Links

“Instead of a discussion of risk (which is both predictive and sissy) I advocate the notion of fragility, which is not predictive—and, unlike risk, has an interesting word that can describe its functional opposite, the nonsissy concept of antifragility.” --Nassim Taleb (Antifragile)

The Acquirers Podcast: Tulip Mania: Chris Bloomstran on Warren Buffett and Berkshire Hathaway (LINK)

Related previous post: Semper Augustus Investments Group: 2019 Annual Letter

Oaktree’s Howard Marks Says Fed Support Isn’t Forever, Distress Coming (video) (LINK)

Apollo Asia Fund: the manager's report for 1Q20 (LINK)

When Failure Is an Option: A Trading Strategy Soaks Investors - by Jason Zweig ($) (LINK)

To Hedge or Not to Hedge - by Frank K. Martin (LINK)

Media, Regulators, and Big Tech; Indulgences and Injunctions; Better Approaches - by Ben Thompson (LINK)

Exponent Podcast: 185 — Open, Free, and Spotify (LINK)

Strategy under uncertainty - by Jerry Neumann (LINK)

Covid-19: Big shifts in the entertainment industry - by Sangeet Paul Choudary (LINK)

Innovation Can’t Be Forced, but It Can Be Quashed - by Matt Ridley (LINK)

Related book (released tomorrow): How Innovation Works: And Why It Flourishes in Freedom

Fed Chair Jerome Powell on "60 Minutes" (video) (LINK)

The Pomp Podcast: 294: Cullen Roche Explains The Ultimate Breakdown Of The Federal Reserve (LINK)

Hidden Forces Podcast: How the Wealth Gap Drives Imbalances in Global Trade & Finance | Michael Pettis (LINK)

The Grant Williams Podcast: Super Terrific Happy Hour Ep. 2 - Inflation/Deflation (LINK)

The Daily Stoic Podcast: Ask Daily Stoic: Ryan and Historian Andrew Roberts Talk Leadership, Character and How One Person Can Change The World (LINK)

Recode Decode Podcast: Jon Meacham: America’s history can teach us how to hope for our future (LINK)

The Twilight of the Iranian Revolution - by Dexter Filkins (LINK)

Some Zoos, and Some of Their Animals, May Not Survive the Pandemic (LINK)

What's Different About the Coronavirus in Kids - by Sarah Zhang (LINK)

Mental Models For a Pandemic (LINK)

A review of The Great Mental Models, Volume 2 (LINK)

Links

My year-end letter at Sorfis is in the proofreading stage. If you are interested in receiving it as soon as it is released next week, you can sign up on the website HERE. 

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Greenlight Q4 2019 Letter (LINK)

Fundsmith Annual Letter (LINK)

Apollo Asia Fund: the manager's report for 4Q19 (LINK)

Wealth Is What You Don’t Spend - by Morgan Housel (LINK)

Every Company Will Be a Fintech Company (LINK)

Paul Tudor Jones on CNBC (video) (LINK)

Ray Dalio on CNBC (video) (LINK)

Brian Moynihan on CNBC (video) (LINK)

Stephen Schwarzman on CNBC (video) (LINK)

David Rubenstein on CNBC (video) (LINK)

Carlos Brito on CNBC (video) (LINK)

Invest Like the Best Podcast: Rebecca Kaden – Thesis Driven Investing (LINK)

The James Altucher Show: 531 - Jocko Willink (LINK)

Related book: Leadership Strategy and Tactics: Field Manual

The Knowledge Project Podcast: #74 Jeff Hunter: Embracing Confusion (LINK)

Finding the One Decision That Removes 100 Decisions (or, Why I’m Reading No New Books in 2020) - by Tim Ferriss (LINK)

Hey, maybe the dinosaur-killer asteroid really did act alone! (LINK)

Links

The Latticework Podcast, presented by MOI Global: William Green with Arnold Van Den Berg at Latticework New York 2019 (LINK)

Rob Arnott Video: Past Is Not Prologue (LINK)

Chasing returns can be very costly. High valuations can go higher, but not indefinitely. At Research Affiliates’ recent Investment Symposium in London, Rob Arnott explains how the link between starting valuations and subsequent returns is powerful, and examines which investments look attractive today.

