I guess this should be titled “Best Things I’ve Read All (Two) Weeks” because I didn’t post last week due to reservist. Reservist is a pain but…No buts. It’s a pain.


books on bookshelves

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Why The Best Predictor of Future Stock Market Returns is Useless (Of Dollars and Data)

I was quite excited to learn about this indicator. The indicator in question is the American Association of Individual Investors’ Asset Allocation Survey. Apparently, selling out of stocks to get into 5-year treasuries brings about better returns with less drawdown. The problem, as highlighted in the article is lack of outperformance over a period of easily 2-4 years.

However, I’m adding it to my list of things to watch because, while I believe market timing is futile, it’s a good psychological indicator to know when investors are optimistic (i.e. they move a higher proportion of their portfolio into equities) and when they are pessimistic.

How To Stay in the Game (A Wealth of Common Sense)

A good reminder that it doesn’t matter even if you have the best strategy if the strategy includes the risk that you get wiped out. I can’t even count the number of wise people I’ve read that have cautioned against the use of excessive leverage because of the double-edged nature of leverage.

Here are two of the best:

“The market can stay irrational longer than you can stay solvent” – John Maynard Keynes

“My partner Charlie says there is only three ways a smart person can go broke: liquor, ladies and leverage,” he said. “Now the truth is — the first two he just added because they started with L — it’s leverage.” – Warren Buffett

Corporate debt growth has exploded – The added macro shock sensitivity creates real risks (Disciplined Systematic Global Macro Views)

I’ve been reading Dalio’s and Marks’ latest books and their description of credit cycles are probably as clear and accurate as it gets. Guess what happens in the late part of the credit cycle?

Anyway, head on over to the link for more details on U.S. corporates.


I read this via Minimalist In the City. I think most of the points made are extremely sensible and should be instructive for most people who want to live a reasonably good life.

My only gripe is whether the point about “being entitled” is accurate. I’ve seen people who don’t have much who hustle hard too. Maybe even harder than people who have more. Could it be a case where the people that hustle have a greater chance at social mobility and therefore, we sometimes confuse the cause and effect – that middle-class people hustle more?


Column: This is what happens when you take Ayn Rand seriously (PBS)

I must confess that in my undergraduate days, I believed strongly in the all-powerful nature of the free market. In recent years, I’m not so sure. After all, the free market can produce imbalances in market and political power that eventually cause itself to function less effectively than what is described in economics textbooks.

The Global Financial Crisis was a good example of how free-market ideals led to an asset bubble in the housing and banking sector which eventually imploded unto itself. The eventual salvation was a massive intervention that free-marketers would scoff at.

I’m not saying that the free market doesn’t work. What I’m saying is that we need to be careful in prescribing the free-market as a cure for everything. What’s important is making sure that market participants have the right incentives and are subject to the right checks and balances in order to ensure outcomes that are conducive for society.

I know. Easier said than done.