“Read more” usually means you should read more books about economy, history, philosophy, science and so on. Unfortunately most people who are on the receiving end interpret it as “read more of what I’m already reading, which often is crime or drama”, while what they really need is a huge dose of biographies, science, investing or economics litterature.
The problem is that neither the advisor, nor the advisee realize they have different perspectives of what reading means.
It works both ways by the way. Here’s how:
If you usually only read facts and research, you could really use the change in perspective and inspiration that some good sci-fi or fantasy could provide.
So, whenever you get the impulse or recommendation to read more, make sure to read elsemore, i.e., more of something else. In addition, be sure to clarify this distinction whenever you recommend somebody else they read more.
Speaking of reading, you can always find my reading lists (past and present) here under Recommendations. Some of the best books I’ve read in 2018 include (you can find details about those, as well as my most urgent top 30 of what to read next under Recommendations) :
Sapiens
The Fourth Turning
From Zero To One
The Fabric Of Reality
Peak
Signals
Utopia
More Money Than God
Fed Up
The Death Of Money
Beyond Blockchain
After On
The Bobiverse trilogy
So, for the holidays this year, wish for books in a genre you typically don’t spend much time on. Relax with some jaw dropping and inspirational good quality science fiction if you’re an avid economics and investment books reader; or try a biography if you usually read crime and drama novels.
Don’t forget to always consider the opposite of any course of action, in particular when it can be considered “normal” or “mainstream”
P.S. If you haven’t yet checked out David Simpson’s amazing hard sci-fi series Post-Human, there’s no time like the present! (my all time favorite sci-fi book [Amazon affiliate link])
P.P.S. Or, alternatively, check out Peter Schiff’s incredibly pedagogical How An Economy Grows… (my all time favorite non-fiction book [Amazon affiliate link])
Executive Summary: Saving enables investment, growth and higher stock prices, not the other way around.
Deranged wag-the-dog strategies by the Fed lead to price distortion, speculation, malinvestment, and eventually a flight to safety in real assets, e.g., gold
Bonus: thoughts on the usefulness of trading courses
Length: medium, 15 minutes?
Quirks: references to “How an economy grows”, “Gödel Escher Bach”, Nobel Prizes 2016, topology, the value of knowledge
Real world, Ideal world, Mental model
I recently listened to an interview with the fascinating and brilliant physicist Sir Roger Penrose.
He touched upon his idea of how just a slight sliver of the field of mathematics is used in physics, and how a just as small a piece of physics is used to explain the chemical and physical processes in a brain that leads to consciousness, and finally how a tiny part of that consciousness is used to develop the world of mathematics.
mathematics/Platonic “ideal” world/philosophy
=> Actual world/physics/chemistry
=> Mental realm/perception/consciousness
=> mathematics…
So what?
What use can you or I possibly have of his musings?
Just being aware of the recursiveness of nature can enhance our understanding of the economy and financial markets.
And, thinking about the existence of a real, fundamental world every now and then can be refreshing after stumbling around in the hall of mirrors that make up the investing landscape these days. More about that and the current Nobel Prizes below.
Wag the dog
Central bankers, e.g., are hard at work exploiting confusion about cause and effect in the economy/banking/market complex:
– The last few years CBs have distorted various price signals, including interest rate levels and the yield curve. They have tried to make the tail wag the dog, by boosting asset prices in a deranged attempt to stimulate unwarranted exuberance and pull forward demand (leaving a black hole in the future).
They hope that debt-financed consumption will kick-start other, supposedly dormant, parts of the economy, thus stimulating enough growth to take care of the debt burden. Given that too much debt and pulled-forward consumption already lies behind the current economic woes, hoping more debt will solve the problem is of course beyond retarded.
The real relationship looks like this:
Save => Invest => Tools/Innovation
=> Increased productivity => Surplus
=> Invest/Produce/Consume or Save =>…
This virtuous cycle gives rise to ever increasing productivity, production and profits, creating the basis for savings, investments, higher economic growth, wealth and stock prices.
