Weekend Reading – U.S. Outperformance & AI ‘Bubble’: Historical Context On How Long It Can Last
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Weekend Reading is a collection of Investment Research and Lifestyle topics from all corners of the Web. We source the highest quality insights from Wall Street and Main Street that you may apply to your investment process. Unlike the rest of Bankeronwheels.com, this series is provided without additional guidance. As usual, everything is to be used at your own risk. Below is the type of content we shortlist:
One who believes in himself has no need to convince others.
Featured
ESG Ratings Uncovered – What Wall Street Doesn’t Want You To Know (Banker on Wheels)
In this series, we decode how the ESG Industry tricked investors into believing they invest in Greener Companies. Greenwashing by companies, you may think? No, there is a more fundamental issue. ESG Ratings are almost the exact opposite of what you think they are.
Portfolio Construction
Asset Allocation
US Exceptionalism: Drivers of Equity Outperformance and What’s Needed for a Repeat (Bridgewater Associates)
We are coming off a decade of extraordinary US equity outperformance. An investment of $1 in the S&P 500 in 2010 is now worth more than $6, and the US has outperformed the rest of the world by several hundred percentage points over that period. In these observations, we break down this S&P 500 outperformance into its key drivers to lay the foundation for the forward outlook. What earnings growth is needed to sustain these returns?
- Making the implicit explicit: A framework for constructing active-passive portfolio (Vanguard)
- Three things investors should know about income (Vanguard)
- Small Wins Can Add Up to Long-Term Investing Success. Just Ask Roger Federer (Morningstar)
- Is it worth owning international stocks? (Humble Dollar)
- Prof. Stephen R. Foerster: Pursuing the Perfect Portfolio (Rational Reminder)
Understand Financial Markets
My guest today is Dr. Bryan Taylor, President and Chief Economist for Global Financial Data, which provides the most comprehensive, historical economic and financial information. In today's episode, Bryan walks through what he's learned from studying 200+ years of market concentration in the US. Then we dive into his analysis of financial history over the past eight centuries by breaking the past up into five historical eras. He shares how this can improve our understanding of the returns to stocks, bonds and bills and the equity risk premium in the future.
De-dollarization: Is the US dollar losing its dominance? (JP Morgan)
The U.S. dollar is the world’s primary reserve currency, and it is also the most widely used currency for trade and other international transactions. However, its hegemony has come into question in recent times due to geopolitical and geostrategic shifts. “The narrative that the U.S. dollar’s reserve currency status is being eroded has gained momentum as the world is dividing into trading blocs. What are the potential implications of de-dollarization, and how is it playing out in global markets and trade?
Active Investing
Factor Investing
Why Value Now? (GMO)
Deep value stocks are GMO Asset Allocation’s highest conviction investment idea. In a world where many stocks are being driven ever higher by positive sentiment and investor optimism, some fundamentally sound but unloved companies are being left behind, consequently trading at extraordinary discounts.
Discretionary Investing
AI Bubble: Ahead of Us or Behind Us? Comparison with prior rallies. (Bridgewater Associates)
I believe the AI bubble is ahead of us, not behind us. The greatest bubbles need a truly transformational technology and a ripe macro and monetary environment. We now have both. The recent disappointment around Nvidia’s quarterly earnings and the market action since then now offers a good opportunity to share my thoughts on how much of the AI story is still to come.
- Market share and industry structure don't dictate corporate profitability (Verdad)
- The Sugar Daddy Effect? Corporate Venture Capital, Sovereign Wealth Funds and Green Investing! (Aswath Damodaran)
- Japan’s stock market is producing too many ‘punycorns’ (FT)
- Updating our long-term return forecast for US equities to incorporate the current high level of market concentration (Goldman Sachs)
Alternative Asset Classes
ETFs
UCITS ETFs
JPM ETF Market Guide (JP Morgan)
Key takeaways: 1. Actively managed ETFs are on the rise and are expected to take market share from mutual funds. 2. ETF investors remain fee conscious, though the decline in average fees is likely to slow or stop given growth in the actively managed segment. 3. Option-based ETFs have seen strong growth and have become a large source of volatility supply. For most of 2024, this has served to suppress market volatility.
US ETFs
Wealth Management
Personal Finance
Real Estate Bubbles: Rent Prices Going Up or Down? (Visual Capitalist)
Across real estate bubble cities, average rent prices have increased 5% since mid-2022 in real terms, while inflation-adjusted home prices have dropped 15%. This has played a role in lowering bubble risk over the last two years. In this way, higher rent prices reflect fundamental demand, such as higher population growth, rather than speculation pushing up home prices. Higher incomes across cities has a similar effect in lowering bubble risk. This graphic shows the annual change in real rental costs in bubble markets, based on data from UBS’ Global Real Estate Bubble Index 2024. Since 2020, real rents in Dubai have surged 60%, outpacing the 40% rise in real home prices. Similarly, Madrid has seen average rent prices climb. In contrast, real rents in Singapore have fallen nearly 7%, following government efforts to curb foreign demand.
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(Early) Retirement
- How rising care costs can wreck your retirement finances (FT)
- Real Estate vs. Stocks: Which Is Faster for FI & Early Retirement? (Sparkrental)
- Mini-retirements are all the rage, but what exactly does it entail — and can you afford to take one? (Irish Independent)
- What I’ve Learned Writing 400 Articles About Retirement (The Retirement Manifesto)
Financial Advice
- RIA: new business models and, new voices and sources of trust (Frazerrice)
- A $12 Trillion Opportunity For Financial Advisors (The Unlock)
- Your Clients Are Clueless About Their Risk Tolerance (Advisor Perspectives)
- Do advisors need a new risk-tolerance tool to help their clients in decumulation? (Morningstar)
- Quantifying Impact Of A Financial Advisor’s Costs On Their Clients (Kitces)
Design Your Lifestyle
Personal Development
Jon Batiste (@jonbatiste) is a five-time Grammy Award-winning and Academy Award-winning singer, songwriter, and composer. His eighth studio album, Beethoven Blues, is set for a November 15th release. In this episode: 1. Is the secret to long life embracing the mundane? 2. Spiritual practice and grounding mantras. 3. Surrender, acceptance, and growth through health challenges. 4. How Jon owns what comes his way rather than allowing it to overwhelm him.
Careers & Entrepreneurship
Travel
Cycling Tibet – Spiritual, Ballistic, Magnificent. (Banker on Wheels)
“What did you think of China?” is a question I got frequently asked. It’s complex. But a day from my life on the bike can give you some flavour.
The highlight of my trip to China is without any doubt the Qinghai Province. Logistically, China was also the most challenging country on a bike. Here is why.
Tech & Economy
Economy
- Big Tech is Going Nuclear (Patrick Boyle)
- Why the Dutch Economy is Outperforming the Rest of Europe (Economics Explained)
- What Your Cashless Future Will Look Like ft. Richard Holden (Top Traders Unplugged)
- A steady path to lower rates (Vanguard)
- Why the EU is Bad at Trade Deals (Economics Explained)
Tech & Science
And Finally
Good Luck and Keep’em* Rolling!
(* Wheels & Dividends)
Weekend Reading – Do Factors Work? And The Very Best Financial Podcasts.
Easy (But Boring) Money: How To Reduce ETF Dividend Withholding Tax?
What Are UCITS Equivalents Of Popular Vanguard Funds?
UK’s Neobrokers: Which One Is The Best For You?
Stuck On The Tube: How I Discovered The Road To Financial Independence as a Self-Employed
Is Your Overconfidence In Understanding Risk Leading You To Financial Ruin?
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