U.S. Attacks Britain Over Support For China-Backed Bank - Financial Times

http://time.com/3743845/us-uk-china-bank-criticism/

• Naina Bajekal @naina_bajekal
 

March 13, 2015

    

Kim Kyung Hoon—ReutersU.S. President Barack Obama gestures next to China's President Xi Jinping during the APEC leaders' meeting at the International Convention Center at Yanqi Lake in Beijing on Nov. 11, 2014.

In a rare public spat between the two allies, an Obama aide has criticized the U.K's stance toward Beijing

The U.S. government has expressed its disapproval of the U.K.’s application to become a founding member of the $50 billion Asian Infrastructure Investment Bank (AIIB), the first G7 country to do so since the institution was launched last year to provide funds for infrastructure in the Asia-Pacific region.

“We are wary about a trend toward constant accommodation of China, which is not the best way to engage a rising power,” a senior Obama administration official told the Financial Times on Thursday. The statement marks a rare breach in the “special relationship” that has long defined U.S. – U.K. relations.

Washington officials view the Beijing-led institution with suspicion, fearing it will not meet the standards of governance and safeguards set by the Washington-based World Bank and the International Monetary Fund (IMF), and the Japanese-backed Asia Development Bank.

The White House has been lobbying its allies not to join the AIIB, concerned that China is trying to extend its reach in the region and that the bank could end up being overly influenced by Beijing foreign policy if it has veto power over decisions.

Meanwhile British Chancellor George Osborne, the driving force behind the U.K.’s decision to join the bank, said in a statement that Britain should be involved early on to promote “closer political and economic engagement” with the Asia-Pacific region and encourage the two regions “to invest and grow together.”

[Financial Times]

Top City financiers warn investors over Grexit chaos - Financial Times

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March 9, 2015 9:17 am

Top City financiers warn investors over Grexit chaos

Patrick Jenkins, Financial Editor

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Investors are underestimating the chaos that a Greek exit from the eurozone could trigger, many of the City of London’s top financiers have warned.

The immediate financial fallout from a possible “Grexit” has been mitigated over the past couple of years, as banks have shored up finances and cut exposures. But according to a poll of the FT City Network — the Financial Times’s forum of chairman and chief executives from across the banking, insurance, investment and broader business communities — markets are too sanguine about the knock-on risks.

Disintegration of both the eurozone and the EU are the biggest threats, the forum warned. “Neither the eurozone, nor perhaps even the EU itself could survive a stampede out the door,” said Xavier Rolet, chief executive of the London Stock Exchange.

Tidjane Thiam, chief executive of insurer Prudential, said: “Financial markets seem remarkably relaxed about a potential Grexit; they believe that either it will not happen, or it will not matter. That belief deserves to be challenged.”

Grexit would “accelerate a dismantling of euroland”, warned Robert Swannell, chairman of Marks and Spencer. It would be a “signpost for others to follow in times of distress”, echoed Sir Roger Carr, chairman of BAE Systems.

Although Greece has struck a deal to extend its current €172bn bailout by four months, Athens is rapidly running out of cash to pay its debts. There is little sign that creditor countries, led by Germany, are willing to release rescue funds without politically difficult economic reforms.

If Greece was forced to default on some of its debts, it could rekindle massive bank withdrawals, which hit €12.8bn in January. Eurozone officials have long feared that a bank run could lead to an “accidental” Greek exit, because the European Central Bank could be forced to cut off emergency loans to insolvent banks. Without the ECB assistance, Athens would be forced to print its own currency to restart its financial sector. 

Monthly debates on topical issues by an invitation-only panel of more than 50 of the City of London’s most influential individuals

Read the full transcript of this month’s debate here 

Read previous debates here

Although Greek markets have been volatile, the yield on 10-year government bonds is now back below 10 per cent, following the bailout extension deal. Other government bond yields across the eurozone periphery have moved to record low territory, with Italy’s and Spain’s 10-year yielding just 1.35 per cent and Portugal’s 1.87 per cent. 

Two members of the FT City Network — M&S’s Mr Swannell and Stephen Hester, head of insurer RSA — described Greece’s continued position within the eurozone, or indeed the project as a whole, may be akin to “an emperor with no clothes”.

Mr Hester was among a small minority who argued that the eurozone should take a more aggressive stance, triggering Grexit if the Greek government baulks at further reforms. “If Greece isn’t prepared to reform enough to stay in I don’t think the EU should risk the knock-on political dangers of too much compromise towards Greece that could halt reform in other member states,” he said.

Describing the situation as a tragedy, Helena Morrissey, who heads fund manager Newton as well as trade body the Investment Association, said reforms that created mass unemployment were “surely a pyrrhic victory”.

Why Finance Is Still a Problem - TIME

http://time.com/3736713/american-finance-problem/?utm_source=feedburner&utm_medium=email&utm_campaign=Feed%3A+timeblogs%2Fcurious_capitalist+%28TIME%3A+Business%29

• Rana Foroohar @RanaForoohar
 

6:45 AM ET

    

Elizabeth Renstrom for TIME

Inequality, tepid job growth, lack of innovation are partially the result of finance's warped incentives

Warren Buffett warned investors that bankers were still up to their old tricks in his recent investor letter. Vanguard founder Jack Bogle is writing about how high fee mutual funds are ripping off investors and endangering retirement security. And Fed Chair Janet Yellen is touting new, tougher capital rules for “Too Big to Fail” banks. Despite the recovery and strong jobs numbers last week, the re-regulation of the financial sector isn’t yet finished. But a deeper worry, and one that’s taking center stage amongst academics, is the fact that finance has yet to be re-moored to the real economy. That may be dampening the recovery for many.

