Opening Bell: 9.5.17

Bridgewater’s Ray Dalio Dives Deeper Into the ‘Principles’ of Tough Love (NYT)
It was a performance review of sorts, and not in a good way. After mentioning his positive attributes, they spelled out the negatives. “Ray sometimes says or does things to employees which makes them feel incompetent, unnecessary, humiliated, overwhelmed, belittled, pressed or otherwise bad,” the memo read. “If he doesn’t manage people well, growth will be stunted and we will all be affected.” To Mr. Dalio, the message was both devastating and a wake-up call. His reaction: “Ugh. That hurt and surprised me.”

BlackRock Bets on Cross-Selling Blitz (WSJ)
BlackRock has spent much of the past year trying to interest J.P. Morgan, a big trading partner and technology client, in the services of a small business known as Financial Markets Advisory, according to people familiar with the effort. That unit has struggled to match the money it made in the aftermath of the 2008 financial crisis, when it assisted banks with a variety of regulatory and financial headaches.

China Bans Digital Coin Offers as Celebrities Like Paris Hilton Tout Them (WSJ)
Coin offerings this year have raised nearly $1.5 billion, up from $256 million last year. Paris Hilton on Sunday tweeted about a coin offering. Boxer Floyd Mayweather has promoted two separate offerings. Tim Draper, a founder of the Silicon Valley venture-capital firm Draper Fisher Jurvetson, has said two of his coin holdings could bring about a “sea change as big as the internet.” SEE ALSO: Bitcoin Tumbles as PBOC Declares Initial Coin Offerings Illegal

Don’t be fooled, the authorities are coming after ICOs (FT Alphaville)
If you’ve been watching the excellent three-part Netflix series ‘Narcos’ on Colombian drug lords in the 80s and 90s, you’ll have learnt by now that when faced with cross-border criminal enterprises of state-undermining proportions, authorities — especially American authorities — have a habit of waiting, watching, collecting evidence and then setting major precedents (usually with the help of ingeniously constructed honey pots). We suspect the free-for-all in ICO issuance will be dealt with no differently.

Finance Geeks Will Love This New Movie About the Tulip Bubble (BBG)
Math is simple. It’s reality, the fundamentals and the underlying supply and demand for whatever’s being traded. The story is where human psychology enters the picture. It’s what causes people to extrapolate wildly, move in herds, and swing from bouts of extreme pessimism to embarrassing optimism. Markets can whipsaw wildly based on story alone, though in the end, raw math eventually wins out. Markets are at their most exciting when the gap between math and story is massive, when humans are fully in the driver’s seat and prices no longer bear any resemblance to reality. With this in mind, a financial bubble is the perfect setting for a romantic drama because, well, love is the other obvious area where the stories we tell and get swept up in can diverge so sharply from actuality.

To Understand Rising Inequality, Consider the Janitors at Two Top Companies, Then and Now (NYT)
The $16.60 per hour Ms. Ramos earns as a janitor at Apple works out to about the same in inflation-adjusted terms as what Ms. Evans earned 35 years ago. But that’s where the similarities end. Ms. Evans was a full-time employee of Kodak. She received more than four weeks of paid vacation per year, reimbursement of some tuition costs to go to college part time, and a bonus payment every March. When the facility she cleaned was shut down, the company found another job for her: cutting film.Ms. Ramos is an employee of a contractor that Apple uses to keep its facilities clean. She hasn’t taken a vacation in years, because she can’t afford the lost wages. Going back to school is similarly out of reach. There are certainly no bonuses, nor even a remote possibility of being transferred to some other role at Apple.

Profit rather than culture presents Uber’s biggest hurdle (FT)
Driving people around is a tough business, wherever you are in the value chain. As this becomes clearer, Mr Khosrowshahi must be wondering how long investors, who have sunk more than $15bn into Uber, will keep cutting big cheques. Mutual funds are writing down the value of their stakes already. Uber’s culture and its balance sheet may be reformed less by the choices of its new leader than by pressures from rivals and rationality from investors. It is not clear how much of the business will remain once order has been imposed.

Strategic-Beta Funds Aren't as Distinctive as Advertised (Morningstar)
Strategic-beta funds tend to be more expensive than traditional market-cap-weighted alternatives and are often presented as a better way to invest. But this study suggests that strategic-beta funds aren't as distinctive as advertised. Most of these funds just repackage market risk, along with size and value exposures that simple cap-weighted indexes can offer. This approach can pay off, as a large minority of strategic-beta funds did outperform their replicating portfolios. However, investors shouldn't pay significantly higher fees for these strategies than market-cap-weighted alternatives, which capture the same performance drivers and can replicate most of their returns.

Profit Margins, Bayes’ Theorem, and the Dangers of Overconfidence (Philosophical Economics)
Winning in the investing game isn’t simply about having true prior beliefs about the world. It’s also about efficiently updating those beliefs in response to feedback from reality. The primary mistake that I made in the above scenario was not the mistake of having incorrect prior beliefs about the likely future direction of corporate profit margins–from the perspective of what I knew in 2011, those beliefs were reasonable beliefs to have. Rather, my primary mistake was my failure to properly update those prior beliefs in response to the steady stream of disconfirmation that kept coming in.

Trump’s team and lawmakers making strides on tax reform plan (Politico)
One idea quietly being discussed would be taxing the money that workers place into their 401(k) savings plans up front: an idea that would raise billions of dollars in the short-term and is pulled from the Camp plan. This policy idea is widely disliked by budget hawks, who consider it a gimmick; the financial services industry that handles retirement savings; and nonprofits that try to encourage Americans to save.

Pope Francis saw a Jewish psychoanalyst to ‘clarify some things’ (NYP)
La Stampa, an Italian daily, quoting from some of the conversations Friday, said Francis went to the analyst’s home. Francis was quoted as saying: “One day, when she was about to die, she called me. Not to receive the sacraments, since she was Jewish, but for a spiritual dialogue [...] She was a good person. For six months she helped me a lot,” Francis said.