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3 timmar

How to silence the noise and come up with new (investment) ideas


The other day I tried a writing exercise I do every now and then - though not as regularly as I probably should. I simply sat down with a pen and paper and wrote down everything that sprang to mind. The start was a bit awkward, but after a while more or less useful ideas started pouring out of me.

"I can't think of anything to write"

"I'm comfortable"

"I wonder who developed the very keyboard I'm using right now"

"How stupid am I? Can't I think of anything that's not right under my nose?"

"Have I lost my ability to manage money? To think? To write?"

"What do I want? Can't I even think of that?"

"Maybe I should write a post about my portfolio and why I've chosen those items. I could, if it weren't for the fact that I've already done that"

"Perhaps I should jot down my current views on interest rates, currencies, bitcoin, stocks, the economy, gold, oil, real estate etc."

At about that point, maybe 2 minutes into the exercise, I began getting surprisingly useful results.

I consider it a kind of meditation, a variant where the idea is to trigger as many thoughts as possible, as well as get them out of the way by writing them down.

I can't claim it's a new thing. I mean I essentially just brainstormed. I can't even claim it's useful, since the brainstorming wasn't directed at a certain topic.

However, it felt really good, it was calming, and I came up with ideas in areas I never planned to. On top of it all I used longhand, which is particularly good for processing information and cementing the corresponding neuronal pathways.

Summary: try it; write a word a day

I won't make this post longer than it needs to be.

Just take this as a strong recommendation from me to try writing (at least) just one sentence a day by hand. Keep a nice journal; write down a word, a feeling, a thought, something to do; sometimes keep going and make 10 seconds into 1, 2, 3 or 10 minutes.

  • It's (probably) good for your brain.
  • It can be useful, but you won't know that until you've tried it for a while.
  • It should make you happier, positively so if you write down things that make you grateful.
  • If it's new to you, it's good for you

Oh, don't forget to subscribe to my weekly-ish newsletter, and get my e-book for free (investment lessons from 15 years at The European Hedge Fund Of The Decade)

If you get too many ideas, not least investment ideas, try bubble sorting them.

Taggar (blogg): 
12 maj

Bubble sort: how to bring order to chaos on financial markets

How to be a stock market genius (OK, perhaps a little hyberbolic)

Idea: bubble sorting: one of the first things they used to teach in programming, i.e., in a list of items try them against each other and see which ones "float" to the surface. After a maximum of n-1 iterations the ranking is finished.

Summary: Find your style of investing, including asset classes, ranking principles etc.. Then start bubble sorting the alternatives in your domain. Put your top choices in the portfolio. The rest is details (sizing, stop-loss etc.)

No matter your level, you can bubble sort your alternatives and avoid being paralyzed of too many choices. If you know nothing at all, just list a handful of industries or stocks that you come to think of. Compare one of them with all the others, one at a time, letting it sink to the bottom if it keeps losing out. The best alternatives (based on your comparison criteria, whether it be charts, valuation, business idea, owners, founders or what have you) will "float" to the top like a bubble.

Hard made easy

Do you sometimes find it hard to know where to begin when choosing investments among the thousands of alternatives that exist? Just begin anywhere, make a list of what springs to mind and bubble sort the list. Add more items and bubble sort those. There, a complicated problem is suddenly made ridiculously easy and mechanistic.

Guidelines for bubble sorting

Start with a "universe" of investables - however you define that. The rest is just a question of ranking them and deciding how many of the top alternatives to invest in.

