Stream

Some nice stuff I am reading, watching, and observing at the start of this weekend…

Of Greater Fools and Bubbles

How many greater fools does it take to make a bubble? An old but highly relevant post from Jason Zweig…

Economists have struggled and failed to explain why markets turn into manias. Some have denied bubbles exist; others have argued bubbles must somehow be “rational.” Often, the argument is that bubbles are caused by “uninformed” traders, or “dumb money,” while the “smart money” sits on the sidelines.

The latest findings suggest, however, that bubbles might be caused not by traders who lack information but by those who have too much.

[Read more…] about Safal Niveshak Stream – The Powerful Effect of Compounding Goodwill

Some nice stuff I am reading, watching, and observing at the start of this weekend…

Beware of Charismatic CEOs

Guy Spier’s The Education Of A Value Investor is a book that reads like having a friendly conversation with a wise friend. It’s one of those very few books where the authenticity is reflected on each page and you can tell that every word has come out straight from the heart.

One of the most important things required for long term investing success, as I have learnt so far, is following a sound investment process. According to Guy, a sound process is a robust set of rules that makes our investment decisions smarter and less vulnerable to the distortions of our irrational brains.

Guy has developed eight such rules to bring an analytical rigour to his process. Here is one rule which made a lot of sense to me and cleared my dilemma about the need to talk to the management. He writes –

…my own experience is that close contact with management is is more likely to be detrimental to my investment returns. The trouble is, senior managers—particularly CEOs—tend to be highly skilled salespeople. No matter how their business is performing, they have a gift for making the listener feel optimistic about the company’s prospects…But this gift of the gab doesn’t necessarily make them a dependable source of information…This isn’t to say that CEOs, CFOs, and other top executives are malicious or immoral…They may be skewing information subconsciously, without any bad intent. But it doesn’t matter. Knowing my own rational limitations, I’d prefer not to expose myself to this potentially distorting influence.

If I want to assess the quality of the management, I’d rather do it in a detached and impersonal way by studying the annual reports and other public data, along with news stories.

So the rule is: Beware of CEOs and other top management, no matter how charismatic, persuasive, and amiable they seem.

And of course there are always some exceptions to every rule. Spier writes –

Exceptions to the rule: Berkshire’s chairman and CEO, Warren E. Buffett, and a small but growing minority of CEOs (at companies like Fairfax Financial, Leucadia National Corporation, and Markel Insurance) who take seriously the idea of sharing what they would like to know if they were in their shareholders’ shoes.

Meeting with management can seriously distort your view and mess up with your mind. Do that only if you’re confident about your ability to keep your mind insulated from a host of biases (Liking, Authority etc.) coming from the charismatic personality of the CEO.

[Read more…] about Safal Niveshak Stream – Three Magic Words for Investing Your Money

Note to Readers: In Stream, we suggest worthwhile reading material on a variety of topics, not all of which are directly related to investing. Some of the articles require you to be paid subscriber of those sites. However, it is often possible to read such articles by going to Google News and searching for the article’s title.

Life/Learning

• HBO documentary “Becoming Warren Buffett”…is a documentary about the world’s most famous investor. It was made with the cooperation of Buffett and his family, deals with Buffett the businessman and investor, but it’s Buffett the man and his complicated, and often difficult, relationships with the people he loved most that are the film’s real subject.
  

  …what makes “Becoming Warren Buffett” far more interesting than a simple hagiography is the exploration of Buffett’s personal life, and, in particular, his relationship with his first wife, Susan, who died in 2004. Personal relationships were not something that Buffett navigated naturally. At one point in the movie, he says, “I don’t have a mind that relates to the physical universe very well,” and the same seems to have been true of the emotional universe. Buffett, by his own description, was socially awkward as a kid (he attributes much of his later success to taking a Dale Carnegie public-speaking course as a young man), and the film is a portrait of a person for whom financial questions “are easy,” as Buffett says. “It’s the human problems that are the tough ones.”

• Life is rife with risks. Misperceiving and underestimating these risks can lead to vital mistakes. Therefore, to make well-informed decisions, we need to become comfortable with uncertainty.
  

  The world is complex, and uncertainty is guaranteed. However, multiple factors can make things seem more certain than they actually are. We need to identify and fight against these false markers, even when it makes us uncomfortable.

