July - September 2020 articles archive home
 
 
Icky
Open the news, and the headlines will shout corruption, government’s failure to deliver basic services, failing state-owned enterprises, and violence. The result? Foreign capital outflows and aversion to anything South African
Wednesday, September 30, 2020 ... more
 
 
 
Why & how
Holding cash has historically been a bad investment choice because its real value is always sinking. “Today the situation is even a bit worse, and may get even worse,” says Daniel Gladiš, in a Vltava Funds letter to shareholders
Tuesday, September 29, 2020 ... more
 
 
 
Airports
While the current health crisis has resulted in an abrupt demand shock across the industry and again tested the economic viability of many airlines, other segments of the market are in a much better position to withstand this pressure
Tuesday, September 29, 2020 ... more
 
 
 
Debt
Getting in debt for what you eat and drink and wear is to be avoided. Some families have a foolish habit of getting credit at "the stores," and thus purchase many things which might have been dispensed with. It is all very well to say
Friday, September 25, 2020 ... more
 
 
 
Rebalancing
The advice to rebalance comes hand-in-hand with the advice to asset-allocate, from advisors looking for a rules-based approach to investing. You should question their objectives. Either they think there is a 'rebalancing bonus' or they think
Wednesday, September 23, 2020 ... more
 
 
 
At the movies
It’s easy for stock market investors to relate to one-liners when watching a movie. When Dirty Harry asks, “Do ya' feel lucky, punk?” What investor doesn’t think, “Whoa, you can’t rely on luck for an answer!” Nor is Harry Callahan the only
Tuesday, September 22, 2020 ... more
 
 
 
Afraid
For those looking for a way to stop worrying about the markets, looking for refuge in the classics isn’t always the answer as they have the potential to trigger what Phillip Larkin called, ‘a special way of being afraid no trick can dispel.’
Tuesday, September 22, 2020 ... more
 
 
 
Trees
For me, trees have always been the most penetrating preachers. I revere them when they live in tribes and families, in forests and groves. And even more I revere them when they stand alone. They are like lonely persons. Not like hermits who have stolen away
Friday, September 18, 2020 ... more
 
 
 
Regret
You own shares in Company A. During the past year you considered switching to stock in Company B but decided against it. You now find that you would have been better off by $1200 if you had switched to the stock of Company B. You also owned
Thursday, September 17, 2020 ... more
 
 
 
Not useful
Many of the biases that most of us believe are driven by limited cognitive ability are in fact driven by emotions, says Eyal Winter the Silverzweig Professor of Economics at the Hebrew University. He cites two examples: Herding behaviour
Wednesday, September 16, 2020 ... more
 
 
 
Dividends
In his book, The Future for Investors, Wharton Business School finance professor Jeremy Siegel gives investors concrete guidance about where to put their money if they are worried about a market downturn. Instead of relying solely on index funds
Tuesday, September 15, 2020 ... more
 
 
 
Money machine
According to Ralph Casale at the Motley Fool, it’s possible to own a money machine that cranks out cash day-in and day-out, because that's what you get when you buy dividend-paying stocks and reinvest the dividends. Not only that, but
Tuesday, September 15, 2020 ... more
 
 
 
Happy City
Some things we can get used to, others we can’t. In Happy City: Transforming Our Lives through Urban Design, urbanist Charles Montgomery explores some of the ways in which we misunderstand how the way we live influences our happiness
Friday, September 11, 2020 ... more
 
 
 
5 types
Five common approaches to investing that you should probably avoid:The Raconteur. A raconteur is no ordinary storyteller. A raconteur is a person who excels in telling anecdotes. That’s exactly what’s dangerous about this approach
Thursday, September 10, 2020 ... more
 
 
 
Bad choices
Success in investing doesn’t correlate with IQ once you’re above the level of 100. Once you have ordinary intelligence, what you need is the temperament to control the urges that get other people into trouble in investing. We don’t need to
Wednesday, September 9, 2020 ... more
 
 
 
Wrong assumptions
“I have improved only in my ability to recognize situations in which errors are likely,” says Daniel Kahneman. Perhaps we should all settle for that. Simply knowing that you’ll find it hard to put more money at risk in a crisis, even if it’s the right thing to do
Tuesday, September 8, 2020 ... more
 
