Weekend Reading

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.

I especially try to not post Corona related articles as that is all one gets to read in all traditional media.

 

If you like the collection this consider forwarding it to someone who you think will appreciate.

The Rise of the Antivitamin

Though many of us have never heard of antivitamins, scientists have known about them since Sir Edward Mellanby identified the first one — though he called it a "toxamin" — in the late 1930s. These substances do what their name implies: They stop vitamins from functioning. As we near the end of the antibiotic era due to the rapid pace at which bacteria are developing resistance to the wonder drugs, researchers are taking a closer look at antivitamins as the basis of a new class of drugs that may potentially replace antibiotics for treating bacterial infections.

https://bigthink.com/surprising-science/antivitamin-antibiotic

 

Education that Works (something which I think is really needed in India)

Google recently made a huge announcement that could change the future of work and higher education: It's launching a selection of professional courses that teach candidates how to perform in-demand jobs. These courses, which the company is calling Google Career Certificates, teach foundational skills that can help job-seekers immediately find employment. However, instead of taking years to finish like a traditional university degree, these courses are designed to be completed in about six months.

Walker then revealed the following on Twitter:

"In our own hiring, we will now treat these new career certificates as the equivalent of a four-year degree for related roles."

https://www.inc.com/justin-bariso/google-plan-disrupt-college-degree-university-higher-education-certificate-project-management-data-analyst.html

 

Investors make the same mistakes over centuries (are we all making one now??)

Forgetfulness is only one of the reasons bubbles happen again and again. Yet past experience offers little reason to trust the wisdom and rationality of financiers or investors. Newton’s contemporaries viewed him as the smartest man alive. If he could go so wrong—risking something like half his wealth in a reckless fashion—so could anyone. Research published last year by the mathematician Andrew Odlyzko into Newton’s actions during the South Sea bubble illuminates not just the great thinker’s long-ago mistakes, but also a pattern of human folly that recurs over and over again. When financial markets offer the temptation of ever-rising values, not even the smartest people can resist.

What gnawed at Newton for years, and what still seems strange, is that his capacity for dispassionate analysis failed him when he needed it most. Here was a man who had calculated logarithms to 50 places. But in the thrill of the moment, he failed to do the math.

https://www.theatlantic.com/ideas/archive/2020/08/even-geniuses-make-bad-investors/615592/

 

Returns are a mounting problem in online shopping

Shoppers love the kind of liberal return policy that makes it easy for them to buy whatever they want in store or online with the confidence that a retailer will take products back without hassle. But retailers are starting to rethink this strategy as they are confronted with rising financial losses from returned merchandise and the headaches that come with figuring out what to do with all that stuff. A recent study found that roughly 10% of purchases are returned, adding up to billions of dollars a year, with online returns higher than in-store.

https://knowledge.wharton.upenn.edu/article/high-cost-of-returns-should-retailers-rethink-policies/

 

US interest rate will remain low for years to come

The Fed’s new monetary policy strategy promises to aim for 2% inflation on average, so that periods of too-low inflation would likely be followed by an effort to lift inflation “moderately above 2% for some time.”

The change suggests the U.S. central bank’s key overnight interest rate, already near zero, will stay there for potentially years to come as policymakers woo higher inflation.

“It’s no news that (Fed Chair Jerome) Powell doesn’t want to raise interest rates,” said Vincent Reinhart, chief economist at Mellon. What is news, Reinhart said, is that the Fed has now enshrined a degree of tolerance for inflation in its guiding document.

https://in.reuters.com/article/usa-fed-jacksonhole/in-landmark-shift-fed-rewrites-approach-to-inflation-labor-market-idINKBN25N0V9

 

Disclaimer: Abhishek Basumallick is the Head of the equity advisory www.intelsense.in for long term wealth creation and a pure quant focused newsletter at www.quantamental.in. The blog posts should not be construed as investment advice. Please do your own due diligence before investing.

Weekend Reading

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.

I especially try to not post Corona related articles as that is all one gets to read in all traditional media.

 

If you like the collection this consider forwarding it to someone who you think will appreciate.

