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C&B Notes

The purpose of C&B Notes is to pass along ideas, concepts, stories, and information that are informing and influencing our worldview and thought.

Which Tops Are Popped Where
July 28, 2017

A look at the world’s most popular beers by country demonstrates just how much consumers are attached to their “local” label.

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High Yield + Cov-Lite = Madness
July 24, 2017

Covenant-lite loans, with their often significantly reduced creditor protections, have been an increasingly large part of one corner of the debt issuance market over the past several years. When these cov-lite loans are issued by high yield borrowers, yield-chasing buyers better beware.

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Resistance Grows in Turkey
July 23, 2017

Turkey’s drift towards authoritarianism and Erdogan’s consolidation of power have accelerated since last year’s coup attempt. Despite the rising personal costs for those opposed to Erdogan’s regime, resistance is growing.

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Red Tape Reduction in India
July 19, 2017

Quick update from one of last month’s Notes: the early returns are positive for India’s new streamlined goods and services tax, which aimed to reduce shipping time and to help businesses save on logistics costs. Prime Minister Narendra Modi is making fundamental reforms that could help transform India’s economy.

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Collective Computation
July 17, 2017

C4, a research group at the Santa Fe Institute, studies all levels of biological organization - from societies of cells to societies of individuals to machine-human hybrid societies - to better understand collective behavior, collective computation, and collective intelligence. The group has begun recently to extend its efforts into the complex adaptive systems that are financial markets.

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(Less) Cash on Delivery
July 14, 2017

Amazon and other online retailers are enjoying a taxpayer subsidy as the US Post Office loses money on their package deliveries. Is this subsidy durable, and if not, how big of an impact would it have on the industry? Delivering goods the last mile to doorsteps is expensive, and it doesn’t exist in many countries.

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Streamlining India’s Commerce
June 29, 2017

India will likely have the world’s largest population within the next decade but not the world’s largest economy. Reducing the red tape and bureaucracy in India is an enormous task, but it is a prerequisite for India’s economy to realize its potential.

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Venezuela Torn in Two
June 20, 2017

Venezuela is a country torn against itself. A special election is set to take place in late July that will install lawmakers sympathetic to Nicolás Maduro. his “constituent assembly” will then soon start rewriting the country’s constitution to further entrench the current regime. The popular outcry against Maduro and the horrible direction that the chavista movement has taken the country remain immense. This story describes the brutal conundrums facing Venezuelans.

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China’s Debt Shell Game
June 17, 2017

As China’s corporate bond market dries up, the country’s shadow bank market has returned as a source of capital. When will the carousel stop turning?

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Looking in the Mirror
June 15, 2017

This 1999 speech by Jason Zweig, inspired by his first encounter with Daniel Kahneman (well before Kahneman was a household name), made us want to spend the afternoon rubbing our noses in our biases and common mistakes in an effort to avoid making these same gaffes in the future. It was also a stark reminder, from a bull market past, of the wealth-destroying inability of so many investors to look much beyond the end of their noses.

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Unforced Errors in China
June 5, 2017

Given an appropriately structured mandate and a suitably long-term perspective, there are no called strikes in investing. You don't have to dance just because the music is playing.

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Details, Details, Details
May 31, 2017

A requirement of a concentrated portfolio like ours is that the rule of law is sufficient (i.e. we feel like outside capital will be treated fairly) in the places in which we invest. The typical developed, emerging, and frontier market categorizations loosely address this issue, but this distinction is a blunt instrument. Our approach requires a more refined, ground-up assessment of geopolitical and legislative condition of each market, and new research hints more closely at the subtleties that we believe are important to our decision-making process on this front.

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Wal-Mart Retools E-Commerce
May 29, 2017

Richard was recently quoted in a BloombergBusinessWeek story on Wal-mart’s re-positioned e-commerce strategy and the new leadership for these online efforts, headed up by Jet.com’s Marc Lore.

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Peering Into The Future
May 27, 2017

The usefulness of CAPE as a valuation metric for broader markets has become a religious argument. CAPE clearly cannot be used to market time (what can?) and this time could always be different, but this EconompicData chart illustrates what we consider a fundamental “law” of finance – price and returns are inversely related. That is, the higher the valuation of an asset, the lower the expected return should be for that asset (and vice versa).

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Too Much of a Good Thing
May 16, 2017

Good and effective governance is not primarily a result of an exhaustive set of rules and regulations, but rather a product of a strong and clear culture of accountability and doing the right thing on behalf of all stakeholders. For some companies, good board governance practices have swung way too far towards independence, which is far from a cure-all.

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Are Retailers Overpromising?
May 10, 2017

Consumers are being conditioned to enjoy a very expensive solution (for the retailers) to the complicated problems of look and fit when shopping for many product categories online. Over the longer-term and in order to be profitable, the retailers will need to be compensated for this service. We are dubious that consumers will be willing to pay for it.

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