Links

"It's one thing to have an opinion, and something very different to act as if it's right." --Howard Marks

The CFA Institute's Virtual Conference [Howard Marks, Peter Zeihan, and others] (LINK)

Platforms in an Aggregator World - by Ben Thompson (LINK)

All six parts of Matthew Ball's & Jacob Navok's primer on Epic Games (LINK)

The Rise of TikTok and Understanding Its Parent Company, ByteDance (LINK)

What Is Clubhouse, and Why Does Silicon Valley Care? (LINK)

The 'Don't Worry, Make Money' Strategy Trouncing The Stock Market By 30 Percentage Points (LINK)

Mortgage Credit Tightens, Creating Drag on Any Economic Recovery ($) (LINK)

Could the Pandemic of 2020 Redefine “Enough”? - by Frank K. Martin (LINK)

Can Remote Work Be Fixed? - by Cal Newport (LINK)

Chapter 1 of Matt Ridley's new book, How Innovation Works: And Why It Flourishes in Freedom (LINK)

Ian Cassel Talks MicroCaps and 100-Baggers on the Chain Reaction Podcast (LINK)

Rob Arnott on WealthTrack (video) (LINK)

Invest Like the Best Podcast: Shishir Mehrotra – The Art and Science of the Bundle (LINK)

The Talk Show With John Gruber (podcast): 285: ‘Fahrenheit Truthers’, With Ben Thompson (LINK)

Recode Decode Podcast: Brian Chesky: These 9 weeks were the most stressful in Airbnb’s history (LINK)

Acquired Podcast: SpaceX (LINK)

Masters in Business Podcast: Michael Lewis on the Power of Intelligent Leadership (LINK)

Against the Rules with Michael Lewis (podcast): The Coach Effect (LINK)

Tail risk of contagious diseases: a conversation between Nassim Taleb and Pasquale Cirillo (video) (LINK)

Freakonomics Radio (podcast): 419. 68 Ways to Be Better at Life [with Kevin Kelly] (LINK)

Links

"...most investors think quality, as opposed to price, is the determinant of whether something’s risky. But high quality assets can be risky, and low quality assets can be safe. It’s just a matter of the price paid for them. . . . Elevated popular opinion, then, isn’t just the source of low return potential, but also of high risk." --Howard Marks

Peter Zeihan chats with Grant Williams (video) (LINK)

Related book: Disunited Nations

Epic Games Primer - by Matthew Ball & Jacob Navok (Part 1, Parts 2 & 3)

Millions of Americans Skip Credit-Card and Car Payments ($) (LINK)

About 15 million credit-card accounts and 3 million auto loans didn’t get paid in April as the coronavirus ravaged the economy, data show

America’s Patchwork Pandemic Is Fraying Even Further - by Ed Yong (LINK)

The coronavirus is coursing through different parts of the U.S. in different ways, making the crisis harder to predict, control, or understand.

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)

Howard Marks Memo: Uncertainty

Link to Memo: Uncertainty

In investing, uncertainty is a given – how we deal with it will be critical. Read Howard Marks’s latest memo, in which he discusses the value of understanding the limitations of our foresight and “investing scared.”

Links

"Security analysis does not seek to determine exactly what is the intrinsic value of a given security. It needs only to establish either that the value is adequate—e.g., to protect a bond or to justify a stock purchase—or else that the value is considerably higher or considerably lower than the market price. For such purposes an indefinite and approximate measure of the intrinsic value may be sufficient. To use a homely simile, it is quite possible to decide by inspection that a woman is old enough to vote without knowing her age or that a man is heavier than he should be without knowing his exact weight." --Benjamin Graham and David Dodd (Security Analysis)

The Tim Ferriss Show (podcast): #431: Howard Marks on the US Dollar, Three Ways to Add Defense, and Good Questions (LINK)

Amazon, Berkshire, JPMorgan Health-Care Venture Looking for New CEO [H/T Linc] ($) (LINK)

Atul Gawande is in advanced discussions to step down as chief executive and take on a less operational role as chairman of Haven, the health-care venture backed by Amazon.com Inc., Berkshire Hathaway Inc. and JPMorgan Chase & Co., according to people with knowledge of the matter. 

