Category Archives: #AntiFragile

Inflammation Anyone? 

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Inflammation… 

… needs a reason to be… 

… and a reason to go. 

Let’s talk about the most common inflammation afflicting mankind. 

Sugar induced obesity. 

Human body recognizes Glucose and metabolizes it. 

However, the same human body treats isolated Fructose as poison. 

HFCS, short for high fructose corn syrup, is therefore full of poison. 

HFCS is much cheaper than table sugar. 

HFCS is used in big volumes by the food industry. It’s replacing normal sugar. Everywhere. It’s sheer… poison. And it’s cheap. Very cheap. 

It’s in cola, it’s in ketchup, it’s in almost all processed foods.

What happens to it in the body? 

Well, what happens to poison?

It goes straight to the liver. This wonderful and magnanimous organ tries to break it down. 

One big side-effect of the breakdown mechanism is the triggering of inflammatory enzymes. Body cells then start to swell up to protect themselves from poison. To and fro is impaired. They don’t want poison coming in. Unfortunately, good stuff, like insulin that throws out excess sugar, is also not allowed to enter.  Mankind is poisoning itself to obesity. 

Cut out the HFCS. 

Exercise to shake out inflammatory mechanism. 

See how your inflammation vanishes. 

Now let’s talk about the most common financial ailment afflicting mankind. 

Debt. 

We are in debt. 

We take more debt. 

We surround ourselves with useless paraphernalia, to ward off reality. 

Inflammation, again, disguised, but inflammation. 

Ultimately,  the mountain of due interest buries us under it. It chokes off our air-supply, just as obese cells produce “bad” lipids that deposit as mountains of plaque in our arteries, and choke off our blood supply. 

Let’s nip the problem in the bud. 

Like no HFCS – no debt. 

Craving for sugar? Fine. Control. To a point. Still craving. Fine. Have. But have normal sugar, along with fibre. Don’t have anything that contains HFCS. Shake off the relatively minor inflammation caused by normal sugar with exercise. You’re good. 

Longing to spend money? Control. To a point. Still longing to possess that something? Fine. Save. Consolidate. Accumulate cashflow. Only use debt when upcoming cashflow nullifies it in very foreseeable future. You’ve gotten your something, and you’re either debt-free already, or are going to be debt-free very soon. 

You’re good. 

🙂 

Looper

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I know, that Bruce Willis sci-fi movie… 

… is also called Looper. 

Know any other Loopers? 

There’s one in your body. 

In hardware terms, it’s your brain. 

In software terms, it’s your mind. 

Its ability to loop can become a tendency. 

Any problems with that? 

Sure. 

Big ones. 

Imagine a trade. 

Goes wrong. 

You’re drained. 

You get out. 

Loss.

Done? 

No. 

At this point, don’t let your mind loop. 

It will, if you allow it the leeway. 

If it loops, you’ve lost the energy value of two trades or more (fatigue) while losing one trade. 

Don’t delve on the loss. 

Move on in search of your next winning trade. 

Define conditions that stop your mind from looping. 

For example, when entry value is small enough to not be bothered about, its partial or even full loss might not be enough to cause your mind to loop. 

And that’s the position you want to be in. 

No looping.

No overthinking. 

Just trading. 

🙂

From Strength to Strength 

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Baby steps… 

… into freedom. 

What kind of freedom are we talking about? 

Universal freedom? 

If you insist, smarty, but first things first.

Financial freedom. 

That’s the kind of freedom that sparks off every other kind of freedom. 

Our first and foremost goal is to achieve financial freedom. 

What is the one big nemesis of financial freedom? 

Debt. 

Tear off debt. 

Detest it with every cell of your body. 

If it comes towards you, move in the other direction.

Don’t allow it’s tentacles to engulf and then strangle you. 

You do all that by nipping it in the bud. 

A new world order in being defined. 

The debt-free… 

… and the in-debt-ones. 

Where do you wish to belong?

The former category calls the shots. 

That’s where you belong. 

Your every move… 

… takes you from strength to strength… 

… towards debt-free-ness. 

Full financial freedom is a short walk from there. 

Story doesn’t stop there, sure, your strength-momentum sees to that.

However, it’s the first debt-free million that’s always the hardest-fought, and the most-fondly remembered.  

Nath on Equity – almost there

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Market being down 61). should not pinch you. If such condition does pinch you, you might react accordingly, and do something painful. 

You make market-downs not pinch you by being 62). miniscually committed at any given time. 

