Links

"It is true that in the packaged goods industry, volume trends for everybody — whether they’re fat or lean in their operation — volume trends are not good. And the test will be over time — you know, three, five years — are the operations which have had their costs cut, do they do poor, in terms of volume, than the ones, that in my judgment, look very fat?" --Warren Buffett (2016)

Howard Marks on Investing In Overpriced Markets (a video excerpt from his recent Real Vision interview) [H/T Linc] (LINK)

“She Never Looks Back”: Inside Elizabeth Holmes's Chilling Final Months at Theranos (LINK)

Warren Buffett Can’t Find Anything Big to Buy ($) (LINK)

Kraft Heinz Divulges SEC Investigation, Swings to Loss ($) (LINK)

Deutsche Bank Lost $1.6 Billion on a Bond Bet ($) (LINK)

One of the banking industry’s biggest soured bets since the financial crisis involved a complex municipal-bond investment. Warren Buffett was enmeshed in the deal.

A Blinders Off View Of The Automotive Sector - by Daniel Ruiz (LINK)

Brexit: The End of the Beginning - by Peter Zeihan (LINK)

Dalio's "The Big Debt Crisis"....the FSB Report & Financial War Games (LINK)

Different Kinds of Stupid - by Morgan Housel (LINK)

Edges That Won’t Go Away - by Ben Carlson (LINK)

Cultivating the State of Flow (LINK)

American Innovations Podcast: Coca-Cola | The Cocaine Clinician | 1 (LINK)

Freakonomics Radio: 368. Where Do Good Ideas Come From? (LINK)

Check out these amazing shots of the Anak Krakatoa caldera before and after its collapse in December 2018 (LINK)

The Surprising Reason Zebras Have Stripes - by Ed Yong (LINK)

Who’s the Cutest Little Tyrannosaur? Is It You? - by Ed Yong (LINK)

"Men do not fail commonly for want of knowledge, but for want of prudence to give wisdom the preference. What we need to know in any case is very simple." --Henry David Thoreau  [H/T Brain Pickings]

Links

What the Hell Happened at GE? - by Geoff Colvin (LINK)

How Elon Musk became an inequality machine - by Roger Lowenstein (LINK)

Banks Won Big in Washington. What It Means for Investors - by Jason Zweig ($) (LINK)

Business Lessons from Oprah Winfrey - by Tren Griffin (LINK)

[I like Bruce Greenwald, but this is your latest reminder that smart people can often be very wrong...] Bruce Greenwald on Amazon in 2012 (video) [H/T @maxolson] (LINK)

Related previous posts: 1) Amazon is going to do to enterprise cloud companies exactly what it did to book stores (April 2013); 2) Bruce Greenwald and Judd Kahn on competitive advantage and Apple (circa 2005)

[I'm late to these, but there were interesting segments on Google and Theranos on "60 Minutes" this past Sunday.]

How To Democratize Healthcare: AI Gives Everyone The Very Best Doctor (LINK)

13D Research: “Liquidity is the new leverage” (LINK)

Dan Ariely talks to Shane Parrish on The Knowledge Project Podcast (LINK)

Exponent Podcast: Black Holes (LINK)

Ben and James continue their discussion on why aggregators and platforms are different and why it matters for big companies, competitors, and regulators.

Marc Cohodes on The Jolly Swagmen Podcast (LINK)

Einstein’s Theory of Relativity Explained in One of the Earliest Science Films Ever Made (1923) (LINK)

Book of the day: Tube: The Invention of Television

Links

"Charlie and I don’t think about the market. And Ben [Graham] didn’t very much. I think he made a mistake to occasionally try and place a value on it. We look at individual businesses. And we don’t think of stocks as little items that wiggle around on the paper and that have charts attached to them. We think of them as parts of businesses.... I know of no one that has been successful at...[making] a lot of money predicting the actions of the market itself. I know a lot of people who have done well picking businesses and buying them at sensible prices. And that’s what we’re hoping to do." --Warren Buffett (1999)

What Exactly Happened to David Einhorn? (LINK)

The Hidden Risk of Passive and Index Hugging - by Rick Bookstaber (LINK)

Exponent Podcast: Platforms Versus Aggregators (LINK)

Eric Topol reviews Bad Blood, John Carreyrou's book on the Theranos saga (LINK)

Scott Adams talks to Naval Ravikant (video) (LINK)

How the Enlightenment Ends - by Henry A. Kissinger (LINK)

How Tom Wolfe Changed My Life - by Scott Kelly (LINK)

Related book: The Right Stuff

"Why — that’s the most important question of all. And it doesn’t apply just to investment. It applies to the whole human experience. If you want to get smart, the question you’ve got to keep asking is: Why? Why? Why? Why? And you have to relate the answers to a structure of deep theory. And you’ve got to know the main theories. And it’s mildly laborious, but it’s also a lot of fun." --Charlie Munger (1999)

Links

"One, remember to look up at the stars and not down at your feet. Two, never give up work. Work gives you meaning and purpose and life is empty without it. Three, if you are lucky enough to find love, remember it is there and don't throw it away." -Stephen Hawking

The Power of Detachment (LINK)

Piramal Enterprises has the rare distinction of generating annualized shareholder return of 30% over 29 years till 2017. And the architect behind this stunning performance is Ajay Piramal.

