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Tuesday, May 11, 2021
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Investors must force change on analysts

There should be less equity research, of higher quality, focused on strategic direction and market position, rather than earnings guidance and market tittle-tattle. Institutions need to be willing to pay for what is valuable to them, and able to refuse to pay for what is not.

Business is not like playing monopoly

The paradox of the private equity business today is that although it permits long-termism it encourages short-termism. Companies move between public and private sectors, sweeping money out of pension funds into the hands of managers and advisers at every rotation.

The dollar will fall – apart from when it rises

Is the dollar overvalued or undervalued - will it rise or fall this year? The dollar will continue its bumpy ride, but the fundamental reasons why the trend is downward remain in place.

Reasons to believe in hedge funds – or fairies

The process by which large numbers of people become convinced of things that are not true has always been an important feature of political and economic life. Believing in Santa Claus is part of the joy of Christmas - but fantasies about great returns on hedge funds or unprecedented commercial opportunities of the internet is a different story.

When to ask an expert and when a crowd

There is wisdom in crowds, but more often wisdom in the wise. And you can beat the market, but not as often as the crowd would have you believe.

Never purchase what you do not understand

Financial markets would work better if we could be confident in the reliability of its products and the integrity of those who sell them. As the example of Scottish Life precipice bonds highlights, selling shares to customers who do not understand what they are buying is hardly a means to this end.

Rebellious investors are only doing their job

Because no rule or code can define the character of a non-executive, even boards compliant with every code and regulation will range from the effective to the useless. Shareholders should keep an eye on excessive remuneration and vainglorious acquisitions, and intervene in issues of management succession when it appears that non-executive directors have become too close to the company to do a proper job.

A fortune built on defying the pull of theory

The efficient market hypothesis is 90 per cent true, and you will lose money by ignoring it. However, judging by Warren Buffett’s fortunes, a few skilled searchers might find rewards in the remaining 10 per cent worth chasing.

Equitable and the end of a British way of life

A nodding acquaintance with modern finance theory tells you that the strategy of Equitable Life was the financial equivalent of alchemy or perpetual motion. Yet, Lord Penrose is wrong to believe that tighter regulation is the best solution – the only answer is higher standards of both ethics and competence in the whole financial services industry.

Bonuses are a problem diet for financiers

Heads, we win; tails, they lose! Managers, traders and advisers who take more of gains than of losses have incentives to support risky courses of action that are not in the best interests of the principals they represent. John explains why this scheme can never really align the rewards of the individual with the objectives of the organisation.

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