A growing slew of research, including several just-published papers, has found that over a multi-decade period, the rise of finance is associated with lower capital investment in the real economy, greater inequality, and the demise of more productive industries. Brandeis International Business School professor Stephen G. Cecchutti, and Enisse Kharroubi, a senior economist at the BIS, recently published a paper entitled “Why Does Financial Sector Growth Crowd Out Real Economic Growth?”

The answer: because finance looks for quick growth rather than long-term rewards. And because finance wants to invest in industries like real estate and construction where there are tangible assets to be collateralized, rather than intangible assets like the ideas and intellectual property that typically power more productive sectors like, say, technology, pharmaceuticals, or advanced manufacturing. What’s more, the disproportionate pay of bankers (they still make about three times what their similarly well-educated colleagues in other sectors do, even post crisis) continues to lure talent away from areas that create more and better jobs for the population as a whole. “When I was at MIT many years ago,” says Cecchutti, “everyone wanted to work in cold fusion or recombinant DNA. By the 1990s, nobody wanted to do that.” Solution? “I think we should take some proportion of the smartest people in the room and make sure they don’t go into finance,” says Cecchutti, only half joking.

Part of the problem with the rise of finance is that it encourages the culture of shareholder value over all else. That means CEOs focus more on buoying stock prices rather than making the best long-term decisions. The effects can be seen in the fact that since the 1980s, share buybacks and dividend payments have increased in direct proportion to a decrease in productive capital investment, according to a recent Roosevelt Institute paper entitled “Disgorge the Cash: The Disconnect Between Corporate Borrowing and Investment.”

What’s more, says JW Mason, a Roosevelt fellow who authored the paper, the low interest rates that have prevailed particularly since the 2008 crisis have sped up the trend as firms actually borrow money at lower rates to do more buybacks, rather than invest in the real economy. (The later is, by the way, what the Fed’s easy money policy was intended to encourage.) In fact, business investment dropped 20 % since 2008, as almost all borrowing went back to investors in the form of such payments. “It may be that we need to move to a more active control of investments to make sure that useful projects get funded,” says Mason, who says a kind of “World Bank for the US” might be one answer.

All this dovetails with the country’s inequality problem, which is an issue that will be big in the 2016 election cycle. As Wallace Turbeville, a Demos fellow who has done yet another influential paper on financialization points out, both the Republican and Democratic positions on inequality are lacking. Conservatives believe in bootstrapping, and liberals in redistribution of wealth. But if the very structure of our capitalism is designed to reward mainly elites (something Thomas Piketty’s best seller Capital in the 21st Centurypointed out so well last year), then no amount of redistribution or hard work can fix the problem.

We need to fix the structure of capitalism itself and, in particular, figure out a way to make it work better for the masses. Turbeville has some of his own ideas about how to do this, including incentivizing long-term share ownership over high-speed trading, and limiting the use of derivatives. I hope that the economic debate in the primary season will be filled with many more.

Mark Zuckerberg Has Advice for Young People Who Want to Change the World - TIME

http://time.com/3735363/mark-zuckerberg-young-people/?utm_source=feedburner&utm_medium=email&utm_campaign=Feed%3A+timeblogs%2Fcurious_capitalist+%28TIME%3A+Business%29

• Megan Gibson @MeganJGibson
 

March 6, 2015

    

The Facebook founder and CEO knows experience isn't everything

Advice is a valuable commodity when it comes to learning leadership. But according to Mark Zuckerberg, sometimes listening to yourself is the most important advice.

The Facebook CEO held a town hall-style question and answer session at Mobile World Congress in Barcelona on Mar. 4, where he addressed topics such as his hiring practices, the ideal team size and working with Sheryl Sandberg.

But one of the most insightful moments from the Q&A came when Zuckerberg was asked what advice he had for young people with world-changing ideas. The 30-year-old billionaire said, “The most important thing is to just have faith in yourself and trust yourself. When you’re young, you hear that you don’t have experience to do things, that there are people that have more experience than you. [But] I started Facebook when I was 19.”

“Don’t discount yourself, no matter what you’re doing,” he continued. “Everyone has a unique perspective that they can bring to the world.”

8 Outstanding Google Tools You Should Know About - TIME

http://time.com/3722820/8-outstanding-google-tools/?utm_source=feedburner&utm_medium=email&utm_campaign=Feed%3A+timeblogs%2Fcurious_capitalist+%28TIME%3A+Business%29

• Jeremy Goldman / Inc.
 

March 2, 2015

    

Which of these tools and resources can give you the competitive advantage?

While approximately 101 percent of this article’s readers routinely use Google to find everything from business plan templates to the best places to buy chinchilla food, Google’s moved well past the search niche. In fact, chances are Google offers up a few services you’ve never heard of that might be beneficial to your business. Here are just a few:

1. Google Trends

What it is: A site to discover how popular certain searches have been on Google historically, as well as what’s popular right now.

Why it’s useful: Want to be ahead of the social media zeitgeist? This is a great place to start. It’s a feature-packed site; you can survey trending YouTube videos as well.

