Novel Investor

Compounding investing wisdom...

John Maynard Keynes on Human Nature and Markets

by Jon

Keynes on reputation
John Maynard Keynes is one of the most well-known economists ever. It turns out he had some insights about markets and human nature too. Keynes laid out his views in Chapter 12 of The General Theory of Employment, Interest, and Money.

I read Chapter 12 recently. It offers a densely packed introduction to the headwinds of long-term investing.

Like, Ben Graham, Keynes believed that investing has more to do with managing yourself than your money. He understood that the advantages market’s offered often brought out some of the worst in investors. Not surprising, they both chalk it up to being drawn toward speculation. Continue Reading…

Happy Hour: Qualifying “Forever”

by Jon

Warren Buffett repeatedly says his favorite holding period is forever. He’s held Berkshire “forever” but most of his other stocks haven’t lasted that long. Still, this is one of Buffett’s mantras, held as gospel, that tends to lead investors astray.

Anytime you deal with stocks, you also deal with the fact that the business might change. Tying a stock to a predetermined holding period is a bad idea. I would like to think most people understand that, but I guess not.

In the recent Berkshire letter, Buffett actually took the time to qualify his “forever” statement: Continue Reading…

5 Lessons from the 2016 Berkshire Letter

by Jon

Buffett on price
Warren Buffett has been dispensing wisdom in Berkshire shareholder letters since 1965. Over that time, he transformed the company from a decent business with a great investment portfolio to a conglomerate of great businesses with a decent investment portfolio.

The transformation was done at a rate of a 20.8% return (based on market value) or a 1,972,595% gain over that period. Mind boggling.

Buffett’s latest letter doesn’t fall short on things to learn. Continue Reading…

Happy Hour: Relentless Innovation

by Jon

The 2017 version of the Credit Suisse Global Investment Returns Yearbook is out and available for download. The Yearbook, for those who don’t know, is a great resource for historical returns nerds like me. It takes a long view of market returns from 1900 to today for five asset classes and 23 countries.

The available Yearbook is only the summary version but it still has 60 pages worth of great info and charts like this: Continue Reading…

A Few Big Ideas from Charlie Munger at the DJCO Meeting

by Jon

Charlie Munger is one of those rare people who figured out that being less stupid is more important than being brilliant. The Daily Journal Annual Meeting is one of two places to see Charlie Munger hold court each year. As always, he doesn’t hold back when dispensing his wit and wisdom, especially on avoiding stupidity.

I won’t cover every minor detail. It’s better to listen to it or read it – I transcribed the entire Q&A session and you can grab a copy in the Library – when you get the chance. But Charlie did return to a few big ideas, which I want to highlight below. Continue Reading…

Happy Hour: Playing Offense and Defense

by Jon

Sports analogies for investing get overused. I’m going to continue that tradition here (don’t hate me).

The point of having a plan is so you can effectively play both sides of the court. Without a plan, you essentially play offense or defense but rarely both, leaving yourself exposed on the other end.

The typical mistake of buying high and selling low is repeated ad nauseam. There’s a good reason. Without a plan, the “plan” devolves into choosing one over the other. That mentality drives the focus on whatever has happened most recently in the market. Great returns become chased returns and poor returns are fled from. Continue Reading…

Learning

Return Tables

Connect