It's link-to-the-New-York-Times day today. First up, this fascinating and informative article about dog/human yoga classes. You can learn how dogs say "Get me out of here" with their faces.
OK, back to the show. In today's op-ed Paul Krugman picks up from John Hempton and argues for a return to boring finance. If Krugman and Hempton get their way, I'd think that would be good for value investing. Broadly speaking, value investors are the low-financiers of Wall Street:
- They tend to invest only in common stocks and avoid more complicated instruments.
- The less going on on the right side of the balance sheets of the companies they invest in, the better.
- The less going on on the right side of their own balance sheets, usually limited partnerships, the better.
- Value investors earn their money by identifying securities trading at a discount to intrinsic value, and by benefitting from the compounding that occurs within the businesses in which they invest.
Value investors face competition for institutional investment dollars from more complicated strategies, the hedge funds and other vehicles that formed the shadow banking system. This competition relied on complexity and leverage throughout the entire supply chain to generate their returns. And if Krugman and Hempton get their way, much of that competition is going away, and investing will go "back to business".