Also, 63). you continue committing your miniscule quanta during market downs. 

That’s because 64). you’ve made sure you have lots more to commit, by defining such an approach for yourself. 

You are 65). happy that the market is down, because it is giving you an opportunity to enter. 

You 66). switch off market TV. You don’t wanna know from them, because they themselves don’t know what works for you. 

All 67). useless emails and smses are put on block. 

That’s because 68). information overload is your nemesis. 

You 69). learn from everything you experience. 

However, you 70). don’t follow any market-person. 

That’s because 71). you are unique. Only you can benefit yourself, ultimately. 

You are going to 72). teach yourself to become a strong hand. 

Thus, you will 73). not get affected by the behaviour of weak hands, ie. the masses.

Instead, you will teach yourself to 74). take advantage of the behaviour of weak hands. 

Market players 75). commit the same blunders again, and again and again. 

That’s because 76). every few years, a whole new batch of market players starts behaving unreasonably. 

This proves to us 77). that the only real learning comes first hand from market-play, to you and you alone, and only from your market-play.

This also pretty darn well insinuates that 78). theoretical learning from books or universities has zilch value in the markets.

You’re lucky 79). if the market knocks you around during your first seven years of market-play, when the kitty is small. 

That’s because 80). exactly that learning from 79). is going to earn you big as the kitty increases during your meat-years of market-play. 

Nath on Equity – Yardsticks, Measures and Rules

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Peeps, these are my rules, measures and yardsticks. 

They might or might not work for you. 

If they do, it makes me happy, and please do feel free to use them. 

Ok, here goes. 

I like to do my homework well. 1). DUE DILIGENCE. 

I like to write out my rationale for entry. 2). DIARY entry.

I do not enter if I don’t see 3). VALUE.

I like to see 4). MOAT also. 

I don’t commit in one shot. 5). Staggered entry.

I can afford to 6). average down, because my fundamentals are clear. 

My 7). defined entry quantum unit per shot is minuscule compared to networth. 

I only enter 8). one underlying on a day, max. If a second underlying awaits entry, it will not be entered into on the same day something else has been purchased. 

I’ve left 9). reentry options open to unlimited. 

I enter for 10). ten years plus. 

Funds committed are classified as 11). lockable for ten years plus. 

For reentry, 12). stock must give me a reason to rebuy. 

If the reason is good enough, I don’t mind 13). averaging up. 

Exits are 14). overshadowed by lack of repurchase. 

I love 15). honest managements. 

I detest 16). debt. 

I like 17). free cashflow. 

My margin of safety 18). allows me to sit. 

I pray for 19). patience for a pick to turn into a multibagger.

I keep my long-term portfolio 20). well cordoned off from bias, discussion, opinion, or review by any other person. 

There’s more, but it’ll come another day. 

🙂

When Push Comes to Shove 

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Genetically… 

… we’re savers. 

Indians. 

Save. 

That’s a good thing. 

Since the ’00s though, our banks have started pushing loans as if there’s no tomorrow.

The motto seems to be : we don’t care who you are, just borrow. If we know who you are, here, borrow some more. 

That is dangerous policy. 

It sets the stage for a push comes to shove scenario. Savings are being lent further, and they might not come back. 

What counts when push comes to shove? 

Deposits in the bank? No. Gone. 

Real Estate? No. No buyers. No renters. Illiquid stuff just won’t move. 

Equities? No. Dumps. Good entry levels though. No resale value for a while. 

Bonds? Perhaps. Short duration ones, provided underlying doesn’t go under. 

Gold? Yes. Big. 

Trading? Yes. Options, forex, commodities, what have you. 

Cash? Yes. Provided there’s no hyperinflation. Use it for day to day life. Use surplus to acquire great bargains. 

Farmland? Yes. You’re then sorted as far as food and water are concerned. 

Use your imagination. 

Prepare for a push and shove scenario. 

It probably won’t happen. 

However, you’re prepared, just in case. 

Making Friends with Poison

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You’re thinking cruise control… 

… when life asks you to step in. 

What just happened? 

Is cruise control a myth? 

Life in the ’10s is about variables. 

Balance arrives, to become imbalance. 

Body-chemistry. 

Most of us are far away from equilibrium because of our inner and outer environments. 

We exist for the longest time in a poisonous state of pseudo-equilibrium.

It’s become a game of how well we cope with such state.  

What’s the fine line here? 

Shying away is not an option. 

