Friday, July 29, 2022

This week's interesting finds

This week in charts

How families have changed over 50 years

A “lighter” argument for nuclear power

Howard Marks Memo - I beg to differ

“In 1978, I was asked to move to the bank’s bond department to start funds in convertible bonds and, shortly thereafter, high yield bonds.  Now I was investing in securities most fiduciaries considered “uninvestable” and which practically no one knew about, cared about, or deemed desirable ...and I was making money steadily and safely.  I quickly recognized that my strong performance resulted in large part from precisely that fact: I was investing in securities that practically no one knew about, cared about, or deemed desirable.  This brought home the key money-making lesson of the Efficient Market Hypothesis, which I had been introduced to at the University of Chicago Business School: If you seek superior investment results, you have to invest in things that others haven’t flocked to and caused to be fully valued.  In other words, you have to do something different.

“Investing strikes me as being very much like golf, where playing conditions and the performance of competitors can change from day to day, as can the placement of the holes.  On some days, one approach to the course is appropriate, but on other days, different tactics are called for.  To win, you have to either do a better job than others of selecting your approach or executing on it, or both.

“The same is true for investors.  It’s simple: If you hope to distinguish yourself in terms of performance, you have to depart from the pack.  But, having departed, the difference will only be positive if your choice of strategies and tactics is correct and/or you’re able to execute better.”

This week’s fun finds

EdgePointer of the month – July 2022

Geoff Goss

If you're going anywhere with Goss* on his home turf in Halifax, be sure to give yourself some extra time, as he seems to know the whole city. Goss is always ready to share a few words and his trademark grin with friends old and new. The secret to his success is simple – stories. Everyone seems to have a different favourite Goss story, while he seems to have an unlimited supply to tell. We're very fortunate that he's willing to share them during his annual "fireside chats" at our internal partners' meetings. 

Goss is the epitome of work hard, play hard – he's always a threat to start up a dancefloor with “the worm” or a chorus of Hallelujah that can inspire even the shyest singer to hit that secret chord. When he isn't helping to lead the Sales team or busting a move, Goss enjoys overseas cycling trips, sitting back and diving into a suspenseful non-fiction spy novel or playing a round of golf. Goss was the fourth person to join EdgePoint and his passion, both for the company and life, has influenced everyone who's had the fortune to work alongside him.

Prior to joining EdgePoint, he built the wholesaler team at Invesco and worked as a regional director at Brandes Investment Partners. He earned his B.Comm. in Marketing from Mount Allison University.

And a two-part bonus from Goss himself.

First, some of his favourite overseas bike trips:

  • France (Provence) – Perfect for anyone who loves the challenge of a steep climb. Mont Ventoux is a personal favourite
  • Spain (Mallorca, Sa Calobra) – From mountains to the oceans, Spain trails are incredibly fun
  • Italy (Tuscany) – A chance to really appreciate the wineries by biking by them (and having a sip at the end of the day)

Second, some of his favourite non-fiction spy novels from Ben McIntyre that seem to be too good to be true:

Operation Mincemeat: A WWII British Deception Operation – The story of how a Spanish fisherman, British intelligence and a corpse with fake correspondence fooled German forces and helped the invasion of Italy

Agent Zigzag: A True Story of Nazi Espionage, Love, and Betrayal – The story of Eddie Chapman, an England-born, but German-trained spy whose loyalty to the British Isles was proven multiple times during World War II

The Spy and the Traitor: The Greatest Espionage Story of the Cold War – The story of two double agents working on opposite sides during the Cold War – a KGB agent working for MI6, while a CIA agent followed orders from the KGB

* Goss was willing to cede first name rights to Geoff Macdonald since they'd known each other from their PEI little league days (albeit on opposing teams).

Cut the meetings, make more friends

If you are both amazed and horrified by how many meetings are being crammed into our working days — you are not alone. Data from Microsoft research show that since the start of the pandemic, the number of meetings has risen by 50 per cent. It seems that our default on any task is to use that simple button to schedule a virtual meeting — and we are doing this multiple times a day.

