The Weekend Bulletin (Vol. 1 | Iss. 31)
A digest of some interesting reading material from around the world-wide-web. Your weekly dose of multi-disciplinary reading.
Volume 1 | Issue 31 | June 20, 2020
Section 1: Investing Wisdom
One of the investor that I wish we could have heard more from is Seth Klarman, for he manages to distill so much insight in to such simple words. And therefore, everytime I find something that mentions his name, I pay attention; and I would request you to do so too. Here are 3 nuggets of eternal wisdom from Klarman's 2011 interview with Charlie Rose.
From eternal wisdom, lets jump straight to the current situation. There is an interesting dichotomy between the economy (mired by lockdowns, job losses, etc) and the stock markets (not very far from all time highs). As puzzling as this anomaly may be, it is not unusual, claims this article.
Over the last couple of weeks, we’ve been looking at new business models arising on the back of the internet. However, not everything that happens on the internet is good - ‘the internet is amoral’. Here is what time on hand, access to internet, discount broking, and a volatile stock market are fuelling. If you remember the ‘rubbish rally’ in the Hertz share prices from last week, then here is a behind the scene look at those investing in that rally.
Drawing a thread forward the previous article, the following two articles make interesting observations:
This article looks at the issue from the lens of morality and argues that it's not all bad. More importantly, it makes the assertion that making money is not necessarily a function of skill, and so dont write the day-traders off yet. This is something that we also look at in the next section.
This article skips morality and seeks lessons from what's going on. And it does find some timeless wisdom.
Section 2: Mental Models & Behavioral Biases
A new study looked at an old problem - while talent and efforts (inputs) follow normal distribution, why does wealth (output) follow power law (80:20 principle)? The answer is a catalyst that we all know, but do not acknowledge enough - Luck. It is the reason that the richest are not necessarily the most talented, and the most talented are not necessarily the richest.
Section 3: Lessons From History
We somehow learn our lessons better when they are conveyed through stories. More so, when these stories are real rather than fables. Amongst the writers that I follow, no one does this better than Morgan Housel. In his latest piece, he looks at four stories from history to teach us that the more things change, the more they remain same. He says,
"Predicting the future is hard. Few can do it. Understanding what’s going through people’s heads is easier, and almost as useful...If, rather than trying to predict the future, you put all your weight into the handful of behaviors that show up constantly in history and played a role in all the big moments, you get about as close as you can come to seeing the future."
Here's another great lesson from the past (his won, this time) teaching us how we should perceive risk.
Section 4: Personal Development
So often we witness that while trying to focus on a task (reading, listening, or watching), we may have drifted away momentarily to a different world. Called day-dreaming, it often carries a negative connotation. However, like most cognitive activities, there is no good or bad. It all depends on how make use of these cognitive conditions. Day-dreaming, or mind-wandering, is also not a bad activity, if we allow it consciously. After reading this, you will encourage your child to day-dream, rater than scold her for doing it.
Section 5: Trivia
Hidden behind this trivial information is wisdom that money can be made in a variety of businesses, and that the most well-known businesses may not necessarily be the best investments.
looked at 20 yr return data on some random companies whose businesses haven't changed much over the decades Some Winners: Nike - 23% CAGR NVR - 23% Union Pacific - 21% Heico - 21% Ball Corp (??) - 25% AZO / ORLY - 20% / 23% Sherwin - 19% BAM - 23.5% MCO - 18% Lockheed - 18%Surprises: Simon Property - 12% (despite recent events) DaVita - 23%! Towers not as good as I thought but not bad either: AMT/SBA/CCI all did between 10%-11% CAGR
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Have a wonderful weekend!!
- Tejas Gutka.