The Spectrum of Wealth - by Morgan Housel (LINK)

Value investor Joel Greenblatt says this company could solve a key hurdle in esports’ growth [H/T Linc] (LINK)

Barry Diller on CNBC (LINK)

Apollo Asia Fund: the manager's report for 3Q19 (LINK)

Remember QR Codes? They’re More Powerful Than You Think (LINK)

Venture Stories Podcast: Jerry Yang on China, Yahoo!, and Early-Stage Investing (LINK)

What is Chasing You? - by Ian Cassel (LINK)

Book of the day [H/T Tamás]: Letting Go - by David R. Hawkins

Links

"There are lots of things in life that come to you where you have no option to not consider the issue. But where it’s voluntary, like choosing one investment from many, then the 'too difficult' pile is a marvelous way of sifting your daily grist." --Charlie Munger (2007)

Horizon Kinetics 2Q 2019 Portfolio Update - July 17, 2019 (audio) (LINK) [If anyone at Horizon Kinetics reads this blog, it would be fantastic if you make these podcasts available for download on Overcast, etc.]

Claire Barnes' Q2 report for the Apollo Asia Fund (LINK)

Is CVS A Value Trap Or A Fallen Angel Ready To Rise Again? - by Jonathan Boyar (LINK)

GMO White Paper | Risk and Premium: A Tale of Value - by John Pease (LINK)

The performance of U.S. value over the last decade has led many to wonder whether the value premium has been completely eroded. We analyze this question by decomposing the relative returns of cheap stocks in order to understand what has driven this change in performance. Our return decomposition suggests value stocks’ performance erosion can be evenly attributed to a reduction in the value premium and a widening of the value spread. Though value might deserve to trade at a greater discount today due to the market’s current dynamics, we believe that cheap stocks are still likely to deliver a premium and are therefore well-positioned to outperform the broad market.

Passive investing boom could be causing a market bubble, but not in the stocks you would expect (LINK)

Critics of passive investing argue it is inflating the prices of high-flying stocks such as Amazon and creating a bubble in those names. However, data compiled by Ned Davis Research shows the bubble may be forming elsewhere. 

The firm found that real estate and utilities stocks are the two sectors that have benefited the most from the rise of passive investing vehicles including exchange-traded funds. ETFs hold more than 11% of the real estate sector and 9.8% of the utilities sector. 

At the individual stock level, Tanger Factory Outlet Centers, a real estate company that invests in shopping centers, has had nearly 32% of its available stock, or float, taken over by ETFs, by far the most of any stock.

With Stocks at Fresh Highs, Investors’ Portfolios Look Alike ($) (LINK)

A rally in stocks has triggered unusual circumstances for some of Wall Street’s biggest investors—they are holding many of the same companies. 

A list of the market’s most crowded trades includes Mastercard Inc., Microsoft Corp., Amazon.com Inc., Abbott Laboratories and PayPal Holdings Inc., according to analysts at Bernstein, who tracked institutional ownership, price momentum, earnings forecasts and valuations. 

The overlap in the top 50 stockholdings between mutual funds and hedge funds—two types of investors whose styles typically differ—now stands at near-record levels, a study by Bank of America Merrill Lynch found.

Hidden Networks: Network Effects That Don’t Look Like Network Effects (LINK)

Albert Wenger: World after Capital | Rise of AI conference 2019 (video) (LINK)

BIS Annual Economic Report 2019 (LINK)

Invest Like the Best Podcast: Brian Christian – How To Live With Computers (LINK)

North Star Podcast: Tren Griffin: The Love of Learning (LINK)

Hidden Forces Podcast: Raoul Pal | The Fourth Turning: Generational Theory and the Future of Global Money (LINK)

5 Mindsets that Create Success - by Mark Manson (LINK)

They Found 43,130 of Her Relatives Before Solving Her Cold Case - by Sarah Zhang (LINK)

Links

"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.

