Tuesday, May 24, 2011

Words of Wisdom

I'll be taking a break from the blog for a few days, so I thought I’d post some quotes I found interesting before taking a going on a brief hiatus.
Howard Marks, The Most Important Thing:
Many people possess the intellect needed to analyze data, but far fewer are able to look more deeply into things and withstand the powerful influence of psychology. To say this another way, many people will reach similar cognitive conclusions from their analysis, but what they do with those conclusions varies all over the lot because psychology influences them differently. The biggest investing errors come not from factors that are informational or analytical, but from those that are psychological.
The prevailing wisdom looks at cash on a historical basis, which completely neglects the inherent opportunity costs associated with a lack of cash. By this I mean simply that cash affords you flexibility; if you have cash, you can allocate that cash when attractive opportunities arise. By taking a backward look at cash, you wind up focusing on the rate it has earned historically. The correct way to measure the return on cash is more dynamic: cash is bounded on the lower side by its actual return, whereas the upper side possesses an additional element of positive return received from having the ability to take advantage of unique opportunities.
Holding cash when markets are cheap is expensive, and holding cash when markets are expensive is cheap.
One of the most important elements of a boom–bust sequence that helps one identify where in the cycle one might be is, to use language from epidemiology, the population of unaffected or unexposed individuals. When one hears that everyone, including those not traditionally active or invested in the market, is “in the market,” then one might naturally (and accurately) assume that the boom cycle is far along and very mature (perhaps approaching expiration), with a limited population of infectable participants.
Arthur Schopenhauer, “the Wisdom of Life”:
Absolute value can be predicated only of what a man possesses under any and all circumstances,--here, what a man is directly and in himself. It is the possession of a great heart or a great head, and not the mere fame of it, which is worth having, and conducive to happiness.
And so people who feel that they possess solid intellectual capacity and a sound judgment, and yet cannot claim the highest mental powers, should not be afraid of laborious study; for by its aid they may work themselves above the great mob of humanity who have the facts constantly before their eyes, and reach those secluded spots which are accessible to learned toil. For this is a sphere where there are infinitely fewer rivals, and a man of only moderate capacity may soon find an opportunity of proclaiming a theory which shall be both new and true; nay, the merit of his discovery will partly rest upon the difficulty of coming at the facts.
Art De Vany, The New Evolution Diet:
Out of this tragedy came my attitude that I have only one moment of power, which is now, and that I can determine not the outcome but only the probable path.
Seneca, Letters from a Stoic (also posted these HERE):
Nothing, to my way of thinking, is a better proof of a well ordered mind than a man’s ability to stop just where he is and pass some time in his own company.
It is not the man who has too little who is poor, but the one who hankers after more.
From Meditations by Marcus Aurelius (reminds me of Ben Franklin’s process for achieving virtue):
It should be a man's task, says the Imitation, 'to overcome himself, and every day to be stronger than himself.' 'In withstanding of the passions standeth very peace of heart.' 'Let us set the axe to the root, that we being purged of our passions may have a peaceable mind.' To this end there must be continual self-examination. 'If thou may not continually gather thyself together, namely sometimes do it, at least once a day, the morning or the evening. In the morning purpose, in the evening discuss the manner, what thou hast been this day, in word, work, and thought.'
Viktor Frankl, Man's Search for Meaning:
Forces beyond your control can take away everything you possess except one thing, your freedom to choose how you will respond to the situation. You cannot control what happens to you in life, but you can always control what you will feel and do about what happens to you.
Live as if you were living already for the second time and as if you had acted the first time as wrongly as you are about to act now!