Money and Finance
My wife and I started re-watching one of our favorite television series, The Wire. We're through the third season now and I've been jotting down some quotes that I thought could also apply toward investing. Here's what I have so far.
"Game done changed. / Game's the same, just got more fierce."
If you dropped Ben Graham or Philip Fisher in today's market, they might say the same thing. The core tenets of investing haven't changed, but the impacts of technology, the daily news flow, and competition from global markets have made the game much more intense. It's important not to let the intensity of the modern investing world distract you from what investing is all about.
"A man got to have a code."
In investing, it's equally important to know what types of stocks you'd consider buying and which ones you wouldn't touch with a barge pole.
"You either play or get played."
It may be more comforting to hold only cash and bonds, but in the long run, if you don't invest in equities, inflation will win the game.
"You come at the king, you best not miss."
If you're going to make a huge bet -- particularly a leveraged bet -- on a single stock, the downside risk is massive.
"See, that's why we can't win...they (mess) up, they get beat. We (mess) up, they give us pensions."
Incentives matter. You don't want to invest in a company led by a management team that has zero downside risk for their capital allocation decisions.
"It's all about self-preservation, Jimmy. Something you never learned."
Err on the side of capital preservation and seek to minimize permanent losses of capital. Live to invest another day.
"If the gods are (screwing) you, you find a way to (screw) them back. It's Baltimore, gentlemen; the gods will not save you."
In the short-run, investing results are driven by luck; in the long run, skill. If you want to play the short-term investing game, you're throwing in your lot with the whims of the gods and your odds aren't great. If you want better odds, focus on the long-run.
What I've been reading/watching this week
- A Fresh Look At The Simple Formula
Earlier this week, a reader* of the blog had a look at the formula I laid out in "A Simple Formula for Investing Success" and cleverly suggested that the formula should be rearranged from: Investment + Good Company + Right Price +...
- 6 Signs Of A Good Investment Process
In my baseball-playing days, I was on the mound in a big playoff game, and at a key moment in the game I threw what seemed to be a good pitch, only to watch as the ball sailed over the fence for a home run. It might still be traveling somewhere over North...
- Investing Lessons From David Einhorn
I recently finished reading David Einhorn's Fooling Some of the People All of the Time, which is primarily focused on his hedge fund's (Greenlight Capital) take down of Allied Capital. The Allied Capital case study is a must-read in itself, as...
- A List Of Good Investing Books
Must-Haves for Serious Investors Benjamin Graham. The Intelligent Investor. The value investor's bible. Make sure you get an edition with Jason Zweig's commentaries.Peter Lynch. One Up on Wall Street. The retail investor's bible. Lynch's...
- One Reason Dividend Investing Works So Well
I am sure there are a number of reasons why dividend investing works, not the least of which is dividends role in long term total returns. I see another factor that dividend investing one reason why dividend investing works so well, and it has to...
Money and Finance
Investing Wisdom from The Wire
My wife and I started re-watching one of our favorite television series, The Wire. We're through the third season now and I've been jotting down some quotes that I thought could also apply toward investing. Here's what I have so far."Game done changed. / Game's the same, just got more fierce."
If you dropped Ben Graham or Philip Fisher in today's market, they might say the same thing. The core tenets of investing haven't changed, but the impacts of technology, the daily news flow, and competition from global markets have made the game much more intense. It's important not to let the intensity of the modern investing world distract you from what investing is all about.
"A man got to have a code."
In investing, it's equally important to know what types of stocks you'd consider buying and which ones you wouldn't touch with a barge pole.
"You either play or get played."
It may be more comforting to hold only cash and bonds, but in the long run, if you don't invest in equities, inflation will win the game.
"You come at the king, you best not miss."
If you're going to make a huge bet -- particularly a leveraged bet -- on a single stock, the downside risk is massive.
"See, that's why we can't win...they (mess) up, they get beat. We (mess) up, they give us pensions."
Incentives matter. You don't want to invest in a company led by a management team that has zero downside risk for their capital allocation decisions.
"It's all about self-preservation, Jimmy. Something you never learned."
Err on the side of capital preservation and seek to minimize permanent losses of capital. Live to invest another day.
"If the gods are (screwing) you, you find a way to (screw) them back. It's Baltimore, gentlemen; the gods will not save you."
In the short-run, investing results are driven by luck; in the long run, skill. If you want to play the short-term investing game, you're throwing in your lot with the whims of the gods and your odds aren't great. If you want better odds, focus on the long-run.
What I've been reading/watching this week
- Keeping things simple - Morgan Housel
- Why you shouldn't track your investing performance - Monevator
- Legacy of Benjamin Graham - Video (h/t Ben Carlson)
- Anatomy of a failed investment - Richard Beddard
- Big markets and network effects - Aswath Damodaran
- Charlie Munger on investment concentration v. diversification - 25iq
- Are you bullish or bearish? - A Wealth of Common Sense
Stay patient, stay focused.
Todd
On Twitter @toddwenning
- A Fresh Look At The Simple Formula
Earlier this week, a reader* of the blog had a look at the formula I laid out in "A Simple Formula for Investing Success" and cleverly suggested that the formula should be rearranged from: Investment + Good Company + Right Price +...
- 6 Signs Of A Good Investment Process
In my baseball-playing days, I was on the mound in a big playoff game, and at a key moment in the game I threw what seemed to be a good pitch, only to watch as the ball sailed over the fence for a home run. It might still be traveling somewhere over North...
- Investing Lessons From David Einhorn
I recently finished reading David Einhorn's Fooling Some of the People All of the Time, which is primarily focused on his hedge fund's (Greenlight Capital) take down of Allied Capital. The Allied Capital case study is a must-read in itself, as...
- A List Of Good Investing Books
Must-Haves for Serious Investors Benjamin Graham. The Intelligent Investor. The value investor's bible. Make sure you get an edition with Jason Zweig's commentaries.Peter Lynch. One Up on Wall Street. The retail investor's bible. Lynch's...
- One Reason Dividend Investing Works So Well
I am sure there are a number of reasons why dividend investing works, not the least of which is dividends role in long term total returns. I see another factor that dividend investing one reason why dividend investing works so well, and it has to...