Some things I read recently - 09/07/2018

Access to management is obviously not easy at FANG. But one of the top value investing firms has invested in Amazon/Tenecent ... is value investing finally changing? 

Source: Sequoia transcript 06/2018

Notes From: Martin Ford. “Rise of the Robots: Technology and the Threat of a Jobless Future.” (1/10)

July 5, 2016 

“While industrial robots offer an unrivaled combination of speed, precision, and brute strength, they are, for the most part, blind actors in a tightly choreographed performance. They rely primarily on precise timing and positioning. In the minority of cases where robots have machine vision capability, they can typically see in just two dimensions and only in controlled lighting conditions. They might, for example, be able to select parts from a flat surface, but an inability to perceive depth in their field of view results in a low tolerance for environments that are to any meaningful degree unpredictable. The result is that a number of routine factory jobs have been left for people. Very often these are jobs that involve filling the gaps between the machines, or they are at the end points of the production process.”

July 5, 2016 

“ It might be argued that the robot’s eyes can trace their origin to November 2006, when Nintendo introduced its Wii video game console. Nintendo’s machine included an entirely new type of game controller: a wireless wand that incorporated an inexpensive device called an accelerometer. The accelerometer was able to detect motion in three dimensions and then output a data stream that could be interpreted by the game console. Video games could now be controlled through body movements and gestures. The result was a dramatically different game experience. Nintendo’s innovation smashed the stereotype of the nerdy kid glued to a monitor and a joystick, and opened a new frontier for games as active exercise.”

July 5, 2016 

“The history of computing shows pretty clearly that once a standard operating system, together with inexpensive and easy-to-use programming tools, becomes available, an explosion of application software is likely to follow. This has been the case with personal computer software and, more recently, with iPhone, iPad, and Android apps. Indeed, these platforms are now so saturated with application software that it can be genuinely difficult to conceive of an idea that hasn’t already been implemented.”

July 7, 2016 

“Nonetheless, those 140 factory jobs represent at least a partial reversal of a decades-long decline in manufacturing employment. The US textile industry was decimated in the 1990s as production moved to low-wage countries, especially China, India, and Mexico. About 1.2 million jobs—more than three-quarters of domestic employment in the textile sector—vanished between 1990 and 2012. The last few years, however, have seen a dramatic rebound in production. Between 2009 and 2012, US textile and apparel exports rose by 37 percent to a total of nearly $23 billion.7 The turnaround is being driven by automation technology so efficient that it is competitive with even the lowest-wage offshore workers.”

July 7, 2016 

“US manufacturing more competitive with low-wage countries. Indeed, there is now a significant “reshoring” trend under way, and this is being driven both by the availability of new technology and by rising offshore labor costs, especially in China where typical factory workers saw their pay increase by nearly 20 percent per year between 2005 and 2010. In April 2012, the Boston Consulting Group surveyed American manufacturing executives and found that nearly half of companies with sales exceeding $10 billion were either actively pursuing or considering bringing factories back to the United States.8”

July 7, 2016 

“Increased automation is also likely to be driven by the fact that the interest rates paid by large companies in China are kept artificially low as a result of government policy. Loans are often rolled over continuously, so that the principal is never repaid. ”

July 7, 2016 

“Many analysts believe that this artificially low cost of capital has caused a great deal of mal-investment throughout China, perhaps most famously the construction of “ghost cities” that appear to be largely unoccupied. By the same token, low capital costs may create a powerful incentive for big companies to invest in expensive automation, even in those cases where it does not necessarily make good business sense to do so.”

July 7, 2016 

“In June 2013, athletic-shoe manufacturer Nike announced that rising wages in Indonesia had negatively impacted its quarterly financial numbers. According to the company’s chief financial officer, the long-term solution to that problem is going to be “engineering the labor out of the product.”12 Increased automation is also seen as a way to deflect criticism regarding the sweatshop-like environments that often exist in third-world garment factories.”

