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Safal Niveshak Stream – October 22, 2016

Some nice stuff we are reading, watching, and observing at the start of this weekend…

Investing/Stock Market

  • Jason Zweig, The Wall Street Journal’s investing columnist, in an interview with Philip Tetlock, the co-author of “Superforecasting: The Art and Science of Prediction,” explore why amateurs can actually be better than experts at predicting the future, and what the experts can learn from it…

    One reason is that experts sometimes know too much. I was talking once to John McLaughlin, former director of the CIA, about the end of the Cold War period, and he was remarking that the analysts who were slowest to recognize that East Germany was disintegrating were the people who had been on the case for 20 years.

    It was the newbies coming in who got it pretty quickly. And there’s a lot of psychological evidence that attests to the power of preconceptions to grip us and make it hard for us to be timely belief updaters. So sometimes knowledge is actually an impediment. Another big factor is that there is a large amount of uncertainty in the world. So no matter how smart you are, it isn’t going to give you a lot of traction.

    [Read more…]

Safal Niveshak Stream – October 19, 2016

Some nice stuff we are reading, watching, and observing during the middle of this week…

Investing/Stock Market

  • The long run is just a collection of short runs, writes Morgan Housel…

    …value is ultimately created in the long run. That’s where scale takes off and compounding works its magic – over years and decades, not months and weeks.

    The key is recognizing that the long run is just a collection of short runs, and capturing long-term growth means managing the short run effectively enough to ensure you can stick around for a long time.

  • In 2011, Seth Klarman explained the psychology necessary to be a good value investor, in an interview that he did with Charlie Rose. In this interview, Klarman says, “Investing is the intersection of Economics and Psychology.” He added…

    The economics, the valuation of a business is not that hard. The psychology, how much do you buy, do you buy at this price, do you wait for a lower price, what do you do when it looks like the world might end. Those things are harder.

    [Read more…]

Safal Niveshak Stream – October 15, 2016

Some amazing stuff we are reading, watching, and observing at this start of this weekend…

Investing/Stock Market

  • If I could reveal just one secret of sensible, successful investing (which isn’t a secret, by the way), it would be…

    Secret of sensible, successful investing
  • Buying stocks when the market collapses is far harder to do than to imagine. But the great economist — and equally great investor — John Maynard Keynes waded into the wake of the Great Crash of 1929, when US stocks fell by more than 80% from peak to trough. His experience should teach all investors the importance of preparation, courage and patience

    Keynes understood, as did his contemporary, the American value investor Benjamin Graham, that bear markets are so unpredictable that reliably sidestepping them is nearly impossible — and that the pain of losing money is nearly unbearable.

    Still, Keynes knew, barging into bear markets to buy, rather than trying to sidestep them, is the way to prevail. Since, over the long run, stocks tend to go up more than they go down, one of the greatest advantages an investor can have is the gumption to buy stocks aggressively in falling markets.

    [Read more…]

Safal Niveshak Stream – October 12, 2016

Some amazing stuff we are reading, watching, and observing during the middle of this week…

Investing/Stock Market

  • Warren Buffett’s Berkshire Hathaway’s unique managerial model is lauded for its great value. However, here is a discussion paper that highlights its costs

    Most costs stem from the same features that yield such great value, which boil down, ironically, to Berkshire trying to be something it isn’t: it is a massive industrial conglomerate run as an old-fashioned investment partnership.

    The most visible—and measurable—costs of the Berkshire model appear in capital allocation, principally acquisitions and investments. Buffett relies on himself in making these decisions, without board or executive input or oversight. While most such decisions have succeeded, many spectacularly so, some bloopers have appeared, the best-known being Dexter Shoe and Gen Re. The costs of error from such self-reliance could readily be mitigated by broader distribution of decision-making power. Buffett does so by periodically consulting vice chairman Charles Munger. Yet since the net costs of this approach have been modest, thanks to Buffett’s acumen and stature, there is no reason for reform while Buffett is at the helm. But some additional power sharing and oversight would be appropriate for his successors, as Berkshire’s succession plan contemplates.

