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By Guest Blogger Tatiana Enhorning
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The brain is a powerful organ and no matter how hard we try, it can sometimes overpower our rational mind. Behavioral Finance investor psychology is a fascinating space which acknowledges investors have limits to their self-control and are influenced by their emotions, assumptions and perceptions. These biased and irrational behaviors have real costs. In fact, a study by DALBAR, a financial research firm, has shown that the average do-it-yourself equity investor earned an average annual return of 4.25% in the 20 years between 2000 and 2019, while the S&P 500 added 6.06%.
We often think the world of investing is purely rational and logic-based and with the proper information, we can make the correct decision every time. But try as we might, our past experience and unique brain wiring can often skew vision. Last year you may have noticed your most irrational investing fears and biases rear their ugly heads. Getting to know your brain’s unique wiring and your own personal biases can help you recognize and circumvent these tendencies before they affect investments.
One way of doing this is to get to know what type of investor you are.
Are you an idealist, or a pragmatist?
Firstly, do you fall into more of the “Idealist” or “Pragmatist” category? Idealists are seemingly eternally optimistic about the stock market and tend to seek information that validates this viewpoint. They may overestimate their abilities and underestimate the abilities of others and, therefore, not always do much research before investing. The idealist may read some articles and seek one or two reputable opinions, but really they are susceptible to investing fads. If you’ve bought into the crypto hype over the past few years, then you may fall into this category. Idealists tend to be vulnerable to overconfidence bias, availability bias, self-attribution bias, recency bias and illusion of control bias.
Pragmatists on the other hand do much more in-depth research and know their abilities and limitations. They tend to demonstrate a healthy dose of skepticism about their own investing knowledge and abilities. Pragmatists know that the markets may very well be operating at a more complex level of probabilities which simply may not fall into their field of expertise. Because of this they are also likely to seek out views that are contrary to their initial belief about an investment and then weigh those opinions accordingly.
The difference between framers and integrators
Secondly, are you a “Framer” or an “Integrator”? Investors who are framers tend to view their investments on an individual basis rather than how they fit into the overall portfolio plan. They tend to be very rigid in their approach to analyzing problems and may have different “pots” of money that aren’t really working together: one for long-term savings, one for a down-payment on a new house and one for an upcoming vacation. This is not necessarily a bad thing but framers may very likely have inefficient investment overlap causing concentration risk or drag on performance. They are subject to anchoring bias, which causes them to get stuck on a particular price (such as their own purchase price), or to cling to arbitrary purchase ‘points’, which can lead to biased future calculations. Framers tend to be susceptible to framing bias, conservatism and ambiguity aversion.
The following statements are typical of framers: “My portfolio matched the index this year, but I’m really disappointed with how ABC Company performed. If I didn’t invest in it to begin with, I would have beaten the market by 3 points!”
Whereas the integrator would say, “That ABC stock which performed poorly may end up performing well when the overall market suddenly turns negative.” If you are a fan of this blog and agree with its views on overall portfolio balance and diversification, you likely fall closer to the Integrator profile. Integrators are able to view the broader context. All the investments in all their portfolios are one big integrated system working together in a harmonious ecosystem where every security has a part to play. Integrators tend to understand the correlations between their various financial instruments and structure their portfolio accordingly, with a more flexible approach to market and security price levels.
How reflectors rationalize and realists accept
Lastly, which of the “Reflector” versus “Realist” types best describes you? Reflectors tend to justify and rationalize poor investment decisions instead of taking action to rectify them. They tend to hold on to hope that their fortunes will turn around. They also fear making mistakes and may hold onto securities even when they see they are not a good fit for their overall portfolio. Reflectors often suffer from decision paralysis as they dread the regret of a miscalculation. For example, reflectors may hold onto inherited securities out of sense of loyalty to a deceased relative, even though they are not a good fit for their overall portfolio or market environment. Reflectors may be susceptible to loss aversion bias, endowment bias, regret aversion, status quo bias and hindsight bias.
Realists, on the other hand, do not have trouble coming to terms with the consequences of their investing choices. Once they see they made a mistake, they are quick to admit it and rectify it before the situation gets any worse. Because realists have an easier time making decisions under pressure, they do not experience regret as acutely, and consequently do not dread them ahead of time.
Even smart investors need advice. If you find that you fall into any or all of the first types in each of the three buckets (Idealist, Framer and/or Reflector), a professional financial advisor can be especially advantageous to help you stay on track. If we can notice and get past our most common biases, we can ensure the illogical brain does not foil well-reasoned investment plans.
And if you don’t think you have any biases, then you may have succumbed to superiority bias.
Tatiana Enhorning is a Financial Advisor with Turner Investments. She builds and maintains portfolios for clients across Canada, and has been in the business as an asset manager for more than a decade.
84 comments ↓
Non Realists tend to rectumfy their positions by adding to a falling stock instead of cutting losses when ahead or at least setting a trailing stop loss . Happens again and again.
Those poor sheep that kept buying Nortel back in the day is a perfect example.
