June 8, 2018

A couple of weeks ago I wrote about how the benefits of donating appreciated securities versus cash has increased significantly under current tax laws. The vehicle by which many donors make these gifts is through a donor-advised fund. The increasing popularity of the donor-advised fund has not surprisingly brought about some friction and criticism.

The most potent criticism of the donor-advised fund is that there is no ongoing requirement for the donor-advised fund to distribute grants. In short, if the donor so chooses the funds can continue to sit in the DAF indefinitely doing no charitable good…

Anthony Bourdain was a great writer. All you need to do is hit up his 1999 piece “Don’t Eat Before Reading This” in the New Yorker. A lot of people quoted the first paragraph today, but the second paragraph is equally great. Bourdain writes:

Gastronomy is the science of pain. Professional cooks belong to a secret society whose ancient rituals derive from the principles of stoicism in the face of humiliation, injury, fatigue, and the threat of illness. The members of a tight, well-greased kitchen staff are a lot like a submarine crew. …

June 7, 2018

How many people do you know that have a hobby? A good old fashioned hobby that doesn’t benefit, directly or indirectly, your job or fitness? It seems that hobbies have become subsumed by our broader technology-centric culture where consumption is a substitute for doing something.

You can argue that hobbies were in prior generations simply a way to fill time and with better options, hobbies have become in today’s parlance: disrupted. Jaya Saxena in the New York Times writes:

For many of us, expectations of an “always-on” working life have made hobbies a thing of the past…

June 7, 2018

What is the purpose of financial news? Seriously, what purpose does it serve? On some level it provides us with a common base of knowledge so we can communicate with other people in the markets. Ben Hunt at Epsilon Theory recently wrote:

It’s not what the crowd believes. It’s what the crowd believes that the crowd believes. The power of a crowd seeing a crowd is one of the most awesome forces in human society. It topples governments. It launches Crusades. It builds cathedrals. And it darn sure moves markets.

Hunt goes on to talk about the…

June 6, 2018

Driven by rave reviews, sophisticated consumers, marketing genius and tourism, Japanese whisky sales are glugging away at a pace far higher than expected at the turn of the millennium, when what are now hit products were being distilled and barrelled. Stocks of the most popular lines are down to vapours.

Leo Lewis in the FT notes how decisions made by the big Japanese whiskey makers nearly two decades ago is affecting their business, negatively today. Just as these world-class whiskeys take time, other fantastic outcomes also take time. …

June 5, 2018

There is an old market cliche: never turn a trade into an investment. Jim Cramer writes:

That’s the number-one commandment of trading, and yet, no matter how many times I say it, no matter how many times I scream it, people just don’t listen.

Here’s another one: don’t confuse buying stuff with an investment.

For example, that diamond ring on your finger. DeBeers is now going to start manufacturing synthetic diamonds at a much lower price point. What effect do you think that will have on the price of natural stones? Replica Wines is using chemistry to…

June 4, 2018

“Nothing so undermines your financial judgement as the sight of your neighbor getting rich.” — J.P. Morgan

What’s more dangerous than winning the lottery? Living next to someone who wins the lottery. A recent study shows that neighbors of lottery winners have a higher tendency to go bankrupt. Peter Coy at Bloomberg writes:

As if you needed proof that trying to keep up with the Joneses isn’t a good idea, here it is: Close neighbors of lottery winners in Canada tended to spend more on conspicuous goods, put more money into speculative investments such as stocks, borrow…

There is an interesting anecdote in a recent Bloomberg story by Kit Chellel about a gambler, Bill Benter, who created an algorithm that allowed him to profitably bet on horse racing. In 2001, Benter essentially walked away from a $16 million payday on an exotic multi-race bet, essentially to allow himself the freedom to continue betting in the future. As Chellel writes, “Publicity is a hex for professional gamblers.”

Not many people have the ability to walk away from a payday like that. The proceeds from the unclaimed winning ticket would eventually go to charity. A recent winner of the…

May 8, 2018

One of the great benefits of having accumulated wealth is the ability to give it away. Research shows that being generous has a number of psychological and physical benefits. Giving is good for you, because it tells your brain that you have enough. Enough to be able to share with others.

The challenge is to maximize the benefit you are able to convey to your favorite charity. It has always been the case that giving appreciated securities either directly to a charity or through a donor-advisor fund was an efficient way of making contributions. Given the changes…

April 19, 2018

Originally published at abnormalreturns.com on April 19, 2018.

David Swensen and Warren Buffett are in a bit of a spat. Buffett thinks institutional investors, other than himself, should settle for the returns on low-cost, indexed investments like the S&P 500. David Swensen the head of the Yale University endowment fund disagrees. He writes:

The superior results of Yale and a number of peers strongly suggest that active management can be a powerful tool for institutions that commit the resources to achieve superior, risk-adjusted investment results.

Source: Yale University

Swensen in the 2017 annual report for the endowment comes to the…

Tadas Viskanta

Founder and Editor of Abnormal Returns

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