Tag Archives: value

A Walk along Risk Road #3 — The Disruptors vs. The Disrupted

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Cameron Webster

By Cameron Webster, CFA

Institutional Portfolio Manager, Mawer Investment Management Ltd.

Special to the Financial Independence Hub

At Mawer, we spend a great deal of time asking and answering the question: So what? A company’s share price is down 6% … so what? A central bank moved interest rates up … so what? Google re-named itself Alphabet … so what?

It’s not always an easy question to answer and often leads us to ask even more questions in an effort to develop key investment insights.

“So what?” is one of the questions that can lead us to investment action (or inaction) in our process of building well-diversified, resilient portfolios. In an effort to pass on our “so what” learnings, I interviewed our Chief Investment Officer, Jim Hall, with specific questions pertaining to his views on risks in the current environment.

Cameron Webster: Jim, we decided at the conclusion of our slow growth world discussion that we’d address technological disruption. Let’s get into the “so what?” of it. What is technological disruption?

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Jim Hall

Jim Hall: It’s many things. It has happened in many industries; rail to auto, telegraph to telephone, typewriter to word processing, CD’s to online music. Of interest to me is where an innovation ends up displacing a whole industry and the ones that support it—and sometimes changes society too.

For example, take e-commerce and the sharing economy. Companies like Uber and Airbnb are changing the economy in significant ways through the application of technology. These companies are growing very fast and they are stealing business from other companies. This may lead to lower growth overall, at least temporarily. That’s the disruption. This dynamic has been around a long time. Clayton Christensen called it “disruptive innovation” and John Maynard Keynes called it “technological unemployment.” Many people have written and talked about the consequences of structural economic disruption over the years—and many are fretting about it now.

CW: How does the disruption manifest itself? Continue Reading…

Video: How to Win the Loser’s Game, Part 5

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UntitledThe fifth video instalment in SensibleInvesting.TV’s How to Win the Loser’s Game has been posted here and at Findependence.TV.

Often we hear say someone ask us the question, “Do you play the market?” The answer should be a resounding no, as the market is not a game. In fact, it’s quite scientific. A trio of Nobel Prize winning economists each have created a model that better helps us to understand the science behind the market.

This 8-and-a-half minute video features interviews with various executives from DFA and Vanguard and reviews the groundbreaking academic research on modern portfolio theory spearheaded by Harry Markowitz, William F. Sharpe and Eugene Fama. The screen shot above shows Eugene Fama on the left and DFA board member Ken French on the right. Continue Reading…

A decade of stagnation scarier than rising rates?

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Ian McGugan/Twitter.com/

Good piece in the Globe by Ian McGugan posted Monday night. When I tweeted it out this morning, it was retweeted by some prominent Tweeters. McGugan — back to writing after years of being an editor at MoneySense and the Globe — suggests a major threat for investors is “the possibility that nothing happens … nothing as in a stagnant market, not just for a year or two, but for a decade or more to come.”

Citing the work of Boston-based Ben Inker (of GMO), McGugan says that if interest rates and bond yields remain stubbornly low, it may be hard for institutional investors (pension funds) to generate a return of inflation plus 5%. Stock investors need to be more cautious because the expected reward for taking on risk is getting muted. Long-term returns from both stocks and bonds may disappoint and investors may be lucky to get a 3.5% real return: net of inflation but before taxes and fees.

Scary indeed! But Inker doesn’t suggest parking in cash, seeing some value in the less obvious emerging markets, European value stocks and high-quality American companies.