Thanks Tatiana. I guess I am a pragmatic, integrated, realist. :-)
Good Morning Tatiana Enhorning,
Today’s question: how real is the possibility of a liquidity crunch/crisis going into 2023/2024?
Thanks for the post.
Did Garth offshore this post to some ESL student abroad?
This post doesn’t sound like Garth. The writing style is almost like spammy websites.
4% returns yoy for the past two decades and emotion. That’s what the post is about.
Good post.
I’ve always believed that a good financial adviser should also have some exposure to human behaviour sciences such a Psychology and Sociology.
Thanks Tatiana, good post!
Yes, everyone has biases and can act emotionally. I’ve personally found hunting to be excellent training for investing, because consistent success requires diligent searching for the productive areas, pattern recognition, hardship, endurance, forethought, care when moving, and above all… patience. Sometimes extreme patience.
Never leave a productive area in hopes another will be more productive. Instead, take the time to fully learn the area. Always be alert to signs and pay close attention to detail.
That’ll get the animal and make you rich. And being rich gives more time for hunting. Win-win.
Like profits over practicality…
I think most of us dogs suffer from superiority bias. LOL
And if you don’t think you have any biases, then you may have succumbed to superiority bias.
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This will be fun. A comment section filled with people who see the bias in everyone else, but think it doesn’t happen to them. In 3…2…1…
Tatiana, an excellent column! I can agree that it can be very difficult to hold the course when the market or circumstances beyond our control send portfolios into a tail spin. I think it is especially difficult for investors who may be relying on their portfolio for income to stay invested during market fluctuations. It is much easier to stay calm if one doesn’t ‘need’ the money in the short term & believes their portfolios will recover in a fairly short time frame.
That was a very good Organizational Behaviour take on Investors.
For me it’s been patience and observation resulting in:
1. Scorn on poor performers – gone after their requisite patience time period.
2. Praise on the good performers – pour more money into those.
3. Pay no attention to the MSM *.
4. Then getting older and eschewing stock appreciation I went for “show me the money” now as time running out, a.k.a. high yield dividends. Learn to live with high Beta ETFs and reap the benefits (Jan div yield for me was 19.3%, stock appreciation 2.5% to 10.5% YTD, today’s numbers).
Latter the best decision I ever made as a Paleo. Have not looked back since. Divs easily funding:
1. February Carnevale in Viareggio, see the House of Vettii reopening in Pompeii (lewd as it is) for the next month.
https://www.theguardian.com/world/2023/jan/10/astonishing-pompeii-home-of-men-freed-from-slavery-reopens-to-public
2. March for a few weeks, my own personal Reconquista Tour of Spain with Madrid, Seville and Granada/Malaga as hubs (day trips to Bordeaux, Lisbon and Oporto from the hubs – learn to love Ryanair et. al. sardine buses in the air, they make day tripping a breeze and inexpensive).
3. April, flee European Easter and go for HEAT, open stores and restaurants. Cairo, Luxor and Jerusalem here I come (the latter after the 10th, obv.).
4. May, who knows? Though no shortage of places to visit in Europa (aim to augment my 13 countries, 121 cities, 567 places per Google Maps Timeline of the past 7 years less 2 years of Covid Captivity).
Peasant Lifestyle there Signori:
Mattl and Ponzius Pilatus
What will your February, March and April be like apart from Igloo/Ark dwelling?
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* EXCEPT for the advice I get from this Blog. If a person can read between the lines, the advice is priceless.
Mille Grazie oh Progenitor, Signore Garth.
I’m a realist.
I realize I suck at investing, and have no desire to learn. So, I pay someone else to do it because I still need to retire someday.
Same thing I do when confronted with drywall or exhaust work.
First time reader…..and First!!
For the record I am risk adverse. Approximately 10% GIC’s reduce my overall returns but let me sleep better at night. I don’t own an individual stock or mutual fund. All ETF’s.
Tesla continues to go up, 60% since its eminent demise by the blog dogs, crypto still holding its 40% gains, so equal cash into both on their death bed would get you a 50% return in the first couple of weeks in January.
If I was a student my brain would be telling me I’m an idiot to ever pay off my student loans.
https://www.cnbc.com/2023/01/27/16-million-people-approved-for-contested-student-loan-forgiveness-.html
It would be interesting to explore how these characteristics are related to a person’s political “tribe.”
Successful retail investing starts with covering all the bases. That’s a free lunch, like global index investing.
Gambling is the road to disaster for those engageged in trading trying to play catch up with sour trades, not that anyone in the comment section practices this sort of activity?
Quality is done over the long haul allowing compounding and exponential growth to do the work. This flies over the heads of so many.
This post reminds me of the Canada mydemocracy.ca survey 2016/2017.
It told me I was a Challenger.
Not a Guardian, Innovator, Pragmatist, or Cooperator.
Sadly, consumption of beer per today’s photo will not increase the IQ, real or perceived, of an average dogawful mutt.
Happy Feline Friday!
https://www.cbc.ca/radio/thecurrent/cats-agents-of-chaos-1.6724540
The brain is a powerful organ
The brain is a powerful organ and no matter how hard we try, it can sometimes overpower our rational mind.
