Bad Investor

An interesting quote I came across. It's about war, but it clearly can be applied to life in general and possibly to investing too.

Market pullbacks are expected after long bull runs. So are rotations when one sector has outperformed. Tech has outperformed and we're seeing some corrections in some parts of the markets, but things are ok overall. If we take a longer time frame -- something like a monthly, quarterly, or annual time frame -- then things don't seem so bad; it's only when we're obsessed about short term volatility that such market conditions cause us anxiety.

A few of my thoughts on the recent market correction. It may be more appropriate to call this a rotation out of tech stocks because it may not be a true correction. I think this isn't bad — it'll harden newbie investors that entered after March 2020 and haven't experienced anything but green fields. It's time for them to experience what it really means to be an investor. This will make them better investors themselves, which is good for the market in the long term.

Stimulus checks are about to go out it seems, with Biden working with the Senate a bit to tone things down. Specifically, they seem to have agreed to lower the income cutoff thresholds so that people making more than $75,000 a year (filing single) start getting the check tapered off very quickly. With the insane level of money printing, it's a bit strange to see discussions at such granular levels - the politicians don't make much sense per usual, but at least they aren't bickering as much any longer and there seems to be at least some semblance of bipartisanship coming out of DC.

Global diversification allows you to diversify across a wide range of political orders and ways of living. The US is just one of many countries, and one of many political systems and ways of being as a people. So far, the approach we have in the US — focused on property rights and reasonable levels of liberty with decentralized governance, rule of law, and the ability to form contracts — has proven an excellent way to build wealth in society. That doesn't mean the future will be the same as the past - it's very conceivable that other societies and other ways of governing may prove better-suited to wealth creation in the 21st century. We simply don't know, because we don't know the future. That's why robust diversification matters so much.

Global diversification is key if you want to be exposed to more than just your country's economic output and growth. Global diversification also allows an investor to take advantage of rare outsized growth opportunities in regions that are developing very quickly relative to the rest of the world.

The modern capitalist world provides us with a lot of goods and services - whether rich or poor, we're far better off materially today than in the past. Are there any drawback to this modern world, however? Is it all good, or is our current way of life taxing to our human nature?

Investing is more than the way we think of it in the West in modern society — it's something far broader and something that can be applied in all sorts of times and places, not just in modern capitalist societies. Investing may mean planting trees, raising chickens, or doing favors for the community. Investing is whatever helps you create a pleasant, secure, and sustainable existence for yourself and those you love. Focus on things from this first principles approach so that you're not so tied into the stories of modern capitalism that drive all of us wild and cloud our thinking about what's really important.

Mild corrections to the overall stock market are normal and even healthy in the long term. Unlike more severe corrections or downturns, these mild ones can be expected to occur annually. So, if you're not expecting a drop of 5% or 10% or 15% in a single day to occur once per year, you're living in an investing fantasyland. Although fun, such places aren't useful for long term investing success — clear your thinking, diversify your portfolio, manage your risk prudently, and invest boldly.

The US can't stop printing money very easily because it's not an entity — it's a bureaucracy made up of a ton of people each optimizing in their own way for their own interests. That makes me pessimistic in terms of our ability to stop printing money like crazy, but I also understand how difficult (and possibly devastating) it would be if we stopped all of a sudden. We're in a very precarious situation no matter which path we choose.

When we're young, we feel like we can become anything and do anything — the possibilities seem endless. As adults, however, it feels like there may be a time to let go of all you could have been in order to focus on what you still can become. This feels like what it means to become an adult, but this may just be one aspect of that.

Bitcoin is inherently anti-inflationary — only 21 million BTC are supposed to ever be mined. This is unlike fiat currency and even unlike gold, because precious metals can continue to be mind as prices rise. Bitcoin is almost the ultimate anti-inflationary asset as the vast majority of BTC have already been mind and the overall Bitcoin-related miner and developer network has so far been conservative and prudent. This may not continue in the future, but it bodes well so far.

The new unemployment claims numbers are out - let's take a quick look at a bit of an unpleasant uptick this week. It likely doesn't mean too much, but it's something to remain cautious about.

Sometimes you're just saving for a vacation (idiotic thing to do in my opinion), sometimes you're saving for a house, and sometimes you're just saving to build up wealth — in each circumstance, your time horizon is different. If you fail to take your time horizon(s) into account when investing your money, you'll fail at investing. Don't make the foolish mistake of thinking all investing is the same because investing for different time horizons requires different tools, techniques, and mental frameworks.

