Strong opinions, weakly held – Gemfinder Q2 2020

Decent software engineers have one thing in common: They all look for edge cases that can break their scenario. To achieve that, they write tests that prove their code works under different conditions.

These tests should all pass before something’s considered done. It even goes further than that. A certain philosophy demands that tests should be written before the working code is actually written.

Hence the acronym TDD – Test-Driven Development.

Even if they try to think of all edge cases, they’ll probably miss a few. Like this Windows 8 phone asking people to insert the installation disc. Or this monthly direct-debit increasing from £87 to £53 million by accident. So it’s not that software engineers are a superior species. I can provide many real-world examples they’re not!

But the trait of trying to cover all scenarios is necessary if you really want to succeed in writing quality code.

It’s not so much the act of writing tests that fool-proofs it. It’s the constant thinking of what can go wrong while you’re building it.

As a result, this “what can go wrong” mentality goes beyond coding. It usually follows them in other areas of their life too.

Checking for cars approaching from both sides when crossing a one-way street. Testing the baby water by hand, even if the digital thermometer says it’s ok. In other words, trusting themselves only gradually.

Constantly looking to prove yourself wrong is hard because it goes against human psychology.

Humans are looking for answers similar to what they believe is true. Confirmation bias is probably the most common of them all. It’s also one of the reasons Facebook shows you what you’re more likely to agree with. More time spent on Facebook means more profit for The Firm. Sure, maximizing shareholders value should not be the only goal of a corporation, but we are where we are with this one. But I digress.

Back to proving myself wrong argument, I find myself constantly trying to invalidate my portfolio despite the great returns. Past performance is not indicative… and all that.

  • Is the market too expensive and am I overexposed?
  • Can my investing philosophy break under extreme conditions (global pandemic anyone?)
  • Gold has reached $2,000, why have I not owned any? what about BTC?
  • Quantitative easing causing very high inflation, like the 1970s
  • Long periods of stagflation because of technology and automation

The structure of index funds (which is my main vehicle for investing) is rewarding the US mega-caps. History tells us they’ll underperform after such a great run. There was no price too high for the Nifty Fiftys in the 60s. That didn’t end well in 1973-74.

If we’re heading for deflation because of technology and low-growth, is my portfolio really protected? Should I own more bonds despite the ultra-low yields?

After all, bonds have outperformed stocks over the past 20 years.

Bonds vs Stocks, 2000-2020
Let that sink for a moment. Bonds have outperformed stocks for 20 years, which is “the long run” everyone talks about.

Sure, I’m cherrypicking time-periods but 20 years is 20 years.

Over the past few months, the most interesting read was from the value stock geek, outlining his contrarian philosophy. It’s basically a book but written as a blog post. It asks some good questions that make you think.

I’m not changing my investing philosophy after reading the post. But that’s not a guarantee I won’t be changing my mind in the future. Strong opinions, weakly held, as they say.

Investing

Wisdom from Larry Swedroe on why the stock market rises when unemployment is at all-time highs. Makes it a bit harder to time the market. As I’ve just mentioned, stocks have underperformed bonds from 2000 to 2020. They’ve also underperformed in other long-term periods. Which is why diversifying is like saying “I don’t know” – and hedging your bets.
The economy and the stock market are not the same – Larry Swedroe (6-min read)
Is it really stocks for the long run – Larry Swedroe (6-min read)

Probably the best article Housel has written. It’s a ski story but it relates to investing. Also, one to read if you want to learn how to craft storytelling 😉 Speaking of which, I’ve bought a Storytelling book
The three sides of risk – Collaborative fund (13-min read)

What I mentioned in the intro. The Value stock geek is not a financial professional. He’s just another blogger with enough passion to build a personalised portfolio and manage it well. The Weird Portfolio is an “all-weather” portfolio with both offence and defence assets.
The Weird Portfolio – How To Avoid Bubbles, Limit Drawdowns, and Safely Grow Wealth (98-min read)

There was a bear market this year and a strong negative reaction to the pandemic. But it was only in the names that were cheap to start with. Fundamental developments have been similar for each group (stocks both in favour and dismissed) yet the ones that people already liked beforehand are actually up YTD. Like all the tech stocks. Thus, expensive stocks not only camouflage the poor treatment of the value names but hold up the broader index too. They’re making things look better than they really are.
Bubblicious – Albert Bridge Capital (8-min read)

What’s happening with internal combustion engine cars being replaced by electric Teslas has happened elsewhere with ice producing companies. The author makes the case that although Tesla’s stock has factored in all of that growth, the rest of the competition has lots of time to catch up.
A new ice age – Albert Bridge Capital (3-min read)

Now whether Tesla is a company worth investing in or not is one of the best ways to start a twitter war. Just look at the volatility of the stock. Makes bitcoin look like a short-term treasury.

tesla 1 year stock price july 2020
Tesla share price Aug 19-20

What happened in the past does not predict the future. Large-cap stocks won’t go on forever. Gold shone again recently. A good read on contrarian investing.
Broken asset classes – Research affiliates (15-min read)

Why the stock market can go much higher despite being thought of as overvalued.
ZIRP, Inflation, QE and other animals – Plain English Finance (11-min read)

“Perhaps you should own some Gold”, says Nick. But “it’s not such a good idea” according to Larry. Gold was always a controversial asset. It’s now easier to justify owning gold after the recent rally in 2020. Personally, although I don’t like the fact that it does not produce any income and it just sits there, I think there is value in owning it as part of a balanced portfolio. Gold deserves its own article at some point. It does well in an inflationary environment when bonds are crushed (think the 1970s). It’s also uncorrelated to stocks and does well when they do badly. So from a rebalancing perspective, it helps you to “buy low sell high” between assets. Disclaimer: I don’t own any (yet).

