Thursday, July 27, 2017


"’s precisely when people can’t see what it is that could make things turn down that risk is highest, since they tend not to price in risks they can’t see." -Howard Marks 

Robert Shiller on CNBC (video) (LINK)

Wall Street Needs You to Borrow Against Your Stock ($) (LINK)

Goldman launches new online lending strategy for mass affluent (LINK)

Third Point's Q2 2017 letter (LINK)

Superinvestors and the Art of Worldly Wisdom podcast: William White on the Undesired Side Effects of Experimental Monetary Policy (LINK)

How I Built This podcat -- BuzzFeed: Jonah Peretti (LINK)

TED Talk -- The manipulative tricks tech companies use to capture your attention | Tristan Harris (LINK)

Freakonomics Radio (podcast): The Stupidest Thing You Can Do With Your Money (LINK)

Tell Me Something I Don't Know podcast -- Behavior Change: Ultra Egghead Edition (LINK)

The Tim Ferriss Show: How to Turn Failure into Success (LINK)

Revisionist History podcast: “State v. Johnson” (part one of a two-part story) (LINK)

Tardigrade genomes help explain how they survive without water (LINK)

Claude Shannon, the Las Vegas Shark (LINK)
Related book: A Mind at Play: How Claude Shannon Invented the Information Age 

Wednesday, July 26, 2017

Howard Marks Memo: There They Go Again...Again

Link to Memo: There They Go Again...Again
Some of the memos I’m happiest about having written came at times when bullish trends went too far, risk aversion disappeared and bubbles inflated.  The first and best example is probably “,” which raised questions about Internet and e-commerce stocks on the first business day of 2000.  As I tell it, after ten years without a single response, that one made my memo writing an overnight success. 
Another was “The Race to the Bottom” (February 2007), which talked about the mindless shouldering of risk that takes place when investors are eager to put money to work.  Both of those memos raised doubts about investment trends that soon turned out to have been big mistakes. 
Those are only two of the many cautionary memos I’ve written over the years.  In the last cycle, they started coming two years before “The Race to the Bottom” and included “There They Go Again” (the inspiration for this memo’s title), “Hindsight First, Please,” “Everyone Knows” and “It’s All Good.”  When I wrote them, they appeared to be wrong for a while.  It took time before they were shown to have been right, and just too early. 
The memos that have raised yellow flags in the current up-cycle, starting with “How Quickly They Forget” in 2011 and including “On Uncertain Ground,” “Ditto,” and “The Race Is On,” also clearly were early, but so far they’re not right (and in fact, when you’re early by six or more years, it’s not clear you can ever be described as having been right).  Since I’ve written so many cautionary memos, you might conclude that I’m just a born worrier who eventually is made to be right by the operation of the cycle, as is inevitable given enough time.  I absolutely cannot disprove that interpretation.  But my response would be that it’s essential to take note when sentiment (and thus market behavior) crosses into too-bullish territory, even though we know rising trends may well roll on for some time, and thus that such warnings are often premature.  I think it’s better to turn cautious too soon (and thus perhaps underperform for a while) rather than too late, after the downslide has begun, making it hard to trim risk, achieve exits and cut losses. 
Since I’m convinced “they” are at it again – engaging in willing risk-taking, funding risky deals and creating risky market conditions – it’s time for yet another cautionary memo.  Too soon?  I hope so; we’d rather make money for our clients in the next year or two than see the kind of bust that gives rise to bargains.  (We all want there to be bargains, but no one’s eager to endure the price declines that create them.)  Since we never know when risky behavior will bring on a market correction, I’m going to issue a warning today rather than wait until one is upon us.


Why the Scariest Nuclear Threat May Be Coming from Inside the White House - by Michael Lewis (LINK)
Donald Trump’s secretary of energy, Rick Perry, once campaigned to abolish the $30 billion agency that he now runs, which oversees everything from our nuclear arsenal to the electrical grid. The department’s budget is now on the chopping block. But does anyone in the White House really understand what the Department of Energy actually does? And what a horrible risk it would be to ignore its extraordinary, life-or-death responsibilities?
Some of the 2017 VALUEx Vail Presentations are available to view (LINK)

A Market History Lesson From Peter Bernstein - by Ben Carlson (LINK)

Investing in the Misunderstood - by Ian Cassel (LINK)

Boyar Value Group's Q2 Letter [H/T @chriswmayer] (LINK)

Microsoft's Monopoly Hangover - by Ben Thompson (LINK)

Invest Like the Best podcast: Compound Your Face Off, with Wes Gray (LINK)

a16z Podcast: The Curious Case of the OpenTable IPO (LINK)

The Ezra Klein Show (podcast): Julia Galef on how to argue better and change your mind more (LINK)

