Weekend Reading

HAPPY NEW YEAR to all the readers!

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 this collection, consider forwarding it to someone who you think will appreciate it.

 

Experiences, not appearances, make us happy

Most of us try to make decisions intended to bring us greater happiness. The problem is that we misunderstand how our choices really impact our well-being and end up making ones that have the opposite effect. We buy stuff that purports to inspire happiness and end up feeling depressed instead. Knowing some of the typical pitfalls in the search for happiness—especially the ones that seem to go against common sense—can help us improve quality of life.

It’s an old adage that experiences make us happier than physical things. But knowing is not the same as doing.

We maximize our chances at happiness when we prioritize our experience of life instead of acquiring things to fill it with.

https://fs.blog/2020/07/appearances-vs-experiences/

 

Keep it Simple: Aditya Puri

I have been a big fan of Aditya Puri. He is without doubt one of the greatest bankers in the world along with being a tremendous institution builder. A true legend. An interview with McKinsey.

Noting that HDFC Bank delivered total shareholder returns of more than 16,000 percent under Puri, the Economist suggested that he might be the “world’s best banker.”

To hear Puri tell it, HDFC Bank’s success comes from keeping its business simple by hewing to its founding principles: customer focus, risk management, technology-led innovation, and a “first among equals” culture.

We developed a standard rule that we wouldn’t bet the bank. We also said that credit would be a separate structure from sales and marketing, to keep credit independent. We decided there’s no point having a credit person if that person is going to report to the sales or business leader, because then sales will always prevail. Constructive tension between these functions worked for us.

https://www.mckinsey.com/industries/financial-services/our-insights/keep-it-simple-aditya-puri-on-hdfc-banks-path-to-market-leadership

 

The true picture of two wheeler sales in India

 As per SIAM, a total of around 9.64 million units of two-wheelers were sold in India during this financial year. FADA puts the number at 6.19 million units, almost 36% lower. This is a difference of close to 3.45 million units.

 A small part of it stems from the fact that FADA sales numbers do not take into account sales made in the states of Andhra Pradesh, Telangana and Madhya Pradesh, which aren’t yet on the government’s Vahan 4 database, which FADA uses to publish the retail sales numbers. But retail sales in just three states can’t explain a difference of 3.45 million units between the SIAM sales number and the FADA sales number.

This basically means that while manufacturers have been selling two-wheelers to retailers and retailers haven’t been able to sell a significant portion of what they have bought from manufacturers to the end consumer. Channel stuffing has been carried out and now the retailers have ended up with a significant amount of inventory. FADA suggests that the average inventory of two-wheelers with dealers is at 45-50 days. This is at the end of the festival season. Last year, at the end of the festival season the two-wheeler retailers had an average inventory of 35-40 days.

https://vivekkaul.com/2020/12/12/the-curious-case-of-indias-two-wheeler-sales-or-why-nothing-is-the-way-it-seems/

 

People will keep taking their vitamin pills

This year the dietary supplement industry is forecast to grow as much as 20%. Why? Because the pandemic is encouraging people to consume more and more multivitamins to try to boost their immunity, so they don’t contract COVID-19. So what we’ve seen is tremendous increases in vitamin C, vitamin D, E3 and probiotics. It’s a great time to be in the supplement market.

People who have now increased their usage of multivitamins will continue to do so. It’s reinforcing. They didn’t get sick during the pandemic when they took more supplements, so they’ll continue to take more supplements after a vaccine is found. We’re very encouraged that the growth we’re experiencing this year in multivitamins and in vitamins overall will continue in the foreseeable future.

https://glginsights.com/articles/nutraceutical-industry-update/

 

Learnings from nature

In undisturbed ancient forests, youngsters have to spend their first two hundred years waiting patiently in their mothers’ shade. As they struggle to put on a few feet, they develop wood that is incredibly dense. In modern managed forests today, seedlings grow without any parental shade to slow them down. They shoot up and form large growth rings even without a nutrient boost from added nitrogen. Consequently, their woody cells are much larger than normal and contain much more air, which makes them susceptible to fungi—after all, fungi like to breathe, too. A tree that grows quickly rots quickly and therefore never has a chance to grow old.

https://blas.com/the-secret-wisdom-of-nature/

For building a solid long term portfolio, look at subscribing to www.intelsense.in long term advisory.

 

For technofunda investing and positional trading, subscribe to our Hitpicks advisory service on www.intelsense.in 

For momentum trend following systematic trading, subscribe to Quantamental at www.quantamental.in

A Big Milestone for Q30 (the Quant System)

Today is indeed a happy day for me. When I started the Quantamental service, I was in two minds. Firstly, it was obvious to me that it was a very different approach and something that I did not have a great deal of experience with. For example, I have been investing with a long term quality focus for pretty much the last 20 years but the quant side has cropped up in the last 2-3 years. 

