Money and Finance

Links

A large excerpt of the Boyles interview with Value Investor Confidential, minus the 3 stock ideas we discussed, on ValueWalk (LINK)

Sanjay Bakshi: Reply to a Mail from a Friend on Valuation (LINK)

A Dozen Things learned from Stanley Druckenmiller About Investing (LINK)

A recent speech from Stanley Druckenmiller (LINK)

Aswath Damodaran: The Small Cap Premium: Where is the beef? (LINK)

Philosophical Economics: Capital Recycling at Elevated Valuations: A Historical Simulation (LINK)

Perspectives on Stock Market Valuation (LINK)

GMO White Paper: The Case for Not Currency Hedging Foreign Equity Investments: A U.S. Investor's Perspective (LINK)

Farnam Street: Seymour Schulich on Deals, Business, Decisions and Life (LINK)

Related book: Get Smarter

60 Minutes: The Attack on Sony (LINK)

North Korea's cyberattack on Sony Pictures exposed a new reality: you don't have to be a superpower to inflict damage on U.S. corporations

Acidic oceans linked to greatest extinction ever (LINK)

Volcanoes and climate: After Tambora [H/T Will] (LINK)

Two hundred years ago the most powerful eruption in modern history made itself felt around the world. It could happen again at almost any time

Hussman Weekly Market Comment: Valuation and Speculation: The Iron Laws (LINK)

There are two central considerations in investing that, when used in combination, have been the source of virtually every major success I’ve had in 30 years as a professional investor, and when inadvertently missed or underappreciated, have been the source of virtually every significant disappointment.

The first is what I’ve often called the Iron Law of Valuation: every security is a claim on an expected stream of future cash flows, and given that expected stream of future cash flows, the current price of the security moves opposite to the expected future return on that security. The higher the price an investor pays for that expected stream of cash flows today, the lower the return that an investor should expect over the long-term. Particularly at market peaks, investors seem to believe that regardless of the extent of the preceding advance, future returns remain entirely unaffected. The repeated eagerness of investors to extrapolate returns and ignore the Iron Law of Valuation has been the source of the deepest losses in history (see Margins, Multiples, and the Iron Law of Valuation).

The second consideration, however, is equally important over any horizon other than the long-term. It deserves its own name, and I’ll call it the Iron Law of Speculation: The near-term outcome of speculative, overvalued markets is conditional on investor preferences toward risk-seeking or risk-aversion, and those preferences can be largely inferred from observable market internals and credit spreads. In the long-term, investment outcomes are chiefly defined by valuations, but over the shorter-term, the difference between an overvalued market that becomes more overvalued, and an overvalued market that crashes, has little to do with the level of valuation and everything to do with investor risk preferences (see A Better Lesson than “This Time is Different”).

Book of the day (a Bill Gates recommendation): Superintelligence: Paths, Dangers, Strategies (Also available on Audible, which is currently having its Spring Cleaning Sale and has almost everything half-off.)

- Links
A Dozen Things Charlie Munger has said about Reading (LINK) Related books: Charlie Munger: The Complete Investor Poor Charlie's AlmanackFPA Crescent Fund: Second Quarter 2015 Commentary [H/T ValueWalk] (LINK) Complete video of Bill Miller...

- Links
Peter Bernstein on risk (video) [H/T The Big Picture] (LINK) Related book: Against the Gods: The Remarkable Story of RiskSafal Niveshak: How to Be Happy and Get Rich (some lessons from a re-reading of Poor Charlie’s Almanack) (LINK) Nathaniel...

- Hussman Weekly Market Comment: Low And Expanding Risk Premiums Are The Root Of Abrupt Market Losses
Link to: Low and Expanding Risk Premiums are the Root of Abrupt Market Losses Through the recurrent bubbles and collapses of recent decades, I’ve often discussed what I call the Iron Law of Finance: Every long-term security is nothing more than a claim...

- Hussman Weekly Market Comment: Optimism Vs. Arithmetic
Link to: Optimism vs. Arithmetic Current market conditions provide an ideal moment to highlight the distinction between investment and speculation. Sound investment is a) the purchase of an expected stream of future cash flows that will be delivered to...

- Hussman Weekly Market Comment:
Last week, I had the pleasure of speaking to investors at the Ibbotson-Morningstar 2011 investment conference. Since I rarely travel outside of charitable work, it was a nice opportunity to talk with shareholders and other investors. The topic was "Useful...

Money and Finance