October - December 2018 articles archive home
Dream on
I pop my head outside the window to look at the ocean. I’m doing my 30 minutes of “work”, making sure that my orders are being correctly processed on the server in London. I could have done it earlier, but I decided to go for a walk on the beach instead, and afterwards I stopped at El Mercado for a Café con leche. Later I’ll go cycling and take the dog for a walk in the mountains.
Tuesday, December 11, 2018 ... more
Wishful thinking
Investors have become so mesmerized by the smoke and mirrors that they believe Wall Street is telling them the truth. In an ideal world, they’d be able to obtain realistic messages about the probability of achieving trading success from brokerage firms, vendors, trading gurus, books, and courses.
Tuesday, December 11, 2018 ... more
6th extinction
The current worldwide loss of biodiversity is popularly known as the sixth extinction: the sixth time in world history that a large number of species have disappeared in unusually rapid succession, caused this time not by asteroids or ice ages but by humans.
Friday, December 7, 2018 ... more
Simple question
A major impediment to our ability to obtain useful information and insights in financial situations is our, often overwhelming, desire to manage how we appear to others. We are prone to ask, or fail to ask questions, because
Thursday, December 6, 2018 ... more
Rotten or not?
"We have always liked the analogy between shopping for fruit and value investing,” says Jacob Wolinsky at Trapeze Asset Management. “It's our job to determine whether a business has sold off because of a minor blemish, one that could be
Wednesday, December 5, 2018 ... more
Schwager on trading
One of my favourite one-liners on the markets is Jack Schwager’s “There's a million ways to make money in the markets. The irony is that they are all very difficult to find.” Schwager, probably best known as the author of the Market Wizards series
Tuesday, December 4, 2018 ... more
Schwager on risk
I think it was in New Markets Wizards that I said you should limit your risks to a very small level. I might have said about 1% or 2% or less. Now I feel it should be 1% maximum and ideally half a percent or less. So yes, I believe if you
Tuesday, December 4, 2018 ... more
Thinking in bets
Every decision commits us to some course of action that, by definition, eliminates acting on other alternatives. Not placing a bet on something is, itself, a bet … A decision about a stock - buy, don’t buy, sell, hold, not to mention esoteric investment
Friday, November 30, 2018 ... more
As is was
It is utterly useless for us on the outside that buy and sell comparatively small blocks of stocks, to conjecture upon what “they” are doing. We cannot know what the insiders intend to do, but we can see their orders on the tape
Thursday, November 29, 2018 ... more
Bonds & stocks
If you buy a 30-year government bond, it has a whole bunch of coupons attached... And the coupon says 3%, or whatever. And you know that's what you're going to get between now and 30 years from now. And then they're going to give you
Wednesday, November 28, 2018 ... more
Markets 101
Wall Street wisdom, such as it is, largely revolves around a few eternal quandaries. And because they are never settled in one direction or the other, investment pundits thrive by dispensing conspicuously contradictory advice. According to some
Tuesday, November 27, 2018 ... more
Growth stocks
One of the oldest sayings on Wall Street is "Let your winners run, and cut your losers." It's easy to make a mistake and do the opposite, pulling out the flowers and watering the weeds. There are two ways investors can fake themselves out
Tuesday, November 27, 2018 ... more
Struggle porn
Two messages that are regularly conveyed on entrepreneurship: 1) Entrepreneurship is hard, but work hard and you can succeed. 2) Struggling is good. In other words, you should be working long hours, failing for years, you shouldn’t be comfortable, because comfortable is death, or worse, mediocrity.
Friday, November 23, 2018 ... more
When poor
Trying to align with the standard expectation of how to interact with your money when you’re low income,” says Linda Tirado, who wrote Hand to Mouth: Living in Bootstrap America, “is useless: You are adapting to your circumstances
Thursday, November 22, 2018 ... more
“I remember when” shapes our beliefs. We view the world through the prism of our own experiences, whether we realize it or not. The arbitrary fact of when you were born might be the single most important factor when determining your experience
Wednesday, November 21, 2018 ... more
What follows is the retelling (the full version) of a true story first told (only in part) by Greg Lukianoff and Jonathan Haidt in their book, The Coddling of the American Mind. How Good Intentions and Bad Ideas Are Setting Up a Generation
Tuesday, November 20, 2018 ... more
Reality: Your beliefs
As a 'belief engine', the brain is always seeking to find meaning in the information that pours into it. Once it has constructed a belief, it rationalizes it with explanations, almost always after the event. The brain thus becomes invested in the beliefs
Tuesday, November 20, 2018 ... more
More like poker
The problem with using chess as a model for the kinds of decisions that we make in life is that chess is a very constrained problem, meaning there just isn’t a lot of uncertainty in it. There is a very little bit of luck and there’s no hidden information
Friday, November 16, 2018 ... more
OK to wait
Some argue that being less than fully invested is akin to market timing. But isn’t a yes or no decision the crucial one in investing? Where does it say that investing means always buying something, even just the best of a bad lot?
