Intelsense Advisory - Annual Review FY21

 Attached is the video of the annual review for the Intelsense Advisory services.

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

1. The new kid on the audio block - Clubhouse

Clubhouse, as you have no doubt heard, is an invitation-only audio social network that has drawn millions of people eager to socialize and listen in on an endless stream of conversations, as if all the text on Twitter, Facebook, and Interview magazine had acquired vocal cords. 

Thought leaders, politicians, and A-list celebrities have headlined countless Clubhouse rooms. More prosaic sessions include scammy get-rich-quick pitches and endless hand-wringing about current events. Some of the discussions have become notorious, with charges of racism, anti-Semitism, misogyny, and disinformation. All of which has generated yet more curiosity about the app.

Clubhouse arrived at a perfect moment. It delivered spontaneous conversations and chance meetings to people stuck at home. For those weary of tidying and curating backgrounds for Zoom, its audio-only format is a virtue. Even being iPhone-only and invitation-only hasn’t held back its popularity. New users often become obsessed with it, spending 20, 30, even 40 hours a week on the app. Discussions are popping up in German, Greek, and Burmese. In early February, the app even earned the badge of respect accorded to free speech-ish platforms such as Google, Facebook, and Twitter: It’s been banned in China.

https://www.wired.com/story/inside-clubhouse-audio-app-paul-davison-rohan-seth/

2. China tries to boycott US brands

Western brands are suddenly feeling the wrath of the Chinese consumer, the very shoppers who for years have clamoured for their products and paid them vast amounts of money. Egged on by the ruling Communist Party, Chinese online activists are punishing foreign companies that have joined a call to avoid using cotton produced in the Chinese region of Xinjiang, where the authorities are waging a broad campaign of repression against ethnic minorities.

It isn’t clear what the long-term impact might be on Western companies that depend on China to make or buy their products. On Thursday, there was still a steady stream of shoppers at several popular H&M and Nike outlets in Shanghai and Beijing. Previous state media-driven pressure campaigns against companies like Apple, Starbucks and Volkswagen failed to dent Chinese demand for their products.

https://www.nytimes.com/2021/03/25/business/china-boycott-hm.html

3. There is no correlation between earnings and stock price returns

Researchers have demonstrated that the relationship between economic growth and stock returns was weak, if not negative, almost everywhere. They studied developed and emerging markets across the entire 20th century and provide evidence that is difficult to refute.

Their results suggest that the connection so often made between economic developments and stock market movements by stock analysts, fund managers, and the financial media is largely erroneous.

From 1904 to 2020, earnings growth and stock returns moved in tandem over certain time periods, however, there were decades when they completely diverged, as highlighted by a low correlation of 0.2.

The perspective does not change if we switch the rolling return calculation window to one or 10 years, or if we use real rather than nominal stock market prices and earnings. The correlation between US stock market returns and earnings growth was essentially zero over the last century.

https://blogs.cfainstitute.org/investor/2021/03/22/myth-busting-earnings-dont-matter-much-for-stock-returns/

4. The fonts used in luxury watches are not fit for purpose

In reality, only a small and decreasing number of watchmakers go to the trouble of creating custom lettering for their dials. More often, watch brands use off-the-rack fonts that are squished and squeezed onto the dial's limited real estate. Patek Philippe, for example, has used ITC American Typewriter and Arial on its high-end watches. Rolex uses a slightly modified version of Garamond for its logo. And Audemars Piguet has replaced the custom lettering on its watches with a stretched version of Times Roman.

That watchmakers use typefaces originally created for word processing, signage, and newspapers highlights a central paradox of watch design: These tiny machines hide their most elegant solutions under layers of complexity, while one of the most visible components – typography – is often an afterthought.

Even subtle tweaks to a typeface can elevate a watch, but the brands who fully invest in custom lettering view it as a distinguishing factor in their timepiece's design. 

https://www.hodinkee.com/articles/the-case-for-better-watch-typography

5. Bitcoin consumes more electricity than Argentina

"Mining" for the cryptocurrency is power-hungry, involving heavy computer calculations to verify transactions.

Cambridge researchers say it consumes around 121.36 terawatt-hours (TWh) a year - and is unlikely to fall unless the value of the currency slumps.

The online tool has ranked Bitcoin’s electricity consumption above Argentina (121 TWh), the Netherlands (108.8 TWh) and the United Arab Emirates (113.20 TWh) - and it is gradually creeping up on Norway (122.20 TWh).