  1. Choose method, style, assets and time frame, including how much time you'll spend on your investing and how much of your portfolio will go into a certain asset class
    1. Style
      1. Value (the only style as far as I'm concerned; what cash flows will the company's assets produce to me, regardless of what others think they're worth)
      2. Trend, model (identifying fads, hoping to sell to bigger fools, based on charts, stats and math)
      3. Derivatives (fundamental, technical, arbitrage or perhaps some other strategy; not for beginners)
      4. Special situations (ahead or after earnings, take overs, news etc.)
      5. Arbitrage (taking advantage of market imperfections)
    2. Asset class (don't limit yourself to stocks, in particular public, domestic stocks) 
      1. Stocks
      2. Bonds
      3. Commodities
      4. Currencies
      5. Private equity
      6. Real estate
      7. Precious metals
    3. Time horizon
      1. Investor (years)
      2. Swing trader (weeks)
      3. Day trader (minutes)
      4. High Frequency (micro seconds)
  2. Bubble sort, e.g., industries and then stocks within industries (e.g., 5-7 industries, and then let 1-2 stocks per industry bubble to the top)
    1. Industry based on view of macro picture (see below)
    2. Relative multiples (see this previous article for more on relative multiples)
      1. PE, PS, yield, P/B, PEG (and many more; you find multiples you like and trust)
    3. Absolute measures
      1. Growth rate, DCF valuation, various multiples, ROE
  3.  Market (it might be worthwhile taking the general market into account, but remember that individual stocks trump markets):
    1.  trend (go with the trend, if possible)
    2. internals (be careful if technicals look shaky from a historical perspective; divergence between various gauges instead convergence caused by indiscriminate risk seeking)
    3. valuation (if the market is ridiculously expensive and set for a correction, perhaps avoid going all in on your investments)
    4. exhaustion gap (Hussman recently wrote about peak signals such as exhaustion gaps close to all time highs)
  4. Macro:
    1. central banks (easing or hiking cycle; when do you prefer to take more risk?)
    2. GDP (growth tail winds can't hurt... unless they can)
    3. point in cycle (long in the tooth, or new and shaky?)
  5. Details:
    1. stop loss (well, do you want one? Do you feel lucky? Well, do ya, punk?!)
    2. stop profit (my own invention, I don't like the idea of letting profits run)
    3. sizing (size according to knowledge, level of certainty, form...)
  6. Read these books:
    1. Margin Of Safety (mindset)
    2. The Most Important Thing (risk)
    3. Reminiscences of a stock operator (execution, holism)
    4. possibly Valuation, by Copeland (math)
    5. or The Intelligent Investor (booooring but perhaps useful basics for beginners)
    6. TAOS (my own psychological framework: The Art Of Sprezzatura)
    7. The Retarded Hedgefund Manager (my own book about 15 years at a successful hedge fund)
  7. Find a few blogs or newsletters you like, e.g.,
    1. Hussman (clear and instructive, lots of useful charts and thoughtful comments on macro, valuation, financial history and more)
    2. GMO
    3. Marks' Memos
    4. Find your own favorites
  8. Start small, make your big bets later when you are more knowledgable. There's no need to hurry
  9. Document every decision in a way that can be evaluated afterward on other parameters than profit/loss or volatility
  10. Read up on my other articles on investing, such as this one on portfolio construction. You'll find the rest here under Investments

P.S. Bubble sort your final portfolio as well as the individual stocks vs. a market index. If they don't beat the index why would you bother with individual stocks? And, if all your components are better than the index, why not buy more and short the index against the portfolio?

Final thoughts: try it, it's fun and easy

Start easy. Take your current portfolio. Bubble sort it; try them against each other until you know which one you'd sell now if you had to, and which one to double up on if you had to.

If you have more than ten holdings, do that; sell the bottom one and double up on your best holding (unless you already have an outsize holding).

Next up: bubble sort the 10-20 stock market industries or 5-7 sectors. Which 5-7 sectors would you want to hold the most? Bubble sort within each of those industries and find the 1-2 stocks within each industry you prefer. Take those stocks and bubble sort them. Invest in the top 8 stocks, but make sure they belong to a minimum of 4 industries.

Taggar (blogg): 
4 maj

Predicting the future, one small step at a time - for happiness, relevance, work and investments

Summary: I'm not writing about, or predicting, the future, I'm asking you to do it, mostly as a brain exercise, forcing you to actually think

Length: very short

So, you doubt the Singularity* will happen?

[* the technological Singularity, when one generation of tech improves the next generation in such a rapid pace that normal humans can't keep up]

Then, why not make your own prediction.

Start with one technology or piece of hardware or software you're familiar with. A cellphone, e.g., or glasses, TV, internet, cars... Extrapolate what that tech will look like in the future. Never mind how far into the future. Take it one step at a time and imagine what the next iteration will look like, and the next, and the next. Again, disregard the time aspect, and focus on the generations. Don't forget to take into account that whatever that piece of tech turns into with enough iterations, it can be used as a tool for improving and accelerating other tech areas.

Where do cell phones get you in a hundred significant iterations? Computers? How big, how fast, how competent? Where do they go, how are they powered?

Keep doing that for cars, planes, space ships, contact lenses, software, computer games and movies, 3D glasses, brain implants, artificial agents and so on.

You might not be an expert in any of these fields, but consider what an AI can do in the future if it's already mastered Chess, Jeopardy, Go and Poker. Where does Crispr-Cas9 gene editing take us in a hundred iterations? Robots are currently stumbling around in Alphabet's labs, but what will they be doing in a thousand years?

When, if ever, e.g., will a team of robots beat the best team of soccer or american football players? In 2050? Sooner? Later? Never?

Do your best at imagining the future piece by piece, and please tell me if you see a hard stop anywhere. If not, the Singularity will happen. Sir Martin Rees, a distinguished astronomer, has suggested that genetically and cybernetically enhanced humans/cyborgs on Mars could be the first artificial intelligences.

