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March 17 · Issue #5 · View online
Investors Therapy is a newsletter, from the Silicon Valley Investors Club (svinvestorsclub.com), that helps investors understand their psychology so they can make smarter investment decisions. If you're ready to take the next step in your investment journey, subscribe!
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Hey Tribe, When Buffet speaks you should listen. I want to highlight 2 excerpts from his annual shareholder’s letter.
…Our aversion to leverage has dampened our returns over the years. But Charlie and I sleep well. Both of us believe it is insane to risk what you have and need in order to obtain what you don’t need. …Despite our recent drought of acquisitions, Charlie and I believe that from time to time Berkshire will have opportunities to make very large purchases. In the meantime, we will stick with our simple guideline: The less the prudence with which others conduct their affairs, the greater the prudence with which we must conduct our own. When markets are booming, we hold onto cash while feeling great shame. So we must get rid of it as soon as possible because everyone else is making so much money. Yes, losing a small percentage of money ( purchasing power) hurts, but being knocked out of the game by losing all of your money is even worse. The name of the game is to stay in the game long enough so you can purchase assets that fit your criteria. No one can forecast when the corrections will happen, but you need to be in a position to act when they appear.Look at your cash as an oxygen canister needed for climbing Everest. At the base of the mountain, everyone has oxygen canisters and some people carry less because it’s a burden to lug those heavy things along. Some expect everything to go smoothly due to excellent forecasts and expertise of their guides, so they decide to carry just enough to get them up and down the mountain within 40 days. Others know things can get rough, so they will bear the burden of carrying an extra oxygen canister incase things don’t go as planned (source: see life). But when in you’re in the mountain’s “death zone” at 26,000 feet things change. The weather forecasts were off and now you’re suffering from a freak blizzard that extends your trip by another 10 days. You can barely breath due to the high altitude. Previously that extra oxygen tank was looked at as a burden, now it’s worth its weight in gold and you’ll thank your lucky stars you have an extra one. Am I saying hold all cash? No, but when you’re already heavily invested and new opportunities don’t meet your investment criteria, think twice before dropping your extra oxygen tank.
Cheers, Jordan
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A picture of me trying to understand technical analysis.
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Expectations vs. Forecasts · Collaborative Fund
“… If I expect recessions, I’m not surprised when they come. But since I don’t know when they’ll come, I won’t take any action in my portfolio that tries to navigate around the next recession. And those actions tend to be the root of most bad investment decisions for amateurs and professionals alike. There is no reason to forecast unless you’re going to take specific actions tied to that forecast. If you want to take fewer actions without being willfully blind to the future, just have expectations. It’s intellectual humility in an industry that doesn’t have enough.”
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The Narrative Fallacy and What You Can Do About It
Read this and learn about the Narrative Fallacy and why we should stop creating stories around events and what we can do instead.
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18 Cognitive Bias Examples Show Why Mental Mistakes Get Made
Here are 18 of the most common mental mistakes in business and investing. Make sure to learn from these cognitive bias examples to make better decisions.
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Warren Buffets Annual Share Holder's Letter
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Addicted to low rates, sending 2x4s, and a market update | Sacramento Appraisal Blog | Real Estate Appraiser
The market feels addicted to low interest rates. So what’s going to happen when rates rise? Let’s travel back to the late 70s for some insight and consider a few thoughts. Then I have a huge local market update for those interested. A few thoughts about interest rates: 1) Addicted: We have a market that feels addicted
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I've Been an Entrepreneur Since the '90s—And I Think I've Finally Found the Perfect Investment. Hear Me Out.
This investment isn’t a fad. It isn’t cyclical. And I believe this multi-generational wealth creation vehicle will impact my children’s children.
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How Complex Systems Fail
The complexity trap and what causes it.
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Tennessee Williams – The Catastrophe of Success | Genius
This winter marked the third anniversary of the Chicago opening of “The Glass Menagerie,” an event that terminated one part of my life and began another about as different in all
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Labor 2030: The Collision of Demographics, Automation and Inequality - Bain & Company
“The benefits of automation will likely flow to about 20% of workers—primarily highly compensated, highly skilled workers—as well as to the owners of capital. The growing scarcity of highly skilled workers may push their incomes even higher relative to lesser-skilled workers. As a result, automation has the potential to significantly increase income inequality and, by extension, wealth inequality. For countries entering the 2020s with a relatively low level of income inequality, where demand growth does not already constrain supply growth, the widening divide may be easier to manage. But the two largest economies in the world—the US and China—have levels of income inequality at or near their historic peaks. Automation will likely further raise inequality.”
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Working At one of China's Largest Factories
What it’s like to work in a company town located in China.
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Recently, I revamped our Silicon Valley Investors Club to allow all current or former tech employees to join, regardless of their current location or employer. Membership Benefits:
- Each day, a story related to investing will be posted to the group’s Facebook page to serve as a jumping-off point for in-depth, quality discussions among like-minded investors.
- Meet tech employees from major tech companies to learn how they invest and what you can do to become a better investor.
- Gain access to our exclusive in-person meetups to network and learn from other investors.
- Access our Real Estate Investors Toolbox and referral generator that has helped thousands of investors analyze real estate investments and connect with real estate investing professionals.
- And last but not least, all of this is free!
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