As a psychologist who studies work, I could tell you that this highly scheduled way of working is likely to reduce your daily productivity. That’s because you are inadvertently squeezing out the time you need to be disconnected and alone. By doing so, you are limiting your capacity to focus undisturbed on more valuable tasks that require deeper concentration.

By doing so we are losing the opportunity to engage in an activity that can in the longer term bring profound value: the activity of building and sustaining friendships with others. By pressing that scheduling button for our next virtual meeting, we are taking away time from that messy, unpredictable business of making friends.

When we make friends, we strengthen our resilience. We are also making the time we spend at work more pleasurable. Take, for example, Gallup polling which puts “I have a best friend at work” as one of the best predictors of whether you will stay in your current job. This resonates with me.

The Power of Our New Pop Myths

The rise of what might be called “narrative universes,” like “Star Wars,” Marvel and “Harry Potter,” is usually explained in business terms, as a way for media companies to wring extra profits out of valuable pieces of intellectual property. Marvel films have grossed $22 billion at the box office, while the Star Wars franchise has grossed $11 billion and Harry Potter $9 billion, according to 2021 data from Comscore. And that’s before you start counting the toys, videogames and theme parks.

The interesting question, however, isn’t why media companies are so eager to keep supplying the market with new content from the same franchises. It’s why the demand is so insatiable. Why do audiences continue to flock to the 10th Star Wars movie or the 20th Marvel movie? What imaginative appetite or cultural need keeps us coming back for more?

Today’s narrative universes also resemble myths in bringing us face to face with fundamental mysteries of human life. Was I born for a purpose, and if so, how do I discover what it is? Why does evil exist? What am I willing to give my life for? Traditionally, people looked to religious and patriotic stories to answer such questions. In 21st-century America, those kinds of narratives no longer have the power to unite us; they are more likely to ignite suspicion and division. Popular culture has stepped into the gap, offering new myths that are less fraught and easier to share.

Thursday, July 21, 2022

This week's interesting finds

EdgePoint Q2 2022 commentaries are now live on the website. This quarter:

  • We have met the enemy, and it is us (equity) – Sydney Van Vierzen discusses why investors are the biggest risk to their own long-term returns
  • Why I can’t sleep at night (fixed income) – Derek Skomorowski breaks down why he's so excited about today's fixed income opportunities
  • Digging deeper (EdgePoint Go West Portfolio) – Frank Mullen talks about why you it’s important to invest in businesses, not just sectors. 

This week in charts

German opinion on nuclear energy by political affiliation 2021 vs. 2022

Family planning during the pandemic in China 

Shopify cancels fall internships, pauses recruiting for further roles amid fallen stock price

In a statement to The Globe and Mail on Friday, Shopify spokesperson Alex Lyons said the “fall internship program will continue with a reduced number of roles, which we have completed hiring for.” Mr. Lyons said Shopify is also evaluating other roles in a bid to focus on immediate initiatives to address the unwavering selloff that is battering the global technology sector.

Many tech companies have significantly scaled back their hiring plans and reduced staff in order to combat economic uncertainty stemming from inflation, rising interest rates, the war in Ukraine and a reversal of pandemic trends. Shopify now joins companies such as Twitter Inc., Coinbase Global Inc. and others that have yanked internship offers to address these global challenges.

Beyond Shopify’s internships, many new hires at the company had already been put in a state of limbo as they await their start date. A number of prospective employees, who were told they were going to be hired, have yet to receive written offers with salary figures apart from those discussed with Shopify recruiters.

Last week, Shopify said it is delaying an ambitious compensation overhaul that would give its employees more choice in how they’re paid. At least 50 people have been laid off since April, and dozens of permanent job offers have been delayed by Shopify while it adjusts that salary framework.

This week’s fun finds

Jack of All Trades, Master of Some

“Mario Kart is a zero-sum game, but real life isn't. In real life, skill development is very much a positive sum game.

