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Investors Therapy #6: Staying cool, what's wrong with financial statements, difference between a cycle and bubble, and much more!

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Hey Investors, Every now and then, one of your stock investments will run into trouble. For any of a
 

Investors Therapy

April 29 · Issue #6 · View online
Investors Therapy is a newsletter 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!

Hey Investors,

Every now and then, one of your stock investments will run into trouble. For any of a variety of reasons, the market will turn on it and assume the worst. The business press will begin to write doom and gloom pieces, and Wall Street analysts will begin the downgrade drumbeat. It’s very easy to get swept into this fervor. But you need to keep yourself calm and ask yourself the right questions before making any investment decisions based on this activity.
During these times, you must ask yourself the following questions:
  • Will anyone care about what happened 1 year from now? How about 5 years from now? Or 10 years from now?
  • Has the company’s core offering been permanently damaged by this event?
  • The company’s product serves a fundamental need for its customers. Has that fundamental need gone away? (McDonald’s serves hamburgers, but on a fundamental level, it provides calories to humans so we can fulfill our caloric need. Starbucks provides expensive coffee, but on a fundamental level, it satiates our desire for a caffeine boost to get us through the day.)
  • Has a competitor come into the market and found an irreplicable way to serve your company’s customers at a much cheaper price while maintaining similar or higher service standards?
  • Do the vocal people who are canceling their memberships or swearing off of the company’s products speak for the majority of users, or are they a vocal subgroup of the whole? Of those who are vocal, how many have actually followed through on their declarations? For the majority of users, how many are aware of what’s going on? And how many them actually care?
These can be tough questions to answer, but it’s well worth the mental exercise to do so before you make any financial decisions following a shift in public opinion. You may very well find that the public spotlight gets pushed to a new target in a few days or weeks and people forget all about whatever issue befell this company.

Cheers,
Jordan



How most of us learned econ.
How most of us learned econ.
Investor Psychology
Decision Making – The Waiter's Pad
The Difference Between a Bubble and a Cycle · Collaborative Fund
Paradox Of Skill
Why So Many High-Profile Digital Transformations Fail
Stocks
Amazon Shareholder letter
Why Financial Statements Don’t Work for Digital Companies
The Easy Pickings
Headline Risk
The Scale Anticipation Fallacy – Andreessen Horowitz
Startups/VCs
Jeff Bezos convinced 22 investors to back his new company Amazon in 1994. Their returns? Mind-boggling | South China Morning Post
The Importance of Time Value of Money for Startups
Economy
Why the Automation Boom Could Be Followed by a Bust
America’s new great migration in search of lower property taxes - MarketWatch
Freddie Mac: Boomers, Gen Xers less interested in buying a home | 2018-04-04 | HousingWire
Real Estate
Zillow Group will start buying and selling homes, taking on Opendoor and expanding real estate footprint – GeekWire
California rent-control limits repeal set for November election. - Curbed SF
Multifamily Strength, Affordability Issues to Persist in 2018: Freddie Mac
California tax break measure could help ease state's housing crunch
As Storms Get Stronger, Building Codes Are Getting Weaker - Bloomberg
10 Lethal Mistakes to Avoid on Your First Real Estate Investment
This cheap 3D-printed home is a start for the 1 billion who lack shelter - The Verge
Careers, Society, and Personal Development
The Big Sort | The Economist
The League and other selective dating apps may worsen inequality - Bloomberg
Understanding Speed and Velocity: Saying "NO" to the Non-Essential
On Analog Social Media - Study Hacks - Cal Newport
Some Thoughts on "Cradles of Eminence: Childhoods of More Than 700 Famous Men and Women" - Intelligent Fanatics
Cisco commits $50 million to Silicon Valley homelessness crisis - Business Insider
North Korea's 'biggest' export - giant statues - BBC News
A Moelis & Co staffer sent a brutal email to colleagues - Business Insider
Weekly Thoughts: Successories | Chenmark Capital Management
Watch/Listen
Nassim Taleb Says Investors Need 'Insurance' From Market Drops - YouTube
Thanks for reading this month's reading list
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