Ferg is a smart guy and he sends a weekly mail of his reading.
| Ferg’s Finds |
| Hello, This is a short weekly email that covers a few things I’ve found interesting during the week. Article Horizon Kinetics is one of the websites I periodically check to see if they have posted anything new. Their quarterly commentaries are must-reads. Podcast Louis Vincent Gave is one of my favourite thinkers and in this podcast or youtube clip he outlines a very clear framework for how he views the world. “There are three prices that matter more than any other and what everything else is priced off. -The 10-year Treasury yield. -The US dollar. -The oil price. If you get these right everything else falls into place.” Quote “You can measure everything about a bubble except the most important part: When investors will stop believing in it. The end of the bubble is just the end of enthusiasm. And enthusiasm isn’t a tameable statistic. It’s a hormone that owes nothing to the logic of your data.” -Morgan Housel My favourite tweet  ChartTechnical analysis isn’t my strong point but when I see a trading range compressing like this, the result is usually explosive.  Books Nassim Taleb’s has done a lot to shape my thinking with his work over the years. I’ve started working my way through Antifragile for the second time.  If you don’t have time to read the book these points from this article summarise it well.Stick to simple rulesBuild-in redundancy and layers (no single point of failure)Resist the urge to suppress randomnessMake sure that you have your soul in the gameExperiment and tinker — take lots of small risksAvoid risks that, if lost, would wipe you out completelyDon’t get consumed by dataKeep your options openFocus more on avoiding things that don’t work than trying to find out what does workRespect the old — look for habits and rules that have been around for a long time Something I’m pondering I’m still fascinated by Raoul Pal’s bold announcement and changes to his macro views, which I’m trying to wrap my head around.I watched his recent video on Real Vision where he poses two questions that have got me thinking. “Question why you hate it?”This question was posed in relation to Cathie Woods Ark; “You are doing it because of jealousy of her performance and her outrageous price targets and they have been right.” I object to this as my big gripe with Cathie is the shallow and flawed analyses she presents. Tesla didn’t achieve its valuation as a result of it meeting any of her assumptions. Yet when it hits her price target she puts out an even crazier price target for which the assumptions make no sense (Ark see that by 2025, Tesla will achieve 80%-120% of non-hybrid global EV to insurance business margins never seen before in the insurance industry) and outright errors and does not consider CAPEX or capital raising in the methodology (if you’d like a deeper dive this is a great thread). It reminds me of Annie Duke’s book ‘Thinking in Bets’“We have a tendency to equate the quality of a decision with the quality of its outcome.Poker players have a word for this: “resulting.” When I started playing poker, more experienced players warned me about the dangers of resulting, cautioning me to resist the temptation to change my strategy just because a few hands didn’t turn out well in the short run.A great decision is the result of a good process – not that it has a great outcome.” Second question“That is mean reversionist thinking, why are you apologising for the euphoric thinking?2000 wasn’t a bubble it was a minor blip on an exponential chart of the internet.” Now, this really annoys me as it ignores the whole behavioural side of investing. Following an 80% drawdown in the Nasdaq by 2002. Then the index largely going nowhere through to 2011. I bet most investors didn’t feel they were riding an exponential trend of the internet and had likely thrown in the towel along the way. It’s a similar idea to saying; “I wish I’d just bought Amazon in 1997.” The truth is that there is near- zero chance you would have hung on through the brutal volatility. Amazon Share Price1997: $11998: $71999: $1102000: $142001: $52006: $362007: $1102008: $502010: $135 $10k to $1.1m and back to $50k would really screw with you mentally! I hope you all have a great week. Cheers, Ferg |