“We aren't given 100 'skill points' at birth, that must be distributed across offsetting sliding scales. There is no limit to how many skills you can improve and master, and improvement in one field doesn't necessitate deterioration in another field.

“In fact, skills build on each other. Honing multiple skills is actually a positive sum game, where 1+1 = 3.”

Danish race fans

Two EdgePointers, Diane and Nataliya, were in Copenhagen at the same time the Tour de France started, and they were able to snag a few photos of the race:

Friday, July 15, 2022

This week's interesting finds

This week in charts 

The worst half year for U.S. 10-Year Treasuries since 1788   

The $100 Trillion Global Economy in One Chart

The Next Bear Market

"One of my favorite things about the markets is how confident most investors are (and without this confidence it’s likely the markets wouldn’t function as well as they do). There is near universal agreement that many investors will freak out during the next downturn in stocks yet no one assumes they will be part of this group that panics. 

“Surely, everyone else will become hysterical when stocks get crushed but I’ll stay level-headed and make all the right moves.

"The problem is there have to be losers in the markets for there to be winners. Someone has to capitulate and sell at the bottom of the bear market for someone else to take advantage and buy when there’s blood in the streets. 

"Everyone wants to be greedy when others are fearful but many investors are simply fearful when others are fearful."

Chinese homebuyers across 22 cities refuse to pay mortgages

Across China, homebuyers are refusing to pay mortgages as property developers drag on construction projects, escalating the country’s real estate crisis and risks of bad debt for banks. 

Buyers of 35 projects across 22 cities have decided to stop paying mortgages as of July 12 due to project delays and a drop in real estate prices, Citigroup Inc. analysts led by Griffin Chan wrote in a research report distributed on Wednesday. 

The payment refusals underscore how the storm engulfing China’s property sector is now affecting the country’s middle class, posing a threat to social stability. Chinese banks already grappling with challenges from liquidity stress among developers now also have to brace for homebuyer defaults. 

Now is “a critical time for social stability,” said Chan, adding that “the forgoing of down payments may bring social instability.” 

Decouple podcast – Germany: The Canary in the Coal Mine (1 hr 10 min)

German energy expert Noah Rettberg discusses his country’s energy crisis and how it’s affecting several industries. He looks into some lessons other countries could need as they figure out their own energy transition.   

This week’s fun finds 

Plain English with Derek Thompson podcast (44 min)

Former writer for the Atlantic Derek Thompson goes on a deep dive into current events with an expert, providing relevant details without getting lost in them. Recent episodes include discussions on inflation, Amber Heard and (in the above link) why air travel is frustrating right now. 

Pringles wants to rename a spider because it looks like the company mascot

James Webb Space Telescope

Some photos from the James Webb Space Telescope, the largest optical telescope in space. 

Bonus: Some science about the telescope, too.

Friday, July 8, 2022

This week's interesting finds

This week in charts

U.S. home equity withdrawals

Brand loyalty dipped during the Financial Crisis

Packaged foods relying on price increases over volume for sales

A tough year for tech workers

Shareholders back away from green petitions in US proxy voting season

“It’s the board’s role to oversee and direct corporate strategy,” said Ben Colton, who heads stewardship at State Street Global Advisors. “As long- term shareholders, we need to be as pragmatic and consistent as possible.”

Proposals asking management to report on several environment-related options drew significantly higher backing than those that sought to restrict management behaviour. Seven resolutions asking for reports on plastic pollution garnered an average of 45 per cent support. However, 10 demands that banks and insurers stop financing new fossil fuel development received average support of just 10 per cent.

“Overall numbers don’t lie, but they don’t tell the whole story for this proxy season,” said Merel Spierings, The Conference Board researcher who analysed the numbers. She said that when the most prescriptive proposals are excluded, support for climate-related resolutions was largely unchanged from 2021.

US College Students Are Shunning Oil-Industry Degrees for ESG Future

Historically, however, petroleum schools have seen influxes of new students when oil booms and the sector goes on hiring sprees. But with US crude up more than 30% so far this year, the link appears to be broken.

