I always love this guy’s perspective !
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10 Rules of Thumb for a Volatile Market - Morgan Stanley
ii_tenrulesofthumb_us.pdf (335.3 KB)
Page 3 & 4 are a must read.
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Investing Through a Crisis: A Handbook from Marcellus Investment Managers
Investing-Through-a-Crisis-A-handbook-from-Marcellus.pdf (1.1 MB)
When stock markets crash during an economic crisis, the move to the bottom is usually so fast, that investors seldom get a chance to react in a rational manner. With panic all around, many end up exiting their investments at or near the bottom. Further, with uncertainty on when the economy will recover, its hard to commit to fresh investments. In the process, investors lose an opportunity to gain from a stock market recovery, which usually precedes an improvement in the economy.
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A brief read on what SBI economists think about the current market:
Buffett said that investors are focusing “not on what an asset will produce but rather on what the next fellow will pay for it.”
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Another warning bell for the stock market
https://www.bloomberg.com/news/articles/2020-07-10/novogratz-says-stock-bubble-is-spurring-dangerous-valuations
Came across this on Twitter.
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The Unsung Hero
Please read this. It is the story of an unsung hero who has left an indelible mark in the world with his contributions.
https://12mv2.com/2020/07/13/transcript-peter-kaufman-speech-at-the-redlands-forum/amp/
Meditation changes your brain
As science begins to dig into the long-term impacts meditation has on the brain, researchers are turning to the minds “Olympic-level” meditators for answers—people who have done up to 62,000 hours of meditation in their lifetime.
Davidson found their brainwaves showed never-before-seen levels of gamma, one of the strongest types of brain waves, theorized to appear when the different regions of the brain harmonize.
The typical person will have a gamma wave very briefly, for example when we’ve solved a problem we’ve been grappling with, and for a second all of our sensory inputs come together in harmony. The brainwaves of long-term meditators, however, show gamma all the time as a lasting trait, no matter what they are doing. “It’s their everyday state of mind,” says Goleman. “Science has never seen this before.”
https://www.mindful.org/the-remarkable-brains-of-high-level-meditators/
China’s ballooning debt problem
An Institute of International Finance report published in May 2020 suggested that China is now the world’s largest creditor to low income countries, with China’s outstanding debt claims on the rest of the world having risen from US$875 billion in 2004 to over US$5.5 trillion in 2019 – more than 6 per cent of global gross domestic product (GDP). The Institute of International Finance (IFF) estimated that China’s total domestic debt hit 317 per cent of gross domestic product (GDP) in the first quarter of 2020, up from 300 per cent in the last quarter of 2019 – the largest quarterly increase on record. China’s consumer debt is the fastest growing segment of overall debt, particularly in the form of mortgage and consumer loans. Household debt rose to 54.3 per cent of China’s GDP in the last quarter of 2019 compared to 51.4 per cent in the last quarter of 2018.
https://www.scmp.com/economy/china-economy/article/3084979/china-debt-how-big-it-who-owns-it-and-what-next
From Rags to Riches
Few consumers, anywhere, have heard of the wiping-rag industry. But it bails out everyone. Approximately 30% of the textiles recovered for recycling in the U.S. are converted to wiping rags. And that’s probably an undercount. The 45% of recycled textiles that are reused as apparel eventually wear out, too. When they do, they’re also bound for the wiping-rag companies. Nobody counts the number of wiping rags manufactured in the U.S. and elsewhere every year. But anyone who knows the industry acknowledges that the numbers are in the many billions—and growing. The oil and gas industry, with its network of pipes and valves, requires hundreds of millions of rags per year to wipe leaks, lubricants, and hands. Hotels, bars, and restaurants need billions of rags to clean glasses, tabletops, and railings. Painters need them for spills and drips. If these businesses can’t reuse clothes and sheets, they’ll opt for disposable paper towels, synthetic wipes, and new cloth rags, complete with all their environmental and financial costs.
https://www.bloomberg.com/features/2019-wiping-rags/
An Introduction to Booneisms
From walking off my first job to start my first company to closing down Mesa Petroleum and to opening up my own hedge fund at 68, it’s three quarters of my life laid bare.
