There is a wealth of knowledge out there for those who seek it
• Great bits of information can be found on webcasts, podcasts, videos and at investor events
Asingle conversation across the table with a wise man is better than 10 years mere study of books, according to Henry Wadsworth Longfellow. Can that be true?
Can a single conversation about investing be better than 10 years of reading on the subject? It seems unlikely. But given the price some will pay for lunch with Warren Buffett — as much as $2,679,001 according to Fortune magazine — there are those who apparently think it is. Or, maybe, they just don’t have the time for that much reading.
One thing is certain though. Great bits of information can be found in many places these days, not just books but webcasts, podcasts, videos and investor events.
The short answer to what can be learnt, from whom and where to find it is pretty much anything, from virtually anyone in almost any format.
It’s surprising what pops up where. The Tim Ferriss Show, which deals mainly with health and lifestyle issues, might seem an odd place to go look for stuff on behavioural finance but Ferriss did an interview recently with Ray Dalio, one of the most successful investors of all time, in which Dalio provides valuable lessons on a wide range of issues — from evaluating your own opinions to analysing markets by looking at the buyers and sellers and their motivations.
Here, for example, is what Dalio had to say on the importance of acknowledging weaknesses and dealing with mistakes: “Losing all my money and ending up on my own again [in 1982] in some ways was one of the best things that happened to me, because it gave me the humility that I needed to become more successful.
“It shifted my attitude from thinking ‘I’m right’ to asking myself ‘How do I know I’m right?’ It made me more analytical. It opened my mind a lot. It made me look for people that disagreed with the smartest and it made me manage my risks better. That became a habit. It changed my attitude towards mistakes, they became more like puzzles. And if I solved the puzzles that would enable me to do a better job.…
“You can learn so much more from mistakes than from success. Mistakes are a loud signal, whereas rewards keep you doing the same things — you don’t grow from success.
“To me it’s a weird world in which there’s a phobia about making mistakes and there’s a phobia about acknowledging one’s weaknesses. Mistakes are part of the process and everybody has weaknesses.
“The greatest people I know have weaknesses and have become successful because they have learnt how to compensate for those weaknesses. The least successful people I know are people who don’t own up to their weaknesses.…
“One of the things I’ve learnt over the years is that many surprises come to us as surprises because they haven’t happened in our lifetime, but they have happened before. So it’s advantageous to look beyond one’s lifetime and beyond one’s own experiences to understand how the world works, so that one can anticipate more.
“I believe that everything is ‘another one of those’, in other words everything happens over and over again, and the key to success is in being able to identify which one of ‘those’ it is. And to know how it’s turned out before, in other words to understand the cause-and-effect relationships. And that can be applied to anything. People have a new child and they treat it as if it’s the first time anyone’s had a child. What you want is the perspective that it’s happened many, many times before.
“Once you start thinking that way it has radical benefits. Life gets a whole lot easier. If you’re not dealing with things that way, then everything becomes a oneoff and you won’t find a way out of that blizzard .... ”
“Psychology is a big deal in the markets. Taking the emotions out of the game is a big, big plus. One way, perhaps the best way, to do that is to diversify to the point where no one thing matters too much.”
Where do you go to find the latest (if not always the best) thinking on the markets if not Bloomberg and CNBC videos? Just last week, for instance … Chamath Palihapitiya, the CEO of newly listed Social Capital Hedosophia, reminded CNBC that investors wanted to avoid firms that were at risk of being “disrupted” by technology and invest instead in the disruptors.
“There is this massive trade right now between the disruptors and the disrupted,” he said.
“Technology companies are dynamic organisms. [There are] so many assets that are fundamentally impaired due to technology [and with] more than 200 technology companies worth more than $1bn on the stock markets … it is a big fertile ground to find and buy the technology disruptors and short the disrupted,” he said.
As to why he’s “massively long” bitcoin: “The genie is fundamentally out of the bottle,” Palihapitiya told CNBC.
And even though he was once an executive at Facebook, he now favours investing in Amazon instead.
Jim Chanos confirmed that he was still betting against Elon Musk’s Tesla.
“It’s a ‘cult stock’,” the famed short-seller told CNBC. “And we’ve been pretty accurate on most of the things we’ve said about the company so far.”
The chief economist at UniCredit, Erik Nielsen, spoke to Bloomberg about investing amid the current geopolitical uncertainty. “Can you really sit in cash because you’re worried about North Korea?” he asked.
“Of course not,” came the reply, “given the liquidity, the fundamentally good economics that we find around the world, and with the Fed and the Bank of England now saying that they were likely to do more than they had suggested before … and I would argue that there are some great opportunities — especially here in Europe.
“European banks, for example, are still trading at a fraction of their book [value].”
The beautiful aspect of speculation is that it’s all encompassing,” hedge fund manager Victor Niederhoffer said in a podcast last week.
“It covers every political, economic, psychological and biological facet of life. And in order to be good at it you need to have a grounding and an appreciation of each of these subjects, besides a very systematic approach and knowing how to count. It calls for a higher framework that overrides the ephemeral and the transitory aspects of the markets.”
Most of us can only hope that’s not true.
PSYCHOLOGY IS A BIG DEAL IN THE MARKETS. TAKING THE EMOTIONS OUT OF THE GAME IS A BIG, BIG PLUS