The energy it uses could power all kettles used in the UK for 27 years, it said.

https://www.bbc.com/news/technology-56012952

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 

Book Notes - Momentum Masters

This is a great book for traders and investors alike. @hitesh2710 suggested I read the book sometime back. Unlike a lot of other books, this one is packed with practical advice from successful practitioners. Because it is written in a Q&A style, it is very easy to read and brings together the answers of all the 4 participants together so that you can understand the similarities and differences in their individual approaches.

Below are my notes & highlights from the book. They are a bit exhaustive and hence a bit lengthy.

• The first thing I do is look at earnings released and news items that may affect my holdings, and I also look at premarket futures to get an idea of how the market will open. I then review all my current holdings and update my stops and set alerts; I set audio alerts on my buy candidates at price levels near my target purchase price and also at levels near my sell stops.
• Everything I do is thought out; I don’t like surprises, so I try to work out as much as possible in advance so I don’t get blindsided and caught off guard. I do this work outside of market hours to remove emotion.
• I usually don’t do much in the first 45 minutes of trading because there are many false moves and reactions to overnight news.
• I know what and where I’m going to buy before the market opens, so there are no surprises, and I just act without thinking. I start in the morning by checking all my open positions. 
• Everything I need to know is based on the stock’s price behavior and volume; the rest is pure noise.
• If a market is going to move, then big funds and institutions are going to drive it. The bigger players have to buy and sell often during days or even weeks. Individual traders have a significant advantage over the big traders, because individual traders can move in and out of positions much faster. So they can change direction very quickly when market conditions change, and to me, that’s a tremendous edge.
• The big money is made in the longer-term moves.
• Bottom line, if you hone your timing and talent to spot the setups and if you have the fortitude to stick to the rules, it doesn’t matter if you start out small; you have a true edge that few traders possess, especially if you do your homework every night and on weekends.
• You shouldn’t be afraid of thinly traded stocks; you should embrace them. Some of the biggest winners are small companies that you’ve never heard of before. But you have to be careful and only trade a position size you can get out of safely. A small position is better than no position, especially if the stock has the potential to skyrocket.
• All the biggest-moving stocks I’ve owned during the past 20 years, where I’ve made 95% of my money, were ones hitting new highs from very solid bases.
• The best time to buy the large-cap names is coming out of a bear market or a deep correction. With small caps, I tend to trade them close to new highs because they’re less efficiently priced, so I don’t have to “beat the crowd” and try to buy lower.
• By definition, if a stock is covered by many analysts and watched by thousands of traders, then it has a far less probability of being inefficiently priced and thus yielding a quick alpha move. It doesn’t mean the stocks shouldn’t be traded or purchased at certain times; but in general, if you’re looking for alpha, you should be discounting the larger capitalization.
• It is rare when you have a market where you can have both longs and shorts. In a market that is trending in one direction, that’s the side you should be leaning toward. Markets moving sideways can be very tough to trade both ways.
• Even though my intuitive feel is pretty good, I have learned not to trust my opinion, because it will eventually be wrong. If you have a strong conviction on a trade, it will be difficult to trust the market and divorce your idea.
• I will only add to positions that are moving higher and performing well. Positions only become bigger with appreciation and follow on purchases after new bases are formed.
• The overall market must be showing strength with higher highs and a significant portion of those market stocks marching into new highs as well. Many strong bases on the charts, as well as strong expanding earnings on a high number of those stocks, are critical indicators of the overall health of the market and ultimately my portfolio.
• The only way to consistently outperform is to be concentrated in the names that are outperforming.
• There should be a period of a week or more of very quiet and very tight price action before a stock makes a move. 
• Many of the best trades occur when you have fundamentals, technicals, and a bullish general market all in your favor. So I try to focus on companies that have solid fundamental and technical characteristics during a healthy market environment. However, life is not perfect. Stocks that set up well technically, in a manner I refer to as “unexplained strength,” are often good riskreward plays because they are less obvious and not as likely to be “crowded.”
• So, yes, I will trade stocks with a lack of apparent fundamentals when the chart is really strong. Most of the time when I ignore surface fundamentals, the stock is in a very high-momentum situation, and the chart is saying that something really big is definitely going on.
• I define an uptrend as a stock with its 50-day moving average above its 200-day moving average and both are trending higher. Even stronger uptrends can be defined as the 20-day moving average above the 50-day, and the 50-day is above the 200-day moving average. 
