Let me tell you a real life story, something that happened last week.

Settle down and read

There is this older promoter with a family office I met last week and he said, "Devinaji, 2-3 years ago when PMS fund managers used to meet me they used to tell me that the main
1/ benefit of investing in a PMS scheme came from a concentrated portfolio of 15-20 stocks.

Ab vahi log aakar mujhe kahte Hain ki 45-50 stock ka portfolio hona chahiye.

Aap bataiye: kya badal gaya in do saloon mein?"

And I told him, "Only one thing has changed...
2/

Everyone wants to emulate RJ...or at least his results😊

One line that stood out from the book
"Not every year I make money. I make money in spurts, like 1989-92, 2003-07, 2009-11

In 1994-99 I would'nt have made any trading income"
- Rakesh Jhunjhunwala

If you...
Thread 🧵
1/ ...internalise one RJ superpower, this is it!

To understand & act on the fact that stock market returns are lumpy

If you remain disciplined through downturns, or frustrating sideways moves which can go on a long time when you're living through them, you'll be way way ahead

2/

Finally finished 'Noise' by Daniel Kahneman's, Cass R. Sunstein and Olivier Sibony...Yoo Hoo

It goes right beside his earlier 'Thinking Fast and Slow' as being among the best books I have ever read.

Each chapter is almost as good as a normal non fiction book...

1/ ...which is the reason it took time to finish.

One key takeaway:
A well designed algorithm/ rule-based system will almost always beat a so-called experienced expert in any area of human enterprise that requires judgement.

2/

The questions I get asked on SVB are: 
What really happened?
How did US regulators react & why?
Does it have any implications for the Fed rate & markets?

I'll try to explain it in very simple language with no tables, graphs & as little jargon as possible.

Settle down to read
1/ The beginning of the end for SVB started with an old-fashioned bank run - something I learnt about literally at my mother's knee.

I remember my mother explaining a bank run to me when I was way down in school (For context, she's a postgraduate in Economics)

2/

Since we're in the Budget month, the research team @firstglobalsec looked at historical patterns in Indian govt finances

Why's it important?
Interest (& salaries) are the inflexible parts of expenditure

Only what's left can be used for social spending or capex

Let's dive in
1/ First the big picture on the government debt

As a percentage of GDP, govt debt which used to be in the low 40s in 1982/82 rose up to 64.5% in 1991(the economic crisis)
Slowly came down to ~57% in 99 when it started to rise again

Reached another peak of 67-68% in FY03 & FY04
2/

Seen investing principles that're supposed to make investing simple & profitable?

One of the favourites:"Buy monopoly businesses. Buy the largest company in the sector - the strongest brand. You can't go wrong."

But is it really the truth?

A thread to explain
Read carefully
1/ What does history show?

Remember Nokia, Kodak, BlackBerry (RIM) - dominant businesses where magazine covers used to be about whether anyone could ever catch up with them. Where are they now?

You may say that this is the nature of tech businesses. But it isn't that simple.

2/

We all know by now Prof @AswathDamodaran 'fair value' calculation of Rs.948 per share for Adani Enterprises

Here's what happens if you vary the assumptions

If Cost of capital increases from 10% to 12% (logical as Risk free yields are 7.3% in India), the value drops to 645(1/6) Prof. Damodaran himself mentions an equity risk premium over risk-free rate of 4.5%
So 12% appears logical even without accounting for the fact that infrastructure projects have more uncertainty & typically higher risk premium

Cost of capital = Risk-free rate + Risk Premium(2/6)

India has more than 1.5 lakh people dying each year in road accidents

Suppose all vehicles are changed to self driving ones & the death toll reduces to 50,000

What'll newspaper headlines be?

Think before you scroll down the thread

And yes, it has to do with investing too(1/7) Will the headlines be, "Self driving vehicles reduce death toll by two thirds"

Or will they be, "Self driving vehicles kill 50,000 Indians every year"

My guess is, it will be the latter

And this is a paradox that Daniel Kahneman talks about in his latest book, Noise (2/7)

I tweeted that an indicator that had historically forecast a US recession is now on

Q I get: Should I now steer clear of US markets?

In India the story is that the economy is booming & hence the mkts look great

But the economy & markets are different animals

A thread 🧵 (1/n) There is no one to one correlation between the economy of a country and its stock market - more so not in the same time frame.

At the minimum,there are leads and lags.

Plus there are many other adjustments to be made.

Simplistic predictions don't work. Neither do stories(2/n)

Here's a cheat sheet on how to get to your goals

This is from the Silva Method of Mind Control. Believe The Secret is similar

Tried and tested!

1. Go to the meditative state and visualize your goal (Financial abundance, great health, good relationship etc) whatever it is (1/6) 2. DO NOT think of the path to the goal as the route may be different from the one you think.

For example, my 2 extra marks for the IIM gold medal pushed me over the cutoff for my Bombay Stock Exchange membership - something that wasn't in my frame of reference at all (2/6)

Was asked about the best non-fiction I've read in 2020. A thread(no particular order) with micro reviews

1. The Halo Effect & Eight Other Business Delusions
- Phil Rosenzweig
Among the best on how our thinking fallacies derail us esp on cause and effect in business & Investing 2. Alchemy: The surprising power of ideas that don't make sense
- Rory Sutherland
Humans are less 'rational' than we think & hence 'illogical' advertising & mktg ideas can work brilliantly. See what works rather than trying to justify it.
@rorysutherland