Links for Thought -- March 30, 2012

A Template for Understanding: How the Economic Machine Works... (Bridgewater) -- This is a MUST READ, and I mean that to the fullest. Ray Dalio and Bridgewater lay out a more complete, robust and accurate assessment for how an economy works than anything we see in the financial presses.  Plus the write-up is concise and written in layman's terms so that anyone and everyone can extract real value.  Reading this report should be a prerequisite for ANY candidate who runs for office, maybe then our economic rhetoric would be a bit more complex, but way more rational? One can dream!

Google Cloud: Coming Soon to Robots Near You (Seeking Alpha) -- To date, the robotics story has primarily been hardware driven, based on innovation in mimicking human movements and/or actions based on necessity. Now the rapid advance in software is adding a whole new dimension and setting the stage for the dawn of widespread adoption of robotics. While on the topic, check out this awesome video of a robot that can jump over 30 feet if need be! 

World's Changed Man, World's Changed-China Edition (Financial Times) -- This is from earlier in March, but still just as relevant.  Throughout the month, each market downtick was more a reflection of concerns over China than Europe.  That's quite the change from this past summer.  What are the consequences?  Well one might be the end of the big commodity bull that's lasted over a decade.  Can the commodity bull persist if China slows?  Does this bode as a positive, or a negative for the US?  These have been the questions that I spent the majority of my attention on this past week.  I should have some charts and analysis within the next two weeks.

Insane in the Membrane (Outside Magazine via Readability) -- This is a fascinating long read on the history of Gore-Tex and the state of the waterproof, breathable fabric market.  There is an intense battle being waged for market dominance that includes some interesting twists and turns.

How the Natural Gas Craze Will Impact Clean Energy (GigaOM) -- This is an issue I have spent quite a bit of time contemplating myself.  Is natural gas a transitory or enduring shift in terms of efficiency, cost and environmental cleanliness?  If so, what are the consequences for clean energy on each of those variables as well?  We seem to be at a big inflection point in the adoption of both.  Is this an "either or" proposition, or can both succeed?  There are way more questions than answers right now, and in these answers lies considerable opportunity.

Why Minsky Matters (EconoMonitor) -- In my book, Minsky is the most important economist today.  Yet, there's a bit of a debate going no amongst the new age Keynesians as to how exactly Minsky is relevant.  Here is L. Wrandall Wray's analysis as to why Minsky is so damn important.  It's slightly wonky, but a must read for anyone interested in macroeconomics.

Praise is Fleeting, but Brickbats We Recall (NY Times) -- Really fascinating psychological analysis of how the mind processes negatives in contrast to positives.  We tend to recall negatives more frequently and with more clarity and this has to do with how the brain works.  Understanding psychology generally speaking is very important in improving as an investor.

I usually close with one of my nature pictures, but today I will leave you all with this awesome video presentation taking advantage of the power of the iPad:

Links for Thought -- March 23, 2012

It's Friday again, that means it's time for more links for thought!

Jonah Lehrer and the New Science of Creativity (Why We Reason) -- If you read one article from this post, this should probably be it.  It's points are so widely applicable and relevant to everyone.  The post takes is a book review on Jonah Lehrer's new book called Imagine: How Creativity Works and takes look at the creative science behind Bob Dylan plugging.

Please Stop Apologizing (NY Times) -- Bill Maher tells everyone to chill out and stop apologizing. He also proposes that we "make this Sunday the National Day of No Outrage. One day a year when you will not find some tiny thing someone did or said and pretend you can barely continue functioning until they apologize."  Great points from Maher about how hyper-sensitivity has been taken way too far in general, and has simply become a distraction from the real, important questions in life.

The Man Who Broke Atlantic City (The Atlantic) -- Awesome article on Don Johnson, the man who won $6 million playing blackjack in just one night, and over $15 million in a short time.  There are many lessons to take from this article, particularly from an investment perspective.  Any investor should do as Johnson did, and seek to stack the odds in your favor, while those same investors should never do what the casino did in desperately seeking a way to make a buck.  

5 Things that Surprised Me About A Career on Wall Street (Ritholtz) -- As a lawyer turned investor, this really struck a chord with me.  Barry Ritholtz too comes from the same background, and he takes a stab here at some of the real shocks of entering the investment world.  Point #1 in particular should hit EVERYONE on Wall Street real hard, because it is just so damn true: "Surprisingly few people rolled up their sleeves and thought deeply about why things in market are the way the are."

A Stock is a Business (Oddball Stocks) -- This is something I say and will continue to say often, "a stock is a business."  It is not a line on a chart, it is not a spreadsheet of ratios, it is a real, vibrant business.  Oddball Stocks takes a good look here at why that's an important point and how it impacts investment analysis.

Links for Thought -- March 9, 2012

Cost of Gene Sequencing Falls, Raising Hopes for Medical Advances (NY Times) -- This is a narrative I will continue to follow from both a science and investment standpoint.  We are at a very real tipping point in terms of the impact the Human Genome Project will have on our lives.  Ultimately deflation in the price of mapping the genome will help drive down the cost of medical treatment.  Just wait (and also read my post on the Innovator's Dilemma to create your own mental model for how this will play out).  

Selling Shovels in a Gold Rush (Leigh Drogan) -- Leigh Drogan, founder of Estimize, offers great insight on how some of those who prosper most from the present tech boom will be the ones who facilitate the boom along the way.  This is precisely how Levi Strauss made himself one of the most successful beneficiaries of the California Gold Rush.  

Warren Buffett: All that Glitters Is Tungsten (Benzinga) -- What's rarer than Rare Earths? Tungsten.  The most successful investor in the world, Warren Buffett has now taken a stake in a major producer via Berkshire's ownership of Iscar.  Tungsten is my favorite commodity investment and one I have been following for some time, as it has unique traits compared to most ordinary commodities.  Good to see Mr. Buffett give his implicit endorsement!

