April 2023 'If someone took control of your life tomorrow, what's the first thing they would change?' - James Clear
Tuesday 4th April 2023
Today the RBA left interest rates at 3.6% this month.
ASIC reported 549 companies in liquidation or administration in March, up 23% on 12 months ago. I’ve not been tracking this so I don’t know if this is typical or another media beat up. Intuitively it seems high.
Thursday 6th April 2023
With interest rates in a rising cycle, there’s discussion around getting a 4% return in the bank with no fluctuation of capital. Over time my view is who’s to say what anyone else should do with their money. I share these updates to keep myself accountable in real time and hopefully others might find some value in what I’m sharing.
The nerd in me gets excited when I find data such as this. The main reason being ‘recency bias’ has such a strong influence on people's thoughts and behaviours. Stepping back for a wider view is often helpful.
…An Australian fund manager assembled stock market data going back to 1875, revealing some very valuable insights that reinforce the argument for investing in equities.
This is no mean feat because Australia hasn’t had a single dominant stock exchange for very long at all. The five state-based exchanges only merged to become the ASX in April 1987, which means obtaining a reliable proxy for a single Australian market index going back another almost 100 years is especially difficult.
Assuming the data is reliable, one of the very encouraging findings is that the average return investing in any 10-year period since 1875 is 179 per cent, and the average return from investing in any 20-year period is 678 per cent. Think about that for a moment, if you had invested at any point and left the investment alone for 20 years, your average expected return would be nearly seven times your original investment.
And some of you might be thinking “I don’t have 20 years!”
But irrespective of your age, you should invest with that kind of time frame in mind because the stock market doesn’t care how old you are. It rewards the right behaviours irrespective of age.
Tuesday 11th April 2023
I recently learnt of the longest running study on happiness which kicked off 85 years ago in 1938. Long story short they’ve found the depth of our relationships play an enormous role in our happiness throughout life.
What’s this got to do with investing?
Everything! Returns are secondary to the people we surround ourselves with. And while it’s known that money can’t buy happiness, it certainly can remove some problems from our lives.
Naval Ravikant’s quote ‘a calm mind, fit body and a home full of love can’t be bought. They must be earned’ ties in wonderfully here. I know I mention it often and there’s a high probably that’s not going to change anytime soon.
I caught up with my mate Matt today who got introduced to investing early in his life from his grandfather. We talked about the challenge of holding on to businesses (shares) that do well long term. It’s a valuable insight because unless you’ve done it or are currently doing it, your height insight bias will cloud your understanding of the difficulty.
As an example, years ago a family friend bought CSL for around $10 and sold it at around $40 for a 400% gain. Today CSL is $301per share not to mention the fantastic growing dividend it’s paid for decades.
It’s SO EASY in height insight to say he should have held on to them.
Another mate bought Mineral Resources for $4 later selling them for $16. A fantastic 400% return. At the time of writing they’re trading at $72 per share and again in addition to the capital growth there’s the fully franked dividends that have been forfeited via selling.
These types of stories are endless.
Like I said, most people speculate how easy it is to hold onto for the long term, but Wall Street and the financial media’s job is to separate us from our money. In most cases they unfortunately do a great job.
If you search Project Passive you’ll find research that dead people tend to make the best investors, because they can’t do any emotional buying or selling. Assets are just left alone to do their thing.
There’s an entire industry out there that doesn’t want you to know that…
Thursday 13 April 2023
Australia's unemployment rate held steady at 3.5% in March. Historically one of the side effects of increasing interest rates is supposedly increasing unemployment. We’re yet to see this.
Friday 14th April 2023
I watched the Bernie Maddoff documentary series on Netflix recently. It’s a fantastic insight into human nature that as I continually mention, mainly to remind myself that it doesn’t change.
Two other behaviours that went out the window for obvious reasons were:
- No investors asked questions when investment returns are out performing. But as soon as returns become compromised, everyone starts asking why! The same thing happens every time there is a legitimate correction in the market, but when things are going well there’s no questions and limited people seeking to understand why.
- Any thoughts of ‘revision to the mean’ were forgotten. Otherwise smart people seemed to think they would outperform forever. Again this happens all the time. Look at Carthy Woods funds over the last few years in the US or here in Australia check out the performance of Hamish Douglass Magellen fund. I have nothing against these people and they are far smarter financially than me, but to think any fund out performs the market indefinitely with no down years, you’d have to be delusional. Turns out there’s no shortage of delusional people.