Thursday, November 15, 2018 ... more
Intrinsic vs book
Value is destroyed, not created, by any business that loses money over its lifetime, no matter how high its interim valuation may get. Intrinsic value can be defined simply: It is the discounted value of the cash that can be taken out of a business
Wednesday, November 14, 2018 ... more
More Munger
It's natural that you'd have more brains going into money management. There are so many huge incomes in money management and investment banking - it's like ants to sugar. There are huge incentives for a man to take up
Tuesday, November 13, 2018 ... more
Ben Graham had a lot to learn as an investor. His ideas of how to value companies were all shaped by how the Great Crash and the Depression almost destroyed him, and he was always a little afraid of what the market can do. It left him with
Tuesday, November 13, 2018 ... more
Listen to what is being preached. Look at everyone around us … [how] they seek happiness and never find it. If any man stopped and asked himself whether he's ever held a truly personal desire, he'd find the answer. He'd see that all his wishes, his efforts
Friday, November 9, 2018 ... more
Caught waiting
Corrections & bear markets don’t make it easier to pull the trigger. You would assume it becomes easier to buy stocks when they’re falling but cash is a comfortable place to be during a correction. When stocks begin to fall that comfort can lead to
Thursday, November 8, 2018 ... more
I get bored with the interminable and rigorous discipline that being a great poker player or a great stock picker requires. To be clear, it’s not the actual work of poker playing or stock picking that I find boring. And it’s certainly not boring to make a bet,
Wednesday, November 7, 2018 ... more
What next?
“We have a tendency to lose the ability to put any given week or month into the broader context,” says Barry Ritholtz. “As an example, last year was a tremendous year with markets up over 20%, with little volatility. We never know when
Tuesday, November 6, 2018 ... more
“During my trading career involving many hundreds of billions of dollars and at least 5,000 separate days of entering the fray, I have not had one satisfactory day. When I make money, I always want to kick myself for not
Tuesday, November 6, 2018 ... more
Not only in peasant homes, but also in city skyscrapers, there lives alongside the twentieth century the thirteenth. A hundred million people use electricity and still believe in the magic powers of signs and exorcisms … Movie stars go to mediums.
Friday, November 2, 2018 ... more
Tipping point
There is one tipping point that you should know better than the rest—your personal selling point. What do I mean by this? Consider your current net worth (all of your assets minus all of your liabilities). What number would your net worth have to reach
Thursday, November 1, 2018 ... more
Good news
The thing to keep in mind about bear markets is that they are good news. We should be yearning for those situations where companies become cheaper than they should be. When people were jumping off bridges in 1974 because the market was terrible
Wednesday, October 31, 2018 ... more
Buying dividends
Russ Gremel recently donated $2.1m of Walgreen stock to a wildlife refuge - having acquired the shares about 70 years ago for $1,000. Walgreen has kept growing over the years, and by the time Gremel parted with his shares they were
Tuesday, October 30, 2018 ... more
In 2005 Mathew Emmert, the editor of Motley Fool Income Investor, gave three reasons for placing the emphasis on a company’s dividend pay-out when making an investment: #1 Cash doesn't lie. “I take serious note of where
Tuesday, October 30, 2018 ... more
Effort vs results
Dan Ariely tells a story: a locksmith is an apprentice, and unskilled at picking locks. It takes him a while to get people into their homes. His time and effort were evident, so clients tip well. As he becomes more skilled, he gets people into their houses quicker, with less effort. But his tips go down, because his skill makes it seem quick and effortless.
