Written by subodh kumar on February 28, 2018 in Market Commentary Precis

Note Précis February 28,2018 – Governance To Matter:

Vitally even amid growth, current risks include deficits, debt and corporate scandal from the U.S. to Europe to Japan to China to India to Brazil and beyond. Relevant globally is the breadth of ongoing corporate tribulations in Japan. Also, ERISA emerged in the U.S. reacting to investment lapses in the go-go 1960s/70s. Social messaging and data massaging technology push with mass usage. They are espoused as early catalysts for market action. We are reminded of several realities. The use of mass data is not new but over half a century old in espionage and in econometrics, with mixed results. Espionage remains a dark art, despite probability theorists since 1948. The economics experience through many cycles since 1968 has been that mathematical formulae and statistical analyses do not alone lead to accuracy. Amid the investment rage in the late 1970s over conglomeration on their supposedly superior knowledge, we were at a seminar hosting two such, one new and feisty and the other, a century old. The representative of the feisty declared it to be driven by criteria. When asked about criteria, the representative of the classical pulled slowly on his pipe. He declared deadpan that they had standards. Both companies subsequently restructured. The feisty soon went out of business. The classicist did return to its roots but survived, with a stock price up many fold since. An investment lesson is that governance matters. It is an aspect about which to weigh central bank policy, volatility and momentum today. The mot de jour may not be criteria now but trendy instead has become momentum or being near term data driven. We favor quality and better balance, including governance even if not amenable to models.



StrategeInvest’s independent consultancy operates as Subodh Kumar & Associates. The views represented are those of the analyst at the date noted. They do not represent investment advice for which the reader should consult their investment and/or tax advisers. Any hyperlinks are for information only and not represented as accurate. E.o.e.  For disclosures, see www.subodhkumar.com

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