Most of you who signed up for my Long Term Advisory did so because you would have read my posts on Valuepickr, or Economic Times or maybe on Twitter. And I was known (whatever little) as someone who had a long term investment focus. So, I was a bit apprehensive about launching something completely different. Though I always maintain that I identify myself more as a learner than anything else. And quant is just another thing I learnt along the way to try and make sense of this investment puzzle.

Well, a large number of people did sign up for the Quant advisory just based on the trust they had in me. And we started on the 1st of March. It was simply what I call a trial by fire. Within a couple of weeks, there was mayhem in the markets and our system and the conviction in our system got seriously tested. 

And today, I am happy to say that we crossed the 50% return mark at the portfolio level for Q30.

So, what's so great about that, you may ask? The markets are in a tearaway rally and a lot of the stocks are up 40, 50 even 100% from the lows. 

Well, firstly this is a milestone. 

Secondly, it is a very difficult thing for a portfolio of 30 stocks to give this kind of results. The Nifty is up 26.4% in this period and the Nifty 500 is up 24.6% (1st Mar to today). Beating the index by nearly 100% when the index itself has done so well is by no means a small feat. 

Thirdly, all this happened with very low risk. The maximum drawdown and the maximum loss are both reasonably low.

The numbers are all there. And for those who have been part of the journey, you would have witnessed it yourself.

There are only two things I can say, "Thank You"  

For details of Q30 and for subscribing, please check www.quantamental.in

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 this collection, consider forwarding it to someone who you think will appreciate.

How Russian opposition leader Alexey Navalny was poisoned?

John Le Carre passed away last week. Here is a real life incident happening now which Le Carre would have been proud to write.

A Russian agent sent to tail opposition leader Alexey Navalny has revealed how he was poisoned in August -- with the lethal nerve agent Novichok planted in his underpants.

The stunning disclosure from an agent who belonged to an elite toxins team in Russia's FSB security service came in a lengthy phone call following the unmasking of the unit by CNN and the online investigative outfit Bellingcat last week.

In what he was told was a debriefing, Konstantin Kudryavtsev also talked about others involved in the poisoning in the Siberian city of Tomsk, and how he was sent to clean things up.

https://edition.cnn.com/2020/12/21/europe/russia-navalny-poisoning-underpants-ward/index.html

 

Good old decency pays

Decency is one of the attributes that leaders should possess. The core message in David Bodanis’ book, “The Art of Fairness”, can be found in the subtitle: “The power of decency in a world turned mean”. The Empire State Building was constructed in just 13 months, and that included the dismantling of the Waldorf-Astoria hotel that sat on the site. Paul Starrett, the builder, treated his workers rather well by the standards of the time, paying much attention to safety and paying employees on days when it was too windy to work. Daily wages were more than double the usual rate and hot meals were provided on-site. The concept is known as “efficiency wages”. Companies that compensate workers well and treat them fairly can attract better, more motivated staff.

https://www.economist.com/business/2020/12/12/why-fair-play-pays

 

 

The bank robbery capital of the world

In 1980s Los Angeles, a bank was robbed every hour of every day. Between 1985 and 1995 the approximately 3,500 retail bank branches in the region were hit 17,106 times. 1992, the worst year of all, there was an almost unimaginable 2,641 heists, one every 45 minutes of each banking day. On a particularly bad day for the FBI that year, bandits committed 28 bank licks.

With more than six million vehicles and more than 1,000 miles of freeway upon which to roam, Los Angeles has created a landscape ideal for bank robberies. By hitting a bank near a freeway onramp, a holdup man can jump on and off and be anonymously cruising surface streets miles away in a completely different police jurisdiction before the cops even get to the crime scene. Switch to a cold car or swap your stolen plates for legal ones and… see ya.

https://crimereads.com/the-rise-and-fall-of-the-bank-robbery-capital-of-the-world/

 

 

Why behavioural economics is itself biased

We spend too little time questioning our understanding of the decisions or observations other people make. If we believe they are in error, we should first question whether the error is ours. we need to inject some humility into our assessment of other people’s decisions. We need stop underestimating the intelligence of other people. We need to tone down the glee we have in communicating sexy, counterintuitive experimental findings that demonstrate errors by others. We need to stop making glib assumptions about what other people want and how they can best achieve their objectives. And importantly, we need to stop being lazy storytellers who don’t subject ourselves to the same critique that we would apply to someone else.

https://evonomics.com/why-behavioral-economics-is-itself-biased/

Compound capital over long periods of time for wealth creation

Buffett’s secret is that he’s been a good investor for 80 years. His secret is time. Most investing secrets are.

Once you accept that compounding is where the magic happens, and realize how critical time is to compounding, the most important question to answer as an investor is not, “How can I earn the highest returns?” It’s, “What are the best returns I can sustain for the longest period of time?”

That’s how you maximize wealth.

https://www.collaborativefund.com/blog/standing/

For building a solid long term portfolio, look at subscribing to www.intelsense.in long term advisory.

