Things I Learned This Week – December 31st, 2017

Article: German Gastronomy, The Economist, December 23rd, 2017

When one thinks of Michelin star restaurants France and more specifically Paris comes to mind. But it seems like Germany has built quite a reputation in gastronomy. German village of Baiersbonn has a Michelin star restaurant for every 2,000 people. Paris has one for every 16,000 and London has one for every 100,000.

Article: Welcome to “nuclear-power town”, The Economist, December 23rd, 2017

China in its efforts to limit the size of its big cities has been rolling out campaign to brand cities. The goal is for cities to gain a specialty and then use that specialty to keep the population in that city and potentially attract tourism. But experts warn that specialties need to be gained organically and not via a forced marketing campaign. Some cities gain expertise in an area such as software or clothing and the brand evolves from that expertise. That makes sense. But in China branding is potentially used to spend more on property developments that may add no value. It is funny how a central government policy in a communist nation can go awry.

Exhibit: The City of Haiyan, Branded as the “Nuclear-Power Town”

Screen Shot 2017-12-27 at 9.27.27 PM

(Source: The Economist)

Article: Higher Still and Higher, The Economist, December 23rd, 2017

The Economist has published a fascinating story about lifts. It also discusses the latest developments, which is to try and do away with lifts that need cables.  Thyssen Krupp has harnessed high-speed rail technology to create a lift technology called Multi. It uses electromagnetic force to accelerate lifts. If this works as promised then lifts could go both vertical and horizontal, thus paving ways for new and interesting building designs.

Exhibit: Lift Height and Speeds

Screen Shot 2017-12-27 at 10.32.45 PM

(Source: The Economist)

Article: How Intangible Assets are Changing Investment, Buttonwood – Out of Touch, The Economist, December 23rd, 2017

If you interested in business, finance or investments, this article would be a must-read.  Authors of an article (Time to Change Your Investment Model) in the Financial Analysts Journal argue that it has become increasingly difficult to forecast earnings and make an excess return of 2%.  The returns have been falling because of the rising importance of intangible investments in recent decades in areas such as software or trademark development.  If a company acquires another business, the intangible assets are classified as assets on the balance sheet.  But, if they develop an intangible asset within the business, that is classed as an expense and is deducted from profits. Something to think about for anyone involved in any industry and especially for those in the software industry. How does the recognition of intangible assets in accounting affect innovation within a company and the management mindset?

This article also cites a book – Capitalism without Capital: The Rise of the Intangible Economy.

CapitalismWithoutCapital

Article: The Tobacco Parabox, The Economist, December 31st, 2017

In this scathing article about the worldwide tobacco industry, the author writes that: “…the world’s biggest multinational tobacco companies seem to be poised to save many consumers in the future, kill millions of them in the meantime and, through multibillion-dollar mergers, become even more powerful.”

The tobacco giants like Philip Morris and BAT have quickly garnered 4/5th of the market in e-cigarettes.

Article: Corporate Earnings: When Will the Profit Boom Fizzle, Fortune, December 15th, 2017

Shawn Tully argues in his article that in 2018 profits won’t expand by 11% and another 10% in 2019. That’s the type of profit expansion Wall Street analysts have been projecting.  Milton Friedman has stated that profits must move back to their traditional share of GDP and will grow at the pace of the economy. This year, corporate profits in the U.S. were equal to 9.5% of GDP. The long-term average since 1950 is 6.6%.

Warren Buffett has argued that corporate profits as a share of GDP tend to go far higher after periods when they’re depressed – and drop sharply after they’ve been hovering at historically high levels.

Article: The All-Tech Portfolio, Fortune, December 15th, 2017

Fortune magazine’s picks for 2017 crushed the market with a 33.9% return compared to 23.3% for S&P 500.They have assembled an all-tech portfolio for 2018 across various industries.

 

 

 

 

 

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