fine robes) takes pity on the thin, shabby monk. Seeking to help, he says: "You know, if you could learn to cater to the king you wouldn't have to live on rice and beans."

To which the monk replies: "If you could learn to live on rice and beans you wouldn't have to cater to the king."

Worth it?
Kevin Roose talks about life as a young investment banker:

Wall Street is notorious for the long hours it imposes on its worker bees. (One young banker bragged to me about working the "banker 9-to-5," defined as 9 a.m. until 5 a.m. the next day.) But lots of professions -- law and medicine, to name just two -- work their underlings hard. What makes banking different is that the work can arrive at any moment, unannounced and requiring immediate attention. If a client needs a PowerPoint presentation at 4 a.m. on Christmas morning, a junior banker will have to wake up and get to the office.

Darwin investing
Josh Brown talks about adaptation

[Peter] Lynch remains untouched by anyone -- whether they managed money before his career, during it or in the 25 years since. No one even comes close.

What made him special? He made changes in a diverse variety of market environments without obsessing over one metric or another like a dying man clutching a religious totem to his chest.

Lynch had six basic "stories" or types of stocks he liked to play and he leaned toward whichever ones were offering the best opportunities at a given time. He didn't walk around wearing a sign on his chest that said "Value Investor" or "Momentum Trader" or "Growth At a Reasonable Price Guy" or "Turnaround Player" and he certainly didn't care to be put into someone else's style box. Lynch knew that no approach worked best all the time.

Data
Watch this awesome video about how nature is explained with numbers:

Enjoy your weekend. 

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Read/Post Comments (7) | Recommend This Article (12)

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  • Report this Comment On February 21, 2014, at 6:56 PM, Mega wrote:

    "But lots of professions -- law and medicine, to name just two -- work their underlings hard. What makes banking different is that the work can arrive at any moment, unannounced and requiring immediate attention."

    To point out the obvious, long hours in law and medicine can be even more unscheduled.

  • Report this Comment On February 21, 2014, at 7:03 PM, Mega wrote:

    "[Peter] Lynch remains untouched by anyone -- whether they managed money before his career, during it or in the 25 years since. No one even comes close."

    He's probably the best mutual fund manager of all time, but not the best investor. He only ran Magellan for 13 years - a pretty short period to anoint him.

  • Report this Comment On February 21, 2014, at 8:47 PM, Mega wrote:

    "The core purpose of status quo finance is to coax people into accepting risks that they would not, if fully informed, consent to bear."

    I think it's more or less the opposite: the purpose of finance is distributing risk, so that collectively we can undertake projects which would be unacceptably risky on an individual basis.

    Thanks for the thought-provoking articles Morgan.

  • Report this Comment On February 21, 2014, at 10:54 PM, TMFHousel wrote:

    Mega: I think that's the theory. The actual purpose is often far different. Financiers have a long history of concentrating risk in places where it shouldn't be.

  • Report this Comment On February 22, 2014, at 9:26 AM, justinsilly wrote:

    Looks like a few people who think they could write articles.

  • Report this Comment On February 22, 2014, at 12:39 PM, maiday2000 wrote:

    Is Kevin Roose's musing one of this week's "8 most interesting reads" because of its ridiculous narcissism? Banking is different than being a doctor because work requires immediate attention? Seriously? I guess he has never met a resident working 100 hours a week in an emergency room.

  • Report this Comment On February 24, 2014, at 12:04 PM, bamasaba wrote:

    American soldiers work 24-7 when they are in a war zone, and the enlisted ranks get paid about 30K-40K a year for doing so. Bankers hours are nothing special, and I really hate it when they try to use the 'stress' or 'long hours' justification for the bloated salaries.

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