Links for Thought -- October 18th, 2013

What Happens When you Don't Buy Quality? (Fundoo Professor) -- This is a great presentation on the investment benefits of buying so-called "quality" companies (in contrast to pure "value"). Quality companies are those with high returns on invested capital and a sustainable business model. This post is replete with great quotes from Warren Buffett and anecdotes from Fundoo's own investments. A true must read.

Millennials: Coming of Age in Retail (Goldman Sachs) -- h/t to @montoyan for sharing this great piece on the brand affinities and trends amongst millennial shoppers. As we know, the retail landscape is changing dramatically with the transition from big boxes to the web. This report takes it to the next step by highlighting the concurrent impact of this huge demographic shift on the retail industry. 

You're Probably Overpaying to Invest (Jason Gilbert CPA) -- My partner at RGA Investment Advisors wrote this great piece explaining how people who invest in what they think are "low-fee" endeavors are really just missing exactly when/where/how many levels of fees are taken from their account each year. People really need to pay more attention to the fees embedded within investments on top of those they pay to advisors.

The Economic Implications of Corporate Financial Reporting (NBER) -- h/t to @jesse_livermore for the find. It was shocking to learn that "55% of managers would avoid initiating a very positive NPV project if it meant falling short of the current quarter's consensus earnings." Positive NPV projects by definition increase the intrinsic value of a business and yet the majority of managers who are entrusted with a fiducuary duty to do just that will turn down projects for what? Meeting BS analyst estimates. What an outrage!

Look for Price Signals? (Capital Spectator) -- It's amazing how closely 5 year rolling returns track the inverse CAPE. This is a point Antti Ilmanen made very effectively in his lecture at this year's Santa Fe Institute Risk Conference (see my notes on it here). Here is another good look at this same effect, also analyzing the role that value and momentum play in returns.

Taxes Raise Bar for a Hedge-Fund Bet (Bloomberg) -- Matthew Klein takes a great look at how comparing hedge fund returns is not really an apples to apples kind of thing. I wrote about this very same topic in my recent "Buffet, Soros and Uncle Sam" post, and it's great to see one of the better writers in the mainstream financial media pick up on this topic. After-tax returns are what most investors really make, so why is more emphasis not placed on this reality? Probably because a lot of people make a lot of money off of limiting our awareness to the topic.

Vox's New Mega-Round Puts a Bow on Content's "Holy Shit" Moment (Pando Daily) -- An interesting look at the massive sums some young web-based content companies are raising. We are definitely seeing the rise of new media, though this reeks of froth to me. How is it that new companies garnering the same, or even fewer eyeballs than traditional media stalwarts are raising money at valuations in excess of some profitable old guys? 

Horizon Kinetics Q3 Commentary (Horizon Kinetics) -- These guys write some of the best commentaries. Here is a really important look at how indexing and ETFs lead investors into investments they simply are not aware of. For example, when you buy EWP you're not really buying Spain, you're actually making a big investment in Latin America. Take a look at some other areas where what you buy is not what meets the eye.

The Soaring Cost of a Simple Breath (NY Times) -- This one hits home, as I was a childhood asthmatic who luckily outgrew the problem. The last time I was using inhalers, they were generics. Fast forward a decade, I now have an asthmatic cat (Freckles) whose inhalers cost about $300 a pop. I never realized how/why this all happened until reading this article covering some big catalysts for our cost problems here in the US.

10 Years Later, Steve Bartman Remains a Tragedy (Deadspin) -- I really feel bad for the guy. Seriously, there were players in the game, with a role in controlling the outcome who messed up far worse than Bartman (looking at you Alex Gonzalez), yet the young fan ended up the goat. How is it that not one player stepped up to take responsibility for the team's collapse in order to protect what really is just an innocent fan?

I've been loving the band Little Feat lately and can't believe I didn't listen to more of them until now. Here is a great version of Dixie Chicken, until next week, enjoy: