This Interview was previously published on Michael’s excellent ShiftingShares website and he has kindly agreed that it can sit on both our sites. He has many quality interviews on his website and make sure you pick up a copy of his FREE ebook – there is a link at the top of my ‘Weekly Performance’ page. You can find Michael’s website here:
I have had a link to this Interview sat on my Homepage for ages but I am quite confident a lot of Readers won’t have noticed it and that is probably even more true for people who are new to this whole WD silliness. So it seemed a good idea to create this as a Blog so it sits in the Archive and people can go back to it if they fancy another dose at any point in the future.
This is the Second Part in a small Series of just a couple of Blogs and you probably need to read Part 1 first for this to really make much sense. You can find it here:
This is personally a tough one for me. I am fascinated by Macroeconomics and Politics and as a result there is a huge problem that I most likely give far too much weight to Macro issues when it comes to managing my Portfolio. I envy people who just seem to be able to blindly ignore Macro and as much as I try to do it, I just tend to find something in the Outlook that worries me.
I am sure that in much of my scribbles over the years I have touched on the subject of ‘Over-thinking’ but perhaps not really brought it all together in one blog that hopefully puts the subject nicely to bed. The essence is that I get a strong sense that I have spent many many years learning things about Stocks and Markets and Investing and Trading, and all the related stuff, but it is only in more recent years that I have been actively trying to ‘un-learn’ much of the stuff I know and be a lot more basic and elemental in my approach.
Less is More.
Keep it simple.
Complex is bad.
In the Investors Chronicle dated 17th to 23rd May 2019 with ‘The Activist Effect’ as the main headline on the front cover, on page 32 there is an article called ‘Fund Managers are human after all – that’s the problem’, which makes a very good read although it is perhaps a bit ‘academic’. I guess that is where I come in and if I am doing my ‘job’ correctly then I hope I can convert what seems academic into something that normal people can digest.
It was written by Nilushi Karunaratne and the high level summary would be that Portfolio Managers make good Buying Decisions but make poor Selling Decisions – and the interesting bit is that some of the conclusions are perhaps worth taking onboard ourselves as Private Investors (assuming you are not a Portfolio Manager reading this !!) because, contrary to what many people think, institutional investors are often no better than we are (and many are worse). And the simple fact is that human psychological biases apply whoever you are. Later in my Conclusion bit I will address what we can learn.
Clearly this is Part 2 of these particular Blogs and you can find Part 1 here if you have not already endured it or you need a refresher:
What can we do to control ‘Panic’?
However much experience we have and however much we prepare and work to reduce the negative impacts, to an extent I think feelings of Panic are pretty much inevitable although perhaps with time we Panic less and it is more a feeling of mild anxiety than a full-on Panic Attack. Anyway, bearing this in mind, it is really about what can we do to lower the dangerous occurrences of such feelings and to reduce their severity when they do strike? I suspect the ‘solutions’ come in 3 categories: Forward Planning, Careful Portfolio Management and Psychological Techniques.
The ‘working title’ for this Blog when it was just a mere whisp of an idea in the WheelieBonce was ‘Only the Inexperienced Panic’ but the more I thought about it the more I felt this was a bit insulting and in reality we all panic but there are ways we can reduce such episodes and I wanted to talk about how to do this.
As usual with my Blogs, a lot of the ideas just come out of thin air and no doubt my Brain is triggered by something which seems unrelated that I then twist (probably much too far) into a topic loosely related to Investing !! My inspiration for this one came from the icon Thomas Weekes on ‘Misfit Garage’ on Discovery Turbo when he came out with the line, “My old daddy used to say, only the inexperienced panic”, and that cemented the thought in my head.
This is a Book that is literally ‘hot off the presses’ and if you fancy a copy you can find it right at the top of ‘Wheelie’s Bookshop’ at the time of publishing this Review (don’t worry, if you are reading this some time later, then the Book will still be in the Bookshop but most likely further down the page).
I met up with Mark (you can find him on the Tweets as @DangerCapital) at a recent ‘Meet-up’ I organised at Gaydon Motor Museum and it was extremely valuable for me because I was hugely impressed by Mark’s knowledge and obvious experience and it is rare I find someone who wows me this much. I have been aware of Mark for many years via Twitter but not ‘spoken’ much with him directly although it had always been obvious from his Tweets that he was fairly on the ball. I understand that Mark used to run a Blog called ‘Danger Capital’ and I have certainly read items on this a few times over the years but had not made the connection that it was Mark who was writing it.
If you follow me on the Tweets and/or manage to read them by some other convoluted method, then you may well have noticed that I got myself involved in some right old shenanigans at the start of last week. In essence it resulted in a night long trip to the Accident & Emergency Department (A&E) at Wexham Park Hospital in Slough but thankfully it turns out that I am absolutely 100% fine and I had really got myself worried about not a lot.
I had intended to work on the second part of the Hotel Chocolat HOTC Blogs but to be honest I still feel a bit jet-lagged at the time of writing this first draft and I’m not really in the right frame of mind for it. It also struck me earlier today that there could be some useful insights into Psychology that apply to life in general and very much to Investing and Trading that arise from my recent nonsense and it makes sense to get them down on electronic paper while they are still very much fresh in my memory recall circuits. I’m sorry the HOTC Blog will be delayed but in the current Markets it’s not like there is a huge urgent need to buy any Stocks and it won’t hurt if it slips a bit. I am not sure what I have on next week but in theory at this point in time I should be able to do it then.
I’m sure by now you have probably figured out that I am a bit of a Bike Nut and although I got nastily bitten by a Honda VFR750FM 21 Years ago which means that I am unable to ride myself now, I am still a huge fan of Bike Racing and in particular the top class which is MotoGP is a big passion. Some while ago I wrote a Blog which was to do with the psychology of Sport and this one was based on Jo Conta and Tennis but the principles of a Positive Mindset without doubt apply across all Sports and are also necessary if you are to achieve success in Investing / Trading.
What has prompted this Blog was an interview I watched when the fragrant Suzi Perry was talking to one of this Season’s hot favourites to win the MotoGP Title, Andrea Dovizioso (that’s a bit of a mouthful and I have probably spelt it wrong but fortunately even Andrea refers to himself as ‘Dovi’ so that’s what I will use !!). What is notable about this is that if you had asked almost anyone who knew a bit about MotoGP if they thought Dovi would be chasing a Championship 5 years ago, you would probably have got a response like, “You must be joking, he’s a great Second Rider for a Team but no way he could win the title”, yet here he is right at the front and in the last 2 years he was battling for the title. This could be his year.
If you haven’t read Part 1 yet, you can find it underneath this Blog on the ‘Educational Blogs’ page or simply click this link:
This next paragraph from the Article is interesting – it essentially says that all Market Participants can be a bit mad and prone to psychological errors but that these cancel each other out if these traits are common on both the Sell and Buy side of the market. Problems start when everyone starts thinking the same and this makes sense in my experience. For example, when Fear grips the markets and we get a general sell-off, then people are mostly thinking the same and there are lots of people selling and very few buying – it is only once it gets extremely low that the fearful Sellers dry up and the Buyers can then take the upper hand and before long the people who were Sellers now become Buyers and everyone starts thinking alike again and driving the Prices up. Herd mentality and all that.
“The presence of overconfidence alone doesn’t create an inefficient market. Indeed, a market with overconfident buyers and sellers on both sides creates a heterogeneous, diverse, and therefore wise crowd. But crowds tend to go mad (and thus inefficient) once investors all start to follow the same rules and think alike.”
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