By Amanda Morrall
1) Risk on, risk off
Although I work in a digital environment, I don't particularly like it. I was dragged kicking and screaming (only a slight exaggeration) into the on-line media. I concede it has benefits but my opposition to this age of 24/7 information access, being wired to work via smartphones, having more Facebook friends than actual friends, remains.
Why? Mainly because of my belief that it is undermining genuine human relationships (too scary to talk a person when you can email or text them) and creating this illusion of internet experts who may have access to information but whose credibility is suspect because they are so fixated on the short-term they lose sight of their perspective.
The following blog, from Templeton Asset Management's VP Tom Wu raises some similar concerns in the context of modern investing. He argues that the information overload puts already schizo myopic investors, (whose behaviour by now has been proven to be irrational) in an even more precarious position because of their tendency to "act first, ask questions later.''
Here's an excerpt from his piece about long-term investing in a short-term world.
We have increasingly become digital devotees in our daily lives. Electronic networks connect us with friends, family and colleagues, and provide us a steady diet of news, 24 hours a day. As news headlines circle the globe within seconds, it can cause investors to make decisions based on emotion and for markets to take dramatic twists and turns. When financial markets seem to be in crisis, we’ve witnessed a tendency for investors to more quickly pull out of markets or asset classes they view as “risky” and into what they consider to be “safer.” This “risk-on,” “risk-off” movement often occurs at times before all the facts are in—It’s often a case of “act first, ask questions later.”
In my experience, that usually turns out to be the worst thing to do. Our approach is to ask questions first, before we act. Mark and the rest of the team at Templeton have learned much from the wise Sir John Templeton, who believed maintaining a long-term investment perspective was essential to long-term success. This approach has certainly been tested time and time again in the years we have been covering and investing in emerging markets. We’ve seen emerging markets post double-digit gains or losses within a month!
The lessons we have learned through these volatile periods are to take a measured, long-term perspective, trust our fundamental, on-the-ground analysis of individual companies, and above all, not react to short-term, often sensationalist news. We are certainly aware of the macroeconomic climate, but it is not the main driver in our decision-making process when it comes to a specific investment. We always seek out companies where we find strong cash flows and a record of returning cash to shareholders via dividends. We examine and meet with management and controllers of each company, whenever possible. Once we find what we believe to be an investment bargain, we typically stick with it as long as we believe the case for future growth potential is still strong.
2) Too much testosterone
Just as testosterone fuelled 18 year old lads make for a high risk behind the wheel of sports car, so too do money intoxicated male traders filled with greed and a lust for high returns make for a dangerous workplace environment. Not for the lone female that has to choke on their testosterone (although that can't be pleasant) but chiefly for the investors whose capital they are putting at stake. Ian Leslie, writing for the Guardian, takes a read of the email and text exchange among Barclay's bad boys and concludes that the too many men on the trading room floor is a sure fire recipe for disaster. Still, nothing much has changed.
Like lovers who embark on an affair because of, as well as despite, its wrongness, the erring bankers clearly took a special pleasure in crossing boundaries. Here is a Barclays trader explaining the rules of the game to a nervous novice: "This is the way you pull off deals like this Chicken, don't talk about it too much … this is between you and me, but really don't tell ANYBODY." In those capital letters alone you can the smell the fevered pleasure of taking part in a conspiracy, knowing that they might get caught out.
But then, as with any affair, there is always the prospect of time together alone, of stolen moments free from the possibility of prying eyes: "Dude. I owe you big time! Come over one day after work and I'm opening a bottle of Bollinger."
This, then, is what brings down banks and distorts economies: sexting with pound signs, followed, at the end of the day, by a Bollinger ejaculation.
3) White people's problems
Anne-Marie Slaughter's cover story for The Atlantic "Why Women Still Can’t Have It All" has stirred up another gender fuelled dust storm. Her complaint is that motherhood and ambition simply don't mesh, not at least given the "tryany of time" and outdated work models. Here's the Globe and Mail Margaret Wente with her delightfully funny and poignant spin on Ms. Slaughter's conundrum. Wente sees Ms. Slaughter's dilemma as less of a working mummy problem and more a "White person's problems.'' Ah, we suffer so.
4) Fix the clock
Futurologists predicted that technology and the modern era would make life easier by replacing human labour with machinery. This commentary item from the Guardian looks at the system design flaw.
5) Numerical blindspots
Retailers using discounts to push sales apparently are going about business the wrong way. Research, reported in this Economist story, suggests that consumers are more likely to choose free stuff over a discount. Disturbingly, it's not because they actually want the free stuff but because they can't do the math to figure out how much money they are saving through a discount. Yikes!