The stock of an upstart but very successful EV company is currently trading at 144 times the average of 2020, 2021, and 2022 forecast consensus earnings. That’s an earnings yield of 0.7%. In contrast, an older telecommunications company that has focused in recent years on its “network” is trading at 12 times the average of forward earnings. Its earnings yield on forward consensus earnings is 8.3%. Few if any investors are doing the math of cashflows and discount rates when considering the former company, but it is still permissible and interesting to think about such things. Maybe theories of value …
Author: Daniel Peris
Random Book Project #4: Men’s clothier staging
Saw these three books as staging in the window of a men’s clothing store that declared bankruptcy this week. Store founded in 1818; think sheep. These books had been de-accessioned once, which is how they got into the window. Because this store is in the downtown business district and therefore likely to close permanently, these books will probably be tossed. Gamle Pybus appears to be a Danish translation of the 1928 novel Old Pybus by English writer G. Warwick Deeping (1877-1950). Pictures from the Life: Paul Gerhardt, an 1881 English-language translation of the 1845 biography of the 17th century German …
NBN Interview with Tim Koller: What’s a company worth?
What’s a company worth? To judge by the stock market, you might think that there is little rhyme or reason to the exercise. Yet, since the beginning of commerce thousands of years ago, people have been asserting the value of enterprises. Despite that long history, the math and specific logic of enterprise valuation is only about a century old. For thirty of those years, Tim Koller and his colleagues at McKinsey have been in the forefront of thinking about value and how to measure it. The first edition of Valuation: Measuring and Managing the Value of Companies came out in …
NBN Interview with David Shimer: Russia and the West…..
“The guard is tired.” With that simple phrase, the newly installed Bolshevik regime in Russia dismissed the duly elected Constituent Assembly in January 1918. And, one might say, so started Russia’s century-long interference in elections and electoral outcomes. In his new book Rigged: America, Russia, and One Hundred Years of Covert Electoral Interference (Knopf, 2020), David Shimer narrates in meticulous but page-turning detail a century of covert electoral interference, by both the United States and the Soviet Union during the Cold War, and continuing to this day with a focus on post-Soviet Russia’s efforts to affect US politics. His account of the …
Heretical views!
Managing a portfolio based on cashflows? Heresy! Well, maybe not. Others are also making arguments similar to mine in Getting Back to Business. See Jim Garland’s 2019 CFA Institute Research Foundation Brief, introduced by Laurence Siegel. Thanks to Will Goetzmann for the link here .
Random Book Project #3: The Sinews of American Commerce (1941)
#3: Roy A. Foulke, The Sinews of American Commerce (New York: Dun & Bradstreet, Inc., 1941). No price. How did I get it: The book was recently given to me as a housegift by someone who knows that my proclivities run in this direction. Why: The book is classic deaccessioning material. It is a commissioned history to celebrate the 100th anniversary of Dun & Bradstreet, a business information and credit research founded in 1841. Published in August 1941, just before the outbreak of direct US involvement in World War II, the book is a testament to a muscular, unapologetic capitalism …
NBN Interview with Catherine Belton: The Russian state is back….
The Russian state is back. That may not be a big surprise to Russia watchers. The degree to which it is a KGB state, however, is documented in great detail in Catherine Belton‘s new book Putin’s People: How the KGB Took Back Russia and Then Took on the West (Farrar, Straus and Giroux 2020). Certain elements of the KGB were playing a “long game” as early as the 1980s and saw the need for an alternative to the sclerotic late Soviet system. And they were going to be part of that post-Soviet regime. Fast forward 20 years later, these security and intelligence officials …
Barron’s conversation about dividend investing
A conversation with Barron’s Lawrence Strauss and Lauren Rublin on dividend investing in the current economic and financial climate. The replay should be “free” but you may have to register with Barron’s to hear it. https://tinyurl.com/ya5apobb Note: The views expressed here are those of the author alone, and do not necessarily reflect the views of his employer. Nothing written here should be construed as investment advice. Consult your investment advisor for specific recommendations.
Another battle in the neverending war between clarity and confusion….
A recent opinion piece in the Wall Street Journal starts off with a promising title, “Why Many People Misunderstand Dividends, and the Damage This Does.” June 7, 2020 . That is most certainly true. After nearly two decades helping to manage dividend portfolios, I can say that even institutional investors and pension fund consultants still seem to trip over the basic math of dividend investing. Unfortunately the newspaper article only adds to the confusion when the author, an academic, asserts that “Paying dividends doesn’t benefit investors, because a dividend of $1 simply reduces the stock price by $1—just as withdrawing from …
NBN Interview with Tyler Cowen: You mean big business is good?
