Will and Ariel Durant wrote the Lessons of History as a survey of human experience throughout history and the role human nature played in evolving and shaping civilization.
History is a funny thing. Despite being over and done with, it’s constantly changing. It’s fluid. Our understanding of history is in a state of flux.
Our knowledge of any past event is always incomplete, probably inaccurate, beclouded by ambivalent evidence and biased historians, and perhaps distorted by our own patriotic or religious partisanship. “Most history is guessing, and the rest is prejudice.”
To top it off, we may not have the knowledge — yet or ever — to piece it all together. New ideas and discoveries constantly rewrite what we thought we knew about the past.
So historians make do with what they have. The result is an incomplete, biased, and often simplistic story that brings order to past events.
That’s roughly how The Lessons of History, a book by Will and Ariel Durant, presents it. And it relates surprisingly well to investing. For instance, the above describes how media present headlines and narratives around market moves. Continue Reading…
In rummaging around my stuff on Peter Lynch, I found the 1988 Barron’s Roundtable. The Roundtable, for those who don’t know, is a chance for fund companies to show off their star manager’s, talk their book, get some free press out it, and Barron’s can feed the demand for stock tips.
Tips aside, it’s Peter Lynch and the ’88 edition is interesting for a few reasons:
- Lynch mentioned roughly 110 stocks. Stock tips are overrated, but chasing after Lynch’s tips seems insane. Maybe his objective was to offer so many “tips,” it was easier to just buy the fund?
- Lynch says he owned “at least 1,500” stocks in the Magellan fund. The fund was so huge, he was basically limited to playing industry bets. And if memory serves, he beat the market in ’88 (along with his entire career).
- The fund managers — the Pros! — were still freaked out about the October ’87 Crash going into 1988 and worried about a recession.
- However, Peter Lynch was not.
Or Lynch didn’t show it. Continue Reading…
The Berkshire meeting was last weekend and I thought I’d share a few highlights. But before I begin, this years meeting was a little dry on content.
There’s always some repetition across past meetings but this year, similar questions were asked several times. I counted three questions about buybacks and, at least, two about circle of competence. And there more Berkshire specific questions than usual (a good thing for shareholders).
If you missed the meeting, CNBC has video and transcripts of it in its entirety (links below). Continue Reading…
Edwin Lefevre tells an entertaining story of a fictionalized account of Jesse Livermore in Reminiscences of a Stock Operator. The draw of Livermore is an interesting one because he failed to learn the biggest lesson, summed up by Levefre:
In addition to trying to determine how to make money one must also try to keep from losing. It is almost as important to know what not to do as to know what should be done.
Even after he made and lost multiple fortunes in his life, Livermore never figured it out. In the end, he died broke. But this is less about Livermore and more about highlights from the book.
Despite the book being fiction, it offers some great lessons on history, human nature, and what not to do: Continue Reading…
The first real banana business began in the 1860s. It was literally a race against time. Profits were dependent on getting from port to port as quickly as possible, so as to avoid spoilage. Sail too long and they’d lose everything.
But once that first company sprung up, other’s soon followed. By the late 1890s, the market for bananas was booming.
Then just before the turn of the century, it stopped.
Like most booms, it could not last. Not because there was anything wrong with the product: the banana is perfect. Not because there was any scarcity in demand: people loved bananas from the start — the average American now consumes seventy a year. But because supply was uncertain… Most firms got their fruit from a single farm or valley, greatly increasing this vulnerability. The entire supply of many early traders could be wiped out by one bad storm.
This became painfully clear in 1899, the Year Without Bananas. There had been a heat wave, a flood, a drought, a hurricane. The market sheds were shuttered, the pushcarts stood empty. Dozens of firms went under. It was like the natural disaster that wipes out all but a few impossible-to-kill species.
The lessons from 1899 became obvious to the few surviving businesses. Since investing is very business-like, those same lessons transfer over. Continue Reading…