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The Red Flag Checklist
Investing is the art of using imperfect information to make probabilistic assessments about an inherently unknowable future. - Barry Ritholtz
VH Staff
February 17th, 2023
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Featured - The Red Flag Checklist
Notes
Every major corporate failures has embedded lessons in it. Leaving the exceptions, the following are group of things to watch out for : -
Letting the Good Times Roll
The Lack of a Legitimate Board
Super-Voting (Dual-class) Stock
Aversion to Audits
Unique Financial Data Presentations
Who is Corporate Counsel?
Odd Corporate Location
Large Secondary Transactions
Overlapping Corporate Interests
Everyone Falls For it
Some of the learning’s may also be applied to analysis of listed entities. For detailed understanding, read the complete article.
Additional Links
Investing
Notes
Key Ideas
The key learnings for the investors briefly are :
Seeing Through the Fog
It is a skill to be able to make sense of evolving, contradictory and confusing information.
More details emerge over time, and the fuzzy picture comes into sharper focus. The challenge is that by the time the fog clears, the battle is usually over.
Bet Favorites, Not Long Shots
Low probability events are less likely to occur than high probability events.
When considering the future, you must consider what is likely to happen, as opposed to what could possibly happen.
Stop Fighting the Last War
Investors tend to become more risk-averse following market volatility, and risk-embracing as stocks go higher.
Understand What you Don’t Know
Good investing demands humility. You do not have to have an opinion on everything. We would all be much better off if we learned to say “I don’t know” a little more.
Strong Opinions, Weakly Held.
The trick is to admit the error and reverse your prior opinion.
For detailed understanding, click here for article.
Bonus Highlights
The intriguing process by which humans sift through a morass of conflicting information. I believe proficiency in this ability is an important life skill and is especially important to investors.
Investing is the art of using imperfect information to make probabilistic assessments about an inherently unknowable future.
Carl Sagan’s : “Extraordinary Claims Require Extraordinary Evidence.”
Word Power
Key Concepts
Investor should Think Like Court Room Lawyer : A skeptical but rational approach shall help. He should ask - Is that witness biased? What is motivating them? Is the Pentagon an objective player here? Is this a reveal of alien invaders, or a not so subtle form of lobbying for more federal dollars?
Reduce the Noise Level - “Signal-to-noise ratio” is an engineering concept that focuses on the amount of useful information being received compared with false or useless data. This is an especially important concept to investors.
Black Swans Events : An extremely negative event or occurrence that is impossibly difficult to predict. In other words, black swan events are events that are unexpected and unknowable. Classic black swan events include the rise of the internet and personal computer, the September 11 attacks, and World War I. However, many other events such as floods, droughts, epidemics, and so on are either improbable, unpredictable, or both.
Earthquake Insurance Problem : It turns out that there’s always a spike in insurance policy sales right after an earthquake, which is the least likely time for there to be another earthquake. And by the time enough time elapses where risk has gone up dramatically, people have forgotten about it, and they — they let that — that risk laps. Investors tend to become more risk-averse following market volatility, and risk-embracing as stocks go higher.
Dunning Kruger Effect :
To read the complete article click here.
Warren Buffett made compelling case in favour of indexing in Berkshire Hathway’s AGM, 2021. The article is a compelling read. Click here to read.
An old article filled with investing nuggets from Peter Lynch, the widely known fund manager and author of “One up on Wall Street”, Beating the Street & Learn to Earn. Click Here to read.
The Scoop
A baby rescued from the earthquake’s rubble was named Aya, meaning “a sign of God’s existence.” But what is the life ahead of her?
What’s Amazon’s cut for selling stuff on its platforms? Well, for over 2 million third-party vendors, the answer is half. Literally. Between commission, fulfillment services, and other fees, the e-commerce giant is now claiming an average of just over 50%…
If you’re an Amazon shopper still angry about last year’s Prime membership price hike to $139 for the year, perhaps now you can at least take solace in knowing the company is squeezing everyone.
Zen
“If you seek tranquility,” he said, “do less.”
I had Olympic mountain biker Kate Courtney on the podcast while I was working on Discipline is Destiny and she told me a piece of advice she had gotten from her coach when she was pushing herself too hard in practice. “Do you want to be fast now,” they asked, “or later?” Meaning, do you want to win this workout or win the race?
“Each day,” he told Lucilius, you should, “acquire something that will fortify you against poverty, against death, indeed against other misfortunes, as well.” One gain per day. That’s it.
There’s no such thing as ‘quality’ time. Time is time.
Forget chasing HUGE experiences. It can all be wonderful, if you so choose.
Success, at the end of your life, is a crowded table—family and friends that want to be around you.
Seneca wrote, “The greatest remedy for anger is delay.”
There are two types of time: alive time and dead time. One is when you sit around, when you wait until things happen to you. The other is when you are in control, when you make every second count, when you are learning and improving and growing.
Social
Microsoft in investing $10 billion in ChatGPT.
This will completely change the way we search the web.
What does it mean for the future of academia:
— Mushtaq Bilal, PhD (@MushtaqBilalPhD)
8:30 AM • Feb 12, 2023
Phil Knight’s manifesto for Nike from 1980 should honestly be hung in every startup office ever - twitter.com/i/web/status/1…
— prayingforexits 🏴☠️ (@mrexits)
1:41 AM • Jan 15, 2023
Sen. Rand Paul makes State Department HACK PANIC after exposing Gain of Function LIES to her FACE:
"The answer is YES."🔥
— Benny Johnson (@bennyjohnson)
5:57 PM • Feb 13, 2023
Source : InvestyWise
William Ackman: Everything You Need to Know About Finance and Investing in Under an Hour | Big Think
The Mighty Pen
Book - The One Minute Manager
#1: The First Secret is One Minute Goals
He feels that a goal and its performance standard—what needs to be done and by what due date—should take no more than a paragraph or two to express, so it can be read and reviewed in about a minute.
#2: The Second Secret is One Minute Praising
People who feel good about themselves produce good results.
#3: The Third Secret is One Minute Redirects
Everyone is a potential winner. Some people are disguised as losers. Don’t let their appearances fool you.
Goals begin behaviors, consequences influence future behaviors.
Goals make clear what is most important to focus on, Praisings build confidence that helps you succeed, and Re-Directs address mistakes. And all three of these help people feel better about themselves and produce good results.
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