Are You a Carboholic? Why Cutting Carbs Is So Tough - by Gary Taubes [H/T Will] (LINK)
Related book: The Case Against Sugar
Bill Browder's Testimony to the Senate Judiciary Committee (LINK)
Related book: Red Notice; Related video: Bill Browder's Real Vision TV interview
Leonardo da Vinci’s Visionary Notebooks Now Online: Browse 570 Digitized Pages (LINK)

The Worst Birds - by Ed Yong (LINK)

The Great American Solar Eclipse of August 21, 2017 (Part 2)  - by Phil Plait (LINK)

The death of reading is threatening the soul [H/T Daniel] (LINK)

PBS FRONTLINE: Inside Yemen (video) (LINK)
The United Nations recently called what’s happening in Yemen the “largest humanitarian crisis” in the world. You might not have heard about it, though. In recent months, journalists have largely been prevented from entering the country to report firsthand on the devastation. 
But in May, FRONTLINE’s Martin Smith made it in. He and his team were the only foreign journalists given permission to enter the country at the time. What they saw unfolds in Inside Yemen, a documentary short that we've just released online: “People are not seeing what’s going on. We’re talking thousands of civilian dead,” Smith says.

Tuesday, July 25, 2017

Boyles Asset Management – Q2 2017 Letter Excerpt

Cockroaches, Margins of Safety, and Knowing Thyself

“In general, survival is the only road to riches. Let me say that again: Survival is the only road to riches.” --Financial historian, economist, and educator Peter L. Bernstein (2004 interview with Jason Zweig)

As he did in his 2007 book, A Demon of Our Own Design, Richard Bookstaber returns to the story of the cockroach with his 2017 book, The End of Theory.  The cockroach has survived and thrived for about 300 million years, thanks in large part to a simple survival mechanism.  As described by Bookstaber: 
...the cockroach simply scurries away when little hairs on its legs vibrate from puffs of air, puffs that might signal an approaching predator, like you.  That is all it does.  It doesn’t hear, it doesn’t see, it doesn’t smell.  It ignores a wide set of information about the environment that you would think an optimal system would take into account.  The cockroach would never win the “best designed bug” award in any particular environment, but it does “good enough” and makes it to the finish line in all of them.
This brings to mind the saying that in order to finish first, one must first finish.  But the broader point being made is that it is often simple, coarse rules that lead to survival advantages.  While these rules, or heuristics, may not be the optimal traits for an organism to reach its maximum potential for thriving in an environment, given a specific set of conditions, it allows the flexibility needed to stick around to see the finish line should the conditions change.  The observation credited to Charles Darwin about a surviving species being not the strongest nor the most intelligent, but the one most responsive to change is applicable here.  Uncertainty and change are inherent in nature, as they are in business and life in general, and it is often simple heuristics and ideas that, if pursued with discipline and consistency, can allow one to survive whatever the future may have in store. 

What are some of the candidates for an investing rule that rivals the survival rule of the cockroach?  It is probably a question that one could ask 10 different investors and get 10 different answers, but for those who follow a fundamental, value philosophy, the concept of margin of safety has to be one of the key contenders for a place at the top of any list.  Even the best investors over long periods of time make plenty of mistakes along the way, and so we as investors must accept that things won’t always turn out the way we expect them to, no matter how much effort we put into trying to understand something.  Building in some margin for error in our process can help us reach the long-term survival necessary for success. 

Another candidate for a key rule of survival comes from a more ancient piece of advice: know thyself.  At a recent Talk at Google, investor Mohnish Pabrai told a story about a dinner he attended with Charlie Munger.  At the dinner, Munger talked about the investment firm Capital Group, and an experiment it performed with its investment team. Capital Group assigned teams to manage different portions of its capital under management.  On several occasions, the firm set up a “best ideas fund,” in which it took the highest-conviction stock picks from each of its managers.  But each time it set up one of those funds, that fund underperformed and ultimately failed. After telling this story to his dinner guests, Munger asked the group if they could guess the underlying reason why those funds did not do well.  But dinner was then served, and the riddle was left unsolved. 

Years later, Pabrai remembered the story; when he was with Munger on another occasion, he asked about the Capital Group story.  It turned out that the reason the best ideas funds failed is because of the common feature among each manager’s pick: it was the idea that he or she had spent the most time studying. 

In a 2007 speech at the USC Gould School of Law, Munger warned against the dangers of drifting into intense ideologies, and made the point that as “you start shouting out the orthodox ideology, what you’re doing is pounding it in, pounding it in, pounding it in.”  And there’s a similar effect when it comes to investment research.  When there’s a decent story for a company to tell about its prospects, the more time one spends with it, the more likely one is to believe in its merits. 