We can already build simple nanomachines, edit genes and create artificial life. There are brain implants controlling neurodegenerative diseases, there are eye implants making blind see (low res for now, but with Moore's law it won't be too long before they can see better than ordinary humans, and a wider spectrum of light).

I see a very bright future, a future where we can widen our intelligence, and live to the fullest. Others see a dystopian scenario of obese and non-thinking human remnants merely being tolerated by the only intelligent life on earth, AIs. Yet others see nothing at all, since we'll soon destroy the Earth before being able to leave.

Where do you see yourself in a world of AI and AR?

While you're at it, where do you see yourself in that future? Not just the end game, but the transitional period in getting there. How will you and your children create a rich and meaningful existence in the coming 25-50 years?

  • How will you educate yourself?
  • What will you work with?
  • How do you plan your investments?
    • Stocks?
    • Bonds?
    • Gold?
    • Real estate?
    • Crypto currencies such as Bitcoin?
  • What will governments look like?
  • How will laws evolve?

Where's your worth when power shifts from governments to tech giants, when cryptocurrencies make current tax regimes impossible to enforce? How do you plan to stay relevant in the future, a future where technology might be able to do everything you can do... for free?

4 maj

Gauge your T-score trading status for better performance, or risk wrong-sizing

Summary: Cornerstone habits tend to make the other pieces of life  click into place

Gauging your status before trading

Before making any trade on the financial markets each day, I'm sure you calculate your T-score*, i.e., subjectively measuring your cognitive and physical status to get a feeling for how balanced and reliable you are. The T-score can be put together in a multitude of ways and works best if it's individually tailored. However, the following factors are probably relevant for most investors:

(* actually, I'm quite sure you don't, but perhaps you should start)

  • How much have you slept, how tired are you?
  • What's your current relationship status, are you arguing with each other? Are you feeling lonely?
  • How's your economy, how's your trading been lately? Are you worried about paying your bills? Do you have a losing trade on that's eating at you?
  • Are you hungover?
  • Are you rushed, did you have to cut your routines short this morning?

Making a quick check on your T-score every morning could do wonders for your investment performance, using it to make sure you don't trade at all (or size your trades responsibly) if you're emotional, tired, stressed or unbalanced in some way.

Remember that the most important thing for great long term investment performance is minimizing your number and size of mistakes. Going over your T-score every morning could in addition have positive knock-on effects on your investments and life in general.

The very act could wake you up, make you more alert and aware, perhaps cause you to do other positive things such as going for a morning walk.

Read on for more on such cornerstone habits.


I build my days around dog walks and workouts. I take my dog out 3-4 times a day, either taking a walk or throwing balls for about an hour.

My sleep, food, meditation and mobility work follow from that. I get tired around 11 pm and typically fall asleep around midnight. I get up when I'm done sleeping, never using an alarm. I tend to wake up at 7 in the summer and 8 during winter. I rise, go out for a walk, then have breakfast including the day's single cup of coffee.

Further, exercise (and mobility work) makes me sleep better, which quickens my recovery and increases the quality of my workouts. Both make me naturally crave better food and so on and on in a synergistic cycle. During my walks and workouts I listen to podcasts on science, exercise and finance.


The same principle of cornerstone habits holds true in investing (not mentioning how important a sound body and mind are for an investor).

Keystones for an investor

If you device a plan, a well thought out strategy, it becomes easier to temper yourself, not trading on emotion, which in turn provides time for doing the warranted research and math, which makes for a solid base to actually both improve on your strategy and actually following it. Whether you start with the plan, with controlling your emotions, with doing the math or with practicing patience isn't that important. Adhering to just one of the habits tends to strengthen the other. That's the magic of keystones.

The 12 components of TAOS, or the 4 major themes that the twelve build upon are those cornerstones when it comes to my style of investing:

StrategyPatienceResilienceEnduranceZealZenAgilityTemperatenessUnbiasednessResolutenessAdequateness, and Self-analysis.

Have a plan

Do the math


Be unemotional

Through this link you’ll find the special artwork that Imcite has crafted based on my ideas, if you are interested in a physical reminder of what I consider the most important cornerstones of investing.

What daily/weekly routines and habits can you think of that would A) fit your life and B) have synergistic effects on the rest of your life, i.e. catalyzing other positive activities that in turn strengthens the original key habits? Check out this post about my keystone habits if you need some inspiration.

  • How about setting aside an hour every Sunday for preparing and scheduling your work for the week?
  • Or, why not walk outside for half an hour every day right after work (perhaps start with 5 minutes and build from there. Aim low to get high)
  • A wild card might be gauging your cognitive and physical status before trading (T-score), and adjusting your sizing and preparations accordingly

Hey! Subscribe to my newsletter or share this article with your social network if you want to make the world better.