Friday, October 26, 2018 ... more
In his book, The Art of Execution, money manager Lee Freeman-Shor divides investors into rabbits, assassins, hunters, raiders and, the most successful group, Connoisseurs. The key to their success came down to how they responded
Thursday, October 25, 2018 ... more
OK to fall
An adaptation of Warren Buffett’s explanation of why shareholders in a company involved in a buy-back (e.g. Blue Label Telecoms) would want to see its share price fall over the buy-back period: "Charlie and I favour repurchases when two conditions
Wednesday, October 24, 2018 ... more
Timing markets
We’re repeatedly told that only fools try to time the markets. “But we have found, and research shows, that most outperformance is achieved in bear markets,” said Trevor Garvin, Head of Multi-Management at Nedgroup Investments
Tuesday, October 23, 2018 ... more
On being right
The year 1987 made Paul Tudor Jones famous as the man who had predicted the crash. Jones had started his firm Tudor Investment Corp. three years earlier after years as a commodity pit trader. In the summer of 1987, he was profiled by Barron’s and
Tuesday, October 23, 2018 ... more
A question of ethics
The history of ethics is a sad tale of wonderful ideals that nobody can live up to. Most Christians did not imitate Christ, most Buddhists failed to follow Buddha, and most Confucians would have caused Confucius a temper tantrum
Friday, October 19, 2018 ... more
Can you get rich trading the stock market? Probably not, but it might be possible to become richer. Getting rich trading the market is close to impossible. It's only possible to the same degree that it’s possible for you to become a Formula 1 driver
Thursday, October 18, 2018 ... more
Most of the time when we want to know the price of something we can use the market or comparable assets. When you go to buy and sell an S&P 500 ETF, the price is known and displayed for you. When you go to sell your home, a proper appraisal and
Wednesday, October 17, 2018 ... more
Nassim Taleb
Nassim Nicholas Taleb is the idiosyncratic author of INCERTO “a philosophical and practical essay on uncertainty” that consists of Skin In the Game, Antifragile , The Black Swan, Fooled by Randomness and The Bed of Procrustes
Tuesday, October 16, 2018 ... more
Procrustes, in Greek mythology, was the cruel owner of a small estate in Corydalus in Attica, on the way between Athens and Eleusis, where the mystery rites were performed. Procrustes had a peculiar sense of hospitality: he abducted travellers
Tuesday, October 16, 2018 ... more
Without consciousness
There is a lot of confusion about what artificial intelligence means or doesn't mean, especially in places like Silicon Valley. For me, the biggest confusion of all is between intelligence and consciousness. Ninety-five percent of science fiction movies are based on the error that an artificial intelligence will inevitably be an artificial consciousness
Friday, October 12, 2018 ... more
Edward Drinker tracked the lineages of thousands of species and showed a clear bias towards animals evolving to become larger over time. Horses went from the size of small dogs to their modern height. Snakes from no larger than an inch
Thursday, October 11, 2018 ... more
Need to hold
Stocks rarely perform in the time frames we predict, and it’s why the market only works for investors that have a long-term portfolio focus. “I’m accustomed to hanging around with a stock when the price is going nowhere,” said Peter Lynch.
Wednesday, October 10, 2018 ... more
In 1984, Hermes, the Columbia Business School Magazine, published an article by Warren Buffett, titled The Superinvestors of Graham-and-Doddsville. The piece was based on a speech he gave at the school to mark the 50th Anniversary of the publication of Benjamin Graham and David Dodd’s Security Analysis, and opened with the question: Is the Graham & Dodd “look for values with a significant margin of safety relative to prices” approach to security analysis out of date?
Tuesday, October 9, 2018 ... more
I would like to say one important thing about risk and reward. Sometimes risk and reward are correlated in a positive fashion. If someone were to say to me, “I have here a six-shooter and I have slipped one cartridge into it. Why don’t you just spin it and
Tuesday, October 9, 2018 ... more
Most workers view the prospect of a meeting with the same enthusiasm as Prometheus awaited the daily arrival of the eagle, sent by the gods to peck at his liver … perhaps the best solution is to have fewer of them. Thanks to technology
Friday, October 5, 2018 ... more
From Tom Wiswell
From Daily Speculations … proverbs from checkers champion Tom Wiswell that have Market import: After you lose a tough game there is only one thing to do: set them up and start all over again. One of the greatest errors is to think
Thursday, October 4, 2018 ... more
Why they share
Ever wonder why hedge fund managers are so willing to get up on a stage and tell the world about their best ideas? A new study suggests an answer: the ideas are getting old, and they need a spot to sell. The research pertains to what is
Wednesday, October 3, 2018 ... more
A while back MoneyInc.com published a list of 10 facts that they claimed prove you have no reason to be afraid of the stock market. The immediate concern with such a claim, of course, is that any fact that allegedly proves anything is already something
Tuesday, October 2, 2018 ... more
Wrong idea
Smart people believe dumb things too. We hardly ever bother to gather up and analyse all the facts before coming to a conclusion, or choose the most logical and rational explanation. Most of us, most of the time, come to our beliefs for a variety
Tuesday, October 2, 2018 ... more
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