For technofunda investing and positional trading, subscribe to our Hitpicks advisory service on www.intelsense.in

For momentum trend-following systematic trading, subscribe to Quantamental at www.quantamental.in 

Highlights from 25th MOS Wealth Creation Study

There are two annual publications hat I eagerly await - Buffett's annual letter and Raamdeo Agarwal's (Motilal Oswal) Wealth Creation Study (MOSWCS). And to be fair, their quality has been going in divergent directions in the last few years. Buffett's letters have become increasingly boring and repetitive and the MOSWCS have come more and more elaborate and engaging. 

This year's study is a treat. Not only has the time horizon been increased from 5 years to 25 years for the base study but the focus on creating a detailed QGLP checklist is a great help to the investment community. As I have said many times, QGLP  is an primary investment framework that I use very often and think is one of the best and since I am also a checklist driven investor, it would help  me personally immensely. I also have 3 separate checklists and I would try to integrate all of them into 1 sometime.

My Highlights

- Stock returns are slaves of earnings power and growth. In the very long run, valuations matter less.

- Most businesses are cyclical in character. As is said, a rising tide lifts all boats. Most sectors do well when the economy is on the upswing. Thus, at the peak of the economic boom in 2007, 29 of 37 sectors recorded RoE>13%. However, for the last 7 years, that number is down to between 7 and 11.

- Only 3 sectors – Consumer/Retail, IT and Paints – maintained RoE>13% for each of the last 25 years.

- Corporate Profit to GDP has stagnated for the last 5 years. This is similar to 1999 to 2003, after which corporate profits took off for the next 5 years. 

- Permanent change in long-term interest rate band (from 12-14% to 6-8%) is leading to change in valuation expectations. Current valuations are supported by expected PAT revival after 5 years of stagnation and high liquidity led by low interest rates.

- Valuations are frothy with market cap around 100% of GDP. 

- Characteristics of wealth creators of last 5 years

○ Were small to mid in size in the base year 1995

○ Were consumer-facing, bestowing them a secular business model

○ Were very profitable (average base RoE was a robust 17%)

○ Grew to emerge as market leaders (among top 3) in their respective business

○ Had management with high integrity and competence. 

The QGLP Checklist

BUSINESS CHECKLIST

Q#1 What is the history of the company and management?

Q#2 Is the company’s business model understandable? How does it make money?

Q#3 Is the company profitable? If not, is it expected to emerge?

Q#4 Are the company’s terms of trade favorable? Is Cash flow healthy?

Q#5 What is the company’s cost and margin structure? How has it changed in the past?

Q#6 How’s the Du Pont Analysis for the company?

Q#7 What is the competitive landscape? What is the role of regulation in the business?

Q#8 Does the company enjoy an Economic Moat? What are its sources?

GROWTH CHECKLIST

Q#9 What is the addressable market opportunity and its key drivers?

Q#10 What is the company's growth plan? How sustainable is the growth?

MANAGEMENT CHECKLIST

Q#11 Is the management high on Integrity & transparency?

Q#12 Is the management competent?

Q#13 Does the management have passion / growth mindset?

Q#14 Does the company have a rational capital allocation policy?

Q#15 Does the company have a suitable organization structure and depth of management?

Q#16 What is the organization culture?

Q#17 Does the company have a sound succession plan?

Q#18 Do the owners have enough skin in the game?

Q#19 Have the promoters pledged a large portion of their holding?

PRICE CHECKLIST

Q#20 Has the financial modeling been done with earnings estimates for at least 3 years?

Q#21 Is it a QGL stock?

Q#22 Is valuation reasonable?

Q#23 Is there enough Margin of Safety?

Q#24 Is the stock reasonably liquid?

RISK CHECKLIST

Q#25 What can go wrong with the company narrative & numbers? 

 

I would strongly recommend all serious investors to read the checklist section of the MOSWCS - page 39 to 87 if they are short of time and can't go through the entire document.

Some Interesting Technical Charts

 

Here are this week's interesting technical charts. You can download the document from here

Disclaimer: These charts are for educational purposes only. It could be used to idea generation for both trading and investing purposes.

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 this collection, consider forwarding it to someone who you think will appreciate.

 

AI is coming to your home

Last week researchers showed it is possible to squeeze a powerful AI vision algorithm onto a simple, low-power computer chip that can run for months on a battery. The trick could help bring more advanced AI capabilities, like image and voice recognition, to home appliances and wearable devices, along with medical gadgets and industrial sensors.

The researchers essentially devised a way to pare down deep learning algorithms, large neural network programs that loosely mimic the way neurons connect and fire in the brain. Over the past decade, deep learning has propelled huge advances in AI, and it is the bedrock of the current AI boom.

Deep learning algorithms typically run on specialized computer chips that divide the parallel computations needed to train and run the network more effectively.

https://www.wired.com/story/ai-algorithms-slimming-fit-fridge/

 

The Cold War version 2

Regarding the trade talks themselves, what really riles both the Trumpsters and the Democrats (moderates and progressives alike) is the very way China does business: stealing intellectual property, acquiring sensitive technology through business buyouts, fusing public and private sectors so that their companies have an unfair advantage (at least by the mores of a global capitalistic trading system), currency manipulation, and so on. Trade talks, however successful, will never be able to change those fundamentals. China can adjust its business model only at the margins.