Links

"Sometimes there are plentiful opportunities for unusual return with less-than-commensurate risk, and sometimes opportunities are few and risky. It’s important to wait patiently for the former. When there’s nothing clever to do, it’s a mistake to try to be clever." -Howard Marks (via the presentation below)

The slides from Howard Marks' presentation ("The The Truth about Investing") are available HERE.

Via Negativa: Wisdom Through Subtraction (LINK)

David Einhorn Ratchets Up Pressure on GM (LINK)

Apollo Asia Fund: the manager's report for 1Q2017 (LINK)

Bill Gross' April 2017 Investment Outlook (LINK)

Buyout Firms Are Magically -- and Legally -- Pumping Up Returns [H/T Matt] (LINK)

How Canada completely lost its mind over real estate [H/T Matt] (LINK)

The Long-Ignored Reptile Rewriting the Prologue to the Dinosaur Story - by Ed Yong (LINK)

Book of the day (to be released in May) [H/T @Sanjay__Bakshi]: The Wisdom of Finance: Discovering Humanity in the World of Risk and Return

Links

Jamie Dimon's full CNBC interview (video) (LINK)

Mental Models: Getting the World to Do the Work for You (LINK)

Reinvestment Moat Follow Up: Capital Light Compounders (LINK)

Apollo Asia Fund: the manager's report for 2Q2016 (LINK)

Looking back at the quarter, it seems to have been dominated by politics, and few of the political developments made me more optimistic. Events in Europe and the US presidential runup commanded a disproportionate share of the headlines, but there was plenty to worry about in Hong Kong and China, Thailand and Malaysia, the South China Sea and the Indian subcontinent. Yet it seems subjectively to have been a constructive period for the fund - not because we can point to spectacular share price surges or great macro insights, but because of a modest collection of new stock selections which we are accumulating, potential candidates which we are working through, and the nitty-gritty of our investment process. It is always stimulating to talk to competent managers and learn about the characteristics of new businesses or specific challenges. This quarter we had a lot of good conversations, and the managers of our holdings rose to a wide variety of challenges in generally sensible ways. (Markets often get excited about temporary changes in business conditions; we frequently consider the quality of the management response more interesting.)

FPA Crescent Fund: Second Quarter 2016 Commentary [H/T ValueWalk] (LINK)

Mutual Fund Observer, August 2016 (LINK)

QE-forever cycle will have an unhappy ending - by Satyajit Das (LINK)

Related book: The Age of Stagnation

Links

America’s secret weapon - By Bill Gates [H/T The Big Picture] (LINK) [The follow-up video and discussion on innovation is HERE.]

Ten Lessons from One of the World’s Most Legendary Investors (LINK)

Related book: Templeton's Way with Money: Strategies and Philosophy of a Legendary Investor

Apollo Asia Fund's Q1 report: Kafka's costs (LINK)

An Exclusive Look: “Warren Buffett’s Ground Rules: Words of Wisdom from the Partnership Letters of the World’s Greatest Investor” (video) (LINK)

Lessons from the Fall of SunEdison (LINK)

Ben Thompson on how the media business is changing (The Ezra Klein Show Podcast) (LINK)

Edge #465: Power Over Nature - A Conversation with Frank Wilczek (LINK)

Hans Rosling’s Important Truths about Population Growth and the Developing World (LINK)

Do Animals Have Culture? (LINK)

Postscript: Bill Campbell, 1940-2016 (LINK)

In the brief history of modern Silicon Valley, Bill Campbell, who died yesterday, at the age of seventy-five, is a giant. His various titles—Columbia football coach, Apple executive, co-founder of Go Corp., Intuit C.E.O., chairman of Apple, chairman of the Columbia University board—do not convey his influence. In the world capital of engineering, where per-capita income can seem inversely related to social skills, Campbell was the man who taught founders to look up from their computer screens. He was known throughout the Valley as “the Coach,” the experienced executive who added a touch of humanity as he quietly instructed Steve Jobs, Jeff Bezos, Larry Page, Sergey Brin, Marc Andreessen, Ben Horowitz, the founders of Twitter, Sheryl Sandberg, and countless other entrepreneurs on the human dimensions of management, on the importance of listening to employees and customers, of partnering with others. His obituary was not featured on the front of most newspapers, or at the top of most technology news sites, but it should have been.