You mean big business is good, contributes to our general welfare, and is not generally guilty–with notable exceptions–of all of the charges made against it? That’s the argument libertarian economist Tyler Cowen makes in his book Big Business: A Love Letter to an American Anti-Hero (St. Martins, 2019) Most NBN listeners will raise an eyebrow to that claim, but most of those same NBN listeners are up for a good back-and-forth on the virtues and demerits of our market system. And to that end, being familiar with Cowen’s arguments–made in this book and his many other publications and platforms–is very useful. The shift …
Random Book Project #1
I’m launching something I call the Random Book Project. Its purpose is to give additional “life” to some of the books that I have collected over the years and are gathering dust on my shelves. These books are disappearing in the digital age. They are left in a decreasing number of public and university libraries, before they are ultimately “de-accessioned.” Some hardbacks end up as color coordinated staging in steak houses and boutique hotels. The Random Book Project attempts to give these books at least a minimal digital presence for works that Project Gutenberg and Google Books will likely skip. …
Are the Generals fighting the last war?
In Dealing with the Russians (Polity, 2019), Andrew Monaghan argues that Western policy makers are using an outdated Cold War model of ideology, language and institutions, which is wholly unsuited for understanding, engaging, and countering where necessary Russia in the 21st century. One of England’s leading experts on Russia, Monaghan argues Western policy makers need to let go of the past Cold War rhetoric and come up with modern tools to manage the current stage of the three-century long “Russia and the West” policy conundrum. Listen to the New Books Network interview here.
What price life?
A New Books Network interview with Howard Friedman on how human lives are valued, in dollars…. https://newbooksnetwork.com/howard-friedman-ultimate-price-the-value-we-place-on-life-u-california-press-2020/
New York Times column on dividend investing.
A recent column by Jeff Sommer in The New York Times (https://www.nytimes.com/2020/04/24/business/coronavirus-stocks-investing-dividends.html) highlights some of the challenges faced today by investors seeking income from their stock holdings. While the economic shutdown has certainly created an adverse environment for the public-company cashflows that have historically been paid out in dividends, income-seeking investors will want to consider a few additional perspectives beyond what is raised in the Times. First, Sommer implies that because stock ownership has shifted from individuals a century or half century ago, to mutual funds, pension portfolios, and other institutional accounts now, that dividends are somehow less felt on …
Interviewed on HistoricallyThinking podcast
I enjoyed being a guest on Al Zambone’s HistoricallyThinking podcast. Discussed making the transition from Russian history to investment management, dividend investing, and the main arguments in Getting Back to Business. https://historicallythinking.org/episode-146-the-historically-informed-investment-portfolio-or-the-historian-as-financial-analyst/
German money situation then and now…
Germany one hundred years ago: wheelbarrows full of money to buy bread. Germany now: vaults overflowing with cash due to negative interest rates. https://www.bloomberg.com/news/articles/2020-01-31/german-banks-are-hoarding-so-many-euros-they-need-more-vaults As a refresher, the well-told tale by Adam Fergusson, When Money Dies: https://www.amazon.com/gp/product/1586489941
“Go East, Mr. Douglas….”
Bill Douglas needed money. He always needed money. And now, reeling from a very expensive divorce, and with a new wife, he needed even more money. Douglas had come from a modest upbringing, the son of an itinerant preacher who had ended up in the Pacific northwest. He worked his way through a local college—after getting the first year free on a scholarship—and then crossed the country to New York, where he worked his way through law school. Douglas advanced very quickly in the legal profession, but his expenses regularly outstripped his income. He borrowed. He did one-off writing jobs. …
At the intersection of History and Finance…..
Think that Wall Street has nothing to do with the real economy? You are probably not alone in that regard. But it turns out, you are wrong. As William N. Goetzmann demonstrates in his Money Changes Everything: How Finance Made Civilization Possible (Princeton University Press, 2016), the tools of finance were as important for the rise of civilization as were the soldiers, castles and battles. Were it not for property contracts, agreements over imports and exports of grain, how to manage risk in increasingly complex economic ventures, etc we are still living in small agricultural communities eaking out an existence, …
Not rational, not irrational, but “for itself” behavior.
