EdgePoint Partners' back to school reading list
Over the past few weeks, we have been collecting some of the reads that have caught your attention lately. The results are in! Here are some of the books that come highly recommended by EdgePoint partners:
- Simple Wealth, Inevitable Wealth by Nick Murray. It’s a book for advisors to give to clients, in order to establish two great, complementary investing truths: (1) that equities are essential to long-term wealth-building and to a solidly rising income in retirement; and (2) that no one will ever be able to hold equities through all the fears (and fads) of the market cycle without you – the empathetic but tough-loving Behavioral Investment Counselor.
- The Code: Silicon Valley and the Remaking of America by Margaret O’Mara. The true, behind-the-scenes history of the people who built Silicon Valley and shaped Big Tech in America.
- The Power of Habit: Why We Do What We do in Life and Business, by Charles Duhigg. It explores the science behind habit creation and reformation. The key to exercising regularly, losing weight, being more productive, and achieving success is understanding how habits work.
- Sell or Be Sold: How to Get Your Way in Business and in Life, by Grant Cardone. Whether it's selling your company's product in the boardroom or selling yourself on eating healthy, everything in life can and should be treated as a sale. Cardone breaks down the techniques and approaches necessary to master the art of selling in any avenue. You will learn how to handle rejection, turn around negative situations, shorten sales cycles, and guarantee yourself greatness.
- The Talent Revolution: Longevity and the Future of Work, By Lisa Taylor and Fern Lebo. The definitive guide to maximizing workforce value, The Talent Revolution exposes work-life longevity as the most influential driver transforming today’s workplace – a competitive edge for organizations smart enough to capitalize on it.
- Talking to Strangers: What We Should Know About the People We Don't Know, by Malcolm Gladwell. The book offers a powerful examination of our interactions with strangers--and why they often go wrong.
- A Higher Call, by Adam Makos. This is the true story of the two pilots whose lives collided in the skies one day. An incredible story of a brotherhood between enemies, that emerged from the horrors of World War II.
- The Fifth Risk: Undoing Democracy, by Michael Lewis. A 2018 political book by Michael Lewis. It examines the transition and political appointments of the Donald Trump presidency, especially with respect to three government agencies: the Department of Energy, the Department of Agriculture and the Department of Commerce.
- When Breath Becomes Air, by Paul Kalanithi. A profoundly moving memoir by a young neurosurgeon faced with a terminal cancer diagnosis who attempts to answer the question “What makes a life worth living?”
S&P 500 Return: Earnings Growth vs. Multiple Expansion
During the dot-com bubble, investors flocked to bet on the purported next big thing. A similar theme can be spotted in today’s IPO market, with some companies asking buyers to bet on unproven technology and untested revenue models. Many winners have emerged, but this deluge of disruptors has also laid down a minefield.
Historical market returns vs. ISM manufacturing index
The left chart shows the correlation between ISM manufacturing index and 10-year Treasury yields since 2010. A PMI index above 50% indicates that the manufacturing economy is expanding, and a PMI index below 50% indicates that the manufacturing economy is declining. The right chart shows the correlation between S&P 500 returns and ISM readings over or under 50.
Mixed signals from bond yields
According to government bond yields, we are making a bee-line for Armageddon. According to credit spreads, clear skies on the horizon.
Stock market returns are inconsistent.
Stock market returns are inconsistent.
Maybe the best and worst part about the markets is the fact that two investors can look at the same exact data and come to completely different conclusions. Looking at the two stats below many might say that “buy & hold doesn’t work” or “this is why I time the market”.
$10k invested in the S&P 500 in Jan 2000 would be worth $29,181 by the end of Aug 2019
$10k invested in the S&P 500 in Jan 2010 would be worth $32,100 by the end of Aug 2019
The first situation invested at the height of the dot-com bubble which might have been the worst entry point in U.S. stock market history. The dot-com bubble soon burst leading the S&P 500 to fall by 45%; 10 years later the financial crisis hit and the S&P 500 fell again, but this time by 51%. Despite this, the investors still managed to triple their money and earn 5.9% annually as of August 2019. How many investors would sign up for 5.9% annual returns today for the next 20 years?
Stock market returns are inconsistent. Sometimes returns are front-loaded, sometimes they’re back-loaded and sometimes they’re not great, even over longer time frames. One period of inconsistent or poor returns isn’t a reason to give up on the stock market. That’s how it works.