Top 10 Thoughts on Investment Philosophy

Because it’s a boring Friday.

1) Demographics is destiny: think about what a more Millennial/non-white/liberal, less Boomer/white/conservative America will mean over the next 10, 20, 30 years.

2) Play on a different time horizon than everyone else: This is how you truly become a constructive contrarian.

3) You can’t succeed in the markets until you know yourself: There are a million ways to make money and there always will be. But we all have our own unique greed and fear triggers, experiences, talents, and dispositions. Shaq can’t play point guard any more than Rajon Rondo can play center.

4) The next bubble/crisis won’t be one that any working-age person remembers: If you’re reading this in 2013, that means there probably won’t be a next 1979, 2000, or 2008 during your career! Sorry. Keep looking.

5) The job of central bankers is to prevent the VIX from going to 100: In terms of financial markets, this is literally their reason for being. They will get this right. Get over it.

6) Wall Street is driven by career risk and year-to-year bonuses: This is similar to #2. It’s not truly an efficient market if investors look at risk differently on December 27th than they do on January 3rd consistently, which they do.

7) Diversity of experience is more valuable than domain-specific specialization: I learn more from watching movie trailers than I do from sell-side research. My favorite people to talk to about markets have interests ranging from classical music to engineering to horse-racing to spirituality. We show our values, beliefs, and tolerance of risk in many ways, and oftentimes the signals are clearer in other domains than what appears in the business pages.

8) Commodities are not an asset class for the long-term investor: We get better at doing the same or more with fewer resources every year, especially in the case of energy. 50 years from now we will be recycling even more of what we currently throw away, and will have replaced much of our carbon-based energy with renewables. Occasionally we’ll have demand booms and supply constraints causing prices to rise, a bunch of companies will invest a lot in more production, and then we’ll have a crash, prices will collapse, and everyone will go bankrupt. Fun times.

9) In the long run, profit margins on tech hardware go to zero: For your own sake, don’t buy and hold the stocks of companies that make hard drives, 3D printers, or anything else of that ilk.

10) It’ll all kinda sorta work out okay: Really, it will. Your grandkids will have never heard of that crisis or politician you were complaining about.

  1. csen posted this