When everyone’s a genius, be intelligent

Yesterday I wrote “When it feels hard to listen to alternative views“, highlighting this passage:

“The willingness to believe crazy things increases when it feels like the world is dangerous and falling apart”

My post was about listening to people with differing views and how I seek to always listen to understand, even when the views of others seems very challenging for me to even listen to (eg Covid deniers, anti-vaxxers and others).

However, the blog the quote came from is not about that, it is from Morgan Hausel and about investing and the current mania phase of the markets and is titled: “When Everyone’s a Genius (A Few Thoughts on Speculation)“. As Morgan finished the piece: “Investing is not the study of finance. It’s the study of how people behave with money. And sometimes those behaviors are absolutely wild.”

The core theme of my writing is around # OpenLeadership, but as I often say: “leadership is about people, end of story”, so today I will talk about investing for a while, and, as I write, I feel it will develop some thoughts relevant to various other fields, including the simple act of understanding a topic and other people.

Shoeshine stock tips

We are in the “mania” phase of the bull market, reminding me of the story of Joe Kennedy being given stock tips while he was getting his shoes shined in 1929. More recently, by late 1999 almost everybody became an expert in investing. A bit like Kennedy in 1929, I sold out of the market in early 2000. Famously the NASDAQ (market for tech companies) hit 5000 on Mar 7, 2000 then crashed, taking fifteen years to reach 5000 again. Oh, and it is over 13,000 now, having double in the last three years. Hmm.

The stock market (particularly the US one) is particularly “frothy”, and within that, anything that can be labelled “-tech” is even more so. We are also seeing a trend of any “ESG” stocks being boosted beyond connection to what ESG actions they are really taken, plus many other areas of disconnect between the underlying value of the companies represented by those stock/share prices.

Some tips on investing in stocks and shares

It seems that right now I’m spending quite a lot of time talking to people about investments, as yes, in the mania phase everyone wants to invest. So, today I share a few simple investment tips for you that have served me well:

• ‘In the short run, the market is a voting machine but in the long run, it is a weighing machine.” ~Benjamin Graham. Put another way, in the long run the underlying intrinsic value of the companies you invest in will be reflected in the share price.
• Yes, that’s right, buying shares on market sentiment isn’t investing, it is trading, it is speculating. Instead, take your time to study the companies you are looking to invest in. Review their financial statements and forecasts, assess their sector, their competitive advantage. In short, do the work to form an opinion based on fact then invest
• Recently I set up a process for a young person I am mentoring on investments. In order for them to learn, we agreed they will invest a small amount in one company per month for the next twelve months. The conditions are that they intend to keep the shares in each company for at least five to ten years, and under no circumstances are they to sell any of them within the first twelve months of ownership. They can and will call me at any time as they are researching the companies, but they may not talk to me about the share price after they invest for at least a year. An investment mentee of mine gave me this process over thirty years ago and it got me into truly learning about the markets.
• Oh, and if you are interested in investing, two pieces of reading. First, visit the Berkshire Hathaway website and read the annual letters to shareholders that started in 1977 (and yes, I recommend all of them, starting at the beginning). The other piece of reading is “The Intelligent Investor” by Benjamin Graham. Yes, that is a lot of reading, but if you are investing, you are doing so for the long term, so start off by investing in your own understanding before you invest with your money
• Linked to this, buying Bitcoin, Tesla, Apple etc without doing research is not investing, it is trading and speculating. If you ask me for my thoughts on those and other “frothy” options, I’ll first ask you what your informed and researched opinion is before engaging in dialogue. If it is the moden equivalent of “I got a tip when i was getting my shoes shined”, I will politely request you do some research before engaging in dialogue.

When you read “tips”, I hope you weren’t expecting me to give you “shoeshine” tips on individual stocks 😉

Staying within my lane

Hmm, there is a link to yesterday’s blog here, in that I keep hearing so many expert opinions on virus spread, vaccines etc from people who “read it somewhere”, often veering into giving opinions on things such as the vaccine research and testing process. As for me, I leave that to the experts from, you know, nationally and internationally approved regulatory bodies.

Where i have opinions on the pandemic, I look to keep them to areas where I do have some deep understanding and expertise, such as behavioural science and mathematical modelling. Hey, if I veer beyond that, tell me, please (we all go outside our realm of what we know and understand in such crazy times!