Friday, May 28, 2021

This week's interesting finds

It’s easy to lose faith in reporting when you read a story like this:

The story is about Snowflake moving out of California. This article fails to highlight that maybe tax is the leading cause. Here is actual data comparing California’s tax rates to Montana’s:

Thank you Canada for your discounted Oil – Sincerely, USA

Climatologists ring drought alarm

Farmers should not underestimate the drought of 2021, says a North Dakota climatologist.

Data from NASA shows that millions of acres of farmland, in northern North Dakota and across the border into Manitoba and Saskatchewan, have extremely low soil moisture this spring. As of the middle of May, NASA rates the soil moisture in the region at the one to two percentile — for soil that is zero to 100 centimeters deep.

The U.S. Climate Prediction Centre is forecasting a warmer than usual June, July and August for the northern plains. That means any rain that does fall, is more likely to evaporate. 

Fiscal stimulus is a larger % of GDP than monetary stimulus when compared to the 2008 Great Financial Crisis. 

ESG improvers

It was found that companies that received ESG rating upgrades outperformed an equal-weighted MSCI ACWI Index during the next 12 months by 0.93%, while stocks that were downgraded lagged (Exhibit 5). Interestingly, the outperformance isn't driven by great companies getting a little better. Instead, companies that were previously poorly ranked (with a CCC rating) but subsequently received a two-notch upgrade generated the strongest outperformance (Exhibit 6).

In the US, the most amount of outperformance (+4.3%) is from companies that had the lowest ESG scores a year ago but have improved their scores the most over the past year. 

In Europe, there is also outperformance by the worst offenders that are getting better, although the correlation is less strong than in the US, likely due to more stringent constraints and regulations that make it more difficult for European investors to own the worst offenders.


Friday, May 21, 2021

This week's interesting finds

Examining the importance of flexibility at the 13th annual Cymbria Day  

At our 13th annual investor day, we discussed how our flexibility benefits us in different ways, from the spectrum of investments we can make to the structure of our Investment team.

10-Year Inflation Expectations 

ESG in the Canadian energy sector: Whitecap Resources

Whitecap Resources published an ESG newsletter highlighting some of their key ESG initiatives:

 • Whitecap will be close to net neutral in 2021 and will continue to pursue net negative emitter status. They remain focused on reducing overall emissions and expanding their carbon capture and storage projects. 

• Whitecap currently sequesters more carbon than it emits, and their New Energy team is hard at work to find economic solutions to further reduce their carbon footprint and advance additional low carbon opportunities. 

• A recent gas injection scheme was developed to avoid emissions during a facility turnaround. This is one of many innovative ways that the team has introduced to maintain and improve upon their environmental stewardship. 

Whitecap Resources is a holding in the EdgePoint Go West Portfolio. This is for informational purposes only and it not a recommendation to buy the stock. 

Magazine covers  

You know by the time the journalists get wind that things are good, it’s probably almost time for it not to be anymore. We just saw the best 52-week period for stocks in over 75 years. You know what they were telling you the week that rally started? These magazine covers were published at the perfect time to be buying stocks. 

Below is another favorite from the New Yorker that shows a chart literally falling from the bottom of earth. Notice the date. That week the stock market bottomed after one of the greatest collapses in stock market history. It then went on one of the most historic runs of all time, right after this cover was published.

Friday, May 14, 2021

This week's interesting finds

Inflation – United States

This chart shows the rolling 5-year cumulative percentage increase in the consumer price index for the United States compared to the rolling 5-year cumulative percentage increase in the broad money supply per capita: 

How to lose money when the stock market is at all-time highs  

From the bottom in late March of last year, the U.S. stock market was up nearly 75%. This was the best 12 month return ever recorded since 1950. Nearly 96% of stocks in the overall U.S. stock market showed positive returns in that time. It’s highly likely we will never experience a 12 month period of returns like that again in our lifetime. For all intents and purposes, the one year period following the bottom of the Corona Crash was the easiest environment in history to make money in the stock market. If you think this type of market is normal, you’re sorely mistaken. It’s not always going to be this easy. In fact, the stock market has already stopped being so easy in 2021 and a number of stocks are currently getting crushed. And it’s not just any stocks; it’s many of the stocks retail investors flocked to last year following the crash:

Supply chain squeeze 

Reopening is ushering in mismatches in supply and demand:

Source: Morgan Stanley 


Humans are pattern-recognition machines. We see patterns everywhere! In fact, we’re so good at recognizing patterns that we often see them where they don’t even exist. 