 
 
Ain't so
People will tell you that it’s naďve to think the laws of supply and demand apply to the stock market; that it would make investing too simple. That something far more complex determines stock prices. But that just ain’t so
Tuesday, September 8, 2020 ... more
 
 
 
Too far
The embrace of markets has lifted billions of people around the world from abject poverty. Nations have been tied together by the flows of goods and money and ideas, and most of the world's 7.7 billion people live wealthier, healthier, and happier lives
Friday, September 4, 2020 ... more
 
 
 
Scottish verdict
The best money managers cannot be demonstrated to be able to deliver the goods of superior portfolio selection performance. Any jury that reviews the evidence, and there is a great deal of relevant evidence, must at least come out with the verdict
Thursday, September 3, 2020 ... more
 
 
 
Stories
What does our unique ability to buy into stories have to do with investing? In effect, the investment business is stories on top of stories on top of stories. As a fundamental bottoms-up investor trying to find undervalued and overvalued
Wednesday, September 2, 2020 ... more
 
 
 
Gimps
“Are you a gimp?” asked Michael Covel on his website once. “Who still pretends markets are efficient, imagines buy and hold as a panacea, believes index investing is Shangri-La and that The U.S. Fed has your best interest at heart? A gimp, according to Covel, is the average investor; the investor that isn’t in control, either by their own choice or choices put upon them.
Tuesday, September 1, 2020 ... more
 
 
 
Bounded
Most of us like to think of ourselves as capable of logical thinking and making sensible choices, that is, of being rational. Always making the best decisions given the available evidence, hedging against ignorance and uncertainty
Tuesday, September 1, 2020 ... more
 
 
 
Jerks
Picture the world through the eyes of the jerk. The line of people in the post office is a mass of unimportant fools; the flight attendant couldn’t possibly have her own cares and struggles; custodians and secretaries are lazy complainers
Friday, August 28, 2020 ... more
 
 
 
Old companies
There are young companies out there that are exciting, growing quickly, and very clearly have the world in front of them. Even before COVID-19, many of us were already enamoured with these businesses that are changing the way we do things.
Thursday, August 27, 2020 ... more
 
 
 
Beta not alpha
Professional investors have to seek out market-beating performance (alpha) that is unnecessary for retail investors like us. The reason being that professionals have billions of dollars to manage, while you and I have thousands to millions.
Wednesday, August 26, 2020 ... more
 
 
 
Why & how
Why do we buy the stocks we do? According to Terrance Odean, professor of finance at the Haas School of Business at the University of California, individual investors mostly buy those stocks that catch their attention. That have
Tuesday, August 25, 2020 ... more
 
 
 
Not so good
We actively edit our lives and spend most of our lives doing things we’re at least average at and which provide a positive stream of feedback, which makes us feel good about ourselves. It’s unsurprising, then, that when most of us think about
Tuesday, August 25, 2020 ... more
 
 
 
Intertemporal choice
“There’s a fundamental tension, in humans between seizing available rewards in the present, and being patient for rewards in the future. It’s radically important. People very robustly want instant gratification right now, and want to be
Friday, August 21, 2020 ... more
 
 
 
Long-term
A young investor might have 40 years to save for retirement. But can they stay optimistic during a deep recession? Avoid chasing what’s done well in the last month? Can they leave their money alone to compound when they’re tempted to buy
Thursday, August 20, 2020 ... more
 
 
 
Decoupled?
The economy we each experience – local, personal and (for the most part) not publicly traded – has been awful. To explain why these subjective experiences are not weighing down equity markets, we must look more closely into the intersection
Wednesday, August 19, 2020 ... more
 
 
 
Earnings
“Of course it's earnings that count!” says Hewitt Heiserman in his book, It’s Earnings That Count. “One need only compare total stock market returns over the past 130 years with the returns created by corporate earnings growth and dividend yields
Tuesday, August 18, 2020 ... more
 
 
 
GAAP
In their book, The End of Accounting, Baruch Lev and Feng Gu bust the myth that earnings move markets by showing that the time-honoured ritual of predicting companies’ earnings and basing investment decisions on these predictions
Tuesday, August 18, 2020 ... more
 
 
 