Dr. Gawande, a prominent surgeon and professor at Harvard University, wants to move away from day-to-day management of Haven and focus more on policy and advocacy work, particularly related to the current coronavirus pandemic, the people said.

Oil Crash Busted Broker’s Computers and Inflicted Big Losses (LINK)

Value Hive Podcast: 24: More Than Shipping Stocks w/ Harris Kupperman, Praetorian Capital (LINK)

What's Next for Oil? MacroVoices #218 Postgame (video/podcast) (LINK)

Peter Zeihan Explains The Geopolitical Landscape (video/podcast) (LINK)

Odd Lots Podcast: Richard Koo Explains Why The Recovery Will Be So Difficult (LINK)

We know everything – and nothing – about Covid - by Matt Ridley (LINK)

Links

"That's how history unfolds. People weave a web of meaning, believe in it with all their heart, but sooner or later the web unravels, and when we look back we cannot understand how anybody could have taken it seriously." --Yuval Noah Harari (Homo Deus)

Howard Marks says the stock market rebound is not reflecting reality (LINK)

Oil Plunges Below Zero for First Time in Unprecedented Wipeout (LINK)

Less Than Zero: What Oil's Crazy Day Means ($) (LINK)

Kyle Bass on CNBC (video) (LINK)

Hin Leong Failed to Declare $800 Million Losses (LINK)

Esports and the Dangers of Serving at the Pleasure of a King - by Matthew Ball (LINK)

Book Notes: Whole Earth Discipline (LINK)

Yes, Even Introverts Can Be Lonely Right Now - by Adam Grant (LINK)

COVID-19: What’s wrong with the models? - by Peter Attia (LINK)

Links

Jeff Bezos' 2019 Letter to Shareholders (LINK)

Marks’s Oaktree Seeks $15 Billion for Biggest Distress Fund Ever (LINK)

Oil Glut May Overwhelm Global Storage Tanks Within Weeks (LINK)

The 14 Most Important Financial Planning Lessons I've Learned Over the Past 30 Days - by Phil Weiss (video) (LINK)

How I Built This with Guy Raz (podcast): Live with Guy Online: David Neeleman and Tristan Walker (LINK)

Ben Thompson: Listen to Free Weekly Stratechery Articles in Your Podcast Player (LINK)

The Tim Ferriss Show (podcast): #421: Dr. Jane Goodall — The Legend, The Lessons, The Hope (LINK)

Howard Marks Memo: Knowledge of the Future

Link to Memo: Knowledge of the Future

Read Howard Marks's latest memo, in which he discusses the notion of making informed guesses regarding the future and shares his questions about re-opening the U.S. economy and the latest Federal Reserve moves to help the economy combat the coronavirus.

Howard Marks Memo: Calibrating

Link to Memo: Calibrating

The most important thing for an investor is to set the right balance between offense and defense. Today Howard Marks no longer feels defense should be favored. Find out why in his latest memo, Calibrating, in which he describes the importance of positioning portfolios in response to the environment.

Howard Marks Memo: Which Way Now?

Link to Memo: Which Way Now?

How should investors think about the economy and asset values when faced with unprecedented uncertainty surrounding the effects of the coronavirus and a complete absence of guidance from analogies to the past? Read Howard Marks’s latest memo, in which he lays out the views of both the optimist and the worrier.

Links

CNN coronavirus town hall Part 4: Bill Gates explains why he sounded the alarm about an impeding pandemic in 2015 and lessons the US can learn from responses in other countries. (video) (LINK)

Ed Yong was on both the Social Distance podcast and the Reset podcast discussing his article, "How the Pandemic Will End," and other things.

