New Books I read...
Classics - I - Ellis
Classics - II - Ellis
Value Investing - Greenwald
More than you know - Mouboussin
Intelligent Investor - Again !!??
Wall Street Meat
Paradox of Choice
Benjamin Graham on Value Investing
A Treatise of an infant investor who is fascinated by Graham, Buffett and Munger..... I passed out of Bskool this year ( 2006 ) and am enthralled by the brand of value investing as taught by a Professor I revere... I will also put up my thoughts on different books that I have read in the past....
by W.E. Henley
But of the night that covers me,
Black as the Pit from pole to pole,
I thank whatever gods may be
For my unconquerable soul.
In the fell clutch of circumstance
I have not winced nor cried aloud.
Under the bludgeonings of chance
My head is bloody, but unbowed.
Beyond this place of wrath and tears
Looms but the Horror of the shade,
And yet the menace of the years
Finds, and shall find, me unafraid.
It matters not how strait the gate,
How charged with punishments the scroll,
I am the master of my fate:
I am the captain of my soul.
The Road Not Taken
by Robert Frost
Two roads diverged in a yellow wood,
And sorry I could not travel both
And be one traveler, long I stood
And looked down one as far as I could
To where it bent in the undergrowth;
Then took the other, as just as fair
And having perhaps the better claim,
Because it was grassy and wanted wear;
Though as for that, the passing there
Had worn them really about the same,
And both that morning equally lay
In leaves no step had trodden black.
Oh, I kept the first for another day!
Yet knowing how way leads on to way,
I doubted if I should ever come back.
I shall be telling this with a sigh
Somewhere ages and ages hence:
Two roads diverged in a wood, and I-
I took the one less traveled by,
And that has made all the difference.
by Rudyard Kipling
If you can keep your head when all about you
Are losing theirs and blaming it on you;
If you can trust yourself when all men doubt you,
But make allowance for their doubting too;
If you can wait and not be tired by waiting,
Or, being lied about, don't deal in lies,
Or, being hated, don't give way to hating,
And yet don't look too good, nor talk too wise;
If you can dream - and not make dreams your master;
If you can think - and not make thoughts your aim;
If you can meet with triumph and disaster
And treat those two imposters just the same;
If you can bear to hear the truth you've spoken
Twisted by knaves to make a trap for fools,
Or watch the things you gave your life to broken,
And stoop and build 'em up with wornout tools;
If you can make one heap of all your winnings
And risk it on one turn of pitch-and-toss,
And lose, and start again at your beginnings
And never breath a word about your loss;
If you can force your heart and nerve and sinew
To serve your turn long after they are gone,
And so hold on when there is nothing in you
Except the Will which says to them: "Hold on";
If you can talk with crowds and keep your virtue,
Or walk with kings - nor lose the common touch;
If neither foes nor loving friends can hurt you;
If all men count with you, but none too much;
If you can fill the unforgiving minute
With sixty seconds' worth of distance run -
Yours is the Earth and everything that's in it,
And - which is more - you'll be a Man my son!
Recently somebody said, "Hey, you lost weight," and I said, "Yeah, thirty-five pounds and three and a half billion dollars." So I'm quite a bit lighter and more flexible than I was.
Flexibility is a much needed resource in Investing and life in general. People generally fall in love with their ideas, their decisions, their Spouses...
Investors suffer from Inconsistency bias and dissonance when they realize that the stock which they thought had great potential for reward is a lemon or their much valued tip from a stock broker does not stand up to somebody's thorough analysis of the company and it's stock. And then what do they do, they stick to their original choice in spite of logic prompting them to change their minds and sell the stock.
Galbraith said -
“Faced with the choice between changing one's mind and proving there is no need to do so, almost everyone gets busy on the proof.”
Changing one’s mind about an earlier held idea leads to an acute dissonance and most people aren't comfortable with this situation. So, they clam up and stick to their guns. There is another term which describes this condition better - Psychological Denial.
If we take the field of value investing, it boasts of stars like Benjamin Graham, Warren Buffett, Charlie Munger, Walter Schloss, Michael Price, Andrew Weiss and many others. All the above mentioned stars have distinct stock picking methods but the same philosophy as the guiding light i.e. Value and Graham
After studying books, articles and academic papers on value investing, I have realized that no perfect method exists that can be picked up without any improvisations and adopted. Innovating continuously is the essence to finding one's own method or methods which can be used and that method has to be individualistic i.e. dependent on the person because everybody's level of risk tolerance, patience and synthesis abilities are different.
Trying out different variations of the themes of value investing, getting used to the routine of carrying out a similar activity day in and day out (For me, it is looking for bad news in the newspapers), understanding the real time psychological factors at play in the stock market are just some of the tasks for anybody wanting to seriously invest using a value approach.
Herein comes in the importance of a sound theory structure as advocated by Charlie Munger in one of his speeches. With a robust theory structure we can tackle the above tasks with much more surety and less strain. Mind you, it cannot guarantee success but it can surely tilt the odds in your favor. This also means that instead of letting the stock market be our master, we can have time tested and successful value investing approaches which would rest on a sound theory structure and would be the guiding light for us.
My Friend - Mayank, my broker says this stock is dead, it is illiquid, I will lose money on it. And you're going on and on about it being a good bargain. It trades 1500 shares in a day.
Me - P*****, your broker is supposed to make money OFF you, not for you. If you buy a stock which is not among the current favorites that means in all probability you want to hold it for the long run. The broker will lose out on his commissions. The shorter your holding period for your stocks, the more your broker will earn. He is a parasite who just wants you to trade, trade and trade, and he does not give a rat's ass whether in the long run you increase your capital or not.
My Friend - The broker knows stuff, he has been in the market for a long time, he has insider information all the time.
Me - Then why isn’t he driving a Ferrari?
We talked a lot, but you get the general idea how our conversation went.
The point is,
Options, Futures, Puts or calls etc etc etc, I classify everything apart from Debt and Equity as a means of making a fool out of myself. The concept of puts can be used to invest in complex securities or situations but I would rather do it after atleast a period of six odd months.
When will we get it? All the market wants us to do is trade. It doesn’t care whether I go bankrupt (They invented Margin trading to make the road to bankruptcy smoother), it doesn’t care whether I even understand what I am doing (Never could understand the different strategies for derivatives trading), it just cares for itself and it's cronies.
Cronies - Brokers, Investment Bankers, Financial News Channels.I define the stock market as the mass of people who compose it and whose buying and selling actions and misreactions dictate prices.
Cynicism is a life skill for an investor. And it should be utilized to the full extent when dealing with either the market or the "cronies" of the market.
We are bombarded with useless noise/financial news 24/7 on television. Even the smallest rise is made out to be an "opportunity" for individual investors. The analysts on television are articulate, very reputed and supremely confident. They sell us the sizzle instead of the steak day in and day out. Pretty anchors keep most men hooked onto the channel.
I think, the combination of such enticing entities makes for an exciting time pass.
Whenever I watch CNBC India, I switch off the sound and just watch the anchors. Some of them are the stuff that most men's dreams are made off. I would love to date them, but I would kick myself if I took investment advice from them. I am not being sexist; I actually wouldn’t take investment advice from anybody ( I would rather learn about different concepts and ideas from somebody with a Value orientation who knows lots more than me )
I came up with my own explanation for one of the numerous jargons that is used all the time on TV -
Resistance Level - (My Take) Strong Resistance level at 0, not too sure about other numbers