Pro tip: Use the optional forecast checkbox to anticipate whether interest in a particular topic is expected to rise over time.

2. Google Cloud Platform

What it is: A platform that allows you to build applications, host websites, analyze data, and much more, via Google’s scalable infrastructure.

Why it’s useful: Similar to Amazon Web Services, Google Cloud Platform is an easy way for entrepreneurs to focus on building their concept, as opposed to worrying about the backend layer. Customers include little-known startups such as Best Buy, Snapchat, Coca-Cola, and Sony Music.

Pro tip: You can get $300 in credit towards a 60-day free trial. Even better: The trial is entirely free; you won’t be billed unless you decide to keep your account after the trial.

3. Google Wallet

What it is: Google Wallet makes it easy to pay–not just online, but in stores too–and it works with any debit or credit card.

Why it’s useful: Paying is made not only seamless: it’s so mobile-friendly that you can make payments while you’re waiting in line.

Pro tip: Owe a colleague money for dinner last night? In Gmail, there’s a new-ish “attach money” icon that will let you send money quickly and easily using Google Wallet.

4. YouTube Trends Dashboard

What it is: A handy tool to figure out what’s trending on YouTube.

Why it’s useful: What are women aged 65 watching? What are men ages 25 to 34 in Cincinnati sharing most often? With the Trends Dashboard, you can tap into the zeitgeist quickly and easily.

Pro tip: Compare the “Most Shared” (across Facebook and Twitter) with “Most Viewed” to get a sense of what content gets viewed often but shared infrequently.

5. Google Bookmarks

What it is: Using the easy browser bookmarklet, save shortcuts to your favorite webpages and navigate to them in seconds, from anywhere.

Why it’s useful: We don’t rely on bookmarks as we used to a decade ago, but they’re still a great way of keeping track of critical links you might need later.

Pro tip: Export your bookmarks with just one click to an HTML page, which you can embed into an external-facing website, style with CSS, or simply share as an email attachment.

6. Google Career Search

What it is: As you might expect, you can use this tool to land a job at Google.

Why it’s useful: Tired of the entrepreneurial life? If you’re looking for something more stable, you can’t do much better than Google.

Pro tip: You can use your Google profile information to help you find jobs relevant to your background.

7. Google Keep

What it is: Google Keep lets you easily jot down whatever’s on your mind via a beautiful, simple interface.

Why it’s useful: Share any one individual note with a collaborator, create to-do lists, drop an image into notes as needed, and organize notes using eight color options.

Pro tip: Don’t want to forget to do something? No problem: You can easily turn any note into a date or location-activated reminder.

8. Display Benchmarks Tool

What it is: Find out how your display advertising campaigns are doing compared with industry averages.

Why it’s useful: Looking to get an understanding of how different ad sizes and formats typically do in head to head competition? This tool lets you get updated industry benchmarks on what’s working and what isn’t.

Mark Zuckerberg Doesn’t Want All the Credit for Bringing the Internet to More People - TIME

http://time.com/3728715/zuckerberg-internet-org-facebook-mwc/?utm_source=feedburner&utm_medium=email&utm_campaign=Feed%3A+timeblogs%2Fcurious_capitalist+%28TIME%3A+Business%29

• Jack Linshi @jacklinshi
 

March 2, 2015

    

David Ramos—Getty ImagesFounder and CEO of Facebook Mark Zuckerberg speaks during his keynote conference during the first day of the Mobile World Congress 2015 at the Fira Gran Via complex on March 2, 2015 in Barcelona, Spain.

"It's really important not to lose sight of the fact that people driving this are the operators"

Mark Zuckerberg kept a low profile Monday during his Mobile World Congress keynote about Internet.org, Facebook’s project to spread Internet connectivity to underserved areas with wireless carriers’ help.

The Facebook founder downplayed his company’s role in Internet.org, instead urging the audience to recognize the work and investments of mobile carriers. Zuckerberg delivered his keynote alongside executives from three global telecommunications companies.

“While it’s sexy to talk about [Internet.org’s Internet-beaming] satellites, the real work happens here, by the companies. It’s really important not to lose sight of the fact that people driving this are the operators,” Zuckerberg said. “Too often Internet.org is conflated with Facebook.”

People in the parts of the developing world where Internet.org’s appis available get access to Facebook, Google search and some other services for free. But the end goal is to convince these users to eventually purchase data plans from wireless carriers — and so far, Internet.org has been successfully driving new smartphone use.

“It Colombia, it’s very encouraging to see about 50% more people in three weeks in our network as new data users,” said Mario Zanotti, senior EVP of Latin America at telecom company Millicom. “In Tanzania, we have seen a ten-fold increase in the number of smartphone sales since we launched the [Internet.org] campaign. So it’s pretty impressive numbers.”

Despite Zuckerberg’s efforts to highlight the work of Internet.org’s carrier partners, it’s hard to see the project being successful without Facebook’s involvement. Zuckerberg’s company has largely spearheaded the organization’s efforts, while its offerings in the Internet.org app, like Facebook Messenger, are a big draw to attract users.

However, some mobile carries could be worried that Facebook might cannibalize their voice and texting plans with its own services. Last year, Facebook acquired chat app WhatsApp, which became popular as means of avoiding wireless carriers’ texting fees.

