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Business Times
8 hours ago
- Business
- Business Times
Who are the world's best investors?
IF FINANCE has a single rule, it is that arbitrage should keep prices in line. If they do stray from fundamentals, so the argument goes, savvy investors should step in to correct them. All good in theory. In practice, less so. Markets can be swept by sentiment, detaching valuations from fundamentals. Economists have surgically documented persistent distortions. Purely mechanical flows, for instance, move markets even when they are known to investors in advance and unrelated to earnings prospects. When a stock is added to an index, its price inflates. Predictable dividend reinvestments also push up prices. Why does this happen? And who, in time, might correct the market? Ask on Wall Street for the identity of such arbitrageurs, and you get the usual suspects. Hedge funds and quant shops, armed with analysts and algorithms, are the most natural candidates. The industry has ballooned from overseeing US$1.4 trillion to US$4.5 trillion in assets over the past decade, and is well positioned to spot mispricings. Others suggest short-sellers, ever alert to signs of froth, or retail investors, now keen dip-buyers. One candidate gets mentioned rather less often: staid corporates. Such businesses are normally seen as passive capital-raisers, not active market participants and certainly not market disciplinarians. Even though they can act on perceived mispricings, firms typically focus more on expanding their own business than on searching for alpha. Bosses have operational backgrounds. They are more fluent in capital spending than capital markets. And when financial officers do wade into the market – to issue or buy back shares, for example – valuation is just one of many considerations, alongside avoiding taxes, ensuring a healthy credit rating and making sure the firm does not take on too much leverage. BT in your inbox Start and end each day with the latest news stories and analyses delivered straight to your inbox. Sign Up Sign Up And yet, a growing body of work suggests that corporations, far from being passive observers, are some of the market's most effective arbitrageurs. In 2000, Malcolm Baker of Harvard University and Jeffrey Wurgler, then of Yale University, found a tight connection between firms' net equity issuance and subsequent stock-market returns. Years in which companies issued relatively more stock were typically followed by weaker market performance. More tellingly, companies seemed to issue precisely when valuations were rich, and especially when other frothy signals, such as buoyant consumer sentiment, were drawing attention. Timing the market is impressive; out-trading the professionals is even more so. Yet, firms that issue or retire their own shares routinely do exactly that. In 2022, David McLean of Georgetown University and co-authors showed that corporate-share sales and buy-backs forecast future returns more accurately than the trades of banks, hedge funds, mutual funds and wealth managers. What explains this prowess? Part of the answer lies in firms' access to private information. Few are better placed to forecast a company's future cashflows than insiders. When a company begins buying back its own shares – or employees convert their options into stock-holdings – investors should pay attention. But informational advantages go only so far. They do not explain why firm-level issuance predicts aggregate stock-market returns. And firms' decisions are publicly disclosed: if they were merely signals of private insight, copycat investors quickly ought to arbitrage away any return. Instead, the success of companies may reflect not just what they know, but what they are able to do. They are unusually well-placed to act on mispricings. Start with short-selling. Firms have a natural way to take a contrarian view: when they believe their shares are overpriced, they can issue more of them. For a hedge fund to express a similar view, it must sell short the stock or purchase more complex products, such as put options. These strategies are not only expensive, requiring the payment of borrowing fees or option premiums, but also expose the investor to large losses and margin calls if the stock price rises. Risks become particularly acute during bouts of volatility, such as in January 2021, when retail investors sent GameStop's share price to astonishing heights. Hedge funds hesitated to short-sell for fear of making losses as investors piled in. GameStop's boss, by contrast, simply issued new shares. Companies also operate across markets. Almost every business finances itself with some combination of debt and equity. If one becomes unusually expensive, it can easily switch to the other. Yueran Ma of the University of Chicago finds that firms routinely move towards whichever market looks cheap. Such flexibility is rarely available to institutional investors, which are constrained by benchmarks and mandates. Only 28 of Vanguard's 267 funds can trade both bonds and stocks, for instance. Last, businesses benefit from insulation. They may face unhappy shareholders, but they do not face redemptions. When institutional investors mess up, their own investors pull out, forcing them to sell at just the wrong time. Firm hand The agility this engenders makes companies valuable providers of liquidity, too. As passive investing has grown to make up a fifth of the market, so has demand for stocks in the big indices. Who meets that demand, helping anchor prices? Marco Sammon of Harvard and John Shim of the University of Notre Dame suggest it is, once again, companies. Intermediaries such as active managers and pension funds buy alongside their passive peers. Firms step in to take the other side of the trade by issuing new shares. Similarly, when governments flood the market with short-term debt, firms respond by issuing longer-dated bonds. As asset managers become more passive, specialised or tied up by mandates, it is the firms they invest in that keep the market ticking. So thank your nearest chief financial officer. ©2025 The Economist Newspaper Limited. All rights reserved
Yahoo
15 hours ago
- Science
- Yahoo
'Shocking' find could change the way Aussies visit the beach