Taggar (blogg): 
25 april

Why religion is the lazy coward's way

Summary: Religion is to science what snacking and TV-addiction is to exercise and deep work; a little bit like how technical analysis relates to fundamental analysis in investing.

Disclaimer: Before bashing on religion you should always ask what kind it is, i.e., exactly what the believer actually believes. When I'm talking about religion, I mean the existence of a personalized God that can and will communicate with people, governs some kind of extra-material realm, as well as can break or change the natural laws. All of that is of course complete bunk.

Religion is lazy, indulgent, and intellectually cowardly.

A scientist has to work much harder at uncovering the true nature of reality.

It takes centuries of missteps and breakthroughs, of courageous individuals and diligent teams challenging and building on each other's findings, to chip away at the big marble block of nature, piece by piece revealing what's beneath.

In contrast, any child can succumb to an overactive amygdala, and assume agency in every occurrence. God is a childish invention, where the familiarity of grown-ups controlling and creating the child's world spills over into adulthood, infecting the mind with shortcut solutions to complex problems.

It's the snack eating, TV-couch dwelling, dopamine addict personality that turns to God for a quick fix; whereas the curious and diligent homeostasis breaker works hard and deeply, knowing that the satisfaction from accomplishment beats any short term sugar rush.

You can tell your bible touting friend the next time you see him, that he's nothing but a feeble-minded, childish addict that's too lazy or too scared to try to understand the true nature of reality.

Hey, if that made you think, why not subscribe to my free newsletter (and get my e-book about investing for free)? After all, I did receive the only European Hedge Fund Of The Decade award to date. Or why, not check out this summary of my 12 investment lessons from the book.

Taggar (blogg): 
17 april

How to relevantly use (relative) valuation gauges

Topic: Valuation multiples and how you should use them

Summary: the word of the day is relative; relative valuation - both in scope and in time

Nota Bene: This is just a short reflection on valuation multiples and their use. You can emphatically not rely on valuation multiples for investing in stocks - not even the triangulation of a multitude of them.

-Whose E?

That was my superior and mentor speaking back in the year 2000.

I had just suggested a company was cheap or expensive based on its P/E multiple. I had kind of taken for granted that the average of sell side analysts' earnings estimate was the default and final place to go to for calculating P/E ratios. Not just 'kind of'. I did take that for granted.

Silly me.

Whose E? Whose earnings estimate? That question has been my mantra in the stock market ever since. I've just reformulated it as "Trust no one"

Absolute multiples are hard

Start with a valuation multiple you like, e.g., the Price to Earnings Ratio, or P/E.

First you have to decide which E to use, and not least whose E. It could be the most recently published and reviewed quarterly earnings number, or the last 4 quarters, or the last full year. It could even be a projection of next year's earnings (remember though that forecasts are fickle creatures, and often not to be relied upon). By, the way is it your forecast, or some unknown third party's, or an average of some kind of trustworthy group of pundits? Is it based on reported numbers straight up, or adjusted to avoid comparing apples and pears?

That got complicated fast, so lets get back to just assuming we actually have some kind of uncontroversial and relevant earnings number, as well as a resulting P/E multiple.

Let's say your stock has a P/E of 15. Now is 15 cheap or expensive from an absolute perspective?

That's really hard to say, and if you actually could do that at all, investing would almost be easy (except for that annoying business with determining the E, past or projected)

Lesson: The E is very difficult to determine: which period, past or projected, whose projection, is the chosen period representative of the full future lifetime of the company? Likewise, determining whether a certain P/E multiple is attractive or not from an absolute perspective is at least as difficult. If it only were a cash flow multiple, and not just based on the accounting invention of earnings*... Anyway, moving on.

* complicated and obfuscated by varying taxes, deductions, one-offs, goodwill, acquisitions, employee stock options, accounting standards etc.

Why relative valuations matter

The chosen multiple needs to be compared to the history of the company. If it has typically traded between 10 and 15 for a very long time, then 15 is pretty expensive for that particular stock (unless something material has changed in terms of its business)

Another way of gauging whether 15 is high or low is to compare it to other companies in the same industry*. If their average is, e.g., 17, then 15 suddenly looks pretty attractive. Or, if the general market is trading at 20, then 15 might start to look quite cheap.

However, let's not get carried away. The important thing to consider is whether the relative valuation is deviating from its standard. If your company usually trades 5 points below the industry* average, then 15 vs 17 isn't cheap anymore. We would need to see a multiple of 12 to be at all enticed - and that would still just be a meh valuation. Further, if the market premium usually is around 8 points, then that's a second confirmation of a 15 multiple (vs. the market's 20x) not being terribly cheap, but actually some ways on the rich side.