DSRS
Bias from Deprival Super Reaction Syndrome, including bias caused by present or threatened scarcity, including threatened removal of something almost possessed but never possessed. Here I took the Munger dog
Friday, August 14, 2020 ... more
 
 
 
Market & news
It is hard to know what drives the stock market … but there are three separate phases of the puzzle in the U.S. that reveals a puzzling association with the news, as lagged market reaction is filtered through investor reactions and stories.
Thursday, August 13, 2020 ... more
 
 
 
More important
The bizarre thing is that history and mathematics show us that it is actually what happens in a negative year that really defines one’s long term track record. Consider two funds: Hare and Tortoise against an Index Y. The index compounds
Wednesday, August 12, 2020 ... more
 
 
 
Indecision
Ever feel that gnawing pain in your stomach because you… just… can’t… decide? Don’t feel bad. Everyone suffers from indecision. As TS Eliot wrote in the Love Song of J Alfred Prufrock: There will be time And time yet for a hundred
Tuesday, August 11, 2020 ... more
 
 
 
Risk aversion
Like all animals exposed to danger, human beings are hard-wired with “fight or flight” survival instincts. But, our innate risk aversion can be problematic when it comes to investment decision-making during a market downturn.
Tuesday, August 11, 2020 ... more
 
 
 
Brain fog
Have you felt as if lockdown has you in a fog? You’re not alone, says a neuroscientist who studies our ability to concentrate. “There is a barrage of information we’re now facing, and working from home involves additional components,” says Nilli Lavie
Friday, August 7, 2020 ... more
 
 
 
Artificial intelligence
A market-neutral strategy powered by new artificial intelligence techniques has beaten its human peers by multiple return and risk measures in this year’s market downturn, one of the most volatile environments ever for stocks.
Thursday, August 6, 2020 ... more
 
 
 
One year
We do not believe that buying and selling stocks based on a short-term outlook or according to the latest headlines translates into a long-term winning strategy. Picture an independent car dealership that has been operating a single location
Wednesday, August 5, 2020 ... more
 
 
 
Gold
No less a personage than Alan Greenspan once said that gold was the only refuge against profligate governments that forever debase their currency. He should know. In the time that’s passed since he said that, governments around the world
Tuesday, August 4, 2020 ... more
 
 
 
Gold: up or down?
o, what could justify another huge increase in gold prices from here? One answer, of course, is a complete collapse of the US dollar. With soaring deficits, and a rudderless fiscal policy, one does wonder whether a populist administration might
Tuesday, August 4, 2020 ... more
 
 
 
Reflective happiness
Are rich people as happy as they think? Psychologists Daniel Kahneman and Angus Deaton might have the answer. They surveyed more than 450,000 U.S. residents in 2008 and 2009. They published the results in their 2010 paper, High Income Improves
Friday, July 31, 2020 ... more
 
 
 
Bababoom
What one may need to know in the real world does not necessarily match what one can perceive through intellect: it doesn’t mean that details are not relevant, only that those we tend to believe are important can distract us from more central
Thursday, July 30, 2020 ... more
 
 
 
It's management
An earnest MBA student once asked me for the secret to choosing the right interest rate to use in a discounted cash flow model. He was clearly agonizing over this question. I wished I’d answered, “It’s always the humans!” Instead
Wednesday, July 29, 2020 ... more
 
 
 
Intrinsic value
“The newer approach to security analysis attempts to value a common stock independently of its market price,” wrote Benjamin Graham in Security Analysis. “If the value found is substantially above or below the current price, the analyst concludes
Tuesday, July 28, 2020 ... more
 
 
 
Analogy
For this exercise, we will ignore the important non-economic benefits of an education and focus strictly on its economic value. First, we must estimate the earnings that the graduate will receive over his lifetime and subtract from that figure
Tuesday, July 28, 2020 ... more
 
 
 
Believe
You get dumped by someone you’re totally in love with. Feel sad? God, yes. The world may as well end, right? But then you find out that he or she was a psychopath who killed their last three partners. Still feel sad? Not so much, right?
Friday, July 24, 2020 ... more
 
 
 
Private equity
Anyone who tells you that money is a commodity has never raised capital, done a deal, or had a partner. Money is always attached to people and people come with a variety of temperaments, time horizons, and incentives. A dollar that can walk tomorrow
Thursday, July 23, 2020 ... more
 