Theranos and Silicon Valley's 'Fake It Till You Make It' Culture (LINK)

Billionaire Raises His Bet on Containerships (LINK)

Not a Single Japanese 10-Year Bond Traded Tuesday (LINK)

WorkLife with Adam Grant (podcast): The Team of Humble Narcissists (LINK)

Jordan Peterson on taking responsibility for your life (video) (LINK)

Related book: 12 Rules for Life: An Antidote to Chaos

What a Giant Soda Stream Reveals About the Fate of Corals - by Ed Yong (LINK)

Stephen Hawking (1942–2018) (LINK)

The Universe and Beyond, with Stephen Hawking [aired 10 days ago] (video) (LINK)

This year’s season finale of StarTalk on National Geographic TV was Neil deGrasse Tyson's interview with Stephen Hawking. In memory of his passing, and in celebration of his life, we offer that episode for you here, now, commercial free.

Links

The Formula for Valuing All Assets (LINK)

25iq: A Dozen Things I’ve Learned About Negotiation - by Tren Griffin (LINK)

John Carreyrou and Michael Siconolfi of The Wall Street Journal discuss the investigation of Theranos (video) (LINK)

Dallas Stares Down a Texas-Size Threat of Bankruptcy [H/T @pcordway] (LINK)

Southeastern Asset Management's fall webcast transcript [H/T @chriswmayer] (LINK)

Mutual Fund Observer, December 2016 (LINK)

James Gleick on the Masters in Business podcast (LINK)

Related books: 1) Time Travel: A History; 2) The Information: A History, A Theory, A Flood; 3) Chaos: Making a New Science (I remember Robert Sapolsky saying this was one of the first-ever books he immediately started re-reading when he finished it. He also assigned it to his students, in what I believe may have been his Human Behavioral Biology course.); 4) Genius: The Life and Science of Richard Feynman; 5) Isaac Newton

Exponent podcast: Episode 097 — Google Versus AWS (LINK)

John Donahoe: Dump the Myth of the High Achiever (article and video) [H/T @anuhariharan] (LINK)

If you're looking for holiday gift ideas, Kevin Kelly's Cool Tools book is worth considering. He also has a Cool Tools blog and email newsletter.

Links

Welling on Wall St. interview with Mark and Jonathan Boyar [H/T @chriswmayer] (LINK)

Two Important Investment Principles - By John Huber (LINK)

Related previous post: Glenn Greenberg on zeroing in and not getting caught up in the minutiae

Big Names Take Hit on Theranos (LINK)

High-profile private investors gave startup much of its funding but could see their stakes wiped out

Bill Walton, Old Einhorn Enemy, Makes a Comeback With Trump Role [H/T @jasonzweigwsj] (LINK)

Related book: Fooling Some of the People All of the Time

Sebastian Mallaby on Charlie Rose discussing his latest book, The Man Who Knew: The Life and Times of Alan Greenspan (video) (LINK)

The Man Behind Shake Shack Explains Why You Love It So Much (podcast) [H/T @iddings_sean] (LINK)

How Otto Defied Nevada and Scored a $680 Million Payout from Uber (LINK)

Tools of Titans: Josh Waitzkin Distilled - by Tim Ferriss (podcast) (LINK)

Related book: Tools of Titans: The Tactics, Routines, and Habits of Billionaires, Icons, and World-Class Performers  

Related previous post (with other links): Josh Waitzkin on The Tim Ferriss Show

Video: How We Get Hooked, & How to Unlearn Our Patterns - By Leo Babauta (webinar) (LINK)

Seneca was a man, not a Sage - by Massimo Pigliucci (LINK)

Related free Kindle book (published in 1920): The Stoic: A biography of Seneca

Links

Microsoft Founder Bill Gates addressing India's top policy makers (video) [H/T @oraunak] (LINK)

A Perfume that Smells Like Poop? - By Bill Gates (LINK)

Sustainable Sources of Competitive Advantage - by Morgan Housel (LINK)

Someone with a 110 IQ but the ability to recognize when the world changes will always beat the person with a 140 IQ and rigid beliefs. The world is filled with smart people who get nowhere because their intelligence was acquired 20 or 30 years ago in a vastly different world than we live in today. And since intelligence has a lot of sunk costs – college is expensive and hard, for example – people tend to cling to what they learn, even while the world around them constantly changes. So the ability to realize when you’re wrong and when things changed can be more effective than an ability to solve problems that are no longer relevant. This seems obvious until you watch, say, Kodak or Sears trying to solve 1980’s problems in the 2000s. 

