The Gemfinder Q3 2018

Another Gemfinder collection for us to devour. The topics are the usual: investing, economics, market psychology etc.

As a reminder, the Gemfinder content is evergreen. This means that at any point in time you can go back and read any previous gemfinder articles without missing out on ‘recency’. Time goes on but investing principles are here to stay.

Before I list all resources, I want to thank Araminta and Alvar for having me on their new Financial Independence Europe podcast. As the name suggests, we talked all things personal finance, the Foxy Monkey blog, my not-so-secret ways to make money (hello matched betting) and more.

It was a lot of fun and if you can bear my non-native English accent then you can find the episode here or hit play below 🙂

Investing

Are Index fund investors more vulnerable to bubbles? (Behavioural Investment) – 3 min read
Joe Wiggins busts the myth that passive investors are subject to bubble investing. I’d suggest you read the whole piece. In short, active investing will set the prices and passive investing will follow. On average, the damage that passive investors will feel is similar to their active counterparts.

Not your father’s Emerging Markets (Bps and Pieces) – 5 min read
An excellent piece on how emerging markets have lately lagged behind and how the evolve over time. EM real growth since 1998 has outpaced the developed parts of the world. Also its country composition has dramatically changed (China 30% is the new Malaysia). If you love graphs then you’ll love this article. 

Adventures in China A Shares PDF (Causeway cap) – 3 min read
With China now becoming more and more open to foreign capital, it’s worth asking the question: Is it time to invest in local shares if they are to be included in the MSCI emerging indices soon? This PDF analyses the risks and the potential rewards for the brave 🙂

A peaceful pain (Pragcap) – 2 min read
“There’s something almost meditative about reaching that point of peaceful pain. And the other day, as I was in the middle of a long and horrific run, I realised that this was exactly like good investing. In other words, the optimal portfolio is the point where you find a peaceful pain point. This is that point where you are optimising your returns in perpetuity, but not stressing them so much that you are tempted to quit.”

10 Years and 10 Lessons from the Financial Crisis (Pragcap) – 3 min read
As Cullen Roche rightly points out, I think the biggest lesson is that optimism will beat pessimism and in the long-term you will be a winner. The next crisis will not be the same as the last, but the investing principles will be the same. You cannot predict, but you can prepare.

Framing Turkey’s Financial Vulnerabilites: Some Rhymes with the Asian Crisis, but Not a Repeat (Council Foreign Relations) – 12 min read
A very thorough analysis of Turkey’s economic problems (iShares MSCI Turkey -44% YTD) mainly due to foreign denominated debt, political interventions, and private banking problems.

Stock Market Valuations by country (CAPE, PE, PB, more) StarCapital – 30 min read
Although the interactive website is pretty good, the PDF report is even better. If you’re interested in finding value in an overvalued world, have a read of the analysis by Star Capital.

GDP growth in EM has outpaced developed markets, so why are prices crashing?

Ray Dalio’s Principles Book but in Video animation (30 mins)

Exception to the Rule (ofDollarsAndData) – 5 min read
Just because a fund outperformed the S&P 500 or London properties outperformed the German ones, it doesn’t mean we should always invest this way. An excellent piece on White Swan Investing.

Jack of Hearts (Humble Dollar) – 4 min read
Jack Bogle, the founder of Vanguard, shares his views on the current market. Index funds gaining more and more popularity (37% market share), mythbusting value vs growth and a “hefty” 1.5% stocks real return in the next 10 years moving forward.

Thinking about money Newsletter (Jonathan Clements) – 3 min read
12 suggestions for how to get the most out of our money

Five ways to cope with “Cape” fear (Early Retirement Now) – 5 min read
If you, like me, suffer from the fear of investing in overvalued markets, Big ERN is here to save us. Let’s say the market is indeed overvalued and stocks are expensive.

What are the alternatives??? Bonds paying 1-3% and low yields? Or let’s say you move out of stocks. What is the cape threshold below which we enter the market again? And finally, is the Shiller CAPE a reliable indicator of future market returns? Excellent Gem.

Property

Shared Ownership: The Cheapest way to rent (Foxy Monkey) – 9 min read
I simply consider Shared ownership to be the best renting lifehack. IF you’re eligible, your ongoing costs are much cheaper compared to both 100% mortgage and 100% rent options. I present the pros and cons I found when doing my research.

Global cities house-price index (Economist) – No wonder London ranks high, but I must say Moscow surprised me! Athens on the other hand… Reminds me of an article I wrote a while ago: How to tell if the property market is on sale.

Is real estate a non-correlating asset? (A Wealth of Common Sense) – 
Ben Carlson is looking at the performance of REITs vs S&P 500 after the financial crisis til now. TLDR; there is no high correlation between the two, and REITs (13.5% annualised) can offer a diversification benefit. Why invest privately instead? “The only problem is no one likes to brag about owning a piece of a commercial real estate through a mutual fund or ETF.” <- true story!

Books – Podcasts

money-for-the-rest-of-us

[Podcast] How to invest in Bonds and other Fixed Income Securities – 34 min
Bonds basics, how to estimate the return on your bonds, owning individual bonds vs owning a bond fund etc. I listen to David Stein not so much for the information he presents but more for his passion and his American voice! Quite a positive guy.

[Podcast] Tim Ferris interviews Howard Marks – 01:58 hours
Marks is the Oaktree capital chief ($122 billion AUM). He suggests we keep investing in this overheated market “but with caution”.  I’m in the middle of his new book (see below) and in every chapter I keep asking myself: Isn’t this market timing?

mastering-the-market-cycle

[Book] Mastering the market cycle – Howard Marks
His views on how to understand different short-term and long-term cycles of the economy. I believe the most important takeaway is this: Although the economy grows quite steadily every year (2-5%) the stock market fluctuates much more because of corporate earnings volatility, credit availability, and last but not least – human psychology. A good book. I’ve enjoyed it so far.
His memos are also worth reading.

Sam Walton - Made in America

[Book] Sam Walton: Made in America
How Sam Walton built Walmart, written by himself. Walmart is one of the biggest commerce stores in the US and Walton started it from nothing. Quite impressive if you think this guy started from an unknown city and was so hungry, humble and frugal. Good read but only if you like biographies. It’s also tilted towards commerce, so it can get boring sometimes if you don’t work in the sector.

Something different

Here’s a video I enjoyed. How a City trader making thousands of pounds a month, enjoying winter Chalets in Switzerland etc, left the system to pursue happiness and podcasting!

#1 Office perk: Natural light (HBR) – 5 min read
Forget the ping pong tables, the free Friday lunch and the ‘work from home’. Natural light, apparently, is the ultimate perk for wellbeing and employees happiness.

The power of doing nothing at all (JotForm) – 6 min read
Just read the crocodile tale. I won’t spoil it for you.

Any good suggestions for the next Gemfinder? Send me an e-mail at [email protected]

PS. Here’s what I’ve been watching lately:

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Hi! I’m Michael and I love writing about different ways to earn, save and invest our money. Coffee addict :)

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