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Yuval Taylor
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Overview Analysts and investors have long puzzled over the difficulties of calculating the cost of equity. The cost of equity is an essential component of the cost of capital, and the cost of capital is essential if we want to know the present value of an investment. In this article,... Continue reading
Posted Oct 26, 2021 at invest(igations)
I recently read seven more Henry James stories (some of them are as long as novels), and I wanted to remark on three of them. “The Siege of London” is one of James’s more perfect productions, detailing the rise of Nancy Beck, or Mrs. Headway, to the British aristocracy. Not quite a prefiguration of Kathleen Winsor’s Forever Amber, it nonetheless offers some of the same thrills—of seeing a low-born and not terribly virtuous woman achieve the highest levels of social status. But it’s more about its heroine’s various adversaries and helpmeets in all their hypocrisy and confusion than about the... Continue reading
Posted Sep 13, 2021 at Backland
Robert Caro’s The Power Broker: Robert Moses and the Fall of New York is a gargantuan biography (over 1300 pages; over 66 hours if you listen to the audiobook, as I did) of a gargantuan man. Robert Moses’s achievements were mind-boggling in their scale and scope, but so was his arrogance, deceit, and contempt. Caro lays out both sides like a lawyer—or an investigative journalist—might, and it’s a damning picture. Rarely is Moses sympathetic; never is he boring. Many parts of the book are tendentious, but Caro makes even the most arcane aspects of urban planning fascinating. I wanted to... Continue reading
Posted Aug 18, 2021 at Backland
If you were given a crystal ball that would accurately predict a company’s growth over the next year, you would logically invest in those companies with the highest growth and short those with the lowest. Portfolio123 recently allowed this kind of crystal-ball prediction in its backtesting by allowing negative numbers... Continue reading
Posted Jun 7, 2021 at invest(igations)
I’ve been immersing myself in Henry James stories, going in chronological order, skipping only the most obscure. I’ve now plowed through 21 of them, from “A Landscape Painter” to “A Bundle of Letters.” I have 75 more to go, a great many of which I’ve read before. These early James stories are full of contrivances, such as the chance meetings in “Daisy Miller” and the abrupt deaths caused by heartbreak or sudden joy. At least half the stories end with a missed opportunity, but possibly they all do in one way or another. His characters are mostly either wealthy or... Continue reading
Posted May 20, 2021 at Backland
Felipe Alfau’s second and last novel, Chromos, was written in 1948 but not published until 1990. Instead, it sat in a drawer until an editor from a small press in Chicago republished Alfau’s first novel, Locos, written in 1928 and first published in 1936, and asked him if he had written anything else. Alfau, who was born in 1902, immigrated to New York from Barcelona as a teenager and wrote in English, but Chromos is all about Spaniards, most of them New York immigrants like himself. It’s an astonishing novel, erudite and discursive, playful and passionate, concerning a group of... Continue reading
Posted Apr 17, 2021 at Backland
Let’s say you believed that the higher the risk, the higher the reward. Let’s say you loved taking risks. Let’s say you participated in all the Red Bull–sponsored extreme sporting events you could, and you watched those you couldn’t participate in. And you drank their sodas like water, regardless of... Continue reading
Posted Apr 14, 2021 at invest(igations)
A few months ago three researchers published an astonishingly ambitious and compendious paper called “Is There a Replication Crisis in Finance?” (Their names are Theis Jensen, Bryan Kelly, and Lasse Pedersen; two are at the Copenhagen Business School, one is at Yale, and two also work for AQR Capital Management.)... Continue reading
Posted Apr 2, 2021 at invest(igations)
This article is the sixth in a series about screens designed by famous investors. The first, on Benjamin Graham, can be found here; the second, on William O’Neil, can be found here; the third, on Joel Greenblatt, can be found here; the fourth, on Ken Fisher, can be found here;... Continue reading
Posted Mar 16, 2021 at invest(igations)
The idea behind value investing is that you buy a stock well below its fair value, wait for it to appreciate to something close to its fair value, and then sell it. The natural questions, then, are: How long does this process take? How often does it actually happen? Why... Continue reading
Posted Mar 11, 2021 at invest(igations)
Juan Rulfo was a Mexican traveling salesman who was fired in 1952, at the age of 35. He turned to short-story writing for a year or two, and then wrote a short novel called Pedro Páramo, which was published in 1955. He never published anything else during his long lifetime (he died in 1986), instead devoting himself to editing indigenous writings. The novel didn’t sell very well at first, but it was discovered by Gabriel García Marquez, among others, after a few years, and is now well known as one of the great Latin American novels. My English-language edition has... Continue reading
Posted Feb 19, 2021 at Backland
This article is the fourth in a series about screens designed by famous investors. The first, on Benjamin Graham, can be found here; the second, on William O’Neil, can be found here; the third, on Joel Greenblatt, can be found here; the fourth, on Ken Fisher, can be found here;... Continue reading
Posted Feb 19, 2021 at invest(igations)