 

Personal debt is going down

Credit-card debt in the U.S. and other advanced economies has fallen. Fewer people are late on their credit-card payments. Consumer demand for new borrowing—through credit cards, personal loans and even pawnshops—is down sharply.

The main reason, according to economists and financial executives, is government stimulus programs launched in the U.S. and other advanced economies that have worked unexpectedly well. The flood of money, along with debt-relief measures such as deferred-mortgage and student-loan payments, has stabilized the finances of many households and even left some in better shape than before the pandemic—at least for now.

https://www.wsj.com/articles/consumers-flush-with-stimulus-money-shun-credit-card-debt-11596373201

 

How Robinhood is fleecing the very customers it was supposed to democratise

Welcome to the stock market, Robinhood-style. Since February, as the global economy collapsed under the weight of the coronavirus pandemic, millions of novices, armed with $1,200 stimulus checks and nothing much to do, have begun trading via Silicon Valley upstart Robinhood—the phone-friendly discount brokerage founded in 2013 by Vladimir Tenev, 33, and Baiju Bhatt, 35.  The firm has added more than 3 million accounts since January, a 30% rise, and it expects revenue to hit $700 million this year, a 250% spike from 2019.

The problem is that Robinhood has sold the world a story of helping the little guy that is the opposite of its actual business model: selling the little guy to rich market operators with very sharp elbows.

Instead of taking fees on the front end in the form of commissions, Tenev and Bhatt would make money behind the scenes, selling their trades to so-called market makers—large, sophisticated quantitative-trading firms like Citadel Securities, Two Sigma Securities, Susquehanna International Group and Virtu Financial. The big firms would feed Robinhood customer orders into their algorithms and seek to profit executing the trades by shaving small fractions off bid and offer prices.

https://www.forbes.com/sites/jeffkauflin/2020/08/19/the-inside-story-of-robinhoods-billionaire-founders-option-kid-cowboys-and-the-wall-street-sharks-that-feed-on-them/

 

The cart full of mobile causing traffic jam on google maps teaches us a lot more

We shape our tools and thereafter our tools shape us. Google Maps provides a particularly illustrative example of that relationship. Not only is it a closed system, with little transparency around what data informs it and how it’s used, but Google Maps also uniquely shapes the physical world. If it picks up a traffic jam—real or fabricated—it might redirect vehicles to less-traveled streets, in turn putting strain on infrastructure that wasn’t built for the extra volume.

Systems people take for granted involve inputs and outputs, and that they themselves are sometimes both. It shows how simple it is to fool a product in which people put tremendous amounts of faith. And it illustrates how maps aren’t neutral, either in their creation or their interpretation.

https://www.wired.com/story/99-phones-fake-google-maps-traffic-jam/

 

Corporate espionage

For as long as there has been commerce, there has been espionage. The methods for spying on competitors have changed over time, but the desire to uncover a rival’s secrets has not. Here’s a sample of some notable cases of corporate espionage.

https://www.bloomberg.com/news/photo-essays/2011-09-20/famous-cases-of-corporate-espionage

 

Is the future of a car not a car??!!

Firstly, autonomous driving doesn't actually seem to be ready for the reality of messy, complicated streets that are teeming with humans. Most experts now agree that full self-driving tech is far from ready — and in fact, may never be ready. That is a stark contrast from the claims from some companies that insist it's already here.

Further, self-driving cars face another problem of their own making: Their various sensors and safety technology is actually making human-driven cars a safer than their autonomous brethren. As just one example, automatic emergency braking has already reduced rear-end collisions by 50 percent, and the National Transportation Safety Board believes this figure will eventually rise to 80 percent. It seems that predictive or avoidant technology, combined with the knowledge of a human driver, is a better solution to the problem of collisions and injury than cars that just drive themselves.

https://theweek.com/articles/890890/what-car-future-isnt-car-all

Disclaimer: Abhishek Basumallick is the Head of the equity advisory www.intelsense.in for long term wealth creation and a pure quant focused newsletter at www.quantamental.in. The blog posts should not be construed as investment advice. Please do your own due diligence before investing.

