George Soros

  • An old but fantastic article on George Soros.
  • Interesting lessons here on buying into bubbles, reflexivity (that markets can influence the events they anticipate), instinct (the famous back pain he gets) and mistakes.
  • He once asked Byron Wien, an investment strategist and friend, why he went to work every day. Why not work on the days when it makes sense to do so, he asked, when there is something special to be done?
  • Wien replied: “George, one of the differences between you and me is you know when those days are and I don’t.

Alternative Data

  • A must read article on the rise of alternative data in the investment management industry from the Man Group Institute.
  • This chart shows how the supply of this data has exploded.
  • Demand has also followed.
  • The article contains plenty of warnings and things to be mindful of including – methodology, data quality, historic length, data lag, various biases, scope, governance and crowding.

UK Universities

  • Good article on the possible future financial difficulties faced by UK Universities as a result of the Covid-19 pandemic.
  • This chart shows that from 2006 to 2019 the number of Chinese students (paying full fees) in UK universities increased from 25k to 90k.
  • Fees are by far the most important source of income.
  • It is unclear what Covid-19 impact will be next year but as suggested it could just be short term liquidity issue for universities.

Making Mistakes

  • Making mistakes in investing is normal.
  • One of the better investment books around is exactly about that.
  • A personal favourite was when Stanley Druckenmiller got himself involved in Tech stocks at the top of the dot-com bubble.
  • Druckenmiller knew exactly what he was doing – he just couldn’t stop himself. ‘I bought $6 billion worth of tech stocks, and in six weeks I had lost $3 billion in that one play. You asked me what I learned. I didn’t learn anything. I already knew that I wasn’t supposed to do that. I was just an emotional basketcase and couldn’t help myself. So maybe I learned not to do it again, but I already knew that.‘”

Debt and Crises

  • This chart shows government debt to GDP of the G7 countries.
  • It has been rising steadily and could close in on a record.
  • Charted against this is the percentage of countries that have seen a financial shock over any 12 month period.
  • Interesting to see that financial crises are more frequent in the post-Bretton Woods era, which coincided with rising debt.

Value

  • Value has had a very tough time.
  • This chart shows drawdowns of value vs. growth since 1926.
  • This drawdown is currently at a record -52%. (h/t 361 Capital)
  • In fact the ratio of growth to value has just hit the same level as in 2000 Tech bubble peak (h/t Redburn).
  • Investors are coming out defending the style even after adjusting for the valuation metric issues discussed before.

The Investor Game

  • An interesting post taking a step back and understanding the investment landscape as a game including appreciating the other players and stages of development.
  • Each year around 100,000 new college graduates apply for internships at investment banks. Around 10,000 get a spot. After three years of banking boot camp, roughly 4,000 of these analysts want to become investors. Add in some analysts from management consulting and accounting firms, plus a handful of lawyers, and you get around 6,000 talented candidates interviewing for buy-side positions. About one in six gets a seat. So imagine a new cohort of roughly 1,000 twenty-somethings joining 15,000 existing analysts and portfolio managers at hedge funds, and another 30,000 long-only investors.
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