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Let me start an analogy that I am saying in relation to the latter statement. When people including us visit the art room, browsing painting pictures, different people have different appraisals on different type of paintings. Physics and Chemistry are science subjects that majority agree on the conclusions based on the experiments. Economics is not science one but art type. Likewise, investment is art. An recent example can easily illustrate this investment statement. Bruce Greenwald, a professor in Columbia Business School, teaching value investing in his school, thought that Warren E. Buffett has lost his mind. It is because, to his view, Buffett overpaid for the Burlington Northern Santa Fe business. On the other hand, Bruce Berkowitz, a successful value investor, appears to be positive on Buffett's Burlington investment. Similar, one or two investors, I came across their article in response to the Greenwald's opinion, was amused by that opinion. It sum up the following quote of Benjamin Graham from Security Analysis:
The common stock investor is neither right nor wrong because others agreed or disagreed with him/her; he/she is right because his/her facts and analysis are right.Alternatively, it is best to test the hypothesis through statistics/econometrics. The empirical evidences are very objective, although there is insignificant error margin. They can be 99% trusted despite of small possbility of being black swan.
Psychology works happen every day, affecting many amateur investors and, even, professional ones. I always thought that many people should leave their money, that is used for investment purposes, to the competent investors who are 100% remotely unaffected by psychology plays. There is a good real-life example to illustrate this. Consider the scenario how value investor, Michael Burry. Before I show you that example, let us know more about him. He, medical school graduate, used to work in hospital for 16 hours shifts. According to him, he try to find time to learn investment between 12am to 3am. With no finance background, he learn investment stuffs online on his own. Fortunately, dot-com crash is the main reason why he decides to be value investor. Once he know enough, he went on to write some articles online until he realise that many people make money due to his articles. He went on to start his investment fund, quitting his medical career. The example associated with psychology play follows as:
Investors leave their money to Burry with an impression that Burry is to buy stocks. Burry has another idea to make more money by finding ways to short housing market through derivative market. Unfortunately, there is no writer for this in the derivative market. he spend most of his time reading textbook about credit dervatives in his office. Because of that, he came to the conclusion that he should buy credit-default swaps on the sub-prime bonds. He called many investment banks to find anyone who can sell derivatives that are linked to sub-prime securities such as asset-backed securities (ABS) to him. Not many investment banks are interested to entertain him. According to him, only Goldman Sachs and Deutsche Bank are interested to make such deals with him. He made the first credit-default swap worth $60 million with Deutsch Bank. Other investment banks follow suit, making such deals with him. Even, BOA, after making deal with him asked him whether it can do another deal with him in 20 minutes later. When Burry reveals his investment cards to his investors via annual letter, investors do not like this kind of dealing because they cannot see why subprime mortgage market will fall. They are so displeased that they want him to justify the new strategy of buying credit default swaps because they see Burry as a brilliant stock investor, not brilliant derivative investor. Therefore, he is forced to fire half small staff and has sold all bets worth few billions dollars that are against companies that are associated with sub-prime market. He is doing this in order to keep his credit default swaps. When the time is up, all investment banks including the ones who never make any deal with Burry, want to buy his credit default swaps. He starts selling all of his credit default swaps to different investment banks. He is puzzled as to why so many investment banks are buying until he realise that the sub-prime mortage market is collapsing slowly. Too bad, his investors didn't wait for this moment.
As you can see, psychology play always make many people too impatient or looking for get-rich-quickly schemes. Hence, they invest in Madoff fund because this fund never has negative return during every downtown. It is our lesson for us to know the importance of keeping ourselves steady regardless of what circumstances are. It is not in any textbooks.
Books
Book Title: Paths to Wealth through Common Stocks
Author: Phillips A. Fisher
Rating:10/10
Remark: I read this book because I am very interested to know what Phillips A. Fisher thinks. After reading this book, his opinion about the investment field during 1950s-1960s is logically interesting. The last chapter of this book is the best part to be read. In that chapter, he offers the insights about the industries that may seems to be growing. This can be used to bridge your idea of how to use the questions that are proposed in his book called 'Common Stocks and Uncommon Profits'. It is something I will like to own in my bookshelf.
Movies
The Hurt Locker (Hollywood Movie 2008)
Synopsis:
In this movie, the bomb specialist, who disarm the bomb on his own, enters in the picture. After the death of the bomb specialist, a new bomb specialist, William James, joins the existing two-men team that attend all the missions involving the bombs in Iraq. This team faces many different challenging missions that involve difficult tasks of finding bomb ignition so as to disarm the bombs. The bottom line in this movie end with the answer to the following question: Does your passion in this line of work last forever?
