[ISSUE 33] - Interesting Things...
@GSElevator – #1: Most people wouldn’t even be the main character in a movie about their own lives.
1. Quote Of The Week / 2. Don’t Sleep On The Dogs / 3. The Hidden Economics of Organ Donations / 4. Interesting Links / 5. Joke Of The Week
1. QUOTE OF THE WEEK
BP has just released their latest annual look at global energy markets, and though the plunge in oil prices might seem temporary, the company thinks there are larger effects at play.
“Rather, they may well come to be viewed as symptomatic of a broader shifting in some of the tectonic plates that make up the energy landscape, with significant developments in both the supply of energy and its demand,” said CEO Bob Dudley in an introductory statement.
Changes on the supply side should be pretty obvious. Thanks to fracking techniques and investments in shale, the US has raised its oil output dramatically. It is now producing more than Saudi Arabia for the first time since 1991 - a fact that gives an extra edge to the two countries’ battle for energy supremacy. And that’s not the only country the US eclipsing: It’s also extending its lead in oil and gas over Russia. The shifts are “a prospect unthinkable a decade ago,” Dudley said.
On the demand side, last year was the second in a row that emerging-market economies, or those outside the Organization for Economic Co-operation and Development, made up the majority of global oil consumption.
Though weak growth in richer economies like Europe and the US has been one of the factors weighing on energy prices—in addition to heightened production—it’s noteworthy that their influence is fading.
Here are links to the interactive and full reports.
2. DON’T SLEEP ON THE DOGS
Over five years ago the Wall Street consensus was to overweight emerging stock markets based on expectations of much faster growth versus lethargic “rich” countries. Yet, based on the headlines from the FT earlier this week, the tables have definitely turned:
Unsurprisingly, emerging nations actually have experienced more robust economic results than their developed country counterparts but despite this, shares have been major laggards.
In an article earlier this year, GMO’s Ben Inker shed some light on this apparent paradox. Markets (or asset classes) that have been champs over a-three-year period frequently turn into chumps during the next three. Conversely, the former duds morph into studs. Ben and his team also found that the fasting growing economies over the prior three years tend to lag over the next three, although the tendencies aren’t as powerful as they are with stock prices.
When investors are bullish on the prospects for a country’s market, valuations are generally high. The premium makes it very difficult to continue producing superior returns. Additionally, they found that above-average economic growth often doesn’t translate into faster than normal earnings per share increases (primarily because of the dilution associated with share issuance that is often necessary to finance rapid economic development.)
What they did find is that the catalyst for bull markets is surprising economic growth spurts. In other words, if a country is not expected to do much and it suddenly comes alive, this typically leads to superior stock market gains (think Japan just a few years ago… and we’re still waiting for that growth).
3. THE HIDDEN ECONOMICS OF DATING, ORGAN DONATION AND COLLEGE ADMISSIONS
Stanford University’s Alvin Roth was awarded the Nobel Prize in economics for helping to fix a long-standing problem with the market for kidney donations. Often family and friends were willing donors for someone who needed a kidney but for medical reasons they weren’t a compatible match.
That system became the cornerstone of the country’s first kidney exchange clearinghouse. Roth estimates his work has resulted in roughly 4,000 kidney transplants that might never had happened if not for the system he worked to build.
The market for donated kidneys is an example of what economists call a “matching market.” These markets govern everything from corporate hiring decisions to how we meet spouses, but they obey laws more complex than the simple balancing of supply and demand with prices.
In this interview he explains how matching markets work, why it’s almost unilaterally illegal to buy kidneys, and why it’s increasingly rare for people to marry their high-school sweethearts.
4. INTERESTING LINKS
Cheap energy spurring consolidation in the pipeline industry; The most hated stocks on Wall Street; Take a vacation to get promoted; Timing tasks for the best results; The disastrous economics of being a male model – I guess they can’t have everything; knowing the basics of champagne v prosecco v cava; Bill Gross' on showers in the golden state; More sex doesn’t always make people happier; VR will change how we empathise; A glimpse into the world of HFT; Samsung supes up silicon for better battery.
5. JOKE OF THE WEEK