As slimy and terrible and snake-like some of our current politicians are, we're lucky to have the ones we've got because it could be far worse. What if Mitch McConnell was replaced by a full on Trump sycophant who was only thinking about the next election? Mitch isn't doing that — his current actions may hurt the Republican Party in the short term, but that's not what he's about right now. Or, probably more correctly, for a brief instant, Mitch's interests are aligned with those of the broader US.

The Senate acquittal of Donald Trump on his 2nd Impeachment prevented a new precedent from being set - one in which a non-President is convicted and “removed” from office (and barred from holding office in the future), which makes little sense. We don't need more and new precedents in US politics now.

Yes - any sane and decent person likes to see Big Wall St. get some of their own medicine by the likes of WSB. However, a long term and prudent approach would make us think twice about the effects of such speculation. In the short term, it's fun and even a good thing. In the medium term, it's ambiguous. In the long term, however, more speculation will lead to greater inefficiencies in the market and can cause capital allocation errors.

Without love, capitalism can't work for the long term. That's because although capitalism seems like the best approach so far, there are inherent negativities that come along with it — one of these negativities is the dehumanization of people in capitalist societies. We can easily compensate for this, however, by recognizing our common humanity, thinking clearly, and adding a dose of love into the mix. Here's the link to the YouTube video that inspired this episode a bit: https://youtu.be/L1AHyiJFoMs

In the early stages of wealth-building, working like an animal to accumulate more capital is key. After a while, however, things change and more balance is required once you accumulate a certain level/threshold of money.

The demand side is not truly important, because societal wealth growth only comes from innovation and the bringing of costs down. That only can happen on the supply side. If you truly see things from a first principles perspective, the demand side can almost be ignored.

Those in academic finance — and those in big finance media, those that consider themselves well-read on finance/investing, and long-time experienced investors — are stunned at Gen Zs and Millennials making a killing on random nonsense firms. These supposed “experts” or “pros” in finance and investing should take a step back be a bit more humble, as their presumed knowledge is just that — a full on story. Don't delude yourself into thinking you know something — stay humble, stay focused, and stay very flexible/adaptable to be a successful investor in all kinds of circumstances.

While everyone is looking at the latest unemployment numbers, here are my thoughts on why the unemployment rate is a bit of a nonsense metric. That, and a small rant about inflation. Tons of static in this episode, as I'm still a complete novice at this.

The CPI numbers are out from the Bureau of Labor Statistics (BLS), and it looks like there's not much inflation happening when you only care about the CPI basket of goods and services. What if you want to buy other things, like houses, assets, or other scare items? Is the CPI a real measure of inflation in today's world, or is it just a false metric that misleads more than it informs?

Two different events — one of them is a primarily political event while the other gives us a chance to gain some historical context for tech-related investing

Tesla is leading corporate America (and the entire business world) into Bitcoin with their recent $1.5 bil purchase of BTC — they've changed their rules for cash and cash equivalents and now the firm is poised to no longer see their purchasing power be eroded by constant money printing

With rumors/reports of a potential proposal for a $3000 to $3600 annual deposit/stimulus (per household per child), it seems like 2021 will be another year of astounding money printing. Both the Dems and some Republicans (namely Senator Mitt Romney) are proposing versions of a quasi-UBI in the form of a $3000 directly-deposited child credit. How much more asset inflation is likely to come from this?

I started this podcast in 2020 as a side project during the pandemic, but took it only slightly seriously in terms of consistency. Going forward, I'll publish far more content on a far more consistent basis. Please share the podcast if you find it useful or interesting. Thanks so much for listening.

There's a lot of rhetoric on both sides of the aisle as to who would be better for the economy -- Biden or Trump? Does the President really make a difference for an economy like the US's? Especially in 2020? I'm unsure -- it seems that we have a true establishment candidate (Biden) with decades of DC experience going agains the quasi-authoritarian reality show star (Trump) who really is limited in his power to improve the economy. Biden's not going to go far left -- he's a true corporate Dem. Trump wants the economy to do well, but he's just one man and the economy depend on a myriad of factors, such as productivity, sentiment, and political stability. Regardless of who wins, investors should be worried form a purely investment-focused perspective. From a more systemic and long-term perspective, however, things might be more ominous. If political stability and rule of law in the US is undermined, everyone will suffer greatly, including investors.