Wounds Heal, Scars Last - by Morgan Housel (LINK)

Steve Bregman on What to Make of the Market Right Now (audio) (LINK)

Oaktree Conversations with Portfolio Managers - Emerging Markets (video) (LINK)

The Oil Glut Is Filling Up the World’s Supertankers Fast (LINK)

Policy in a World of Pandemics, Social Media and Passive Investing (LINK)

Yaron Brook Interviews: Matt Ridley on his New Book -- How Innovation Works (video) (LINK)

A Spur to the Biotech Century Ahead - by Walter Isaacson ($) (LINK)

Carolina Stories with Steve Vafier (podcast): 2: Mills Snell – Learning in the Trenches (LINK)

Client-Only Memo from Howard Marks: "Latest Update"

Link to Memo: Latest Update -- March 19, 2020

After giving our clients a few days to digest it, we’d like to share this memo from Thursday with all of our readers. We hope you’ll find it helpful.

Links

Oaktree Relative Value Conversation with Howard Marks, Armen Panossian, Madelaine Jones and Justin Guichard (video) (LINK)

Seth Klarman Sees Bargains, Baupost Seeks More Capital During Chaos (LINK)

A Simple Investing Playbook for the ‘Great Cessation’ - by Jason Zweig ($) (LINK)

OSAM Update: Blizzard, Winter, or Ice Age (LINK)

Compaq and Coronavirus - by Ben Thompson (LINK)

Denmark Has a Message for America: ‘Do More—Fast!’ (LINK)

Ryan Holiday: "Stillness is the Key" | Talks at Google (video) (LINK)

NPR Short Wave Podcast: Why Is The Coronavirus So Good At Spreading? [w/ Ed Yong] (LINK)

10 Things You Should Know About WWII [H/T @wolfejosh] (LINK)

Links

I've been a bit behind on other reading as I've been trying to both take advantage of current volatility as well as make sure clients at Sorfis Investments have portfolios that I think will be well situated for the next 5-10 years. There is plenty of uncertainty and risk right now—both as it relates to one's physical and financial health—but there are also undervalued businesses out there with good balance sheets that will be more valuable 5, 10, and 20 years from now. 

Note: This is my opinion and not a recommendation to buy or sell a security. Please do your own research before making an investment decision.

*****

"It was psychologically painful in 1999 to give up making money on the way up and to expose yourself to the career risk that comes with looking like an old fuddy duddy. Similarly today, it is both painful and career risky to part with your increasingly beloved cash, particularly since cash has been so hard to raise in this market of unprecedented illiquidity. As this crisis climaxes, formerly reasonable people will start to predict the end of the world, armed with plenty of terrifying and accurate data that will serve to reinforce the wisdom of your caution. Every decline will enhance the beauty of cash until, as some of us experienced in 1974, ‘terminal paralysis’ sets in. Those who were over invested will be catatonic and just sit and pray. Those few who look brilliant, oozing cash, will not want to easily give up their brilliance. So almost everyone is watching and waiting with their inertia beginning to set like concrete. Typically, those with a lot of cash will miss a very large chunk of the market recovery. There is only one cure for terminal paralysis: you absolutely must have a battle plan for reinvestment and stick to it." --Jeremy Grantham, March 2009 ("Reinvesting When Terrified")

Two Things We Know With High Confidence - by Morgan Housel (LINK)

A Viral Market Meltdown III: Pricing or Value? Trading or Investing? - by Aswath Damodaran (LINK)

Why Are Markets So Volatile? It’s Not Just the Coronavirus. ($) (LINK)

Howard Marks says the market is ‘pricing in a bad scenario’ and there is value for investors (video) (LINK)

FPA Crescent Fund: First Quarter Preliminary Update (LINK)

Lux Capital memo on the Coronavirus (LINK)

How small businesses can cut expenses (LINK)

