Both equity short sellers and precious metals investors have been in despair. This proves again that investing is not a craft for merely smart, intelligent people. The emotional skill set that one needs to endure market folly is just as necessary a prerequisite. I gladly recall the famous words of Jesse Livermore, a notorious speculator in the era of the Great Depression: “It never was my thinking that made the big money for me. It always was my sitting. Got that? My sitting tight!” Apparently, [...]
There is a huge divide between theorists of two allegedly opposed monetary doctrines: the 100% reserve bankers and the free bankers. Although I do contend that both postures have more in common than many at first sight think, the fatal flaw of 100% reserve banking can be boiled down to one very simple error. When we take this fatal flaw away, nothing stands in the way to reconcile both doctrines.
Procter & Gamble tried it and it utterly failed. The CEO at the time, Bob McDonald, was promptly removed from the board. Under his command, P&G became the world’s largest advertiser, with annual advertising expenditures exceeding $10 billion dollars. Bob McDonald never budged. He relentlessly refused to cut advertising costs. Yet by his refusal, he unwittingly signed his own death sentence. Would he have been blessed to read this text earlier, he might have saved himself from this corporate (and [...]
Most of us remember the exuberance of the stock markets at the height of the dotcom bubble. Much, however, has apparently been forgotten. Then, back in 2000, internet companies that were planning to sell door knobs (but hadn’t sold one yet) were given a valuation that wouldn’t even be justified if they sold all door knobs in the world, let alone the ones bought over the internet. Their business models were weak, their revenues non-existent. Prices departed from value to [...]
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It’s 2001 all over again. Netflix is being bought just because everybody’s buying. Netflix shares sell like hot cakes, even though they’re not generating a dime. Likewise, Facebook’s acquisition of WhatsApp was received euphorically by investors, with its stock price rising despite a 10% dilution of shareholder capital. Although Facebook is already a loser’s game, its small cousin (WhatsApp) was bought at an even more irrational valuation. It’s exuberance and excess again, just as in 2001; price doesn’t matter and [...]
I often get the question why I “deprive” myself by not eating certain things. Or why I make it myself “so difficult” when it comes to eating. Why I am “so hard” on myself. I even heard things like “it can’t be that bad”, with “it” referring to corn, soy, soda, cereal or even pizza (they have vegetables on them, you know).
In this series, I will discuss one psychological bias at a time and its ramifications for investors. How does this bias affect our decision making and how could we mitigate its negative consequences? This week we’ll discuss precision bias.
As an investor, Dell never really attracted my attention. Previously, it was one of Wall Street’s favorites and its start-up story a future bestseller. It thrived on a well thought-out business model based on an ancient-old trick: cut out the middleman.
What do Leonardo da Vinci, Albert Einstein, Benjamin Franklin, Thomas Jefferson, Michel Angelo and Thomas Edison have in common? Two things.