TLDR
on learning and markets (+ random insightful quotes)
Hope everyone had a relaxing weekend. I took the Putnam math exam for the second time this weekend and confident I got a non-zero score (n=18 on problem A1)—results out in February, so we’ll see. (the Putnam’s median score is a 0 or 1 out of 120, lol)
I was on FaceTime with my Swedish grandmother the other day and after saying, “the more I learn, the more I realize I don’t know much,” she started laughing and showed me a poem her friend gave her. Written by Alf Henrikson, it goes like this:
Så länge man inget vidare vet, vet man att man vet.
När man vet lite mer så vet man att man inget vidare vet.
När man äntligen vet vad man inte vet vet man hur lite man vet.
in English:
As long as you do not know further, you know that you know.
When you know a little more, you know that you do not know further.
When you finally know what you do not know, you know how little you know.
With years of schooling, so many forget that the majority of one’s ‘learning’ starts after university—school is where U learn how to learn. “Lifetime learning,” as cliche as it sounds, is a survival mechanism—grow or die… so, follow your curiosity
Study hard what interests you the most in the most undisciplined, irreverent and original manner possible.1
I’ve always been interested in how markets move, trying to piece together the unending puzzle. As a kid, I read my father’s Economist papers and kept up by reading WSJ, geopolitics through Foreign Affairs, countless books, interviews on YouTube, and of course Twitter. I’ve filled notebooks with information—and yet I know less than 0.1%. How humbling.
With that said, here’s a recap of what I learned this past week in the markets:
Quotes from Charlie Munger’s last interview (Rest In Peace):
“I would have paid any amount to catch a 200-pound tuna when I was younger, I never caught one. And now if given the opportunity, I would just decline going… There are things you give up with time.”
“And I got unfair advantages in old age, the way I got unfair advantages in not old age and when they came, I just grabbed them. Boom, boom, boom.”
Write your obituary the way you want, then live your life accordingly.
“I basically believe in the soldier on system. Lots of hardship will come and you gotta handle it well by soldiering through. And… a few rare opportunities will come. You got to learn how to recognize them when they come and not [to] make too minor of a trip to the pie counter when the opportunity is available.”
To get what you want, deserve what you want. (from a different interview)
Interview with Chua Soon Hock (CEO/CIO of Asia Genesis Asset Management) (here)
slowing Chinese GDP growth parallels Japan’s slowing growth in the 1970s
when an economy matures from high to low growth, there’s a transition from lower to higher profit margin goods
higher profit margin goods leads to higher equity valuations, as ROIC rises
majority of the gains in Japanese equities began after 1970
high consumer deposit rates in China and low exposure/allocations into domestic equities
thus, 2024 onwards could be fertile grounds for Chinese equities*
*he did say (with a laugh): “every 5 years theres a Chinese bubble. [the Chinese] like to gamble” + high savings rates could show China’s citizens fear of the future—but eventually, capital will be invested, right?
USD/JPY
investing in Japanese equities (in 2023) was mostly a directional bet on USD/JPY
skeptical on strength of Japanese economy and suspicious of investment flows into Japanese “ski resorts” (and what not) because its a seasonal business (low CF) (+ hikers don’t spend much money)
(paraphrased): “You have to have a healthy respect for risk—be sensitive to risk”
Jamie Dimon
“We’ve had a little bit of drugs injected directly into our system called ‘fiscal stimulation,’ the largest we’ve ever had in peacetime… But there are drugs running through the system, and they create this kind of sugar high, and we’re in a sugar high.” (here)
‘s Substack and Twitter
follow + read their posts. and for the institutional investors reading, Citrini has a paid (and profitable) subscription, that’s worth looking at
In response to a tweet about “post trade analysis,” I learned:
“PnL is the best indicator you have. It’s visceral, immediate, and provides a true sense of how the market is moving and what it believes. It’s valuable not to discard that insight because of some sunk cost fallacy and to instead utilize it to your advantage.” (here) (memory of a goldfish)
“don’t short gold when real rates are collapsing” (here)
Kuppy’s Corner, Praetorian Capital
“Just think about how accretive it is to buy back your shares at a low-single-digit multiple of cash flow and a fraction of replacement cost of your assets.” (here)
Ken Griffin (paraphrased from various interviews)
“I need liquidity to monetize my ideas” / “Trading is how to monetize research”
“Think in distributions. The upside and downside range”
“TAM (total addressable market) matters!”
[Bitcoin] “A solution in search of a problem”
You never want to be in the position where you are forced to sell *reminisces of ‘08*
Some lessons I’ve learned over the years:
More variables in markets than U think. In high school, when I was trading crypto and FX in 2017, I thought markets were simple. I focused only on the dollar index (DXY: relative value of USD against a basket of other currencies, like Yen, Euro, etc.), a primitive “sentiment analysis” (a.k.a looking at Twitter/social media + post replies), using my own PnL to tell me if I was wrong or right, and “web-scrapers”/monitors to arbitrage ICO (initial coin offerings) on various exchanges—shoutout Parth. (If anyone’s interested, I still have a notebook with my trades and reflections from that time, lol.) I understood the bits and pieces, but that was only the tip of the iceberg.
With that said, one thing I’m confused about is how USD/JPY is still so high with both long term rates and oil falling so fast. I expected USD/JPY to reverse more, but maybe its just a sign of a structurally weak economy (+weak fiscal position)? Not sure. Or increased tensions globally leave investors wanting to hold USD, even if they receive less interest? Maybe the carry trade will just continue (until *actual* rate cuts)
*UPDATE from 7 Dec 2023: it seems the carry trade is beginning to wind down. few hrs after I posted, USD/JPY fell to 144 from mid 147s. Live learning!
The importance of liquidity. In 2017/2018, I remember being stuck with some random cryptocurrency (pretty sure it was EmberCoin, $EMB) and losing money because the order book on the exchange vanished. I couldn’t sell the cryptocurrency because no one wanted to buy it. In retrospect, it was a bad idea, but I learned an [expensive] lesson on market liquidity. We take liquidity for granted, but when times are rough, it’s not always going to be there. Remember, something is only worth what someone else is willing to pay for it.
(related quote: “It's liquidity that moves markets” — Druckenmiller:)
Portfolio management = an optimization problem. U need to have capital available to invest (when U have an idea), while not risking too much of your account per position—but U also have to size up on conviction (the paradox of portfolio management). U can neither rush into trades, nor get married to price levels. And, sadly, oftentimes the exact moment U have to “de-risk” (size down or get margin called) is the time when U should be sizing up.*
*like Oil today (6 Dec) what a time to buy!
It’s been interesting to see how all the markets are interconnected (and how intricate and transparent it really is). Every week I write, its clear how naive my writing was the previous week—but “knowledge” compounds, so as long as I keep writing, I’ll learn and learn
thanks again for reading
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Quote by Richard Feynman