During this process there are also cycles of irrational exuberance, malinvestments and corrections/recessions. As long as they are identified in time and debts are not too large, they amount to minor cleansing periods and healthy restarts.
Unfortunately, somehow the US Federal Reserve was allowed to hijack the system. With increasing centralization of power, Greenspan, Bernanke and Yellen have focused their attention on masking the most important price signals of the underlying health of the economy, in order to:
…push asset prices higher in a futile attempt of creating a wealth effect,
that would lead to higher consumption and thus more investments in production and employment,
creating the growth and consumption power that could warrant the preceding run-up in stock prices (valuations instead of profits)
Some believe this chart reflects reality
Distorted price signals and speculation instead of wealth creation
What instead, quite predictably, has happened is that more and more resources have been directed toward financial speculation, stock buybacks etc., while real investments in productive assets and employees have dwindled (with the exception of robots and other means of automation, thanks to the low cost of financing those investments vs. taking on additional employees -or keeping the ones already on the payroll for that matter).
Central bankers have targeted interest rates and the yield curve to distort signals about the economy; and the gold price and inflation measures to distort signals about the health of the monetary system – including the value of fiat money.
The next step is the ban on cash, since negative rates just don’t work when you can hide your wealth from the authorities in the form of dollar bills (or gold, gems or bitcoins).
“The aim of the Kurodas and Yellens of the world, the DI*CKs / DY*Cks, is tantamount to stopping (hiding) global warming by manipulating thermometers” – heard here on the superb podcast MacroVoices I think.
* Ingves/Yellen
Gold or not gold?
Anyway, this is not a post about Bug Out Locations, the merits of gold, Bitcoin or other alternative investments. I just want you to start thinking about everything in terms of recursivity, as in the phenomenal book Gödel Escher Bach by Douglas Hofstadter (e.g., food, environment, education, happiness, exercise, investing).
However, while on the topic of gold, just take a minute to think about what could happen to the demand for gold by criminals, if (when) 100-dollar bills and euro notes are outlawed. Gold doesn’t leave a digital trace, it’s easy to carry or hide, it’s resilient to weather and chemicals…
Personally, I’ve sold all my listed precious metal assets this summer, including GLD, GDX, PHYS and SLV. Instead I have invested in an unlisted Canadian company that buys gold production options from many different gold producers.
My exit strategy is to either list the company, sell it to a bigger company or to take delivery of the physical gold.
Alrighty then, since you ask… If everything is overvalued, rates are negative and some catalyst or other (falling profits, inflation, chance) topples the system (making banks intolerably risky), where would you, could you, put your money – whether a criminal or law abiding ordinary person? Did I hear gold?
I almost miss my clunky old Hublot Big Bang now. My Jack Ocean bracelet is more nimble but a little light on gold in comparison.
Investing is hot these days
It’s becoming more and more apparent that this bull cycle is long in the tooth. Everything seems to be related to investing in start-ups, IPOs, growth companies, dividend kings etc. Never before, except for a few brief moments before a major crash, has the willingness to accept risk been higher* – and the prospects for reasonable returns been lower.
* several gauges, including covenant-lite loans, debt levels, valuations, IPO/M&A activity etc
As the icing on the cake, there are courses on macro, investing, risk, technical analysis, derivatives and trading flourishing everywhere and by everybody it seems. By the way, the demand for my presence at various seminars is definitely a manifestation of the latter.
In defense of such courses I have the following to say: They are useless.
However, I still think you should go.
What? Wait. Why?
I think you should go to see what others are thinking, what others are teaching, their lines of reasoning. Then find your own style of fundamental and technical filters, while hopefully avoiding the very worst mistakes you pick up among other course attendees. In addition you might find some new friends or speaking partners. Anything works, except what doesn’t, as I stated in this post.
In line with the recursiveness of nature and of the economic/financial complex, there are important parallels to the world of macro trends, research, technical analysis and investing. They are all interconnected and feeding off each other.
– Actually, to a certain extent Harakiri Kuroda and Janus Yellen have got it right: you can wag the dog a little, for a while. As long as you ignore the exponential costs that follow.