Links

Today's Audible Daily Deal ($3.95) is a worthwhile listen: The Hard Thing About Hard Things: Building a Business When There Are No Easy Answers - by Ben Horowitz

Broyhill Book Club 2015 - by Chris Pavese (LINK)

In Silicon Valley Now, It’s Almost Always Winner Takes All [H/T @BrattleStCap] (LINK)

Apollo Asia Fund's Q4 report: Upheaval and new perspectives (LINK)

The First Million - by Ian Cassel (LINK)

What made Charles Darwin an Effective Thinker? Follow the Golden Rule (LINK)

Links

Nassim Taleb - The Most Stubborn Wins: The Dominance of the Minority (LINK)

Latticework of Mental Models: The Power Law (LINK)

Negative Gross Margins (LINK)

The Individual Investor’s Edge (LINK)

John Hempton: Some comments on the Valeant conference call (LINK) [The stock was also halted earlier today as it took a nose-dive.... Some well-known investors that have this as a huge position, as of the end of Q2, may have some explaining to do.]

Leithner Letter Nos. 192-195 (Part 1, Part 2)

Claire Barnes' Q3 Report: Tides and tsunamis (LINK)

Tectonic plate shifts have far-reaching consequences that are hard to time or predict: as with geology, so with geopolitics. The great realignment now under way in the Middle East and worldwide may have momentous consequences. Many people seem oblivious to the dangers, and to the need to discriminate between news and propaganda. There is much talk in the investment world of innovation, and much excitement about powerful disruptors - but perhaps too much in the context of new technologies, and too little in relation to political and military strategy. We too spend a lot of time thinking about innovation and potential disruptors in the context of business models, but try not to be so focussed on our own sandcastle that we fail to notice incoming tides and occasional tsunamis. 

In the event of an approaching tsunami it may be advisable to run for the hills - if the hills themselves remain stable, and not too far undermined or overloaded. Another option is to head for deep water and float. In this world of rapid and interconnected change, traditional safe havens may be unavailable. Neither bonds nor bank deposits now offer safety, and a new War on Cash seeks to block savers fleeing in that direction. (The unintended consequences of this may well cause as much disruption to efficiency as the closure of physical borders.) We have no great confidence about price performance, but are more concerned about optimising our chances of preserving purchasing power and minimising the risks of permanent loss: in this context a portfolio of carefully chosen equities still seems a relatively attractive option.

Poo turns naked mole rats into better babysitters (LINK)

Links

Warren Buffett and Bill and Melinda Gates will be on Charlie Rose tonight.

Horizon Kinetics: 2nd Quarter Commentary (LINK)

Claire Barnes' Q2 Report: Stormy macro, reassuring micro (LINK)

TEDx Talk - Lukas Neely: Is This the Death of Investing? (video) (LINK)

Related book: Value Investing: A Value Investor's Journey Through The Unknown

Speech by Andrew Haldane, Executive Director and Chief Economist of the Bank of England (LINK)

Study Shows Diseases Like Plague Can Perilously Evolve (LINK)

Edge: The Next Wave: A Conversation With John Markof (LINK)

Stephen Colbert talks to Neil deGrasse Tyson about Pluto (video) (LINK)

David McCullough with Ken Burns on The Wright Brothers (video) (LINK)

Related book: The Wright Brothers

Links

Presentations from The Ben Graham Centre’s 2015 Value Investing Conference [H/T ValueWalk] (LINK)

Nestle chairman: Heinz owners have 'pulverized' the food industry [H/T Matt] (LINK)

The Apollo Asia Fund's Q1 Report (LINK)

Horizon Kinetics: 1st Quarter 2015 Commentary (LINK)

Five Good Questions for Michael Yogg about his book, Passion for Reality (LINK)