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Well an obvious joke response comes to mind.
But you are suggesting here that the brain sometimes overpowers… the brain. True enough we have both emotional and rational parts to our brains. Fear has not time for rational thought. Gotta run when the bear appears, no time to think – even though thinking is called for.
This is an interesting read. Thanks.
For my wife and I, we find it best to let our advisor handle our portfolio. Clear, forthright communications between ourselves and the advisor are essential. We have found it best to listen more than we speak.
Am I a Reflector if I haven’t yet sold my 2% position in Algonquin Power?
Yogism 35: “I liked to argue about feelings until someone pointed out that I must be mad”.
Europa relentless.
Let me start with the “Where is Europe’s gas coming from?” animated graphic by BBC, 2nd from the bottom:
https://www.bbc.com/news/58888451
Russian GDP will take a hit in 2023, that’s for sure.
The 2 “planned” LNG facilities in Germany (last graphic) 1 is already open as of December (try to keep up BBC). Germans, they do not muck about. Apparently done in record time.
https://www.euractiv.com/section/energy/news/germanys-first-lng-terminal-is-open-for-business/
Italia similar and looking at 2023/2024 to secure energy supplies not just for herself, but also for Europa.
Meloni busy securing oil and gas supplies from Africa, seems like a daily event for her. Just came back from Algeria, more gas and oil from there. Signing this week an agreement with Libya for the same. Lucky Italia with energy giant Eni.
https://oilprice.com/Latest-Energy-News/World-News/Italy-Looks-To-Secure-More-Oil-And-Gas-From-Libya.html
Ya, ya the DOOMERS will say N. Europa had warm weather. Well, not THAT warm. At +80% overall as I type:
https://www.consilium.europa.eu/en/infographics/gas-storage-capacity/
And Italia finally kicking Russia out – their large Lukoil refinery in Sicily sold (Swiss-Cypriot consortium).
https://www.reuters.com/business/energy/trafigura-with-consortium-agrees-buy-lukoils-isab-refinery-sources-2023-01-09/
Italia, unusually, more SUBTLE than Germany’s confiscation of Rosneft’s Schwedt refinery and Gazprom Germania.
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I am still warm in my on the down low hovel in Pordenone.
Nice to see Europa pulling together as one. Russia grossly underestimated European resolve.
Take that DOOMERS.
Hi Tatiana,
Great post! I guess i would describe myself as an IIR…
An Idealist, Integrator, Realist.
Idealist – mainly cause I buy a few stocks then hope for the best
Integrator – because i like harmonious ecosystems…and other harmonious things…that bring harmony
Realist – ’cause I have no problem admitting when I’ve f’d up. Just the other day I met a Brazilian and now she’s mad at me ’cause i haven’t been at v-ball for a while….she thinks i don’t like her now…somehow, its my fault…I’m willing to except that.
Og
There are few things more rewarding than buying good companies all the way down, then riding the rocket back up.
Dopamine on top of cheerful optimism is a heady mix.
Also booked tix to Brisbane to hang with our Aussie transplant daughter in the spring. She’s loving life there. The kids are ok.
May you recommend further reading material about capitulating (selling) loser investments and how to avoid anchoring behaviour? Thanks!
How to Avoid Anchoring?
#29 EnhorningEmpire aka Prince Polo on 01.27.23 at 4:18 pm
May you recommend further reading material about capitulating (selling) loser investments and how to avoid anchoring behaviour? Thanks!
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Anchoring is doing things like refusing to sell a stock until get past your buy price or some goal price.
I think it is easier to avoid when using ETFs.
With individual companies (and they are companies not stocks) it’s easy to get overly attached to the little rascals especially those you have owned for year. I don’t think I would feel the same attachment to an ETF most of the time.
Doing fresh analysis can also help. Would you buy it now? If not why are you holding?
#1 Victor Llearna on 01.27.23 at 1:21 pm
Non Realists tend to rectumfy their positions by adding to a falling stock instead of cutting losses when ahead or at least setting a trailing stop loss . Happens again and again.
Those poor sheep that kept buying Nortel back in the day is a perfect example.
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An old friend of mine several years ago had invested in Nortel when price was around 5.00 and he had about 10,000 shares of them at the time. At one point he was sitting on a million dollars. A few years later after the stock dropped to zero I asked how he’d make out with it. He told me that he broke about even. Too much in love with it to sell.
Many pension funds including our company fund held quite a few shares of it as well. The managers were not smiling at our next board meeting unlike the previous meeting when they were gloating about the great investment they’d made in it. Even the experts got caught up in the illusion. No different with BreX. Many fund managers got caught with their pants down. So its not just individual investors who get caught up in the hype.
I am a pessimist. I got this way by spending too much time listening to liberals and optimists.
ZZZZ
Where’s Garth? What are we paying for here?
Exodus from Europe and neighbors coming this way.
Guess they will have to rent for a while.
I had that dog’s doppelganger … Charlie. Was a good dog too.