To achieve, one delves deep into the world. 

One becomes habituated to body-chemistry being regularly out of whack. 

One makes friends with one’s poisonous state of non-equilibrium. 

One achieves. 

Simultaneously, one keeps killing accumulated toxins, or pumping them out. One doesn’t let them overflow. 

Exercise. Metabolizes toxins at a fast pace. 

Anti-oxidants. Straight-away attack and break-up cancer cells. 

Water. Dissolves water-soluble toxins and flushes them out. 

Smoothies. Micronutrients. 

Fruits. Micronutrients. 

Veggies. Micronutrients.

Sleep. Recuperation.

Meditation. Recuperation. 

Chanting. Recuperation. 

Family. Rejuvenation. 

Harmony. Rejuvenation. 

Recreation. Rejuvenation. 

Etcetera. 

Do what you’ve come to do. 

Make sure you do this stuff too. 

Cheers! 

🙂 

Monotony

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Plan in motion? 

Let it play. 

Sure, monotonous. 

Monotony bores you, right? 

Boring monotony yielding acceptable results is a good outcome. Don’t spoil its party. 

Divert your attention. 

Try a stunt. 

Risk a little. 

Maybe one out of your ten stunts works out. 

Develop this one further. 

Still working. 

Scale it up slowly. 

Working. 

Auto-pilot. 

Monotony. 

Results still good. 

Stop looking. 

Let it play. 

Look elsewhere. 

Do something new with yourself. 

Soon, it’ll be time to go. 

Meanwhile, build a legacy to leave behind, in your memory, one that benefits many. 

The Thing with Focus

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Depth. 

Confidence. 

Proper entry. 

Decent exit, if required. 

Understanding. 

Lack of panic. 

Overall picture. 

These are some of the things that focus is capable of giving. 

Swagger? 

One-basket attitude. 

Over-depth. 

Narrow-mindedness. 

Loss of overall picture due to over-chewing one subject. 

Robotic mindset leading to freeze. 

Yeah, these too. Within the capabilities of focus. 

We want the former qualities. 

We’re discarding the latter ones. If they come knocking at our doorstep, we’re shooing them away. 

We spoke about diversified focus. 

Whatever we do in life, let’s do it well. 

We’ll have our many baskets. Why should we take the risk of having just one basket? 

And, into our many baskets, we’ll delve deep-deep-deep. 

Period. 

Sheer Moat Investing is not Antifragile 

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There we go again. 

That word. 

It’s not going to leave us. 

Nicholas Nassim Taleb has coined together what is possibly the market-word of the century. 

Antifragile. 

We’re equity-people. 

We want to remain so. 

We don’t wish to desert equity just because it is a fragile asset-class by itself. 

No. 

We wish to make our equity-foray as antifragile as possible. 

First-up, we need to understand, that when panic sets in, everything falls. 

The fearful weak hand doesn’t differentiate between a gem and a donkey-stock. He or she just sells and sells alike. 

Second-up, we need to comprehend that this is the age of shocks. There will be shocks. Shock after shock after shock. Such are the times. Please acknowledge this, and digest it. 

To make our equity-play antifragile, we’ll need to incorporate solid strategies to account for above two facts. 

We love moats, right? 

No problem. 

We’ll keep our moats. 

Just wait for moat-stocks to show value. Then, we’ll pick them up. 

We go in during the aftermath of a shock. Otherwise, we don’t. 

We go in with small quanta. Time after time after time. 

Voila. 

We’re  already sufficiently antifragile. 

No magic. 

Just sheer common sense. 

We’re still buying quality stocks. 

We’re buying them when they’re not fragile, or lesser fragile. 

We’re going in each time with minute quanta such that the absence of these quanta (after they’ve gone in) doesn’t alter our financial lives. We’re saving the rest of our pickled corpus for the next shock, after which the gem-stock will be yet lesser fragile. 

Yes, we’re averaging down, only because we’re dealing with gems. We’ll never average down with donkey-stocks. We might trade these, averaging up. We won’t be investing in them. 

Thus, we asymptotically approach antifragility in a gem-stock. 

Over time, after many cycles, the antifragile bottom-level of the gem-stock should be moving significantly upwards. 

Gem-stock upon gem-stock upon gem-stock. 

We’re done already. 

The Thing with Sugar and Dairy

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It’s common knowledge now. 

Cancer cells love sugar and dairy. 

In fact, they love them so much, that they grow ten (?) times faster in their presence. 