• The most important indicator is the overall market trending up with higher highs and higher lows, and the same goes for the stocks that I look to buy. Next would be a well-defined base and then the strength of the group.
• A breakout is a stock emerging out of a base or sideways consolidation. I like a base to be at least four weeks or longer. As the stock breaks out, the volume should be larger than average. The volume should increase at least 25% or more. The best moves start with very big increases in volume of 100% or more.
• You want a stock to rise on higher volume and pull back on lower volume because the buying and selling by institutions is what moves stocks in the market, and the institutions can’t hide the fact that they have to buy in size. The most important area to concentrate on is what volume is doing at key points like breakouts to new highs, breakdowns from bases, and even when a stock undercuts a previous low.
• I want both the fundamentals and the technical characteristics of the stock to be in an uptrend. I have much more confidence in holding a stock that has good fundamentals than if I’m buying based solely on a good chart. There are so many stocks to choose from, why not go with the one that has the best characteristics.
• I am usually more successful if I spend a number of hours researching the fundamentals, listening to conference calls, investigating the company’s website to really get to know where the company has been and its future plans.
• You want to watch the general market but not to the point that you sell all your stocks when your indicators flash a downtrend.
• I think most traders would do much better if they completely ignored the “market” or the major indexes and just focused on the stocks themselves.
• Stock trading is about anticipating coming movements and then waiting to be proved right or wrong. Even if I turn bearish on the market while I’m holding longs, I will usually let the stocks stop me out. I don’t usually sell everything on my “opinion” of the market. I simply tighten my stops and let the price action take me out of the positions one by one. Very often a handful of my stocks will hold their stops, and I’ll even get through a market pullback still holding names I had before the correction began.
• If things are working, I get more aggressive. When my stock trades are not working well, I cut back my exposure and the number of commitments. This is a very simple method but very effective. If you scale up when trades are working and scale back when things are not working well, you ensure that you will be trading your largest when trading your best and trading your smallest when trading your worst.
• In a year, you really only need one or two really good stocks to have great performance, but you must handle them right. You must add to a stock after it has built a new base following its first move up. You can add to it again on subsequent bases. On a longer move, you can build the size of the position into 20–25% of your portfolio. A position of that size should only be achieved through price appreciation and by adding more on subsequent bases.
• The problem about setting price targets is that the best stocks usually end up going a lot further than anyone expects.
• I don’t usually make all-or-nothing decisions, especially on winning positions, but instead I scale in and out of them. If something has had a big move and is extended and looks like it is starting to pull back, I might sell a portion of the position, but I never want to lose a position in a stock that looks like a leader. Once you sell out the entire position, sometimes you can miss the next move higher.
• During the beginning stages of a new bull market is the best time to hold, and in the late stages of a bull market—usually after several years—is the best time to trade shorter-term
• During the beginning stages of a new bull market is the best time to hold, and in the late stages of a bull market—usually after several years—is the best time to trade shorter-term moves and sell into strength.
• I also had to learn to practice patience. The fear of missing out is a strong emotion when trading. It is the root of many trading failures. I have two main rules: (1) no forced trades. (2) no big losses. You must develop “sit-out power,” the ability to wait for correct setups and not force action and take subpar trades.
• Minervini: 
1. Think risk first. Always trade with a stop loss and know where you’re getting out before you get in. 
2. Keep losses small and protect your breakeven point once you attain a decent profit. 
3. Never risk more than you expect to gain. 
4. Never average down. 
5. Know the truth about your trading—study your results regularly.
• Ryan: 
1. Cut your losses and keep them small. 
2. Be extremely disciplined. 
3. Trade smaller if you have a number of losses in a row. 
4. Never let a good gain turn into a loss. 
5. Move money from your losers to your winners.
• Zanger:
1. Never let a stock get below what you paid for it. 
2. Never chase a stock that is up more than 3–5% above its pivot or breakout area. 
3. Avoid options. 
4. Reduce position size after a good move up. 
5. Hang on to those winners and let go of the laggards.
• Ritchie II: 
1. Always trade with a plan, specifically one that evaluates risk in every possible way for an individual position as well as your entire portfolio. 
2. Always reduce trading size after a big loss or losing period. 
3. Shift capital to ideas and strategies that are working and reduce it from ones that aren’t. 
4. Guard your emotions with equal value to the way you guard your capital. 
5. Bring your “A” game every day.