The book is built around little bits of advice I’ve been known to give over the years. At some point, family, friends and staff began writing them down and they became their own genre, now known as “Booneisms.” Many of them are about life and leadership, and other lessons I’ve learned through my ups and downs over 90 years.
https://www.forbes.com/sites/tboonepickens/2018/05/11/ninety-years-of-lessons-learned-t-boone-pickens-letter-to-the-class-of-2018/#6f26bf18e3c6
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Practicing a “Punch Card” Approach to Investing
http://sabercapitalmgt.com/practicing-a-punch-card-approach-to-investing/
Below is a collection of writing by John Huber that describes Saber Capital’s investment approach and ideas in more detail.
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The Nespresso coffee revolution
The idea of a portioned coffee system had been around since the 50s, but no one had seriously pursued it. Favre’s aim was to build a world in which espresso was available at home. Customers would own a machine, into which they would place a sealed pod filled with ground coffee. The pod would keep the coffee fresh. (Although roast coffee can stay fresh for weeks, ground coffee loses its freshness after about half an hour.) The capsule design would also ensure greater aeration, mimicking the repeat oxidisations at the Sant’Eustachio. After the pod was inserted, a needle-like spout would pierce one end. Hot water would be pumped through this needle at high pressure. As the capsule became pressurised with water, the foil would be forced against a spiked plate, bursting it inwards, and out through the spout would run an espresso.
Today, some 14bn Nespresso capsules are sold every year, both online and from 810 brightly lit boutiques in 84 countries. More than 400 Nespressos are drunk every second. Hundreds of rivals and imitators have emerged, some making capsules for Nespresso machines, others pushing competitor systems.
One line summary of investment classics
The author has gone through all the classic finance books and distilled the message into a single sentence or phrase.
A short history of money (with a US bias)
In his expansive and excellent book A History of Money, author Glyn Davies lists six functions of money:
- Unit of Account
- Common measure of value
- Medium of exchange
- Means of payment
- Standard for deferred payments
- Store of Value
Modern paper currencies don’t meet the sixth function—un-invested dollars (or euros, or yen) dwindle in value over time. The modern dollar is an abstraction, created out of thin air. It can no longer be converted into anything at a fixed price. Yet, for most of its history money was tied to some underlying commodity.
http://www.millennialinvest.com/history-of-money/
The origin story of the Tupperware party
The story of the ubiquitous plastic container is a story of innovation and reinvention: how a new kind of plastic, made from an industrial waste material, ended up a symbol of female empowerment. The product ushered women into the workforce, encouraging them to make their own money, better their families, and win accolades and prizes without fear of being branded that 1950s anathema, “the career woman.”
The most amazing thing about Tupperware wasn’t that it extended the life of leftovers and a family’s budget, although it did both remarkably well. It was, above all, a career maker. When women came to one of Wise’s parties, they were more than just convinced to buy the product— Wise was such a charming host that she persuaded many buyers to also become Tupperware salespeople. Putting people on waiting lists, for instance, made them more eager to buy, so she signed them up regardless of whether the product was available. She also discovered that throwing containers full of liquid across the room made customers reach straight for their chequebooks. Amassing more and more saleswomen, Wise encouraged her followers to do the same. Driven by the idea of making money simply by throwing parties for friends and neighbours, the women in Wise’s workforce ballooned in number. Wise’s team in Detroit was selling more Tupperware than most department stores.
The evolution of emojis
This elasticity of meaning is a large part of the appeal and, perhaps, the genius of emoji. They have proved to be well suited to the kind of emotional heavy lifting for which written language is often clumsy or awkward or problematic, especially when it’s relayed on tiny screens, tapped out in real time, using our thumbs. These seemingly infantile cartoons are instantly recognizable, which makes them understandable even across linguistic barriers. Decoding pictures as part of communication has been at the root of written language since there was such a thing as written language.
Pictograms—i.e., pictures of actual things, like a drawing of the sun—were the very first elements of written communication, found in Mesopotamia, Egypt, and China. From pictograms, which are literal representations, we moved to logograms, which are symbols that stand-in for a word ($, for example) and ideograms, which are pictures or symbols that represent an idea or abstract concept. Modern examples of ideograms include the person-in-a-wheelchair symbol that universally communicates accessibility and the red-hand symbol at a pedestrian crossing that signals not “red hand” but “stop.”