    [Read more…]

Safal Niveshak Stream – October 8, 2016

Some amazing stuff we are reading, watching, and observing at the start of this weekend…

Investing/Stock Market

  • One of the most dangerous places to be as an investor is…

    …when you’re the smartest person in the room. Smarts, when not combined with a heavy dose of humility, can get you into trouble because it can lead to overconfidence. Overconfidence can lead to overthinking which can be a deadly combination when managing money.

  • Do you know about the most overlooked trait of investing success, especially when you are managing other people’s money? Hint – It’s a trait not directly related to investing. Go, figure. 🙂
  • Many investors and investment managers have taken to copying Buffett’s approach, but is it really possible to become a value investor by reading a few books and desiring to make money? In a letter to investors several years ago, Seth Klarman of The Baupost Group warned of value pretenders, investors who brand themselves as value investors but actually miss the essence of value investing. So are you one i.e., a value pretender? Here’s a nice post from John Mihaljevic on ways to determine if you are a value investor or pretender. One of the ways John writes about is…

    If you base your purchase decisions on the likelihood that the market will assign a higher P/E or other multiple to a stock in the future, you may not be a value investor. You may instead be engaging in John Maynard Keynes’s “beauty contest”, an exercise centered on guessing the behavior of others. Value investors independently appraise the value of businesses in order to make an informed investment decision.

    [Read more…]

Safal Niveshak Stream – October 5, 2016

Some interesting stuff we read, watched, and observed today morning…

Investing/Stock Market

  • It’s very normal to find such magazine covers appearing in bull markets. They sell well, given the various biases they instantly spark in the brain of the reader..

    By the way, the average P/E of the 25 stocks mentioned in this report is 40x, and there are a few at 69x, 71x, and 85x. Let’s talk about wealth “creation”. 🙂 [Read more…]

Safal Niveshak Stream – October 1, 2016

Some interesting stuff that would be worth your time today …

Investing/Stock Market

  • For the September edition of our Value Investing Almanack newsletter we had compiled the thoughts of many well known value investors on the subject of “when to sell”. Ian Cassel, a full-time micro-cap investor, was gracious enough to provide his insights on this topic for Almanack readers. Recently he penned a wonderful post on his blog expanding on the idea…

    Qualitative analysis and field based research acts like corrective lenses that will let you see further. You will have an edge on most investors if you make investments based on expected 3 – 5 year returns instead of 3 – 12 month returns.

    One of the biggest mistakes or wrong reasons to sell a stock is boredom. Don’t be a bumble bee buzzing around from one position to the next. Find a few great companies early and FOCUS on evaluating their business performance, not stock performance. The hardest part of achieving multi-baggers is having the patience and conviction to hold through multi-year periods of under-performance. Successful investors can disconnect emotion from investment decisions and can differentiate business performance from stock performance.

    Boredom is an offshoot of Do Something Bias. In investing, having a loaded gun (cash) helps but firing it because of an itchy finger is a mistake.

  • [Read more…]

Safal Niveshak Stream – September 28, 2016

Some interesting stuff that would be worth your time today …

Investing/Stock Market

  • Shareholder value can’t be pursued. Like happiness, it must ensue, argues Roger L. Martin in his article in HBR

    …pursuit of shareholder value maximization does a crummy job of maximizing shareholder value. The reason is that it cannot be pursued directly. Shareholder value only grows when other things – like making customers happy, creating a create environment for employees, being a great corporate citizen – happen. As Aristotle once opined: if you seek happiness, you probably won’t end up happy; but if you seek to lead a worthy life, you are likely to end up happy. Shareholder value and happiness are counterproductive to pursue directly; rather they will happen when other things are pursued.

  • When to fire your financial adviser

    ..unlike the pizza with everything on it, a portfolio with everything on it is just expensive without giving you a return kicker…Ask for the details of what is sold and what is bought from your adviser. If you see funds being recommended for a ‘sell’ within 2 years of being put on the buy list, ask why. There could be a genuine reason—such as a fund house sale or the exit of a star fund manager —but it could be that the guy is churning you; maybe to win a junket his fund house is offering.