The solution to this psychological tendency is not to spend less time on ideas.  We feel that one of the long-term advantages that we can have in the investment world is knowing more about the companies in which we are invested than almost anyone else.  Rather, the mechanism to fight this bias is to try to suspend judgment and opinion about a company’s investment merits until one can thoroughly state the cases both for and against that company’s prospects.  We need to be aware of our own psychology, and how it is affected by the ways in which we spend our time.  And if we ever catch ourselves spending too much time preaching about the ideas we’ve spent the most time on, or not spending enough time trying to understand the case against our best ideas, then—like the puffs of air hitting the hair on a cockroach’s legs—we need to recognize that there may be something amiss.


Disclosure: I am a portfolio manager at Boyles Asset Management, LLC ("Boyles") and the fund managed by Boyles may in the future buy or sell shares of any stocks mentioned above and we are under no obligation to update our activities. This is for information purposes only and is not a recommendation to buy or sell a security. Please do your own research before making an investment decision.

Monday, July 24, 2017


Phil Ordway's talk on human misjudgment (LINK)
Here is a copy of a talk I gave at John Mihaljevic's excellent conference in Zurich last month. The goal was to "update" Charlie Munger's famous talk "The Psychology of Human Misjudment" to include more recent examples and the work of Kahneman and Tversky. The best part is probably the contribution of Jason Zweig -- collaborator with Kahneman on his book and leading expert on all things behavioral and investing -- who was kind enough to share his thoughts. A big thank you to him for that and to John for hosting an excellent event.
[Related to the above, the Word file I'll probably update at some point to include a bunch of things Phil added to the research via his talk: Charlie Munger's "The Psychology of Human Misjudgment"]

Farnam Street: A Primer on Critical Mass (LINK)

Latticework of Mental Models: Echo Chamber Effect (LINK)

A Dozen Lessons on Investing from Ed Thorp - by Tren Griffin (LINK)
Related book: A Man for All Markets
Baupost Readies Dry Power Amid Frothy Markets (LINK)

Grant’s Podcast: An invigorating interview with Trey Reik of Sprott Asset Management (LINK)

Adventures in Finance podcast: The Hedge Fund That Almost Broke the World (LINK)
Before the hundreds of billions in corporate bailouts and trillions in central bank interventions, there was a time when we believed there was no way our financial models and investment strategies couldn’t be wrong. That was until a hedge fund came along that threatened to bring down the global financial system in 1998. 
Jesse Eisinger talks with Barry Ritholtz on the Masters in Business podcast (LINK)

The Tim Ferriss Show: When to Quit – Lessons from World-Class Entrepreneurs, Investors, Authors, and More (LINK)

Everything you need to know about the dichotomy of control - by Massimo Pigliucci (LINK)

The Success of Paying People to Not Cut Down Trees - by Ed Yong (LINK)

Humpback Whales Remix Their Old Songs - by Ed Yong (LINK)

The Great American Solar Eclipse of August 21, 2017 (Part 1) - by Phil Plait (LINK)

George Soros on recognizing mistakes, and forgiving oneself

"I recognize that I may be wrong...I am a very critical person who looks for defects in myself as well as in others. But, being so critical, I am also quite forgiving. I couldn't recognize my mistakes if I couldn't forgive myself. To others, being wrong is a source of shame; to me, recognizing my mistakes is a source of pride. Once we realize that imperfect understanding is the human condition, there is no shame in being wrong, only in failing to correct our mistakes." -George Soros


Friday, July 21, 2017

Autonomy, mastery, and purpose...

From Drive: The Surprising Truth About What Motivates Us:
The best use of money as a motivator is to pay people enough to take the issue of money off the table: Pay people enough so that they’re not thinking about money and they’re thinking about the work. Once you do that, it turns out there are three factors that the science shows lead to better performance, not to mention personal satisfaction: autonomy, mastery, and purpose.

H/T Rob Vinall of RV Capital on the above, which I had read before, but I enjoyed reviewing Pink's ideas, as well his TED Talk, RSA Animate video, and an old HBR podcast. I also enjoyed what Vinall wrote about the idea in his latest investor letter:
According to Dan what motivates people is autonomy (the sense of freedom to do what you want), mastery (the sense of getting better at something through practice), and, above all, purpose (the sense that there is a point in what you are doing). If you are still sceptical, imagine your parents’ reaction if you tossed them a tip after they finished preparing dinner for the family. 
A quick aside: if you are wondering which career path to go down or advising a younger person on the same question, I believe Dan´s mental model is a far more actionable one than the more traditional advice of “follow your passion”. If you have been playing the violin since the age of 5 and it is all you ever wanted to do, that is great. Back in the real world, if you have not got a clue what you want to do, look for a company that gives you autonomy, the opportunity to learn, and is doing something meaningful. Irrespective of what the company makes or what service it provides, the passion will come.

