Readings Digest 06.10.2017: Think Long Term

Weekly Chart: Invest for the long run“As we invest for longer and longer, the mass of probability smears upwards: our upside odds improve.”



The Irrelevant Investor: New Highs Should Be Bought, Not Sold:

Consider new stock market highs not as

times to sell but as times to buy.

Above the Crowd: In defense of the deck

Learn to tell a good story.

“The great storytellers have an unfair competitive advantage. They are going to recruit better, they will be darlings in the press, they are going to raise money more easily and at higher prices, they are going to close amazing business developer partnerships, and they are going to have a strong and cohesive corporate culture. Perhaps more to the point, they are more likely to deliver a positive investment return.”

Farnam Street: Are you open Minded or closed Minded?:

“The rate at which you learn and progress in the world depends on how willing you are to weigh the merit of new ideas, even if you don’t instinctively like them.”

“The test of a first-rate intelligence is the ability to hold two opposed ideas in mind at the same time and still retain the ability to function.”— F. Scott Fitzgerald

Behavioural investment: Why is value investing so difficult?

Despite compelling evidence that value beats growth in the long run, people don´t invest in value especially because it is behaviourally demanding. “Whilst in its basic form a value approach may be considered elementary compared to other investment styles, it is the most exacting behaviourally; this is a key reason why a long-term premium exists for owning value stocks and why both active managers and fund investors struggle to embrace the discipline.”

Morgan Housel: The power law at work

Being good at investing doesn’t´t mean being right all the time because sometimes, “A few of our investments will drive nearly all of our returns.” It reminded me of Peter Lynch: “You don’t have to be right all the time to do well in stocks. If you find one great growth company and own it long enough to let the profits run, the gains should more than offset mediocre results from other stocks in your portfolio.”

The Enterprising Investor: When does volatility equal risk?

Volatility may equal risk sometimes. “There are two lessons here: First, know your client’s situation so you can determine how important a risk portfolio volatility is in their specific case. Second, do your best to condition clients to be long-term investors with strong “stomachs” for a substantial part of their portfolio.”

Morgan Housel: Skills vs Behaviour

On then need to have the right behavioural mindset in investing:

“Behavior, in business and investing, is the art of putting skills to use. It’s probably the hardest part of this game. It’s not analytical. It’s often counterintuitive. But it’s the secret ingredient most of us are after.”


How I Built This with Guy Raz: Live from Seattle with Howard Schultz

  • He got 90 days exclusive at the beginning to get to buy Starbucks at 3.8 million USD. He didn’t know where to get the money. He searched for funds and was about half way here in 60 days only to realise that another investor, whom he knew, pitched a competitive bid to buy Starbucks from the owners at 4 million USD. The help he got from Bill Gates Sr. in buying out Starbucks at the beginning was touching though. “You are not going to steal this kid´s dream”
  • Interesting stories on how they opened up the first Starbucks in Japan on what felt like the wrong time of the year but the opening still went on to be a remarkable success.
  • He felt the company had lost track at some point: “Success in any business is not an entitlement. I has to is earned and we stopped earning it and that is why we  got in trouble.”

Invest like the best (episode 50) with Jason Zweig and Morgan Housel

These two are incredibly gifted and some of my favourite finance writers. Jason Zweig writes for the WSJ mostly on value investing while Morgan Housel is in the private venture capital business. In this episode, they dig deep into such issues as the differences between private and public markets.

  • On sunk costs. Learn to cut your losses and move on. “Give up all the time, but never quit” For instance if a book is bad, just put it down and move on.
  • Morgan House advices on allowing yourself margin for error meaning allow yourself to make some mistakes.

Invest like the best: Hash Power

Hash Power episode 1 and 2: Patrick O’Shaughnessy gives you an in-depth look at the crypto world. In episode 1, he ventures into understanding bitcoin an ethereum. In episode 2, he explores the people who invest in cryptocurrency. The guides to the second episode are pioneers in investing in cryptocurrency Polychain, Metastable, and BlockTower Capital

On cryptocurrencies:

The New York Times: Understanding Ethereum: Ethereum is a peer-to-peer network that allows the performance of complex financial transactions. You pay using Ether to use the network. “Ethereum is a global computing network operating according to rules defined by Ethereum software”

The New York Times: Understanding Bitcoin: Bitcoin is at once a “digital token — with no physical backing — that can be sent electronically from one user to another, anywhere in the world” and the name of the payment network on which bitcoin is stored and moved.

Medium: Investors in Cryptocurrencies: Hedge funds investing in cryptos seem to fall into 4 categories according to Gil Penchina an investor in these cryptos. They are Long only, Arbitrage, ICOS and Algo trading

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