[The Weekend Bulletin] #112: Semper Augustus, Minsky Moment, Retention,...
Valuations, Experience, Transcript, and more.
A digest of some interesting reading material from around the world-wide-web. Your weekly dose of multi-disciplinary reading.
Section 1: Investing Wisdom
If investor letters were an episode, this one would be a couple of seasons. At 129 pages, it is the length of around half a book, and covers a multitude of topics (I am less than halfway through at the time of this writing). The first section of Christopher Bloomstran's (Semper Augustus) 2021 letter to clients talks about intrinsic value, and the link between earnings yields and forward returns. The second section charts the investments of two investors, a lesser known Mr. Smith and a well-known Mr. Buffett. The sections that follow cover thoughts on energy and commodities (oil), student-managed funds, book recommendations, followed by a deep dive into Berkshire. Lot of food for thought in this one.
There is a general belief that as stocks get expensive, a correction is due. Investors often look at valuations to take exposure to, or exit from, stocks completely. However, this is not a good strategy, as this article explains.
Section 2: Mental Models & Behavioral Biases
How do market cycles occur? What causes the pendulum to swing from euphoria to crisis and back? That is what this article attempts to explains, using Hyman Minsky's ‘financial instability hypothesis’. It then goes on to explain how the venture capital world today may be having its own Minsky moment. A very articulate and interesting read.
As Minsky bust is easy to read about. In fact, it easy to think that we can buy the dip, whereas in reality it may be very difficult to live through the dip. This difference between imagining a situation and actually experiencing it is, in some ways, a behaviour gap. Morgan Housel explains it here.
Section 3: Personal Development
We are consuming information at break-neck speeds today. And the speed at information comes to you is ever-increasing. When consuming at such a pace, it becomes difficult to retain most of it. Here is a good way that you can retain the important stuff.
A couple of weeks back (#110), I had shared a video: Principles distilled from interviewing world-class performers by Sean DeLaney. I enjoyed the talk so much that I transcribed it for a slower consumption. You can access it here.
Section 4: Blast From The Past
Revisiting articles from a past issue for the benefits of refreshing memory and spaced repetition, as well as for a fresh perspective. Below are articles from #38:
In his book, 'A Zebra in Lion Country' Ralph Wanger highlighted the institutional imperative (In Berkshire Hathaway's 1990 letter to shareholders, Warren Buffett defined the institutional imperative as “the tendency of executives to mindlessly imitate the behavior of their peers, no matter how foolish it may be to do so.”). Ralph also goes on to highlight his investment process, especially in small cap companies. His philosophy around finding small cap companies that have good fundamentals and buying the companies that are the ‘downstream’ beneficiaries to a major trend can be understood here.
Section 5: Readworthy Passage
Let's read together a random, but read-worthy, passage from a randomly picked book.
- From The Mahabhrata by Ved Vyasa
Inspired thought:
Quotable Quotes
* * *
That's it for this weekend folks.
Have a wonderful week ahead!!
- Tejas Gutka
[Feb 26, 2022]