·
I finished reading a series of Graham lectures from a course he taught in 1946. The full transcripts are published online and linked below. The course focuses on potential problems in security analysis following World War II (Graham’s worry is the extrapolation of WWII market performance into the future).
Graham starts the course off by explaining the two important things you should know about the market. He calls the first one continuity: Continue Reading…
·
Howard Marks delivers a very consistent message on the importance of understanding where we are in the cycle. He does so because risk changes as we move through the cycle.
So if you’re basing your allocation decisions on risk (you’re controlling for risk, not returns), this is a most important thing to know. In the Investor Series, I linked to last week, Marks came back to explain why a few times: Continue Reading…
·
The cycle of optimism and pessimism drives markets. Ben Graham understood this well enough to point it out whenever he saw an excessive amount of either one in the market.
One of those times was 1958, where Graham warned of the risks inherent in the bull market of the time. According to Graham, the big risk was how optimism slowly creeps into an investor’s thought process (the same thing happens with pessimism during a bear market). He noticed that people were projecting lofty expectations around earnings growth (of course, optimism isn’t limited to just earnings).
Future assumptions plugged into in math formulas, infect investment decisions with an optimistic viewpoint. And when everyone thinks that way, it gets reflected in prices. When optimism is priced in, investors end up paying a high price for lofty expectations. Continue Reading…
·
Recode held its Code Conference this week, which had several great interviews. There’s a link to all the full interviews below. Some took a slight political bent – no surprise considering the climate – but still retained its tech focus.
As a side note: I get why people worry about tech being too disruptive, but this has been going on since the industrial revolution. Nobody knows beforehand all the hazards a new innovation might bring until after the fact, as we found out with the social media “hacking” and “fake news” in the recent election.
The general takeaway is that innovation often gets messy but the thing about tech is that it continues to innovate and disrupt itself during those messy times (the real issue is our tendency to project the big problems as everlasting as if we’ve lost our ability to find solutions). Continue Reading…
·
I read through two Marc Andreessen interviews this weekend. There was the usual discussion around the dot-com era which offered a nice walk down memory lane having experienced it first hand.
But he also offered a different view from the general perception around internet companies after the dot-com crash, which struck a cord.
Andreessen ended one interview with this:
There are no bad ideas. There are only early ideas.
He briefly explains it in the first interview but actually expands on it further in the second interview: Continue Reading…
·
With the Memorial Day weekend ahead, now is a great time to expand your horizons with a few good books this summer. If you’re not sure where to start, I’ve got you covered. I collect reading lists.
Several book lists popped up the past few weeks that should offer something for everyone (not just investing books). The lists below should give you ideas for putting your own summer reading list together. Continue Reading…