  …Our experience teaches us how to live with the uncertainties of frequently occurring events such as daily variations in the weather or the stock market. But we get anxious about uncertainties when the events are rare and the stakes are high: That’s why most of us panic in the face of a medical mystery, environmental disaster, financial crisis, or a presidential election. It’s also why we prefer leaders and authority figures who pretend to know exactly what to do all the time instead of acknowledging ambiguity.

[Read more…] about Safal Niveshak Stream – February 4, 2017

Note to Readers: In Stream, we suggest worthwhile reading material on a variety of topics, not all of which are directly related to investing. Some of the articles require you to be paid subscriber of those sites. However, it is often possible to read such articles by going to Google News and searching for the article’s title.

Life/Learning

• Marcus Aurelius on how to motivate yourself to get out of bed in the morning and go to work…
  

  At dawn, when you have trouble getting out of bed, tell yourself: “I have to go to work — as a human being. What do I have to complain of, if I’m going to do what I was born for — the things I was brought into the world to do? Or is this what I was created for? To huddle under the blankets and stay warm?”

• One blogger who never fails to inspire me is Leo Babauta of Zen Habits. I have been reading him for the past seven years, and have also found mental stimulation in most of what he has written. Like this post that Leo wrote on what he has learned in 10 years of Zen Habits…
  

  It’s been a decade filled with learning for me … too many things to put into one post. But as I’ve been reflecting on it all, I have a dozen or so notes I’d like to share with you.

  Some of the things I’ve learned, starting with personal lessons and ending with lessons about my business:

  Focus on intentions rather than goals. As you might know, I experimented with giving up goals after being very focused on goals for years. It was liberating, and it turns out, you don’t just do nothing if you don’t have a goal. You get up and focus on what you care about. Read more here. Instead, I’ve found it useful to focus less on the destination (goal) and instead focus on what your intention for each activity is. If you’re going to write something … instead of worrying about what the book will be like when you’re done, focus on why you want to write in the first place. If you are doing something out of love or to help others, for example, then you are freed from it needing to turn out a certain way (a goal) and instead can let it turn out however it turns out. I’ve found this way of working and living to be freeing and less prone to anxiety or procrastination.

[Read more…] about Safal Niveshak Stream – January 28, 2017

Note to Readers: In Stream, we suggest worthwhile reading material on a variety of topics, not all of which are directly related to investing. Some of the articles require you to be paid subscriber of those sites. However, it is often possible to read such articles by going to Google News and searching for the article’s title.

Life/Learning

• The American chess player and martial arts champion Josh Waitzkin’s The Art of Learning is one of the best books I have read on, well, the art of learning and the entire process of going about doing it. This book reveals Waitzkin’s unique systems of thematic learning, idea generation, building resilience, and mastering the art of performance psychology. Here is one of the many passages from the book that have inspired me…
  

  If I have learned anything over my first twenty-nine years, it is that we cannot calculate our important contests, adventures, and great loves to the end. The only thing we can really count on is getting surprised. No matter how much preparation we do, in the real tests of our lives, we’ll be in unfamiliar terrain. Conditions might not be calm or reasonable. It may feel as though the whole world is stacked against us. This is when we have to perform better than we ever conceived of performing. I believe the key is to have prepared in a manner that allows for inspiration, to have laid the foundation for us to create under the wildest pressures we ever imagined.

• It’s understandable that we respond to the ratcheting demands of modern life by trying to make ourselves more efficient by managing our time better. But what if all this efficiency just makes things worse?
  

  Given that the average lifespan consists of only about 4,000 weeks, a certain amount of anxiety about using them well is presumably inevitable: we’ve been granted the mental capacities to make infinitely ambitious plans, yet almost no time at all to put them into practice. The problem of how to manage time, accordingly, goes back at least to the first century AD, when the Roman philosopher Seneca wrote On The Shortness of Life. “This space that has been granted to us rushes by so speedily, and so swiftly that all save a very few find life at an end just when they are getting ready to live,” he said, chiding his fellow citizens for wasting their days on pointless busyness, and “baking their bodies in the sun”.