Fun fact: The brain is 2% of the body by weight, but it consumes 20% of the body’s energy.
So take care of it. Eat only healthy food, drink at least 6 glasses of water per day, get regular exercise, and sleep 7 to 9 hours per day. Don’t ruminate about the past or worry about the future. Stop rehearsing and rehashing. Live in the present, the here and now.
How much of a risk do you see in the US Credit ceiling issue? The MAGA’s seem to have balance of power in the House. They seem to have a “let it all burn down ” mantra. Thoughts ?
I like it.
#28 Sail Away
cheerful optimism is a heady mix.
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TSLA still in the hole, 1Y, -37%:
https://www.google.com/finance/quote/TSLA:NASDAQ?window=1Y
But ya, reason for optimism THAT’S for sure, YTD, +65%:
https://www.google.com/finance/quote/TSLA:NASDAQ?window=YTD
I do not believe TSLA will see explosive growth as in the past BUT I do believe they will do well with their Selling Price Cuts vs. Increasing Market Share strategy. Transitioning from Premium/Low Volume to Lower Priced/High Volume. They know they are not Lamborghini or Rolls Royce. Smart on their part I think. Milked for all it was worth while they could.
Learning Curve in a manufacturing business like that will let them price compete against EV Johnny Come Latelys such as Ford and GM all day long. Newcomers will have to pay a steep price vs. TSLA if they want to stay in the game trying to earn market share.
Cybertruck low volume sales in June 2023. Wise on low volume – see how it does against Ford’s F-150 Lightning, the Pro version starts at $57,869 up 40% from the original $41,669 (MSM Math, not mine). $90K for the Platinum version. 4th price increase.
That tells me the Ford Beancounters realized they were losing money or not making much at all. Probably preemptive pricing against the Cybertruck gone amuck would be my guess.
You know,
TSLA dropping price.
Ford EV increasing price like crazy.
Does not bode well for the latter if you were to ask me.
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Cautious optimism there SA.
Very well written and researched. Thank you.
Sometimes luck plays a part as well.
#28 Sail Away on 01.27.23 at 4:16 pm
There are few things more rewarding than buying good companies all the way down, then riding the rocket back up.
Dopamine on top of cheerful optimism is a heady mix.
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I think Tatiana missed the Nacissist investor.
Sailo, would be a good example.
I’m going to give Tatiana 5 stars today, for a well written article about an interesting subject related to investing on an investment blog.
I find the workings of the human brain interesting. Although models like “idealist vs. pragmatist and framer vs. integrator” are often discounted because they are overly simplified, I do think they are helpful to frame a discussion about how brains work and how they all differ. We all like to think our own brains work perfectly and no errors result from our thinking because, well, our own brains are perfect. We know this to be true because we check our results against our own brain and other people who think like we do. Sometimes we even compare our results to other people who don’t think like we do to to prove how correct we are an how incorrect they are.
All you have to do to see this in action is ask yourself why anyone likes Adele. Or conversely, if you like Adele then ask yourself why anyone doesn’t. If we can’t even get that right, surely there is something subjective going on. Investment is no different.
“Know thyself”, as the wise men of old liked to say.
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Also 3 cheers for not having any politics in the post. This is a financial blog after all.
Don’t get me wrong, I love to talk about politics as much as anyone, and have done it here in the past, but I am strongly trending towards the view that this isn’t the best place for it. There are much better blogs available (for that purpose) where that is the main topic. Here, politics should be treated mainly from the perspective of how the mechanisms of politics will affect investments. Beyond that, well, never combine love and money.
It’s hard to do completely, for example just the plans for the carbon tax alone to 2030 could devastate the Canadian economy, so that is something we need to talk about. Although strangely Garth never does. Also something like a capital gains tax on primary residences could affect everything from how people pay for retirement homes to the total full cycle cost of ownership of housing, so it can’t help but come up. Deficits and debt and inflation also factor in. But the war in Europe? Probably only affects us so far as oil prices go, despite strong feelings on both sides. Or Trudeau in black face? Well, that’s embarrassing for Canada, but probably has no financial impact.
#21 Shawn on 01.27.23 at 3:23 pm
The brain is a powerful organ
The brain is a powerful organ and no matter how hard we try, it can sometimes overpower our rational mind.
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Well an obvious joke response comes to mind.
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I didn’t dare as Tatiana post & all. Had it been Mr Turner I woulda let er rip.
Nice. I like to think I am a realist, but I may be biased, I try not to be too hard on myself.
#27 Quintilian on 01.27.23 at 4:13 pm
But you know Ponzie, there are some among us who have disparaged the Humanities and they constantly refer to those sciences as “basket weaving “.
We won’t name names. We are kind, and don’t need to put others down to lift ourselves up.
But let’s just say I have often asked them to line up with us angels and they just don’t listen.
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I agree completely and will happily join you in line to appreciate the work of Humanities grads.
It’s amazing to see those intricate shapes created with nothing more than whipped milk. Magical. Transformative.