Marc Andreessen promotes the idea of “strong beliefs, weakly held,” which I love. Few things are more powerful than strongly believing in an idea (focus) but being willing to let go of it when it’s proven wrong or outdated (humility).

Quality Companies, Compounders and Value Traps (LINK)

Jim Chanos on Trump's Election Win and Stocks [H/T ValueWalk] (LINK)

Theranos Whistleblower Shook the Company—And His Family (LINK)

Amazon.com’s Marketplace Concept Spreads to Other Retailers [H/T Matt] (LINK)

Unmoored From Reality: DryShips Halted After 1,500% Post-Election Rally [H/T Matt] (LINK) [It dropped quite a bit when it re-opened, though still up significantly from where it was before the election.]

Default Clouds Hang Over Commercial Property Sector [H/T @IntrinsicInv] (LINK)

Want to Really Make America Great Again? Stop Reading the News. - By Ryan Holiday (LINK)

Freakonomics Radio: How to Make a Bad Decision (audio) (LINK)

Some of our most important decisions are shaped by something as random as the order in which we make them. The gambler's fallacy, as it's known, affects loan officers, federal judges -- and probably you too. How to avoid it? The first step is to admit just how fallible we all are.

TED Talk - Steven Johnson: How play leads to great inventions (LINK)

Related book: Wonderland: How Play Made the Modern World

Links

Exploring the latticework: Some reflections and a list of around 100 cross-disciplinary mental models - by Chetan Parikh (LINK)

Mars Buys Out Buffett Preferred Stake That Paid 5% Dividend (LINK)

Ray Dalio's Remarks at the 40th Annual Central Banking Seminar [H/T Barry Ritholtz] (LINK)

The Howard Marks Investor Series at The Wharton School: A Conversation with Stephen A. Schwarzman (video from April 2016) [H/T ValueConferences] (LINK)

Deutsche Bank: A Greek Tragedy at a German Institution? - by Aswath Damodaran (LINK)

Flash crash sees the pound gyrate in Asian trading (LINK)

The Most Overlooked Trait of Investing Success - by Morgan Housel (LINK)

MailChimp and the Un-Silicon Valley Way to Make It as a Start-Up [H/T @BaseHitInvestor] (LINK)

Theranos Retreats From Blood Tests (LINK)

Company led by Elizabeth Holmes will shut down facilities and shed more than 40% of its workforce

Behind The Crash Of 3D Robotics, North America's Most Promising Drone Company (LINK)

Venture capitalist Marc Andreessen explains how AI will change the world [H/T Barry Ritholtz] (LINK)

Exponent podcast: Episode 091 — Google’s New Business Model (LINK)

Seth Godin: Do what you're good at, or... (LINK)

The Cato chronicles, part VI: the legacy (LINK)

Related book: Rome's Last Citizen: The Life and Legacy of Cato, Mortal Enemy of Caesar

Links

Seth Klarman's 2015 Year-End Letter [I've seen this linked to in a couple of places, but it probably won't be available for long.] (LINK)

GMO Whitepaper: An Investment Only a Mother Could Love: The Case for Natural Resource Equities - by Lucas White and Jeremy Grantham (LINK)

How Elizabeth Holmes's House of Cards Came Tumbling Down - by Nick Bilton (LINK)

Survivorship Bias Explained - by Ben Carlson (LINK)

Pershing Square buys nearly 10% of Chipotle (LINK)

Goldman Sachs Has Started Giving Away Its Most Valuable Software [H/T @jasonzweigwsj] (LINK)

Now Companies Are Getting Paid to Borrow [H/T Matt] (LINK)

Investors are now paying for the privilege of lending their money to companies, a fresh sign of how aggressive central-bank policy is upending conventional patterns in finance. 

German consumer-products company Henkel AG and French drugmaker Sanofi SA each sold no-interest bonds at a premium to their face value Tuesday. That means investors are paying more for the bonds than they will get back when the bonds mature in the next few years. 

A number of governments already have been able to issue bonds at negative yields this year. But it is a rare feat for companies, which also ask investors to bear credit risk.