Bernanke and Yellen: the Federal Reserve must reduce long-term damage from coronavirus ($) (LINK)

The Surreal Weekend (LINK)

America’s Restaurants Will Need a Miracle - by Derek Thompson (LINK)

Amazon Prioritizes Medical Supplies, Household Staples From Merchants Amid Coronavirus ($) (LINK)

Detroit Car Makers to Temporarily Close U.S. Plants Over Virus Concerns ($) (LINK)

Costco Buys Logistics Firm From Sears Owner for $1 Billion ($) (LINK)

The U.K.’s Coronavirus ‘Herd Immunity’ Debacle - by Ed Yong (LINK)

The Patients Who Can’t Have Surgery Because of the Coronavirus - by Sarah Zhang (LINK)

Defining Information - by Ben Thompson (LINK)

Invest Like the Best Podcast: Dan Rasmussen – Investing Through a Crisis (LINK)

The Acquirers Podcast: Steady Hands: How the leaders of four SME businesses are weathering the Coronavirus storm (LINK)

a16z Podcast: Labs for Diagnostics: Then, Now, and Next (LINK)

Acquired Podcast: The Top 10 Acquisitions of All-Time (LINK)

The James Altucher Show (podcast): 560 - Critical Coronavirus Update: The BEST and The WORST Case Scenarios with Johns Hopkins Dr. Marty Makary (LINK)

Why Americans Are Dying from Despair - by Atul Gawande (LINK)

Howard Marks on how to detect and respond to market cycle extremes...

From Mastering the Market Cycle:

Finally in discussing how to detect and respond to market cycle extremes, I want to return once more to the widespread panic that followed the bankruptcy filing by Lehman Brothers in September 2008. 

Although the sub-prime mortgage crisis originated in a small corner of the financial and investment world, the impact was soon felt widely, particularly by the financial institutions that had underestimated the risk in mortgage backed securities and thus invested too heavily in them. As a result of the threat to these essential institutions, the impact metastasized to the stock and bond markets in all countries—and then to economies all around the world—in the form of the Global Financial Crisis. 

Thus, as I described earlier, money market funds and commercial paper had to be guaranteed by the U.S. government. A number of prominent banks and financial institutions failed or had to be bailed out/rescued/absorbed. No one knew how far the carnage would spread. The equity and debt markets collapsed. Now the generalizing was on the negative side: “the financial system could totally melt down” in a vicious circle without end. 

Since the generalizations were on the downside, the error-making machine went into reverse. No greed, only fear. No optimism, only pessimism. No risk tolerance, only risk aversion. No ability to see positives, only negatives. No willingness to interpret things positively, only negatively. No ability to imagine good outcomes, only bad. Thus we reached the day on which I had the discussion mentioned back on pages 131–132, in which the pension fund head was unable or unwilling to accept that any assumption regarding possible defaults could be conservative enough. 

What was the essential observation? Here’s what I wrote in “The Limits to Negativism” (October 2008): 

Contrarianism—doing the opposite of what others do, or “leaning against the wind”—is essential for investment success. But as the credit crisis reached a peak last week, people succumbed to the wind rather than resisting. I found very few who were optimistic; most were pessimistic to some degree. Some became genuinely depressed—even a few great investors I know. Increasingly negative tales of the coming meltdown were exchanged via email. No one applied skepticism, or said “that horror story’s unlikely to be true.” Pessimism fed on itself. People’s only concern was bullet-proofing their portfolios to get through the coming collapse, or raising enough cash to meet redemptions. The one thing they weren’t doing last week was making aggressive bids for securities. So prices fell and fell, several points at a time—the old expression is “gapped down.” 

The key—as usual—was to become skeptical of what “everyone” was saying and doing. One might have said, “Sure, the negative story may turn out to be true, but certainly it’s priced into the market. So there’s little to be gained from betting on it. On the other hand, if it turns out not to be true, the appreciation from today’s depressed levels will be enormous. I buy!” The negative story may have looked compelling, but it’s the positive story—which few believed—that held, and still holds, the greater potential for profit. 