For 200 years, there has been speculation that swimmers could be tormented by more than one species of bluebottle jellyfish. It turns out there are at least four, including one in Australia that has a 'prominent nose'. 'We were shocked, because we assumed they were all the same species," Griffith University marine ecologist Professor Kylie Pitt said. Until recently, studying these notorious jellyfish has been a challenge because they're hard to keep in captivity, and when they wash up on the beach they disintegrate quickly. Speaking with Yahoo News, Pitt explained the game-changer has been advances in DNA sequencing. 'With our paper, we used the most powerful method, whole genome sequencing, so it's entire DNA has been sampled,' she said. 'By combining the DNA with morphology, we've got the strongest evidence possible for separating out the species.' The discovery is likely to have a direct impact on Aussie swimmers because it could help researchers better understand jellyfish behaviour and predict when they'll swarm towards beaches. Pitt was part of an international research effort by Yale University, University of New South Wales and Griffith University that sequenced the genomes of 151 jellyfish from around the world and published their findings in the journal Current Biology. A key finding of the study that the notorious Portuguese man o' war is only found in the Atlantic and is a completely separate species from Australian bluebottles. 'For a long time, people have said they're much bigger over there and the venom is much more potent,' Pitt said. 'Now we know that the potency of their venom might differ.' Related: 😳 Swimmer's painful encounter with deadly creature on Queensland island The existence of three newly described species, Physalia physalis, Physalia utriculus and Physalia megalista, had been proposed in the 18th and 19th Centuries, but the idea was later dismissed. The researchers also identified a fourth species Physalia minuta that had never been described before. 'The one that really stands out is Physalia megalista because it has a really pronounced nose,' Pitt said. It's also believed there are several distinct subpopulations shaped by regional winds and ocean currents. This new knowledge about bluebottles will have a real-world impact for swimmers, as there could be differences with the venom of Australian species too. It will also help support an investigation into jellyfish behaviour that's funded by the Australian Research Council. 🌏 Secret hidden beneath Australia's 'most important' parcel of land 👙 Tourists oblivious to disturbing scene 500m off sunny Aussie beach 📸 Confronting picture showcases state of Aussie wildlife on world stage Pitt explained a PhD student is working to understand how winds and currents move the bluebottles towards beaches, as well as how they move in the water. 'Bluebottles can actually erect their float or lay it down, depending upon what the wind conditions are. And they can also expand and or extend and contract their tentacles, which might act a little bit like a sea anchor, so there might be a bit more of a drag,' she said. 'Now we know there are at least three species in Australia she may need to look at their behavioural differences.' Love Australia's weird and wonderful environment? 🐊🦘😳 Get our new newsletter showcasing the week's best stories.
Yahoo
19 hours ago
- Science
- Yahoo
'Shocking' find after 200-year-old bluebottle jellyfish theory investigated
For 200 years, there has been speculation that swimmers could be tormented by more than one species of bluebottle jellyfish. It turns out there are at least four, including one in Australia that has a 'prominent nose'. Until recently, studying these notorious jellyfish has been a challenge because they're hard to keep in captivity, and when they wash up on the beach they disintegrate quickly. Griffith University marine ecologist Professor Kylie Pitt explained the game-changer has been advances in DNA sequencing. 'With our paper, we used the most powerful method, whole genome sequencing, so it's entire DNA has been sampled,' she said. 'By combining the DNA with morphology, we've got the strongest evidence possible for separating out the species.' Pitt was part of an international research effort by Yale University, University of New South Wales and Griffith University that sequenced the genomes of 151 jellyfish from around the world and published their findings in the journal Current Biology. She describes feeling 'shocked' by the result of the study. A key finding was that the notorious Portuguese man o' war is only found in the Atlantic and is a completely separate species from Australian bluebottles. 'For a long time, people have said they're much bigger over there and the venom is much more potent,' Pitt said. 'Now we know that the potency of their venom might differ.' Related: 😳 Swimmer's painful encounter with deadly creature on Queensland island The existence of three newly described species, Physalia physalis, Physalia utriculus and Physalia megalista, had been proposed in the 18th and 19th Centuries, but the idea was later dismissed. The researchers also identified a fourth species Physalia minuta that had never been described before. 'The one that really stands out is Physalia megalista because it has a really pronounced nose,' Pitt said. It's also believed there are several distinct subpopulations shaped by regional winds and ocean currents. This new knowledge about bluebottles will have a real-world impact for swimmers, as there could be differences with the venom of Australian species too. It will also help support an investigation into jellyfish behaviour that's funded by the Australian Research Council. 🌏 Secret hidden beneath Australia's 'most important' parcel of land 👙 Tourists oblivious to disturbing scene 500m off sunny Aussie beach 📸 Confronting picture showcases state of Aussie wildlife on world stage Pitt explained a PhD student is working to understand how winds and currents move the bluebottles towards beaches, as well as how they move in the water. 'Bluebottles can actually erect their float or lay it down, depending upon what the wind conditions are. And they can also expand and or extend and contract their tentacles, which might act a little bit like a sea anchor, so there might be a bit more of a drag,' she said. 'Now we know there are at least three species in Australia she may need to look at their behavioural differences.' Love Australia's weird and wonderful environment? 🐊🦘😳 Get our new newsletter showcasing the week's best stories.
