The Weekend Bulletin (Vol. 1 | Iss. 19)
A digest of some interesting reading material from around the world-wide-web. Your weekly dose of multi-disciplinary reading.
Volume 1 | Issue 19 | March 28, 2020
Section 1: Investing Wisdom
So you have been waiting on the sidelines with some dry gunpowder (cash)? The markets have finally taken a beating. What do you do now? Should you go all in, or should you wait for more? What if you don't have cash, should you create some, borrow some, or is there some other way? This article answers most of these questions.
While we are at the topic of buying during a crisis, here is a novel, albeit simple, framework with which to evaluate such an activity. Understanding this may take off the burden of the emotional stress of buying in to a falling market. You may actually be doing yourself a favor by reading this article.
This is in stark contrast to the articles above, and probably borders on fear mongering. However, as much as investing breeds upon optimism, it also requires one to remain cognizant of the lingering risks. That is exactly what this review by KPMG does; it highlights the economic risks that can emanate from COVID-19. Some of the most important slides are appended below:
The pandemic hits at a time when the global economy was still in recovery mode
And not just economies, but households are struggling as well (especially in the developed world)
As with most crisis, debt remains a ticking time bomb, both amongst corporates.....
...and amongst economies
A long drawn rebound in economic activity seems to be the base case
Especially with most of the developed world facing twin risks:
Section 2: Mental Models & Behavioral Biases
We know very well that market movements are driven by greed and fear. The grips of these sentiments are so strong that no contrarian advise is paid heed to. For instance, we all know that the best time to buy is when there is a bloodbath on the streets. However most investors are unable to buy during panics - for if they did, the prices wouldn't sustain so low. How is it that we cant rationalise ourselves in to buying during bear markets? The following article by James Montier of GMO provides a good explanation of FEAR AND THE PSYCHOLOGY OF BEAR MARKETS.
Having knows the impact that fear can have on how we deal with a bear market, it is important that we develop strategies for effective decision making during such times. When it comes to the subject of decision making, who better than Michael Mauboussin to seek advice from? In a recent podcast, he discussed frameworks for making good decision in turbulent markets, monitoring stress, assessing valuation, and determining where to look for opportunities. You can listen to it here.
Section 3: Personal Development
Amidst the gloom spread buy the virus, accentuated by the lockdown and the sharp fall in share markets, here is a dated newspaper column reminding us of the importance the small, beautiful things in our lives. A much needed happy read.
Section 4: Trivia
Stuck at home with kids and lot of free time? Try teaching them this simple multiplication technique (also check the comment for some more such techniques):
Math not for you? How about animals. Google is using virtual reality to project animals into your home - a guaranteed way to keep them kids entertained. Here is how it works.
Bonus Feature: A few projects to fill the extra time during the lockdown
Have a lot of free time on hand and don't know what to do? The following are some high time-involvement activities that you can take up to fill the void. Under normal circumstances, you'd always find the 'too busy' excuse to take these up.
What better to do in free time than to learn from the wisdom of Warren Buffett? Indeed his investor letter are famous and available for free, however, if you prefer more organised material, then here are two free resources that can help you do so:
The best of each of WB's annual letters, sorted by year. Think of this as a distilled cue card for each letter.
If you wish to dig deeper, then this website has curated all of WB's wisdom by topics into sections and sub-sections. A great resource to look for specific knowledge and a great library to browse through in your free time.
This may also be a good time to get your kids and yourself acquainted with some mythology. Television network DoorDarshan will be recasting Ramayana starting March 28 (today) with one episode in morning (9 -10 am), and another in the evening (9 - 10 pm) as per this article.
If mythology is not for you, then maybe stand-up comedians, musicians and the likes are your types. Bookmyshow is hosting a number of free gigs for you. More details here.
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Have a safe and secluded weekend!!
- Tejas Gutka.