At this market cycle extreme, all the news truly was negative . . . and certainly not imaginary. The only questions I received were “How far will it go?” and “What will be the effects?” Given that asset prices reflected nothing but abject pessimism regarding these things—I’d say near-suicidal thinking—the key to profiting lay in recognizing that even in the face of uniformly bad news and a very poor outlook, pessimism can be overdone, and thus assets can become too cheap. 

It was the excessiveness of the prevailing pessimism that led me to write “The Limits to Negativism” at the credit market’s low ebb in October 2008. In it I pointed out, as mentioned in the chapter on attitudes toward risk, that the superior investor’s essential skepticism “calls for pessimism when optimism is excessive. But it also calls for optimism when pessimism is excessive.” That variety of skepticism was totally lacking in the market’s darkest days, of course. 

Shortly after Lehman’s bankruptcy filing on September 15, 2008, Bruce Karsh and I reached the conclusion that (a) no one could know how far the financial institution meltdown would go, but (b) negativity was certainly rampant and very possibly excessive, and assets looked terribly cheap. Thinking strategically, we decided that if the financial world ended—which no one could rule out—it wouldn’t matter whether we’d bought or not. But if the world didn’t end and we hadn’t bought, we would have failed to do our job. 

So we bought debt aggressively. Oaktree invested more than a half a billion dollars a week over the fifteen weeks from September 15 through the end of the year. Some days we thought we were going too fast, and some days too slow; that probably meant we had it about right. The world didn’t end; the vicious cycle of financial institution implosion stopped with Lehman Brothers; the capital markets reopened; the financial institutions came back to life; debt was again able to be refinanced; bankruptcies turned out to be very few relative to history; and the assets we bought appreciated substantially. In short, paying heed to the cycle was rewarded.

Links

"Our model is a seamless web of trust that’s deserved on both sides. That’s what we’re aiming for. The Hollywood model, where everyone has a contract, and no trust is deserved on either side, is not what we want at all." --Charlie Munger (2009)

Howard Marks on Bloomberg TV discussing his latest memo (video) (LINK)

Sam Zell on CNBC (video) (LINK)

The End of Pay-TV - by Matthew Ball (LINK)

How To Manage Change (LINK)

Value Investing with Legends Podcast: David Samra - Leveraging Fundamentals to Remain Relevant (LINK)

One Doctor’s Life on the Coronavirus Front Lines. ‘If We Fail, What Happens to You All?’ ($) (LINK)

Coronavirus: The Black Swan of 2020 - Sequoia Capital Publication (LINK)

Scott Adams and Naval Ravikant talk about Coronavirus (video) (LINK)

The Tim Ferriss Show (podcast): #413: Tyler Cowen on Rationality, COVID-19, Talismans, and Life on the Margins (LINK)

Freeman Dyson’s Letters Offer Another Glimpse of Genius (LINK)

Howard Marks Memo: Nobody Knows II

Link to Memo: Nobody Knows II

I wrote most of this memo over this past weekend, on the heels of the tumultuous seven-day correction.  But I couldn’t get it out on Monday, and that day the S&P 500 rallied by 4.5%, or 135 points, for the biggest point gain in its history.  I just can’t update it daily to take into account every rise or fall (or rate cut).  And my real goal – as usual – is to suggest how to think about developments, not to say “buy” or “sell.”  So please read this memo as of Sunday afternoon – whatever the markets have done since – and let me show how I assess the recent events.

