Tag Archives: charlie munger

A string of worst evers

As the COVID19 deaths peak, in the first wave at least, across much of the developed world the narrative this week has moved to exit strategies. The medical situation remains highly uncertain, as the article in the Atlantic illustrated. A core unknown, due to the lack of extensive antibody testing, is the percentage of populations which have been infected and the degree of antibodies in those infected. What initially seemed to me to be a reasonable exit framework announced by the US has been fraught with execution uncertainty over the quantity and quality of the testing required, exasperated by the divisive ramblings of the man-child king (of the Orangeness variety).

The economic news has been dismal with a string of worst ever’s – including in retail sales, confidence indices, unemployment, energy and manufacturing. The number of turned over L shaped graphs is mind-blowing. And that’s only in the US! The exhibit below stuck me as telling, particularly for an economy fuelled by consumer demand.

In the words of the great Charlie Munger: “This thing is different. Everybody talks as if they know what’s going to happen, and nobody knows what’s going to happen.” The equally wise Martin Wolf of the FT, who penned an article this week called “The world economy is now collapsing” posted a video of his thoughts here. His article was based upon the release of the latest IMF economic forecasts, as below.

The IMF “baseline” assumes a broad economic reopening in the H2 2020. The IMF also details 3 alternative scenarios:

  • Lockdowns last 50% longer than in the baseline.
  • A second wave of the virus in 2021.
  • In the third, a combination of 1) and 2).

The resulting impacts on real GDP and debt levels for the advanced and emerging/developing countries respectively are shown below.

A few other interesting projections released this week include this one from Morgan Stanley.

And this one from UBS.

And this one from JP Morgan.

In terms of S&P500 EPS numbers, this week will provide some more clarity with nearly 100 firms reporting. Goldman’ estimates for 2020 compared to my previous guestimates (2020 operating EPS of $103 versus $130 and $115 in base and pessimistic) were interesting this week given the negative figure for Q2 before returning to over $50 for Q4. The “don’t fight the fed” and TINA merchants amongst the current bulls have yet to confront the reality of this recession for 2021 earnings where the fantasy of an EPS above $170 for 2021 will become ever apparent with time in my opinion. Even an optimistic forward multiple of 14 on a 2021 operating EPS of $150 implies a 25% fall in the S&P500. And I think that’s la la land given the numbers that are now emerging! We’ll see what this week brings…..

Stay safe.

Precarity or fecundity?

The title of this post suggests some apposite thoughts on the world but, as will become obvious later, this post is far from that. 2015 has been a good year for me professionally, if very busy at times. Investment wise, it’s been a “so what” year with valuations roughly where they were 12 months ago, although the strong dollar and pound have helped a slightly down year in local currencies for some fund positions. Markets enter 2016 in a state of uncertainty. Still, I can’t complain even though an early retirement due to my investing genius is as implausible as ever!

I did not get as much time as I had hoped this year for blogging with an average of just below 3 posts per month compared to 5 in 2014. Besides work, I did manage to spend some time this year reading a few books (I posted on Wolf’s book here and Mason’s book here). In fact, I am currently enjoying reacquainting myself with many of the words of wisdom of Charlie Munger in Tren Griffin’s book “Charlie Munger: The Complete Investor”. Munger’s views on continuous learning and being worldly wise can never be said often enough. This time around, Munger’s words on needing to test one’s thought process against multiple models to avoid torturing truth into a perceived reality have helped me in a number of cases recently. It has a Monty Pyton feel to it, but the internet is full of examples of the multiple models Munger may be referring to, although he rightly declines to give us the handbook for wisdom (now there’s a best seller!). This article from Griffin is one example.

Another pearl from the Sage is on what a waste of energy envy is. Munger says that “envy is a really stupid sin because it’s the only one you could never possibly have any fun at”. Now, that’s a motto for 2016!

Another book that I am hoping to read over the holidays is “Superforecasting” by Philip Tetlock and Dan Gardner which has been getting rave reviews. Tetlock’s previous work, such as that on foxes (know a little about a lot) and hedgehogs (know a lot about very little), has always been engaging.

One of my reading habits is to note down words which I am unsure of and then try and use them in the future. That explains the title of this post! A list of some of these words is below (and I may just spend my free time over the next few weeks trying to come up with some clever sentences to use them in for posts next year!!!).

  • Apposite: apt in the circumstances or in relation to something.
  • Sundered: split apart.
  • Vainglorious: vain, excessively boastful, swelled pride.
  • Progeny: a descendant or the descendants of a person, animal, or plant.
  • Insuperable: impossible to overcome.
  • Insouciant: showing a casual lack of concern.
  • Fecund: producing or capable of producing an abundance of offspring or new growth.
  • Hysteresis: the phenomenon in which the value of a physical property lags behind changes in the effect causing it.
  • Dissonance: lack of agreement or harmony between people or things.
  • Propitious: giving or indicating a good chance of success.
  • Strictures: a restriction on a person or activity.
  • Parsimonious: very unwilling to spend money or use resources.
  • Higgling: to bargain in a petty way.
  • Sublation: assimilate a smaller entity into a larger one.
  • Impermanence: not permanent or enduring; transitory.
  • Precarity: a condition of existence without predictability or security, affecting material and/or psychological welfare.
  • Dialectial: relating to the logical discussion of ideas and opinions; concerned with or acting through opposing forces.
  • Confected: make (something elaborate or dainty) from various elements.

I did warn at the beginning of this post on its content…..

I really just wanted to wish all readers a great holiday and to thank you for your time and support this year.

Happy Christmas.