There Are No Truffles in Truffle Oil (LINK)

How It`s Made | Bricks (video) (LINK)

a16z Podcast: Sleep! (LINK)

Related book: The Sleep Revolution

Links

Warren Buffett Endorses Hillary Clinton in Omaha (Full Speech) (video) (LINK)

Microcap Activism is a Hard Road to Travel - by Jeff Gramm (LINK)

Related book: Dear Chairman: Boardroom Battles and the Rise of Shareholder Activism

The Activist and Herbalife: Just Maybe Ackman’s Right - by Andrew Ross Sorkin (LINK)

Theranos Makes Case to Laboratory Experts (LINK)

Horizon Asia Opportunity: Q2 2016 Commentary (LINK)

The Brooklyn Investor blog with some scary (and not-so scary) charts (LINK)

Peter Thiel on the Characteristics of Monopoly (LINK)

Related book: Zero to One

Button Salesman Discovers Most of Life on Earth: True Story (LINK)

Related books: 1) I Contain Multitudes: The Microbes Within Us and a Grander View of Life; 2) The Upright Thinkers: The Human Journey from Living in Trees to Understanding the Cosmos

How the DNA Revolution Is Changing Us (LINK)

Links

If you have Netflix, I highly recommend the BBC's Life Story series, narrated by the great David Attenborough. It looks like you can also buy the DVDs HERE.

Berkshire's Blemishes: Lessons for Buffett's Successors, Peers, and Policy - by Lawrence A. Cunningham (LINK)

Buffett’s Investment in Dempster Mill–A Cigar Butt (LINK)

Michael Mauboussin on Creating a Checklist (LINK)

Related book: Think Twice: Harnessing the Power of Counterintuition

Alex Tapscott: "Blockchain Revolution" | Talks at Google [H/T ValueWalk] (LINK)

Related book: Blockchain Revolution: How the Technology Behind Bitcoin Is Changing Money, Business, and the World

Lessons learned from Theranos’ fall (LINK)

Hugh Hendry: How We Learned To Sop Worrying And Love "the Brexit bomb" (LINK)

Amidst today’s hysteria concerning the drop in sterling, people forget that the pound dropped 36% in the wake of the collapse of Northern Rock in 2007 and by 15% in 2014 on fears of a triple dip recession, and the world didn’t come to an end. Again, plus ça change…it appears that the prevailing glut of global liquidity seems to act as a shock absorber; the money simply has to go somewhere, typically sovereign bonds and bond like equity proxies.

A Brief History of Trial by Combat (LINK)

The Loudest Sound In The World Would Kill You On The Spot (LINK)

99% Invisible podcast, Episode 195: Best Enjoyed By (LINK)

Date labels (e.g. “use-by”, “sell-by”, “best-by”, “best if used by,” “expires on”, etc.) are on a lot of products. Forty-one states require a date label on at least some food product, but there are huge inconsistencies, not just in the wording, but in the meaning of these labels. Some states require them only on dairy, some on shellfish, some on any perishable foods. It’s become complicated to decipher these dates, or to know how to act on them, for large retailers and individual consumers alike. And despite what many people assume, they are not about food safety, and were actually never meant to be. 

Links

Thornton O'Glove: "Quality of Earnings" | Talks at Google (LINK)

Related book: Quality of Earnings

The Values of Value Investing (LINK)

When Startups Put the Fab in Fabricate (LINK)

India + Internet = ? (LINK)

Lunch with the FT: Philip Tetlock (LINK)

Related book: Superforecasting: The Art and Science of Prediction

A Guide to E-Mail Sign-Offs [H/T @AdamMGrant] (LINK)

Chart of the day - Real House Prices, % change from Q1 2000-Q3 2015 [H/T @PlanMaestro]:

Links

2003 CFA Magazine article (Inaugural Issue): Living Legends [Bernstein, Bogle, Brinson, Buffett, LeBaron, Neff, and Templeton] [H/T Barry Ritholtz] (LINK)

Benjamin Graham on Financial Advisors (LINK)

Best's Review Article about Ajit Jain [H/T Linc] (LINK)

Buffett’s Gen Re Turns to Rival for Broker Relationships [H/T Linc] (LINK)

Why Banks Aren’t Giving You a 3%, 30-Year Mortgage…Yet (LINK)

Government bond yields have plummeted this week, but mortgage rates haven’t fallen so fast. 

After plumbing record lows earlier this week, the 10-year yield closed at 1.387% on Thursday. The national average for a 30-year, fixed-rate conforming mortgage was 3.41%, according to the latest data from Freddie Mac released Thursday. The difference or spread between the two, at 2.02 percentage points, has risen in recent weeks and is at one of its widest levels since mid-2012. 

