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What is common between Aswath Damodaran and Forrest Gump, one a widely published professor of finance at the Stern School of Business at New York University and the other a naive, unintelligent fictional hero? Well, both got lucky with investments in shares ofApple Inc. Damodaran bought the shares for around $5 each in 1997, which he describes as an emotional investment, selling them eventually for $600 last year.
- DAMODARAN: For Investors, The Goal Is Not To Minimize Taxes(businessinsider.com)
- What Books Should I Read To Learn Fundamental Analysis / Value Investing?(satyajeetmishra.com)
- DAMODARAN: What Hurricane Sandy Teaches Us About Investing(businessinsider.com)
- ‘Realty, gold have beaten equities over a 5-yr period’(economictimes.indiatimes.com)
- Moats: Profit Fortifiers(dailyfinance.com)
- FINANCIAL ADVISOR INSIGHTS: Long-Term Investors Don’t Need To Freak Out About Where Tax Rates Are Going(businessinsider.com)
- Valuation of Financial Companies(stockvaluationcanada.wordpress.com)
No good deed goes unpunished. This phrase came to mind after reading the results of a 2011 National Business Ethics Survey titled “Retaliation: When Whistleblowers Become Victims.” The report contains some shocking statistics:
- 45% of US workers observed wrongdoing;
- 65% of those who witnessed wrongdoing reported it;
- 22% of those who reported wrongdoing said they experienced retaliation (an increase of 46% from 2009); and
- 46% of those who observed wrongdoing but chose not to report it, cited fear of retaliation as the reason.
Employees who “blow the whistle” or report wrongdoing should be lauded, not vilified. A study conducted by the Association of Certified Fraud Examiners (ACFE) estimates that fraud costs a typical company about 5% of its revenues and that whistle-blowing is the single most common method of fraud detection. Another study shows that “18.3% of the corporate fraud cases in large US companies between 1996 and 2004 were detected and brought forward by employees.” In Europe, the Middle East, and Africa, an analysis by KPMG found that 25% of fraud cases were brought forward by employees and that anonymous tipping was the primary source of detection.
Continue reading on CFAInstitute.org…
NEW YORK – Europe has been in a financial crisis since 2007. When the bankruptcy of Lehman Brothers endangered the credit of financial institutions, private credit was replaced by the credit of the state, revealing an unrecognized flaw in the euro. By transferring their right to print money to the European Central Bank (ECB), member countries exposed themselves to the risk of default, like Third World countries heavily indebted in a foreign currency. Commercial banks loaded with weaker countries’ government bonds became potentially insolvent.
There is a parallel between the ongoing euro crisis and the international banking crisis of 1982. Back then, the International Monetary Fund saved the global banking system by lending just enough money to heavily indebted countries; default was avoided, but at the cost of a lasting depression. Latin America suffered a lost decade.
Continue reading on Project Syndicate…
- Can money pumping solve the European economic crisis? (cobdencentre.org)
- Three’s company (economist.com)
by Gene Callahan*
In his book Knowledge and Coordination, Daniel Klein distinguishes between mutual coordination and concatenate coordination. Mutual coordination is coordination which people intend: you and I plan to meet for lunch, or several con artists devise a scheme to defraud an elderly widow of her fortune. Concatenate coordination is coordination that is pleasing to an impartial observer: one of Klein’s examples is a room designed with a harmonious combination of colors, shapes, and so on.
- Fads as Social Cycles (thinkmarkets.wordpress.com)
- A few tidbits on the upcoming Adam Ant record (theredradio.typepad.com)
- 152. concatenate (muirnin.wordpress.com)
"We can’t legislate wisdom or passion. We can’t legislate competency. All we can do is create the structures and hope that good people will be appointed who will attract other good people."
B y now, the fallout from the epic financial crisis is both familiar and tangible: foreclosed mortgages, failed banks, lost jobs, recession. On the less tangible side, the meltdown also shook faith in a widely accepted economic principle: Markets are efficient. Since the mid-1960s, many academics have embraced the theory that prices paid in large public markets, such as those in stocks and bonds, reflect the collective wisdom of investors acting rationally on all available information. Yet there’s been growing recognition during the past 15 to 20 years that human psychology — including irrationality — can play havoc with the wisdom of crowds. The historic bursting of the real estate and financial bubbles further undermined the belief that investors and markets behave with machine-like perfection.The crisis also gave new relevance to the work of Charles M.C. Lee, who joined the Stanford Graduate School of Business as a full-time faculty member in July 2009. The professor of accounting has been at the forefront of the debate about market efficiency for nearly two decades. He was an early believer in the relevance of human behavioral patterns to market dynamics. Lee is among the pioneers in developing computer-based strategies for stock selection that take into account behavioral factors such as the tendency for investors to be overconfident or to ignore statistical likelihoods. The techniques he developed for valuing companies and predicting stock price movements help investors systematically evaluate and trade equities by taking advantage of market mispricings.