“This is a point of tension between operators and Facebook in particular. It’s a consideration for any company to be careful to deliver the ‘key’ to the competitor,” said Jon Fredrik Baksaas, CEO of telecom company Telenor. “You really want to watch that ‘key’, and you want to control how that ‘key’ develops. That’s where the disruption comes.”

Why China is Making Life Miserable For Big U.S. Tech - Fortune

• Scott Cendrowski/Fortune
 

Feb. 26, 2015

    

A new report says China’s government has banned purchases from Cisco, Apple and other tech firms nearly two years after the NSA’s spying programs were revealed

On Sunday night, Citizenfour, a film about Edward Snowden holed up in a Hong Kong hotel room revealing the global spying programs run by the U.S. National Security Agency, won the Oscar for best documentary for its chilling portrait of technology and surveillance.

MORE

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Three days later this week, in China, news surfaced that the country has banned government purchases from some of the largest U.S tech firms implicated in the very affairs revealed by Snowden, including most notably Cisco Sistems, but also Apple Inc, Citrix Systems, and Intel’s INTCMcAfee security business. The companies were recently banned from China government purchases, according to an analysis of the government-procurement list by Reuters. The number of approved foreign tech brands on China’s purchase list fell by a third.

Whether China is really worried about U.S. tech firms jeopardizing state security, or if it’s simply using the Snowden news as pretext for favoring domestic technology firms, is being debated. But U.S. companies being banished from the government purchase list clears up any doubt that China is an oppressive market for big U.S. tech firms.

China reacted almost immediately after Snowden divulged the NSA programs in mid-2013. Cisco said afterwards its China business had slowed to a crawl, in part because its IT-equipment was associated with spying. (It was later reported that the NSA intercepted Cisco routers to install surveillance equipment without the company’s knowledge, which Cisco CEO John Chambers later complained about to President Obama.) Last year, Microsoft’s Windows 8 was banned from Chinese government computers for what the government said were security concerns. Today, the country is trying to cleanse key industries in banking, state-owned enterprises, and the military from U.S. technology by 2020, according to reports.

Until now, China hasn’t explicitly banned U.S. tech products, but it has gradually distanced itself from foreign tech. Earlier this month, China’s banking regulator said it was planning to require source code from any suppliers of IT products used by its banks. That is greeted as a nonstarter by Microsoft Corp, IBM and Cisco. If approved, the rule would effectively shut them out of billions of dollars of contracts. Industry analysts say the Chinese are years away from building their own equipment on par with say, Cisco’s, but they are getting closer.

The stripping of Cisco and Apple from the approved government list is the latest salvo in an ongoing tech conflict between the U.S. and China. The U.S. has similarly discriminated against Chinese telecommunications equipment makers for “state security” reasons. In 2012, a U.S. congressional committee warned that Huawei products could be used for spying—a charge the company continues to deny—but did not release evidence to support its claims. Huawei, the biggest telecom infrastructure maker in the world, can’t bid for U.S. government projects or large U.S. telecom contracts. ZTE , the second largest telecom infrastructure maker in China, is similarly banned.

In China, the situation has grown so poor for foreign IT that Cisco, in its latest quarterly results announced two weeks ago, said China sales dropped by 19%. Cisco’s public relations department won’t even directly address the topic of discrimination in China.

Except for Apple, which posted record sales in large part because its iPhone 6 dominated China’s market, there’s little reason to expect future good news for big U.S. tech in the Middle Kingdom. Snowden changed the dynamics in an already uneasy relationship. Now the effects are showing.

Warren Buffett Says He’s Found a Successor — But Won’t Say Who - Fortune

http://time.com/3727405/warren-buffett-says-hes-found-a-successor-but-wont-say-who/?utm_source=feedburner&utm_medium=email&utm_campaign=Feed%3A+timeblogs%2Fcurious_capitalist+%28TIME%3A+Business%29

• Stephen Gandel / Fortune
 

Feb. 28, 2015

    

Nati Harnik—APBillionaire investor Warren Buffett speaks in Omaha, Neb., Nov. 14, 2011. Buffett's annual letter to Berkshire Hathaway shareholders is always one of the best-read business documents of the year. The 2015 letter marks the 50th year of Buffett's leadership. 

“Both the board and I believe we now have the right person to succeed me as CEO"

Once again, in this year annual letter to Berkshire Hathaway shareholders, Buffett has not unmasked who the next CEO will be. But he does say as definitively as ever that the person has been picked and he has revealed a little bit more about who he is. (Buffett has already confirmed in the past that the next CEO of Berkshire will be a man.)

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That’s more than Buffett has said in the past. But the fact that, once again, the next CEO of Berkshire has not been named may come as a disappointment to some.

This year’s letter is the 50th Buffett has written as the chairman and CEO of Berkshire Hathaway. And, as promised, a section of the letter is titled, “The Next 50 Years at Berkshire.” Some had speculated that meant Buffett would take the opportunity to name his successor. Some have said the fact that he hasn’t has been a drag on the company’s stock in the past, though it’s hard to see evidence of that. Berkshire’s shares were up 27% in 2014, about double the market in general.

In his clearest statement on the subject so far, Buffett writes in this year’s letter, “Both the board and I believe we now have the right person to succeed me as CEO – a successor ready to assume the job the day after I die or step down.”

In previous annual letters, Buffett has said that Berkshire’s board knows who he would pick for CEO should that person be needed immediately. But he has left the door open to changing his mind later on. Buffett now appears appears to have closed that door.