...Indeed, if the difference between the 30-year mortgage rate and the 10-year Treasury yield were at its average level for the previous 10 years, the average mortgage would be 3.17%. Mortgage rates key off the 10-year Treasury because most homeowners tend to move within around 10 years, repaying their loans in the process.

Even so, borrowers are doing well. Rates around 3.5% are historically low. And the fact that the national average has dipped decisively below 3.5% may spur even more borrowing activity. A range of average rates between 3.6% and 4% has occurred many times for 30-year fixed-rate mortgages since 2012, but they fell below 3.5% for only brief periods; the record low of 3.31% was hit in November 2012.

Groundhog's Shadow and the Cost of Fear: A Case for the Mounting Bubble in Defensive Stocks (LINK)

How Accounting Standards Went Insane: It Didn’t Start with IFRS Convergence (LINK)

Crazy - A Story of Debt, by Grant Williams (video) (LINK)

This is a story about debt – 2008 was the crystallization of that, the years since have been the denial of it, and the years to come will be the resolution. Grant Williams, founder & publisher of the ‘Things That Make You Go Hmmm...’ research service, and co-founder of Real Vision TV, brings us an eye-opening presentation titled Crazy, where he puts into perspective the extraordinary levels of global debt and unprecedented monetary policy, and reminds us that the many factors that led to the ‘08 crisis are still very much present.

U.S. Regulator Bans Theranos CEO Elizabeth Holmes From Operating Labs for Two Years (LINK)

U.S. Federal health regulators dealt a major blow to Theranos Inc., banning founder Elizabeth Holmes from operating a blood-testing laboratory for at least two years and yanking regulatory approval for its California lab. 

The Silicon Valley company announced the sanctions, by the Centers for Medicare and Medicaid Services, in a news release late Thursday night. The company can appeal the ruling. 

The sanctions, which include an unspecified monetary penalty, cap eight months of public scrutiny that began in October when The Wall Street Journal raised questions about the company’s ability to perform a wide variety of blood tests with just a few drops of blood. Theranos once was a leading light in the technology boom, with the private company valued at $9 billion in 2014.

Cool Tools Podcast - Show 058: Tim Ferriss (LINK)

Links

Oaktree Insights - Strategy Primer: Investing in Mezzanine Debt (LINK)

Spring 2016 Issue of Graham & Doddsville (LINK)

Horizon Kinetics' latest in their index series: How Indexation is Creating New Opportunities for Short-Sellers, And Why This Should Alarm Ordinary Buyers of Stock and Bond ETFs (LINK)

Bruce Greenwald's Talk at GuruFocus Value Conference Notes (LINK)

Mutual Fund Observer, May 2016 (LINK)

David Einhorn's Q1 Letter [H/T ValueWalk] (LINK)

The Absolute Return Letter - May 2016 (LINK)

Audio interview with James Grant discussing his piece in Time magazine (~13 minutes) [H/T ValueWalk] (LINK)

Yanis Varoufakis: "And the Weak Suffer What They Must?" | Talks at Google (LINK)

Everything as a Service - by Ben Thompson (LINK)

How Uber conquered London [H/T @iancassel] (LINK)

Coupang: The $5 Billion Startup Filling Amazon's Void In South Korea (LINK)

The Secret Culprit in the Theranos Mess [H/T The Big Picture] (LINK)

Duncan Clark: "Alibaba: The House That Jack Ma Built" | Talks at Google (LINK)

Related book: Alibaba: The House That Jack Ma Built

Exponential Wisdom Podcast - Episode 21: Inside the Future of Healthcare (LINK)

Latticework of Mental Models: The Two Systems of Thinking (LINK)

Related book: Thinking, Fast and Slow

Evolution’s Next domain, the Symbology - by Nick Gogerty (LINK)

Related book: The Nature of Value: How to Invest in the Adaptive Economy

David MacKay - final interview and tribute (video) (LINK)

Related book: Sustainable Energy - Without the Hot Air

Life As We Know It - By Bill Gates (LINK)

Related book: The Vital Question: Energy, Evolution, and the Origins of Complex Life

If you're interested in blockchain technology, I've seen a couple of mentions of the new book The Business Blockchain: Promise, Practice, and Application of the Next Internet Technology.