What we really have to fear is not a rising China but a declining one. A China whose economy is slowing, on the heels of the creation of a sizable middle class with a whole new category of needs and demands, is a China that may experience more social and political tensions in the following decade.

https://foreignpolicy.com/2019/01/07/a-new-cold-war-has-begun/

 

Tech retailing gets into luxury retail

Traditionally, high-end brands have been cautious about selling online. While they were growing rapidly, digital transactions were a relatively low 12% of global luxury sales in 2019. They are expected to hit 23% in 2020 and up to one-third by the middle of the decade, according to Bain & Co. projections.

Boundaries between store and website sales also blurred in new ways this year. With boutiques closed, shop assistants resorted to contacting customers through messaging apps or arranged digital consultations to drive business. Gucci’s parent company, Kering, expects these so-called “distance sales” to stick. In the future, store workers may log on during quiet times and interact with online shoppers to improve the low sales conversion rates that afflict many luxury-brand websites.

Big brands that have already poured cash into their e-commerce businesses are in the best position to control what happens next. The ideal setup for a luxury brand is to sell mostly on its own website, where margins are highest. Roughly 75% of LVMH’s e-commerce sales flow through this channel, for example. The company only works with outside platforms that give it full control over the presentation and pricing of its products.

Tech companies have spotted the opportunity. Amazon launched a new luxury store in September. Social-media platforms, too, have ambitions to turn themselves into e-commerce sites. Instagram, where many luxury shoppers already go for inspiration about what to buy, recently introduced a checkout button in the U.S. that allows them to purchase goods without leaving the app. Terms are very attractive: Instagram will take a 5% cut of transactions, compared with the 30% average charged by online luxury retailer Farfetch.

https://www.wsj.com/articles/to-sell-luxury-online-deep-pockets-matter-more-than-ever-11607682603

 

The key to a successful business is its people

Successful businesses have strong management teams which value and empower their people, they promote innovation and risk taking, encourage ownership, and adopt appropriate incentives through the full rank and file of the organisation. It’s little wonder the world’s top CEO’s and the investment industry’s sharpest minds focus on people and culture.

Even a business with product differentiation, valuable intellectual property or patents must evolve; competitors innovate, patents expire and technological advantages become redundant. The necessary process of constant evolution is ultimately driven by people.

Finding the historical financial numbers to fill a spreadsheet isn’t hard. Discovering the qualitative aspects of the business which will determine the future numbers is a little more challenging. In large part, these numbers will be determined by the people.

http://mastersinvest.com/newblog/2018/10/4/people

 

What comes after the smartphone?

We’ve spent the last few decades getting to the point that we can now give everyone on earth a cheap, reliable, easy-to-use pocket computer with access to a global information network. But so far, though over 4bn people have one of these things, we’ve only just scratched the surface of what we can do with them. There’s an old saying that the first fifty years of the car industry were about creating car companies and working out what cars should look like, and the second fifty years were about what happened once everyone had a car - they were about McDonalds and Walmart, suburbs and the remaking of the world around the car, for good and of course bad. The innovation in cars became everything around the car. One could suggest the same today about smartphones - now the innovation comes from everything else that happens around them.

https://www.ben-evans.com/benedictevans/2020/12/13/what-comes-after-smartphones

For building a solid long term portfolio, look at subscribing to www.intelsense.in long term advisory.

For technofunda investing and positional trading, subscribe to our Hitpicks advisory service on www.intelsense.in

For momentum trend following systematic trading, subscribe to Quantamental at www.quantamental.in

Some Interesting Technical Charts

Here are this week's interesting technical charts. You can download the document from here

Disclaimer: These charts are for educational purposes only. It could be used to idea generation for both trading and investing purposes.

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 this collection, consider forwarding it to someone who you think will appreciate it.

Bio-manufactured material Hyaline can change our gadgets

Biology is the most advanced manufacturing technology on the planet. Hyaline may be the first fermented electronic products and is already in use in flexible circuits, display touch sensors, and printable electronics. The product merges the benefits of advanced bio-fabrication with traditionally manufactured materials.

Increasingly, companies are demonstrating fermentation can be used to make things like jet fuel, vanilla, nylon, beauty products, and other items that ordinarily depend on petrochemicals. In addition, the petrochemical toolbox is limited, expensive and is running up against manufacturing bottlenecks.

Hyaline can be used to create thinner films that are foldable, flexible, and more durable. It can be used to develop full-screen touch sensors with new mechanical, physical, and optical properties.