And I've finally got a proper mic. Hear my thoughts on the Trump situation without all the political nonsense that fills the media.

This first Presidential debate for the 2020 election cycle was unusual -- it was filled with interruptions and was different from the typical US Presidential Debate (not primary debates, which are often absurd and seem to be organized more for ratings than for informing the public). We need to care about American traditions more than we do now - we can't simply require things to be written down for them to be a part of our nation's "way of being." A small rant on un-American speech policing to close off the episode.

You won't be a good investor if you can't think clealry about the world. The world is a compelx palce, so you've got to get your information from outside sources (you obviously can't gather all the info you need on your own). But, not all news sources are equal. You should know this already if you consume the news, but too many people don't. In this episode, I'll take you on a brief journey from far left (Jacobin) to far right (The American Spectator) news -- stopping by purportedly moderate news (CNN) in between -- so we can see how different news outlets/blogs/magazines approach news in different ways.

Don't try to time the markets. Yes - the market can drop or rise tomorrow, but that's not something that you're going to be able to predict. Instead, focus your energies and efforts on finding great companies to invest in. Dollar cost averaging still makes sense today and it will help you avoid the risks related to deploying all of your capital into the market at one time.

Investors who are truly sophisticated with a deep understanding of risk (and history) will include a bit of gold and silver in their portfolios to hedge against low probability but very severe tails risks. Those that think that there is no place for these ancient metals in their portfolios must explain why they assume the future will be more similar to the last 100 years as opposed to almost any other time in human history.

Every investor knows the importance of diversification for risk mitigation. But, if you really know what you're doing -- and most investors don't -- then too much diversification may prevent you from getting really wild returns. A more narrow or concentrated portfolio is required if you want to get truly stunning returns. This concentration comes with more risk, however, so prudence and clarity is key.

In the beginning of an investor's life, saving money matters far more than rates of return. Chasing an extra few percent return is a fruitless effort if you're not able to put aside a substantial amount of money. Focus on accumulating capital first - after a number of years, when you have a strong base of capital, you can transition your efforts over to seeking better rates of return. Don't mix these stages up. This is the first episode in which I actually wrote down some notes before I started speak - previous ones were totally off the cuff. Not sure which approach I like better.

Most people fear recessions, but recessions are where real wealth is built in the stock market. During recessions, both good companies and bad companies are battered and cheap. If you have cash and you're able to find the good companies -- those that are innovative and are set up for success in the coming decades -- you'll make a killing in recessions and will not fear them. For everyone else, they'll sell off, sit on their cash, and wonder why they are never able to succeed at investing.

It's important to be able to take a step back and see the bigger picture when investing -- otherwise you're at risk of making fear-based or greed-based decisions. How can you become a better investor? By learning more, including about market ups and downs throughout history. Studying market history will make you a more well-rounded and better-prepared investor. Sorry about the bad audio - I recorded this in the car.

To be a good investor, you need to have perspective about what can go wrong with your portfolio and how severe this will be. Too many people have severe recency biases that prevent them from having broad and realistic outlooks - they think the market will keep going up and ignore the many times in modern finance and investing that catastrophic losses occurred (let alone losses that occurred pre-modern era). This episode will give you a very brief intro into the idea of stress testing your portfolio along with some basic concepts you'll need to know to do it effectively.

The power of the United States is derived from our very powerful free market capitalist economy - it's what allows the US to produce so much wealth per capita and it is the foundation of our common prosperity. Are we forgetting this with our intense coronavirus reaction? Is a national economic shut down too severe of a solution for a virus of this type? No one can know for sure what's right and it's always better to err on the side of caution with these types of things, but here are a few contrarian thoughts on this the virus, the shutdown, and the economy. 

You hear a lot about the actions the Federal Reserve is taking to keep this global pandemic from causing a financial crisis. You also hear about the potential economic stimulus package that's being discussed in Congress. One of these is monetary stimulus and the other is fiscal stimulus - learn more about this key distinction in this episode.

Are you stunned by what's happening in the markets? Have you been stress testing your portfolio to understand the kinds of risks it's exposed to? Here are my thoughts and my mistakes on understanding my equities positions.