The Digest #89

Published on December 16, 2021

“No, I don’t want to ‘learn fast’, in any subject. I don’t want shortcuts. If I don’t enjoy the subject, I don’t want to learn it; and if I enjoy it, I want to prolong the pleasure. I avoid what exam-takers do: I trade speed for depth.”

— Nassim Nicholas Taleb


The Revolution That Wasn’t, December 14, 2021. “The story of a period of unprecedented speculative excess is the subject of The Revolution That Wasn’t, a new book by Spencer Jakab, editor of The Wall Street Journal’s Heard on the Street column. Jakab tells the story of Robinhood, GameStop, AMC, and other meme stocks (also known as “stonks”) by examining the motivations of the individuals involved, the economics that make “free” trading possible, and the technical details behind the market gyrations.” (The Rational Walk)

James Madison: America’s First Politician, December 9, 2021. “It is impossible to overstate the importance of James Madison’s contributions to the political process of the late 1780s that led to the ratification of the United States Constitution. Madison was only in his mid-thirties during the Constitutional Convention, but he was already a well-known figure on the political stage after his service in the Virginia House of Delegates and the Continental Congress. Although small in physical stature, quiet in demeanor, and often overshadowed by Thomas Jefferson, his fellow Virginian, Madison was a political genius. This is the subject of Jay Cost’s new book, James Madison: America’s First Politician.” (The Rational Walk)

Time to Raise Rates by Roger Lowenstein, December 14, 2021. As expected, this week the Federal Reserve announced that it would “taper” its bond purchases at a pace that would conclude this round of quantitative easing by March which will presumably pave the way toward increases in the federal funds rate which in recent days has hovered around 0.08%. The Fed is projecting a slow pace of increases with real rates certain to remain negative for the foreseeable future. In this article, Roger Lowenstein expresses incredulity regarding the Fed’s continued asset purchases and urges immediate moves toward rate normalization. I also recommend his article from November: What if the Fed is Wrong? (Intrinsic Value by Roger Lowenstein)

The Many Worlds of Enough by Lawrence Yeo, December 9, 2021. This is an outstanding illustrated essay related to the concept of the hedonic treadmill, a psychological effect that causes humans to return to a baseline level of happiness after attaining a goal. Yeo digs deeper into this phenomenon by examining why the concept of “enough” is an ever-shifting target. His key insight: “Enough is elusive because when you reach it, you’re no longer the person that once desired it.” (More to That)

Assured Misery by Morgan Housel, November 30, 2021. “Managing expectations and getting the goalpost to stop moving is one of the hardest tricks in life. But it’s so essential. A big part of it is realizing that managing expectations doesn’t have to mean being conservative or unambitious. It’s just realizing that an insatiable appetite for more will always push you to the point of disappointment and regret – always, every single time.” (Collaborative Fund)

Master Series: David Rolfe, May 28, 2021. This is a profile of David Rolfe, Chief Investment Officer of Wedgewood Partners. A few years ago, Rolfe made headlines regarding his decision to sell Berkshire Hathaway stock which was a 20-year holding for his firm. This profile includes his rationale for the sale and, more importantly, what he did with the proceeds. As a longtime Berkshire shareholder, I am always interested in both the bull and bear case for the company. (Investment Master Class)

Twitter Has a New CEO; What About a New Business Model? by Ben Thompson, November 30, 2021. Jack Dorsey stepped down as Twitter’s CEO last month. The stock initially went up on the news but has since declined to the point where the stock traded when it went public eight years ago in 2013. The company’s market cap is around $35 billion which used to be a lot of money but seems “small” in an era of trillion-dollar giants, especially given Twitter’s indispensable status from a political and cultural standpoint. Ben Thompson raises the possibility that Twitter should shift its business model toward charging for access. (Stratechery)

Can Nuclear Fusion Put the Brakes on Climate Change? by Rivka Galchen, October 11, 2021. I’ve recently subscribed to The New Yorker and find many of the long-form articles well written and interesting. Although The New Yorker is not a free website, readers can get a few free articles per month. In this article, Rivka Galchen explores the potential of nuclear fusion as an energy source. In contrast with nuclear fission, which is the process used in current nuclear power plants, fusion has comparatively few downsides. But progress in this field has been elusive. (The New Yorker)

Retirement Fund Giant Calpers Votes to Use Leverage, More Alternative Assets by Heather Gillers, November 16, 2021. There seem to be no easy solutions for the chronically underfunded California Public Employees’ Retirement System. Although the long-term return objective has been lowered to 6.8%, how can even that return be achieved when fixed income securities, even of the “junk” variety, yield far less? Apparently, hope is being kept alive by opting for more alternative assets and the use of leverage. This doesn’t sound very different from the strategy of Calpers CIO Ben Meng who resigned in 2020 after less than two years on the job. (WSJ)

BlackRock Takes First Step Towards Shareholder Democracy by Lawrence Cunningham, December 9, 2021. The rise of index funds has made ownership of widely diversified stock indices available at very low cost, but until now fund shareholders have not had control of the votes their shares entitle them to. This is starting to change, at least at the institutional level: “BlackRock is making history with an innovative policy change: It will soon let its largest institutional clients vote on corporate proxy matters themselves. While critics note that this sea change from BlackRock voting its client’s shares is limited to a small group of well-heeled funds, the move could spark an overdue renaissance for shareholder democracy.” (National Review)

Photo of the Week

United States Capitol Building, December 11, 2021

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The Digest #89
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