Just act as if the question mark isn’t there. 

I’ve put it there because I’m not sure whether the number should be eleven, or nine, or what have you. 

However, the numbers are deadly. 

Shocker, right?

Spent my childhood gobbling sugar and gulping dairy. Didn’t know any better. 

Now, only dairy going in (hopefully) is the good dairy. Yoghurt. 

Only sugar in diet is the good sugar. Honey. 

At least, that’s the goal. 

What makes these two “good”?

There’s something bio in them. 

Yoghurt’s got bacteria. They’re the good bacteria. They cleanse one’s system. Cancer cells don’t like them, because probiotic bacteria probably break them down. 

Honey’s got the saliva of bees, containing vital enzymes. These catalyse various biochemical and metabolic processes. Cancer cells don’t like them either. They like the sweetness of honey, but not these enzymes. So, honey’s a tad less dangerous.

The bio-portion saves the day. It’s for a good cause. It’s purpose is friendly, and positive. 

Cut to equity. 

Where does one look for terminal disease?

In balance-sheets and annual reports. 

Debt. 

Promoter ego.

Fraud. Scam. Manipulation. 

Creative accounting.

These are some of the things that can cause terminal disease. 

All of them might exist, at some level, in any given balance-sheet and / or annual report. 

What we need to gauge in our minds are the levels. 

Is any level alarming enough to cause terminal disease, or for that matter just disease?

Bearable debt leading to growth is even a good thing. It’s like a tonic. Unbearable debt leads to terminal disease. We need to stay away from a stock with unbearable debt on its balance-sheet.

Nothing functions without ego. I am. Therefore I do. However, an overbearing and overambitious ego leads to disastrous decisions that can cause terminal disease. We need to stay away from companies whose promoters have overbearing, self-promoting and overambitious egos. Such promoters don’t even realize when they’re functioning in self-destruct mode. Am not going to take any names here, but you get the gist. 

Frauds, scams and manipulations come under the category of “sheer disease that’s already terminal or just one step away from going terminal”. Upon finding them, needless to say, avoid the stock.  

Accounting. Sure, everyone’s busy getting creative here. We need to separate positive accounting from its negative counterpart. 

Accounting that leads to fund-availability at the time of need and results in value-creation for the shareholder is to be welcomed. This kind of accounting does not cause terminal disease. It creates a detour that strengthens the company overall in the long run. 

Such accounting whose sole purpose is to deceive the shareholder and benefit the promoter is a very big red flag. This kind of accounting leads to terminal disease.

While zeroing in on a quality stock, you’re simultaneously ensuring longevity-enhancing conditions. 

In the process, you’re automatically ensuring that your portfolio accumulates one gem after another. 

Wishing for you happy and successful investing. 

🙂

Looking for a Deal-Breaker

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I look. 

Don’t find it. 

Look again. 

And again. 

Keep looking. 

Tired. 

Eyes ache. 

Sleepy. 

Stop. 

Resume next morning. 

Still nothing. 

So on and so forth. 

Few days. 

Absolutely nothing. 

Buy the stock.

Yes. 

That’s the chronology. 

After zeroing in on a stock…

…that’s the chronology. 

Am I happy the search was unsuccessful?

You bet!

Am I spent?

Yawn…yes. 

Was it worth it?

Of course. I now own a quality stock. 

What’s happened before?

Stockscreener. 

Stock pops up. One that appeals to me. 

Check it for value. 

Pass.

Check it for moat.

Pass. 

Look for deal-breaker. 

Yeah, final step. 

Takes the longest. 

It’s boiled down to a yes or no. 

One’s going to holding the stock for a long, long time. 

This is when one is asking every cell in one’s body. 

Yes or no?

No deal-breaker?

Fine. 

Going for it. 

It’s a yes. 

What is an Antifragile approach to Equity?

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Taleb’s term “antifragile” is here to stay.

If my understanding is correct, an asset class that shows more upside than downside upon the onset of shock in this age of shocks – is termed as antifragile.

So what’s going to happen to us Equity people?

Is Equity a fragile asset class?

Let’s turn above question upon its head.

What about our approach?

Yes, our approach can make Equity antifragile for us.

We don’t need to pack our bags and switch to another asset class.

We just approach Equity in an antifragile fashion. Period.

Well, aren’t we already? Margin of safety and all that.

Sure. We’ll just refine what we’ve already got, add a bit of stuff, and come out with the antifragile strategy.

So, quality.

Management.

Applicability to the times.

