The Weekend Bulletin (Vol. 1 | Iss. 18)
A digest of some interesting reading material from around the world-wide-web. Your weekly dose of multi-disciplinary reading.
Volume 1 | Issue 18 | March 21, 2020
These are extraordinary times!!
A number of us may be too young (as individuals) to remember an epidemic of this scale or (as investors) to remember market volatility of this measure. Even for those who do, the memory may be too distant for a vivid recollection of how those times felt; and the current times serve no 'gentle' reminder of the past.
While we all have our own ways of dealing with stock market corrections, I believe a good place to start is by looking at history. Indeed, history does not provide precise answers, but it certainly provides a template to test your convictions against.
Section 1: Investing Wisdom
It is generally believed that once stock markets correct more than 20%, they enter in to a bear phase. Four most abused words just before, and during, a bear phase are: 'this time its different'. However, the four most needed words, especially during a bear market phase, are" 'this too shall pass'. Draw some comfort from this article which says that it'll all be good, eventually.
Indeed, this will all subside over time as postulated by the above article. In fact, it is known that long term returns from these bear markets turn attractive. However, what happens in the medium term - say 1-2 years after? Should investors remain invested after such a sharp fall or are they better off liquidating their investments and entering at a later point in time? This article may have some answers for you based on historical data.
On the other hand, what happens if you decide to plunge in to the markets after a reasonable fall? How does one decide to re-enter markets after a fall? What happens if you enter a little too soon? This article will help you find some direction.
While the above articles discuss the market in general, what about segments of the market? Should investors focus on extremely beaten down names, or should they buy in to the names that have corrected the least? Or should they take the middle path? This short twitter thread looks at historical data to answer this question.
Lastly, it is a good idea to revisit fundamentals, especially when the chips are down. This meditative note by Prof. Damodaran is a timely reminder that price and value can remain at a divergence for an extended period. If you have only one article to read from this section, then this should be it. Three things this article touches upon:
difference between drivers of price and drivers of value
how your liquidity is an important factor in determining your next investment move
how your edge as an investor determines your investments
Section 2: Mental Models & Behavioral Biases
It is at times of severe market stress that our worst behavioural impulses come to pass. Whilst the recent losses in the value of portfolios are undoubtedly painful; the poor decisions that we will make as a result of the torrid environment will likely prove more damaging to our long-term outcomes. Against such a turbulent market backdrop, which behavioural issues should we be most concerned about? This article provides a succinct list.
Section 3: Personal Development
With offices increasingly shifting to work from home to curb the spread of the virus, employees will unknowingly experience a very effective communication method. Asynchronous (not in real time) communication will lead to significant productivity gains and improve focus. Here is how to take advantage of situation. It's so good that we should consider adopting this for regular work days as well.
If you are looking to utilise the extra time (saved from not having to commute, as well as from productivity gains explained above) to develop better reading systems, then this article is for you. Shopify's director of production engineering explains his extensive reading system that helps him not only read more but also improve retention.
Special Feature: A few projects to fill the extra time this week
Assuming that you are going to be stuck at home for the better part of the week, we'll skip the trivia this week and look at the things that you can do to better yourself during the lock-down.
Spend some time with you children and relive your childhood through stories:
Or read your favorite comics Amar Chitra Katha / Tinkle for free until March 31, 2020.
Education
Art & Science
Books
Podcasts / Google talks (Some of my favorites)
How to get rich (by Naval Ravikant) : what started as a tweetstorm, ended up being a long (over 3.5 hours) interview podcast, which was later transcribed in to a giant article. A great meditation on the subject of wealth.
Howard Marks: Luck, Risk and Avoiding Losers [The Knowledge Project Ep. #53]: A stimulating conversation between Shane Parish and Howard Marks where Howard Marks discusses risk assessment, how to think different than the crowd, and the three mighty dares that separate the successful from the also-rans.
Grant Williams in Conversation with Anthony Deden: An enriched interview of a media-shy investor who opens up about everything, from his investment journey, to finding the right partners, to his investment philosophy and process. This one is guaranteed to sweep you off your feet.
Tom Gayner: "The Evolution of a Value Investor" [Talks at Google]: Another fabulous talk of an investor describing his journey, defining is investment philosophy and outlining his investment process.
In addition to the above, you can also take up some productivity improvement goals like improving your typing speed, reading speed and comprehension, learning better memory techniques etc. A simple google search should lead you to numerous free resources. Additionally, you can also browse through previous version of The Weekend Bulletin for a treasure trove of timeless reading material.
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Hoping the best for your health and wealth, and wishing you a wonderful & safe weekend!!
- Tejas Gutka.