New Math Will Drive a U.S. Manufacturing Comeback (HBR Blog) -- HBR lays out the math behind why the U.S. is experiencing a manufacturing renaissance, and why this trend will accelerate over the coming years.  This is a highly compelling argument, substantiated by a good look at the numbers.  If the prediction is in fact correct, it bodes amazingly well for the U.S. economy.

Consumer Price Index (CPI): Comprehensive In-depth Analysis (ValueWalk) -- The CPI is controversial to many, for a variety of reasons. Here Kim Palacios at ValueWalk takes an excellent look at some of the ways in which the CPI is not properly constructed for the modern economy.  Substitution, sharing, and auction-based pricing all have serious consequences for the broader economic price level.  

Speculation Blamed for Global Food Price Weirdness (Wired) -- Yes Futures are an important tool for commodity consumers and producers to hedge their exposure, but, these days several crucial commodities seem inundated with speculators who are accumulating long-term positions.  This is leading to a disconnect in the true supply and demand equilibrium.  Food is far too important arena to allow such gamesmanship to influence everyday prices.

The Illusion of Understanding Success (Why We Reason) -- This is a great write-up on JK Rowling, the wildly successful offer of the Harry Potter series.  Rowling was in a state of depression before a twist of fate sent her life on a rapid ascent to stardom.  Too often society builds after-the-fact narratives of success as if someone started on the bottom left of a chart and ended at the top right without any bumps along the way.  This is a theme Daniel Kahneman has spelled out nicely, and one I will take a deeper look at sometime soon.  In the meantime, give this one a read.

Who Has the Moral Highground in A's-Giants Dispute (Baseball Nation) -- The Oakland A's and the San Francisco Giants are in the middle of a territorial dispute.  Tied into this fight is some interesting baseball history and more general questions about fairness. 

Links for Thought -- March 2, 2012

Apple: Thoughts on bias, value, excess cash and dividends (Musings on Markets) -- Two weeks ago, Aswath Damodaran brought us his valuation analysis of Facebook, this week he takes on Apple.  Aswath is a long-time Apple investor and a valuation guru.  He is generous enough to share not only his thoughts on Apple, but also his model.  Go check it out!

Mapping Solar Grid Parity (Energy Self-Reliant States) -- This is a really cool interactive map that shows when solar energy will hit grid parity around the United States.  Importantly this chart is taking a look at solar WITHOUT subsidies.  

The Silver Lining to Scarcity: It Drives Innovation (Harvard Business Review) -- Necessity combined with scarcity are powerful forces in the drive for innovation.  Too often innovation is not anticipatory, but rather reactionary to need.  Herein lies the "silver lining to scarcity."  This is a particularly relevant piece considering the questions about scarcity with regard to the future supply of crucial commodities like oil amidst surging emerging market demand.

Big Market Worries: Profit Margins (A Dash of Insight) -- Jeff Miller takes his stab at debunking one of the oft-stated mantras of today's market valuation: that margins are mean regressing and high, therefore they are due for contraction.  This is an important debate in establishing whether we are dealing with the real long-term compression of valuations, or whether this is simply a temporary uptick that will inevitably fade.  My belief--I side with Jeff.

Let Your Winners Run (A VC) -- Fred Wilson of Union Square Ventures tells us all to ride our winners.  When people see they are making money, it's very hard to take that itchy trigger finger off the sell button, especially in these days of high volatility.  Yet, to build outstanding performance over the long-run, it's important to recognize that the benefits of winners that keep growing are greatly increased by the effects of compound interest.  This is one of Kevin Douglas' strengths.

Links for Thought -- February 17th

The IPO of the Decade? My Valuation of Facebook (Musings on Markets) -- Aswath Damodaran, professor at finance at NYU, takes his stab at constructing a valuation analysis on Facebook.  This is an outstanding post for anyone who has an interest in the Facebook IPO, and even better for those who want to learn the "how to" of valuation analysis from an outstanding teacher.

Memo to Lyle LaMothe: The Die is Cast (The Reformed Broker) -- Josh Brown offers some strong points on why the Registered Investment Advisor (RIA) platform is gaining momentum at the expense of the traditional wirehouse brokers.  Great read on the state of the investment industry today.

Kodak: A Parable of American Competitiveness (Harvard Business School) -- Very interesting analysis of Kodak's decline as a company and what lessons can be drawn for America at large.  A key point is the idea that outsourcing manufacturing resulted in the outsourcing of the means through which people derive innovation.

Allan Mecham: The 400% Man (Frankly Speaking) -- Frank Voisin takes a look at the recent SmartMoney profile on an under-the-radar investor from Utah who has earned a 400% return for his investors over the past 12 years.  Embedded in this post is an interview with Mecham conducted by the Manual of Ideas in 2010 which is a must read on how to become a successful investor (clue: one must think differently than the herd).

Lasry Sees Europe Bankruptcy Bonanza as Bad Debts Obscure Good Assets (Bloomberg) -- This article is as much an expression of Marc Lasry's belief that there are good values to be bought in Europe, as it is a mini-biography on one of my favorites in the investment business.  Lasry is a Moroccan immigrant, who studied hard to become a lawyer and then a successful investor.  A lot can be learned from this man, both as a person and a fund manager.

What Does Declining Gasoline Consumption Mean (Ritholtz) -- With oil prices on the rise yet again, James Bianco bring to light an important fact.  Gasoline consumption in America has been falling since 2007, and recently accelerated the pace of the decline.  What does this mean?  Go ahead and read the link to find out what Bianco thinks.