Thus, study it all, just as Jesse Livermore in Reminiscences of a Stock Operator did, starting with technical analysis and proceeding to global macro strategies and cornering various commodity markets (btw, a friend of mine made a fortune cornering the white fish market back in the 1990s).
Just don’t think you understand it all or can control it (any of it). Remember that investing is mostly about psychological pain tolerance, and much less about mathematics, models and predictions. Please read the books Margin of Safety and The Most Important Thing for a deeper understanding of this crucial knowledge. Check out my other book recommendations here.
I’ll write a full post further down the road on how I think a newbie should tackle the markets, including what to pay attention to in macro, micro, momentum, trading, options, technical analysis etc. Not today.
“Do you remember when people thought TA patterns established decades ago were still relevant today, despite machine learning and rampant algo trading? That was fun”
By the way, have you seen anybody detailing the current likelihood (37%) of a certain pattern (flag) leading to a certain outcome (+/- >10%) or is it all just nostalgia and pretty drawings?
A final note on the Nobel Prizes this year. The physics prize referred to mathematical topology, the chemistry prize to another (shape) topology; and I often refer to life topology (a third notion meaning the schematical principles of a non-uniform and thus worthwhile life).
I would encourage you to pay attention to similar quirks of the language as well as the underlying reality. It’s a useful brain exercise that primes you to see things from other vantage points and could help you spot flaws in your reasoning.
In addition, the Nobel prizes serve as a well-needed reminder of the real world, as opposed to the la-la land of monetary policy, economics and stock valuations.
A macro course might very well be superficially useless, since you won’t be able to predict the economic trajectory afterward anyway; just as a trading course probably won’t help you identify better trades. Nevertheless, knowing what others think they know, and knowing what biases govern their decisions and what mistakes they are likely to make might prove valuable.
So, go, study their jargon, find others like you, accumulate as much peripheral knowledge as possible; and then find your own personal style of investing in terms of time horizon, preferred asset classes, risk level, short term tactics and longer term strategies. Are you a trader or an investor?
Summary
Oooof, so what was the message here really?!
There is a real physical world out there, governed by fundamentals
However, over periods shorter than a decade fundamentals can often be ignored altogether, in particular when the real world is deliberately hidden behind Potemkin facades
I think such a decade is drawing to an end (thus the shorts and gold), but hey, what do I know; the future is unknowable
Nevertheless, keep studying all aspects of markets, fundamentals, science, language and life, to more readily spot cracks in the facade before others – or to identify good buying opportunities where others dare not tread.
Don’t forget to wear a high quality tin foil hat at all times to protect you from the authorities
Are you new to the site?
Apart from weekly articles on investing and health among other topics, there is a free e-book about 50 investment lessons waiting, if you sign up for my free newsletter. Go ahead, join tens of thousands of other seekers who seem to find value in my work.
My guess is you and I are similar in many ways; curious, philosophical, looking for truth and happiness. The only material difference is perhaps that I’ve reached a later stage in life than you, which is exactly why my work may provide some utility for you.
I’m writing in order to spread my everyday insights about how to live a happy, healthy and wealthy life in modern society. All I ask of you is to help me in that endeavor – tell others about this site, share it in your social networks, if you think it’s worth sharing. Can you do that for me to keep this going?
FYI: I’m thinking about limiting the maximum number of subscribers, since MailChimp keeps increasing the price to maintain it. I recently deleted 1000+ subs that were too inactive, in an attempt to keep the list clean. Perhaps I’ll have to introduce some kind of latecomer fee sooner or later, or sell something. Well, that’s a question for a later day.
I’ve made a lot of mistakes in my investing career, probably more than most. That’s not least true of my private investments since I retired, in particular my bearish view of stock markets and my short position on the Swedish stock market since 2012-2013.
Nevertheless, or perhaps owing to my many mistakes, I’ve done a few big things right as well. That’s why I am in a position to write my articles and books. I sincerely hope they can be of use to you and others.
Executive Summary: My preferred sources of weekly information flow, I use to take care of my 21 principal asset pillars; and some pointers on how to set up your own.