Medscape
2 days ago
- Health
- Medscape
Are Disposable Vapes Hiding a Sweet Trap?
A recent study from Yale University, New Haven, Connecticut, and Duke University School of Medicine, Durham, North Carolina, found that the artificial sweetener neotame is present in many popular disposable electronic cigarettes (e-cigarettes) sold in the US, regardless of whether they contain nicotine. Neotame is several times sweeter than sugar or aspartame, and some products in European Union markets also contain it. Although the additive is considered safe in food, reliable data on its inhalation are lacking, which is a critical knowledge gap, given its prevalence in e-cigarettes. A spokesperson for the Federal Institute for Risk Assessment told Medscape Medical News , 'The Federal Institute for Risk Assessment has not yet addressed neotame in its assessments of e-cigarettes and has no information on its prevalence in e-cigarettes on the German market.' Manufacturers of tobacco and nicotine products have always relied on flavours to enhance the taste of their products and to appeal to young consumers. Sweet, fruity, and cooling additives are widely used in e-cigarettes. They not only enhance the appeal but also raise the likelihood of trials. Despite their key role, sweeteners in these products remain unregulated in both the US and Europe. Recently, neotame has received particular attention due to its unique properties. This chemical substance is 7000-13,000 times sweeter than table sugar and 35-65 times sweeter than aspartame. E-cigarette manufacturers prioritise neotame for its intense sweetness and thermal stability. It is used particularly in fruity or menthol-like 'cooling' flavours to intensify the taste and create a pleasant vaping experience. One example is the Cherry Lemonade flavour offered by the brand Tauro Vape. Study The researchers investigated which e-cigarettes available in the American market contained neotame. Their focus included the most commonly used disposable products, nicotine-free e-cigarettes, devices with synthetic nicotine analogues such as 6-methyl nicotine, and products either approved by the US Food and Drug Administration (FDA; eg, Vuse and NJOY) or submitted for approval (eg, JUUL). In most cases, neotame was not listed in the outer packaging. A total of 73 e-cigarettes sold in the US were analysed to check for the presence of neotame. These included 11 popular disposable brands, 4 nicotine-free products, 2 with synthetic nicotine analogues such as 6-methyl nicotine, all FDA-approved cartridge systems (eg, Vuse and NJOY), and two products purchased in 2021. Most packaging did not list neotame. For comparison, the team assessed a commercially available mint candy. Scientists dissolved e-liquids in methanol or water and measured the neotame using liquid chromatography-mass spectrometry. Furthermore, gas chromatography was used to detect nicotine, menthol, and synthetic cooling agents similar to menthol but without its typical taste, such as WS-3 and WS-23. Neotame and Toxicology Neotame was detected in 57 of the 73 e-cigarette samples (78%). The average concentration was 1.75 µg/mg of liquid, which is approximately 4.6 times higher than the neotame concentration in a strongly flavoured mint candy used as a comparison product. Neotame was found in all tested disposable products, all nicotine-free e-cigarettes, and all devices containing the nicotine analogue 6-methyl nicotine. In contrast, neotame was not detected in any of the FDA-approved cartridges, such as those from Vuse, NJOY, or any JUUL device. Two of the four e-cigarettes purchased in 2021 suggested that neotame has been increasingly established in e-cigarettes for several years. Devices with 6-methyl nicotine showed particularly high levels (average 2.69 µg/mg, range up to 18.3 µg/mg). The study indicated that neotame is deliberately used to optimise flavour, thus making e-cigarettes more appealing to adolescents and young adults. Previous research has shown that sweetening and cooling additives, such as sucralose or menthol, can significantly enhance the appeal and addictive potential of e-cigarettes. However, some crucial questions remain. 'We don't even know exactly how much of the neotame in the liquids ends up in the aerosol of an e-cig,' said Hanno C. Erythropel, PhD, lead author and research scientist at the Department of Chemical and Environmental Engineering, Yale University. 