“Personally, I think we are heading to a bit of a crisis,” said Jennifer Miskimins, who leads the petroleum-engineering department at the Colorado School of Mines, one of the world’s premier oil universities. “As petroleum engineers age, the industry will need to replace a retiring cohort of Baby Boomers. But we are not seeing enough petroleum engineers to fill the demand.”

Germany’s Union Head Warns of Collapse of Entire Industries

Top German industries could face collapse because of cuts in the supplies of Russian natural gas, the country’s top union official warned before crisis talks with Chancellor Olaf Scholz starting Monday. 

“Because of the gas bottlenecks, entire industries are in danger of permanently collapsing: aluminum, glass, the chemical industry,” said Yasmin Fahimi, the head of the German Federation of Trade Unions (DGB), in an interview with the newspaper Bild am Sonntag. “Such a collapse would have massive consequences for the entire economy and jobs in Germany.”

The energy crisis is already driving inflation to record highs, she said. Fahimi is calling for a price cap on energy for households. The rising costs for Co2 emissions mean further burdens for households and companies, Fahimi added. The crisis could lead to social and labor unrest, she said.  

Keep It Going

“But in training, you tend to build the best athletic machine when longevity is favored over intensity, when your body gets a signal to adapt vs. thinking it’s been temporarily tortured, and when you’re less subject to in jury and mental burnout.

“For the highest levels to be attainable over time, the process has to be sustainable.

“Which is exactly how good investing works too, isn’t it? 

This week’s fun finds

EdgePoint Golf Day 2022 

At the end of June, 16 EdgePoint partners golfed at Granite Ridge Golf Club. Four groups competed for the best round, with the title going to Heather, Greg, Derek and Ryan.

And congratulations to the winners of the longest drive – Ben and Sarah

People Are Dating All Wrong, According to Data Science

This may be the most consequential decision of a person’s life. The billionaire investor Warren Buffett certainly thinks so. He calls whom you marry “the most important decision that you make.”

And yet people have rarely turned to science for help with this all-important decision. Truth be told, science has had little help to offer. Scholars of relationship science have been trying to find answers. But a few years ago, a young, energetic, uber-curious, and brilliant scientist, Samantha Joel, aimed to change that. Joel, like so many in her field, was interested in what predicts successful relationships.

After building her team and collecting and analyzing the data, Joel was ready to present the results—results of perhaps the most exciting project in the history of relationship science.

So, as discovered by both a team of 86 scientists and whoever writes Daily Inspirational Quotes, one’s own happiness outside a relationship is by far the biggest predictor of one’s happiness in a romantic relationship. But what else predicts romantic happiness beyond one’s own preexisting mental state? What qualities of a mate are predictive of romantic happiness? Let’s start with the qualities of one’s mate that are least predictive of romantic happiness.

Among more than 11,000 long-term couples, machine learning models found that the traits listed below, in a mate, were among the least predictive of happiness with that mate. Let’s call these traits the Irrelevant Eight, as partners appear about as likely to end up happy in their relationship when they pair off with people with any combo of these traits:

  • Race/ethnicity
  • Religious affiliation
  • Height
  • Occupation
  • Physical attractiveness
  • Previous marital status
  • Sexual tastes
  • Similarity to oneself

If I had to sum up, in one sentence, the most important finding in the field of relationship science, thanks to these Big Data studies, it would be something like this (call it the First Law of Love): In the dating market, people compete ferociously for mates with qualities that do not increase one’s chances of romantic happiness.

Moreover, if I had to define the qualities that are highly desired even though they don’t lead to long-term romantic happiness, I would call many of them shiny qualities. Such qualities immediately grab our attention. Just about all of us are quickly drawn to the conventionally beautiful, for example. But these attention-grabbing, shiny qualities, the data suggests, make no difference to our long-term romantic happiness. The data suggests that single people are predictably tricked by shininess.

How artists get paid from streaming

Do you ever wonder how much an artist makes when you listen to a song on your favourite streaming service? This article breaks down the math behind the royalties with some fun animation.