Hank Paulson (discussing his new book Dealing with China: An Insider Unmasks the New Economic Superpower), and Steve Wynn on Charlie Rose (video) (LINK)

Hoisington Quarterly Review and Outlook, First Quarter 2015 (LINK)

This CEO may have the sweetest job around [H/T Phil] (LINK)

Y Combinator President Sam Altman is Dreaming Big (LINK)

Square’s Jack Dorsey Puts It All Together (LINK)

Mark Zuckerberg chooses Michael Chwe’s Rational Ritual for his book club (LINK)

Book of the day [H/T Phil]: The One Hour China Consumer Book

Links

Apollo Asia Fund: the manager's report for 4Q2014 (LINK)

Amidst all these distractions, I omitted to post a link to GMO's 3Q report, with another compelling exposition from Jeremy Grantham on what I consider the key issue of our time. While acknowledging short term benefits from the fall in the oil price, as income is transferred from producers to consumers with a greater propensity to spend, he explains with great clarity why the current fall in the oil price 'does nothing to offset the squeeze on the total economy from rising costs', and provides some alarming illustrations of the magnitude of that squeeze. We differ on coal: as mentioned here six months ago, the usage of coal in Asia is rising and not falling, as oil and gas production falters. However, Grantham's central message could hardly be clearer - or further from complacent assumptions of business-as-usual. '... other parts of the complex economic system have to be sacrificed to retain the ability to acquire sufficient oil... if oil costs continue to rise the trade-offs become more and more painful. Our complex system has been trained by experience to deal with steady growth. Now it must deal with slowing growth and one day it may face contraction. In this changed world we can only guess how robust the stressed system will be. We may hope it will be tough but quite possibly it will be brittle. At the extreme it might even threaten the viability of our current economic system. It is vital therefore, if we want to reduce these stresses, to emphasize fuel efficiency, reduce wastage of all kinds, and encourage the rapid development of sustainable "alternative" forms of energy... Clearly the writing is on the wall. It is now up to our leadership and to us as individuals to read it and act accordingly.' First read the rest: 'The Beginning of the End of the Fossil Fuel Revolution (from Golden Goose to Cooked Goose)'. 

If only we knew how to invest accordingly. Portfolio turnover in 2014 was low, at 12%. With the world in turmoil, we may well need to make more changes in the year ahead. Some of the changes we made earlier have not, as yet, gone to plan. Suggestions, as always, are welcome.

See’s Candies Case Study (LINK)

One Powerful Success Secret I Learned from Warren Buffett (Hint: It’s Not about Investing) (LINK)

Related book: Daily Rituals: How Artists Work

Buffett, 'Dilbert' creator Scott Adams differ on passion [H/T Will] (LINK)

Related book: How to Fail at Almost Everything and Still Win Big

Scott Adams: Speed is the New Intelligence (LINK)

The Shake Shack Economy [H/T The Big Picture] (LINK)

Mark Hanson's latest on the housing market (LINK)

Ray Kurzweil’s Mind-Boggling Predictions for the Next 25 Years (LINK)

Related book: Bold: How to Go Big, Create Wealth and Impact the World

William Ury, co-author of the Charlie Munger recommended Getting to Yes: Negotiating Agreement Without Giving In, is out with a new book; Getting to Yes with Yourself

Links

James Montier: Shareholder Value Maximization: The World's Dumbest Idea? [Montier starts in the video around 5:30] (LINK)

The Apollo Asia Fund's Q3 report (LINK)

Hussman Weekly Market Comment: Fast, Furious and Prone to Failure (LINK)

Jason Zweig: So You Think You’re a Risk-Taker? (LINK)

Bill Ackman and His Hedge Fund, Betting Big [H/T Will] (LINK)

Jim Koch: The Steve Jobs of Beer (LINK)

Jared Diamond talks with The Guardian (LINK)

Related books, HERE.

On the Obsessive Focus of Bill Gates (LINK)

One trait that differentiated [Gates and Allen] was focus. Allen’s mind would flit between many ideas and passions, but Gates was a serial obsessor. 