* 'industry' in this context means any single stock or group of companies you consider relevant

Lesson: compare the chosen multiple of your company to the industry's current average, to the market average and to the company's own history. Also remember to take the historical valuation spread vs. the industry and the market into account as well.

There are other relativities to consider such as the point in the cycle

As a final note, industry spreads vs. the market average tend to change during the economic cycle. After a long bull market, like right now, the typical valuation spread might be bigger or smaller than average. Even if the average spread vs the industry is 5 points, it might be just 1 point in aging bull markets. If that's the case 15 vs. 17 might look interesting again and warrant further research.

A word of warning: Do not rely purely on valuation or valuation multiples for short term investments (less than 5 years horizon), in particular not notoriously unreliable ones like the P/E multiple. The least thing you should do is triangulate between several measures, such as Price to Cash Flow, Price to Sales and Price to DCF.

That's of course still not enough, since it might be more instructive to check various technical gauges, such as trends and market breadth, not to mention signals from other asset classes.

And then there is that problem again, with pinpointing a relevant earnings number, cash flow or sales estimate that's representative of the future 25 years. Check out my other articles on investing and valuation under Investments here.


Fools rush in

P/E-ratios and other valuation multiples are almost useless, but if you are going to use them anyway. make sure you investigate relative ratios in scope and in time before jumping on the "Oh, it's trading at just 10x P/E, it's the cheapest stock in the index" train.

The market doesn't 'weigh' stocks based on their fundamental merits*, it's a beauty competition where you need to figure out what other people are currently thinking, or might soon be thinking - perhaps what they're thinking you're thinking they're thinking, or might come around to think.

* at least not on time scales that are relevant to most mentally healthy individuals.

If you're Swedish, I made a 1-minute video on the topic the other day. Check it out on YouTube here.

If not, I've started making short videos in English as well, e.g., hereherehere and here.

NEW here? Check out my free e-book on investing, as well as free newsletter (weekly-ish)

Taggar (blogg): 
23 mars

What if the new new things were slightly delayed

The bull has many legs
3D printing, AI, robotics, automation, CRISPR/Cas9, millennials, cheap and clean energy... there are lots of reasons for a great bull market. Maybe a bull market to eclipse all previous bull markets.

-In 2025, that is (well, starting before, but really booming by then).

  • Until then, perhaps Trump's rule won't be that smooth (which president's is?)
  • Perhaps retiring baby boomers mean less umph in the economy and stock markets (selling stocks to finance retirement, less borrowing, less consumption, scaling down home ownership, car churn...).
  • Perhaps interest rates won't keep falling. Perhaps debts won't keep rising.
  • Perhaps the highest median valuations in the history of stock markets won't rise further. Perhaps record high profit margins won't either.
  • Perhaps after Trump's honeymoon months, the typical new-president-after-a-2-termer correction ensues. Perhaps, as per usual, the 7-8th years of the decade show "a bit" of turbulence (like 1987, 1997-8, 2007-8 [and, yes, it goes back further]). 
  • Perhaps Variant capital's idea of surplus capital being eaten up by capex and rising inflation means less stock market strength. 
  • Perhaps China/Russia/US won't be as fast friends as they been the last quarter century.

What if all those things converged and happen at the same time? What if Trump's honeymoon came to an end in the 7-8th year of the decade? What if interest rates bottomed out? What if inflation came back and ate up surplus capital coincident with higher capex and a resurgence for commodities? What if the baby boomers born 1945-50 started retiring and consuming less around the same time, while millennials lived with their parents a while longer?

What if those things reinforced each other and caused falling margins and falling valuation multiples at the same time as slower sales and negative sentiment and negative cycle phenomena? What if increased innovation means faster churn of companies, i.e. fiercer competition, and consequently productivity surplus increasingly going to consumers again?

Perhaps then the great bull market would have to wait a few years and let a bear market clear out some cobwebs left over from the ongoing bull market first.

Perhaps we won't see two bull markets in a row. Perhaps ever rising stock markets aren't a human right. Perhaps things aren't different this time


Taggar (forum): 
Taggar (blogg): 
23 mars

The Art Of Sprezzatura investing

Have a plan

Do the math


Be unemotional

Over the course of the last three weeks I have published 12 articles covering what I consider the most important traits of an investor. You can find them through these links: 

StrategyPatienceResilienceEnduranceZealZenAgilityTemperatenessUnbiasednessResolutenessAdequateness, and Self-analysis.

