Today´s post is on the power of compounding and is inspired by articles I read this week. Isaac Einstein once called it the eighth wonder of the world. We look at compounding from two perspectives: Actions and investments. Answer this question first: “Take a piece of paper that is 0.1mm think and fold it in half and then in half again, and again up to fifty folds. How thick will it be after 50 folds? Take a random guess on what the results would be?
This week has mostly been about Tech companies, most of which have delivered solid topline and bottomline growth this quarter. Among the companies on everyone’s lips is Amazon. Scott Galloway, author of The Four: The Hidden DNA of Amazon, Apple, Facebook, and Google, tells us that 58% of Americans have amazon prime accounts (that is 2% more than voted in the 2016 US elections) while adventures.es indicate that 52 % of American consumers start their online buying process at Amazon. Bottom line is Amazon is a thousand pound gorilla. Evidently, whenever rumour spreads of Amazon is entering a market,
This week is the 30th anniversary of the stock market crash of 1987. Reading through the articles meant as recollections of the events of the day, it is hard to miss the fear s that bear markets, and especially market crashes, bring. Living as we are in an 8-year bull market, some of the younger investors who have not experienced a crash before would do well to read some of the articles. Some of the other key reflections from this week’s readings are the importance of having a simplified investing strategy and that bitcoin and cryptos may be here to stay.
Relive the crash to get a feel of how markets work and players react in a crash:
“I remember walking from the 41st floor down to the 40th floor. The 41st floor was this cathedral of bonds, and then you walked down to 40 and were in this cramped, low-ceiled, dark place that was the equity department, with a lot of guys who were named Vinny and Tommy and Donny….they were all
Weekly Chart: The value function below was pioneered byDaniel Kahneman and Amos Tversky in their paper Prospect Theory: An Analysis of Decision under Risk. The paper provided the base for Richard Thaler to begin ´misbehaving`. Prospect theory states that people hate losses much more than they love gains even though the losses and gains are equal in magnitude.