Prime Membership

Most of us invest in the first place is to attain financial freedom so that we do not have to worry about money. But most of us become slaves of the short term stock price movements. And that creates stress. And stress is bad, very bad.

One of Warren Buffett’s all-time great investments is Coca-Cola, and it just happens to be the stock Berkshire Hathaway has held the longest. There is no other holding that better exemplifies his investing skill, patience, and temperament than this one.

Buffett first started buying shares of Coca-Cola in 1988, and seemingly paid around $2.5 per share (adjusted) for his purchase. In 2019, the company paid a dividend of $1.6 per share, thus taking Buffett’s dividend yield from the stock to 64%!

“See, when you want to reverse the car to left, you have to turn the steering wheel to the left,” I told my wife while I was trying to teach her reverse parking.

“But when I turn left, the car is going towards right!” she exclaimed.

“No! The car is going towards left. See, the left tail lamp is going left,” I showed her in the side view mirror.

“Yeah but the right headlamp is going towards the right,” she pointed towards the right headlamp which appeared to be moving towards right from driving seat. Of course, it had to. If you are focusing on the front, the nose of the car will seem to go towards the right.

“But why are you focusing on the front head lamp? When you’re reversing your point of reference should be the tail lamp,” I explained.

“Then why didn’t you explicitly tell me that before?” she asked almost in complete frustration.

“I thought you would…” I started mumbling but before I could complete that sentence, a light bulb went off in my head. Eureka!

In 2014, JPMorgan Asset Management did a study and discovered that the 40 best days accounted for more than the entire S&P 500 return from 1993–2013. In other words, if someone traded only on these specific 40 days, i.e., invested his money in S&P 500 in the morning and sold in the evening then he would have the same returns as someone who stayed invested for 20 years.

Investing is simple, but not easy. Still there are a few eternal rules that, if you can tie them well with your investment process, should make the journey profitable.

The Wizard: Do not arouse the wrath of the great and powerful Oz! I said come back tomorrow!

Dorothy: If you were really Great and Powerful, you’d keep your promises!

The Wizard: [As Toto reveals him behind a curtain] You presume to criticize the Great Oz? You ungrateful creatures! You’re lucky that I’m only holding this till tomorrow, instead of the next twenty years from now!

Dorothy: [Pulling aside the curtain] Who are you?

The Wizard: I am the great and powerful…Wizard…of Oz.

Dorothy: You are? I don’t believe you.

The Wizard: I’m afraid it’s true. There’s no other Wizard except me.

Dorothy: Oh, you’re a very bad man!

The Wizard: Oh, no, my dear, I… I’m a very good man – I’m just a very bad Wizard.

In the noted 1939 American musical comedy-drama fantasy film The Wizard of Oz, one of the lead characters Dorothy, along with her dog Toto, is swept away by a tornado to the Land of Oz. It is ruled by a tyrant in whom people had vested extraordinary powers, but who was later exposed as vulnerable as the spell surrounding Oz is broken.

In the controversial movie, The Social Network, which supposedly portrayed Mark Zuckerberg’s Facebook journey, Sean Parker’s character famously quipped –

“A million dollars isn’t cool. You know what’s cool? A billion dollars.”

It’s probably the most favourite problem that majority of the individuals in the world are trying to figure out i.e., how to get rich?

So let’s investigate this problem by using Charlie Munger’s most cherished mental model i.e., inverting the problems to solve them.

On December 24, 2014, AirAsia Flight 8501 took off from Surabaya (Indonesia) at 5.30 am local time. With 155 passengers and 7 crew members onboard, the flight was headed to Singapore. About 43 minutes into its flight, the Airbus A320 disappeared from the radar. The worst had come to pass. Two days later, the rescue team discovered the plane wreckage in Java sea. All 162 people onboard perished in the crash.

The crash investigation revealed that it was a pilot error. The in-command Captain Iriyanto – a 53-year old former Indonesian Air Force pilot – performed a non-standard reset of the onboard flight control computers. Which means he did something which was not mentioned anywhere in any of the operating manuals.

Why would someone with an experience of more than 20,000 flight hours do such a thing?

Here is the November issue of StockTalk, a Prime members exclusive, that contains analysis of a leading Indian company in the financial services space.

It was sometime in 2005 when a close friend of mine gifted me Ben Graham’s The Intelligent Investor, knowing that I was working as a stock analyst and aspired to become a sensible investor (aspirations are always sensible, you see).

“Is this a good book?” I asked him.

“Seek for yourself,” he told me.

One of the best books on the art of learning I’ve read is, well, The Art of Learning by Josh Waitzkin.

Josh is a champion in two distinct sports – chess and martial arts. He is an eight-time US national chess champion, thirteen-time Tai Chi Chuan push hands national champion, and two-time Tai Chi Chuan push hands world champion.

In his book, Josh recounts his experiences and shares his insights and approaches on how you can learn and excel in your own life’s passion, using examples from his personal life. Through stories of martial arts wars and tense chess face-offs, Josh reveals the inner workings of his everyday methods, cultivating the most powerful techniques in any field, and mastering the psychology of peak performance.

One of my favourite chapters from Josh’s book is titled – Making Smaller Circles – which stresses on the fact that it’s rarely a mysterious technique that drives us to the top, but rather a profound mastery of what may well be a basic skillset.

Josh starts this chapter with the story of the protagonist in Robert Pirsig’s book Zen and the Art of Motorcycle Maintenance. This man is Phaedrus, a teacher, who in this particular scene is reaching out to his student who is all jammed up when given the assignment to write a five-hundred-word story about her town, Bozeman.