Performance-wise, Hyaline has high-temperature features that enable faster processing times in manufacturing. As a printed circuit board, Hyaline can be printed and used at high temperatures, while eliminating epoxy and acrylic adhesive layers to create systems that are thinner and more flexible.

https://www.forbes.com/sites/johncumbers/2020/04/12/inspired-by-nature-zymergen-brews-high-performance-bio-electronics

 

After meatless meat, here is fishless fish

Many of the most popular seafoods now suddenly face direct competition from dozens of startups offering animal-free alternatives. The industry is still tiny, but sales of plant-based foods have surged 29 percent in the past two years, compared with just 4 percent overall for U.S. retail foods, and many expect the category to follow the arc of plant-based milks, which now account for 14 percent of all retail milk sales.

Fish-Free Tuna was made using a blend of six legumes—soybeans, peas, chickpeas, fava beans, lentils, and navy beans—with some algal oil and seaweed powder mixed in for “Real Seafood Taste.”

https://www.outsideonline.com/2419099/plant-based-fish-seafood-good-catch

 

Distraction is not about tech

Plato complained about how distracting the world was 2,500 years ago. Clearly Plato never struggled with an iPhone, so I take issue with the current narrative that technology is hijacking your brain and that it’s addictive. It promotes learned helplessness: We stop trying to change something because we think there’s nothing we can do.

Most people don’t want to acknowledge the uncomfortable truth that distraction is always an unhealthy escape from reality; the drive to relieve that discomfort is at the root of all our behavior. So instead of blaming technology, look for the discomfort that precedes it. By identifying an uncomfortable internal trigger — for example, loneliness, boredom, anxiety, or discontentment — and exploring the sensation with curiosity, we can more easily disarm it.

https://www.gsb.stanford.edu/insights/super-power-tomorrow-being-indistractable

 

 

Of business longevity

Japan is an old-business superpower. The country is home to more than 33,000 with at least 100 years of history — over 40 percent of the world’s total, according to a study by the Tokyo-based Research Institute of Centennial Management. Over 3,100 have been running for at least two centuries. Around 140 have existed for more than 500 years. And at least 19 claim to have been continuously operating since the first millennium.

Most of these old businesses are, like Ichiwa, small, family-run enterprises that deal in traditional goods and services. To survive for a millennium, Ms. Hasegawa said, a business cannot just chase profits. It has to have a higher purpose.Those kinds of core values, known as “kakun,” or family precepts, have guided many companies’ business decisions through the generations. They look after their employees, support the community and strive to make a product that inspires pride.

The Japanese companies that have endured the longest have often been defined by an aversion to risk — shaped in part by past crises — and an accumulation of large cash reserves.

https://www.nytimes.com/2020/12/02/business/japan-old-companies.html

 

You’re only as good as your worst day

We tend to measure performance by what happens when things are going well. Yet how people, organizations, companies, leaders, and other things do on their best day isn’t all that instructive. To find the truth, we need to look at what happens on the worst day.

Products and services are only as good as they are when they break, not when everything is functioning fine. From a financial standpoint, companies prove their worth when they show how they cope when something fundamental changes in the market or there’s a financial crisis.

https://fs.blog/2020/12/worst-day/

For building a solid long term portfolio, look at subscribing to www.intelsense.in long term advisory.

 

For technofunda investing and positional trading, subscribe to our Hitpicks advisory service on www.intelsense.in

 

For momentum trend following systematic trading, subscribe to Quantamental at www.quantamental.in

Some Interesting Charts

We started a new learning initiative for ourselves and our subscribers in Hitpicks, our technofunda advisory. Here the focus is on looking at some interesting medium to long term technical charts to identify interesting ideas for further exploration.

You can download a copy of the weekly report here: Download (intelsense.in)

For technofunda investing and positional trading, subscribe to our Hitpicks advisory service on www.intelsense.in

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 this collection, consider forwarding it to someone who you think will appreciate.

Amazon spies on its own staff

Dozens of leaked documents from Amazon’s Global Security Operations Center reveal the company’s reliance on Pinkerton operatives to spy on warehouse workers and the extensive monitoring of labor unions, environmental activists, and other social movements.

The documents offer an unprecedented look inside the internal security and surveillance apparatus of a company that has vigorously attempted to tamp down employee dissent and has previously been caught smearing employees who attempted to organize their colleagues. Amazon's approach of dealing with its own workforce, labor unions, and social and environmental movements as a threat has grave implications for its workers' privacy and ability to join labor unions and collectively bargain.

Amazon intelligence analysts appear to gather information on labor organizing and social movements to prevent any disruptions to order fulfillment operations. 

https://www.vice.com/en/article/5dp3yn/amazon-leaked-reports-expose-spying-warehouse-workers-labor-union-environmental-groups-social-movements

How to think differently

It's not enough for a public market investor to predict correctly how a company will do. If a lot of other people make the same prediction, the stock price will already reflect it, and there's no room to make money. The only valuable insights are the ones most other investors don't share.

You see this pattern with startup founders too. You don't want to start a startup to do something that everyone agrees is a good idea, or there will already be other companies doing it. You have to do something that sounds to most other people like a bad idea, but that you know isn't — like writing software for a tiny computer used by a few thousand hobbyists, or starting a site to let people rent airbeds on strangers' floors.

http://paulgraham.com/think.html

Some Business & Leadership Lessons From Past US Presidents

• Temperament is the great separator. 
• Strong opinions, weakly held.
• Storytelling is more important than statistics. 
• Simple is better than complex.
• Patience is key.
• Timing and luck will always play a role.

