Friday Night Potpourri

First an excerpt from a client letter I sent out this morning about the recent stock market volatility.

There’s no way to know what will happen in the short term but as we’ve talked about before, we know how this will play out longer term. The decline will end at some point, maybe for no reason at all, and then the market will start to go back up and make a new high. We just don’t know how long that will take. In many instances, that process is very quick like in March of 2020 or December of 2018 if you even remember that panic. Sometimes the process for digesting declines takes longer like in 2008 or 2000. 

I would also add the idea that although we have been somewhat hedged with BTAL, TAIL, SH, GLD, BLNDX (they've worked to varying degrees), when the market is going up, you're hedged too much and when the market is going down you're not hedged enough. Recognize that potential sentiment early to help minimize the odds of succumbing to emotion.

The other day I found a great quote. “For short-term investors, volatility is a risk. For long-term investors, volatility is a gift.” This ties in with the quote from Peter Lynch I like to cite which is about not knowing which direction the next 25% is but being certain which direction the next 100% is...or 200%.

Nassim Taleb lamented that he may have "created a monster" over the way people misuse the term anti-fragile. The concept fascinates me but I think people conflate it with resiliency. There's room for both of course. Anti-fragile means to benefit from disorder, chaos or adverse events. Resilience is when you're able to endure disorder, chaos or adverse events without too much trouble.

I'll use a personal example that I hope clearly and simply delineates between the two. In January, 2020 we started to buy some extra stuff at the grocery store (I've told this 100 times) out of concern over what Covid might become. Doing this made us more resilient in the face of what Covid became. We did not derive a benefit beyond having less hassle during the shortages of meat, water and toilet paper. Nothing anti-fragile there.

Our Airbnb rental may have turned out to be anti-fragile however. Other than Airbnb canceling all reservations for the first two weeks of April 2020, our Airbnb's bookings increased. Our semi-isolated, cabin on top of a mountain in the forest, turned out to be a great place to hide from the world and continues to be so today. We caught a wave that we're still riding, this means a little more revenue which is why I think it is at least a partial example of being anti-fragile if not a full blown example of anti-fragility. 

True anti-fragility is rare but resilience doesn't have to be.

Joe Norman Tweeted "Don't let the people you admire narrow your curiosity. Don't let their judgment be yours." This resonates with an idea I've said many times and pertains to Taleb mentioned above which is it would be odd to agree with everything someone you respect says. There are plenty of people I learn from even if I don't agree with half of what they believe/say.

I've learned a ton from Taleb over the years, really a lot but anymore I don't agree with half of what he says. Another tie in from me from the past is to take bits of process from various sources to create your own process.