What we’re reading (10/29)
“Hedge Fund Two Sigma Is Hit By Trading Scandal” (Wall Street Journal). “A researcher at Two Sigma Investments adjusted the hedge fund’s investing models without authorization, the firm has told clients, leading to losses in some funds, big gains in others and fresh regulatory scrutiny. The researcher, Jian Wu, a senior vice president at New York-based Two Sigma, was trying to boost his compensation, Two Sigma has told clients, without identifying Wu. He made changes over the past year that resulted in a total of $620 million in unexpected gains and losses, according to people close to the matter and investor letters. Two Sigma has placed Wu on administrative leave.”
“Spiking Treasury Yields Are Triggering Pain In Stocks. 3 Experts Discuss The Renewed Threat Of Bond Vigilantes And What Else Could Move Markets.” (Insider). “Forget about the technical charts, he [Gordon Johnson, of GLJ Research] says — they are not driving the bond market right now. Investors have their eyes on macroeconomic and geopolitical trends. And for Johnson, the recent spike in yields indicates the return of bond vigilantes, a term coined by the longtime economist Ed Yardeni to reference how some investors can sell bonds to protest certain government policies, thereby pushing up yields.”
“We All Know Social Media Is Bad For Mental Health. But Is It Go To Court Bad?” (Dealbreaker). “As interesting as the suit is, it is hard to know what law(s) Meta and its subsidiaries have broken. What are the causes of action — is causing depression in kids tortious? Is not doing “enough” to prevent online bullying a breach of contract? One of the more salient parts of the suit accuses Meta of collecting the data of children under 13, but the rest of the suit seems pretty nebulous.”
“What Ford’s Labor Deal Might Mean For The Auto Industry” (New York Times). “The new contract could cost Ford up to $2 billion annually over four years, according to Barclays analysts, or about 1 percent of sales. The company said it would look to offset those costs elsewhere. Employees were jubilant about the preliminary deal, which includes a 25 percent pay increase over the life of the contract and improvements on job security, pensions and more. ‘This is the best contract I have seen in my 30 years with Ford,’ one worker, Robert Carter, told The Times.”
“What Returns Should You Expect In The Stock Market?” (A Wealth of Common Sense). “My thinking here is there is a case to be made that stock market returns can and should be lower going forward but it’s not really based on valuations per se. Instead, it’s based on the idea that accessing the stock market was much harder in the past. Costs were higher and the financial system was more unstable. Thus, investors rightly demanded higher returns on a gross basis. But net returns in the past were likely much lower since trading costs, fees and expense ratios were so much higher. Even if gross returns are lower going forward, it’s much easier to earn market returns on a net basis through index funds, ETFs and zero-commission trading. Plus, there were no tax-deferred retirement accounts before 1980 or so.”