All of the above are equally true for investors.

https://awealthofcommonsense.com/2020/11/some-business-leadership-lessons-from-past-presidents/

All that is wrong with VC funding

In 2008, Jeremy Neuner and Ryan Coonerty, two city-hall employees in Santa Cruz, California, decided to open a co-working space. They named their company NextSpace Coworking. But their company faced a big challenge, finding a venture capitalist (VC) to invest in their firm. All the VCs wanted to have a share of WeWork. When Jeremy Neuner began having meetings with venture capitalists, he said, “their first question was ‘How do you compete with WeWork? Why should we invest with you instead of them?’ ” WeWork was reportedly losing millions of dollars each month, but it was expanding to new locations at a feverish pace. Neumann’s promises to VCs were so wildly optimistic, bordering on ridiculous, that Neuner was convinced WeWork had to be a scam.

Mr. Neuner was building a solid business, but the VCs wanted fantasy. “All we needed was five million dollars a year in revenues, and we would have made money for everyone,” he told me. “That’s enough to earn a living and buy a house and put your kids through school. But no one wanted something that just made a healthy living. They all wanted to find the next Zuckerberg.” Critics of the venture-capital industry have observed that, lately, it has given one dubious startup after another gigantic infusions of money. Increasingly, the venture-capital industry has become fixated on creating “unicorns”: startups whose valuations exceed a billion dollars.

https://www.newyorker.com/magazine/2020/11/30/how-venture-capitalists-are-deforming-capitalism

Using Biology to create new materials

We are now looking to biological materials to solve challenges that were once thought to be engineering problems – for example, developing cellular processes to desalinate water more efficiently; creating biological molecules that will help us build more comfortable medical prosthetics; and engineering microbes that could clean up underwater oil spills. From this year, we will find the building blocks for these materials not in petroleum-based technologies, but in biology.

https://www.wired.co.uk/article/biological-molecules

For building a solid long term portfolio, look at subscribing to www.intelsense.in long term advisory.

For technofunda investing and positional trading, subscribe to our Hitpicks advisory service on www.intelsense.in

For momentum trend following systematic trading, subscribe to Quantamental at www.quantamental.in 

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 this collection, consider forwarding it to someone who you think will appreciate.

How to make decisions the Jeff Bezos way

As a senior executive, what do you really get paid to do? You get paid to make a small number of high-quality decisions. Your job is not to make thousands of decisions every day. There are two types of decisions. There are decisions that are irreversible and highly consequential; we call them one-way doors, or Type 2 decisions. They need to be made slowly and carefully. I often find myself at Amazon acting as the chief slowdown officer: “Whoa, I want to see that decision analyzed seventeen more ways because it’s highly consequential and irreversible.” The problem is that most decisions aren’t like that. Most decisions are two-way doors.

https://www.fastcompany.com/90578272/how-jeff-bezos-makes-decisions

The fight for value investing to stay relevant

In an economy mostly made up of tangible assets you could perhaps rely on a growth stock that had got ahead of itself to be pulled back to earth, and a value stock that got left behind to eventually catch up. Reversion to the mean was the order of the day. But in a world of increasing returns to scale, a firm that rises quickly will often keep on rising. The appeal of old-style value investing is that it is tethered to something concrete. In contrast, forward-looking valuations are by their nature more speculative. Bubbles are perhaps unavoidable; some people will extrapolate too far. Nevertheless, were Ben Graham alive today he would probably be revising his thinking. No one, least of all the father of value investing, said stockpicking was easy.

https://amp-economist-com.cdn.ampproject.org/c/s/amp.economist.com/briefing/2020/11/12/value-investing-is-struggling-to-remain-relevant

How the internet changed our consumption pattern?

This point cannot be emphasized enough: the Internet is the single most disruptive force of our lifetimes because it does not evolve existing ways of doing things, but completely smashes the assumptions underlying them — assumptions we often didn’t even realize existed.

So it was with the Internet and the trade-off between reach and time: suddenly every single media entity on earth, no matter how large or small, and no matter its medium of choice, could reach anyone instantly. To put it another way, reach went to infinity, and time went to zero.

https://stratechery.com/2020/never-ending-niches/

The Road Ahead by Bill Gates - looking back after 25 years   

One thing I wrote about that hasn’t happened yet—but I still think will happen—is the way the Internet will affect the structure of our cities. Today the cost of living in a dense downtown, like Seattle’s, is so high that many workers (including teachers, police officers, and baristas) can’t afford to live there. Even high earners spend a disproportionate percentage of their income on rent. As a result, some cities are arguably too successful, and others are not successful enough. It’s a real problem for our country.

