Good reads from around the Web.
The road to knowing a lot about investing is paved with knowing a little bit.
And as we all know, a little bit of knowledge is a dangerous thing.
I’ve seen the pattern on this very website. A new actively-minded reader will discover Monevator, often via one of my more actively focused articles, and then start commentating on other posts around the site.
They’ll usually state how they’re not stupid enough to put money into bonds or how they’re very cleverly positioned in the investing theme de jour (dividends, gold, and emerging markets at various points over the past few years).
Or, if you go back far enough, you’ll find them saying how unlike those other lemmings they aren’t being fooled by the bull market at all.
(Indeed the Armageddon-blog Zero Hedge now seems to be a support group for these particular people.)
Damascus is lovely at any time of the year
Anyway in time the market does what it does, which is punish over-confidence and piss on hubris.
Usually we don’t hear much from these chastened geniuses again, but a few have become regulars on my co-blogger The Accumulator’s articles. As best I can tell they’ve become largely passive converts.
I don’t point this out to mock them, but rather to applaud them.
For most people true wisdom in investing means coming to understand how little is knowable – especially if you need to slap timing onto the reckoning sheet – and instead focusing on what is controllable (costs, taxes, asset allocation, and your personal savings rate).
If like me you do carry on active investing (and my allusion to the famous old movies is entirely deliberate) then you had best be doing it with a mug of humility on the desk next to you.
It is happening again
One of the most consistent newish investor foibles is a belief that they can perceive market tops that somehow everyone else has missed.
They’ve all seen an asset crash or two and read all the quotes, and they can’t wait to opine that “this time is never different” or “We’ve seen this movie before and it ends badly”.
But we usually haven’t seen exactly this movie. To offer another over-exposed quote, history doesn’t repeat itself, it rhymes.
Markets rise and fall, but if the moves were as easily forecast by people who’ve done little more than read a few articles on Warren Buffett, we wouldn’t get stock market bubbles or busts.
Reality is far trickier, except with hindsight.
The continuing advance of both the US stock market and the bond market are current examples; the strength of London property a longer-standing one that’s totally humbled yours truly.
People have been wrong about these markets for years. Each will someday decline, but someday is another matter.
Boringly true
The brilliant blogger Ben Carlson points out [1] that the quote “I’ve seen this movie before and it ends badly” is almost invariably used by doomster pundits, who are wrong far more frequently than they’re right.
It’s potent because it sounds so sassy and dark.
In reality, anyone who has seen the movie of the markets before knows that – over anything other than the short-term – it mostly doesn’t end badly.
As Carlson says:
No one ever says, “I’ve seen this movie before and it ends with higher dividend yields, lower prices, better valuations and higher expected returns.”
Over the long-term, investing in Western stock markets hasn’t been anything like a movie, but more like a long-running soap opera.
One that has continued remarkably [2].
p.s. My runner-up post of the week has to go to Morgan Housel. He made me laugh out loud when lamenting the poor state of US infrastructure and pointing out [3] that someday it will inevitably need to be addressed, writing: “You can’t just let critical bridges and water structures fail and say, ‘Damn. That Brooklyn Bridge was nice while we had it.'” Touché!
From the blogs
Making good use of the things that we find…
Passive investing
- Someone is always outperforming your portfolio – PragCap [4]
- Bonds are supposed to be boring – A Wealth of Common Sense [5]
- Forecasting 30-year asset class returns – Rick Ferri [6]
- Even quiet markets are risky – The Investor’s Paradox [7]
Active investing
- A new 5.875% from IPF – Fixed Income Investor [8]
- When beating the market is not enough – UK Value Investor [9]
- The GM buyback: Beyond the hysteria – Musings on Markets [10]
- Deep dive into the 3G/Buffett Kraft-Heinz deal – Brooklyn Investor [11]
- Howard Mark’s latest memo; on liquidity – Oaktree Capital [12]
Other articles
- Your ideal self versus your financial self – Abnormal Returns [13]
- We’re tits to borrow for tat – Simple Living in Suffolk [14]
- Leverage and success – Oddball Stocks [15]
- The miserable maths of lifestyle inflation – The Escape Artist [16]
- How to cut your electricity bill by 80% – Mr Money Mustache [17]
Product of the week: Virgin Money [18] has launched a new one-year fixed cash ISA paying 1.65% and a five-year option paying 2.35%. That makes them both Best Buys, reckons ThisIsMoney [19].
Mainstream media money
Some links are Google search results – in PC/desktop view these enable you to click through to read the piece without being a paid subscriber of that site.1 [20]
Passive investing
- Money managers RIP – Institutional Investor [21]
- What happens when Vanguard owns everything? – MorningStar [22]
- Swedroe: Avoid famous, authoritative experts – ETF.com [23]
Active investing
- The big risk of ‘unconstrained’ bond funds – Fortune [24]
- Retail bonds are back – Interactive Investor [25]
Other stuff worth reading
- How to build a portfolio [Search result] – FT [26]
- Merryn: Slow death of equity market is bad news [Search result] – FT [27]
- Actor evicted because he sublet a room on AirBnB – Guardian [28]
- Where to get a two-day mini-break for £100.04 all-in – ThisIsMoney [29]
- Advice from Charlie Munger – Motley Fool (US) [30]
- How seed VC Chris Sacca made his $1 billion – Forbes [31]
Book of the week: Book reviewers and Silicon Valley insiders are raving about the new biography Becoming Steve Jobs [32]
Like these links? Subscribe [33] to get them every week!
- Note some FT articles can only be accessed through the search results if you’re using PC/desktop view (from mobile/tablet view they bring up the firewall/subscription page). To circumvent, switch your mobile browser to use the desktop view. On Chrome for Android: press the menu button followed by “Request Desktop Site”. [↩ [37]]