Misc

COBOL

  • COBOL is the programming language that underpins the entire financial system.
  • “Over 80% of in-person transactions at U.S. financial institutions use COBOL. Fully 95% of the time you swipe your bank card, there’s COBOL running somewhere in the background.“
  • “The second most valuable asset in the United States — after oil — is the 240 billion lines of COBOL”
  • The language is old (from the 1960s) and runs on huge machines (mainframes), yet it is extremely suited to the task of processing billions of transactions very fast.
  • A fascinating read.
Stocks

Fintech Lending

  • Interesting study by IMF on fintech’s experience during the Covid crisis.
  • The chart shows continued strong growth through 2020 by fintech lenders, outpacing traditional institutions.
  • But also a pronounced increase in non-performing assets, something traditional lenders did not see.
  • This work is based on data from 20 economies and is part of the IMF Global Financial Stability Report.
Stocks

Factors

  • Since its inception financial research has been on the hunt for factors that can consistently generate positive returns. Most famously Fama and French’s value factor.
  • This search has led to a what one author has termed the “factor zoo” – a proliferation of factors – a direct consequence of data mining.
  • There is also a replication crisis – that factors are not internally (i.e. the results can’t be replicated within the original sample) and externally (i.e. results can’t be replicated out of sample) valid.
  • This paper (summary here) is a rebuttal of these issue – it uses Bayesian updating from a prior that a factor’s usefulness is zero. Their work finds that no crisis exists.
  • One idea worth thinking about is that according to the authors the 153 factors explored actually cluster into 13 themes – “possessing a high degree of within-theme return correlation and economic concept similarity, and low across-theme correlation” (as seen in the chart).
  • h/t AQR Research.
Misc

UNPRI

  • “The number of asset managers and asset owners that are signatories to the Principles for Responsible Investment – thereby committing to incorporate environmental, social, and governance considerations into investment analysis and decision-making processes – more than doubled from about 1,400 in 2015 to more than 3,000 in 2020“
  • Source: IMF.
Stocks

Hedge Fund Holdings

  • Hedge funds have had a love affair with expensive stocks since early 2020.
  • They have massively boosted their holdings of stocks trading >10x EV/Sales.
  • These currently represent a third of US equity hedge fund long portfolios in aggregate.
  • Such stocks are 23% of the Russel 3000 market cap.
  • h/t themarketear.
Misc

European Cloud (update)

  • Two years ago we posted about Europe’s attempt to challenge US tech dominance in cloud computing.
  • Predictably it has struggled.
  • “In conversations with POLITICO, more than a dozen industry and government officials involved with the work of Gaia-X said the project was struggling to get off the ground amid infighting between corporate members, disagreement over its overall aims and a bloated bureaucratic structure that is delaying decisions. One industry official closely involved in the work of Gaia-X called it a “mess.”“

Misc

Peter Thiel

  • Intriguing review of latest book on the Silicon Valley legend.
  • The book “does an excellent job of unpicking the disparate elements of the Thiel mythology”
  • From trying to get out of his early Facebook investment as fast as he could, including trying to convince Zuckerberg to sell to Yahoo for $1bn.
  • To his failed anti-college scholarships.
  • Absolutely worth a read.
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