July 7, 2016 

“San Francisco start-up company Momentum Machines, Inc., has set out to fully automate the production of gourmet-quality hamburgers. Whereas a fast food worker might toss a frozen patty onto the grill, Momentum Machines’ device shapes burgers from freshly ground meat and then grills them to order—including even the ability to add just the right amount of char while retaining all the juices. The machine, which is capable of producing about 360 hamburgers per hour, also toasts the bun and then slices and adds fresh ingredients like tomatoes, onions, and pickles only after the order is placed. Burgers arrive assembled and ready to serve on a conveyer belt. While most robotics companies take great care to spin a positive tale when it comes to the potential impact on employment, Momentum Machines co-founder Alexandros Vardakostas is very forthright about the company’s objective: “Our device isn’t meant to make employees more efficient,” he said. “It’s meant to completely obviate them.”

Notes From: Martin Ford. “Rise of the Robots: Technology and the Threat of a Jobless Future.” iBooks. 

Revisiting my media consumption habits

Top Podcasts:
Serial (Season 2 isn't the best, but still an incredible master class in investigative journalism)
Tim Ferris show(great interviews in general)
Planet Money(short and crips - always)

Some that listen to here and there:
Reply All
Startup
Radiolab
99% invisible
Energy Gang
Criminal
Ted Radio Hour

Stuff that I've completely cut out:
Live markets news/WSJ/Bloomberg Live

Stuff partially cut out:

Economist(I read it cover to cover for years, but still a little negative; still read the technology/science/International segments)
FT Alphaville(too addictive to stop reading)

Value investing:
valueinvestingworld.com
Slack access to Manual of ideas
valuewalk.com
hurricanecapital
punchcardblog

FBEL(Groupe Bel) Equity Research Report

Fromageries Bel, FBEL,

Global Borrowing costs vs. GDP

via: JPM

Some thoughts on Harvard Management Company

1. What are some advantages that HMC has over its competitors? 


Some of the biggest advantages of the HMC over it’s competitors i.e. other endowment funds can be stated as following:

·      Because of Harvard Management Company’s association with Harvard University (a globally recognized Ivy league institution), the portfolio managers and research analysts enjoyed access to some of the best research from around the world

·      HMC also had a AAA credit rating – which implies that it had extremely low borrowing costs to leverage up its bets, regardless of size

·      AAA rating also helped HMC to be recognized as a favorable swap counterparty

2. In class you saw a number for the target real expected return for HMC: around 6.25%. How is this figure derived in the case? 


Basically:

6.5% = 4.5- 5% + 1.5 %

If in the long run – the endowment fund was able to generate returns of 6.5 % over the CPI (benchmark), then that would meet the needs of the policy stated by the board.

Where the 4.5% is what is needed to cover the expense of the university, and the 1.5% gap would need to be filled by gifts and donations.

“In the last several decades, spending as a percent of endowment value had been as high as 5.9% and as low as 3.3% but had averaged 4.6%.”

3. What is the Policy Portfolio? Can HMC deviate from its weights? Do you think the Policy Portfolio is a useful concept? (Is it really necessary, or did HMC set it up just to satisfy the Board?) 


Meyer essentially established the ‘policy portfolio’ in 1990 after an extended set of analysis and discussions about return expectations and risk Tolerances. One of the key pillars of the policy portfolio was to focus on long-term opportunities for the endowment and not to focus on short-term market fluctuations.

Exhibit 3 shows what the policy portfolio is under ‘neutral conditions’ and what the expectations are under normal conditions.

While the Policy portfolio is the guideline for performance – the HMC fund is allowed to deviate from its weight as stated in exhibit 3, provided it stays within tolerance. This system of allocation and rotating asset classes and capitalizing on opportunities is what is termed as ‘tactical asset allocation’.

The policy portfolio is a good guideline/mechanism because it let’s users observe performance of asset managers from an objective standpoint and prevents them from succumbing from their biases i.e. moving too far away from their area of expertise and deviating from the portfolio goals. 

By keeping a policy, HMC can control and measure the performance in one core way – over performance over the policy requirement.

via: HMC

The Inside Job[video]

Inside Job full movie hd by AAAliAhmad

Buffet on Investment Strategy[recent interview]

You are not good at investing[google talks]

Searching for Alpha[Milken Institute Video]

Charlie Rose: An hour with Lloyd Blankfein

Leaders on Leadership[including Howard Marks]

Gladwell in conversation with Lewis

The Last Tycoon: Lazard Feres

How China Fooled the World [video]

A brief History of the Efficient Market Hypothesis[video]

Larry Fink on Charlie Rose[video]

The Frackers[video]

Taleb on Luck & Life[Podcast]

H/T VIW

Value Investing + Keynes [video]