Journey to Financial Independence

On India’s Independence Day, let me tell you my journey of financial independence.

When I was in class 11, my father, who was the sole earning member of our family, became seriously ill and had to leave his job, one where he had worked for over 25 years. Our family came face-to-face with a massive financial setback. From being reasonably well off to suddenly barely making ends meet, was a massive shock to my psyche.

When I started my job after finishing my engineering, a friend gave me a book which changed the trajectory of my life. Robert Kiyosaki’s Rich Dad, Poor Dad. The book talked about financial freedom and drilled in me the fact that depending on a salaried job is not going to make me either financially independent or wealthy. It stressed on becoming either a business owner or an investor as a way out.

Now, no one in our family had ever run a business. At 22 years of age, with no understanding of business and no money and parents to support, starting a business was out of the question. The only way left was becoming an investor. I came up with the same problem here as well. No one in our family had ever invested in the share market. I practically knew nothing. But as luck would have it, I was working in an IT company and had access to the internet after office hours on our project manager’s desktop (Odd as it may sound now, that is how it was in 2000!!)

I started reading up whatever I could on equity investing. I opened an online trading account, something that was just being launched around that time.  I started reading up all the research reports I got from the brokerage. I read all (and I literally mean all) the articles in investpedia.com and fool.com. I used to have trouble even with basic terms. I did not know what EPS meant or what book value was. So, I started taking notes and learning.

I was always an avid reader and I started devouring books on investing. It was like a new world had opened in front of me. I discovered a person called Warren Buffett. He seemed to talk sense. Plus he had made this humongous amount of money. So, he became my first role model. Later I discovered Charlie Munger who has been an equally big influence on my life. Later on discovered many stalwarts in the investing world and tried to learn as much as possible about them. So, the journey started. Buying stocks, making mistakes, learning, reading, reflecting on the process of investing. This went on in cycles.

I had internalised the concepts of compounding and had gravitated towards buying quality companies which would compound well over time. I started investing with five thousand rupees and used to put in a couple of thousand every month.

The concept that I can be a part-owner of a business and participate in the profits of an enterprise fascinated me. I have always loved to follow the life and narratives of great businesses and business people. With history as one of my favourite subjects, I loved reading up on market history and finding patterns woven in the tapestry of past events that resonate even today.

Due to family commitments, I could not add any additional capital in my portfolio after 2010. But the 8^th wonder of the world, compounding, kept working and by around 2017, I was well on my way to being financially independent. It took another 2 years to convince my family to leave my job and becoming “just an investor”.  Then I started the advisory, again against the warnings from quite a number of close friends and well-wishers. But that’s a story for another day!!

Investing has given me freedom – financial and that of time. I know of no other way one can create serious wealth without having a lot of money to start with. It just requires patience, hard work, discipline in learning and an open mind to learn from one’s own and mistakes of others. Investing is a creative pursuit. The best thing about investing is, you enjoy the process and get handsome rewards while doing something you love!

Wish you all a Happy Independence Day. May you take a small step towards becoming financially independent yourself.

 

Abhishek Basumallick is the Head of the equity advisory www.intelsense.in for long term wealth creation and a pure quant focused newsletter at www.quantamental.in. Nothing in the article should be construed as investment advice. Please do your own due diligence before investing.

Weekend Reading

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.

I especially try to not post Corona related articles as that is all one gets to read in all traditional media.

 

If you like the collection this consider forwarding it to someone who you think will appreciate.

How a Canadian convenience store giant built its empire

Having started in 1980 as a single store, Couche-Tard (pronounced “koosh-tar,” it means “late sleeper” or “night owl” in French) now owns or licenses more than 14,500 “c‑stores” in a network that spans North America and Northern Europe, with outposts in Latin America, the Middle East, and Southeast Asia. Couche-Tard took in $54 billion in sales in its 2020 fiscal year, making it Canada’s third-biggest company. But the U.S. accounts for 70% of its revenue, and its stateside footprint could get bigger.

