What we’re reading (12/3)
“Will High Interest Rates Trigger A Debt Disaster?” (Project Syndicate). “Deficits and high debt-to-GDP ratios are not the problem. What matters is the difference between the interest rate and the growth rate. For many years, the US Congressional Budget Office has regularly projected that high interest rates and low growth rates would lead to a debt explosion. But those projections were always wrong – until the US Federal Reserve started jacking up interest rates last year.”
“Momentum Investing Has Struggled For 20 Years. Here’s Why” (Wall Street Journal). “From 1940 through mid-2002, a portfolio rebalanced monthly owning the 10% of stocks with the greatest trailing-year returns, while simultaneously shorting the 10% of stocks with the trailing year’s worst returns, appreciated at an annualized pace of 17.4%, before transaction costs. Since then, this portfolio has declined at a 3.6% annualized pace. In contrast, the trend of the overall stock market remained steady throughout both periods: 11.4% annualized appreciation before mid-2002 and 10.4% thereafter. What changed? A new study attributes the shift primarily to Morningstar in mid-2002 changing the methodology for its mutual-fund star-rating system.”
“There Really Was A Corporate Conspiracy To Inflate Egg Prices, And It's Been Proven In Federal Court” (Dealbreaker). “Some precedent now indicates that nefarious corporate scheming may indeed be possible within the U.S. egg market. On November 21, 2023, a federal jury in the Northern District of Illinois delivered its verdict finding that the two largest domestic egg producers, Cal-Maine Foods Inc. and Rose Acre Farms Inc., together with two egg-industry trade groups, conspired to reduce supply in order to artificially drive up the price of eggs.”
“Hundreds Of Stocks Have Fallen Below $1. They’re Still Listed On Nasdaq.” (Wall Street Journal). “As of Friday, 557 stocks listed on U.S. exchanges were trading below $1 a share, up from fewer than a dozen in early 2021, according to Dow Jones Market Data. The majority of these stocks—464 of them—are listed on the Nasdaq Stock Market, whose rules require companies to maintain a minimum share price of $1 or risk being delisted.”
“Gold Bars And Tokyo Apartments: How Money Is Flowing Out Of China.” (New York Times). “The outbound shift of money in part indicates unease inside China about the sputtering recovery after the pandemic as well as deeper problems, like an alarming slowdown in real estate, the main storehouse of wealth for families. For some people, it is also a reaction to fears about the direction of the economy under China’s leader, Xi Jinping, who has cracked down on business and strengthened the government’s hand in many aspects of society.”