Links

Lucky Problems (LINK)

Controlling the Pendulum of Emotions - by Ian Cassel (LINK)

Charles Schwab on The David Rubenstein Show (video) (LINK)

Roblox Valued at $4 Billion as Investors Bet on Future of Gaming ($) (LINK)

Andreessen Horowitz leads investor group in latest $150 million funding round for popular videogame hub

Up to 91% More Expensive: How Delivery Apps Eat Up Your Budget (LINK)

Infinite Loops Podcast: Jim Chanos – Financial Frauds and Manias: Past, Present, Future (LINK)

The Tim Ferriss Show (podcast): #412: Josh Waitzkin on Beginner’s Mind, Self-Actualization, and Advice from Your Future Self (LINK)

Alfred North Whitehead’s Awe-Inspiring Focus (LINK)

Roger Lowenstein reviews the book Dark Towers [H/T @pcordway] (LINK)

The introduction to Peter Zeihan's latest book, Disunited Nations (LINK)

Matt Ridley: Officially Introducing My Latest Book, "How Innovation Works" (LINK)

Links

"One of the most notable behavioral traits among investors is their tendency to overlook negatives or understate their significance for a while, and then eventually to capitulate and overreact to them on the downside.  I attribute a lot of this to psychological failings and the rest to the inability to appreciate the true significance of events. As negatives accumulate – whether they surface for the first time or just are finally recognized as significant – eventually a time comes when they can no longer be ignored, and instead they come to be treated as being of overwhelming importance." --Howard Marks ("On the Couch," January 2016)

Amazon Empire: The Rise and Reign of Jeff Bezos (video) (LINK)

FRONTLINE examines Amazon CEO Jeff Bezos’ ascent to power and the global impact of the empire he built. The film also investigates the darker side of the company’s rapid growth, and the challenge of trying to rein in the power of the richest man in the world.

Summary version of the Credit Suisse Global Investment Returns Yearbook 2020 (LINK)

Email Addresses and Razor Blades - by Ben Thompson (LINK)

Brent Beshore interviews Trish Higgins and Will Thorndike at Capital Camp 2019 (video) (LINK)

This is Not 1999 - by Eric Cinnamond (LINK)

Leithner Letter No. 245-248 (26 March – 26 June 2020) (LINK)

A Viral Market Meltdown: Fear or Fundamentals? - by Aswath Damodaran (LINK)

Invest Like the Best Podcast: Niko Canner – Become a Perfect Instrument (LINK)

Planet MicroCap Podcast: 109 - Boring is Beautiful with Brent Beshore, Founder and CEO of Permanent Equity (LINK)

Trailblazers with Walter Isaacson (podcast): Theme Parks: Where Tech Meets Thrills (LINK)

Hidden Forces Podcast: Market Nihilism: Price Discovery in a World Where Nothing Matters | Ben Hunt & Grant Williams (LINK)

Edge #566: Waiting for "The Final Plague" - A Talk with Nathan Wolfe [January 2009] (LINK)

You’re Likely to Get the Coronavirus - by James Hamblin (LINK)

Most cases are not life-threatening, which is also what makes the virus a historic challenge to contain.

Book of the day: Spillover: Animal Infections and the Next Human Pandemic - by David Quammen

"Those who have knowledge don't predict. Those who predict don't have knowledge." --Lao Tzu

Links

Howard Marks on investor psychology during coronavirus fears (video) (LINK)

How to Write Usefully - by Paul Graham (LINK)

100 Little Ideas - by Morgan Housel (LINK)

Finite and Infinite Games: Two Ways to Play the Game of Life (LINK)

What the E*Trade Deal Tells You About the New Investing Game - by Jason Zweig ($) (LINK)

13 Metrics for Marketplace Companies (LINK)

The Future Will Be Genetically Engineered (LINK)

Exponent Podcast: 181 — Competing with Spotify and Regulating Acquisitions (LINK)

Related article: "The Daily Update Podcast"

Venture Stories Podcast: Scaling and Network Effects with Anu Hariharan (LINK)

Highlights from Matt Ridley's reddit AMA (LINK)

Why have so many of our recent viruses come from bats? - by Matt Ridley (LINK)

The Strange Influence the Sun Has on Whales - by Ed Yong (LINK)