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

1. Ignore the forecasts. No one knows anything about the future.

People pay far too much attention to experts who predict/forecast/comment confidently simply because confidence convinces. The audience is looking for a buy in and nothing helps get that more than the confidence of the expert talking.

Also, in these days of social media, many a time we are simply looking for confirmation of something that we already believe in. If the expert ends up saying something along those lines, he tends to become our go to man. Our echo chambers are really small.

People making a living out of the stock market (or any other market for that matter) have an incentive in saying that the future will be better than the present is. Many analysts make a living by simply doing this on the business news TV channels, on a regular basis.

The media, looking for bold headlines to run, laps it up. And the investors who are more like sheep ready to be slaughtered, follow the sheep in front of them.

https://vivekkaul.com/2021/03/15/on-confidence/

2. More people have SPACs than Covid!!

“People used to say that hedge funds are a compensation scheme masquerading as an asset class,” William A. Ackman, the famed hedge fund manager, told me. “You could say the same about SPACs.”

Mr. Ackman himself has a SPAC — in fact, the largest raised thus far. What makes his vehicle different, aside from its $4 billion size, is a unique arrangement that makes it tougher for him to score a big payday unless the subsequent merger is successful. “Every friend is launching a SPAC,” Mr. Ackman said. “It’s like everyone who had an internet company in 2000. It’s like, ‘Oh, yeah, I got one, too.’”

https://www.nytimes.com/2021/02/10/business/dealbook/spac-wall-street-deals.html

3. The fragrance of Kannauj

It is said that perfume flows through the drains of the ancient city of Kannauj in Uttar Pradesh. And this is no exaggeration.

In the perfume capital of India, which is home to about 300 small, medium and large distilleries, a pleasant fragrance constantly lingers in the air and the remnants of roses and other flowers are strewn across the city, including in the drains.

The centuries-old tradition of distilling perfumes or ‘attar’, also pronounced itr, in Kannauj dates back to the Mughal courts, and this legacy continues. The old-world perfumery still uses the traditional method of distilling perfumes that are based on essential oils and not alcohol.

Woodsy, floral, musky and androgynous, attars are markedly different from alcohol-based perfumes. They’re made from essential oils extracted from flowers and other ingredients, which are dissolved in water or oil rather than alcohol. And this makes them more fragrant and easily absorbent.

https://theprint.in/features/where-even-drains-smell-of-roses-inside-indias-perfumery-kannauj-on-world-fragrance-day/625571/

4. AI is the future of intelligence warfare

Since 9/11, America’s intelligence agencies have become hardwired to fight terrorism. Today’s threat landscape, however, is changing dramatically, with a resurgence of great power competition and the rise of cyber threats enabling states and non-state actors to spy, steal, disrupt, destroy, and deceive across vast distances — all without firing a shot. For the U.S. to avoid the risks and maximize the opportunities of this technological era, policymakers need to act swiftly to ensure the Intelligence Community adapts, integrating AI into all of its processes in ways that augment human capabilities and reflect American values.

Advances in technology like artificial intelligence tend to be a double-edged sword for intelligence collection and analysis: They generate opportunities for gain while also exposing the nation to new risks. Exponential improvements in pattern recognition and the optimization of digital weapons that AI makes possible mean that the United States as well as its competitors and adversaries are able to make better decisions, faster. With data and threats moving at the speed of networks, intelligence must rely on AI to help humans keep up.

https://www.hoover.org/research/moment-reckoning-ai-and-future-us-intelligence

5. Facebook helps spread misinformation

Stopping the spreading of false information has been the biggest challenge for Facebook, especially after the debacle of Cambridge Analytica. In late 2018 the company admitted that this activity had helped fuel a genocidal anti-Muslim campaign in Myanmar for several years. In 2020 Facebook started belatedly taking action against Holocaust deniers, anti-vaxxers, and the conspiracy movement QAnon. All these dangerous falsehoods were metastasizing thanks to the AI capabilities.

Over the last two years, the team has built out an original tool, called Fairness Flow. It allows engineers to measure the accuracy of machine-learning models for different user groups. They can compare a face-detection model’s accuracy across different ages, genders, and skin tones, or a speech-recognition algorithm’s accuracy across different languages, dialects, and accents.