NB: if you are a day trader, none of this is relevant.
NB2: if you are looking for basic information on investment psychology, mindset and methodology check out my Required Reading.
NB3: nothing in this post works as instructions for creating or maintaining detailed sell side level financial accounts research. Here, however is a primer I made some time ago.
First, decide why you want to inform yourself
Exactly what is your purpose? Better investments? More fun? Both? Aim for a balanced diet, including some fun – but keep work and play somewhat separate.
Second, decide how to stay up to date:
Have it your way. Make sure you find your own favorites, you’ll need have a strong internal motivation to keep at it
Be pragmatic. Choose what actually works, rather than try to appear clever.
Don’t aim to digest it all (but do create a framework that automatically puts you in study mode a certain amount of time every week). I always aim low.
Why do you read?
Don’t waste your time studying without a defined purpose; choose your sites and shows carefully and strategically from a clearly defined utility perspective.
Money
or
Girls
Ask yourself how you expect your life to improve by absorbing certain information. To perform better and be promoted at work, to be a better salesman, better trader, better investor, appear clever, witty… Is it money, status, fame, girls or something else that drives you?
Don’t mix reading for fun and for pleasure too much, lest you risk confusing when and why you spend time on a certain activity.
The reason I personally choose to stay up to date is to be ready to act when and if the authorities make something truly deranged. In addition, I want to learn new things just for the sake of exercising my brain (staying healthy). I also want to be entertained in thoughtful and inspiring ways.
My focus, regarding financial and economic information, is mainly on downside risk factors, since I don’t really need an upside to sustain my lifestyle. Your choice of sources should reflect your particular situation in terms of wealth, lifestyle and available time.
21 problems
For comparison, my current asset portfolio consists more or less of the following 21 items:
A short stock index position, unlisted Canadian gold assets, a Swedish biotech start-up, a gaming platform company, an algae w-3 oil company, a nuclear facilities consultancy, a place to live, lent out money to several friends and business associates, several unlisted investments (a credit rating company, clothes and jewellery, HR software; and 5 other small start-ups in insect protein, venture capital, algorithmic investing, the sharing economy, my blog & podcast assets in my own nano-scale company), a book publisher that I and my partner are winding down, cash, various pension funds (mostly multi strategy hedge funds), some Russian art and a, possibly defaulted (update: about to be acquired for scrap value), convertible loan to a medtech company.
I have no income and no loans.
No, there is no room for 22 pillars
Update, November 8, 2016: I’m investing in another start-up. The new Pillar 21, replacing the medtech co. It’s secret for now, but all will be revealed in due time (within a year)
Deciding on what to read
Don’t let availability bias and technology get the best of you.
Control your time and information intake by going off-line, by frequent periods of deep work, by only using a limited number of information and social media apps (well-filtered to avoid irrelevant noise such as cute animal videos and beautiful pictures), by leaving your phone at home.
Systematically go through recommended and popular information sources every year, and assess whether to add them to your flow of information, and whether to discard some of your old sources at the same time.
Avoid keeping sources in the loop if you don’t actively use them. Just keeping them there takes mental energy and can cause a bad conscience. However, don’t be afraid to build a repository of non-urgent material to read or listen to when stuck on, e.g., a long haul flight.
Pay attention to your keystone habits and the general shape they render to your days and weeks, and make sure they create room and impetus for reviewing the information you have set out to digest.
Do What Works
If not, it will all just pile up as so much bad conscience which would amount to a net negative.
Don’t go there.
Nobody will reward you for the amount of information you process, and definitely not for the amount you just let pile up. The only judge is yourself (and your wallet). Do what works and no more than that.
Positive pile
Inspiration – what I’m reading
Hussman
I start every week (Sunday night or Monday morning) with Hussman’s Weekly Market Comment. Dr John P. Hussman combines a beautiful financial prose with deep insights about macro economy and stock market behavior. Be prepared to read at least a dozen of his most recent newsletters before you start to fully understand what he is saying. Also, keep in mind that he is playing a long game; look elsewhere if you think 5 years = long-term.
