Five things I learned this week: Nov 4th 2012

I hadn’t heard about one of the measures of central tendency of a data range — “mid range”. Turns out, there’s good reason for it. Mid Range averages the minimum and the maximum value of a dataset, so uses less information than mean and is more skewed by extremes. So, I can’t imagine an reason for using it, especially when as investors, we’re often trying to predict information using data, and trying to find a stable central tendency of it/its components.

On a similar topic, I learned about box-and whiskers plot to depict range of data. I think it’s a clever way to show the median, the range, and the quartiles.

Greece now has 20% of its population living below the national poverty line, and continues to slip fast. How does this not lead to a revolution in a still democratic society is hard to imagine.

The current “recovery” in the United States understandably feels less to be so for understandable reasons beyond the headline jobs (forget the unemployment rate as that is skewed by the falling participation rate to begin with)–the average weekly wage. U.S average hourly rate is at $19.57 and its growth has been falling recently. This means that now wage growth is barely keeping pace with inflation (even if we look only at CPI ex fuel and food).

Damodaran has an excellent post on how filings have become increasingly cumbersome to read with more data coming through with less information and has a slide up that talks about some of the ways to deal with it (http://people.stern.nyu.edu/adamodar/pdfiles/eqnotes/PG/Reading10KPG.pdf). I sort of agree but don’t really. I agree that when you’re simply looking to vet a company for investment, this is a good strategy, but when you’re putting money behind a name or are looking at a name which you already own, there’s no excuse not to read everything that’s in there (after 2-3 readings of Qs/Ks you know where they information centers live within the filings as the companies roughly follow a template that they pick). Services like FactSet’s Blackline reports can help you do the first pass as about 30-50% of the text remains the same. For example, risk factors is a section that I always skip after the first reading, unless there are any numbers in it (e.g. numbers behind >10% customers). As investors, we owe our clients the effort to read filings of the companies we put money behind. I agree that it is providing less and less value, but it would be criminal to lose something of value because we chose to only look for things we “care for”–i.e validating/confirming our bias. If you have read Einhorn’s book “Fooling Some of the People All the Time”, you know that he wouldn’t agree with Damodaran on this bit.

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