The company posits that gas-station retail can be quality retail, with higher-margin merchandise: It doesn’t have to be day-old coffee and endless beef jerky. At hundreds of stores in the U.S. and Canada, the company is bringing in fresher food, installing espresso machines, and stocking wines that cost up to $50 a bottle. In Canada, where recreational marijuana use is legal, Couche-Tard is even exploring cannabis retail. Couche-Tard is attracting a customer into their stores who’s not necessarily going in to fill up their gas tank.

https://fortune.com/2020/08/10/couche-tard-gas-station-convenience-stores-biggest-canadian-companies/

 

The AI fear all over again - will man get superseded by machines?

True artificial intelligence, if it is realized, might pose a danger that exceeds every previous threat from technology—even nuclear weapons—and that if its development is not managed carefully humanity risks engineering its own extinction. Central to this concern is the prospect of an “intelligence explosion,” a speculative event in which an A.I. gains the ability to improve itself, and in short order exceeds the intellectual potential of the human brain by many orders of magnitude.

Such a system would effectively be a new kind of life, and in their simplest form, are evolutionary: that humanity will unexpectedly become outmatched by a smarter competitor. He sometimes notes, as a point of comparison, the trajectories of people and gorillas: both primates, but with one species dominating the planet and the other at the edge of annihilation. “Before the prospect of an intelligence explosion, we humans are like small children playing with a bomb,” he concludes. “We have little idea when the detonation will occur, though if we hold the device to our ear we can hear a faint ticking sound.”

https://www.newyorker.com/magazine/2015/11/23/doomsday-invention-artificial-intelligence-nick-bostrom

 

How all coffee shops are beginning to look the same across the world

As an affluent, self-selecting group of people move through spaces linked by technology, particular sensibilities spread, and these small pockets of geography grow to resemble one another, as Schwarzmann discovered: the coffee roaster Four Barrel in San Francisco looks like the Australian Toby’s Estate in Brooklyn looks like The Coffee Collective in Copenhagen looks like Bear Pond Espresso in Tokyo. You can get a dry cortado with perfect latte art at any of them, then Instagram it on a marble countertop and further spread the aesthetic to your followers.

This confluence of style is being accelerated by companies that foster a sense of placelessness, using technology to break down geography.

https://www.theverge.com/2016/8/3/12325104/airbnb-aesthetic-global-minimalism-startup-gentrification

 

What happens if you complain every day?

Our brain possesses something called the negativity bias. In simple terms, negativity bias is the brain’s tendency to focus more on negative circumstances than positive. Dr. Rick Hanson, a neuroscientist and author of Buddha’s Brain, explains negativity bias: “Negative stimuli produce more neural activity than do equally intensive positive ones. They are also perceived more easily and quickly.” Repetition is the mother of all learning. When we repeatedly focus on the negative by complaining, we’re firing and re-firing the neurons responsible for the negativity bias. It’s not possible to be “happy-go-lucky” all of the time. We should, however, take concrete steps to counteract negative thinking.

Research has repeatedly shown that meditation and mindfulness are perhaps the most powerful tools for combating negativity.

https://educateinspirechange.org/science-technology/science-explains-what-happens-to-someones-brain-from-complaining-every-day/

 

Use the internet, but with caution. You are getting Googlified

Our internet usage has “Googlified” our brains, making us more dependent on knowing where to access facts and less able to remember the facts themselves. This might sound a little depressing, but it makes perfect sense if we are making the most of the tools and resources available to us. Who needs to waste their mental resources on remembering that an “ostrich’s eye is bigger than its brain,” when the internet can tell us at a moment’s notice? Let’s save our brains for more important problems.

Photographs also have transformative effects on the way our memories work. Photographs can be a great way to physically save a moment into your collection, and cameras may help visual memory if used as a tool to enhance how you engage with an experience. But don’t let them come at the expense of your own enjoyment and natural memory of the real thing in front of you. It’s counterproductive and a little bizarre to take photos of the world’s wonders, but forget to look at them while they’re actually there. A 2009 study showed that people who heavily engage in multiple forms of media at the same time (e.g., talking on the phone, while working on an essay, while listening to music, while watching TV), perform worse in standardized cognitive tests that measure memory, attention, and task-switching.