Thursday, July 20, 2017


Another great 2006 quote from Howard Marks, that is probably worth thinking hard about today:
The workings of free capital markets require that in order to overcome investors’ innate aversion to risk, seemingly riskier investments must offer the possibility of higher returns providing “risk premiums.” But when risk aversion is at cyclical lows, risk premiums needn’t be generous; people will invest anyway. Too many people trying to dine at the buffet simultaneously can lead to a disorderly process and skimpy portions. I recommend that you look twice at the cost of admission and – if you do decide to partake – proceed carefully.
Horizon Kinetics' Q2 Conference Call Slides [H/T @chriswmayer] (LINK) [And Commentary HERE.]

Where Are the Dips? The Weird, Unsettling Rise of Global Stocks This Year (LINK)
Stock markets go up and down: It is a fact of life. Except in 2017. 
Three major stock-market benchmarks in the U.S., Europe and Asia have avoided pullbacks this year, commonly defined as 5% declines from recent highs. Never in at least the past 30 years have all three indexes—the S&P 500, MSCI Europe and MSCI Asia-Pacific ex-Japan—gone a calendar year without falling at some point by at least 5%.
Bill Gross' July 2017 Investment Outlook (LINK)

It’s never too late to succeed: How this 60-year-old founder took her business from zero to $500 million in 6 years [H/T Matt] (LINK)
Related video: The RealReal's Julie Wainwright Had to Get Out of Town After
The surest way to go broke in America today is to get sick. (LINK)
Related book: An American Sickness: How Healthcare Became Big Business and How You Can Take It Back
Graham Allison: "Destined for War: Can America and China Escape Thucydides’s Trap?" | Talks at Google (LINK)

Why I Hate Adverbs - by Jason Zweig (LINK)

HBR IdeaCast podcast: Nike's Co-founder on Innovation, Culture, and Succession (LINK)
Related book: Shoe Dog
Freakonomics Radio (podcast): These Shoes Are Killing Me! (LINK)
The human foot is an evolutionary masterpiece, far more functional than we give it credit for. So why do we encase it in "a coffin" (as one foot scholar calls it) that stymies so much of its ability — and may create more problems than it solves?
Revisionist History podcast: "The King of Tears" (LINK)
In this week's episode, I identify a musical divide in America - the sad song line. I wanted to know: why does half the country prefer rock n' roll music, while the other half prefers country? And what is it about some music that makes us so sad? 
The questions begged for answers. So I tracked down the King of Tears himself, a man who has written more sad songs than almost anyone else, to find out.
The Man Who Blew The Door Off The Microbial World - by Ed Yong (LINK)

Wednesday, July 19, 2017


"While it's true that only large positions can get you into trouble, it's equally true that only large positions can make a big contribution. (This is one of the great dilemmas in investing.)" -Howard Marks (Source)

Apollo Asia Fund: the manager's report for 2Q17 (LINK)
We are patient with companies which are having short-term difficulties - perhaps to a fault, but when managers respond to each setback with sensible steps, the results are usually good in the end, and we sometimes learn more about the business characteristics during such periods. When our confidence dwindles, however, we pay more and more attention, and may trim; if it is lost, we try to exit completely, rather than trying to be too clever about the price.
Conversations with Tyler (podcast): Atul Gawande on Priorities, Big and Small (LINK)

How Digital Platforms Increase Inequality (LINK)

Waking Up podcast: Sam Harris talks with Geoffrey West (LINK)
Related book: Scale
Waking Up podcast: Sam Harris talks with Scott Adams (LINK)

The Tim Ferriss Show: Morning Routines and Strategies (podcast) (LINK)
This is a special episode of the podcast. After more than 200 conversations with the world's top performers, you start to spot certain patterns. These are the shared habits, hacks, philosophies, and tools that are the common threads of success, happiness, health, and wealth. These commonalities were the premise of my most recent book, The New York Times #1 bestseller Tools of Titans -- a compilation of my favorite lessons, routines, and tips of many of my guests. In this episode, I've gathered some of the best advice from past guests about morning routines.

Tuesday, July 18, 2017


"There is nothing reliable to be learned about making money.  If there were, study would be intense and everyone with a positive IQ would be rich." -John Kenneth Galbraith

Mark Yusko on the Superinvestors and the Art of Worldly Wisdom podcast (LINK)

Invest Like the Best podcast: Rishi Ganti - Esoteric Assets (LINK)

Ryan Holiday talks about his new book, Perennial Seller: The Art of Making and Marketing Work that Lasts, with James Altucher (podcast) (LINK)

Danny Meyer says this is the biggest challenge facing the restaurant industry [H/T Matt] (LINK)

Aswath Damodaran on CNBC (video) [H/T Matt] (LINK)

Turning Baker’s Yeast Into a Disease Sensor - by Ed Yong (LINK)