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Zero Emissions Vehicles: Making Sense of the Transition with SASB Standards

“The days of the internal combustion engine are numbered.” — Neal E. Boudette and Coral Davenport, The New York Times, 28 January 2021 What precipitated such a dramatic pronouncement? General Motors (GM) had just released its plan to phase out traditional petroleum-fueled automobiles and sell only zero-emissions vehicles (ZEVs) by 2035. While attention-grabbing, GM’s was […]
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Book Review: Machine Learning for Asset Managers

Machine Learning for Asset Managers. 2020. Marcos M. López de Prado. Cambridge University Press (Cambridge Elements in Quantitative Finance Series). Some asset managers view machine learning (ML) as a breakthrough for better analysis and prediction. Others argue these techniques are just specialized tools for quant analysts that will not change core asset management practices. Machine […]
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Refreshing Revenue, the Cash Conversion Cycle, and Free Cash Flow

Like it or not, companies are judged by flawed standards.  GAAP sometimes misrepresents business reality. Let’s use that fact to generate some alpha. Continuing from the first memo, we’ll start by examining revenue recognition, the cash conversion cycle, and free cash flow. “Revenue” isn’t revenue, it’s contract timing. Revenue is recognized when a contract between a […]
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A SPARK for the Alternative Investment Industry?

The alternative investment industry has always been fiercely Darwinian: The fittest survive and underperformers soon disappear. New entrants are a vital ingredient for a vibrant marketplace: They bring innovation and competition to the space and provide institutional investors with more investment choices. For small and emerging managers, however, there are increasing barriers to both entry […]
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How to Manage Inflation Risk: The Local Inflation Factor

Governments around the world have deployed massive stimulus to battle the economic effects of COVID-19. And as economies reopen, there is a fear of rising consumer prices. As a result, investors, market strategists, and other market participants are increasingly thinking about the impact that inflation could have on their portfolios. Given this environment, how can […]
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COVID-19 and 17 May: Tax Day Considerations for Clients

With Tax Day in the United States delayed until 17 May, now might be a good time to talk to your clients about how pandemic-imposed working-from-home (WFH) arrangements may affect their tax liabilities. The income tax system across the United States is something of a patchwork quilt. Of course, the federal income tax applies across […]
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Trading at All Hours: The Portfolio Implications

Millions of retail investors opened up brokerage accounts this past year and many took to trading throughout the day as a way to pass the time, keep themselves entertained, and make a bit of money. So did all this trading actually help the average retail investor’s portfolio during the COVID-19–dominated months of 2020? Nighttime is […]
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Capitalism Is Dead, Long Live Debtism

Notwithstanding its many failings, capitalism has been a formidable engine of wealth creation and economic development over the last three centuries. Yet, what classical economists and revolutionary theorists like Karl Marx called capital was in fact what financiers label “equity.” Retained earnings sit in the shareholders’ equity section of a company’s balance sheet. Technically speaking, […]
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Myth-Busting: Earnings Don’t Matter Much for Stock Returns

Introduction What drives stock returns? Earnings, right? So, what drives earnings? Likely economic growth. After all, it’s much harder for companies to expand their sales and profits in a sputtering economy. However, the relationship between equity returns and economic growth is more illusion than reality. It may make logical sense, but there is little actual […]
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Book Review: Fed Watching for Fun and Profit

Fed Watching for Fun & Profit: A Primer for Investors. 2020. Edward Yardeni. YRI Press. Fed Watching for Fun & Profit: A Primer for Investors provides a detailed explanation of a topic that economist Edward Yardeni discussed in Predicting the Markets: A Professional Autobiography. His lessons from following and analyzing the Federal Reserve Board over […]
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