Some Small Hedge Funds Reap Big Gains in Tough Times; Traders Quit Banks to Earn $4.8 Million Hedge Fund Salaries in Brazil; GE to Pay $200 Million to Settle SEC Accounting Probe; This Japanese Shop Is 1,020 Years Old; An Uplifting Update, on the Terrible World of Pornhub; My latest thoughts on the pandemic

1) It's good to see smaller funds (I managed one for nearly two decades!) doing well. Some Small Hedge Funds Reap Big Gains in Tough Times. Excerpt:

Hedge funds are trailing the U.S. stock market this year. Some of the smallest funds are emerging as some of the best performers, driving greater demand for these types of managers.

Funds with less than $1 billion in assets are benefiting from their more manageable portfolios. They can dart in and out of holdings to protect gains or minimize losses amid the market volatility that has characterized this year. They also get more bang for their buck – making investments that require less firepower to affect their overall performance.

2) And I thought things were getting crazy in the U.S.! Traders Quit Banks to Earn $4.8 Million Hedge Fund Salaries in Brazil. Excerpt:

As hedge funds around the world shrink because of low returns and high fees, one country is bucking the trend: Brazil, where traders are quitting their bank jobs in droves to try their luck at potential multimillion-dollar payoffs.

"New asset-management firms are raising money and posting fast profits, so they have a lot to spend on traders' compensation," Leon Goldberg, a partner at XP Inc., Brazil's biggest brokerage, said in an interview. "Many of them are taking talent away from competitors."

Senior executives in Brazil are abandoning long careers at major banks including JPMorgan Chase & Co., Credit Suisse Group AG, and Itau Unibanco Holding SA to create their own hedge funds and equity funds, lured by the chance for more independence and fatter paychecks. Several firms are poaching each other's ranks as the fight for talent intensifies.

A top hedge fund trader can earn more than 25 million reais ($4.8 million) a year in Brazil, with a handful of the biggest asset-management stars hauling in as much as 100 million reais in total compensation, according to people familiar with industry pay levels.

3) In my August 6 e-mail, I wrote:

I wanted to share my thoughts on the book I just finished, Lights Out: Pride, Delusion, and the Fall of General Electric.

It documents the utter collapse of one of the world's most iconic businesses, resulting in the destruction of more than $500 billion in market cap since 2000, when the company was briefly the most highly valued in the world. This New York Post article captures the sordid story well: How a power-hungry CEO drained the light out of General Electric.

I was reminded of this yesterday when I saw this article in the Wall Street Journal: GE to Pay $200 Million to Settle SEC Accounting Probe. Based on the widespread accounting fraud and misleading of investors that Lights Out documents, I think General Electric (GE) got off with an absurdly light slap on the wrist...

4) What a fascinating article in the New York Times: This Japanese Shop Is 1,020 Years Old. It Knows a Bit About Surviving Crises. Berkshire Hathaway's (BRK-B) Charlie Munger would have a field day going through the mental exercise of identifying the characteristics of a business that will last over 1,000 years! Excerpt:

Japan is an old-business superpower. The country is home to more than 33,000 with at least 100 years of history – over 40% of the world's total, according to a study by the Tokyo-based Research Institute of Centennial Management. Over 3,100 have been running for at least two centuries. Around 140 have existed for more than 500 years. And at least 19 claim to have been continuously operating since the first millennium...

The businesses, known as "shinise," are a source of both pride and fascination. Regional governments promote their products. Business management books explain the secrets of their success. And entire travel guides are devoted to them.

Most of these old businesses are, like Ichiwa, small, family-run enterprises that deal in traditional goods and services. But some are among Japan's most famous companies, including Nintendo, which got its start making playing cards 131 years ago, and the soy sauce brand Kikkoman, which has been around since 1917.

To survive for a millennium, Ms. Hasegawa said, a business cannot just chase profits. It has to have a higher purpose. In the case of Ichiwa, that was a religious calling: serving the shrine's pilgrims.

I think there are many good business lessons here. At the top of my list would be: Don't let any Harvard MBAs (I am one) within a country mile of a business if you want it to last – LOL!

5) In Monday's e-mail, I wrote:

Blasting business leaders who do the wrong thing in order to profit (typically by boosting their stock prices) is a regular theme in my e-mails.

Pornhub is perhaps the most extreme example I've ever come across, as New York Times columnist Nicholas Kristof documents in one of the most powerful, important, and I suspect, policy-changing articles of the year, The Children of Pornhub.

I'm pleased to say I was right about the "policy changing" nature of Kristof's article, as he reports in yesterday's follow-up column: An Uplifting Update, on the Terrible World of Pornhub. Excerpt:

We all need uplift this terrible year, so here's inspiring news about some young heroes and the good they've achieved on a wrenching topic.

Young men and women who had been exploited by Pornhub as children shared their stories, their documentation and their mortification in hopes that this might prevent other children from being abused. And now, guardedly, there's hope that they've brought about change.

Pornhub on Tuesday announced huge moves that could – if thoroughly put into effect – significantly curb future exploitation. I don't trust Pornhub a bit, so officials will need to monitor this sector in a way they haven't before.

And perhaps that will happen. Four senators, Josh Hawley, Maggie Hassan, Joni Ernst and Thom Tillis, on Wednesday introduced bipartisan legislation to make it easier for rape victims to sue porn companies that profit from videos of their assaults. Another senator, Jeff Merkley, is separately drafting bipartisan legislation to regulate such companies more rigorously, and Prime Minister Justin Trudeau of Canada (which is home to Pornhub) said Tuesday that his government was developing new regulations for these platforms as well.

Visa and Mastercard are reviewing their ties with Pornhub; there are calls for criminal prosecutions; activist groups like Traffickinghub are demanding action; and lawyers are circling with civil suits.

All this may explain why Pornhub on Tuesday announced three steps that mirrored suggestions I made in a long investigative column over the weekend that quoted the young people who so bravely told their stories. 1.) It will allow videos to be uploaded only by people who have verified their identities. 2.) It will improve moderation. 3.) It will no longer allow video downloads, which allow illegal material to proliferate.

6) In my latest e-mail to my coronavirus e-mail list last night, I:

• Commented on the column in the Wall Street Journal by South Dakota's governor: South Dakota's Balanced COVID Response
• Compared South Dakota to eight other states
• Shared my thoughts on lockdowns and whether they work
• Explored why Peru has been so much harder hit than Kenya

To read it, click here... and to subscribe to this e-mail list, simply send a blank email to: cv-subscribe@mailer.kasecapital.com.

Best regards,

Whitney