About the Average Person Can’t Buy the Average House
#172 Jason on 01.27.23 at 12:31 pm
Ok so let me dumb it down for folks who don’t get it. Yes it’s true the average home is unaffordable for the average person / family to purchase.
But, there are homes that are priced below the price of the average home. Some of them even significantly below.
And there are folks who make above the average income. Some folks make significantly more.
Those two facts alone make it possible for home prices to stop dropping, and even go up as long as inventory remains low.
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Well put!
People take a true statement like the average person can’t afford the average house and then jump to a wrong conclusion that house prices should fall. Or that the average family SHOULD be able to buy the average or median house. Like that’s a law of physics or something. Nope.
#27 Quintilian on 01.27.23 at 4:13 pm
#5 Ponzius Pilatus on 01.27.23 at 2:01 pm
Good post.
I’ve always believed that a good financial adviser should also have some exposure to human behaviour sciences such a Psychology and Sociology.
Excellent post as usual.
But you know Ponzie, there are some among us who have disparaged the Humanities and they constantly refer to those sciences as “basket weaving “.
We won’t name names. We are kind, and don’t need to put others down to lift ourselves up.
But let’s just say I have often asked them to line up with us angels and they just don’t listen.
Moreover they seem to have a mental block that impedes learning
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I forgot Anthropology.
“The Naked Ape” by Desmond Morris.
Is still relevant.
Pragmatic integrating realist here.
No more than .025% of my total wealth in any one thing, and no more than 2% of it in any one sector.
I don’t mind taking a 5% haircut, in selling slow decliners. Then I repurchase when down 5% further, and repeat rather than going for a bobsled ride to oblivion like many did last winter and spring.
Last time I held SPY, I sold at $430.
I’m taking the same ratchet route back up with the climbers. CCO and MFC bit me on being January hold cautious, but I make money on everything I sell since last summer, before I do.
I’m holding very few, at their discounted loss, and quite a few items down 1.5>15%. Divs coming in.
AQN fell too fast to react. I hold and smile. It was only 0.025% of me, anyhow.
I’m considering repurchasing some of those stinky worldly ETF’s I lost some money on with the down ratchet last year, in a lesser volume than before, though they are still below my sold price.
You have to be tenacious. I do O.K.
Edit 0.25%, not 0.025%.
One thing about Europe’s gas consumption in the BBC article ref. in a prior Comment was how much Europe cut back.
million cubic metres per month:
2017 = 87
2022 = 69
About 20% less. THAT is amazing. Good for the air too.
I cut back as well, my way.
Swapped my nat gas cooktop for a primo Bosch induction cooktop. The Italian one’s were prettier, I went for German BRUTE FORCE instead.
Has a PowerBoost feature delivering max power to 1 heating element from the others, I love pressing it for the exhilaration = 9kW, big in Italia … had to ask ENEL for more juice and I got it … Italian electricians looked at me like I was some kind of kW fiend.
Still Canadian with the need for kW. See that recent little upward bump for Italy, that was me:
https://ourworldindata.org/grapher/per-capita-energy-use?tab=chart&country=ITA~CAN
I’m a pure gambler but I like to gamble on things that require skill rather than luck. I try to weigh risk/reward. From what I’ve seen over the decades very few try to find things with the least amount of risk that have the highest returns. The average investor can’t grasp the concept of risk. Sometimes what looks risky isn’t risky compared to the possible payoffs.
#26 ogdoad on 01.27.23 at 3:49 pm
You haven’t met many Brazilians have you?
Holy moly that dog looks a bit like Smoking Man.
Drinks beer like him too.
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A wag reporter one asked our Forum Host, are you a Mod or a Rocker? He replied – Neither, I’m a Blogger.
@#27 Quinty’s Quandry
Tatiana used her university skills to great effect.
Her blog was interesting, informative and well received.
4 years of uni debt and “education” to display all that knowledge as a Starbucks Barista perfecting whipped toppings ….not so much.
An aimless education is worse than no education…..because you have to pay for it.
Trades baby.
Earn while you learn….
Then you can gouge the Ponzies of the world as the bitch and moan about their broken bidet.
Life is sweet.
Invoicing Ponzies is even sweeter.
I’ve found it easier just to call myself an investment hack.
It frees me up to do whatever I want, stay the course, change course, and then when I realize what I should have been doing, yell out, of course…
M48BC
#149 Elon Fanboy on 01.27.23 at 12:54 am
If Putin comes to the conclusion he can’t beat Ukraine with traditional war tactics (thanks to unlimited western hardware support), then that presumably only leaves him one option to ‘win’.
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Yep, he has found his magic bullet. Buying back old Soviet-made tanks from the country of Laos:
https://www.express.co.uk/news/world/1727019/Vladimir-Putin-Ukraine-war-Russia-tanks-T-34-Laos
Most of them were made before 1950.
So as I fed a $100 bill into the side of The Old Gas Guzzler this morning, I could tell the old girl was enjoying the drink, just like an old horse down by the river.
She’s only in her mid thirties, but because she left the factory floor in the late 80’s, I guess technically she’s working through her 5th decade.
