Wishing you all a Merry Christmas and a wonderful New Year Ahead.
Reading
across disciplines is one of the best ways to improve our investment acumen.
Here is a summary of some of the best articles I read this week.
The economics of the
"young old"
The year 2020 will
mark the beginning of the decade of the yold, or the “young old”, as the
Japanese call people aged between 65 and 75.
Health worsens with
age, but the yold are resisting the decline better than most: of the 3.7 years
of increased life expectancy in rich countries between 2000 and 2015, says the
World Health Organisation, 3.2 years were enjoyed in good health. The yold are
also better off: between 1989 and 2013, the median wealth of families headed by
someone over 62 in America rose by 40% to $210,000, while the wealth of all
other age groups declined.
The yold are busier,
too. In 2016 just over a fifth of people aged 65-69 were in work in rich
countries, a figure that is rising fast. Working is one of the factors that are
helping people stay healthy longer. A German study found that people who remain
at work after the normal retirement age manage to slow the cognitive decline
associated with old age and have a cognitive capacity of someone a year and a
half younger.
8 ways financial statements
are manipulated
Every company
manipulates its numbers to a certain extent to make sure budgets balance,
executives score bonuses, and investors continue to offer up funding. Such
creative accounting is nothing new. However, factors such as greed,
desperation, immorality, and bad judgment can cause some executives to cross
the line into outright corporate fraud. Investors should know how to recognize
the basic warning signs of falsified statements. While the details are
typically hidden, even from accountants, there are red flags in financial
statements that can point to the use of manipulating methods.
Reducing noise helps in
forecasting better
In a digital world
swarming with fake news and sensationalist content, those who cast about widely
for information are sure to reel in some strange fish. To extrapolate,
superforecasters’ true edge may be more about discipline – the mental rigour
required to distinguish random from revealing data – than innate wisdom or
intellectual objectivity.
Whatever the reason,
investing in noise reduction may not be a bad idea. One proven, if drastic,
noise-reduction solution is to assign predictions to algorithms rather than
humans. Bots are programmed to pay attention to patterns in data and discount
random information.
The silent mobile revolution
in India
There are now more
than 450 million mobile internet users in India, a number that is expected to
grow to 667 million by 2022. Not so surprising considering that India has the
lowest data costs in the world and its fixed-line download speeds continue to rise.
It’s not just the urban middle class who have benefitted. Nearly half of
India’s 250,000 village councils are now connected by fibre optic networks,
with the other half scheduled to come online in the next two years. More than
300,000 so-called common service centres have been set up around the country to
provide even impoverished villagers with access to digital services.
Always average up
Never double down,
always double up. And here’s the interesting thing, so most people think if
you’ve done the work and you buy something and it goes against you, you should
buy more. And what Julian would say is no, we’re just wrong. Made a mistake and
the market’s right, the market’s … this goes back to the efficient markets.
It’s not that the market’s always efficient, but when it’s telling you you’re
wrong you should listen to it. And there’s the famous picture of Paul Tudor
Jones in his dorm room with the losers average losers sign.
Now most people
would say, “Well wait a minute, that’s not a value investor.” Well think about
it, is it or is it not? So what he’s saying is when he had edge, when he had
knowledge about an area, an asset, a company and they made an investment and
now the market is coming around to your view, rather than do what most human
beings do, which is pull their flowers. They’re so happy to have a win they
take profits. He’s like, “Well let’s buy more because it’s working.” And
there’s the simple statement of let’s do more of what’s working and less of
what’s not. Most of us don’t do that, we do more of what’s not working and less
of what’s working, which is why the average person underperforms.
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