The Best Investment Writing Volume 2

Selected writing from leading investors and authors

Meb Faber

• Publisher: Harriman House
• Year: 2018
• ISBN:
  9780857196743
• Edition: 2
• Topic: Business
• Subtopic: Financial Accounting
• Index: Business

The Best Investment Writing is back for a second year, with 41 hand-selected articles. These are the best recent pieces of investment writing from some of the most respected money managers and investment researchers in the world.You'll get valuable insights into:-- Why $1 trillion will flow into Chinese stock markets-- How share buybacks are good for dividend yields and per share growth-- The truth about cryptocurrencies-- Why it's a myth that bonds lose value if rates rise-- The four pillars of retirement income-- And so much more!We likened The Best Investment Writing - Volume 1 to a masters course in investing. The second year of the program begins now, with The Best Investment Writing - Volume 2. See how it can help you become a better investor today.With contributions from:Stan Altshuller, Rob Arnott, Cliff Asness, Noah Beck, Charlie Bilello, Chris Brightman, Adam Butler, Anna Chetoukhina, Jonathan Clements, Andreas Clenow, Tavi Costa, Aswath Damodaran, Elroy Dimson, Leigh Drogen, Ed Easterling, Meb Faber, Rick Friedman, Steven Germani, Rodrigo Gordillo, Charles Grant, Wes Gray, Rusty Guinn, Corey Hoffstein, Morgan Housel, Ben Hunt, Nils Jenson, Vitali Kalesnik, Norbert Keimling, Russel Kinnel, Michael Kitces, Samuel Lee, Feifei Li, Adam Ludwin, Tom McClellan, Paul Marsh, John Mauldin, Chris Meredith, Peter Mladina, Jim O'Shaughnessy, Michael Philbrick, Dan Rasmussen, Barry Ritholtz, Cullen Roche, Jeremy Schwartz, Jon Seed, Joseph Shim, Steve Sjuggerud, Kevin Smith, Ehren Stanhope, Porter Stansberry, Mike Staunton, Larry Swedroe, Todd TresidderRead an extract from the book on Biblet https://b2l.bz/sA35zo

‘Why $1 Trillion Will Soon Flow Into China’ by Steve Sjuggerud

This, my friend, is one of the greatest opportunities I have ever seen...

I never imagined I would see a day where NOBODY was invested in the world’s second-largest economy and second-largest stock market. But that’s where we are in early 2018.

Nobody owns locally traded Chinese stocks. But that will change in the coming years. And it’s created a huge investment opportunity.

One trillion dollars—or more—should flow into Chinese stocks and bonds in the next five to seven years.

You see, fund managers will soon be forced to “rebalance” their portfolios to include more Chinese positions. It’s a long story, but a powerful one, and the result is a lot more money in China.

The specifics of what’s going on include a little-known, technical decision. Nobody is talking about it. But the story is simple at its core...

China is the world’s second-largest stock market. It’s larger than every other stock market in the world, except the U.S. But right now, China’s stock market is not included in world stock market indexes.

That is crazy, when you think about it...

How can you have a complete, legitimate, world stock market index if you leave out the world’s second-largest stock market?

Apple’s iPhone operating system is the world’s second-largest by market share (behind Google’s Android). Would it be right to completely ignore the iPhone when talking about the global mobile-phone market?

That’s what’s happening with China right now.

It’s clearly a wrong that needs to be righted.

As this story unfolds, it will cause a lot of money—as much as $1 trillion—to ultimately flow into China’s stock market. We want to make sure we have our money there first.

The only question is when this wrong will be righted... But we actually already know the details.

The process began with a major decision in June 2017. Money will begin pouring in starting in 2018… and for years to come.

Before I explain the exact details of what’s going on, you need to understand the incredible transformation that has occurred in China over the last 20 years.

This transformation, as much as anything, is why investing in China is a smart idea for the next few years at least.

Let me explain...

The Greatest Transformation I’ve Ever Seen

“No pictures! No pictures!” our guide screamed.

“Settle down, buddy,” I thought... I didn’t even have a camera.

It was 1996, and I was entering the doors of China’s Shanghai Stock Exchange.

At first, I thought the guide was trying to protect state secrets. After going through the doors, my opinion changed...

“What a dump!” I thought. China wasn’t protecting state secrets—it was protecting itself from embarrassment!

I had been to plenty of stock exchanges (back when people actually traded on them). And Shanghai’s stock exchange in 1996 was the most embarrassing one I had ever seen.

It didn’t feel like you were entering a stock exchange. It felt like you were entering a decrepit old hotel in New York City. You could tell it had been a special place a century ago. But those days were long gone. Nobody had cared for it in a very long time.

It turns out, that was exactly the case. The Shanghai Stock Exchange was located in what was formerly the Astor House Hotel. Only now, it was a youth hostel. For $10 to $20 a night, you could sleep in a cot—right next to stock exchange rooms.

