Thursday, November 8, 2018

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Today's links:

Fun stat of the day:

We surveyed our Operations team, who always seems to be jonesing for java, about their daily coffee intake. The longest order? A grande, half-sweet, vanilla latte with soy milk and caramel drizzle (yes, they're those people). On average, their daily dose is two on weekdays and three on weekends. With an average age of 40, investing their caffeine cash* for the next 25 years in the S&P 500 Index at an estimated annualized 9% per year would result in $259,000 at age 65. Coffee anybody?

Correlation vs. causation using McDonald's pork-based sandwich: The McRib (Link)

 "While you might laugh at the McRib Effect as an obvious example of correlation does not equal causation,  I don’t see how it is that different from a lot of the arguments I see being made about financial markets every single day.  Some pundit will claim that event X caused the market to drop or how President A was better than President B for stocks.  All of these arguments boil down to inferring simple causality for a complex, chaotic system involving millions of decision makers.  To think that one individual has an effect that is both large and measurable on aggregate equity performance is absurd."


📺 Buffett and Munger on how they never have an opinion about the market - 1994 Berkshire Hathaway Annual Meeting (Link)

"The best thing that can happen from Berkshire’s standpoint (we don’t wish this on anybody) is to have markets that go down tremendous amounts.  We are going to be buyers of things over time. If you’re going to be buyers of groceries overtime, you’ll want prices of groceries to go down, if you’re going to be buying cars overtime, you’ll want car prices to go down.  We buy businesses. We buy pieces of businesses and we’ll be much better off if we can buy them at attractive prices."


Every past decline looks like an opportunity, every future decline looks like risk. (Link)

"The biggest factor affecting market returns over a short period of time are changes in investor moods. And moods don’t care about spreadsheet, reasoning, formulas, or metrics. They make fools out of those who try to predict them."

*Assumptions: Weekday coffee consumption: a grande Starbucks latte: $4.45, A grande Americano: $2.25.  Weekend consumption: one latte and two Americanos. Index return assumption based on the S&P 500 Index's performance over the last 25 years, source: Bloomberg LP.  In C$. The S&P 500 Index is a broad-based market-capitalization-weighted index of 500 of the largest and most widely held U.S. stocks.