Scalability.

Value.

Fundamentals.

Blah blah blah.

You’ve done all your research.

You’ve found a plum stock.

You’re getting margin of safety.

Lovely.

What’s missing?

Entry.

Right.

You don’t enter with a bang.

You enter at various times, again and again, in small quanta.

What are these times?

You enter in the aftermath of shocks.

There will be many shocks.

This is the age of shocks.

You enter when the stock is at its antifragile-most. For that time period. It is showing maximal upside. Minimal downside. Fundamentals are plum. Shock’s beaten it down. You enter, slightly. Put yourself in a position to enter many, many times, over many years, upon shock after shock. This automatically means that entry quantum is small. This also means you’re doing an SIP where the S stands for your own system (with the I being for investment and the P for plan).

Now let’s fine-fine-tune.

Don’t put more than 0.5% of your networth into any one stock, ever. Adjust this figure for yourself. Then adjust entry quantum for yourself.

Don’t enter into more than 20-30 stocks. Again, adjust to comfort level.

Remain doable.

If you’re full up, and something comes along which you need to enter at all costs, discard a stock you’re liking the least.

Have your focus-diversified portfolio (FDP) going on the side, apart from Equity.

Congratulations, you just made Equity antifragile for yourself.

🙂

Learning to live with (temporary) imperfection

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Perfectionist?

You?

Brace up.

Something small goes amiss.

You still have to get your act together.

If you have lots going under your umbrella, well, then even more so, exponentially.

Life’s about permutations and combinations.

Something or the other goes astray, almost always.

Make sure you don’t.

Go astray, that is.

Yeah.

Explain to yourself.

Hold your act together.

The other stuff under your umbrella hasn’t gone astray.

Only the one thing has.

That’s not a bad score.

Move on.

Times change.

You will get a chance to set it right.

Such is time.

Meaning, take care of your other stuff.

Well.

Take care of it well.

When the time arrives, set your astray business right.

Now you’re good.

See?

Didn’t hurt, did it?

You held your other stuff together.

You set your astray stuff right.

All came out perfect.

What more could you want?

It paid to keep your cool.

You didn’t blow it.

Worry could have blown it.

Your other stuff could have suffered.

However you were stronger.

You had learnt to live with imperfection…

… because you had also learnt…

… that time is the great equalizer…

… and that you’d get the opportunity to make it perfect again…

which you did, while you kept your world balanced…!

Well done!

🙂

Focused Diversification : Mantra for all Times

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I’m more into focus.

One can focus on one thing at a time.

Agreed.

What if after that one thing starts running, it doesn’t require any more focus?

Wow.

Then I focus on another thing.

Get it running.

Then another.

Till my focus window is full.

Let me tell you about my focus window.

I focus on cash, debt, equity, forex, gold, real-estate, arbitrage, and options.

With that, my professional focus in finance is full full full.

I get something running.

That’s it.

Then I don’t need to be with it. Mostly.

Let me run you through.

1). Cash – Bind it in a worry-free and accessible manner. Done.

2). Debt – Study the underlying very thoroughly. Reject 10 underlyings. Take up the 11th which passes all criteria. Be happy with a slightly better than FD-return. Done.

3). Equity – Invest for life. Study till you drop the stock or take it up. Only invest in what meets all criteria and offers margin of safety at time of investing. On top of that – SIP (systematic investment plan). Done.

4). Forex – Get a software robot to trade it for you. Or some human-capital. All available online. Requires a bit of fine-tuning. Keep tuning till you start making a return. Done.

5). Gold – Buy physical gold. Research your source. Needs to be impeccable. Bullion. Coins. SIP. Accessible. No jewellery. Done.

6). Real-estate – Make your real-estate yield you an income. Regular income? Done.

7). Arbitrage – Understand what this is, and why it gives you a tax benefit. Get an online MF account going with Kotak MF or DWS. Divert some funds into their arbitrage MF, either or. I prefer Kotak. Monthly dividend payout option. Done.

8). Options – Get the option-strategy going. You don’t require a desktop. Mobile is sufficient. All you now need to do is take care of square-off. On mobile. This means a slightly higher level of engagement than the above avenues. Only slightly. Are you ok with that? Fine. Done.

In a flow, it’s all doable.

And, you remain focused.

Why all this?

Times demand it. You never know what might come in handy, and when.

Yeah, times are tough.

However, you are tougher.

To use Nassim Nicholas Taleb’s terminology, you are antifragile.