Friday, June 21, 2019

This week's interesting finds

June 22, 2019

Check out our Investment team’s latest summertime reading & listening picks (Here) 

Early stages...but the value in Japan will start to get recognized if this continues
The Japanese stock market is one of the most inefficient in the world, largely because corporate governance has been bad for a very long time. But if the corporate governance reforms stay on the right track the value in Japan could start to get recognized.

Management and investors are slowly embracing dialogue as seen by the increase in the number of shareholder proposals at shareholder meetings. Another positive sign is the increase in the number of foreign activist funds in Japan which can push to continue corporate governance reforms.

Stability is being highly prized
The market is willing to pay higher prices for large-cap companies with the highest fundamental stability scores. Fundamental stability score is a measure of the volatility of the key financial metrics.

Advising professional athletes
Finding real financial advice can be difficult for professional athletes as many “yes men” only associate with these athletes for self-serving reasons.

One guy who seems to be doing right by his clients is a former Arizona college basketball player Joe Mclean. Joe manages the wealth of professional athletes, including big names like Klay Thompson. McLean’s main goal is to help his athletes achieve long-term financial stability and avoid the financial pitfalls many athletes with a lot of money fall into.

To retain his services, each player must agree to put aside at least 60% of every dollar he earns, with the rate climbing to 80% if he’s fortunate enough to land a long-term deal. Or they’re gone. Mr. McLean has fired two clients for ignoring the policy. He hates it, because “in my mind, it means I’m giving up on them,” he said. “But they didn’t buy into it.”

None of us will ever have to worry about how to make our 9-figure contract last a lifetime, but there are a few lessons from Joe McLean’s story that apply more broadly to financial management.

Making your money last
In the US, the average 65-year-old has enough savings to cover about 9.7 years of retirement income (8.3 years for men and 10.9. years for women). In Japan, this number jumps to 15 years for men and almost 20 years for women.

Japanese workers are good savers so why do they have the largest gap? First, they tend to live much longer than the rest of the world and second, they avoid return-seeking assets, so the amount they do save ultimately produces few gains over time.

GE's new CEO, Larry Culp is attempting the largest "turnaround" in American history
For the first time in its 126-year history, an outsider will lead GE to attempt to clean up a mess that took decades to create. Larry Culp is a proven leader and mostly known for transforming Danaher Corp. from an industrial manufacturer into a science and technology firm. Culp took the helm at Danaher at the age of 37 in 2001 and quintupled the company’s revenue over the next 14 years.

He now faces a monumental task to restore GE to its former greatness. Since taking over in October 2018 he has avoided the company’s Boston headquarters and opted for frequent visits to GE units around the world. Gary Wiesner, who runs GE’s wind-turbine-blade factory in Florida, was shocked to get an email from the new CEO. Larry Culp wanted to stop in and walk the factory floors, something that hadn’t been done by a GE executive in over 18 years.

Raptors and Noodle champions