Caveat Emptor

Key takeaway to become Anti-Fragile 1) Optionality and non-linearity When you lift weights, muscles tear and rebuild given time and your body builds up excess capacity so that your body adapts to lift  heavier  weights next time. In evolutionary biology,  <Tummy fat and glycogen metabolism> is a natural mechanism to build up energy buffers in case the body goes through periods of starvation or requiring sudden bursts of energy usage. Excess capacity is often frowned upon as it is sub-optimal allocation of resources, until you truly need it. Fund managers pile up leverage that can withstand the worst earthquake  that was observed until the next mega-catastrophe that occurs. Companies leverage up excessively to catch the tailwind of the economic boom until the next blowup occurs. Making one anti-fragile involves the willingness to make sub-optimal returns compared to risk taking peers, building warchest and deleveraging, and focus on survival until th...

Facts pertaining to the US economy 1) The debt binge of corporate America has been well documented in various sources and conveniently ignored as enthusiastic investors continue to chase stock market highs across the years.  Although I am not a macro investor, I do occasionally listen to analysis of the present state of the economy and the spillover effects on the other areas. 2) Certain hedge fund and private equity managers has noticeably tried to leverage up the balance sheet of the companies it owned and conduct share buyback to maximize the valuation of their existing shares, before selling them off for a profit. Although conventional corporate finance suggests this is the right action to do to minimise the weighted average cost of capital and maximise existing shareholder value in low interest rate environments, this only benefits exiting shareholders and not long term shareholders whom have to bear the interest rate burden if business slows and companies cannot refi...

The Rise and Fall of Nations - A Greek Review Much of Finance has been dominated by Greek alphabets such as Alpha (Abnormal returns, Beta (Market Returns), Theta and gamma (with relation to options). A surprisingly little of that is dedicated to recent history and case studies of countries (Noticeably Greece) and what made their economies poor performing. If people take a close look at the rise and fall of modern economies, and steer away from the factors / mistakes made, it will be much more useful compared to forecasting what is largely unknowable. The economic failure of Greece cannot be directly extrapolated to the US economy. Greece noticeably has very different soil, industries and productive capacity, tax regulation and collection, as well as macroeconomic policy compared to the US. Japan is another particular interesting case study which had a lost decade which I will want to read up on. Looking at the Greece situation made me partially relieved that Singapore is probably...

Aftermath of the onslaught The stock markets have noticeably stabilized after the calamitous collapse for the past 2 months. After 2 months of furious buying into the negative momentum, it is time to reassess the portfolio changes and how I should position myself for the next 5-10 years ahead. Personally, I am wary of believing in the forecasts of self professed market gurus, a s I might form a biased view that I will be irrationally anchored to, and cloud my judgement when the facts change.  After attending webinars by various trainers as well as podcasts by fund managers that I think are credible, my conclusion is that the market is still undecided whether it should move up or down, and I am better served on buying companies with strong fundamentals and weed out the ones that are deteriorating. They are significant interesting investment ideas being pitched by certain smart investors and I am looking into them as I patiently wait for any <durians> to drop. To keep myself ...