“Where I was curious to study everything in sight, Bill would focus on one task at a time with total discipline,” said Allen. “You could see it when he programmed. He would sit with a marker clenched in his mouth, tapping his feet and rocking; impervious to distraction.”

.....

Related book: The Innovators

Related previous post: Bill Gates quote from Charlie Rose interview (or, how the world's best companies are built by fanatics)

a16z Podcast: The (Definite) Optimism of Peter Thiel (LINK)

What is Silicon Valley’s greatest reigning monopoly? How did PayPal manage to emerge from the dotcom implosion? Can you build a great tech company and keep it private forever? And how did Elon Musk manage to wreck an uninsured, million-dollar car with Peter Thiel in the passenger seat speeding on the way to a VC meeting? Marc Andreessen and Thiel discuss all of it in a wide-ranging conversation that toggles off the topics in Thiel’s new book “Zero to One.”

Munger Gives $65 Million to U.C. Santa Barbara [H/T Daniel] (LINK)

Charles Munger, the vice chairman at Berkshire Hathaway Inc. (BRK/A), is giving $65 million to the University of California at Santa Barbara for a housing facility where visiting scientists can gather to discuss physics. 

Construction of the three-story residence is expected to be done in two years, the university said in a statement. The gift by Munger, the long-time business partner of Warren Buffett, is the largest single donation in the school’s history, according to the statement. 

“Once you see what a combination of calculus and Newton’s laws will do and the things you can work out, you get an awesome appreciation for the power of getting things in science right,” Munger, 90, said in the statement. “I don’t think you get a feeling for the power of science — not with the same strength — anywhere else than you do in physics.”

What Will Set Warren Buffett’s Company Apart When He’s Gone? (LINK)

Related book: Berkshire Beyond Buffett

Buffett’s Model Not Challenged by IBM Loss (video) [H/T Will] (LINK)

Oct. 21 (Bloomberg) -- Lawrence Cunningham, author of “Berkshire Beyond Buffett,” talks with Betty Liu about how the value lost in IBM impacts the effectiveness of Warren Buffett’s investment plans. He speaks on “In The Loop.”

Talks at Google: John Mihaljevic, "The Manual of Ideas: How to Find the Best Investment Ideas" (video) (LINK)

Related book: The Manual of Ideas: The Proven Framework for Finding the Best Value Investments

Steve Keen: Time for a Copernican Revolution in Economics (LINK)

Related book: Debunking Economics

Coal-fired growth: Apollo Asia Fund: the manager's report for 2Q2014

Link to: Coal-fired growth

Many economic forecasters in Asia continue to extrapolate the trends of the recent past, failing to recognise the past contribution of resource windfalls which are dwindling, vanished, or overtaken by domestic consumption. Some of these trends are clearly unsustainable. If coal usage in Malaysia were to rise at its present rate for another 16 years, it would have risen 109 times since the start of the fund, and the consequences for the environment are important to contemplate. In practice it seems likely that coal will continue to increase as a proportion of the Southeast Asian energy mix; growth in energy use will moderate as costs rise and some subsidies are withdrawn; and GDP growth will be less than before. 

Moreover, a higher proportion of economic activity will relate to resource extraction and the costs of environmental change (from water procurement through flood mitigation to health impacts). Anecdotally, we have also noticed a number of cases of forced investment in replacement systems due to individual unobtainable parts, without any of the productivity benefits experienced at the time of the original expenditure. Maintenance and replacement expenditure, along with debt service, may thus consume a rising percentage of income. Exports, the traditional growth driver, have faltered since the global financial crisis erupted in 2008. In several countries it now seems appropriate to focus on companies supplying the goods and services that will be prioritised if disposable income is squeezed.

Claire Barnes' Q1 Report: World in flux

Link to: World in flux

In a fast-changing world, business models have to keep pace. Creative destruction has served society better than 'too-big-to-fail'. Instability may lead to opportunity, and we are certainly on the lookout. A snag is that established business models are often disrupted by upstart innovators, and the latter are not only riskier, but often not open to investment. We'll keep looking.