Nearly retirement age, said I probably shouldn’t call a senior citizen a gas guzzler.
What else to call an over-height 21 foot long vehicle?
What about A Mirror Filler…
M48BC
My my my.
The US Navy practicing Carrier takeoffs and landings in the South China Sea….during a rainstorm.
https://www.reuters.com/world/beijings-backyard-us-demonstrates-its-military-might-2023-01-27/
Has China perfected daylight carrier landings in perfect weather yet?
Over diversified
#48 Wrk.dover on 01.27.23 at 6:57 pm
Pragmatic integrating realist here.
No more than .25% of my total wealth in any one thing, and no more than 2% of it in any one sector.
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Sounds extremally wimpy I mean cautious. So invested in 400 things and 50 sectors. Sounds implausible.
I go as much as 25% in one stock at times, but yeah that can be stressful. 5% in one tock is okay.
Trick is to keep your head and not mind the volatility too much. Easier said than done…
#50 Dolce Vita on 01.27.23 at 7:04 pm
“About 20% less. THAT is amazing. Good for the air too.”
It’s called “doing without”.
“Swapped my nat gas cooktop for a primo Bosch induction cooktop.”
If your power is coming from fossil fuels, you just increased your carbon footprint. Way to go genius.
Whenever the end use of energy is heat, and it is being generated by fossil fuels, it is always more efficient to burn the fuels at the point of consumption. The most efficient fossil fuel generators in existence are combine cycle gas turbines, which are 50% efficient (so 50% of the heat goes up the stack doing no useful work). Single cycle like a coal plant are even worse. Then add about 10% loss for transmission and you get at best 45% of the energy burned arriving at your electric stove, water heater, furnace, whatever. This is why natural gas furnaces and stoves save you money: you still have to pay for the natural gas, and twice as much of it, being used to generate the electricity.
Compare that 45% to source efficiency of your electric range to near 95% for modern gas stoves and furnaces. You are wasting a lot of fuel.
It would be nice if people who want to talk about energy options would take a course in thermodynamics. The only way an electric range makes sense from a carbon standpoint is if you live in an area that gets most of it’s electricity from renewable or nuclear sources, and will not be meeting the additional electric load by firing up a fossil fuel plant.
As a general rule, the higher the cost of an energy source, the higher the carbon footprint. Solar and wind might be excepted, but to do the calc first you have to figure out how much carbon was burned to make the panels or pinwheels.
And the same goes for electric vehicles! Except that internal combustion engines / transmissions are horribly inefficient, so the efficiency of an electric car does make a difference if it is being charged by combined cycle / renewable / nuclear power. But if it is being charged by coal, a gas engine is about even.
Anyway, back to thermodynamics, you have to count the losses all along the system people! Electricity doesn’t just show up out of the ether! And making it is not efficient. And it won’t get more efficient either, at least not with expanding gas technology. 50% is as good as you can do due to physics.
Flop Drops.
So a guy the other day wanted to know if someone was playing silly buggers the other day by listing a house in Surrey assessed at 1.46 for a million dollars flat.
I said as part of my reply the bottom was around early 900s for a bulldozer, and this one just went for a flat 900k, hello 800’s, it sure seems like it, but we’ll see what the pause, pivot or divot brings.
https://www.zealty.ca/mls-R2736739/11100-132-STREET-Surrey-BC/
There’s some rough and ready types on here, this is what someone just spent 55k on.
Nothing a bottle of Febreze won’t fix…
M48BC
https://www.zealty.ca/mls-R2740226/11-41711-TAYLOR-ROAD-Mission-BC/
#56 Michael in-north-york
Been wanting to throw in on this for a week. Finally have something juicy to report – me retweeting to a US Righty on number of tanks:
https://twitter.com/bsant54/status/1619076977499185152
They forgot Canada:
https://twitter.com/AnitaAnandMP/status/1618717206526951424
Hey, 4 is better than 0. Some argued there goes all of our tanks.
And, not knowing a single thing about tanks, but this Tweet to me was sympathetic for the Ukrainian tank service/repair person:
https://twitter.com/Eurabist/status/1618680116191854592
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Twitter. The New Tank Manual.
#54 crowdedelevatorfartz on 01.27.23 at 7:42 pm
Trades baby.
Earn while you learn….
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Learn with someone else’s materials before you try it at home.
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#55 Flop… on 01.27.23 at 7:50 pm
I’ve found it easier just to call myself an investment hack
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Flop; you are a genius. You bought a GIC before a bank rate hike, and got a bigger rate on it anyhow!!!!
GIC’s offered today are less than last week people!
But of course, I suppose….but how?
#45 Sail Away on 01.27.23 at 6:18 pm
#27 Quintilian on 01.27.23 at 4:13 pm
One of your, Sail Away, favourite people has a History degree.
#54 crowdedelevatorfartz on 01.27.23 at 7:42 pm
@#27 Quinty’s Quandry
An aimless education is worse than no education…..because you have to pay for it.
