Why I Read (Part III)…

Tags

activist investors, autodidactism, books, Bruce Kovner, consensus, contrarianism, fear and greed, Howard Marks, investing, Isaiah Berlin, latticework of mental models, literature, Magic Eye, mosaic theory, Nosce Te Ipsum, reading, Warren Buffett

OK, back in June & July, I covered two key benefits of reading:

Knowledge, Experience & Inspiration – a constant & wide-ranging diet of non-fiction reading’s essential for any investor, and something you’ll find all the great investors practice & recommend. 

Nosce Te Ipsum – I believe reading literature’s equally important, it’s one of the few ways you can truly know thyself (& other people). And painful self-awareness & examination offer the best hope of avoiding the potentially devastating impact of fear & greed on your portfolio.

It’s been a long time coming – let’s tackle the final benefit of reading, which I call:  Magic Eye. It’s definitely the most exciting – I guess I’d classify it as offensive, versus the rather defensive nature of the other benefits. But some context would be useful – let’s first talk a little about how I actually read:

Ever since I was a kid, I’ve always found it incredible how the entire world (even multiple worlds) can be encapsulated in a single book. And there’s almost never-ending mountains of them, just waiting to be discovered! In fact, they really are never-ending: In the UK, for example, 150,000 new titles are published each year! Faced with those kinds of numbers, I’ve always felt an overwhelming sense of urgency – how can I ever bloody read quickly & widely enough to ever make a dent in such a mountain?!

Advertisements

Portfolio Allocation (XV – Emerging & Frontier Markets)

Tags

asset managers, BRICS, closed-end funds, developed markets, dollar-cost averaging, emerging markets, frontier markets, Hong Kong, Howard Marks, NAV discount, NAV premium, portfolio allocation, reductio ad absurdum, Trading Economics

Continued from here. [And most definitely, this is the last post in the series!]

This might actually be the perfect time to write about emerging markets – the developed market douche-bags (DMDs) are out in force again, warning us emerging markets are tanking… It’s a common refrain: a) developed markets are in recession, emerging markets must tank, b) developed markets are showing zero growth, emerging markets must tank, c) developed market growth’s bouncing back & rates are rising, emerging markets must tank, and d) well…emerging markets simply must tank!

2013 may turn out to be even sillier. So far, most of the year’s been spent denigrating – nay, reviling – emerging markets, simply because developed stock markets have done so well. Of course, the sub-text here is ‘why don’t you just forget/sell emerging markets (forever) & just stick to developed markets?!‘ Christ on a rope, that’s like handing out bloody gold medals to whoever took the most steroids… And now developed markets have caught a dose of the colly-wobbles in the past week or two – again, DMDs would have you believe it’s another good reason to sell emerging markets. Yes folks, we’ve finally reached the point of reductio ad absurdum:

i) Developed markets go up – sell emerging markets,

ii) Developed markets go down – sell emerging markets, and

iii) Don’t forget i) & ii).

The Activist Investor

Tags

activist investors, catalyst, Charlie Munger, growth investing, Howard Marks, intrinsic value, latticework of mental models, mosaic theory, recapitalization, second-level thinking, shareholder activism, value investing, Warren Buffett

I’m obviously not averse to some growth – well, if I can buy it bloody cheap, or free – but I don’t think anybody would dream of calling me a growth investor!? But you may be surprised to hear I don’t consider myself a classic value investor either. Ideally (at least in relation to some investments), I like to think of myself as an activist investor.

In this instance, let me hasten to re-define activist in the v broadest sense: Activist investing isn’t necessarily about public engagement with a company’s management – far from it, in many cases. I believe the essence of activist investing actually lies in the investment analysis & the investment itself – not the investor (as many would presume). An activist looks at a company and, on that rare occasion, sees a v different enterprise vs. the company (most) other investors currently see…

– Perhaps he sees a company that’s genuinely worth more dead than alive. Or one that would be far more valuable in the arms of a larger rival. Or a company that has a jewel in the crown that’s obscured by other/inferior divisions, central costs, etc.

– Maybe it’s a company that has under-utilized assets that can be sold to reduce/eliminate excessive debt. Or a company that could execute a recapitalization, and transform its financial metrics & shareholder value.

– Perhaps it’s simply misunderstood – investors may simply not grasp a company’s management/business/strategy have changed in a major way, or they under/over-estimate the potential impact (for example) of some litigation or regulatory action.

Hitting The Century (VII – Natural Resources)

Tags

agri-business, BP, bubbles, correlation, garbage stocks, gold, Howard Marks, idiots, inflation, junior resource stocks, miners, natural resource stocks, oil, Petroneft Resources, QE, quantitative easing, Richland Resources, silver, Statoil, Total

In my recent Inflation post, I elaborated on my conclusion that, contrary to widespread (and my prior) opinion, inflation was likely to prove a fairly distant threat. Despite the smoke rising from the bloody printing presses… And despite the Fed since confirming their long-expected QE III – or should I say: QE Forever, QE Infinity, QE God Fucking Save Us… Take your pick! You know, the mind boggles – how/why on earth does the Fed confidently expect Agency MBS purchases to smoothly flow through into improved labour conditions?!

No real need to revisit my post, just read Howard Marks’ latest instead, which came out a few days later. In his memo, he covers much of the same ground – probably in a far better & more relentless manner… [And apologies if I ramble on: Remember, with this series, my intention isn’t to necessarily write about specific stocks here, old or new. Rather it’s to give you some deeper insight into the thoughts, logic and pros & cons underlying each of my allocations].