My overarching message is that the psychology of investing is much more important than the numbers. Sure, you still have to do the math, using actual facts not opinions. And you still have to assess the competitiveness and endurance of the companies you are researching, or other fundamentals that are relevant to your style of trading or investing.

Most of all, however, you need to keep yourself in check:

Stay calm, discard good deals and wait for great ones, don't let others rush or deter you - investing is absolute, not relative; avoid trading on emotion; use check lists to counter psychological biases...

Investing is an evolutionary mismatch and thus potentially a source of both great misfortune and opportunity. If you master your own psychology and manage to avoid easy but very human mistakes, you will find yourself leagues ahead of most market participants. It's easy. But hard. It's...

The Art Of Sprezzatura

What follows is an attempt at condensing 12 long articles, and even more years in the hedge fund business, into one single short article about how to become a good investor. If you haven't already I suggest you go back and read all twelve, before or after finishing the below.

Start by forming a strategy that has a logical underpinning, as well as is a good fit with both financial history and your own temperament. I prefer a value oriented style, grounded in the microeconomic business logic of single enterprises, and supported by a macro backdrop of longer economic and stock market trends and cycles. Further, I don't like single large bets or frequent trading, instead focusing on long term investments with geographical, industry and asset class diversification.

Practice patience both in and out of markets. I myself am patient to a fault not seldom venturing into the swamp of denial.

Keep track of your decisions and trades, your entry and exit points, your logical thinking and your feelings around those decisions. The aim is to make sure your learn something from every loss, from every gain - making you a stronger investor with every trade, no matter the result. That is the meaning of resilience. I for one could definitely do better in this area, as I occasionally exhibit unbecoming streaks of ad hoc thinking, laziness, complacency and hubris.

The screwest thing you can do

is think you’re a master of the universe

We’re all just little cogs,

and the universe will go on without us

We have to fit into it and adapt to it.

-Howard Marks

It's easy to advise against going all-in, but harder in practice. Sometimes certain opportunities just seem so good greed gets the better of you. It might help considering that if an investment is that great, you don't have to put very much in to make a killing. In any case the risk reward is much better that way than risk getting killed altogether. Not least, make sure the deal really is as good as you first think, rather than relying on your own track record and superiority. Talk to other people with other opinions and complementary knowledge; triangulate valuations and market positions from various vantage points

Finally, strive for a growth mindset, always learning, always improving. Analyze your hits as well as your misses in order to identify which traits were in play, which traits can be improved and how.

Money is nothing but a gauge of your progress

toward self-actualization and freedom

Investing is a lot more than just money


Investing for me means building, growing, learning

and acquiring tools for

continuous learning and improvement


The 12 traits of an investor, The Art Of Sprezzatura, can be grouped together in 4 themes, where several traits often fit in the intersection between two different themes:

Patient: Wait for the right opportunity, in accordance with your plan and math

Analytical: Do the math. Track. Improve.

Unemotional: Avoid herding, hubris, greed and fear. Hope is not a strategy. Stick to the plan.

Strategic: Have a plan, a good, well-founded, one; one you can trust.

More than anything else,

what differentiates people who live up to their potential

from those who don't

is a willingness to look at themselves and others objectively.

-Ray Dalio



Occasionally, I will offer subscriber-only material in my newsletter. Please sign up (it's free, and it includes my book about hedge fund investing), if you want to make sure you don't miss out on freebies, offers and subscriber-only discounts on special products.

Taggar (blogg): 
23 mars

Self-analysis creates a feedback loop of improvement for all TAOS components

Supercharging the engine

Okay, I know nothing about engines, but I think there is a way to increase the efficiency and effect by feeding some of the exhaust fumes back into the carburetor - or something like that.

A positive feedback loop works in a similar way, with your introspection insights strengthening the other facets of your game.

In practice self-analysis means you should track and study various aspects of your investment process as well as the results.

Why did you gain or lose money in a certain investment? Did you adhere to the other 11 TAOS guidelines?

Did you follow your strategy, was the strategy well-founded? Did you wait patiently for the right entry and exit points? Did you size your position responsibly? Did you go the extra mile, doing the math yourself rather than trusting an authority? Did you keep your calm and rationality? Did you explore other sides of the story or did you fall prey to availability bias and selective perception? Did you become cocky, thinking "I've got this"? Did you follow your best practices and other procedures to discover and neutralize dangerous and biased tendencies? Did you stick firmly to your own conclusions or were you swayed by clever salesmen or the cozy feeling of belonging to the herd?

For every TAOS trait, an intellectually honest analysis can reveal mistakes and weaknesses as well as strengths and strokes of genius. Feed back whatever you learn from both your winners and losers about the way you handle the other eleven TAOS traits of a great investor. Maintaining a habit of introspection can refine and enhance both psychological, technical and and mental aspects of your method. Thus cutting out unwanted aspects, creating boosters and brakes, checks and balances that make you perform more consistently on the markets. 

