Weekend Reading

11 November 2016 | by Paul Perrino, CFA

A summary of this week’s best articles. Follow us on Twitter (@INTRINSICINV) for similar ongoing posts and shares.

Shift From Active to Passive Investing Isn’t What It Seems (Barry Ritholtz; @ritholtz; Bloomberg View)

There is a lot of analysis and articles about active versus passive investing. The most common error they make is the inclusion of “high-priced closet indexers” as part of active management. These “active” mutual funds typically hold hundreds of stocks. This causes their gross performance to mimic their index. Once you subtract their fee, they consistently underperform, which is what those articles show. You can read more about this here in: Portfolio Management The True Cost of Diversification.

Silicon Valley Decides It’s Just Too Hard to Build a Car (Keith Naughton, Alex Webb, and Mark Bergen; @KeithNaughton@atbwebb, and @mhbergen; Bloomberg)

Silicon Valley is known for their ambition, but they are finding out that building a car is a lot harder than they thought. The auto industry has spent decades developing the mass production process and tech companies are realizing they need to leverage their experience. It’s not a one-way street. “Where automakers come up short is attracting sufficient numbers of software engineers, which they lack by the thousands. Technology now represents half the cost of a car…”

Uber’s Self-Driving Truck Makes Its First Delivery: 50,000 Beers (Alex Davies, @adavies47, Wired)

The technology offers truck drivers true “level 4” autonomy. The truck still needs a driver to handle side streets but is fully autonomous on the freeway. This allows the driver to work on paperwork or “or even catch a few Z’s.” It’s believed that this will lead to safer roads. “Some 400,0000 trucks crash each year, according to federal statistics, killing about 4,000 people. In almost every case, human error is to blame.”

U-Haul Parent Amerco: Ready to Move (Andrew Bary, Barron’s)

The CEO of U-Haul display’s many of the same characteristics as the CEO’s profiled in William Thordike’s book The Outsiders. He “pays no attention to Wall Street; doesn’t manage earnings; rarely meets with investors; gets paid modestly by CEO standards, with total compensation of about $1 million in each of the past two years; oversees a thrifty corporate culture; and is focused on the expansion and management of the company’s truck-rental and self-storage businesses.”

On the lighter side….

Authorities Break Up Active Management Cell (Joshua Brown, @ReformedBroker, Ritholtz Wealth Management)

This is one of the funniest investment management related stories I’ve read in a while.

 

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