“Last week, on the most reliable measures we identify, that floor quietly dropped away.”
He also commented on the irrelevance of the US Federal Reserve:
“Whatever policy error the Fed might make by raising, or not raising, interest rates here pales in comparison to what activist Fed policy has already baked in the cake.”
…and managed to squeeze in some useful teachings about the Phillips curve (emphasis mine):
“See, Phillips studied a century of British wage data during a period when the U.K. was on the gold standard, when general prices were quite stable. So the wage inflation that Phillips observed during periods of low unemployment was actually real wage inflation.”
MacroVoices
I make sure to listen to Erik Townsend’s podcast MacroVoices every week. It features Erik’s own up to date thoughts on stocks, gold, oil, interest rates and other useful investment stuff, but the main event every week is an interview with a prominent financial or economic thinker.
In addition, every week MacroVoices presents a RealVision encore; a replay of a previous interview made on RealVision TV. The most recent encore was a conversation, recorded April 4, 2016, between Grant Williams and Michael Schneider.
Wait, there is more; register and get the MacroVoices weekly research roundup letter, with tons of free research every week.
Goldman Sachs
This really sucks, but as much as I hate to say it, Goldman’s podcast is actually interesting and somewhat useful; by the vampire squid and Most Imperial Company in the world. Get ready to tune in every second week for a little less than half an hour.
ZeroHedge
You can call me a permabear all you want, but ZeroHedge is the most up to date, readable and entertaining financial site there is.
If it’s news, it’s at ZeroHedge – always with their own unique spin on the matter.
Don’t try to read it all, there is just too much material, but click ZH whenever you want a quick, insightful comment on an event you don’t quite grasp. Just make sure you understand ZH mostly provides the downside persepective to everything, as a counterweight to the rest of the media landscape’s pollyannaish spin
In addition to visiting the site every now and then, I subscribe to the “ZeroHedge Frontrunning” daily newsletter to get a quick feel for what’s currently going on (down) every morning
Every quarter, Howard Marks sends out an important memo with musings about the economy and the financial markets. I read it as soon as it appears in the inbox. The most recent one, “Political Reality” was posted on August 17, 2016.
Various blogs, pods and newsletters
The Felder Report(short, easy to read market thoughts by the hedge fund manager Jesse Felder)
Chris Bailey (lots of charts on stocks and the economy from a long time fund manager and strategist)
HORAN (more charts, including the recent Dogs Of Dow September 9, 2016 update below)
Cornucopia (Swedish site with deep and interesting insights about [Swedish] housing and the economy, and way too much information about the military. Check in and browse a few days’ worth of posts to find what you’re looking for at the moment)
Mauldin (newsletters: Thoughts from the frontline, and Outside the box – but to be fair, I rarely read these anymore, even if I usually think they are interesting when I do)
Barry Ritholtz (very frequent newsletter – I seldom read it or visit his site, Big Picture. It’s still good stuff though, if you have the time)
News
The Economist (more or less personalized newsletters with less biased and superficial news than from most sources, except 60 minutes)
Financial Times (Newsletters: Breaking News, Essential Daily Briefing, and The latest Companies by Sector news and analysis, FT Exclusive)
My full list of people, newsletters and sites that I have bookmarked is of course much, much longer. I’ll just might publish it in a comprehensive format later.
Bonus 2: My own list of recommendations isn’t all bad either. A tip: take notes when reading a book, review the notes periodically, and re-read the best books every few years.
Summary and conclusions
Schedule your daily and weekly habits with room and impetus for focused reading or listening
Clearly define and state your purpose of learning
Decide how and through which information sources to achieve that purpose
Aim for depth and pragmatism, rather than quantity or showing off
Update the list of sources every now and then, keep it manageable
If you are into investing, you have to read the books by Schiff, Marks and Klarman, which you can find here, before setting up your framework of daily information flow. After that I suggest Hussman and Macro Voices.
And, last, never, ever take recommendations on investments from anybody. Never. Ever. See for yourself, do your own work. Genji Gambashi