Book of the day [Bill Gates and Charlie Munger both mentioned they just read it. Munger said he enjoyed it but was disappointed with the conclusions.]: The Rise and Fall of American Growth: The U.S. Standard of Living since the Civil War

Links

Performance vs. Outcomes (LINK)

Alec Ross: "The Industries of the Future" | Talks at Google (LINK)

Related book: The Industries of the Future

Peter Thiel on China, Tech, Education, and Diversity (video) [H/T Will] (LINK)

Bill Gates on CNBC (article and videos) (LINK)

Reimagine Retail: A Conversation with Kathleen McLaughlin and Walter Isaacson (video) (LINK)

Documents Undercut U.S. Case for Taking Mortgage Giant Fannie Mae’s Profits [H/T Linc] (LINK)

Facebook, Phones, and Phonebooks - by Ben Thompson (LINK)

Regulators propose banning Theranos founder for at least two years [H/T Matt] (LINK)

Chip, Implanted in Brain, Helps Paralyzed Man Regain Control of Hand (LINK)

Links

I'm getting caught up after being away for a bit, so some of these are several days old...

The Best Teacher I Never Had - By Bill Gates (LINK)

Thirty years ago I went on vacation and fell for Richard Feynman. 

A friend and I were planning a trip together and wanted to mix a little learning in with our relaxation. We looked at a local university’s film collection, saw that they had one of his lectures on physics, and checked it out. We loved it so much that we ended up watching it twice. Feynman had this amazing knack for making physics clear and fun at the same time. I immediately went looking for more of his talks, and I’ve been a big fan ever since. 

.......... 

Related books:  

Six Easy Pieces: Essentials of Physics Explained by Its Most Brilliant Teacher  

Surely You're Joking, Mr. Feynman!  (also a good audiobook)

"What Do You Care What Other People Think?" (also a good audiobook)

Musk vs. Buffett: The Billionaire Battle to Own the Sun (LINK)

As Berkshire Hathaway meeting set to be streamed online, will fewer make Omaha pilgrimage? [H/T Linc] (LINK)

Conversation that Matters: Freeman Dyson (video, from last year) [H/T @SpaceWeather101] (LINK)

Related previous post: The Civil Heretic 

Related link: Freeman Dyson: By the Book  

Related book: Dreams of Earth and Sky

Nearly all of our medical research is wrong (LINK)

Matt Ridley reassesses Richard Dawkins's pivotal reframing of evolution, 40 years on. (LINK)

Related book: The Selfish Gene [And on a related note, one of the key things on my mental model to-do list is to go a little deeper into the differences between Dawkins and E.O. Wilson and their disagreements about things.... A small example of which can be found in the article: Biological warfare flares up again between EO Wilson and Richard Dawkins]

Investing by Design: Parallels between Architecture and Investing (LINK)

Graham & Doddsville newsletter, Winter 2016 (LINK)

Ray Dalio: Pay attention to long-term debt cycle (LINK)

The Absolute Return Letter, February 2016 (LINK)

Mutual Fund Observer, February 2016 (LINK)

Theranos Is Running Out of Time (video plays) (LINK)

Alphabet Passes Apple To Become the World’s Most Valuable Company (LINK)

Some recent podcasts of note:

Venkatesh Rao on The Knowledge Project 

a16z Podcast: When Banking Works Like My Smartphone 

a16z Podcast: Reinventing Insurance 

How Personalized Medicine Works

Books of the day:

Power, Faith, and Fantasy: America in the Middle East: 1776 to the Present [Recommended by Kyle Bass when he was on Wall Street Week]

The Silo Effect: The Peril of Expertise and the Promise of Breaking Down Barriers

Hussman Weekly Market Comment: The Gas Pedal Is Useless When The Spark Plugs Are Gone (LINK) [On a side note, I've gotten several comments about why I link to John Hussman, both because of his more macro focus and what I suspect is a poor record post economic crisis. The reason is that I respect the work he does, and I always think it is good to read things by people whom one thinks are informed about what they are talking about, even if one disagrees about the applicability and predictability of much of what they say. When it comes to the macro, I like to take the approach of being a risk-identifier--as opposed to being a forecaster--and so listening to people who are intelligent and spend way more time on certain macro things than I do helps me get a sense for whether or not I might be missing something big while I spend most of my time thinking about individual companies. And because this blog also serves as a bit of a real-time journal for me as to what was going on at a given time and to see what I thought was interesting at a given time as I get older and (hopefully) wiser, having him write weekly and highlight certain key developments in the macro landscape, sentiment readings, implied market returns and valuations, etc. is a great point-in-time summary that I can review years down the road by just posting some key paragraphs about something I might not touch on anywhere else. The excerpt from this week's comment below is an example of that.]

