Finance - Interesting Articles

Corporate Profits, Share Buybacks and the Booming US Stock Market

Good Harvard Business Review piece: Profits Without Prosperity by William Lazonick.

Lazonick observes:

“The allocation of corporate profits to stock buybacks deserves much of the blame. Consider the 449 companies in the S&P 500 index that were publicly listed from 2003 through 2012. During that period those companies used 54% of their earnings—a total of $2.4 trillion—to buy back their own stock, almost all through purchases on the open market. Dividends absorbed an additional 37% of their earnings. That left very little for investments in productive capabilities or higher incomes for employees.”

Drastic Changes Coming to Financial Advising/Planning Industry
Vanguard Group is planning to radically alter the financial industry. According to a Jason Zweig piece (The Rise of Ultracheap Financial Advisers) in the WSJ:

“Vanguard is joining a fast-growing trend toward delivering dirt-cheap financial advice online. So-called robo-advisers such as Betterment and Wealthfront use computer models to provide automated portfolio management for fees of around 0.25% of total assets, or $25 per $10,000 invested.”

Caplers Axes Hedge Fund Portfolio
One of the biggest pension fund managers decides to ditch hedge funds:
http://www.economist.com/news/finance-and-economics/21618899-hiring-hedge-funds-was-never-going-make-pension-deficits-disappear-cant-pay

Global Monetary Policy Developments

Who will raise interest rates first - UK’s BOE or the US Fed?

http://www.reuters.com/article/2014/09/09/us-britain-boe-carney-idUSKBN0H410F20140909

There is some confusion over the term ‘considerable time’ in recent Fed statements. A piece in the New Yorker notes -

“In other words, Yellen had somehow managed to render the phrase “considerable time” even more vague. The Fed watchers, failed utterly by their thesauruses (synonyms for “considerable” can range from “reasonable” and “respectable” to “huge” and “astronomical”), have generally concluded that an increase remains very likely to take place next year. Further supporting that interpretation, the Fed released an economic-projections document Wednesday showing that fourteen members of the committee felt that 2015 was the appropriate year to raise rates, while one person said that it should happen this year and two people believed that 2016 made the most sense.”

Zhou Xiaochuan – Chinese Central Bank Chief

http://www.bloombergview.com/articles/2014-09-19/the-world-s-most-important-central-banker

Little Things Matter - Economic Reforms in India

FT’s Amy Kazmin has written an insightful piece on economic reforms in India:

http://www.ft.com/cms/s/0/5badad82-3ff6-11e4-a381-00144feabdc0.html [gated]

She notes:

“As a prime ministerial aspirant, Mr Modi was imagined by many to be a potential Margaret Thatcher-style reformer, who would boldly tear down the remains of India’s Nehruvian socialist state, even risking run-ins with powerful vested interests. He may yet. Presently, though, his team’s main priority is cutting through the dense thicket of niggling rules, regulations and reporting requirements that have contributed to India’s reputation as a fiendishly difficult place for business.

Though it may seem like mere tinkering with government machinery, analysts say making life easier for companies is a logical first step towards Mr Modi’s goal of attracting more investment to job-generating manufacturing industries.”

Are we headed towards a Cashless Future?

A recent piece in The Economist noted:

“But as electronic payments get easier—most recently with the launch of a “contactless payment” system by Apple—economists are beginning to ask whether notes and coins have had their day”

...

Related graphic:

Cultural Differences and the Tech World

A fascinating piece by VIKRAM CHANDRA in the Wired magazine:

http://www.wired.com/2014/08/silicon-valley-sexism/

Chandra observes:

“The proportion of programmers in India who are women is at least 30 percent. In the US it's 21 percent...

In India, women feel at home in engineering. One 2013 study of Indian engineering students asked whether they ever felt left out in an academic setting. About 8 percent of female engineers reported such feelings, while almost 20 percent of male engineers sometimes felt left out. In another study, female students described the culture of computing as one that prizes meticulousness, intelligence, sociability, and mutual assistance. In workplace interviews with both sexes, sociologist Winifred Poster found “a pervasive conviction that women and men have similar mental abilities to do technical work” and so “an assumption that technical work itself has no gender.””

FT 2014 Masters in Management Rankings

Financial Times Rankings - Masters in Management (different from MBA rankings):http://rankings.ft.com/businessschoolrankings/masters-in-management-2014

The Magic of Asset Reflation

Apparently, we are all rich again:

http://www.nytimes.com/2014/09/20/business/household-net-worth-has-rebounded-since-financial-crisis.html