Buffett also says for the first time that the next CEO of Berkshire will be someone who already works at the company. He says that was a requirement of Berkshire directors. In the past, Buffett has said only that his pick for the next CEO of Berkshire is someone the company could put into that position in a flash, not that his chosen successor was already an employee of the company.

Buffett also puts a very loose age range on the next CEO. He writes in this year’s letter that Berkshire’s directors believe the next CEO should be someone relatively young, who can be expected to run the company for at least 10 years. But Buffett says he doesn’t expect the board to pick someone who is likely to retire at 65, giving some wiggle room to how “relatively young” this person may be.

Buffett also says that his successor will be “vigilant and determined” at warding off the “ABCs of business decay, which are arrogance, bureaucracy and complacency.” Buffett says those are the three sins that have brought down companies that once sat “atop huge industries” but through bad behavior fell to depths their CEOs didn’t think possible. It’s noteworthy that Buffett includes General Motors GM-0.67% and IBM IBM0.67% in that group, two stocks that are currently in Berkshire’s portfolio.

So, there you have it. Berkshire’s next CEO will be a 55-ish man who currently works at Berkshire and is not prone to mucking up what Buffett has built over the past 50 years. If you fit that description, congrats!

In the past, Berkshire watchers have kept a careful watch on which top lieutenants gets the most mentions in Buffett’s annual letter. This year, the clear winner is Ajit Jain, who runs Berkshire Hathaway’s largest insurance division. “[Jain’s] mind, moreover, is an idea factory,” Buffett writes in the letter. But at 63, Jain may be a little too old for the job, if Buffett sticks to his prescribed age range.

Todd Combs and Ted Weschler, Buffett’s back up investment managers, get a mention in the letter and praise for their investing abilities. And Buffett says he has handed over a bit more control to them. Buffett says both managers have been given one of Berkshire’s smaller companies to look after and both are taking on the title of chairman of those firms. But, unlike in previous years, Buffett says nothing about the performance of Combs and Weschler’s investments in 2014. Fortune calculated that both lagged the market for the first time since joining Berkshire.

Buffett makes no mention in this year’s letter of Matt Rose, the chairman of BNSF, who Buffett has praised in previous letters and some have speculated is a front runner for the CEO job. Perhaps that’s ecause BNSF had a disappointing 2014, or perhaps Rose, 55, is out of the running. Only Buffett, and Berkshire’s board, knows.

False hope Most trading strategies are not tested rigorously enough - The Economist

http://www.economist.com/news/finance-and-economics/21644202-most-trading-strategies-are-not-tested-rigorously-enough-false-hope?fsrc=scn/fb/te/pe/ed/falsehope

Feb 21st 2015  | From the print edition

LET me tell you about the perfect investment offer. Each week you will receive a share recommendation from a fund manager, telling you whether the stock’s price will rise or fall over the next week. After ten weeks, if all the recommendations are proved right, then you should be more than willing to hand over your money for investment. After all, there will be just a one-in-a-thousand chance that the result is down to luck.

Alas, this is a well-known scam. The promoter sends out 100,000 e-mails, picking a stock at random. Half the recipients are told that the stock will rise; half that it will fall. After the first week, the 50,000 who received the successful recommendation will get a second e-mail; those that received the wrong information will be dropped from the list. And so on for ten weeks. At the end of the period, just by the law of averages, there should be 98 punters convinced of the manager’s genius and ready to entrust their savings.

In this section

• The high cost of falling prices
• False hope
• The Saudi project, part two
• Currency peace
• Pyramid scheme
• Shipshape
• It takes 28 to tango
• Worse than nothing
• The Saudi project, part two

As a paper published last year in the Journal of Portfolio Management argued, this is a classic example of the misuse of statistics. Conduct enough tests on a bunch of data—run through half a million genetic sequences to find a link with a disease, for example—and there will be many sequences that appear meaningful. But most will be the result of chance.

This is a problem that has dogged scientists across many disciplines. There is a natural bias in favour of reporting statistically significant results—that a drug cures a disease, for example, or that a chemical causes cancer. Such results are more likely to be published in academic journals and to make the newspaper headlines. But when other scientists try to replicate the results, the link disappears because the initial result was a random outlier. The debunking studies, naturally, tend to be less well reported.

Faced with this problem, scientists have turned to tougher statistical tests. When searching for a subatomic particle called the Higgs Boson, they decided that to prove its existence, the results had to be five standard deviations from normal—a one-in-3.5-million chance.

Financial research is highly prone to statistical distortion. Academics have the choice of many thousands of stocks, bonds and currencies being traded across dozens of countries, complete with decades’ worth of daily price data. They can backtest thousands of correlations to find a few that appear to offer profitable strategies.

The paper points out that most financial research applies a two-standard-deviation (or “two sigma” in the jargon) test to see if the results are statistically significant. This is not rigorous enough.

One way round this problem is to use “out-of-sample” testing. If you have 20 years of data, then split them in half. If a strategy works in the first half of the data, see if it also does so in the second out-of-sample period. If not, it is probably a fluke.

The problem with out-of-sample testing is that researchers know what happened in the past, and may have designed their strategies accordingly: consciously avoiding bank stocks in 2007 and 2008, for example. In addition, slicing up the data means fewer observations, making it more difficult to discover relationships that are truly statistically significant.

