Financial News – September 10, 2016
Wells Fargo Fined $185 Million After Employees Opened 2 Million Unauthorized Accounts
5,300 Wells Fargo employees have recently been fired after having opened millions of accounts so the employees could “earn” extra compensation for opening accounts. Fees on these accounts ranged from a more standard $8-$10/month on business accounts to $40 a month to money market accounts. Many of these abuses were committed by having customers sign many, many, pages of documents, which they thought were just bureaucratic necessities to open a single account.
“Wells Fargo built an incentive-compensation program that made it possible for its employees to pursue underhanded sales practices, and it appears that the bank did not monitor the program carefully,” said CFPB Director Richard Cordray.
Unfortunately, this type of headline can feel a bit routine…”Oh look, another abuse of consumers by a Wall Street megabank….”
How Elizabeth Holmes’s House of Cards Came Tumbling Down
Vanity Fair has a great exposé about the Theranos blood-testing start-up scandal. How Elizabeth Holmes, CEO and founder of Theranos, had deceived the public and investors about the accuracy and efficacy of the technology they were building. Her company was shrouded in secrecy, with Holmes one of the only members of the company who knew what was really going on. To the public, she claimed that their microfluidic testing could test for thousands of diseases in blood, with just a drop of blood. But the reality was that Theranos continually struggled with developing an accurate technology. The article is worth a read to delve into how the story of the company outshone the reality of its successes and failures.
The Three Most Important Words? ‘I Don’t Know’
Barry Ritholtz makes some great points about the ridiculousness that surrounds the Theranos scandal. Basically, it was built on zero fact-checking and hope. Many investors and pundits did not admit they didn’t know how the company did what it was claiming to do with the blood test technology it offered. I’d like to add that knowing your circle of competence, which Buffett and Munger expound upon at length, (and not straying beyond it) is of utmost importance in investing.
G-20 Leaders Pledge to Fight Slow Growth
“The statement called for G-20 members to use “all policy tools” including monetary, fiscal and structural policies either individually or collectively depending on situations in the respective countries.”
Although I’m not sure what the governments will feasibly do to bolster economies in the near future. The US needs a huge infrastructure overhaul, so unless we’re talking about useful infrastructure projects in the trillions of dollars for things we need (not just to create jobs) I don’t think the government can do much to help the slowing economy.
The John Bogle Stock Valuation Model – Bogle Predicts 2% Stock Returns For The Next Decade
By any valuation measure the United States markets are expensive. This leads to lackluster performance in the longer term because markets are cyclical and mean-reverting. What goes up more than average tends to have lower returns in the future. Sometimes it takes a while, but the mean reverting nature of markets always comes roaring back.
Now You Can Finally Use Your Drone to Make Money
“The U.S. Federal Aviation Administration’s new drone regulations limit commercial operations to relatively low-risk scenarios. The aircraft must weigh less than 55 pounds, remain below 400 feet, and cannot fly beyond the operator’s visual line of sight, at night, or directly over crowds of people.”
Underperformance: Not a Bug, a Feature
It takes guts to be a contrarian investor and do something different from what everyone else is doing. And doing something different is the only way to become a stellar investor. This article takes a look at the long periods of underperformance of the better investors out there.
“When I looked at some of the best track records out there, they underperformed the S&P 500 or 60/40 portfolio most of the time.”…” Buffett’s Berkshire Hathaway has underperformed the market a little more than half the time.”
Apple iPhone 7 Plus’s new dual camera: Computational imaging finally goes mainstream
Apple has quite the buzz going for it, both for and against, having stripped the iPhone 7 of its headphone jack, but the camera tech its adding is a real step forward. iPhone 7 Plus’s new dual camera system allows analog zooming by changing lenses and utilizing two cameras for instant post processing. By having two cameras at different angles you can do things like refocus an image after the fact or have a better chance of your pictures being in focus.
Now I’m off to watch the Battle at Bristol…Go Hokies!