Monday, May 19, 2014


Hunter S. Thompson on Finding Your Purpose and Living a Meaningful Life (LINK)
A great excerpt from Shane over at Farnam Street from the book Letters of Note.
Thinking & Writing : The CIA’s Guide to Cognitive Science & Intelligence Analysis (LINK)
A great find from Miguel over at Simoleon Sense.
Marc Andreessen on EconTalk (LINK)

The Liquidity Gauge (LINK)
I think this is one of the more interesting macro models to keep in one's mind. One description of this might be the macro-equivalent of 'in the short-run the market is a voting machine, in the long run it is a weighing machine.' While maybe not something the long-term value investor will worry much about, it is the concept behind why Richard Duncan predicted in 2012 that 2013 would be a great year in the stock market (there was going to be record liquidity in the market). While that correct call was possibly more a result of randomness than economic law, as the macro is so hard to  analyze correctly and consistently, it does make sense to me that the inputs that go into his liquidity gauge is a decent summary of short-term votes. Valuation will rule in the long run, but given that the liquidity gauge is going to finally start turning negative in Q3 and especially Q4 of this year, I think it's something to keep an eye on. Duncan believes this liquidity is going make for a rough market in the second half of the year, and also believes that this roughness is going to lead the Fed to reverse course on its tapering. While I don't think one should make investment decisions depending on this, many other great investors' cash build-up along with this idea makes me think having plenty of cash in one's portfolio may be a useful thing to have the rest of the year. (For more on Duncan's work, see THIS previous post)
The Single Greatest Predictor of Future Stock Market Returns (LINK)
I think some interesting data could come from combining the 'average investor portfolio allocation to equities' data in this post with 'the liquidity gauge' mentioned above, and seeing how they trend and compare to each other and the market over time. If anyone has the time and statistical capability to go ahead and do it, please share when you're done!