ESG

Doing Good While (Hopefully) Doing Well

Each year, BlackRock’s Chairman and CEO, Larry Fink, writes a letter to CEOs of “leading companies” in which BlackRock’s clients are shareholders.  Last year’s letter encouraged long-term thinking in the context of a world that is increasingly focused on short-term volatility.  This year’s letter strikes a similar tone, but goes a step further in mentioning environmental, social, and governance (ESG) matters as factors CEOs should be considering in their long-term strategies.  Socially responsible investing (SRI) is gaining traction among investors.  Is this just kumbaya investing or is it for serious investors, too?  Why would anyone do this?  On the other hand, why would anyone NOT do this? The Basics ESG and SRI are sometimes used interchangeably, but they are different.  SRI is the broad overarching investment thesis of the movement.  ESG filters this mandate through three lenses, environmental, social, and governance.  SRI is open to personal interpretation just like the…

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Bron

‘Bron, ‘Bama, and the January Effect

  The NBA may as well cancel the rest of the season.  Why?  Alabama won the college football championship, of course!  This means LeBron James is sure to win a title of his own: This reminds me of the January effect in the markets.  The thinking is that if January is positive, the year as a whole will be positive and if January is a down month, it means negative returns for the year as a whole.  That’s totally ridiculous, of course.  The January effect ‘feels’ right because most months are positive and most years are positive.  Since January is the first month of the year, humans tend to add emphasis to it whether it is deserved or not.  Similarly, Alabama has had a great football program for the last decade and LeBron has been the best player in the NBA for about the same time (don’t @ me).  It…

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cheating

Are You More Likely to Cheat with Bitcoin?

I recently spoke with a client who wanted to know what could go wrong with bitcoin.  We talked about bitcoin and the monetary system (not a risk now, but who knows in the future) as well as black market applications (greenbacks work just as well or better here).  The question stuck with me, though.  What could go wrong?  I remembered attending a session at an IMCA (now the Investments & Wealth Institute) conference with Dan Ariely and something clicked.  Ariely’s research suggests that the further we get from money, the higher the likelihood that we will cheat. Check out his TED talk here.  He performed an experiment where subjects were given a limited amount of time to complete a number of math problems and would get paid based on the number of problems they completed.  Subjects who handed in their papers got an average of 4 problems correct. Lots of…

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gummis

Bears, Beats, Bitcoin

In honor of my favorite vignette from The Office… Question:  What kind of bear is best? ‘Tis the season for market predictions (and forgetting last year’s predictions).  The optimists predict low single digit returns for equities.  The bears predict bear things.  Which means no one expects even decent stock market returns.  Now more than ever it makes sense to hold a portfolio that doesn’t require you to predict the future to be successful. Bears Eat Beets Schwab’s Jeffrey Kleintop points out that while stocks have gone up every month this year, so have earnings. Battlestar Galactica Bitcoin is going bananas yet again.  Charlie Bilello has tracked bitcoin sentiment via Twitter polls at major milestones which is fascinating.  He also occasionally marks bitcoin’s “market cap” (or whatever you want to call it) which has hit $214 billion.  OMG!  That’s more than Home Depot!!! Calm down, Apple’s cash hoard is around $270…

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No Picture

My Favorite Posts This Week

I try to share good posts via Twitter.  A bunch of people were writing solid stuff this week:   A Little Knowledge is Dangerous – Nick Maggiulli – Surprising stat about survival rates for people lost in the wild.  Kids six and under have a surprisingly high survival rate while one of the lowest is for kids seven to twelve.  Younger kids follow their instincts.  Older kids overthink and panic.  This maps over to investing in that knowing a little bit can lead to devastating over-confidence. Is Robert Shiller Right that Passive Investing is Dangerous? – Cullen Roche, Chicken Farmer – This is a sensible layout of one argument in the active/passive debate, pointing out that the sides often aren’t even debating the same points. How to Deal with Market Moving News – Ben Carlson – Binary thinking and single variable analysis are killers to long-term portfolio success. Backtested Strategies:…

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