[The Weekend Bulletin] #198: Is Gold really a good inflation hedge?, How Do We Get New Ideas?, ...

... Misunderstanding Market Cycles, Mistakes and Risks to Avoid, A Toolkit for Motivation, and more.

A digest of some interesting reading material from around the world-wide-web. Your weekly dose of multi-disciplinary reading.

Investing Wisdom

• In my opinion, one of the most misunderstood or under-appreciated aspect of investing is the cyclical nature of things. It is my belief that everything is cyclical, over different time horizons. This article echoes my sentiments on the subject. Using the example of fund performance, it explains the problems that arise when we do not understand the cyclical nature of things in investing.

• An investor looks back and identifies some common threads in the mistakes that he made over his 2+ decades long career. He also recognises that the more themes that his mistakes fits into, the larger his losses were. He further lists some anti-dotes that investors can add to their process to reduce such mistakes.

• A version of Howard Mark's book - The Most Important Thing has comments from many investors, including Marks himself. He categorises his comments into four themes, one of them being 'the riskiest things'. This article lists such riskiest things that investors should try to eliminate from their investment process.

• Traditional theory has us believe that Gold is a good inflation hedge. Most market observers would agree that Gold prices rise in tandem with inflation. However, this article (backed by research) does not agree. The author lists a few other factors that have a bearing on gold prices.

Mental Models & Behavioral Biases

• 'How do people get new ideas?' That is the question with which Isaac Asimov starts this essay. He was invited to be a part of a group that was tasked with a creative project by the Advanced Research Project Agency of the US Government. While he chose not to become a part of the group, he penned an essay on creativity as his contribution to the group. In it, he describes not only the creative process and the nature of creative people, but also the kind of environment that promotes creativity. The essay was originally penned in 1959, but was made publicly available less than a decade ago.

Personal Development

• It's interesting how research has over the years revealed that a number of our abilities are not static, but can be developed with practice. Science has been proving that our abilities, like our muscles can be developed through a focused approach. One such ability if motivation - the drive to get things done, especially in the long term (recurring tasks over a long period of time). This article provides a scientific toolkit for improving self-motivation (the internal desire to get things done).

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 121:

• This short article asks a very important question: When Does Volatility Equal Risk? It then goes on to highlight three out of four scenarios in which volatility is indeed a risk for investors.

• This article makes an important distinction between various market moves. It asserts that investors would do well in knowing the difference between secular and cyclical markets.

• Stock markets are very rewarding. They reward you either with wealth or with lessons. The following two articles highlight some beliefs or lessons that if you remember across cycles will help you avoid the lessons and protect/grow the wealth. 

  • Morgan Housel - A Few Beliefs

  • Michael Batnick - Twenty Lessons Learned

• If there was only one link in this issue that you would want to click on, I would suggest this talk by Dr. Robert Sapolsky. Talking about his 1994 book Why Zebras Don't Get Ulcers, he provides a seemingly logical explanation of what stress is and what it does to our body (including the kind of stress signals you send you body when you go for that 5k run). You may have heard or read about this topic, but you would not have come across anything close to how Dr. Sapolsky puts it. He is a talented scientist and a gifted speaker. This talk is a mix of humor and horror. I wouldn't skip it.

Quotable Quotes

“We see many people are not ready to handle failures because they were not exposed to failure in their childhood. When a kid loses a tournament in front of everyone, family and friends, it’s a public failure. And imagine when he comes back and wins next time, what a positive impact he has on the rest of his life. The sport helps him to handle public failure at a very young age. In sports, not everyone can become a champion, but the valuable life lessons you get while playing matter the most. Whether you win or lose, you are still a champion.”

- P Gopichand

"When my brother and I were growing up, my father would encourage us to fail. We'd sit around the dinner table and he'd ask, "What did you guys fail at this week?" If we had nothing to tell him, he'd be disappointed. The logic seems counterintuitive, but it worked beautifully.

He knew that many people become paralyzed by the fear of failure. They're constantly afraid of what others will think if they don't do a great job and, as a result, take no risks. My father wanted us to try everything and feel free to push the envelope. His attitude taught me to define failure as not trying something I want to do instead of not achieving the right outcome.”

- Entrepreneur Sara Blakely, the founder of Spanx

[Getting There]

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That's it for this weekend folks.

Have a wonderful week ahead!!

- Tejas Gutka

[Jun 01, 2024]