Interesting Things... [ISSUE 46]

@GSElevator – #1: Most people are extras in the movie of life. Why would I watch their Facebook Year in Review?

1. Quote Of The Week / 2. The Outperformance Of Low EV Stocks / 3. Becoming A Billionaire Is Hard But Staying One Is Harder / 4. Interesting Links / 5. Joke Of The Week


On CNBC, just an hour before the Fed made the announcement, Doubleline’s Jeffrey Gundlach went over data points that indicate the economy is now weaker than it was the last time the Fed met — and decided not to raise interest rates. Those include low commodity prices, weak nominal gross domestic product growth and junk bond prices at multi-year lows.

“They are raising rates because they promised they would in 2015 and they want to maintain credibility.”

Gundlach’s advice for investors now is to buy closed-end bond funds and real estate investment trusts, many of which are trading at historically low discounts to net asset value.

“Buying a fund or REIT trading for at an 15-20% discount to NAV is sort of a no-brainer.”


For the first time ever in retail’s biggest weekend, more people shopped online in the U.S. than went to brick-and-mortar stores. The keystone for brick-and-mortar stores has long been instant in-store availability of products for immediate use. But online retailers are partnering with an ever expanding array of options for rapid delivery. Retailers that fail to embrace online and mobile shopping will fail to survive.

A new paper from Christian Walkshäusl and Sebastian Lobe* called The Enterprise Multiple Investment Strategy: International Evidence examines the performance of the enterprise multiple (EV/EBITDA) in international markets, including Australia, Canada, France, Germany, Hong Kong, Japan, Singapore, Sweden, Switzerland and the UK.

The paper, published in the Journal of Financial and Quantitative Analysis, confirms the U.S. evidence that cheap enterprise multiple stock outperform expensive enterprise multiple stocks by about 1 percent per month and it works just as well in emerging markets and small-caps.

The authors conclude that the enterprise value premium - the difference in performance between the cheapest and the most expensive - is significant for the majority of countries, and is highly persistent for up to 5 years after portfolio is formed, demonstrating that its performance in the US is not an outlier - it’s the norm.

Also fascinating is the manifestation of mean reversion in cheap enterprise multiple stocks. The authors document the progression of cheap enterprise multiple stocks from an average enterprise multiple of 3.4x at purchase to 4.3x a year later, 4.5x in the third year, and then slowly but steadily growing to an average enterprise multiple of 5.5x in the fifth year. The expensive stocks follow a similar path in opposite direction, but do so more quickly, falling from 23.3x at purchase to 9.9x in the fifth year. By the sixth year, the authors found that the cheap and expensive stocks had comparable valuations.


A study made by UBS and PricewaterhouseCoopers showed that more than half of the billionaires 20 years ago were no longer billionaires today.

In 1995 there were 289 billionaires but only 126 have remained in that select group. What happened to the 163 that dropped out of the list?

There are now over 1,300 billionaires in the world; this means more than 1,000 were minted in the last 20 years. Most of them gained wealth from finance, technology or consumer/retail industries. Since there is more volatility upstairs, that list could be very different 20 years from now.


Algodoctors are the future [NY Times]; Uruguay now 95% renewables [Quartz]; The Guinness Brewer Who Revolutionized Statistics [Price Economics]; Men are more attracted to non-conformist women [Scientific American]; A/B Testing beyond online [Podcast: Planet Money]; Are EMs a value trap [QMO 3Q Letter]; By 2018, 21% of U.S. households won’t pay for [WSJ]; Asia’s migrant domestic servants [The Economist]; Indonesia bans Uber – what nonsense [Deal Street Asia].


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