Aswath Damodaran Podcast Interview

I was listening to this podcast yesterday and thought that it was a great resource that investors need to hear and keep in mind. It fits in nicely with a lot of the discussion I’ve been having with others in the investing community regarding valuation. It addresses a lot of points that I was trying to make in this post on Market Timing. Have a listen and feel free to share your thoughts/comments below.

Short Bio: Aswath Damodaran is Professor of Finance at New York University Stern School of Business. Professor Damodaran received a B.A. in Accounting from Madras University and a M.S. in Management from the Indian Institute of Management. He earned an M.B.A. (1981) and then Ph.D. (1985), both in Finance, from the University of California, Los Angeles. His student accolades are no less impressive: he has been voted “Professor of the Year” by the graduating M.B.A. class five times during his career at NYU. In addition to myriad publications in academic journals, Professor Damodaran is the author of several highly-regarded and widely-used academic texts on Valuation, Corporate Finance, and Investment Management. Professor Damodaran currently teaches Corporate Finance and Equity Instruments & Markets. His research interests include Information and Prices, Real Estate, and Valuation.

Podcast length: 1hr 22m

Masters in Business: Aswath Damodaran Interview

 

The Hardest Thing To Do In Investing

Recently I got into a discussion about the hardest to do in investing. Like it or not, emotions always come into play when it comes to investing. Some investors identify the fallacies and try to remove emotion from the decision making process and succeed, while most people tend to fall for the inherent psychological nature we humans are programmed with. Investing at some point in time becomes more about understanding human/market emotions and psychology than anything else.

Investing to grow our assets over the long run is a shared goal that we all have, but it is also important to remember that it is a zero sum game. Every time you buy a security on the market, there is a seller and vice versa. So, we need to ask ourselves the question: what does the counterparty know that we do not. Is the other person buying or selling with potentially more information/knowledge on the matter or is the move based on ignorance? This is really hard to fathom on a scale as big as the stock or bond market and macro issues that are not under anyone’s control. Chances are, there is no one single answer for all cases. As they say, predicting the future is a fools errand, but so is ignoring market psychology.

With that mind, I wanted to discuss what is the hardest thing to do in investing? I gather it is one of the three options below. Whether you agree or disagree, feel free to share your thoughts in the comments section below.

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Casino Capitalism

I came across this Hedeye interview featuring David Stockman, which was a gem. It hits the nail on the head on a plethora of issues that mire not only the financial markets, but the American politics and the coming social unrest. While each of those topics themselves are complicated and will need deep dives to read and understand, an overview should pique the interest of investors on the said topics. This 30 minute video will be time well spent and I invite you watch it and delve on the topics and rethink on what it means to your personal finances and investments.

Short Bio: David Stockman is a former businessman and U.S. politician who served as a Republican U.S. Representative from the state of Michigan (1977–1981) and as the Director of the Office of Management and Budget (1981–1985) under President Ronald Reagan. After leaving government, Stockman joined Wall Street investment bank Salomon Bros. He later became one of the original partners at New York-based private equity firm, The Blackstone Group. Stockman left Blackstone in 1999 to start his own private equity fund based in Greenwich, Connecticut.

 

Broken Fed

Thanks to the Fed not raising interest rates this week, we can keep this party going for a few more weeks/months. We keep hearing in some small corners of the media that the Fed’s model is broken. But what does that really mean? I came across this video recently and thought it was a gem and addresses this point. Its a long video, and for the most part, its a very dry subject and theoretical (I skipped most of it myself). But one section from Dr. Jason Cummins, who is an ex-Fed member, really stood out and was very refreshing to hear. He turns it into more of a rant, but makes some very good points of how the Fed is working with a broken model and needs to be addressed. I invite you to watch this video (about 25 minutes long) that we can all understand and relate to .

Bio: Jason Cummins joined Brevan Howard in 2004 and is the Head of Research and Chief US Economist. Jason is also a member of the US Treasury Borrowing Advisory Committee, a government appointed panel of external experts that has served the country for almost half a century. Formerly, Jason was a Senior Economist at the Federal Reserve Board, where he ran the Macro Forecasting team. Jason began his career in 1995 as an Assistant Professor of Economics at New York University and also taught at Harvard University. Jason earned a Ph.D. in Economics from Columbia University and graduated with high honours from Swarthmore College.

 

Reading Between the Lines

Reading Between the LInes

Communication has always been a fascinating subject to me. While discussing communication, we always tend to focus on languages, dialects etc, but there is so much more than just the spoken word. This may include other forms of communication such as body language, for instance. This post is a discussion focusing on what is *not* being said and trying to decipher the meaning of something; whether the other person has something to obfuscate or simply not a good communicator. As it turns out, what is *not* being said can shed more light on the interaction. I discuss a few personal stories in this post about reading between the lines.

The following tweet from Michael Batnick a few days ago quoting Peter Drucker resonated with me and reminded that as I get more experienced in a certain aspect of life, it becomes more and more important to learn how to read between the lines. What is it that a person is implying by saying something, or more importantly, what is that crucial piece of information that is not being communicated? As it turns out, this can have a big impact on the overall interaction.

Our Recent Car Buying Experience

To illustrate this idea, let me recount a car buying experience we recently went through. My wife’s car broke down earlier this year. We could have spent a lot of money to keep it going, but considering that it was already 15 years old and would cost us more to fix it to keep running, we decided not to sink more money into it. We tried living on one car, but after a trial of a few months, which didn’t work out — we finally decided that we are a two-car family and the mobility provided was worth the saved time and annoyances of taking public transit (we have a terrible public transit system here in our city, which is a disgrace considering its the capital city).

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