The Psychology of The Female Investor (case study of 1)
"Investing in stocks is an art, not a science, and people who've been trained to rigidly quantify everything have a big disadvantage." - Peter Lynch
“I don’t think I am a good ‘science’ brain - I think I am a good ‘philosophy of science’ brain”, said Tim Minchin, recently on The Origins Podcast with Lawrence Krauss.
Minchin’s idea struck a chord with me immediately. That’s exactly how I feel about investing! If I’m being honest - my brain doesn’t really enjoy the hunt for wonderful companies at fair prices; being an investor. No - my brain enjoys understanding how the wilderness works, which the hunt occurs within; analysing investing.
My soulmate welcomed me to the wonderful world of investing, though it took the poor guy a really long time. He’s persistent, and should quite frankly be the mould for men should God/Aliens/Simulation Tech’s ever wish to step in and fix anything.
He first introduced me to the legendary trio of Buffett, Munger and Graham. It’s the greeting I would wish upon everyone. Value investing; is to investing - what cricket; is to sport. Refined. Intellectual. Strategic. The gentleman’s choice.
Everyone needs to know how to calculate value
It keeps your portfolio tethered to reality. And ladies - please; unless you all start going for guys who are less jacked than our economy, I’m going to say calculating value might not be our strong point. Net asset value, cashflow, dividends, compounded annual growth rate - these should be some of our favourite things - in an investment and in a man.
I wish I could inhale 10-K’s and annual reports like Buffett. But my monkey mind is constantly distracting me to “zoom out dude…zoom out!”. In the space of 5 minutes, a tidal wave of questions have hijacked my neural pathways, when I should be DCF’ing I’m lost on a thought tangent about where the numbers on this cashflow have travelled through, other businesses, other industries, other countries.
All I want to do is get to the ending to find out how it all works. Impatience, I’m working in it.
That’s where macro economics has become a love. It just so happened, that when I began learning about economics for the pleasure of it, not for the objective of profiting from it - the hunt was transformed into berry picking. And I love berries.
This is where Minchin’s “Philosophical Scientist” meets my “Philosophical Investor”
Macro economics gives you a birds eye view of the marketplace you’re invested in. Sure, if you’re 80% in micro caps and nimble (good luck on the volatility guys), macro might be a total waste of time; but for most asset classes I would say macro can impact from a little, to a lot.
You can refine your circle of competence down to areas of the market where you can foresee a significant tail wind propelling the industry. US Cannabis would be a good example; which I may delve into in a future article. Macro gives you an ability to pick winners and losers from a broader perspective of the playing field. An overview; of the players, the cycles, the disruptions and ultimately, who you’re invested alongside:
Currencies / Commodities / Geo-Politics / Trade Wars / Debt Cycles / Elon Musks Twitter Feed
The global markets are in constant flow with each other, and if you begin to learn how the flow of money generally behaves; then you might stumble upon some better fishing spots, to fish for your wonderful companies at fair prices.
That’s where value investing comes right back in for the practical use which I value it the most for - picking plump ripe berries over mushy bruised ones in the wilderness I’m constantly trying to learn how to read.
Bonus Round: A Random Interesting Thought…
Simple words are so incredibly refreshing. Intelligent people don’t use them enough.
Simple words communicate ideas clearly. The greater the value of your idea, the clearer you should want it to be, and, the simpler your words should get. If this principle was a golden nugget - it would live in a stream where Philosophy meets Mathematics, rivers feeding back into our mother ocean, Science.
Another nugget: People who speak florally and fast, generally do so, to not grant you the time to grasp what they’ve just said.
Never be embarrassed to ask simple questions. If its met with opposition, you’ve likely just found yourself a slick-talker not a deep-knower - hoping you’ll accept their words based on confidence alone.