Recent studies even suggest that children who use the internet excessively may develop less gray and white matter volume in certain brain areas, and may harm their verbal intelligence. It is not yet clear if internet usage directly causes these effects or if children who are predisposed to the effects are just more likely to overuse the internet. For now, the evidence provides notes of caution and attention rather than conclusive insights.

https://medium.com/s/story/how-the-internet-is-changing-your-brain-756e3de7c6b6

 

Disclaimer: Abhishek Basumallick is the Head of the equity advisory www.intelsense.in for long term wealth creation and a pure quant focused newsletter at www.quantamental.in. The blog posts should not be construed as investment advice. Please do your own due diligence before investing.

The Multibaggers

The biggest money is made when you have a lollapalooza effect - a strong trend in increasing business momentum and stock price momentum. 

At times the trend can continue for years. The real multibaggers come from those who can ride such stocks.

Page, Eicher, Symphony, Divis, Aarti, Atul, Pidilite, Asian Paints and many such companies.

It usually starts with increasing earnings and low valuations. Then the business continues doing well and the growth keeps coming. Others get attracted to the growth and low valuation and start buying. Increased buying increases the liquidity and attracts the big boys. Then they start getting in and the price momentum accelerates. And the company keeps defying the odds and posting good results and consistent growth. The PE keep re-rating upwards. The valuation after a point goes out of whack. Some investors book out. 

You need to keep abreast of the developments in the company. There will come a time when the growth will slow down. Try to assess if it is a short term blip or a medium to long term slowdown. That is the cue to get out.

Typically, a company is able to grow well for a period of 3-5 years after which the growth stops or slows. If the quality of the company is good, investors stick around and the price consolidates in a range without falling off (example, PI Ind in the last 2-3 years, before the growth again picked up).

To understand and ride such big moves, you need to have an understanding of both fundamentals and technicals. One without the other results in a sub-optimal outcome.

Never get scared of rising prices. That's the only way you make money!!

We Are Hiring

I am looking to expand the Intelsense Advisory team. 

Intelsense is an equity-only advisory service focused on three different styles of investing- long-term, technofunda and quantitative investing for a diverse range of clients in India and across the world.

The best-fit candidate would be:

- Honest, hard-working and ready to learn. As we are a small team, a good person to work with is the most important criteria.

- Able to analyse businesses and do deep-dive into company financials statements and perform valuations.

- Able to interact with company management /investor relations to understand the company strategy. 

- Conduct primary research (e.g. channel checks, dealer interactions, exploring expert networks etc)

- Ability to explain thoughts clearly through writing

- Able to prepare excellent PowerPoint presentations and Microsoft Word reports.

- Possessing strong analytical skills and a good understanding of finance and accounting concepts.

- Excellent with MS Excel, preferably with VBA macro writing skills.

- Excellent written and verbal English communication skills

- Ability to work remotely.

Preferably located in Calcutta (Kolkata), but any location is fine. Currently, would need to work remotely till decided otherwise.

Educational qualification: CFA / CA / PGDBM (Finance) would be preferred but is not mandatory. Passion for equities and equity analysis is mandatory. 

Freshers or those with minimal experience would be preferred as they would have less to re-learn!! A lot of work experience is a dis-qualification.

Flexible work timing. 

Anyone interested should apply with the following:

1) Brief CV

2) Written research report on any listed company in India or any Indian sector. Reports should be in pdf format only and in the English language.

Please send in your details to hr@intelsense.in. DO NOT send only your CV. The research report is the primary criteria for shortlisting.

We will revert back to the shortlisted candidates only.

Weekend Reading

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.

I especially try to not post Corona related articles as that is all one gets to read in all traditional media.

 

If you like the collection this consider forwarding it to someone who you think will appreciate.

The incredible allure of TikTok

It turns out that in some categories, a machine learning algorithm significantly responsive and accurate can pierce the veil of cultural ignorance. Today, sometimes culture can be abstracted.

