Curiosity@Intelsense
Weekly dose of learning
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Media Updates
I shared my thoughts on the markets, opportunities and where we need to be cautious.
1.
Core pillars of rationality - by Li Lu
Whether your conclusion is correct actually depends on the basic facts, the basic assumptions, and reasoning process. This is the basic thinking of physics, mathematics, and all modern sciences. However, most people do not apply this way of thinking to other aspects outside of science.
If you want to think rationally, you need to systematically detect these thinking patterns that have been imprinted in your genes and then go through them in a checklist way so that you can be truly rational when making decisions.
With China’s economy on a long slog to nowhere, Deng ditched the planned-economy playbook and embraced the healing power of the market.
“Deng Xiaoping pursued a planned economy all his life,” said Li Lu, “but when this was proven to be wrong, he decisively chose to try those things in the market economy that could be applied under the Chinese system. He took a set of methods of ‘crossing the river by feeling the stones’ (meaning that any modernization came slowly and carefully) — allowing China to take a completely new path.”
2.
Bad decisions are made in bear markets
Everything will feel bad during a bear market, if it didn’t we wouldn’t be in one.
Risk is not a theoretical concept – it is about how we feel:
Living through a 30% decline in equity markets is an entirely different proposition to looking at a theoretical loss on paper. We might know that equities can fall a lot in the short-term, but we won’t truly understand what that means until we feel it. We are far more likely to insure our house against flood risk after it has flooded – risk often only becomes real when we have experienced it.
During bear markets the attraction of overhauling our investment approach and turning it into something that makes us feel comfortable right now will be incredibly strong, but making decisions about the future when under immediate pressure is rarely a good idea.
Our default assumption should be that decisions made during bear markets will be bad ones. Humans are designed to make certain types of choices under stress and few of these are aligned with good long-term investment thinking.
Pic of the Week
Thought of the Week
“The reward for conformity was that everyone liked you except yourself” - Rita Mae Brown
“Success is liking yourself, liking what you do, and liking how you do it.” - Maya Angelou
Video of the Week
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