Wednesday 19th April 2023
Apple has dipped its toe into the world of banking backed by banking giant Goldman Sacs, essentially avoiding the need to set up as a bank itself. It’s an interesting move with qualified savers receiving 4.15% interest on their money.
My mate Matt reminded me that the downside is it’s another kick in the guts for physical cash…
Thursday 20th April 2023
The RBA inquiry recommended setting up a money policy board to make interest rate decisions, meeting less frequently and the current RBA board to run banking as opposed to setting and commenting on interest rates.
Mentally I file this under the ‘I'm aware of it, but I cannot control it so I don’t worry about it’ category.
Wednesday 26th April 2023
Inflation here in Australia came in at 7% for the March quarter. While inflation is coming down, it’s far from where the RBA likes it to be. In my mind this means interest rates have not finished rising.
Check out this introduction to Noel Whittaker's newsletter today:
"The budget should be balanced, the Treasury should be refilled, public debt should be reduced, the arrogance of officialdom should be tempered and controlled, and the assistance to foreign lands should be curtailed lest Rome become bankrupt. People must again learn to work, instead of living on public assistance."
CICERO - 55 BC
Written 2078 years ago it might as well have been written today… Earlier in the update I mentioned the value in stepping back for a broader view. 2078 years certainly meets that criteria in my mind and is further evidence that some things never change!
Thursday 27th April 2023
I came across this little thread by Bob Loukas on Twitter. Couldn’t have said it better myself so I’ll quote him:
'How many big options do you have floating around? How many (varying chances of success) uncorrelated paths to success?
I think people are far too busy on one path where they’re better served exploring many lower effort, high impact possibilities.
I get the need to pay bills. Or focus on a primary source.
But people get so caught up in that slog, they burn so much unproductive time for little benefit. They forget to plant trees, build on compounding, alternative skill sets, invest spare time in networking and other ideas.
I'm a big believer in being involved in so many uncorrelated spaces that you have any genuine interest in. To tinker, explore, and learn. Through that exploration, connections are made, ideas are born, and opportunity arises.
if you're the best at one discipline, I get that. You're making it big there. But 99% of people are not there or their discipline has a capped upside.
So the more effort in that space only results in very marginal gain. You're best served using idle/extra capacity on an uncorrelated path.
Friday 28th April 2023
I can’t remember if I’ve already shared this. Even if I have, it's worth revisiting. James Clear who wrote Atomic Habits said: ‘Your entire life happens inside your body. It’s the one home you will always occupy and can never sell… everything is downstream from how your body is functioning’.
I suggest this may be the largest missing piece in our lives as we age. No one can outsource or buy doing the internal work and consistent physical work necessary throughout life for a calm mind, fit body and home full of love to quote Naval Ravikant.
No one can do your push ups for you. No one is coming to save you. If it’s to be it’s up to me.
Saturday 29th April 2023
Another quote, this time from Micro cap investor Ian Cassel via his Twitter a couple of days ago.
‘The worst part of investing is wishing time goes faster so you can get to your returns quicker only to be disappointed when you get there that you didn’t fully live in the present with the time you had. Live in the present. No one that loves you cares about your returns’.
It’s a valuable perspective. I’ve been guilty of such thinking for a short period of time myself.
This ties in perfectly with a quote attributed to His Holiness the Dalia Lama:
‘When asked what surprised him most about humanity he answered, man. Because he sacrifices his health in order to make money. Then he sacrifices money to recuperate his health. And then he is so anxious about the future that he does not enjoy the present. The result being that he does not live in the present or the future; he lives as if he’s never going to die and then dies having never really lived’.
Rounding out this topic Australian entrepreneur Mark Bouris shared an insightful realisation after selling his company Wizard Home Loans in 2004. He sold it for $500 million. After collecting his cheque in New York he went back to his hotel room, ordered a pizza and drank a beer from the bar fridge.
The moment was nothing like he thought it would be after all the years of hard work. Instead he realised the process or the journey of building the business is what was most special. The destination, while no doubt wonderful, was not the apex he envisioned.