The Digest #51

Published on November 13, 2020

“Any jackass can kick a barn down. But it takes a good carpenter to build one.”

— Sam Rayburn

Which vaccines are winning the race to tame the COVID-19 pandemic? by Mark Lynas, November 12, 2020. Vaccine development is normally a slow and painstaking process that can take years to bear fruit, but in the months since the COVID-19 pandemic struck early this year, scientists have been hard at work to compress the timeline. Earlier this week, news of a promising Pfizer/BioNTech vaccine sent the stock market up sharply and bolstered hopes that 2021 could be a turning point in the battle against the pandemic. The Pfizer/BioNTech vaccine utilizes a new technology that harnesses messenger RNA to induce human cells to produce COVID viral proteins and induce an immune system response. (Cornell Alliance for Science) 

Disney and Integrators Versus Aggregators by Ben Thompson, October 13, 2020. In retrospect, the timing of the launch of Disney+ a year ago could not have been more propitious. The pandemic made it even more valuable for content creators to have a direct means of distribution to consumers as movie theaters and other entertainment venues were forced to close. In this insightful article, Ben Thompson examines how Disney is leveraging its streaming platform with the launch of a new Pixar movie. “By controlling distribution of its content and going direct-to-consumer, Disney can deepen its already strong connections with customers in a way that benefits all parts of the business” (Stratechery)

What a Biden Presidency Means for Your Finances by Nick Maggiulli, November 10, 2020. It is not uncommon for investors to make year-end tax planning moves and this is often even more common when a November election results in a transfer of power between political parties. However, there are many reasons to believe that relatively little will change next year from a federal tax perspective. Maggiulli examines the specifics in this article. (Of Dollars and Data)

Big Wall Street Donors to Biden Will Maneuver for Key Posts by Pam Martens and Russ Martens, November 9, 2020. Election spending in 2020 hit nearly $14 billion with $6.6 billion spent on the presidential election, blowing away past records. It would be naive to think that large donors are not attempting to exert some level of influence over the candidates they backed. Pam and Russ Martens look at donations from the finance industry as well as from lawyers and lobbyists in an attempt to analyze which donors might attempt to exert the most influence in the Biden administration. (Wall Street On Parade)

Value Stocks May Have Done a Lot Better Than You Think by Mark Hulbert, November 7, 2020. As I wrote last week, value investing has been out of favor for many years and has caused some soul-searching among longtime practitioners. Accounting for intangible assets has long bred confusion among investors. On one hand, companies that develop technology normally book such costs as expenses rather than investments which depresses current reported income and understates equity on the balance sheet. On the other hand, when a company acquires technology by purchasing another company, intangible assets are placed on the balance sheet. In this recent article, Mark Hulbert argues that properly incorporating intangibles into book value would make many “growth” stocks appear to be “value” stocks instead. (WSJ)

Judging the Cash Conversion Cycle of a Business November 5, 2020. Geoff Gannon and Andrew Kuhn discuss the finer points of the cash conversion cycle in this podcast. Many inexperienced investors do not pay adequate attention to the cash flow statement, preferring to focus on sales and margins. However, it is critical to examine the cash conversion cycle of a business. Key variables include the average time that passes between acquiring inventory and paying suppliers and the time that passes between making a sale to a customer and collecting cash from customers. This is especially important when assessing the level of capital required for a business rapidly growing its sales. (Focused Compounding)

Two Years Without Health Insurance (and What I’m Doing Now) November 9, 2020. Open enrollment for 2021 coverage under the Affordable Care Act has begun and runs through December 15. Like many people in the individual market, I was not happy with the value proposition of the options that were available but I did end up (grudgingly) enrolling in a plan. Although I do not endorse the idea of going without traditional health insurance, some people have opted to do so out of frustration. In this interesting article, the author discusses his experience with direct-pay primary physicians and catastrophic cost-sharing plans. It is worth noting that this author has previously revealed that he is extremely financially secure and would be able to pay for unforeseen catastrophes if necessary. (Mr. Money Mustache)

Learning Through Play November 9, 2020. Our focus on measured productivity has caused many people to regard anything that doesn’t look like “work” to be a waste of time. This reduces the opportunities we have for pursuing our interests and the lessons that can be learned through serendipity. “When the pressure mounts to be productive every minute of the day, we have much to gain from doing all we can to carve out time to play. Take away prescriptions and obligations, and we gravitate towards whatever interests us the most. Just like children and baby elephants, we can learn important lessons through play. It can also give us a new perspective on topics we take for granted—such as the way we represent numbers…” (Farnam Street)

The Omnipresence of Work by Lawrence Yeo, November 12, 2020. We are now living in an age characterized by the “omnipresence of work”. This has been facilitated by technology that allows many workers to be productive from anywhere at any hour and the pandemic has accelerated a trend toward working from home. But this has a downside: “… The age-old physical barrier between work and rest has all but dissolved. We wake up, work, wind down, and sleep within the same four walls that used to serve solely as a haven of rest and recharge. The home is no longer an environmental cue to put work aside. It is a place that constantly reminds you that there is always more work to be done.” (More to That)

Trader Joe’s

I’m thrilled to once again live within walking distance of a Trader Joe’s location. Those who are unfamiliar with the grocery chain may not understand its cult-like following. Locations have quirky themes that often have a local flavor and the private-label products offer excellent value. The CNBC video below, produced earlier this year, provides some background on the chain which is reported to have the highest sales per square foot of any grocer in the United States.

Avoiding Mental Junk Food

“As in walking you take care not to tread upon a nail, or turn your foot, so likewise take care not to hurt the ruling faculty of your mind. And if we were to guard against this in every action, we should enter upon action more safely.” 

— Epictetus, The Enchiridion XXXVIII

What we put into our minds is just as important as what we put into our bodies, which is what I think Epictetus was getting at in this quote. This is particularly challenging today given the amount of content available to read or watch, but we should remember that a lot of it is the mental equivalent of junk food.

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The Digest #51