—
Incorrect. I know some extremely successful people with BAs in liberal arts (no specified major as is the norm for small private schools). Their knowledge of logic, rhetoric and philosophy give them the thinking tools to run circles around most people and succeed in many fields. They later use those tools in a very broad set of careers. Some others drill down and add to the human base of knowledge.
To paraphrase Groucho Marx, I refuse to be any member of category that will have me as a member
#60 Nonplused on 01.27.23 at 8:18 pm
Compare that 45% to source efficiency of your electric range to near 95% for modern gas stoves and furnaces. You are wasting a lot of fuel.
What are you talking about? Nat Gas is horribly inefficient at small cooktops, yes it’s nice to more directly control the heat however it’s proven you’re literally pissing away the heat.
Resistive elements are alright but sort of slow and have a thermal lag that requires practise to manage.
Immersion elements for water heating are a reliable simple efficient concept. Spec it out properly and you can dump a huge amount of energy nearly directly into a mass of water. No worries about venting, leaks, HX ruptures.
Induction is amazing, it has all the control of Nat Gas without using radiant heat, rather magnetically interacting with the metal vessel itself – heating it as a ‘waste’ byproduct.
Nothing is 100% or perfectly clean that’s for sure but for home use Gas sucks. Canada is pretty clean in terms of electricity generation – mostly Hydro and Nat Gas (at scale contains losses). Sure some third-world level utility using Coal or Biomass (garbage).. yeah that is dirty electricity.
#50 Dolce Vita on 01.27.23 at 7:04 pm
Still Canadian with the need for kW. See that recent little upward bump for Italy, that was me:
That makes sense, Canadians are wasteful like Americans but we have this season everywhere called winter.
Lot easier to cool 10c maybe 20c inside compared to heating 50c to 60c inside good part of the year. Not to mention our housing was made not so long ago in the 10c/Gal era and wood was almost free, so who cares just burn it?
@#62 Quinty’s Questions
Ahhhh yes.
Crowdie so mean for pointing out the obvious.
Some university degrees are more worthless than others.
The world is so mean, so cruel.
Sniffle sniffle.
But we’ll tell the baristas with their “degree factory diplomas”
Good Job!
When they hand us a double Frappuccino with half fat and a lemon twist… ( shoot me now)
As they realize they were scammed into 4 years of debt…..and then ask you.
The real world doesnt care about empathy when they realize ….they can’t afford to eat, to buy gas or to rent a crappy apartment…
The Liberalistas in power are about to find that out.
Life choices Quinty.
Rich plumber or poor barista.
The choice is yours.
#62 Quintilian on 01.27.23 at 8:28 pm
#54 crowdedelevatorfartz on 01.27.23 at 7:42 pm
Why are you so nasty Crowdie?
Deprecating people for what they do to earn an honest living is despicable.
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Crowdie is mocking a tradesperson. LOL.
Also, frowning on any work that anyone does (even fraudulent engineers) is a garbage move. There’s no such thing as unskilled work. The inly reason that phrase exists is to justify minimum wages that are far far too low and exist to keep the 1% in stupid amounts of wealth.
@#54 Faronista
“An aimless education is worse than no education…..because you have to pay for it.”
+++
I’ve always considered my education “aimless”.
I have changed my work career 3 major times in the last 40 years.
Completely different jobs that had nothing to do with my previous career.
The school of hard knocks.
And every time I changed careers…..I made a lot more money.
But I didn’t have to go into debt and spend 4 years (minimum?) kissing a professors butt to graduate into a useless degree that the real world didn’t want or care about.
That’s called…The Real World.
“Degree factories”.
Google it.
#71 crowdedelevatorfartz on 01.27.23 at 11:46 pm
@#54 Faronista
“An aimless education is worse than no education…..because you have to pay for it.”
+++
I’ve always considered my education “aimless”.
I have changed my work career 3 major times in the last 40 years.
Completely different jobs that had nothing to do with my previous career.
The school of hard knocks.
And every time I changed careers…..I made a lot more money.
But I didn’t have to go into debt and spend 4 years (minimum?) kissing a professors butt to graduate into a useless degree that the real world didn’t want or care about.
That’s called…The Real World.
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Just wait until FURZ needs a shrink to deal with his inferiority complex.
And he finds out that the shrink has a PHD.
And charges 300 bucks an hour.
In addition to horrendous weather, “world class” Vancouver has made the international press for other reasons …..
https://www.dailymail.co.uk/news/article-11685535/On-Tuesday-Canadian-city-decriminalise-HEROIN-CRACK.html
I don’t get it. Statistically I should have under performed the lowly index, but I didn’t. Why? Is it possible that “average performers” are like index averages, mostly weighed down by dogs? The number of success stories in any line of work are miniscule.
We know about the mediocre doctor or the genius snowplow driver…..the horrible financial advisor .There’s no perfect cohort. I could give you a long list of stocks I hold that have delivered over 5O0% , BKNG is 600% winner since I read the tea leaves in it’s prospects…but what would that do to the ‘average’ guy? How did I end up retired rich poolside and you didn’t? Would you cry or fight?