Campbell Harvey, one of the report’s authors, says that the only true out-of-sample approach is to ignore the past and see whether the strategy works in future. But few investors or fund managers have the required patience. They want a winning strategy now, not in five years’ time.

The authors’ conclusions are stark. “Most of the empirical research in finance, whether published in academic journals or put into production as an active trading strategy by an investment manager, is likely false. This implies that half the financial products (promising outperformance) that companies are selling to clients are false.”

For the academics, the lesson is simple. Much more rigorous analysis will be needed in future to reduce the number of “false positives” in the data. As for clients of the investment industry, they need to be much more sceptical about the brilliant trading strategies that fund managers try to sell them.

All this will leave many readers wondering how to invest their savings. That’s fine. Buttonwood has an investment strategy that is sure to boost your wealth. Just send your e-mail address and a stock tip will arrive every month...

^{Economist.com/blogs/buttonwood}

* “Evaluating Trading Strategies”, by C. Harvey and Y. Liu, Journal of Portfolio Management (2014)

Why Warren Buffett Wants to Buy a Bunch of German Companies - TIME

http://time.com/3721834/warren-buffett-germany/?utm_source=feedburner&utm_medium=email&utm_campaign=Feed%3A%20timeblogs%2Fcurious_capitalist%20%28TIME%3A%20Business%29

• Sam Frizell @Sam_Frizell
 

Feb. 25, 2015

    

Germany is the über-economy of Europe

Legendary investor Warren Buffett is preparing to buy companies in Europe’s biggest and most reliable economy after purchasing a German motorcycle parts maker this month.

Buffett said in an interview published Wednesday in the newspaper Handelsblatt that his Berkshire Hathaway holding company is eyeing companies in Germany because of the size of its economy and its regulatory framework.

“Germany is a terrific market, lots of people, lots of buying power, productive, it’s got a legal system we feel very good with, it’s got a regulatory system we feel very good with, it’s got people we feel very good with—and customers,” Buffett said.

Berkshire Hathaway acquired family-owned motorcycle apparel and accessories retailer Detlev Louis Motorrad-Vertriebs in February and is looking to expand its footprint in Germany. Berkshire Hathaway purchased the company for a little more than 400 million euros ($456 million), Reuters reports.

Buffett said he was ready to pay cash for good German companies, despite the weakness of the euro currency, which has dropped more than 15% against the dollar over the past year.

What we learnt from Edward Snowden's Reddit AMA - TIME

http://time.com/3701928/answer-what-do-you-do/?utm_source=feedburner&utm_medium=email&utm_campaign=Feed%3A+timeblogs%2Fcurious_capitalist+%28TIME%3A+Business%29

Experiment with different ones to see which allows you to represent yourself the best

The question “What do you do?” has basically become synonymous with “Who are you?” There’s a reason it almost always follows “What’s your name?” in polite conversation: It’s helpful. It’s get-to-know-you shorthand. The one-word answer to “what do you do?” lets people categorize us and gives them a snapshot of what we do or who we are.

But there’s also a dark underbelly to introducing ourselves with this kind of shorthand: When labels go wrong, they can lead to stereotypes. Perception becomes more about the experiences accumulated by the people you’re talking to than anything that they may or may not know about you, personally.

For example:

You Say: I’m in sales.
They Think: You’re a pushy, sweet-talking charmer.

You Say: I’m a lawyer.
They Think: You’re the argumentative type.

You Say: I’m an accountant.
They Think: You’re a numbers geek.

Maybe I’m being a little harsh, but you get the picture; odds are, whatever quick description you’ve used in the past barely does what you do—or who you are—any justice. But everywhere from networking events to family gatherings, this question is going to live on. So we need to find a way to answer it so it’s an energizing conversation starter, instead of a fast track to the pigeon-hole.

Here are seven ways to reframe this common question to help you come up with a more compelling answer. Experiment with different ones during conversations in the next couple weeks to see which allows you to represent yourself the best and build more meaningful relationships.

1. Talk About How You Help People

You might be, say, a copywriter. Or you might be someone who helps companies tell compelling stories about their brands. And doesn’t that sound infinitely more interesting? I’ve used this at dinner parties to great effect: It instantaneously removes stereotypes about your job title and explains the value you bring to the table. Start your next response with “I help people…” and see where the conversation takes you from there.

2. Tell an Anecdote About Your Job

Narrative is always compelling. It helps us make connections. A study out of Princeton University found that the brain activity of the storyteller and the listener actually begin to mirror each other, despite the fact that one person is talking and one is listening.

And best of all, to solve the “What do you do?” problem, you get to provide context for the person you’re talking to, instead of relying on the picture they have in their minds of what you do.

When implementing this strategy, you might have to use your job title as a segue, but transition immediately into a story about something that was fun or inspiring to you at work. For example, at a recent party I told someone I was a communications consultant, but then followed up with a story about a client that offered context for my work and illustrated the need in the market for what I do.

3. Make it a Teachable Moment

Think about your answer in this light: You are educating the other person on the subject of you. So instead of just saying your title, explain something he or she might not know about your work or industry. Talk about the void in the market that you are filling. Talk about the latest thing happening in your industry. Talk about the most interesting thing you’ve learned lately.

4. Be Vulnerable

Don’t be afraid to get personal and talk about your journey. What led you to where you are today? What are your dreams for the next phase of your career? Every conversation is building a relationship. To do this effectively, you need to let people behind the curtain, even just a little, so they understand where you are coming from.