Fairness Flow also comes with a set of guidelines to help engineers understand what it means to train a “fair” model. One of the thornier problems with making algorithms fair is that there are different definitions of fairness, which can be mutually incompatible. Fairness Flow lists four definitions that engineers can use according to which suits their purpose best, such as whether a speech-recognition model recognizes all accents with equal accuracy or with a minimum threshold of accuracy. But testing algorithms for fairness is still largely optional at Facebook. None of the teams that work directly on Facebook’s news feed, ad service, or other products are required to do it. Pay incentives are still tied to engagement and growth metrics.

https://www.technologyreview.com/2021/03/11/1020600/facebook-responsible-ai-misinformation/amp/

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

Baa Baa Black Sheep

Black sheep have been both loved and loathed in equal measure over the centuries. In terms of wool production, black sheep among a white flock were problematic. Black wool is difficult to dye, and so a black sheep in a white flock destined for cloth would have represented a financial loss. The coat color of wild sheep is usually a dark body with a pale tummy, but over the centuries shepherds strongly selected for a uniform white coat, which was easy to dye. The gene for dark fleece didn’t disappear, however; it is simply recessive—in other words, a white sheep can carry the black fleece gene within a flock, but you wouldn’t be able to tell which animal it was until it produces a black lamb.

The arrival of a black sheep from a white flock must have left ancient shepherds scratching their heads, bewildered by nature’s alchemy. And so perhaps it’s no surprise that black sheep became the target for superstitions and peculiar folk remedies.

https://www.laphamsquarterly.org/roundtable/feeling-sheepish

 

A ad-free search engine from one of the builders of google search

During his 15-year career at the search startup that became an Internet giant, Ramaswamy built, scaled and ultimately ran Google’s $115 billion advertising division. However, he finally left in 2018 after becoming disillusioned that Google’s obsession with growth was affecting everything from search quality to consumer privacy. Then the 54-year-old did the completely unexpected: Launching a startup to build an entirely new search engine from scratch — but this time without data tracking and without ads. In other words, without the things that make money.

Neeva users will pay between $5 and $10 a month to get the search results they want rather than what advertisers want them to see. The challenge, obviously, is getting folks to pay for something they are used to getting for free.

https://www.forbes.com/sites/martyswant/2021/03/08/after-building-googles-advertising-business-this-founder-is-creating-an-ad-free-alternative/

 

The secret of Nanda Devi

Elite climbers were trained by the CIA and paid huge sums of money to carry an atomic-powered spy gadget to the top of an undisclosed peak. The stage for the 007-esque drama was the Himalayas. Somehow this plutonium-powered device was lost or stolen, now either providing the fissile juice to a secret Pakistani nuke or threatening every man, woman and child in India with deadly radiation in the form of contaminated run-off into the Ganges River.

The peak ultimately chosen was Nanda Devi. The peak, India’s highest, rose from a pristine bowl of alpine meadow bordered by a jagged rim of summits. In 1965, at the start of the CIA field operation only six climbers from various expeditions had stood on Nanda Devi’s summit at a cost of three lives. Indeed, only as late as the 1930s did humans even penetrate the Sanctuary.

The CIA planned to intercept radio telemetry signals between the Chinese missiles and ground control. A transceiver, powered by a plutonium battery pack, would beam information to a CIA listening station, where data analysis would reveal the range, speed and payload of the Chinese missile.

https://rockandice.com/snowball/the-secret-of-nanda-devi/

 

"We will be watching you!!"

Sharp Eyes is one of a number of overlapping and intersecting technological surveillance projects built by the Chinese government over the last two decades. Projects like the Golden Shield Project, Safe Cities, SkyNet, Smart Cities, and now Sharp Eyes mean that there are more than 200 million public and private security cameras installed across China. China’s 2016 five-year plan set a goal for Sharp Eyes to achieve 100% coverage of China’s public spaces in 2020. What gets reported to police by the Sharp Eyes program isn’t just limited to crime. One Pingyi resident in the state media article spoke of reporting a collapsed manhole cover, while another mentioned that they had suspected a multilevel marketing scheme happening in a nearby building. The MLM organization was reported to the police, who allegedly broke it up with warnings and fines.

Though the system primarily relies on facial recognition and locally broadcast CCTV, the city of Harbin, for instance, published a notice that it was looking for predictive policing technology to sweep a person’s bank transaction data, location history, and social connections, as well as make a determination as to whether they were a terrorist or violent.

https://onezero.medium.com/chinas-sharp-eyes-program-aims-to-surveil-100-of-public-space-ddc22d63e015

 

The devil is in the zipper!