[Read more…] about Safal Niveshak Stream – January 21, 2017

Note to Readers: In Stream, we suggest worthwhile reading material on a variety of topics, not all of which are directly related to investing. Some of the articles require you to be paid subscriber of those sites. However, it is often possible to read such articles by going to Google News and searching for the article’s title.

Life/Learning

• At times it’s scary to think how time is flying. And then there are posts like these that tell you that you may not learn some of the most important lessons till it’s too late in life, like these three…
  

  1. Time passes much more quickly than you realize.

  2. If you don’t take care of your body early then it won’t take care of you later. Your world becomes smaller each day as you lose mobility, continence and sight.

  3. People are far more important than any other thing in your life. No hobby, interest, book, work is going to be as important to you as the people you spend time with as you get older.

• Does anyone know anything any more? The ease with which one can look up facts on a phone at any time is one of the wonders of the modern age. But are we becoming too reliant on it? A new study indicates, at least, that there might be a snowball effect to such reliance. The more we depend on Google for information recall, it suggests, the more we will do so in the future. In short, Google may be rewiring our minds, and the debate we are now having about the effect of constant internet access on memory and creativity has precedents thousands of years old.

[Read more…] about Safal Niveshak Stream – January 14, 2017

Note to Readers: In Stream, we suggest worthwhile reading material on a variety of topics, not all of which are directly related to investing. Some of the articles require you to be paid subscriber of those sites. However, it is often possible to read such articles by going to Google News and searching for the article’s title.

Life/Learning

• (930 words / 4 minutes read) Meet the ‘James Bond of Philanthropy’ who has given away the last of his fortune…
  

  Nearly five years ago, Charles F. Feeney sat in a cushy armchair in an apartment on the east side of Manhattan, grandchildren’s artwork taped to the walls, and said that by the end of 2016, he was going to hand out the last of a great fortune that he had made.

  Altogether, he had contributed $8 billion to his philanthropies, which have supported higher education, public health, human rights and scientific research … His remaining personal net worth is slightly more than $2 million. That’s not quite broke, by any standard, but it is a modest amount for a man who controlled thousands of times as much wealth. He and his wife, Helga, now live in a rented apartment in San Francisco. “You can only wear one pair of pants at a time,” Mr. Feeney has said.

  [Read more…] about Safal Niveshak Stream – January 7, 2017

Note to Readers: In Stream, we suggest worthwhile reading material on a variety of topics, not all of which are directly related to investing. Some of the articles require you to be paid subscriber of those sites. However, it is often possible to read such articles by going to Google News and searching for the article’s title.

Investing

• (1700 words / 7 minutes read) Could one person’s speculation be another person’s investment? The case study presented in this article titled The Risk of Backing into a Speculative Position illustrates the idea that investment and speculation are linked to an investor’s intent rather than the characteristic of stock he or she is buying.
  

  Let’s assume that the investor and the speculator purchased the exact same security at the same time and then subsequently sold at the same time. Obviously, the returns that both of them will experience are identical, but it is still useful to differentiate between investment and speculation. This is because over long periods of time, process is important and will eventually dominate results. The effect of a good process on any individual investment may not be clear but, over time, a good investment process should generate good long term results.

  It is important to make a clear distinction between investing and speculating and to classify one’s activities appropriately. The possibility of major losses exists when someone who believes that he is investing is actually speculating instead. There is nothing illegal or immoral about speculating but such activities really do need to be segregated from investing in our minds to avoid trouble.

  [Read more…] about Safal Niveshak Stream – December 17, 2016

Note to Readers: In Stream, we suggest worthwhile reading material on a variety of topics, not all of which are directly related to investing. Some of the articles require you to be paid subscriber of those sites. However, it is often possible to read such articles by going to Google News and searching for the article’s title.

Life/Learning

• (740 words / 3 minutes read) Perseverance and determination are good qualities when the objective you’re working so hard to achieve is actually attainable. But there is a lot in life you just can’t change, like trying to change the world, so you must quit wasting your time trying…
  

  It’s nice and inspirational and all to think one person could actually change the world, but some things are just bigger than all of us. You can definitely make a difference in the world around you — that’s not a problem. Just watch that you’re keeping your expectations of the impact you can actually have in check.

  [Read more…] about Safal Niveshak Stream – December 10, 2016