Is there a relationship between inflation and stock returns in India? A recent study that looked at monthly data between 1994 and 2014 shows that there is no significant pro-cyclical inter-dependency between inflation and stock returns.
However, the paper does not present the results of any statistical significance tests. This leaves the reader at the mercy of trying to interpret pretty pictures of wavelet transforms.
On the Dynamics of Inflation-Stock Returns in India
Chaos Monkeys: Obscene Fortune and Random Failure in Silicon Valley (Amazon,) is a meandering story about one man’s startup journey. (Excerpts.)
The book is entertaining but it brought little in the way of added insight. The bit that stuck a chord was:
Most VCs are playing a version of baseball in which the only way to score is to hit a home run when you’re at bat. They don’t care if you disgrace or impoverish yourself and strike out, and they don’t care if you get a solid line drive that lands you on second. To them, strikeouts and getting on base are equally pointless, and so they’ll push to proverbially “swing for the fences” no matter the count or the team you’re up against.
The reason for this all-or-nothing approach is how their funds are structured. VCs raise a fund, out of which they’ll provision some number of investments. Barring doubling down on the same company, which they might do if the fund still has money when a company raises again, those investments are effectively “fire and forget.” The fund’s total profit will be calculated from whatever those initial bets return. Unlike, say, a hedge fund portfolio manager, who rolls the winnings from one good bet into the next, compounding a series of returns into something truly huge, VCs do not take liquidity from one company’s exit and pour it into yet another’s. This, at heart, is why the go-big-or-go-home strategy makes the Silicon Valley world turn, and why entrepreneurs push themselves to be either the next Airbnb, or nothing. The entrepreneur who bucks this and creates a long-term business of recurring revenue but relatively slow growth is dismissed as running a mere “lifestyle business,” which is a dirty word among VCs.
This is our monthly update to our continuing coverage of the performance of portfolio management services. Read the first one for an intro.
Monthly Performance Diffusion
Jan returns are a bit spotty right now. It should be fun…
|Brent Crude Oil
|WTI Crude Oil
International ETFs (USD)
More: Sector Dashboard
Market Cap Decile Performance
More: Equal-Weight Deciles, Cap-Weight Deciles
||Change in YTM
Bonds put in a decent show…
Investment Theme Performance
Momo (Automated) Themes out-performed hand-crafted ones…
Equity Mutual Funds
Bond Mutual Funds
Foreigners sold and domestic investors SIPped…
Boomerang – Travels in the New Third World (Amazon,) is about how the 2008 banking crisis morphed into a sovereign crisis. (Excerpts)
The 2008 Global Financial Crisis established a few things:
- If you fail, make sure you fail big. Bankruptcy is for the little guys.
- Banks are an extension of state policy.
- There is no getting rid of moral hazard and the principal-agent problem.
- It will happen again.
This book adds a 5th one to the list: a country’s banking system reflects the society within which it operates. It embodies and amplifies all the cynicism, envy and hypocrisy of its owners, regulators and customers.
After reading this book, I wonder if all banks should be forced to become utilities where the state guarantees a certain return on equity to its shareholders and the banks are allowed to take a narrow set of very specific risks. For example, the regulated power and gas utilities in the US have a guaranteed monopoly status within a region, allowed a fixed maximum return on capital and a highly regulated set of activities.
As usual, Michael Lewis does a good job of presenting his research is easy to digest chunks of wit. Highly recommend that you read the book.