Claire Barnes' Q4 letter: The next three decades may be different

You don't hear many fund managers say this: "In a changing world, fresh thinking and skills may be required. Investors may wish to seek fund managers better equipped for the future: redemption requests remain welcome."

Investors will be familiar with the adage that the most dangerous phrase in investing is that "this time is different". When it comes to excitement over new technologies, fads, and bubbles, the sceptics are generally (in the end) proved correct. Yet today it seems appropriate to examine several potential cracks in the foundations of conventional thinking on economics and investment. I have been fortunate enough to spend my working life in Asia during a period of peace, prosperity, and globalisation, and to have witnessed tremendous growth, with a few major bear markets along the way. I am accustomed to cycles, but currently more interested in secular trends. It seems to me that the next three decades may be very different from the last three, and from the last century or so on which most investment thinking is based. A number of my assumptions have changed significantly in the last five years, with more focus on the following:

Claire Barnes' Q3 letter: Overcomplexity to dysfunctionality

The Apollo Asia Fund's NAV fell 0.8% in the third quarter, to US$1,896.80. Over the last twelve months it was up 9.3%.

Despite a 5% retreat in NAV from the peak in May, the estimated current-year PE of the fund at the end of September was 15.6, still relatively high by the fund's own historical standards. Moreover, some of the high-quality, cash-generative consumer stocks which have stood us in good stead in the past are now priced for ongoing high growth which we doubt they will be able to deliver, and many of the stocks less highly rated are discounted for good reason. Stock selection currently seems quite challenging.

Moreover, a growing proportion of our attention goes to monitoring (and trimming) our existing holdings, many of which seem to be finding their own businesses equally challenging.

Our report in July 2011 discussed bureaucracy and overcomplexity, highlighting this graphic illustrating an issue which appears more and more relevant. The complexity of simple tasks and services seems to be growing apace. More and more detailed regulation is crowding out useful activity. More and more professional people seem to be swamped - and to have less and less time remaining to focus on the most important aspects of their jobs. More and more systems seem to be tipping from overcomplexity to dysfunctionality. Fascinating examples have arisen in recent weeks.¹ ²

There must be beneficiaries of this somewhere. Individual lawyers, regulators, and fixers are hard to invest in. Some IT companies, conference organisers, printing companies and hotels may benefit - but these are not particularly promising sectors for a fund such as ours.

…..

The companies we like are those which have continued ability to grow and a clear plan of action which we believe they will be able to implement steadily, adjusting to inevitable gusts, but able to maintain a steady course even in changing circumstances. Any well-run company of this type is one that we would like to have on the radar screen, as analysis often takes us months; we can then be in a position to buy when valuations are fair or better. We have a number of these, and have added one new one recently. We have many more candidates on the watchlist or yet to research, but are always happy to hear of more.

Apollo Asia Fund Q4 Report: Markets expensive, complacency dangerous

The Apollo Asia Fund's NAV rose 4.1% in the fourth quarter, to a new high of US$1,805.72: over the last twelve months it was up 41%.

This has taken valuations right up to the high end of the historic range. At the end of December, our portfolio was on an estimated current-year PE of 16.2. The 'portfolio EPS' for the current year are estimated to be 15% higher than a year ago, but we forecast lower EPS growth for the year ahead. As we noted in the last quarter, past growth in the Fund's NAV has been enhanced by rerating; this could very easily be reversed.

Portfolio turnover for 2012 was as low as it has ever been, at 13%. This is probably too low, given the valuations - we err on the side of sluggishness when it comes to making changes. That has stood us in good stead in the past, but more good ideas would be welcome - so if I can develop a greater degree of enthusiasm for new possibilities than for our current holdings, you may see a higher figure in 2013.

Companies behaving badly: first Unilever and then Holcim announced steep unilateral increases in the royalties charged to their listed Indonesian subsidiaries. Both shares plummeted. At the time, fortunately, we owned neither - but the corporate governance precedents are quite shocking.

There's No Tomorrow

Recommended by Claire Barnes. An introduction to the challenges of energy and resource limits.


Link