The Digest #61
Munger's Letter, BYD, Trust and Mistrust, The Value of Failure
"It’s dangerous to short stocks. Being short and seeing a promoter take a stock up is very irritating. It’s not worth it to have that much irritation in your life. We don’t like trading agony for money.”
Charlie Munger’s Letter to Daily Journal Shareholders, January 11, 2021. In a brief letter to shareholders, Charlie Munger provides an update on Daily Journal’s operations as well as a warning to those who expect recent appreciation in the company’s portfolio of marketable securities to continue. The company will hold a virtual annual meeting on February 24 and is accepting questions from shareholders. For information, videos, and commentary on the 2020 Daily Journal annual meeting, please read the Rational Reflections issues published on February 19 and March 4.
Berkshire Hathaway’s BYD Investment by Theron Mohamed, January 23, 2021. Berkshire Hathaway’s 2008 investment in BYD was initiated by Charlie Munger who had become enamored with Wang Chuanfu, BYD’s brilliant founder. The investment has risen over 30-fold and is now worth over $7 billion. I followed BYD closely during the early years of Berkshire’s involvement but grew somewhat disillusioned when the company failed to follow through on its goal of entering the U.S. market a decade ago. Shares have skyrocketed over the past year as prospects for widespread electrification of the worldwide fleet of light vehicles gains momentum. (Business Insider)
Every Warren Buffett Needs a Charlie Munger by Jason Zweig, January 22, 2021. There’s a big difference between hanging out on virtual stock message boards and having true confidants who will not only validate your investment ideas but also tell you when they think you are dead wrong. In Charlie Munger’s official role as Vice-Chairman of Berkshire Hathaway and his unofficial role as “the abominable no-man”, as Warren Buffett jokingly puts it, Munger acts as a vital sounding board and counselor. In my opinion, Berkshire Hathaway would have been a resounding success run by either Buffett or Munger had the other never been involved, but it achieved exceptional results through the interplay between two very different individuals. (WSJ)
The High Price of Mistrust, January 25, 2021. Institutions like Berkshire Hathaway are only possible in a system that Charlie Munger refers to as a “seamless web of deserved trust.” Indeed, without trust, the world would be a very dysfunctional place, as this Farnam Street article points out. I attempted to make similar points in my 2019 article called The Paradox of Trust. We all have the responsibility of balancing the risk of being credulous and naive with the need to trust in others when doing so is well deserved. It is a balance that not everyone gets right without substantial trial and error. (Farnam Street)
Happy New Year! Bubble Yet? by Brooklyn Investor, January 21, 2021. In this post, Brooklyn Investor shares his thoughts regarding the latest Howard Marks memo and whether the stock market has reached bubble territory among other topics. Given the ultra-low level of interest rates, Brooklyn believes that stocks are not in a “historic bubble”. The problem I have with this line of reasoning is that ultra-low rates have been artificially engineered by central banks, a point that Jeremy Grantham makes in a recent interview. Does it make sense to evaluate the level of stock prices based on artificially low rates that could be a sign of a bond market bubble? As we can see, investors have not reached a consensus on that vital question. (Brooklyn Investor)
Why You Should Practice Failure, January 20, 2021. There is no way to avoid failure if you aim to live a full and complete life. In fact, attempting to avoid failure when the stakes are low can actually lead to failure when the stakes are much higher. “We learn valuable lessons when we experience failure and setbacks. Most of us wait for those failures to happen to us, however, instead of seeking them out. But deliberately making mistakes can give us the knowledge we need to more easily overcome obstacles in the future.” (Farnam Street)
Money matters to happiness—perhaps more than previously thought by Matthew Killingsworth, January 18, 2021. I have long believed that past a certain relatively modest figure, additional wealth is unlikely to lead to commensurate increases in human happiness. The hedonic treadmill often seems to lead only to fleeting happiness, followed by a return to the prior status quo. However, it is important to be open to contrary viewpoints such as the one presented in this article claiming that there is no dollar-value plateau at which money’s importance lessens. (Penn Today)
Stanford study reveals immune driver of brain aging, January 20, 2021. “Suppose Smokey the Bear were to go on a tear and start setting forest fires instead of putting them out. That roughly describes the behavior of certain cells of our immune system that become increasingly irascible as we grow older. Instead of stamping out embers, they stoke the flames of chronic inflammation. Biologists have long theorized that reducing this inflammation could slow the aging process and delay the onset of age-associated conditions, such as heart disease, Alzheimer's disease, cancer and frailty, and perhaps even forestall the gradual loss of mental acuity that happens to nearly everyone.” (EurekAlert)
Josh Clemente on Improving Metabolic Health, January 20, 2021. Josh Clemente is the Co-Founder of Levels and a former employee of SpaceX. I found this discussion of continuous monitoring of metabolic health using biowearable devices interesting. Most people who wear continuous blood glucose monitors already have metabolic disorders such as diabetes, but Levels is also targeting people who are healthy and want to stay that way. Until a few years ago, I subscribed to the “calories in/calories out” notion of nutrition, a ludicrously naive viewpoint in retrospect. (The Pomp Podcast)
Lonely Millennials Who Fled Cities During Covid-19 Turn to Co-Living by Konrad Putzier, January 26, 2021. The COVID pandemic has proven that many jobs can be done remotely but we are only just starting to understand the implications of what this could mean for society in the long run. Just because you might be able to move from the city to a rural location and do your job remotely doesn’t mean that you will want to do so. Already, we can see that younger people are seeking to replicate some of the elements of city life in more rural settings. I suspect cities will be back after this pandemic fades into the rearview mirror. (WSJ)
The Mason-Dixon Line
A few years ago, I happened to come across this sign on the Appalachian Trail marking the border between Maryland and Pennsylvania — a demarcation point known as the Mason-Dixon Line, named in honor of Charles Mason and Jeremiah Dixon who surveyed the region in the 1760s. Even though Jeremiah Dixon was an Englishman who had nothing to do with the South, the term Dixie, or Dixieland, came to refer to the southern United States starting in the 19th century. File this under weird trivia of the day …
Copyright, Disclosures, and Privacy Information
Nothing in this newsletter constitutes investment advice and all content is subject to the copyright and disclaimer policy of The Rational Walk LLC.
Your privacy is taken very seriously. No email addresses or any other subscriber information is ever sold or provided to third parties. If you choose to unsubscribe at any time, you will no longer receive any further communications of any kind.
The Rational Walk is a participant in the Amazon Services LLC Associates Program, an affiliate advertising program designed to provide a means for sites to earn advertising fees by advertising and linking to Amazon.com.