Last week, Bank of Japan Governor Haruhiko Kuroda, supported by a slim 5-4 board vote, announced a move to cut short-term interest rates to negative -0.1%, effectively charging banks for deposits held with the BOJ. While the knee-jerk response to central bank easing moves is invariably positive, investors should be careful to recognize the context surrounding this move. Based on the broad market action of Nikkei component stocks, market internals in Japan have deteriorated sharply since December, in contrast to most of the period since August 2012. Following a doubling of the Nikkei over that horizon, the current policy shift comes at a time when both valuations and market internals in Japan have shifted to the most unfavorable status in years. 

...What’s somewhat striking is that having moved the Japanese monetary base from 20% of GDP to more than 75% of GDP in recent years, with very little economic response, anyone would seriously call this liquidity “ammunition.” From an economic perspective, the expansion in the BOJ balance sheet has been accompanied by a precisely offsetting collapse in monetary velocity, with little effect on either real GDP or inflation. From a speculative perspective, while the Nikkei Index remains lower than it was in 1986, 30 years ago, investors have demonstrated risk-seeking inclinations in recent years, holding the Nikkei above its 40-week average during most of the period from 2012 until mid-December of last year. 

At present, however, one should take quite a negative signal from the BOJ's action, because it's clearly a response to deteriorating economic prospects. A favorable shift in market internals would be supportive of speculation in Japan, but that possibility should be monitored explicitly. One can’t rule it out, but there is no inherent or reliable tendency for central bank easing to reverse unfavorable market internals, or to avoid steep further market losses (recall 2000-2002 and 2007-2009 in the U.S.).

Links

The Best Books Bill Gates read in 2015 [H/T ValueWalk] (LINK)

The Two Sides of Seneca and A Lesson on Human Fallibility (LINK)

The Manual of Ideas' Top 10 Interviews (LINK)

Richard Thaler: "The Behavioralizing of Economics" | Talks at Google (LINK)

Related book: Misbehaving: The Making of Behavioral Economics

Niall Ferguson with David Gergen: On Henry Kissinger (video) (LINK)

Related book: Kissinger: 1923-1968: The Idealist

The latest from Horizon Kinetics in their 'What’s in Your Index?' series (LINK)

Aswath Damodaran: Aging in Dog Years? The Short, Glorious Life of a Successful Tech Company! (LINK)

A good presentation on the oil market [H/T @AlexRubalcava] (LINK)

Can Elizabeth Holmes Save Her Unicorn? [H/T Matt] (LINK)

Gene-Editing Technology Could Help Eradicate Malaria, Study Shows (LINK)

The Art of Setting a Drug Price [H/T @BaseHitInvestor] (LINK)

It's All Gone Wrong for One of World's Biggest Mining Companies (video plays) [H/T @Wexboy_Value] (LINK)

Billions of Barrels of Oil Vanish in a Puff of Accounting Smoke (video plays) (LINK)

The Origin Story of Marie Kondo’s Decluttering Empire (LINK)

Related book: The Life-Changing Magic of Tidying Up

Steve Jobs introducing the 'Think Different' ad campaign, a couple of months after returning to the company in 1997 (video) [H/T @iancassel] (LINK)

Quote of the day, from Walter Isaacson in his book The Innovators: "Sometimes the difference between geniuses and jerks hinges on whether their ideas turn out to be right."

Investing thought of the day, via Ben Inker in the GMO Q3 Letter: "The rather odd thing about financials relative to other industries is that a high return on equity capital is as likely to be a sign of weakness as strength. Overly-levered financial firms generally look extremely profitable in the good times but have no cushion against losses when the cycle turns."

Book of the day: Dark Matter and the Dinosaurs: The Astounding Interconnectedness of the Universe

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On an investment-related note, I had previously posted an excerpt from the Boyles Q2 Letter where we mentioned one of our latest investments, Legend Corporation Limited (ASX: LGD) in Australia. As value investors who think the stock is undervalued, the company's buyback announcement from today is one we like to see: 

Managing Director Brad Dowe said: “The buy-back is an effective means of returning capital to shareholders whilst the directors see the company’s share price trading much below the underlying value of the company. Legend expects the buy-back to be earning per share accretive, funded from existing cash reserves and debt facilities and will be prudently managed to maintain appropriate balance sheet capacity to fund further acquisitions”

Disclosure: I am a portfolio manager at Boyles Asset Management, LLC ("Boyles") and the fund managed by Boyles may in the future buy or sell shares of the stock(s) mentioned above and we are under no obligation to update our activities. This is for information purposes only and is not a recommendation to buy or sell a security. Please do your own research before making an investment decision.

Links

If you have haven't listened to Shane Parrish's interview with Jason Zweig yet, I highly recommend it. Jason mentions a number of great books (fiction and nonfiction) in his interview, which can be found in the show notes. For those that are interested in audio versions, you can get the Crime and Punishment audio for pretty cheap if you're interested in that one by buying the Kindle version first for $0.99. Once you own the Kindle version, you can then download the Audible version for $2.99 (there is a box you can check when buying the Kindle version to buy both at the same time). 