With most government bonds paying less than 1% right now, why should I own bonds is a valid question. I think the returns we’ve seen from bonds in the past 40 years are unsustainable. This is because they’ve been riding the falling interest rates trend. And when interest rates fall, bond prices increase. That’s because they’re shinier compared to the lower-yielding new bonds. Right now, interest rates are close to zero (in some countries, they’re negative). This means price increases from falling rates are unlikely since rates can only go so negative before everyone keeps cash under the mattress as I’ve written before.
Do treasuries have a place in a modern portfolio? – Alpha Architect (12-min read)

Another piece supporting the case against bonds. Lower returns from bonds seem likely as they’re playing a different game than their 2000s counterparts. However, in my opinion, the benefits of risk reduction, good night sleep and better withdrawal rate in the de-accumulation phase are decent traits to consider.
No longer superheroes? Twilight of the bonds – CFA institute (6-min read)

The crypto-price innovation cycle. Although crypto prices are all over the place, the startups and developers are in constant growth. As I’m writing this, Bitcoin is around $11,000. Are we at the end of cycle 3 (peaked at 2017) and entering the 4th one?
The crypto price innovation cycle – a16z (5-min read)

Brain food

A debate with a friend on whether technology is destroying more jobs than it creates. What will the future hold if software does the majority of the work in most industries? What shape will our world take?
Jobs vs Robots – Foxy Monkey (6-min read)

nerds
Nerds

Why nerds are unpopular. As a nerd myself I couldn’t have explained it any better. The education system lacks purpose. Unpopularity is a byproduct of that. This essay was written in 2003 and is as relevant today as it was back then.
Nerds – Paul Graham (26-min read)

The best and worst countries for raising a family. It comes as no surprise to me that the Scandinavian countries rank the highest when it comes to feeling safe, having a great educational system for free, quality healthcare and free time to enjoy it. Gearing towards socialism makes a difference. However, as with any data presentation, the answer lies in the metrics you use more than anything else. So let me tell you that Greece is not such a bad place to grow up 😉
The best and worst countries for raising a family – Reddit Infographic

Why do we doubt ourselves? We overestimate other people’s abilities and only see the end product. We’re also jealous and constantly comparing ourselves to our peers/family instead of being inspired by what they’ve accomplished. But people not so close to us who are way more successful don’t bother us. Self-doubt is here to stay but we shouldn’t quit meaningful work because of that reason alone.
Self-Doubt – More To That (14 min read)

productivity guilt

Productivity is good, productivity guilt is bad. The answer to not feeling guilty is to understand you can’t do everything perfect. Picking a few goals means you’re not achieving others. And that’s ok.
What is productivity guilt and how you can prevent it – Pocket

From skimming to analytical deep dive, there are different approaches to read a book. Personally, 95% of the books I read are non-fiction and I regret not taking notes or synthesize and distil on a topic. There are better ways such as note-taking using tags and a new paid software called Roam. The personal knowledge management topic has got me into thinking lately. How do you organize information and keep it up to date as you roam through life? That’s only happening in spare Kindle highlights, this blog and in my head. It surely can be done better.
How to read a book – Farnham Street (7-min read)
Roam: Why I love it and how I use it – Nat Eliason (16-min read)

How Stanford, MIT and other prestigious universities will partner with big tech to disrupt education. I can’t agree more with the professor.
Campus culture and iStanford – Prof Galloway (7-min read)

Rather than trying to steer your output to a certain standard, what if you focused primarily on what goes in, and let the whole system process it naturally? This mentality shift is so useful to me. Stressing about the output is good but more important is to focus on the input. Do you want to understand a topic better? Focus on the number of books you read. You want to be more productive at X? Don’t just measure how much you’ve done, but focus on waking up one hour earlier consistently.
Focus on the inputs – Raptitude (3-min read)

Climate change: Who’s to blame? What we can do about it?

Noone could have put it better than Kurgezagt.

Business

Tiny is a holding company which buys internet businesses. Although they’re at a much higher level to starting a business, it gives you a nice perspective on company building.
My First Million Q&A – cofounder of Tiny [Podcast]

Everyone has something to say. Usually, what we have to say can be very useful to others but you just don’t know that. Although starting a blog that changes your life is probably the 1% here (or less), I tend to agree with the arguments Nat makes. Starting a blog helps you to:

  • Articulate your thoughts in a structured way. I usually just have ideas floating around
  • Hold yourself accountable to your goals
  • Meet very interesting people (as I’ve done in Foxy Monkey meetups and in emails/comments)
  • Make good money after a while if you treat it as a business
  • Increase your personal “brand”, especially if the blog is relevant to your profession

How to start a blog that changes your life – Nat Eliason (26-min read)

Corporate culture, social connections, networking. Offices will be less of a prison cell and more of a collaborative area with colleagues.

The Economist

Financial Independence

A former fire-sceptic is now fully on board with the FI part of the movement after speaking to a few FIRE leaders.
Confessions of a former fire skeptic – Morningstar (5-min read)

When MMM gives an interview I always listen. He’s inspirational despite having heard the same stuff multiple times. My favourite quote is this:

If you double your salary and then double your spending, you are not a single day closer to retirement, even if you are saving a higher number of absolute dollars. But if you can learn to be happy with less spending, things get interesting very quickly.

Mr Money Mustache

Here’s How to Retire Far Earlier (Even If Another Downturn Strikes) – MMM at Fool (13-min read)

Unsurprisingly, most of FI bloggers shared the same view: Keep investing during the pandemic if you can. It’ll only make you richer.
How FI bloggers invest during the coronavirus pandemic – Money Mow (3-min read)

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