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Good article on effects of Credit Guarantee schemes offered by governments to commercial banks.
Highlights from the article.
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Government will give Loan Guarantees to Commercial Banks to fund corporate.
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This way governments will increase money supply in the system and create inflation.
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Credit guarantee is not fiscal spending, it’s not on the balance sheet of the state, as it’s only a contingent liability. So if you are an elected politician, you have found a cheap way of funding an economic recovery and then green projects. Politically, this is incredibly powerful.
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I see 4% inflation in the US and most of the developed world by 2021. This is primarily based on my expectation of a normalization of the velocity of money. Velocity in the US is probably at around 0.8 right now. The lowest recorded number before that was 1.4 in December 2019, which was at the end of a multi-year downward trend. Quantitative easing was an important factor in that shrinking velocity, because central banks handed money to savings institutions in return for their Treasury securities. And all the savings institutions could do was buy financial assets. They could’t buy goods and services, so that money couldn’t really affect nominal GDP.
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For the last three decades, China was a major source of deflation. But I think we are at the beginning of a new Cold War with China, which will mean higher prices for many things.
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Not a recommendation. Only for information.
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Thanks for sharing. I’m happy to see many companies I’ve invested in, in these lists although Im not sure to what extent they can be trusted.
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I found this article rather interesting :
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Excellent analysis on Dividend paying stocks. Wonder how it would turn out if we apply this to Sensex or Nifty.
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great way to spend weekend
Professor Niall Ferguson examines the origins of the pillars of the world’s financial system, and how behind every great historical phenomenon – empires and republics, wars and revolutions – there lies a financial secret.
Episode 1: Dreams of Avarice. From Shylock’s pound of flesh to the loan sharks of Glasgow, from the ‘promises to pay’ on Babylonian clay tablets to the Medici banking system, Professor Ferguson explains the origins of credit and debt and why credit networks are indispensable to any civilization.
Episode 2: Human Bondage. How did finance become the realm of the masters of the universe? Through the rise of the bond market in Renaissance Italy. With the advent of bonds, war finance was transformed and spread to north-west Europe and across the Atlantic. It was the bond market that made the Rothschilds the richest and most powerful family of the 19th century. And today governments are asking it to bail them out.
Episode 3: Blowing Bubbles. Why do stock markets produce bubbles and busts? Professor Ferguson goes back to the origins of the joint stock company in Amsterdam and Paris. He draws telling parallels between the current stock market crash and the 18th-century Mississippi Bubble of Scottish financier John Law and the 2001 Enron bankruptcy. He shows why humans have a herd instinct when it comes to investment, and why no one can accurately predict when the bulls might stampede.
Episode 4: Risky Business. Life is a risky business – which is why people take out insurance. But faced with an unexpected disaster, the state has to step in. Professor Ferguson travels to post-Katrina New Orleans to ask why the free market can’t provide adequate protection against catastrophe. His quest for an answer takes him to the origins of modern insurance in the early 19th century and to the birth of the welfare state in post-war Japan.
Episode 5: Safe As Houses. It sounded so simple: give state-owned assets to the people. After all, what better foundation for a property-owning democracy than a campaign of privatisation encompassing housing? An economic theory says that markets can’t function without mortgages, because it’s only by borrowing against their assets that entrepreneurs can get their businesses off the ground. But what if mortgages are bundled together and sold off to the highest bidder?
Episode 6: Chimerica. Since the 1990s, once risky markets in Asia, Latin America and eastern Europe have become better investments than the UK or US stock market. The explanation is the rise of ‘Chimerica’, the economic marriage of China and the United States. But does it make sense for poor Chinese savers to lend to rich American spenders?
https://www.youtube.com/watch?v=fsrtB5lp60s&t=11706s
another great lecture
Each idea presented by Dubner will be illustrated by a story or example, in the ever-popular counterintuitive Freakonomics style, that will provide you with illuminating thoughts for profitable thinking!
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