Strategy

Information asymmetry, climate investing and the active management edge. By Garvin Jabusch The theory of efficient markets says all stock prices are perpetually accurate, because investors always have complete and up-to-date information about their holdings. But as any casual observer knows, information and topical awareness are not evenly distributed, even among professional analysts. Reality is always far more complicated than equity markets can quickly assimilate, meaning information asymmetry is a constant. While usually considered a type of market failure, information asymmetry is frequently used as a “source of competitive advantage.” The person with the most information is best equipped to make the best...

There is no shortage of things to worry about as we start 2023.  The Federal Reserve is (rightly, in our opinion) worried about inflation becoming entrenched, and so is likely to continue hiking interest rates for much of 2023.  Putin looks unlikely to concede defeat in Ukraine, and his desperation may lead to escalation, potentially even of the nuclear variety.  California seems to be washing away while remaining in a drought.  China has loosened the zero-Covid policies that helped the country continue functioning during the first stage of the pandemic, while much of the rest of the world shut down. ...

by Tom Konrad, Ph.D., CFA My friend Jan Schalkwijk, CFA of JPS Global Investments just asked me if I had any thoughts on Kontrol Energy (KNR.CN, KNRLF), a Canadian smart building firm I had never heard of. (I just added it to AltEnergyStocks.com's Energy Efficiency and Smart Grid stock lists.) The stock had just shot up after the client sold and went on a kayaking trip.  It had disclosed a sensor for detecting COVID-19 from the air. While I didn't have anything to say about the company, I did have some thoughts on dealing with the emotions around missing out.  Since it's...

For readers in the Hudson Valley, I will be giving a free talk next Monday night.  I will speak about applying permaculture design principles to your investment strategy.  While I developed my own strategy over the last two decades without any reference to these design principles, now that I'm familiar with them, I realize that I have been thinking along these lines for a long time.  The design principles are remarkably robust and intuitive. I used to think Permaculture was just about redesigning our food systems, but it's much much more than that. The talk is sponsored by the Rondout Valley...

Tom Konrad, Ph.D., CFA I don’t spend much time reading investment company ESG reports, but a friend asked me to take a look at a copy of the TIAA’s 2021 Climate Report.  I was deeply unimpressed.  Here are a few things in the report that triggered my greenwashing radar: TIAA wants to work with companies to improve their behavior.  They call this company engagement.  “e do not expect to account for the majority of our emissions reduction — we are primarily focused on company engagements” page 9. Much of TIAA’s emphasis is on reducing emissions from their own operations,...

By Tom Konrad, Ph.D., CFA An 80% Weasel Coefficient Some activists, including a friend of mine, recently had a conversation with representatives of TIAA to try to persuade them to divest from fossil fuels.  The conversation was mostly cordial, but predictably did not get anywhere. One of the activists summed up the response from TIAA as “a non-response with a weasel coefficient of at least 80%.”  Regarding the weasel coefficient, he also asked, Can anyone explain to me what "our overarching strategy which targets climate-risk adjusted returns over the long-term” means in plain English?  Well, yes.  Yes I can. Climate Risk Adjusted Returns When an investment...