Tired of the mechanical, narrowly rational human behavior of the Chicago school, but not exactly comforted by the emphasis on irrational activity in behavioral economics? So am I. Richard Robb, professor at Columbia and fund manager, offers a third way. In Willful: How We Choose What We Do (Yale University Press, 2019), Robb develops the notion of “for itself” behavior and decision making that can’t be reduced to the algorithms of calculating machines, or even those that are adjusted for human foibles. Willful is not a comprehensive theory of decision making, but an effort to reinsert some element of humanity into explanations of …
The impact of the Chicago model: NBN Interview with Binya Appelbaum
Think economics is the “dismal science” with abstract formulas that have no impact on life as it is actually lived? Think again. In The Economists’ Hour: False Prophets, Free Markets, and the Fracture of Society (Little Brown, 2019), Binyamin Appelbaum–former correspondent and now an editorial board member of the New York Times–brings to life how academic economists rose “from the basement” of banks and universities in the post-war period to have a direct impact on almost every aspect of our lives. The end of the draft, unemployment levels, inflation, deregulation, air transport, phone service, patent law, monopolies and anti-trust activity, …
NBN “interview”: Robert Shiller’s Narrative Economics
Culture matters. And a key element of culture is storytelling. These maxims can be accepted as given, except in modern economics, where the mechanistic framework of modern macroeconomic analysis allows just for formulas. Concerned about the relationship between unemployment levels and inflation? Here’s the formula: gW = gWT – f(U − U*) + λ·gPex It’s called the Phillips Curve. Your personal experience of unemployment or rising costs, the stories that you tell others or hear from them–about globalization, about jobs being exported, about “disintermediation” through technology, etc–these stories play no role in the economics taught in the classroom, but may have a significant impact on the decisions that …
Interview with another dividend guru…
I very much enjoyed having David Bahnsen, CIO of The Bahnsen Group, on the New Books in Finance podcast. David is a fellow dividend practitioner, and a very sharp guy. Hear the interview here: https://newbooksnetwork.com/david-bahnsen-the-case-for-dividend-growth-investing-in-a-post-crisis-world-post-hill-press-2019/
The Economics in Two Lessons NBN inteview
Trying to follow the key macroeconomic debates that are swirling around DC, CNBC, the WSJ and the NYT? If you are but don’t want to go back to graduate school or re-open your college macroeconomics textbook, John Quiggin has a solution. His Economics in Two Lessons: Why Markets Work So Well, and Why They Can Fail So Badly (Princeton University Press, 2019) achieves several goals. First, it frames the current debates, providing a concise, well-written history of macroeconomics and the key twists and turns in economic policy that have brought us to our current state of (general) disagreement on economic policy. Second, he structures …
Big is Beautiful interview: not what you might expect!
Small is beautiful, right? Isn’t that what we’ve all been taught? From Jeffersonian politics to the hallowed family farm, from craft breweries to tech start ups in the garage. Small business is the engine and the soul and the driver of the American system. That’s the dominant narrative. And according to Robert Atkinson and Michael Lind, it is really wrong. In their new book, Big is Beautiful: Debunking the Myth of Small Business (MIT Press, 2018), the authors review the empirical evidence and conclude that large businesses create more, generate more intellectual capital, pay better, pollute less, are more diverse, and score higher on pretty …
New Books in Finance interview: The machines versus the humans…..
The machines have taken over…. For many operating in investment management, it can certainly seem that way: factor investing, algorithmic investing, dynamic hedging instruments, risk management derivatives driven by changes in market prices, etc. dominate much of the investment narrative. And now and again these supposedly superior investment approaches get blamed for causing big blow ups. If portfolio insurance led to a wave of computer selling in 1987, then the chaos generated by the models in 2008-2009 was incomparably larger. So say the critics. But in Financial Models and Society: Villains or Scapegoats (Elgar, 2018), Ekaterina Svetlova begs to differ. She looks at how …
Two seashells found on the Internet beach…. about Strategic Dividend Investor (2011)
https://app.fortunechina.com/mobile/article/99167.htm https://personalfinance.bondeconomics.com/2014/08/book-review-strategic-dividend-investor.html?m=1 [personalfinance.bondeconomics.com]
The key is private sector debt……
Richard Vague really really cares about private-sector debt. And he thinks you should too. In A Brief History of Doom: Two Hundred Years of Financial Crises(University of Pennsylvania Press, 2019), Vague sees the rise and fall of private sector debt as the key factor explaining the cycle of economic crises experienced by developed and major developing economies over the past two centuries. The early stages of a lending cycle look and feel good. Everyone is happy, the lenders think they are smart, the borrowers feel they have everything under control. Then the lenders and borrowers take it to another level, and then …
New Books in Finance Podcast: Banking on Freedom
Think running an insurance company or a bank is hard? Try doing it as an African-American woman in the Jim Crow South. Shennette Garrett-Scott‘s new book, Banking on Freedom: Black Women in U.S. Finance Before the New Deal (Columbia University Press, 2019) tells the fascinating story of just such an endeavor, first the Independent Order of St. Luke, and then the St. Luke Penny Savings Bank, founded in Richmond in 1903. Along the way, she tells the tale of force-of-nature strong women, particularly Maggie Lena Walker, who wouldn’t take no for an answer as she built up a culture of business and entrepreneurship …
Brief Barron’s Interview on dividend investing.
https://www.barrons.com/articles/dividend-fund-manager-daniel-peris-51557706862
Crime and culture: a review of Heinzen’s The Art of the Bribe (2016)
Complex societies require rules. No rules, no complex societies. It’s that simple. Or is it? In the case of state-oriented societies, like late Tsarist Russia or the Soviet Union, a visible and important subset of those rules concern proper behavior towards and by government officials. The historical concentration of resources and power in the hands of the government created the nearly inevitable risk of people falling short of ideal impartiality or ideological rectitude. Hence the rules, particularly concerning the giving and taking of bribes by government officials. The challenge in Russia has been all the greater because for significant periods …