The Hare is the second novel by César Aira I’ve read, the first being El divorcio, which I wrote about here. It concerns a British naturalist who comes to Argentina in the late nineteenth century to research a legendary hare and ends up living with the indigenous people on the pampas. Unlike the silent, wise, and calm Indians we usually read about, these tribes are garrulous, silly, prone to misunderstandings, and constantly fighting. The novel seems as aimless and half-crazy as the Indians, but Aira wraps it all up brilliantly in the end. It’s all tongue-in-cheek, thus impossible to take... Continue reading
Posted Feb 15, 2021 at Backland
I just reread Anna Karenina, having recently read Tolstoy’s previous novel, War and Peace. In one respect Anna Karenina is an improvement on the earlier book: the female characters are richer, more complex. The flaws in both books lie in their endings. Anna Karenina opens with Oblonsky, Anna’s brother; in the end he is completely absent, and one has no idea how he reacted to his sister’s horrifying death. Both endings are preachy, as if a story were incomplete without a morality lesson to wrap it up. Reading Tolstoy helps illuminate much of the Strugatsky Brothers’ work for me. They... Continue reading
Posted Feb 8, 2021 at Backland
This article is the fourth in a series about screens designed by famous investors. The first, on Benjamin Graham, can be found here; the second, on William O’Neil, can be found here; the third, on Joel Greenblatt, can be found here; and for an overview of the subject, see my... Continue reading
Posted Jan 12, 2021 at invest(igations)
2020 was an insane year on a lot of levels: the pandemic, the impeachment proceedings, the massive unemployment, the killings on America’s streets, the hubris of law enforcement, the rampant misinformation, the contesting of the election results . . . But it was an insane year on a personal level... Continue reading
Posted Jan 1, 2021 at invest(igations)
Mickey Guyton, “Black Like Me.” The country anthem of the year? Arlo Parks, “Eugene.” An honest reckoning with a friendship gone sour? I love the high bass line. Jessie Ware, “Spotlight.” Were the Pet Shop Boys involved with this? Or is it a case of theft? Either way, it’s transcendent. Two Fingers, “Fight! Fight! Fight!” A soundtrack to protest from EDM genius Amon Tobin. Steve Earle, “Devil Put the Coal in the Ground.” At first I thought this was a folk song. Bad Bunny x Sech, “Ignorantes.” There’s a reason Bad Bunny is the most popular artist on Earth. I’m... Continue reading
Posted Dec 19, 2020 at Backland
Michael Chabon’s Moonglow is an impeccably written adventure story about a man who resembles (and is called) his grandfather, full of plot twists and vivid set-pieces. It’s an enjoyable read, yet it failed to satisfy me—it felt slight—and I’m still trying to figure out why. (A friend who has also read it felt the same way.) Perhaps it’s because it wasn’t messy enough. Everything is nicely packaged, carefully worked out, with few loose ends or blurred edges. Or perhaps it’s that it seemed self-satisfied; I could almost hear Chabon congratulating himself on his work. Or perhaps it’s that the narrator... Continue reading
Posted Dec 17, 2020 at Backland
The Problem with Calculating Intrinsic Value The calculation of intrinsic value has become a forbidding and abstruse practice. It seems reserved for nerds and members of the Warren Buffett cult. As Aswath Damodaran, one of its most elegant and charismatic practitioners, and perhaps the person who has promoted it more... Continue reading
Posted Nov 22, 2020 at invest(igations)
Roger Lowenstein’s When Genius Failed: The Rise and Fall of Long-Term Capital Management was first published in 2000 (it was republished with a new afterword in 2011) and is now considered a classic book of business history. It tells how a firm consisting of PhDs and financial wizards—including two Nobel... Continue reading
Posted Nov 1, 2020 at invest(igations)
I finished Tristram Shandy only to find out that the author didn’t. Laurence Sterne died after publishing nine volumes. If he had lived, he doubtless would have written a tenth and an eleventh. I’m disappointed—I was looking forward to some sort of conclusion. But silly me. That would have been incongruous. The book has no beginning—well, actually, most of the book is its beginning—or middle, really, so how could it have an end? So much has already been written about Tristram Shandy that I’m not sure what I can add. And really, what can you say about a shaggy dog... Continue reading
Posted Oct 28, 2020 at Backland
This article is the third in a series about screens designed by famous investors. The first, on Benjamin Graham, can be found here; the second, on William O’Neil, can be found here; and for an overview of the subject, see my article “Can Screening for Stocks Still Generate Alpha?“ In... Continue reading
Posted Sep 14, 2020 at invest(igations)
There are a number of reasons why you might be interested in the future sales/revenue growth of a company. For instance, in order to perform a discounted-cash-flow analysis of a stock, it’s one of the essential inputs. Or perhaps you believe that the higher a company’s projected sales growth, the... Continue reading
Posted Sep 8, 2020 at invest(igations)
This article is the second in a series about screens designed by famous investors. The first, on Benjamin Graham, can be found here; for an overview of the subject, see my article Can Screening for Stocks Still Generate Alpha? In 1988, William O’Neil published How to Make Money in Stocks,... Continue reading
Posted Sep 1, 2020 at invest(igations)
In 1977, Yaakov Shabtai published a novel in Israel called Zikhron dvarim, which means A Memory of Things. If you took the English mistranslation of Proust’s title À la recherche du temps perdu, Remembrance of Things Past, and translated that as concisely as possible into Hebrew, you’d probably get Zikhron dvarim. The novel is Proustian in many ways: the sentences are long and intricate; paragraphs go on for pages (in fact, Zikhron dvarim consists of one unbroken paragraph); the central characters are idle and irresolute; one of the principal subjects is decay and degeneration; the cast of characters is vast... Continue reading
Posted Aug 25, 2020 at Backland