But as digital technology makes it easier to work at home, then you can commute less often. That, in turn, makes it more attractive to live father away from the office, where you can afford a bigger house than in the city center. It also reduces the number of cars on the road at any given time. Over time, these shifts would mean major changes in the ways our cities work and are built.

https://www.gatesnotes.com/About-Bill-Gates/The-Road-Ahead-after-25-years

100 Baggers: The Lost Chapter

The profiles in this chapter were originally collected for my book, 100 Baggers: Stocks That Return 100-to-1 and How to Find Them. They are the stories of 100-baggers... Brilliant thinkers... and mavericks who built fortunes with their wits – and a good bit of luck…

In the end, I felt the stories distracted from the main idea of the book. But these investing greats have important lessons to teach... as much from their failures as their successes.

https://drive.google.com/file/d/1_VLCiGPhVCPh9SsUowIX574KqzFCYzuh/view

For building a solid long term portfolio, look at subscribing to www.intelsense.in long term advisory.

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For momentum trend following systematic trading, subscribe to Quantamental at www.quantamental.in 

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 this collection, consider forwarding it to someone who you think will appreciate.

Are economic forecasts any good?

How much stock should you place in the consensus macro forecasts generated by the experts? How much value should you place on the forecasts of an individual macro forecast from an expert?

They find that there is consistent under-reaction in the expectations of the consensus forecasts. The aggregated expectations and the slow revisions of economist means their forecasts are playing catch-up to reality. This conclusion is not new albeit still inconsistent with a rational expectations view of the world. Given this under-reaction to news, the consensus forecast revisions are positively correlated to forecast errors. The conclusion is that investors should discount these forecasts. 

While individuals may over-reaction, the use of different models, different information, and slow updating will lead to an under-reaction in aggregate. So, the investor should fade the forecast of the individual but assume that the group is slow to respond to the market realty. 

https://mrzepczynski.blogspot.com/2020/11/how-much-value-should-you-place-in.html?m=1

The pursuit of luxury products

Luxury consumption used to strictly mean the purchase and display of items from well-known luxury brands. It has now taken on diverse and sometimes unexpected forms – within the traditional luxury domain but also beyond and even outside of it. 

For instance, in the realm of traditional luxury, less experienced consumers (typically from lower socioeconomic status) prefer ‘loud’ luxury products with more prominent brand identifiers such as logos, as they seek a visible affiliation with affluent people. Meanwhile, more experienced luxury buyers, who chiefly aim at dissociating themselves from mainstream consumers, favour less conspicuous luxury products.

For the same purpose of differentiating themselves from the middle class, high-status individuals may mix and match traditional luxury products with non-luxury ones. 

Luxury consumers have also started looking outside of the traditional luxury categories and increasingly invest in education and health. Parents, for instance, face mounting pressure to send their children to elite kindergartens and schools. In Beijing, the fees for such kindergartens can be up to six times the cost of a top university education.

https://knowledge.insead.edu/marketing/the-tension-filled-world-of-luxury-consumption-15561

The secondhand clothing market is booming

According to a new report, the US secondhand clothing market is projected to more than triple in value in the next 10 years—from US$28 billion in 2019 to US$80 billion in 2029—in a US market currently worth $379 billion. In 2019, secondhand clothing expanded 21 times faster than conventional apparel retail did.

The secondhand clothing market is composed of two major categories, thrift stores and resale platforms. But it’s the latter that has largely fueled the recent boom. Secondhand clothing has long been perceived as worn out and tainted, mainly sought by bargain or treasure hunters. However, this perception has changed, and now many consumers consider secondhand clothing to be of identical or even superior quality to unworn clothing. A trend of “fashion flipping”—or buying secondhand clothes and reselling them—has also emerged, particularly among young consumers.

https://qz.com/1933900/can-secondhand-clothing-solve-fashions-sustainability-crisis/

The lessons from history

History is full of specific lessons that aren’t relevant to most people, and not fully applicable to future events because things rarely repeat exactly as they did in the past. An imperfect rule of thumb is that the more granular the lesson, the less useful it is to the future.

The second kind of history to learn from are the broad behaviors that show up again and again, in multiple fields and different eras. They are the 30,000-foot takeaways from events that hide layers below the main story, often going ignored.

How do people think about risk? How do they react to surprise? What motivates them, and causes them to be overconfident, or too pessimistic? Those broad lessons are important because we know they’ll be relevant in the future. They’ll apply to nearly everyone, and in many fields. The same rule of thumb works in the other direction: the broader the lesson, the more useful it is for the future.

https://www.collaborativefund.com/blog/the-big-lessons-from-history/

Is value investing dead?

The performance of value stocks is the worst it’s been in nearly 200 years.

The first problem with the above is that it doesn’t accurately portray the performance of actual value investors. What we are seeing here is the performance of the value ‘factor’. In this case, the value factor is measured using dividend yield between 1825-1871, price-to-earnings between 1871-1938 and book-to-market from 1927-2020. 

In other words, it portrays a simplistic view of how value stocks have actually performed over the last 200 years. It assumes that value stocks all fit into a neat category and by definition have a low p/e, p/b or high dividend.