5. Be Relevant

It’s not all about you, even when it is. Relay the details about you and your work that are relevant to the person you’re talking to. The client whose story I told at the party was also finishing up successful rehab after a car accident, and as I told it, I saw the cardiac rehab therapist’s face light up with recognition. Think about what experiences you have that will resonate with the people you’re talking to or be able to help them out in some way.

6. Let Your Freak Flag Fly

Find something about what you do that really lights you up, and focus on that. When you show how enthusiastic you are about something, you are a magnet. People actually really want to be around that. Don’t let anyone tell you to take a chill pill. Ever.

7. Be Self-Promotional

We need to rebrand self-promotion. We need more people who can speak frankly about the value they bring to the clients and organizations with which they work. Wouldn’t the world be a better place if everyone just let down the veil and really opened about what they are good at? More people would be doing things they love. We would, collectively, be happier.

So, don’t be shy. You’re actually doing everyone a favor by being honest about what you’re good at and what lights you up. And you can plainly see how much better that is than saying “I’m an accountant” the next time someone asks.

“What do you do?” may forever be synonymous with “Who are you?” but with one of these alternative answers, you have a say in who you get to be in the mind of the person you’re talking with.

7 Scientifically Proven Ways to Achieve Better Success in Life - TIME

http://time.com/3697991/achieve-better-success-life/?utm_source=feedburner&utm_medium=email&utm_campaign=Feed%3A+timeblogs%2Fcurious_capitalist+%28TIME%3A+Business%29

• Christina Desmarais / Inc.
 

Feb. 13, 2015

    

Success is a subjective notion, if there ever was one. But for simplicity’s sake, let’s assume the higher you are on Maslow’s hierarchy of needs, the better you’re doing. In case you don’t remember the levels from Psych 101, essentially, people can’t be their best possible selves (self-actualization) until lower-level needs are met first. In other words, you can’t be an ideal version of yourself if you don’t have enough food and money to pay the bills, or enough love and esteem to feel good about your value as a human being. So, what can you do to move yourself up the pyramid?

Check out the findings from several studies, which shine a light on what it takes to achieve more in life.

Increase your confidence by taking action.

Katty Kay and Claire Shipman, authors of The Confidence Code, wrote a stellar article for The Atlantic on this subject. Highlighting scads of studies that have found that a wide confidence gap exists between the sexes, they point out that success is just as dependent on confidence as it is on competence. Their conclusion? Low confidence results in inaction. “[T]aking action bolsters one’s belief in one’s ability to succeed,” they write. “So confidence accumulates–through hard work, through success, and even through failure.”

Broaden your definition of authenticity.

Authenticity is a much sought-after leadership trait, with the prevailing idea being that the best leaders are those who self-disclose, are true to themselves, and who make decisions based on their values. Yet in a recent Harvard Business Review article titled “The Authenticity Paradox,” Insead professor Herminia Ibarra discusses interesting research on the subject and tells the cautionary tale of a newly promoted general manager who admitted to subordinates that she felt scared in her expanded role, asking them to help her succeed. “Her candor backfired,” Ibarra writes. “She lost credibility with people who wanted and needed a confident leader to take charge.” So know this: Play-acting to emulate the qualities of successful leaders doesn’t make you a fake. It merely means you’re a work in progress.

Improve your social skills.

According to research conducted by University of California Santa Barbara economist Catherine Weinberger, the most successful business people excel in both cognitive ability and social skills, something that hasn’t always been true. She crunched data linking adolescent skills in 1972 and 1992 with adult outcomes, and found that in 1980, having both skills didn’t correlate with better success, whereas today the combination does. “The people who are both smart and socially adept earn more in today’s work force than similarly endowed workers in 1980,” she says.

Train yourself to delay gratification.

The classic Marshmallow Experiment of 1972 involved placing a marshmallow in front of a young child, with the promise of a second marshmallow if he or she could refrain from eating the squishy blob while a researcher stepped out of the room for 15 minutes. Follow-up studies over the next 40 years found that the children who were able to resist the temptation to eat the marshmallow grew up to be people with better social skills, higher test scores, and lower incidence of substance abuse. They also turned out to be less obese and better able to deal with stress. But how to improve your ability to delay things like eating junk food when healthy alternatives aren’t available, or to remain on the treadmill when you’d rather just stop?

Writer James Clear suggests starting small, choosing one thing to improve incrementally every day, and committing to not pushing off things that take less than two minutes to do, such as washing the dishes after a meal or eating a piece of fruit to work toward the goal of eating healthier. Committing to doing something every single day works too. “Top performers in every field–athletes, musicians, CEOs, artists–they are all more consistent than their peers,” he writes. “They show up and deliver day after day while everyone else gets bogged down with the urgencies of daily life and fights a constant battle between procrastination and motivation.”

Demonstrate passion and perseverance for long-term goals.

Psychologist Angela Duckworth has spent years studying kids and adults, and found that one characteristic is a significant predictor of success: grit. “Grit is having stamina. Grit is sticking with your future, day in, day out, not just for the week, not just for the month, but for years, and working really hard to make that future a reality,” she said in a TED talk on the subject. “Grit is living life like it’s a marathon, not a sprint.”

Embrace a “growth mindset.”