 
 
Fair price
It’s not unusual to hear people say that they’re happy to pay ‘a fair price’ for a business. It usually means they’re willing to pay a little more than what they think the business is worth. But, why would anyone do that? Surely paying a fair price
Wednesday, July 22, 2020 ... more
 
 
 
3 classics
“Great books,” said American author William Deresiewicz in a seminal lecture at the United States Military Academy at West Point, “even if they merely reflect the conventional wisdom of their own day, have the permanent power to disrupt our
Tuesday, July 21, 2020 ... more
 
 
 
Keynes
For it is, so to speak, a game of Snap, of Old Maid, of Musical Chairs — a pastime in which he is victor who says Snap neither too soon nor too late, who passed the Old Maid to his neighbour before the game is over, who secures a chair for himself
Tuesday, July 21, 2020 ... more
 
 
 
Freedom
I have come to realise that freedom is a principle to which there are very important limitations of which those in education are in a certain sense typical. What people will do in given circumstances depends enormously upon their habits
Friday, July 17, 2020 ... more
 
 
 
Enterprise value
Our early focus was to sort through all the companies whose share prices had fallen significantly to identify those that fell less on an enterprise-value basis and that were more in the eye of the storm. Given the unique nature of what
Thursday, July 16, 2020 ... more
 
 
 
2nd marshmallow
Do you cut winning trades short because you don’t think you’ll be able to make large profits? The Stanford marshmallow experiment was a 1972 study on delayed gratification led by psychologist Walter Mischel. In this study, a child was offered
Wednesday, July 15, 2020 ... more
 
 
 
Wonderland
“’Would you please tell me which way I ought to go from here?’ said Alice. ‘That depends a good deal on where you want to get to,” said the cat. ‘I don’t much care where –‘ said Alice ‘Then it doesn’t matter which way you go,’ said the cat.”
Tuesday, July 14, 2020 ... more
 
 
 
The Mad Hatter
After falling down the rabbit hole Alice encounters The Mad Hatter, who explains to Alice that he and the March Hare are always having tea because, when he tried to sing for the Queen of Hearts at a celebration, she sentenced him to death for "murdering time."
Tuesday, July 14, 2020 ... more
 
 
 
How good?
Many of us care deeply about feeling like a good person and being seen as a good person. But what if I told you that our attachment to being good people is getting in the way of us being better people? And what if I told you the path to being better
Friday, July 10, 2020 ... more
 
 
 
Zell view
Sam Zell, the founder and chairman of private investment firm Equity Group Investments, says he thinks the capital markets are being too Pollyannaish and expects a U-shaped recovery for the economy, rather than a quick, sharp rebound
Thursday, July 9, 2020 ... more
 
 
 
When extrapolating
Creating a simple, powerful story to describe historic performance is ineffective and illusory, but it is also relatively harmless if all we are doing is explaining the past. Unfortunately, the narratives we create don’t just help us decipher yesterday
Wednesday, July 8, 2020 ... more
 
 
 
Unimagined
Unprecedented events occur on a regular basis. Under the best of circumstances, we remain uncertain about almost everything. How the economy will perform, corporate results, etc. In the end, investing pretty much comes down to informed guesswork
Tuesday, July 7, 2020 ... more
 
 
 
Inflation
It’s worth considering the concerns of those who see the return of inflation. Their story goes like this: The public health crisis caused by Covid-19 comes to an end, with either a vaccine or more reliable treatments. People rush to stores and
Tuesday, July 7, 2020 ... more
 
 
 
Contrasts
A great experiment that Cialdini* does in his class is he takes three buckets of water. One’s hot, one’s cold, and one’s room temperature. And he has the student stick his left hand in the hot water and his right hand in the cold water. Then he has them put both
Friday, July 3, 2020 ... more
 
 
 
Graham
We have seen much more money made and kept by ordinary people who were temperamentally well suited for the investment process than by those who lacked this quality, even though they lacked an extensive knowledge of finance
Thursday, July 2, 2020 ... more
 
 
 
Where to look
The market has been swift to punish companies with leverage, but it is also a fact that the more predictable a business is, the better it is, and the more debt it can handle. There are many instances of excellent businesses with dominant
Wednesday, July 1, 2020 ... more
 
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