As you probably know, there is a big difference between factor investing (which seeks to find small edges from financial indicators) to value investing which generally seeks to buy high quality companies for less than their intrinsic value.

https://decodingmarkets.com/is-value-investing-dead/

For building a solid long term portfolio, look at subscribing to www.intelsense.in long term advisory.

For technofunda investing and positional trading, subscribe to our Hitpicks advisory service on www.intelsense.in

For momentum trend following systematic trading, subscribe to Quantamental at www.quantamental.in 

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 this collection, consider forwarding it to someone who you think will appreciate.

Has our luck finally run out?

The global economy has been extraordinarily lucky for 75 years. Food and energy have been cheap and abundant. 

In our complacency and hubris, we attribute this to our wonderful technologies, which we assume, guarantee us permanent surpluses of energy and food. The idea that technology has reached hard limits or that it could fail doesn’t occur to us. 

We’ve taken good luck to be our birthright because it’s all we’ve known. We attribute this good fortune to things within our control — technology, wise investments and policies, etc.

We are woefully unprepared for a long run of bad luck. My sense is the cycles have turned, and the good luck has drained from the hour-glass. Energy and food will no longer be cheap and abundant, our luck in leadership will vanish, and our vaunted technologies will fail to maintain an abundance so vast that we can squander the finite wealth of soil, water, resources and energy on mindless consumption.

https://dailyreckoning.com/has-our-luck-finally-run-out/

Lots of Overnight Tragedies, No Overnight Miracles

The most important things come from compounding. But compounding takes a while, so it’s easy to ignore.

New technologies take years or decades for people to even notice, then years or decades more for people to accept and put to use. Show me a new technology that was immediately recognized for its full potential and instantly adopted by the masses. It doesn’t exist. A lot of pessimism is fueled by the fact that it often looks like we haven’t innovated in a decade because it takes a decade to notice innovations.

Same for economic growth. Real GDP per capita increased eight-fold in the last 100 years. America of the 1920s has the same real per-capita GDP as Turkmenistan does today. 

Same for investments. Netflix stock returned 35,000% between 2002 and 2018. But it was below its previous all-time high on 94% of days, which made the progress easy to ignore, and the number of investors to actually hold Netflix from 2002 to 2018 round to zero.

Growth always fights against competition that slows its rise. New ideas fight for attention, business models fight incumbents, constructing a building fights gravity. There’s always a headwind. But everyone gets out of the way of decline. Insiders might try to stop it, but it doesn’t attract masses of outsiders who rush in to push back in the other direction like progress does.

https://www.collaborativefund.com/blog/lots-of-overnight-tragedies-no-overnight-miracles/

The need for an antilibrary

Tsundoku is a beautiful Japanese word describing the habit of acquiring books but letting them pile up without reading them. I used to feel guilty about this tendency, and would strive to only buy new books once I had finished the ones I owned. However, the concept of the antilibrary has completely changed my mindset when it comes to unread books. Unread books can be as powerful as the ones we have read, if we choose to consider them in the right light.

The goal of an antilibrary is not to collect books you have read so you can proudly display them on your shelf; instead, it is to curate a highly personal collection of resources around themes you are curious about. Instead of a celebration of everything you know, an antilibrary is an ode to everything you want to explore.

Remember that knowledge is a process, not a possession. In addition, building an antilibrary is an investment in yourself which should stay within your means. Even if you only have 3-5 books you haven’t read on your shelf, this is already a great step in expanding your intellectual horizon.

https://nesslabs.com/antilibrary

The story of Suguna Foods

B. Soundararajan, chairperson of Suguna Chicken, talks about building a billion-dollar company. Suguna Foods Pvt. Ltd is the largest company in commercial poultry farming in India, with an annual revenue of nearly a billion dollars.

https://lifestyle.livemint.com/news/big-story/how-two-brothers-from-coimbatore-created-india-s-biggest-poultry-company-111603377035018.html

Are vitamins a marketing a scam?

Today, there’s an explosion of vitamin startups that operate on the idea that vitamins can work their wonders for most anyone. Vitamins are vital, but most of us get the ones we need in our own diets. 

Eliseo Guallar, a professor at Johns Hopkins, sees vitamins as offering most people a “false sense of protection” and marvels at Americans’ commitment to taking them despite a lack of evidence that they should. 

Most are probably neither helpful nor harmful (he says, though, that some can be iffy in high doses, like vitamin E, which might increase the risk of prostate cancer).There are also many instances of supplements containing unapproved and potentially harmful ingredients.

https://slate.com/human-interest/2019/03/vitamins-careof-marketing-not-necessary-wellness-evidence.html

Subscriptions:

For building a solid long term portfolio, look at subscribing to www.intelsense.in long term advisory.

For technofunda investing and positional trading, subscribe to our Hitpicks advisory service on www.intelsense.in

For momentum trend-following systematic trading, subscribe to Quantamental at www.quantamental.in