In September, I linked to Adam Kramer’s terrific piece about the new Iowa football tradition for the fans and players to wave up at the parents and children on the 12th floor of the adjacent Children’s Hospital between the first and second quarter of its home games.
George Schroeder has now posted a excellent, emotional look at this tradition but from the eyes of a 6-year old boy who has spent all of 2017 at the hospital. I highly recommend reading it here.
The Schroders Global Investor Study was just released for 2017. Globally, investors expect a 10.2% annual return over the next five years. For millennials, it’s even higher at 11.7% per year.
That’s possible but unlikely, especially because it’s a projection for a broad investment portfolio, not just stocks. The historic annual returns of stocks, the best performing asset class, don’t even reach that 10% figure.
We’ll reiterate that given where starting valuations are today for stocks and bonds, a 4-5% expected annual return for the next 5-10 years is a more reasonable assumption and is less likely to lead to disappointment.
Source: David Brett at Schroders
This will be interesting to follow over the next several decades. Africa already has more of its population moving to urban areas than any other country/region in the world, and it is projected to have the largest urban population globally by 2045.
Source: Bluegrass Capital on Twitter
On a related note, the Financial Times published this great piece on Accra, the capital of Ghana, back in September. It provides a specific example for how cities in Africa are catering to the emerging middle class.
The study cited in this NY Times piece has a very small sample size (just 14 participants), but it adds an insight I had not seen before.
Adopting a more healthy diet is crucial for a person trying to lose weight initially. However, once the pounds are lost, exercising often becomes the key to keeping the weight off going forward. One reason for this is the study’s participants showed slower metabolism after their initial weight loss. Basically, your body is disagreeing with your new healthier state by burning 500 fewer calories per day. Exercise can be used to offset this.
For the successful stories among the study participants, the amount of daily exercise they did was more than the recommended amount normally seen.
On average, those who managed to maintain a significant weight loss had 80 minutes a day of moderate activity, like walking, or 35 minutes a day of vigorous exercise, like running.
The catch with so much physical activity is it can lead to injuries. Each of us must still listen to our bodies and know when to ease off.
Another takeaway is we can become more understanding of why people regain weight they have lost. A large factor is the body’s natural reaction. It is not an indictment of that person’s commitment to being healthy.
The idea that people who regain lost weight are necessarily slothful and gluttonous is an unfortunate stigmatization that is not based in fact.
Source: Gina Kolata at NY Times
A good, succinct 9-post thread on Twitter by Tsachy Mishal on the value vs. growth debate is here.
The quick summary: the internet created a winner-take-all atmosphere in business. In the old days, if there was a good business model in an industry, many other players could follow the leader and still have some success. Now, in the world of Google, Amazon, and Facebook, if you aren’t the dominant player, you may struggle to even survive. That has left the singular winners in the growth category while value investors have to avoid the increased portion of companies in its category that are in secular decline. “The most important thing is to avoid the secular decliners.”
Today, there are more than 620,000 establishments for eating and drinking in the United States. The growth rate in number of restaurants is still double that of the population growth rate too.
While the total industry sales is still growing, that growth rate has decelerated. More individual locations and chains are struggling to keep up with the increasing competition. It doesn’t help that wage inflation is also accelerating in what remains a labor-intensive business.
The franchisee/franchisor model is partly responsible for the over-expansion of fast food chains and casual dining restaurants. The corporation as franchisor incurs less of the development and operating costs and has a more predictable earnings stream in the form of royalty payments from the franchisees running the individual locations.
Famous investor Jim Chanos has pointed out though that a corporation using this business model can only grow in three ways: open more stores, grow sales of current stores, or negotiate a higher royalty payment from your franchisees. However, when current stores are struggling, you are not going to ask your franchisees for more money. That leaves only store expansion as a growth strategy, which exasperates the oversupply problem in the industry.
It will require more restaurant chains declaring bankruptcy, and perhaps interest rates going up (to make the main form of financing such expansion plans more difficult), for this current oversaturation to rationalize itself.
Source: Rachel Abrams and Robert Gebeloff at New York Times
A good oldie post from Meb Faber:
There are two states an investor lives in with their portfolio: record highs and drawdowns. If Apple’s stock trades at $170 per share tomorrow, it would be a new all-time high. However, if it fell to $160 per share, it would be in a 5% drawdown from its past record at $168.
The emotional risk for investors is it’s easy to anchor the value of one’s investments at the highest level they’ve seen in their portfolio to date. Then, when a drawdown inevitably occurs, one is liable to be disappointed at the reduced value they see today instead of being content with the large gains they have likely accrued compared to years earlier.
Faber points out we need to be comfortable with this ‘drawdown’ state because after adjusting for inflation, that’s how we spend most of our days as investors. Here is the percentage of days from 1972-2014 that investors were looking at new highs in their portfolios, broken up by asset class:
US Stocks 17%
Foreign Stocks 12%
Best-case scenario: only 78% of trading days will you know your assets were worth more at some point in the past. One simple solution to reduce the frequency of this disappointment is don’t check your portfolio as often. If you are only looking every 6 to 12 months, the odds of seeing a higher value today than you remember seeing the last time you checked are much greater.
30% of Americans will deal with depression at some point in their lives.
Technological advancement has made a lot of things easier for us, but that has resulted in our being even more sedentary than we were before. Instead of being active outside with that extra time, we spend 93% of our days indoors.
Being able to contact anyone through digital messaging may make us feel connected to the rest of the world at all times, but this form of communication likes the multi-sensory benefits of face-to-face conversations. Today, 40% of Americans say they feel chronic loneliness; three decades ago that number was 15%.
In a 2010 study of college students that removed all screens from their life for a 24-hour period, the participants reported being more calm, having a greater ability to hold their attention on one task, and feeling greater depth and meaning in their interactions with friends.
Source: Dr. Stephen Ilardi at Wall Street Journal
Pro football player Chris Long is donating his entire salary for this season to various educational causes. This entire piece by Charlotte Wilder at SB Nation is enlightening, but one quote of Long’s while speaking to a group of high school students stuck out to me:
Life is short. Live it with joy. I really think that the biggest thing I could leave you with today is to take pleasure in the work that you do, whether in classroom or community, and enjoy it. Be that contagious light that spreads energy to other people. Great people make other people feel they can be great, too. We talk about this in the locker room as football players and leaders, how you want everyone around you to feel like they can be great for having played with you, sat in a classroom with you, been a friend of yours. Through your loyalty, your excitement, and for who you are. Be contagious in your energy.
The last installment!
“Success is walking from failure to failure with no loss of enthusiasm.” — Winston Churchill
“When you stop chasing the wrong things you give the right things a chance to catch you.” — Lolly Daskal
“I find that the harder I work, the more luck I seem to have.” — Thomas Jefferson
“People often say that motivation doesn’t last. Well, neither does bathing – that’s why we recommend it daily.” — Zig Ziglar
Past posts: Part 1, Part 2, Part 3, Part 4, and Part 5