It was dark. It was dingy. And it had the enthusiasm of a public library.

The few traders who were around (wearing little red vests) were typically as...

Table of contents

• Contents
• Introduction
• Market Conditions, Risk & Returns
• ‘The Evolution of Equity Markets’ by Elroy Dimson, Paul Marsh and Mike Staunton
• ‘The Reasonable Formation of Unreasonable Things: An explanation of market bubbles that doesn’t blame greed or incompetence, and a strategy to protect yourself from their inevitability’ by Morgan Housel
• ‘An Expert’s Guide to Calling a Market Top: The landscape is filled with pundits predicting the demise of the bull market. Here’s how to get in on the action’ by Barry Ritholtz
• ‘Why $1 Trillion Will Soon Flow Into China’ by Steve Sjuggerud
• ‘Crescat Capital Quarterly Investor Letter Q3 2017’ by Kevin C. Smith, Otavio Costa and Nils Jenson
• ‘Tackling Myths in Investing: Bonds Lose Value if Rates Rise’ by Cullen Roche
• ‘Mind the Gap: Global Investor Returns Show the Costs of Bad Timing Around the World’ by Russel Kinnel
• ‘A Letter to Jamie Dimon: And anyone else still struggling to understand cryptocurrencies’ by Adam Ludwin
• ‘Running Out of Workers’ by Tom McClellan
• ‘10,000 Hours or 10 Minutes: What Does It Take to Be a “World-Class” Investor?’ by Charlie Bilello
• ‘Forecasting Factor and Smart Beta Returns: (Hint: History Is Worse than Useless)’ by Rob Arnott, Noah Beck and Vitali Kalesnik
• ‘Catching Up With The Tiger Cubs’ by Stan Altshuller
• Investment Portfolios, Strategies & Edges
• ‘You Still Have Made a Choice’ by Rusty Guinn
• ‘The Three-Body Problem’ by Ben Hunt
• ‘Passive Investing Misconceptions’ by Larry Swedroe
• ‘How to Become a Professional Trader’ by Andreas F. Clenow
• ‘The One Business I’ll Teach My Children’ by Porter Stansberry
• ‘Factor Investing is More Art, and Less Science’ by Wesley R. Gray
• ‘Waiting for the Market to Crash is a Terrible Strategy’ by Samuel Lee
• ‘The Best Way to Add Yield to Your Portfolio’ by Meb Faber
• ‘Skis and Bikes: The Untold Story of Diversification’ by Adam Butler, Michael Philbrick and Rodrigo Gordillo
• ‘A Benchmark for Efficient Asset Allocation’ by Peter Mladina, Charles Grant and Steven Germani
• ‘Revenge of the Humans: How Discretionary Managers Can Crush Systematics’ by Leigh Drogen
• ‘“Passive” Investing: Theory and Practice in a Global Market’ by Jonathan Seed
• ‘A Smoother Path to Outperformance with Multi-Factor Smart Beta Investing’ by Chris Brightman, Vitali Kalesnik, Feifei Li and Joseph Shim
• ‘Microcaps’ Factor Spreads, Structural Biases, and the Institutional Imperative’ by Ehren Stanhope
• Pricing & Valuation
• ‘The Bitcoin Boom: Asset, Currency, Commodity or Collectible?’ by Aswath Damodaran
• ‘Portfolios in Wonderland & The Weird Portfolio’ by Corey Hoffstein
• ‘Net Buybacks Supplement Dividend Yields and Support Future Per Share Growth’ by Jeremy Schwartz
• ‘Is Market Valuation Determined By Sectors?’ Norbert Keimling
• ‘FAANG SCHMAANG: Don’t Blame the Overvaluation of the S&P Solely on Information Technology’ by Anna Chetoukhina and Rick Friedman
• ‘Making Private Equity Great Again’ by Dan Rasmussen
• ‘Factors are Not Commodities’ by Chris Meredith
• ‘Buyback Derangement Syndrome’ by Clifford Asness, Todd Hazelkorn, and Scott Richardson
• ‘Reconciliation Principle: Returns and Forecasts Must Add Up’ by Ed Easterling
• ‘Stock Size Deciles’ by Meb Faber
• Personal Finance, Behavioral Biases & Beyond
• ‘Timely Tale’ by Jonathan Clements
• ‘The Distribution of Pain’ by John Mauldin
• ‘The Great Financial Forecasting Hoax: Why Stock Market Predictions Are Dangerous To Your Wealth’ by Todd Tresidder
• ‘The Evolution of the Four Pillars for Retirement Income Portfolios’ by Michael Kitces
• ‘Why Selling a Big Position of Puts the Day Before the Crash of ’87 was a Great Trade’ by Jim O’Shaughnessy