Warren Buffett’s Lucky Millionaires Club (LINK)

Elizabeth Holmes Discusses Theranos at WSJDLive 2015 (video) (LINK)

Pershing Square's Bill Ackman Buys Two Million Valeant Pharmaceuticals Shares Amid Plunge (LINK)

John Kay discusses his latest book, Other People's Money: The Real Business of Finance (audio and podcast) (LINK)

TED Talk - Jennifer Doudna: We can now edit our DNA. But let's do it wisely (LINK)

Genetics probe identifies new Galapagos tortoise species (LINK)

A New Thermodynamics Theory of the Origin of Life [H/T James] (LINK)

Links

The WSJ has written a couple of critical articles on Theranos, HERE and HERE. Theranos responded with a statement HERE. Elizabeth Holmes was also on CNBC discussing things HERE.

Bethany McLean talks to Felix Salmon about Fannie and Freddie, and her book Shaky Ground: The Strange Saga of the U.S. Mortgage Giants [H/T Abnormal Returns] (LINK)

Aswath Damodaran on the Ferrari IPO (LINK)

Niall Ferguson on Charlie Rose discusing his latest book, Kissinger: The Idealist (video) (LINK)

Malcolm Gladwell's latest article, on school shootings (LINK)

Links

Catching back up after a few days in Miami...

PBS Program: E.O. Wilson – Of Ants and Men, premieres Wednesday, September 30, 2015 (LINK)

Related book: Journey to the Ants: A Story of Scientific Exploration

A Dozen Things Learned from Charlie Munger About The Berkshire System (LINK)

Related book: Charlie Munger: The Complete Investor

The latest from Michael Mauboussin: Sharpening Your Forecasting Skills (LINK)

Elizabeth Holmes on CNBC (video) (LINK)

Sequoia Fund Managers Suffer $1.2 Billion Loss as Valeant Falls (LINK)

Related link: Ruane, Cunniff & Goldfarb Investor Day Transcript (May 2015)

Carl Icahn's 'Danger Ahead' video (LINK)

With Glencore, Commodity Rout Beginning to Look Like a Crisis (article and video) (LINK)

Aswath Damodaran: No Mas, No Mas! The Vale Chronicles (Continued)! (LINK)

a16z Podcast: Advertising vs. Micropayments in the Age of Ad Blockers (LINK)

The Pulse podcast on disruptive innovation in higher education (LINK)

Related book: Hire Education: Mastery, Modularization, and the Workforce Revolution

Hussman Weekly Market Comment: Valuations Not Only Mean-Revert; They Mean-Invert (LINK)

For decades now, I’ve regularly detailed the historical evidence linking equity valuations to actual subsequent long-term returns in stocks. An important feature of historically reliable measures of valuation is that they mute the impact of cyclical fluctuations in profit margins. Current earnings – or analyst estimates of expected “forward” earnings – should not be taken at face value, because profit margins are not permanent. The most reliable measures of broad market valuation are actually driven by revenues, not earnings. For a review, including the arithmetic linking valuations to actual subsequent market returns, see Ockham’s Razor and the Market Cycle and Margins, Multiples, and The Iron Law of Valuation. 

It’s sometimes argued that the long-term expected return on stocks is simply the expected long-term growth rate of earnings, dividends and the like, plus the prevailing dividend yield. While this would be true if valuations were held constant for all of eternity, the fact is that elevated and depressed valuations tend to normalize over time, which investors know as “mean reversion.” As a result, higher valuations are systematically related to lower subsequent long-term market returns, and lower valuations are systematically related to higher subsequent long-term market returns.

Some advice from Jeff Bezos [H/T @derekhernquist] (LINK)

He said people who were right a lot of the time were people who often changed their minds. He doesn’t think consistency of thought is a particularly positive trait. It’s perfectly healthy — encouraged, even — to have an idea tomorrow that contradicted your idea today. 

... 

What trait signified someone who was wrong a lot of the time? Someone obsessed with details that only support one point of view. If someone can’t climb out of the details, and see the bigger picture from multiple angles, they’re often wrong most of the time.

Notes on the book Diaminds: Decoding the Mental Habits of Successful Thinkers (Part 1, Part 2, Part 3, Part 4, Part 5)

‘Find your passion’ is terrible career advice [H/T @cfchabris] (LINK)

Related book: So Good They Can't Ignore You: Why Skills Trump Passion in the Quest for Work You Love

'Snakeskin' Pluto revealed in planetary close-up (LINK)