The naked ape

Desmond Morris studied humans from the perspective of a zoologist, as if humans were just one more primate. Do that with yourself. Make an impartial FBI serial killer profile on yourself, as you would any other portfolio manager. What is your style really? How do you actually take decisions, follow up on your trades etc. Try to categorize if your actual investment decisions are value based, trading oriented, impatient, emotional, ... and so on. How do you actually behave and how would you want to behave? What's been the difference between your game plan and your actions or failure to act?

Please notice that there are at least two aspects to this. One is identifying your strategy. The other is mapping out your psychological profile in order to gradually modify your temperament.

Scrutinize your own Modus Operandi

Remember that both successes and failures need to be analyzed

It's easy to only pick apart your bad trades, but don't forget about the winners. Sometimes they were the result of a good procedure, sometimes luck. Sometimes you made a lot of mistakes, being impatient, reckless and emotional but got a good result for other reasons. So, take a good, hard look in the mirror, whether your bank account just got fatter or thinner.


your successes

and failures


Preemptive strikes

We are all burdened by biases, by homeostasis, by laziness, by greed and fear. By identifying which ones are your worst, you can put systems in place beforehand, e.g., best practices check lists and filters, that preempt unnecessary mistakes. Counter your cons and boost your fortes with clever routines and habits, based on your commonplace notes and self-analysis.

Identify your irrational tendencies, biases, inclinations and flaws

without preconception

Preempt your own reflexes and emotions,

and control them with bespoke tactics and strategies

In my book about 15 years at the best performing hedge fund in Europe over a decade, I list 50 rules of investing.

This post is one in a line of articles detailing and explaining some of my most important insights from that time. Taken together I believe they will make for a useful and inspirational reminder for evolving and consistently improving your investment habits.

Whenever having a bad experience in the markets, or exhibiting signs of hubris after a lucky streak, refer back to these twelve ideas, thus combining your own experience with mine to maximize your investment wisdom.

Strengthen your strengths

Self-analysis means realizing your investments are prone to human error.

It's not enough to gather numbers and pictures, you have to actively fight against and try to shrink your blind spots of cognitive biases. Sure, knowing Apple's strategy, numbers and image is a good start. But if you don't keep your own human irrationalities under close guard, or forget to constantly improve and evolve your method and execution, you'll find yourself on the losing side sooner or later.

Know yourself. Keep track of yourself. Analyze yourself. Implement brake systems for your worst psychological biases, and reward your strokes of insight. Allow yourself to consistently improve by feeding back lessons about yourself, fully owning both your strengths and your weaknesses.

Your investments are made in the interface

between you and the world

You need to know both to get it right 

Self-analysis is the twelfth and final article in my 12-part series of TAOS - The Art Of Sprezzatura. If you missed the previous eleven articles you can find them here: StrategyPatienceResilienceEnduranceZealZenAgilityTemperatenessUnbiasednessResoluteness and Adequateness.

Did you like the series? Do you know somebody that should read it? Tell them about it; share this post with them. If you please.


Occasionally I will offer subscriber-only material in my newsletter. Please sign up (it's free, and it includes my book about hedge fund investing), if you want to make sure you don't miss out on freebies, offers and subscriber-only discounts on special products.

Taggar (blogg): 
21 mars

Adequateness - being pragmatic, analytical; guided by empirical evidence

There is no such thing as supernatural beings

That is an indisputable fact; since everything in nature is natural, and given nature is defined as everything. So. I'm sorry to break it to you, there are no werevolves (for context, see last week's article on Vampires, Werewolves and Resoluteness). Well, unless werewolves are natural of course.

Which they might be; it's just that the probability for humans living on Earth in the 21st century ever coming across a true shape shifting werewolf is so close to zero there really are no reasons to take the possibility into account. However, should one happen fall into your lap... 


Facts, facts, facts

(Nope, that's not the opening scene in "Four weddings and a funeral")

That's the gist of Adequateness right there:

1) Reality is what it is. A is A, and all that

2) Be curious in investigate reality; just don't get ridiculous regarding probability weights*

3) Be open to exactly what reality entails, what the empirical evidence actually tells you

* The probability of the existence of God, a tea kettle orbiting the sun or a spaghetti monster - or intelligent design for that matter - is for all practical purposes zero (at least down to the hundredth decimal place), whereas, e.g., the principles of evolution and the natural law of quantum mechanics have been confirmed in a multitude of clever experiments (and never refuted). There is nothing "50/50" or "You have your view and I mine" about it.