'And how much of that neotame actually reaches the sweet taste receptors to produce a sweet sensation? These are complex questions influenced by the type of e-cigarette, the power output of the device, the design of the device, and the user's puffing behaviour — to name just a few factors.' Heat during evaporation could produce chemical degradation products whose effects on the lungs, immune system, or central nervous system have not yet been studied. The relative heat stability of neotame compared with that of other sweeteners likely explains its use by manufacturers and poses a potential risk to consumers. Regulation Push In light of these findings, researchers have advocated the stricter control of sweetening additives in e-cigarettes. Disposable products, popular among youth and often containing high-potency sweeteners such as neotame, are of particular concern. From a scientific perspective, this is concerning, as even nicotine-free versions could have a significant addictive potential due to their appealing taste. Therefore, researchers urge comprehensive studies on the toxicological effects and abuse potential of these substances. Only on this basis can a decision be made as to whether neotames should be more strictly regulated or banned in the future.
Yahoo
3 days ago
- Business
- Yahoo
Tariff damage looms without new trade deal, says economist
May's lower import volumes through the Port of Los Angeles could be a sign of things to come absent a new trade deal with China, even as the tariff pause boosts U.S.-bound shipments even with year-ago levels. The southern California container gateway, a bellwether indicator for broader economic activity, saw its 10-month growth streak snapped on total throughput of 717,000 twenty foot equivalent units, 5% lower than the previous year's volume for the same month. The 9% drop in imports from the previous year and a sharp 19% decrease compared to April prior to the tariff pause created a striking variance from expectations. 'Inbound cargo totaled 356,020 TEUs, about 25% less than our projections from the beginning of April, prior to the tariffs' announcement,' said port Executive Director Gene Seroka, in a media totaled 120,000 units, also down 5% y/y, the sixth straight month of decline. Seroka said it was 'promising' that the U.S. and China continue to talk, referring to the recent negotiations in London. But 'tariffs remain elevated,' maintaining an impactful 55% rate on Chinese imports to the United States. The retaliatory tariffs from China, averaging 10%, contribute to an uncertain trade environment. Still, data from SONAR showed shippers taking advantage of the tariff pause. Through June 16 loaded container volume headed to the U.S. from Chinese ports was even with year-ago Tedeschi, director of economics at the Budget Lab at Yale University, in the briefing provided a detailed analysis of how the tariffs are affecting consumers and the economy at large. 'Tariffs to date announced in 2025 raise the average effective tariff rate in the United States by an additional 12 percentage points,' Tedeschi said. This increase translates into a 1.5% hike in prices for American families, which effectively reduces purchasing power by approximately $2,500 per family per year in 2024 dollars. Tedeschi said the regressive nature of tariffs 'hurt lower and working-class families more,' with those at the income scale's bottom experiencing a 2.5% pinch compared to the top's 1%. As the conversation turned to the inflationary impacts of tariffs, Tedeschi said it takes time for tariffs to flow through to the official data. He said tariffs on imported washing machines in 2018 took three months to influence consumer prices significantly. The current situation, complicated by factors like inventory levels and uncertain policy outcomes, suggests a gradual but persistent effect on inflation. Despite these challenges, there was a semblance of positive news shared with respect to future port activities. Seroka noted, 'Released just this week, the National Retail Federation's port tracker predicts a decline in imports for June, July, and August.' Although this points to continued caution, the port's operational readiness offers some optimism. 'Our velocity statistics are good,' Seroka emphasized, indicating that the port's infrastructure is well-prepared to manage fluctuating cargo volumes efficiently. Find more articles by Stuart Chirls here. WATCH: 'Dark fleet' tanker collision sparks fire near Strait of Hormuz Los Angeles box volume hits lowest level in two years Israel ports unfazed by new missile strikes UPDATE: Return of Red Sea cargo 'less likely' after attacks on Iran The post Tariff damage looms without new trade deal, says economist appeared first on FreightWaves. Error in retrieving data Sign in to access your portfolio Error in retrieving data Error in retrieving data Error in retrieving data Error in retrieving data
