Links for December 2022
Yet another reminder about the impossibility of predicting the future. Pilots love to say that the enemy you don't see is the one that shoots you down: https://www.mindfullyinvesting.com/if-youve-already-won-the-investing-game-should-you-stop-playing/
More sense and sensibility from Mindfully Investing: https://www.mindfullyinvesting.com/fitting-square-inflation-data-into-a-round-stock-market-narrative/
Just stumbled across Joshua Kennon's blog, and it's filled with wisdom! Ignore his lessons at your own peril! P.S. the comments are usually excellent, too.
- Never invest in something you don't understand: https://www.joshuakennon.com/how-joe-campbell-found-himself-106445-56-in-debt-to-his-broker-in-a-matter-of-minutes-because-he-didnt-understand-the-risks-of-shorting-stock/
- The risk of investing in individual stocks: https://www.joshuakennon.com/gt-advanced-technologies-bankruptcy/
- Note: this is exhibit #407 on why the Froogal Stoodent recommends low-cost index funds!
- https://www.joshuakennon.com/lets-talk-about-the-gamestop-short-squeeze/
- https://www.joshuakennon.com/assumptions-are-the-enemy-of-the-rational-thinker/
- Perspective: https://www.joshuakennon.com/won-lottery-yet-people-still-think-world-going-hell/
- https://www.joshuakennon.com/the-valuation-levels-prior-to-the-1929-crash-were-absurd/
- https://www.joshuakennon.com/food-stocks-and-the-great-depression/
- A heartbreaking study called "The Night Black Wall Street Burned to the Ground:" https://www.joshuakennon.com/night-black-wall-street-burned-ground/
- A good policy analysis: https://www.joshuakennon.com/lets-talk-about-elizabeth-warrens-proposed-wealth-tax/
- I think there's a lot of great points in this analysis: https://www.joshuakennon.com/who-is-the-future-self-made-american-millionaire/
- Essentially, there have always been two main paths to wealth: 1) make enormous amounts of income, or 2) careful stewardship of what resources you have. Essentially, prioritizing either 1) offense or 2) defense.
- Joshua's analysis seems to focus mainly on 'offense,' or earning power. He's not wrong on that point, but consider my commentary on the case of MC Hammer, among others. Championships are generally won by well-rounded teams that play good offense and good defense; similarly, the wealthy almost always need to have some elements of both. But some will be best-suited, by disposition, to prioritize offense. Others, like myself, will be best-suited to prioritize defense.
- Defense is probably the slower route to wealth, but it's also more sustainable during dark economic times. That is, you can't always depend on being able to make a big income. As such, risk-averse people like me tend to prefer an emphasis on cost control.
- I was fond of his concept of 'economic drag' (as in 'drag show'). People who live two lives: one with a normal house and ordinary car, and another life, with much more extravagance, around other wealthy people. Related: stealth wealth.
- An interesting (and mathematically correct) use of capital: https://www.joshuakennon.com/how-one-of-my-family-members-used-shares-of-u-s-bancorp-to-build-substantial-wealth/
- My own aversion to debt would make me reluctant to behave in a similar manner. But I will admit that history suggests this would be a better course of action.
An interesting human-interest piece with a retrospective on the life of A&P heir Huntington Hartford: https://web.archive.org/web/20220120053932/https://www.vanityfair.com/news/2004/12/hartford200412
Interested in accounting methods? Probably not. Interested in how the federal government spends money? Probably so. Many people don't realize how the two are interconnected: https://www.nationalaffairs.com/publications/detail/the-case-for-fair-value-accounting