A ‘pro tip’ for evaluating the quality of a piece of gear is to look at the small details, such as zippers and stitching. Cheap-minded manufacturers will skimp on those details because most people just don’t notice, and even a cheap component will often last past a basic warranty period, so it’s an easy way to increase profits without losing sales or returns.

If a designer does bother to invest in quality components, that’s a tried-and-true sign that the overall product is better than the competition.

Zippers are a classic example when looking at backpacks, clothing, and similar gear. And although there are a few other fine zipper brands out there, the king is YKK Group — to the point that the first thing some gear reviewers look for is the “YKK” branding on the zipper pull tab.

https://theprepared.com/blog/why-ykk-zippers-are-the-brown-mms-of-product-design-look-at-the-little-details-to-judge-overall-gear-quality/

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

Life as a full-time investor

 

Once upon a time, I had a full-time job. I used to go to the office and do the “office work” and in the evenings and weekends, I used to hone my investing skills. After about 15 years of such existence and having reached a semblance of financial independence, I started toying with the idea of leaving my job and becoming a “full-time investor”, and FTI, in short.

In the investor circles, there is a perceived highbrow feeling that I get whenever I spoke to an FTI. In conversations, the FTIs would make me feel that unless you were part of the FTI crowd somehow you were not a serious investor. Which of course is really stupid. I know so many great investors who are happy and probably better off because they are part-time investors. Having a stable income from a job can be a very liberating thing. You can focus on identifying a handful of companies every year and then let those investments work the magic for you. Of course, if you yearn to be a day trader, having a job is not going to work.

As a full-time investor, the first thing that hits you is the amount of time you have at your disposal. And unless you are disciplined it can derail your efforts very quickly. Distractions in the form of Whatsapp, Twitter (ever notice how many so-called investors tweet so many tweets during the day?? I wonder what they actually do for work or is it all just an exercise in social media outreach) can take you down a rabbit hole and you realise that you have spent a few hours and accomplished nothing.

But having this additional time can be a boon. You get time to reflect on different businesses. You get a lot of time to learn different things. I focused a fair bit on reading much more diversely. You can slow down and learn things slowly, at your own pace. Macroeconomics, quantitative theory, technical analysis, geopolitics were topics I started picking up slowly.

My strategy is to break up my work into three distinct parts. I had two till some time back and added the third (will come to that shortly). Here are my parts of work:

• Passive (reading, monitoring portfolio and watchlist stocks, learning new things, listening to podcasts)
• Active (Writing, Coding, creating summaries of stuff which I have read or listened to, running screeners)
• Thinking (the new addition)

I wasn’t keeping aside time for thinking. And the challenge was unless I actively keep aside time for thinking about making decisions like if I want to make a switch in my portfolio, I was leaving it aside for it to come and hit me while I was pursuing my active work like writing about my portfolio picks.

I started marking my days of the week based on themes of study. So, Monday and Tuesday are for Quant & technical analysis, Wednesday is earmarked for general reading including macro, geopolitics etc, Thursday and Friday are kept aside for looking at interesting businesses and business models. These theme-based days help in focusing attention and making progress in each area.

My biggest challenge was that I simply overworked and overstimulated myself. Previously, office work and investment study were different. With now both coinciding, I ended up doing investment work for 12-14 hours a day without a break, seven days a week.

For twenty years, my “hobby” or “passion project” was investing. Now that is the primary focus. So, after many years, the search is on for building a new hobby. Reading fiction, watching movies, sports have started taking up more time in the day which provides a mental break from investment work. Hopefully, once the pandemic is behind us for good, then I can resume playing again. Losing the battle of the bulge for the last twenty years, seriously considering taking up some sports or activity that will focus on the health and fitness aspect.

Looking back I feel lucky I started the advisory because it gives me some purpose and work to do. Otherwise, I would probably have just sat the whole day reading and writing!! Running the advisory, interacting with investors, reading and responding to their questions gives me an immense amount of pleasure and most of the time helps me in my learning process as well.

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

Why Valuations Probably Won’t Matter For a While

• Markets are in an uptrend
• Easy money is here to stay for a while
• The government isn’t going make the same mistake it made following the last crisis by pushing for austerity
• The consumer is in better shape even after a pandemic-induced recession
• Housing prices are on fire
• And there is a light at the end of the Covid tunnel.

On the other hand, valuations are stretched, we are coming off a 10+ year bull market that never truly got reset during the pandemic plunge and there is a speculative frenzy among investors that hasn’t been seen since the dot-com bubble.