According to research conducted by Stanford psychologist Carol Dweck, how people view their personality affects their capacity for happiness and success. Those with a “fixed mindset” believe things like character, intelligence, and creativity are unchangeable, and avoiding failure is a way of proving skill and smarts. People with a “growth mindset,” however, see failure as a way to grow and therefore embrace challenges, persevere against setbacks, learn from criticism, and reach higher levels of achievement. “Do people with this mindset believe that anyone can be anything, that anyone with proper motivation or education can become Einstein or Beethoven? No, but they believe that a person’s true potential is unknown (and unknowable); that it’s impossible to foresee what can be accomplished with years of passion, toil, and training,” she writes.

Invest in your relationships.

After following the lives of 268 Harvard undergraduate males from the classes of 1938 to 1940 for decades, psychiatrist George Vaillant concluded something you probably already know: Love is the key to happiness. Even if a man succeeded in work, amassed piles of money, and experienced good health, without loving relationships he wouldn’t be happy, Vaillant found. The longitudinal study showed happiness depends on two things: “One is love,” he wrote. “The other is finding a way of coping with life that does not push love away.”

Greek Strategy of Highlighting Germany’s Nazi Past Has Backfired - Fortune

http://time.com/3711910/greece-germany-highlighting-nazi-past/

• Geoffrey Smith/Fortune
 

Feb. 17, 2015

    

Yannis Behrakis—ReutersPeople wave Greek flags in front of the parliament during an anti-austerity pro-government demonstration in Athens on Feb. 15, 2015. 

It may have been a great tactic for Syriza in the elections but it is a major error for the Greek government in European negotiations

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Of all the general rules that have evolved over time for those about to ask for money, one is pretty much at the top of every list: don’t gratuitously insult the guy you’re asking ahead of time.

Sadly, it doesn’t seem to be anywhere near the list of the new Greek government, which seems to think that the best way to get money out of Germany is to remind Germans of their criminal Nazi past at every opportunity.

Whether it’s Prime Minister Alexis Tsipras laying a rose at the site of a Nazi massacre in his first official act as Prime Minister, or Finance Minister Yanis Varoufakis describing the bailout’s effects as a “social holocaust”, or Foreign Minister Nikos Kotzias banging on about a loan forcibly exacted from Greece by the German Reichsbank during the Nazi occupation, officials have gone out of their way to try to shame their biggest creditor into cutting them some slack.

And even when the government takes a break from it, it can rely on friendly elements of the press to carry on the struggle for it. Witness the cartoon in Monday’s edition of the Syriza-friendly paper “Dawn”, depicting German Finance Minister Wolfgang Schaeuble in World War 2 uniform, saying “We insist on the soap from your fat. We’re willing to discuss the compost from your ashes.” No wonder the doughty Badenser didn’t feel much in the giving vein at Monday’s Eurogroup meeting.

It’s a tactic that consciously seeks to deflect attention away from Greece’s own shortcomings, and will hit entirely the wrong target. Who exactly will pay for this? Around 300,000 Greeks live and pay taxes today in Germany (another million live in the countries that Tsipras is asking for debt forgiveness). By contrast, there are fewer than 400,000 German men over 90 left alive, only a minute fraction of whom could possibly be considered as even indirectly responsible for what happened in Greece between 1941 and 1945. It’s only a small exaggeration to say that, by the same logic, Iran should file for damages committed by Alexander the Great’s army.

The most likely result of Syriza’s German-baiting is the exact opposite from the one intended. German public opinion, which is by no means short on “European solidarity”, will harden even further against Greece, leaving it no option but to leave the Eurozone as its money runs out. An opinion poll published last week by the magazine Focusshowed that 48% of Germans wanted Greece to leave the currency union, while only 29% wanted it to stay in.

Yes, it’s true that Germany hasn’t directly repaid 476 million Reichsmarks that it forced the Bank of Greece to lend it interest-free, a sum that some analysts estimate as translating into €10 billion at today’s exchange rates (best not to ask how they arrive at that calculation). It’s also true that some of the reparations agreed under various postwar settlements never arrived in Greece (although it would be more pertinent to ask how well that which did arrive was spent).

But Messrs. Tsipras, Kotzias et al. are guilty of missing the forest for the trees. In one of the more enlightened policy choices of modern history, Germany was spared a heavy reparations bill after WW2. Instead it entered into a tacit bargain that it would bankroll the European Union’s budget. The historian Niall Ferguson reckons that Germany has already recycled more through the European economy in this way than the whole of the reparations bill handed to it at Versailles for World War 1. Time to let it go and concentrate on today, and on Greece, rather than its creditors.

Since Greece joined the E.U. in 1981, it has benefited more than virtually any other country from that arrangement, getting the equivalent of €110 billion out of E.U. coffers, according to European Commission numbers crunched by the Munich-based Ifo think-tank. Around a third of that is ultimately attributable to Germany. In the E.U.’s last budget, Greece was still able to extract more subsidies, on a per capita basis, than all but two of the–much poorer–countries that joined the Union after the fall of Communism.

After the failure of Monday’s Eurogroup meeting, time is now fast running out for Athens to get real. The country only has 12 days before it loses access to billions of euros that its creditors–at great political cost domestically–approved for it in 2012. It needs to stop wasting time and energy whipping up old animosities that are increasingly irrelevant to modern Europe. And in any case, it costs nothing to ask nicely.

This article originally appeared on fortune.com