Would you settle for 6% while your government assures you you’ll lose your shirt? You can’t settle. You have to get better at what you do, or find something you’re better at. Maybe write a blog. Or, Mr Trudeau is offering ‘MAID” service .
This is probably some of the best advice I’ve read for a long time. As a DIY investor it’s very difficult not to make costly mistakes that easily could have been avoided if I had a second opinion or two to talk me out of dumb decision. I doubt that most will grasp what you have written here Tatiana but thanks for trying. Like many of Doug’s posts any mention of the psychology of investing is enough to make many folks, mostly men imo, scramble for the remote to see if there’s a game on. The truth is the older we get the more likely we are to go with our gut feeling and throw all those facts and figures right out the window, never mind asking or accepting advice from others. Let’s call it Curmudgeonitis.
#52 Chucky on 01.27.23 at 7:09 pm
:):):):):)
Brazilians, no. But I’m well versed south of the equator.
Og
#59 Shawn on 01.27.23 at 8:08 pm
No more than .25% of my total wealth in any one thing, and no more than 2% of it in any one sector.
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Sounds extremally wimpy I mean cautious. So invested in 400 things and 50 sectors. Sounds implausible.
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You missed the total wealth part of the statement.
33% in RE, 15% in rolling stock (8pcs. indoors), 18% in stuff, leaves 33% liquid.
Then there is 2% in a 5% 1 yr GIC. 1% each in 2yr, 3yr and 5yr, at lower rates.
Leaves not so much for ETF’s and stocks.
40 of ’em on a good day, with cash on the side.
@#72 PHD Ponzie
And charges 300 bucks an hour
+++
How ironic.
Thats what I’m making on the latest quoted job Im working on ( actually its a bit more than that but why quibble over obscene earnings eh wot).
And I dont have to listen to neurotic grumpy accountants.
I come here for that.
Charlie Munger is regarded as a legendary investor. When he describes his investing method in detail, two things stand out.
One is that he describes successful people as learning machines. He states that he and Warren Buffett are better investors than they were thirty years ago, because they are always learning.
The second is that he describes his analytical approach to an investment as one that uses over 100 “mental models,” his models are drawn from finance, law, economics, psychology, engineering, physics and chemistry to name some of the fields. He trained as a lawyer.
He employs these models, avoids big mistakes, and prospers.
#74 Walker
Check out Pareto Principle you will see this everywhere once you know what to look for. Basically 20% of your portfolio gives you 80% of your returns, I have been rereading Edward Thorps “A Man For All Markets” and “Dual Momentum Investing” Gary Antonacci to get a better perspective and idea on how to place and run trades.
Always good to read and learn.
Who doesn’t love Tatiana?
Since I started investing in 1990, I’ve become more of a pragmatist. Years ago some smart person said that predictions are always difficult, but especially when they’re of the future. The fact is timing the market is practically impossible. The best you can do is rebalance your portfolio periodically. I read about that back in Gordon Pape’s book Low Risk Investing back in the 1990s.
Another thing you can do is when the market takes a big dive, like in March 2009 and March 2020, go on a big equity buying blitz. Boxing Day sales don’t always come on December 26. I’s so idiot no brainer simple, I don’t know why everyone doesn’t’ do it.
#80 millmech on 01.28.23 at 10:23 am
#74 Walker
Check out Pareto Principle you will see this everywhere once you know what to look for. Basically 20% of your portfolio gives you 80% of your returns, I have been rereading Edward Thorps “A Man For All Markets” and “Dual Momentum Investing” Gary Antonacci to get a better perspective and idea on how to place and run trades.
Always good to read and learn.
—————
Yes, you bet. Fun reads, and worth trying out their methods. Identify and exploit the mismatch.
Although my main focus is Buffett/Munger procedure of buying good companies and hold forever while adding at auspicious times, it’s fun to explore other strategies.
Didn’t somebody say Tesla is going to 10? :-)
Natural Gas for Home Heating Can be Gret
Mike from Montreal above said:
Nothing is 100% or perfectly clean that’s for sure but for home use Gas sucks.
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In Alberta, natural gas heat has been fantastic. It’s been dirt cheap for decades with only the rare blip higher (we just had one but still not expensive really)
But it seems it does spew a lot of carbon and we pay a lot in carbon tax on it now. As we should. At some point as the carbon tax rises we are incented to think about other heating sources, more efficient furnace and insulation etc. It’s all good! Certainly vastly better than Ontario and the Maritimes heating costs.
Doce Vita
Add fast trains to your itinerary -forget Ryan Air/Easy jet
New Madrid to Barcelona direct train 350Km/hr
Bologna to Napoli
Paris to Berlin
Milan to Hamburg
Switzerland to Amsterdam
Orient Express
etc
or
River Cruises
This seems a fun post to do some kind of Myers-Briggs type matrix with.
Idealist/Pragmatist I/P
fraMers/inTegrator M/T
reFlector/Realist F/R
Are you?
IMF
IMR
ITF
ITR
PMF
PMR
PTF
PTR