  • John Medina’s Brain Rules for Baby is a must read for every parent. And even if you aren’t a parent, you’ll find quite a few remarkable insights in it. John uses Evolution, the big idea from the field of Biology, to explain why human beings have relatively shorter gestation period for their unborn offspring and a pretty long period of dependent childhood. He writes –

    It’s a question that bothers many evolutionary scientists: How come it takes so long to raise a human child? Aside from perhaps a whale or two, we have the longest childhood on the planet. Where did this decades-long sojourn come from, and why don’t other animals have to endure what we go through?

    Blame our big, fat, overweight, gold-plated, nothing-else-like-it brains. We evolved to have larger brains with higher IQs, which allowed us to move from leopard food to Masters of the Universe in 10 million very short years. We gained those brains through the energy savings of walking on two legs instead of four. But attaining the balance necessary to walk upright required the narrowing of the Homo sapiens pelvic canal. For females, that meant one thing: excruciatingly painful, often fatal births. An arms race quickly developed, evolutionary biologists theorized, between the width of the birth canal and the size of the brain. If the baby’s head were too small, the baby would die (without extraordinary and immediate medical intervention, premature infants won’t last five minutes). If the baby’s head were too big, the mother would die. The solution? Give birth to babies before their skulls become too big to kill mom. The consequence? Bringing kids into the world before their brains are fully developed. The result? Parenthood.

    Because the bun is forced to come out of the oven before it is done, the child needs instruction from veteran brains for years. Clearly, childhood is a vulnerable time. More than a decade passes between the birth of a baby and its ability to reproduce—an eternity compared with other species. This gap shows not only the depth of the brain’s developmental immaturity but also the evolutionary need for unflinchingly attentive parenting.


  • India’s most important business group is socially responsible but financially disappointing

    Tata remains active in 100 different business lines, many of which are themselves diversified. Far from slimming down, Tata is eyeing still further expansion: defence, infrastructure and financial services are the latest targets…One former adviser to several Tata CEOs says that “the risk is that Tata uses its long-term emphasis and ethical way of doing business as an excuse to tolerate underperformance.”…Mr Mistry has shown some signs that he knows what needs to be done. For the moment, however, he appears dangerously content just to sit atop what has grown into an impressive but lumbering pachyderm.

  • Trying to predict the future is futile. However, imagining future as a spectrum of probabilistic outcomes can turn out to be an interesting thought experiment. Today India is leaning on the edge of massive technological disruption. Here’s a stimulating discussion on what could unfold, not as a prophecy but as an alternative view of the future, over next few decades in Indian economy as a result of this disruption.

    Fortunately, I was in the audience when the talk was being delivered. It was a pleasant surprise to find this on youtube and I just couldn’t help sharing it.


  • William Zinsser, in his book On Writing Well, sites the World War II incident when the government drafted the order for blackout. The 1942 memo read –

    Such preparations shall be made as will completely obscure all Federal buildings and non-Federal buildings occupied by the Federal government during an air raid for any period of time from visibility by reason of internal or external illumination.

    President Franklin Roosevelt saw the memo and said, “Tell them that in buildings where they have to keep the work going to put something across the windows.”

    “Simplify, simplify.” Thoreau said it and Roosevelt practiced it. Clear thinking becomes clear writing. Journaling is an effective way to crystallize thinking but it too demands simplicity.

  • A science-backed guide to taking truly restful breaks.

    Psychologists and business scholars have recently started studying the most effective ways to relax during a workday – they call them “micro breaks”…[But] Cognitive activities during work breaks actually made fatigue worse, likely because reading websites or checking emails taxes many of the same mental processes that we use when we’re working.

    Pomodoro technique is very effective in this context. It essentially allows you to work in bursts of 25-30 minutes followed by 5 minutes of break.

    There’s a work zeitgeist today that says you have to be constantly busy to succeed. If you’ve got time to go for a short walk, you’re obviously not consumed by drive and ambition, so the mistaken ethos goes. The psychological reality is that your mental and physical reserves are limited and it is only by taking frequent short breaks of a truly restful nature that you will fulfil your true potential.

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