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Safal Niveshak Stream – November 19, 2016

Note to Readers: In Stream, we suggest worthwhile reading material on a variety of topics, not all of which are directly related to investing. Some of the articles require you to be paid subscriber of those sites. However, it is often possible to read such articles by going to Google News and searching for the article’s title.



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

Life/Learning

  • (970 words / 4 minutes read) Nilanjana Roy discusses the concept of being a “time-millionaire”, a measure of how much person has control over his or her time. It’s not so straightforward to draw an analogy between time and money in the bank. However, the importance of having control of one’s time cannot be emphasized enough when it comes to understanding human happiness…

    The American writer and blogger Mason Currey tracked the daily routines of 161 highly creative people, from Twyla Tharp and Agatha Christie to Matisse and Benjamin Franklin, in Daily Rituals: How Artists Work. Despite wide variations in working styles and habits, some patterns emerge. The brightest humans find work satisfying in itself, continuing to be productive long after they’ve achieved financial stability; they tend to work for a few hours every day, with the odd marathon session.

    The most happily successful people you might imagine — Warren Buffett, for example — have the knack of enjoying what they do for work, and take time off to play bridge, learn the ukulele, or whatever. Although Currey didn’t explicitly say this, it also becomes clear that highly creative people exercise iron control over their time — and enjoy spending time, perhaps as much as we’re conditioned to think of enjoying spending wealth.

  • (1800 words / 8 minutes read) We’re massively impressed by a concert pianist, or a truly skillful visual artist. Their abilities seem otherworldly. But what makes these people so skillful? How did they start out like you and I and then become something so extraordinary? Farnam Street writes about the science of success

    Top 0.01% success is a multiplicative system: Everything’s gotta go right. The world is too competitive to allow for anything else. So in your quest for success, realize that you’ll have to do deep, hard work for many years, you may need the right parents (to an extent) and you’ll need a whole lot of luck.

Reading/Thinking

  • (1800 words / 8 minutes read) “Many successful speculators, after their first break in life, get involved in large scale structures, with multiple offices, morning meeting, coffee, corporate intrigues, building more wealth while losing control of their lives. Not Ed.” writes Nassim Taleb in his latest article on Ed Thorpe. There’s a profound insight in this piece about how newly acquired wealth can lead to an increasingly complicated life and how Ed Thorpe dealt with this problem.

    After the separation from his partners and the closing of his firm (for reasons that have nothing to do with him), he did not start a new mega-fund. He limited his involvement in managing other people’s money. Most other people do reintegrate in the comfort of firms and leverage their reputation by raising monstrous amounts of outside money in order to collect large fees. But such a restraint requires some intuition, some self knowledge. It is vastly less stressful to be independent –and one is never independent when involved in a large structure with powerful clients. It is hard enough to deal with the intricacies of probabilities, you need to avoid the vagaries of exposure to human moods. True success is exiting some rat race to modulate one’s activities for his peace of mind. Thorp certainly learned a lesson: the most stressful job he ever had was running the math department of the University of California Irvine. You can detect that the man is in control of his life. This explains why he looked younger on the second time I saw him, in 2016, than he did the first time, in 2005.

  • (1100 words / 5 minutes) Human gullibility to stories is what makes the Nigerian scammers so successful. And if you think you’re smart enough to never click on such suspicious mails, it doesn’t make you less susceptible to scams, this article argues, “because intelligent people are more vulnerable to investment frauds.

    Our predisposition to believing good stories comes down to human physiology and psychology. We’re wired for well-told narratives. They can be so alluring, enticing, and transformative that they can cause even the smartest readers to change their minds, relinquish money, and see the world through someone else’s eyes.

Investing/Stock Market

  • (930 words / 4 minutes read) Mario Gabelli, who has been managing Gabelli Asset Fund (US$ 2.6 billion now) since last three decades holds, holds onto his typical stock for an impressive average of 14 years. Jason Zweig in his recent article quoted him saying, “We love to watch paint dry and turtles race.” Zweig profiled three more such fund managers who have weathered the vagaries of stock market in last three decades and have come out with flying colours.

    As these fund managers show, stamina is the key to success, and patience is the key to stamina…So patience is the prime directive for most of these veteran fund managers.

  • (1.40 hour watch) The quest for 10-100 baggers – Mohnish Pabrai’s talk at Peking University’s Guanghua School of Management…

Business

  • (3500 words / 15 minutes) One of the best posts we’ve read on the infighting within the Tata group comes from Aswath Damodaran. And as this post suggests, the mess is deeper than you think…

    The turmoil at the Tata Group has all the makings of a soap opera and can be great entertainment if you are an armchair observer with no money in Tata company shares. It would be a mistake, though, to view this as an aberration because the palace intrigue and the infighting that you observe can not only happen in other family groups but take an even darker tone. To the extent that family group companies pushed their companies into public markets because they wanted to raise fresh capital and monetize their ownership stakes, they have to play by the rules of the game.

  • (1050 words / 4 minutes) David Paul Gregg invented the CD, which is amazing and changed history. But you’ve probably never heard of him because CDs aren’t difficult to make, and lost relevance over time. Most things work this way. As soon as a smart product or business idea becomes popular, the urge to copy it and commoditize it is the strongest force economics can unleash. Jeff Bezos summed this up when he said “Your margin is my opportunity.” In such an environment, what could be the sustainable sources of competitive advantage for a business? Morgan Housel reveals five big ones, including…

    Business success doesn’t necessarily go to those with the best product. It goes to whoever is the most persuasive. George Soros may be one of the brightest minds in finance, but he would fail miserably as a financial advisor. Not one person in ten who reads his books understands what the hell he’s talking about.

    Most business edges are found at the intersection of trust and simplicity. Both rely on the ability to tell customers what and why you’re doing something before losing their attention.

    This is one of the crazy things that gets harder to do the smarter you are. There’s a bias called “the curse of knowledge,” which is the inability to realize that other people with less experience than you have don’t see the world through the same lens you do. I saw this firsthand when a financial advisor told an utter novice grandmother that a higher bond allocation (which she wanted) didn’t make sense “because of the slope of the yield curve.” She had no idea what this meant, and told me experiences like this eroded trust since she couldn’t distinguish her confusion from his obfuscation.

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About the Author

Vishal Khandelwal is the founder of Safal Niveshak. He works with small investors to help them become smart and independent in their stock market investing decisions. He is a SEBI registered Research Analyst. Connect with Vishal on Twitter.

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