WEEKEND READING

21 April 2017 | by Paul Perrino, CFA®

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

Why Facebook Keeps Beating Every Rival: It’s the Network, of Course (Farhad Manjoo, @fmanjoo, NYT)

In previous posts, we discussed the impact of moats (HERE and HERE). Facebook created a moat by establishing one of the strongest networks. This network becomes more valuable the more people that use it. “What’s important is that Facebook has forced this coexistence [with Snap]. Facebook’s billions of users will now be introduced to Snapchat’s best features on Facebook’s own platform, eliminating, for a lot of them, any reason to switch. There is essentially no chance now that Snapchat will eclipse Facebook anytime soon, if ever. In other words, Mr. Zuckerberg has done it again; he has neutralized yet another rival.”

Toronto Home Prices Just Jumped Another 33% (Kim Chipman and Erik Hertzberg, @KimChipman1 and @ErikHertzberg, Bloomberg)

Over the past 3 years, the year-over-year (yoy) percentage increase in Toronto home prices have been rising. As of March 2017, this yoy increase reached 33%, which is 4 standard deviations from the mean. According to the Mayor of Toronto, it’s unclear what has been driving the rapid increase. This has started a debate among residents. Some are blaming foreign investment and are pushing for a “tax to curb price gains and discourage speculation”, but the data on foreign buyers is unreliable.

How Well Do Stocks Hold Up In Geopolitical Crises? (John Kimelman, @johnkimelman, Barron’s)

It may be counter-intuitive, but as your personal fear index goes up, that doesn’t necessarily mean the stock market is going to go down. In fact, “When it comes to major events like war, terrorism and even presidential assassinations, stock markets have proven to be remarkably resilient, assuming of course that these events don’t lead to a massive hit to the economy.”

How This Company Combines The Gig Economy Model With AI To Be More Productive (Jeremy Quittner, @JeremyQuittner, Fast Company)

First, let’s start with a quick definition for those who haven’t heard the term Gig Economy. It refers to this new type of labor market where individuals work based on short-term contracts or freelance. Uber drivers are the quintessential example of these individuals. This can be a great way to attract quality talent to complete a project, who might not otherwise want to become a full-time employee and without the high-cost of consulting firms. Their software platform, Orchestra, acts as the project manager by setting “up a dedicated Slack room for communication, and then plays umpire for the workflow, ensuring tasks are completed in order and on time.”

Corporate short-termism is a frustratingly slippery idea (The Economist)

The short-term focus of some investors and company management is not a new concept. McKinsey conducted a new study that looked at 600 companies they deemed to be “short-termist.” To be labeled a “short-termist” the company needed to exhibit “five habits: investing relatively little, cutting costs to boost margins, initiating lots of buy-backs, booking sales before customers pay and hitting quarterly profit forecasts.” Based on some of these characteristics you might assume the outcome of these companies is straightforward, however, “The theory of short-termism suffers from three difficulties: it isn’t an accurate description of what is happening across America’s economy; it doesn’t deal with the question of causality and, last, it is a distraction from the real difficulty.”

 

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