It's all good and well having a great strategy, being patient enough to wait for the right moment, learning from mistakes, never going all in, being thorough and calm, exploring unexpected vantage points, avoiding hubris and biases, not to mention being rationally resolute.

However, if you fall prey to superstition or start assuming instead of investigating all your hard work will be for naught. It's the facts that count. It doesn't matter how great your model is if your input is garbage. You need all your zeal and agility to collect the facts, and all the other psychological facets of TAOS to implement the facts and execute the investment. But first of all you need the facts.

Shit in

Strategy, Patience, Resilience, Endurance, Zeal, Zen, Agility, Temperateness, Unbiasedness, Resoluteness

Shit out

What facts?

I am not a rigid financials and economics professor type, claiming only cash flow and interest rates count as facts. Perhaps a bit surprising, I'm quite open to any kind of empirical evidence of relevant causal correlations in reproducible research; be it HFT trading algorithms mined by machine learning systems, or more down to earth value based methods using publicly available financial reports - or a combination.

I don't care what kind of facts you use, as long as they are facts - and you are open to those "facts" being wrong, misinterpreted or evolving.


Oil facts?

Maybe the Cushing oil inventory level at one point was a relevant variable for the price of oil. Maybe OPEC production quotas and their communication once was important information. Maybe open speculative interest was. But now or later, maybe they aren't. Maybe new flexible storage capacity, new exploration technology, new pipelines or zero funding costs are changing the "facts".

Maybe even the very underlying fundamentals of production, demand, storage, transportation, energy substitutes and human speculation, aren't that important for a prolonged period of time due to tens of trillions of dollars having been conjured from nothing over the last decade. Perhaps the machines have thrown everything out of whack and are running circles around us mere humans laughing at our feeble attempts to participate in the game.

Perhaps. Perhaps not.


Watch carefully where you are going

Investigate and analyze

the actual evidence; don't assume

Stop, collaborate and listen

Whether the AI scenario above is relevant yet or not isn't the issue. My message is that it's up to you to research the relevant data for your investment style to find facts that hold water, rather than assuming heavy objects fall faster than light ones, or that high density objects fall faster even if there is no air.

If you want to pour a ton of liquid steel, you'd want to check the metallurgical facts thoroughly first. Treat large investments the same way - research what needs to be researched for your style, sizing and risk level.

Sometimes the truth hurts, but better sooner than later, better the ego than the wallet. Or in the above case, better stand corrected before than a statue after.

So, if things don't evolve as expected, take pause to take stock of the evidence. Listen to your "adversaries" and cooperate if possible to establish the truth. Then you can apply whatever different models and methods you prefer to massage those facts into investment decisions. Your ego, your assumptions, your self-image, your status are all irrelevant to your investment prowess. The only thing that counts is the facts of your entry point and your exit point. To get those things right you have to stand back to reality, be interested in and love reality. It's there, no matter if you want to or not. 

Reality is what it is

Be curious and pragmatic

In my book about 15 years at the best performing hedge fund in Europe over a decade, I list 50 rules of investing.

This post is one in a line of articles detailing and explaining some of my most important insights from that time. Taken together I believe they will make for a useful and inspirational reminder for evolving and consistently improving your investment habits.

Whenever having a bad experience in the markets, or exhibiting signs of hubris after a lucky streak, refer back to these twelve ideas, thus combining your own experience with mine to maximize your investment wisdom.

Don't be stubborn;

Look for and allow new empirical data

to change your investment thesis

Adequateness means establishing facts and truths, ruthlessly discarding obsolete heuristics, misconceptions and prejudices.

Adequateness means conforming to reality, analyzing what is actually there, rather than what you'd like it to be. You can't close your eyes to reality. Well, you can, but that won't stop the train/lion/stock.

If you actively pursue and accept the facts you can analyze them rationally and take action accordingly. But if you stay in the denial phase for too long, panic will sooner or later hamper your ability to do anything about the fact of the hammer hitting you on the head. Hope is not a strategy based on adequateness.

Be analytical while you still can

Ignoring the facts won't mitigate

the extent of the eventual losses one iota 

Adequateness is the eleventh article in my 12-part series of TAOS - The Art Of Sprezzatura. If you missed the previous ten articles you can find them here: StrategyPatienceResilienceEnduranceZealZenAgilityTemperatenessUnbiasedness and Resoluteness. One final installment is coming tomorrow.

Do you like the series? Do you know somebody that should read it? Tell them about it; share this post with them. 


Occasionally I will offer subscriber-only material in my newsletter. Please sign up (it's free, and it includes my book about hedge fund investing), if you want to make sure you don't miss out on freebies, offers and subscriber-only discounts on special products.

Taggar (blogg): 


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