the bottom line: 2015 articles archive home
A dozen biases:
Framing bias "The best example of narrow framing that I can think of is the use of pro forma earnings. Essentially this is a company turning up and saying, hello I’m lying to you, these are the earnings I didn’t make, but I’d be jolly grateful if we could all just pretend I did.” - James Montier Our brains only have so much cognitive capacity so humans suffer from in-attentional blindness. When people are told to focus on EBITDA, they often don’t see a lack of genuine profit and poor cash flow.

Denial bias “Denial ain’t just a river in Egypt.” - Mark Twain. Richard Feynman put it this way: “The first principle is that you must not fool yourself–and you are the easiest person to fool.”
Tuesday, December 15, 2015 ... more
The thing about penny stocks
One of my favourite pieces on penny stocks was the pump and dump recipe published at some time ago. It went something like this:

Ingredients 1. One penny stock; Ideally a former high flier or a newer issue that has failed to attract investor interest. 2. No institutional following. This is important - too many cooks may spoil the broth. 3. Low liquidity. Ideally, with large holdings tied up in the hands of management, family interests or other connections who are not ready sellers. 4. An industry that has the capacity to generate excitement - gold mining is a tried and trusted favourite but basically, anything that will make a good story...
Tuesday, December 8, 2015 ... more
An imaginary interview with Peter Lynch
Peter Lynch ran Fidelity’s Magellan fund for 13 years during which time he achieved annual returns of nearly 30%. From 1977 to 1990 he grew the fund from $18m in assets to $14bn. Consistently more than doubling the S&P 500 market index. Lynch retired at age 46, having coined a number of now famous mantras, such as ‘invest in what you know’, and coming up with the ‘ten bagger’ to describe a stock that has gone up 10 fold in value.

We turned to some of his earlier interviews to find answers to some of today’s pressing questions. Starting with whether there was a formula behind his success that we might follow.
Tuesday, December 1, 2015 ... more
learning from books
Plenty of books exist that directly school the reader on proper investment strategy. You can find pages upon pages of rules, guidelines and advice.

Some relevant books, however, fall outside the realm of investing or the merely “financial.” These have little to do with income statements, balance sheets or moving averages, but contain insights about the money game and ways to address it that you don’t find elsewhere.

For example, from Elliot Aronson and Carol Tavris' book Mistakes Were Made (But Not by Me) ...
Tuesday, November 24, 2015 ... more
Preparation, discipline, patience and decisiveness
Since human beings began investing they have been searching for a magic formula or an easy recipe for instant wealth.

According to Charlie Munger though the only way to come out on top is to work, work, work, work, and hope to have a few insights.
Tuesday, November 17, 2015 ... more
A HOLT Perspective
Michel Lerner, Co-Head of HOLT, delivered a paper last week at a Credit Suisse client colloquium on spotting investment opportunities in Africa. We met with him to get a basic explanation of the HOLT methodology and a Holt perspective on a few broad issues.

A basic description of HOLT could be that it examines accounting information, converts it to cash and values that cash.
Tuesday, November 10, 2015 ... more
Some rants
A rant: to speak or write in an angry manner; to express at length a complaint or negative opinion. – The Free Dictionary

“Stock exchanges once were operated as not-for-profit public utilities, managing the listing and trading of companies in the public marketplace. Today, they have morphed into rent-seeking, publicly traded companies in the zero-sum game of executing orders,” wrote Barry Ritholtz at The Big Picture.
Tuesday, November 3, 2015 ... more
Better-off alone
According to Victor Niederhoffer there’s nothing to be gained by studying what other speculators are doing or have done in the past, as only “in the humdrum everyday experiences, combined with the wisdom of immortals, does one learn the nitty-gritty of buying low and selling high.”

“If I did hold an ‘open sesame’ to the markets, I wouldn’t share it,” he says in his book, The Education of a Speculator.
Tuesday, October 27, 2015 ... more
Thinking of investing?
In an interview with Morningstar towards the end of last year William Bernstein said precious metals stocks were starting to pique his interest and that it might not be a bad time to add them to a portfolio.

However, the advice did come with the warning that if there’d been anything worse to invest in over the previous few years Bernstein hadn’t found it.
Tuesday, October 20, 2015 ... more
Last week...
…the world didn’t end. It was supposed to, according to the eBible Fellowship, a small online religious group whose leaders somehow interpreted the Bible as predicting Armageddon a result of the recent blood moon and a total lunar eclipse.
Tuesday, October 13, 2015 ... more
Change is not what it was
Change is not what it used to be. In the US entrepreneurial start-ups are reaching the $1bn valuation milestone quicker than ever before, and the average lifespan of S&P 500 companies has shrunk by almost two thirds in the last 50 years.
Tuesday, October 6, 2015 ... more
Latticework of mental models
The phrase ‘Latticework of Mental Models’ comes from Berkshire-Hathaway’s Charles Munger who has spent most of his life working out ways to, for lack of a better term, “think better.” Munger believes that in order to make better decisions in business and in life, it helps to understand the core principles of different disciplines.
Tuesday, September 29, 2015 ... more
Economists, academics, research analysts, fund managers and individual investors often have different and even conflicting theories about why the market works the way it does. But these theories are really nothing more than opinions. Some opinions might be better thought out than others, but at the end of the day, they are still just opinions.
Tuesday, September 22, 2015 ... more
Time in the market Tuesday, September 15, 2015
From Nedgroup Investments Tuesday, September 8, 2015
Risk Tuesday, September 1, 2015
Beyond the bad news Tuesday, August 25, 2015
Foxes and hedgehogs in the market Tuesday, August 18, 2015
Best done in isolation Tuesday, August 11, 2015
How does it help to know more? Tuesday, August 4, 2015
Different models Tuesday, July 28, 2015
Looking for yield Tuesday, July 21, 2015
Contradictions Tuesday, July 14, 2015
Greece, China & the US Tuesday, July 7, 2015
About risk Tuesday, June 30, 2015
Lessons from ... Tuesday, June 23, 2015
A new app Tuesday, June 9, 2015
Not always a mistake Tuesday, June 2, 2015
Movies & books Tuesday, May 26, 2015
Beating your biases Tuesday, May 19, 2015
Nicolas Darvas Tuesday, May 12, 2015
Insights Tuesday, May 5, 2015
Threats Tuesday, April 28, 2015
Planning and predicting Tuesday, April 21, 2015
Thinking about ... Tuesday, April 14, 2015
Finding growth Tuesday, April 7, 2015
Depending when Tuesday, March 31, 2015
3 market delusions: Tuesday, March 24, 2015
1929: How useful? Tuesday, March 17, 2015
Nervous and greedy or like a god? Tuesday, March 10, 2015
What Graham taught Tuesday, March 3, 2015
A bizarro world Tuesday, February 24, 2015
Irrational thoughts Tuesday, February 17, 2015
The importance of staying in the game Tuesday, February 10, 2015
One down eleven to go Tuesday, February 3, 2015
Davos 2015 Tuesday, January 27, 2015
No fewer than fifteen Tuesday, January 20, 2015
No other choice Tuesday, January 13, 2015
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