The Weekend Bulletin (Vol. 1 | Iss. 30)
A digest of some interesting reading material from around the world-wide-web. Your weekly dose of multi-disciplinary reading.
Volume 1 | Issue 30 | June 13, 2020
Section 1: Investing Wisdom
Markets are unpredictable; they do crazy things in the short-term (down 1800 points and then up 550 next day?). How does one deal with them? Two articles that arrive at the same answer by taking two different paths:
This short article provides an extremely simple solution - no fuss.
This long and statistical essay from the renowned professor of valuation intertwines narratives, consensus, and numbers to arrive at a conclusion that sometimes the markets narrative may be different than yours. But, don't bet against it.
"…this is the fourth great stock market event of my career and rightly or wrongly, we took a position in the previous three, where we felt nearly certain that we were right and we presented it that way...This one, without trying to pun, this one is novel, this is different. It is completely original. We have never had anything like this....The five most dangerous words or whatever it is in the English language said John Templeton. I responded by saying, "Forget the four words, the five most dangerous words in the English language is 'this time is never different'." Because occasionally, of course, something really important happens that is different. The Coronavirus is one of them."
Jeremy Grantham of GMO in this free-wheeling chat talks about past market crises, FAANGs, commodities, and why he is less certain about the current crises than he has been during the three other. A great listen; this talk transcends a wide range of topics: from equities, to commodities, to the relation between pesticides and fertility - both of soil and of humans, to the importance of venture capital over private and public equities, to advice to new investors and kindness. (transcript of the conversation is at the bottom of the podcast page).
If you haven’t had enough from the wisdom of the greats, maybe you want to indulge in the mistakes of a novice. This young investor, curator of this reading list, recently spoke about his investment journey, beliefs, and mistakes. You can see the video here. Have something to say about it? Feel free to comment below.
Last week we looked at an interesting new business evolving on the back of the internet economy. This week we look at another interesting business that is booming, thanks to the proliferation of the internet.
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Section 2: Mental Models & Behavioral Biases
‘Extending the Trend’ is a sin that most investors commit. We create a compelling narrative to justify why past performance has been particularly strong or weak. We then use that same narrative to predict its continuation, and therein lies a trap.This article looks at the mental model of Extrapolation, and why it is a dangerous tool in the hands of investors.
Section 3: Lessons From History
A recent rally in the share price of Hertz was unmissable. After declaring bankruptcy, the company’s stock hit a low of $0.59 on 26th May 2020. For some unknown reasons, the stock rallied from that low to over $5.4 in a little over a week. This article posits that such ‘rubbish rallies’ have in fact been witnessed in history as well.
Section 4: Personal Development
“Building wealth is a skill. A skill anyone can master given enough time and a relentless desire to learn and work hard.”
This (slightly elaborate) article is the most comprehensive meditation on building wealth that I have come across, outside of a book. It’s a great article to be read slowly, and repeatedly. If you are pressed for time, start from the section titled “8 principles to grow your wealth and income over time”, although I would urge you to persist through the entire article at least once.
Section 5: Trivia
The world is changing at a rapid pace; and some of these changes are going unnoticed. For instance, the video game market is not 2.5x bigger than the box office and music combined.
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Have a wonderful weekend!!
- Tejas Gutka.