Prior to TikTok, I would’ve said YouTube had the strongest exploit algorithm in video, but in comparison to TikTok, YouTube’s algorithm feels primitive. The top creators on YouTube have long ago figured out how to game YouTube’s algorithm’s heavy dependence on click-through rates and watch time, one reason so many YouTube videos are lengthening over time. It’s rumored that Bytedance examines more features of videos than other companies. If you like a video featuring video game captures, that is noted. If you like videos featuring puppies, that is noted.

Merely by watching some videos, and without having to follow or friend anyone, you can quickly train TikTok on what you like. In the two sided entertainment network that is TikTok, the algorithm acts as a rapid, efficient market maker, connecting videos with the audiences they’re destined to delight. The algorithm allows this to happen without an explicit follower graph.

https://www.eugenewei.com/blog/2020/8/3/tiktok-and-the-sorting-hat

 

A look at how New York Times is approaching news business

New York Times has six million subscribers, almost $700 million in cash in the bank, and a singular insight that underpins the Times’ path forward: the average number of news subscriptions a news subscriber will have is one.

Local publishers may not believe that they are competing with the Times, but the Times believes it is competing with them. Its rich-get-richer dynamic increasingly provides all the news that’s fit to subscribe to, while publishers both national and local fall further behind.

https://www.cjr.org/analysis/nytimes-subscriptions-local-publishers-compete.php

 

Success is a catalyst for failure

Why don’t successful people and organizations automatically become very successful? One important explanation is due to what I call “the clarity paradox,” which can be summed up in four predictable phases:

Phase 1: When we really have clarity of purpose, it leads to success.

Phase 2: When we have success, it leads to more options and opportunities.

Phase 3: When we have increased options and opportunities, it leads to diffused efforts.

Phase 4: Diffused efforts undermine the very clarity that led to our success in the first place.

https://hbr.org/2012/08/the-disciplined-pursuit-of-less

 

The tech-terrorist

Technology is, in other words, enabling criminals to target anyone anywhere and, due to democratization, increasingly at scale. Emerging bio-, nano-, and cyber-technologies are becoming more and more accessible. The terrorist or psychopath of the future, however, will have not just the Internet or drones—called “slaughterbots” by the Future of Life Institute—but also synthetic biology, nanotechnology, and advanced AI systems at their disposal.

http://nautil.us/blog/omniviolence-is-coming-and-the-world-isnt-ready

 

Ever wondered the difference between dumplings, dimsum, momo and wontons?

Dumplings are just wheat-based snacks with some fillings, or at times there is no filling at all! So, even an Italian Gnocchi or Ravioli, or even our very own Indian Samosa will qualify as a dumpling!

The term “Dimsum” originates from Chinese lexicon and can also be made with any kind of flour- be it rice, or wheat, or even potato starch. A dimsum’s outer coverings are semi, or at times, even fully transparent and the fillings are finely diced and chopped.

Momos are Tibetan or Nepalese counterparts of the Dimsum. They are traditionally supposed to be only steamed, made with wheat flour, and usually always stuffed with some filling. Moreover, momos, unlike dimsum, are mostly eaten alone without any kind of beverage accompanying it.

Wontons are a kind of dumpling that are traditionally found in the Northern regions of China. Unlike their brothers, the dimsum, and the momo- wontons are more square-ish in shape and slightly more fine in their texture and are also fried to golden-brown perfection. The fillings inside are also flavoured intensely with garlic and ginger- thereby giving the humble Wonton a unique place in the dumpling hall of fame!

The gyoza is a much more recent addition to the dumpling family, and it comes all the way from Japan! The gyoza has a much thinner outer layer, and the fillings are also more finely chopped. The Japanese gyoza is a close cousin of the Chinese dimsum- but there are subtle differences in the flavor, texture, and cooking techniques of both.

https://www.mygoodtimes.in/food/bucket-list-khana/dumplings-momos-dimsum-whats-the-difference/

Disclaimer: Abhishek Basumallick is the Head of the equity advisory www.intelsense.in for long term wealth creation and a pure quant focused newsletter at www.quantamental.in. The blog posts should not be construed as investment advice. Please do your own due diligence before investing.