This shows up frequently anywhere there are big bodies of data. And while well-intentioned, this is one of the big behavioral mistakes we make time and again in personal finance. We look for patterns. And guess what, they absolutely exist, right up until the point where you try to invest your money based on the pattern. Then *Poof!* they vanish into thin air. 

David J. Leinweber from Caltech, apparently figured out how to predict the stock market using just three variables: 

1- Butter production in the United States and Bangladesh. 

2- Sheep populations in the United States and Bangladesh. 

3- Cheese production in the United States. 

It turns out these three variables predicted 99% of the stock market’s movement! 

There’s only one problem: The joke’s on us. 

In our very human pursuit of patterns, we start seeing things that aren’t really there. We think if something happened a certain way in the past, then it will surely continue into the future. We start to believe—we desperately want to believe—that this pattern will have predictive value. 

But it doesn’t. And that’s the thing about most patterns—they don’t predict the future; they just describe the past. 

While some of these silly data mining tricks might be interesting to talk about, they don’t actually help us. 

Believe me, I’ve gone down the rabbit hole many times. For years, anytime someone approached me with this type of pattern, I would feel like I had found the Dead Sea Scrolls. But each time, the same thing happened. The pattern existed right up until it was time to invest... and then it didn’t. 

Now, when people approach me with this research—and it’s always called “research”— promising to show me a new pattern in the data, I come back to them with a magic pattern of my own. 

“It turns out,” I tell them, “that the only pattern that will influence your investing success is your behavior.” 

• Can you break the pattern of buying high and selling low? 

• Can you break the pattern of chasing after the next “big” investment? 

• And perhaps most importantly, can you buy low-cost investments in a diversified portfolio based on your values and goals and then simply ignore it?

Friday, May 7, 2021

This week's interesting finds

 Earnings, losses and relative returns 

Why interest rates are rising 

If you combine that fact with excessive US money supply growth and massive excess savings you can understand why investors feel unsettled. Without doubt, the almost absurd rise in excess savings everywhere is a result of the lockdown(s). Consumers have simply not been able to spend what they would have spent under normal circumstances, hence the big war chest building up.

The combination of those three factors – rising wage growth, rapid money supply growth and huge excess savings – can only lead to higher inflation (say the bond bears), hence the rise in bond yields. Officials at the Federal Reserve Bank don’t disagree with that but, importantly, they argue that the rise in inflation will be transitory and that inflation will begin to fade again in 2022, hence why they don’t need to act (they say). Only time can tell who is right and who is wrong. 


 About 44% of older millennials born between 1981 and 1988 report having been diagnosed with at least one chronic health condition, according to a recent survey. 

Canadian oil companies set self-imposed penalties if they don't meet sustainability targets  

Canadian oil sector companies are willing to pay more interest on their debts in exchange for more environmental, social and governance credit from investors. 

In a first for the North American energy industry, midstream company Gibson Energy Inc. announced a sustainability-linked credit facility. Gibson’s sustainability targets include a reduction in emissions and also an effort to boost diversity at the oil storage and pipeline company — as energy companies try to improve their credibility on the S and G components of ESG. 

Used car prices seem primed for another spike based on JDPower Auction data.

Red line indicates used car auction data pricing. The blue line indicates used car prices. Used car auction data pricing is a leading indicator of used car prices. 

Rents have started climbing meaningfully

Source: ApartmentList data

Massive spike in mentions of “inflation”.  Many of the mentions relate to rising commodity prices, but also scarcity of workers despite elevated unemployment. 

The sure-fire way to get out of debt