Markets, in many ways, are insane right now.

Yes, fundamentals will always matter eventually when it comes to the markets but the next 18-24 months is setting up to be one of the better economic environments we’ve seen in some time. But there is just so much money sloshing around that it seems like any correction will see buyers step in.

https://awealthofcommonsense.com/2021/02/why-valuations-probably-wont-matter-for-a-while/

 

Is Tiny Cars the future of EVs?

Having decided that the future of mobility is electric, the Chinese government has subsidized sales of standard electric cars since 2010. With close to 1.18 million sold in 2019, China accounts for just over half of electric-vehicle sales globally. The country has set a top-down target for electric vehicles to make up 40% of car sales by 2030. Tiny cars, which first began appearing in the early 2010s, have more than double the sales of regular electric cars but have never benefited from subsidies. Nor do advertisements for them air on television. As they don’t technically require licenses, tiny cars tend to be popular with migrant workers, who struggle to pay for driving lessons and other car-related costs. The elderly, too, find tiny cars attractive since, up until October of last year, people over 70 could not apply for a driving license in China. They’re also convenient for anybody who wants a car to pick up groceries or their kids from school: No tiny car is longer than 1.5 meters, and their speed tops out at between 40 and 56 kilometers an hour. They’re for the short trips of daily life, not for traveling from one side of the city to another.

https://restofworld.org/2021/tesla-vs-tiny-cars/

 

The next big risk

A few years back that some hackers managed to get a hold of the Swift credentials of Bangladesh Bank, the central bank of Bangladesh, and caused several tens of millions of dollars to disappear from Bangladesh Bank’s master account at the Federal Reserve Bank of New York. Some of the money was recovered, but some of it seems to have disappeared into casinos in Macau—walked out the door and was never recovered. In this case it was not a failure of the Federal Reserve. Someone managed to get access to the Swift credentials of a bank that had an account at the Federal Reserve, and they drained that bank’s master account.

As we discovered in the pandemic, there’s a lot of systemically important companies. It suddenly became obvious to everybody. Without Amazon or Google or our internet service provider, our problems would become even greater.

https://www.bloomberg.com/amp/news/articles/2021-01-12/what-do-wall-street-leaders-think-is-the-next-big-risk

 

What's the dumb thing you can do here?

In a new interview, billionaire Thomas Tull — who runs a holding company called Tulco modeled in part after Buffett's — described just a piece of advice from Buffett that shifted his approach to investment decisions. At a meeting in Buffett's office in Omaha, the legendary investor shared the lesson during a two-hour conversation, which Tull said he'll "treasure for the rest of my life." The lesson involved an approach taken by Buffett and his longtime business partner, Charlie Munger.

 

"There was a moment," Tull says. "Where I was describing and talking through the business model [of Tulco] and how I thought about something."

 

"I said, 'What we're trying to do is be smart about,' and [Buffett] stopped me and said, 'I gotta be honest, for years, Charlie and I have always asked, 'What's the dumb thing we could do here?'"

 

"I kind of laughed, and he said, 'No, I'm dead serious. We always ask. We don't want to be in the clever pile. What what could we do here that would be the dumb thing, and how do we avoid it?'" Tull says. "Honestly, it actually has had a fair amount of impact on the way that I assess and think about situations."

https://finance.yahoo.com/news/warren-buffett-advice-thomas-tull-142946500.html

 

The future of education is online

In 2011, Stanford professor Andrew Ng—along with the help of Daphne Koller—posted videos of his course on machine learning. Within weeks, there were over 100,000 learners who viewed it.  To put things into perspective: Ng’s on-campus course would involve about 400 students per year. This meant that he would have to teach for 250 years to get the same levels achieved on Coursera.

In today’s economy in which the skills needed to succeed are rapidly evolving, education is becoming more important than ever. As automation and digital disruption are poised to replace unprecedented numbers of jobs worldwide, giving workers the opportunity to upskill and reskill will be crucial to raising global living standards and increasing social equity. Online education will play a critical role, enabling anyone, anywhere, to gain the valuable skills they need to earn a living in an increasingly digital economy. In 2019, the spending on global higher education was $2.2 trillion. As for the online degree category, it was $36 billion in 2019 and is forecasted to hit $74 billion by 2025.

https://www.forbes.com/sites/tomtaulli/2021/03/06/its-ipo-time-for-coursera/

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