Rating:8/10
Remark: Every scenario involving the disarming the bomb has the convicing surroundings, where Iraq people are watching them with their curiousity. At the same time, Jeremy Renner does a good job, acting bomb specialist. I recognise him as a SWAT rogue in SWAT movie that I have watched it few years ago back. It is a good film, with very refreshing perspective of action-filiming.
Bodyguards and Assassins (Hong Kong Movie 2009)
Synopsis:
There is a preparation for Sun Yat-sen to come to Hong Kong for the meeting. The purpose of the meeting is to discuss the revolution plan with 13head villagers for the revolution group called Tongmenghui. Empress Dowager Cixi wants to send her army to kill Sun Yat-sen before he can discuss the plan. It is to ensure that Qing dynasty last longer. Revolutionary Chen Shaobai comes to Hong Kong first before Sun Yat-sen comes in few days later. Mr Chen is trying to arrange a plan to protect Sun Yat-sen. This plan involves all good-natured martial artists as well as poor people that consist of rickshaw pullers, hawkers and a beggar. Will Sun Yat-sen survive?
Rating:8/10
Remark: It is a good movie with enough suspense. I am surprised to see so many well-known stars acting in this movie.
The Storm Warrior (Hong Kong Movie 2009)
Synopsis:
Cloud and Wind face an imminent battle against Lord Godless, who wants to control China. At this stage, Lord Godless is already powerful than Cloud and Wind individually as well as as a pair. At the start of the campaign, he poisons many powerful fighters and locked them with the chains. Fortunately, there is a breakout. But only one fighter, Nameless who suffers an internal injury and Chu Chu escape with Cloud and Wind. In order to stop Lord Godless to achieve his dream, Cloud and Wind have to learn new skills from Nameless and Lord Wicked respectively. How shall the battle will be like?
Rating:5/10
Remark: Disjointed story with above average GCI effects. It can be very boring movie.
Blood and Bone (Hollywood Movie 2009)
Synopsis:
Bone made a new friend in the prison. When his friend was killed by other prisoners, he told Bone to take care of his family. When he went out of the prison, he went on to fulfill his promise. What lie in his promise is to get his friend's wife out of a gang's hand and get her to have a new life with her son, who is in another kind person's procession.
Rating:8/10
Remark: The story is surprisingly good with fine fighting actions.
Aeja (Korean Movie 2009)
Synopsis:
Aeja aspires to be successful writer. In reality, she is struggling to be recognised writer while her mother wants her to get married before she dies. How shall Aeja get by and reconile with her mother?
Rating:8/10
Remark: The story is so touching that you want to cry. At this point, you will remember of your past between you and your parents.
Planet 51 (Hollywood Animation 2009)
Synopsis:
A human, as a astronaut, named Charles T. Baker is travelling to a unknown world with his spaceship. In the unknown world, there are unknown people that look different from us, the humans. Baker just wants to plant his USA flag on the unknown world before he wants to go back to Earth.
Rating:7/10
Remark: The story is average but interesting music together with fine actions.
Ninja Assassin (Hollywood Movie 2009)
Synopsis:
A young male kid, an orphan, was taken in a ninja clan by the master of the ninja clan. Subsequently, he was taught how to fight and kill as ninja. All orphans in the ninja clan are to make their own hearts non-existent. But, one of these orphans does not harden her heart, show him that his heart exists in him. One day she wanted to escape from this clan because she want to have a life, not a hardened ninja. Unfortunately, she was caught and killed by another orphan who was assigned by that master. His heart hurt upon her death and, therefore, he want to kill that master. Will he succeed?
Rating:8/10
Remark: The action is quite remarkable, something different from seeing kung-fu fighters.
Heroes Season 4 (American Drama 2009-2010)
Synopsis:
Sylar was being brainwashed to be Nathan Petrelli while the real dead Nathan was hidden somewhere else. Sylar's soul is trying to find his own body while Sylar, being trapped in the Parkman's mind, pester Parkman for the information about the location of his body. A new character, Samuel, entered into the picture, wanting to strike fear in the normal humans with his power. His power can increased tenfold as long as there are other people with abilities around him. How will good people with abilities prevent this?
Rating:7/10
Remark: Robert Knepper, who acted very well T-bag in Prison Break, is a great introduction in the Heroes. He certainly adds colours to Heroes drama. There is no twist so far.
Tony Del Piero wrote and posted at at 12:04 am
