Week In Review 06/25/2017

MSCI includes Chinese stocks in its global index

  • Reuters on China’s poor corporate governance: China ranks ninth out of 11 Asian economies for corporate governance, according to the ACGA. Its overall scores have declined since 2014.
  • FT on the market’s reaction to the decision: “MSCI’s move means mainland equities, known as A-shares, will next year be included in its flagship emerging markets index, obliging the estimated $1.6tn of investment funds that track the index to buy the stocks.”
  • Fortune on the stocks included: “In total, those 222 companies are worth $3.8 trillion in combined market value, but will account for a mere 0.7% of the MSCI’s emerging market index.”

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Programming #10: AI Sudoku

Sudoku is one of those NP-Complete problems that brute force solutions have a problem with. Consider a board with a single blank space, we would have to work through 9 possibilities to find the right answer. For two blank spaces, we would work through 9 possibilities for the first space, and then for each of those possibilities, 9 for the second.

This simplifies to a time complexity of O(n^m) where n is the number of possibilities for each square (9 in normal Sudoku) and m is the number of blank spaces. A hard Sudoku problem with 50 blank spaces would take about 5.15 * 1047 computations, which would take longer than the age of the universe to solve with a decent computer.

This is where artificial intelligence (AI) comes into play. Think of AI less as a Skynet robot and more as a set of hacks to solve exponential problems like Sudoku. Code for this post can be found here.
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Week In Review 06/18/2017

Fed Raises Rates

  • From 1.00 percent to 1.25 percent: The Fed also gave a first clear outline on its plan to reduce its $4.2 trillion portfolio of Treasury bonds and mortgage-backed securities, most of which were purchased in the wake of the 2007-2009 financial crisis and recession.”
  • Neel Kashkari continues to dissent: “In short, the economy is sending mixed signals: a tight labor market and weakening inflation.”

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Investment Theory #21: Klarman’s 1999 Letter

I’ve been awol while studying for the CFA. With level 3 hopefully behind me, I’m going to get back into the habit of writing. Let’s jump back into our series on the 1990’s with Seth Klarman’s letters as our guide to the period.

Klarman is a well-respected value investor who founded the Baupost Group in 1982. Since then he has generated an average annual return of 19%. Klarman’s investing philosophy can be summed up by the title of his book Margin of Safety: Risk-Averse Value Investing Strategies for the Thoughtful Investor.

This series of posts will reflect on Klarman’s activity during the period 1995 to 2001. Links to past posts: 1995, 1996, 1997, 1998

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