Archives for November 2018

The Dagger of Debt

November 22, 2018 | Reading Time: 11 minutes | Leave a Comment |

Archimedes — a Greek mathematician — was born in 287 BC in the seaport city of Syracuse, Sicily. Some consider him as the greatest mathematician of all time. Although he’s known for the discovery of Archimedes Principle, his often quoted for his famous saying —

Give me a lever long enough and a fulcrum on which to place it, and I shall move the world.

While Archimedes did not invent the lever, his did extensive work on the usage of levers. Archimedes designed block-and-tackle pulley systems, allowing sailors to use the principle of leverage to lift objects that would otherwise have been too heavy to move.

A lever is a simple machine that amplifies an input force to provide a greater output force, which is said to provide leverage. There isn’t a single mechanical device in the world which doesn’t use the laws of the lever.

When people realized that leverage could magnify the effect of non-physical things too the first thing they tried it on was money. In the last few decades, the world of finance has taken Archimedes’ words literally.
[Read more…] about The Dagger of Debt

The Sixteen Silliest (and Most Dangerous) Things People Say About Stock Prices

November 22, 2018 | Reading Time: 7 minutes | 39 Comments |

The title of this post is inspired from Ch. 18 of Peter Lynch’s One Up on Wall Street, that reads – The Twelve Silliest (and Most Dangerous) Things People Say About Stock Prices.

For today, I have just added to and removed from Lynch’s list, and have illustrated the silliness using real-life examples of listed Indian stocks. None of what you see below portrays my view on any stock showcased in this post. These are purely examples, and that too from the benefit of hindsight. But they offer meaningful lessons.

Anyways, before you read ahead, please understand that I agree with what Morgan Housel wrote recently that people are not crazy in general. Just that they can…

…be misinformed. They can have incomplete information. They can be bad at math. They can be persuaded by rotten marketing. They can have no idea what they’re doing. They can misjudge the consequences of their actions.

I also agree with Charlie Munger who said that even smart people may have their ‘streaks of nuttiness’ that cause them to make occasional dumb remarks and decisions.

So, what follows below showcases just those moments of nuttiness and craziness that get a lot of people into problems in investing. I have experienced some of these moments myself, just that I have managed to survive to tell the tale. 🙂

Siddhartha’s Dilemma, Marcus Aurelius On Honest Men, And Bezos on Amazon

November 17, 2018 | Reading Time: 10 minutes | 3 Comments |

Here’s some stuff I am reading and thinking about this weekend…

Book I’m Reading – Siddhartha
Siddhartha is a beautiful novel by Hermann Hesse, first published in 1922 in Germany, that deals with the spiritual journey of self-discovery of a man named Siddhartha during the time of the Gautama Buddha.

The book follows this young man named Siddhartha on his journey to find the true meaning of life and peace. One passage that is particularly enlightening for me is when a ferryman, Vasudeva, the spiritual guide of Siddhartha, consoles him after the latter’s son (also Siddhartha) from a courtesan woman (Kamala) doesn’t seem to be interested in reciprocating well to his father’s love and advice, and seems like running away to a path of his own that looks dangerous to his father –

Zoom Out, Baby, Zoom Out

November 15, 2018 | Reading Time: 13 minutes | 10 Comments |

It was Valentine’s Day in 1990. The Voyager 1 space probe, which had completed its primary mission, was leaving the Solar System.

At the request of astronomer Carl Sagan, the American space agency NASA commanded Voyager to turn its camera around and take one last photograph of Earth, across a great expanse of space. The photograph that got clicked was from a distance of about 6 billion kilometers (same as 240,000 round trips from Mumbai to New York).

In the photograph, against the vastness of space and among bands of sunlight scattered by the camera’s optics, Earth appears like a ‘pale blue dot’ (that’s what the photograph was named) that is smaller than a pixel.

Anyways, four years later, in 1994, during a public lecture at Cornell University, Sagan presented the photograph to the audience and shared his reflections on the deeper meaning behind it –

Fighting the Last War

November 12, 2018 | Reading Time: 9 minutes | 1 Comment |

Note: This post was originally published in the November 2017 issue of our premium newsletter – Value Investing Almanack (VIA). To read more such posts and other deep thoughts on value investing, business analysis and behavioral finance, click here to subscribe to VIA.

In Safal Niveshak’s Value Investing workshops, when we discuss the mental biases, we show the following video to our participants.

I would suggest that you pause here and watch this video before reading further.

It’s a test of your awareness so don’t cheat 🙂 [Read more…] about Fighting the Last War