This is the first time we’re publishing on The Good Investors the best articles we’ve read in recent times. We’ve constantly been sharing a list of our recent reads in our weekly emails.
Do subscribe for our weekly updates through the orange box in the blog (it’s on the side if you’re using a computer, and all the way at the bottom if you’re using mobile) – it’s free!
But since our readership-audience for The Good Investors is wider than our subscriber base, we think sharing the reading list regularly on the blog itself can benefit even more people. The articles we share touch on a wide range of topics, including investing, business, and the world in general.
Here are the articles for the week ending 22 March 2020:
1. Coronavirus: The Hammer and the Dance – Tomas Pueyo
When you’re done reading the article, this is what you’ll take away:
Our healthcare system is already collapsing.
Countries have two options: either they fight it hard now, or they will suffer a massive epidemic.
If they choose the epidemic, hundreds of thousands will die. In some countries, millions.
And that might not even eliminate further waves of infections.
If we fight hard now, we will curb the deaths.
We will relieve our healthcare system.
We will prepare better.
We will learn.
The world has never learned as fast about anything, ever.
And we need it, because we know so little about this virus.
All of this will achieve something critical: Buy Us Time.
If we choose to fight hard, the fight will be sudden, then gradual.
We will be locked in for weeks, not months.
Then, we will get more and more freedoms back.
It might not be back to normal immediately.
But it will be close, and eventually back to normal.
And we can do all that while considering the rest of the economy too.
Ok, let’s do this.
2. Common Enemies – Morgan Housel
Fritz’s theory was that modern society has gravely disrupted the social bonds that have always characterized the human experience, and that disasters thrust people back into a more ancient, organic way of relating. Disasters, he proposed, create a “community of sufferers” that allows individuals to experience an immensely reassuring connection to others.
As people come together to face an existential threat, Fritz found, class differences are temporarily erased, income disparities become irrelevant, race is overlooked, and individuals are assessed simply by what they are willing to do for the group. It is a kind of fleeting social utopia that, Fritz felt, is enormously gratifying to the average person and downright therapeutic to people suffering from mental illness.
3. The world after coronavirus – Yuval Noah Harrari
In this time of crisis, we face two particularly important choices. The first is between totalitarian surveillance and citizen empowerment. The second is between nationalist isolation and global solidarity…
…The coronavirus epidemic is thus a major test of citizenship. In the days ahead, each one of us should choose to trust scientific data and healthcare experts over unfounded conspiracy theories and self-serving politicians. If we fail to make the right choice, we might find ourselves signing away our most precious freedoms, thinking that this is the only way to safeguard our health…
… Humanity needs to make a choice. Will we travel down the route of disunity, or will we adopt the path of global solidarity? If we choose disunity, this will not only prolong the crisis, but will probably result in even worse catastrophes in the future. If we choose global solidarity, it will be a victory not only against the coronavirus, but against all future epidemics and crises that might assail humankind in the 21st century.
4. The Power of the Human Spirit – Ben Carlson
World War II was the first war where airplanes would play a major role and [Winston] Churchill was worried the Germans would bomb London. The population of the city at that time was something in the range of 8-9 million people.
Churchill was convinced as many as 3-4 million people would take shelter in the countryside, thus more or less completely shutting down the city. Others predicted mass panic in the streets, refusal by many to continue working and hundreds of thousands of deaths.
Churchills warnings proved prescient but not necessarily the outcome of the bombings.
Germany did bomb London mercilessly in 1940 and 1941. The blitz included targeted airstrikes on supply chains, industrial targets, and the city at large. The plan of attack for the Germans was to demoralize the British population, bombing them day and night for 8 months, including 57 days in a row at the outset.
Tens of thousands of bombs were dropped. Forty thousand people were killed and another forty-six thousand injured. Buildings all across the region were damaged or destroyed. Entire neighborhoods were decimated. More than a million people lost their homes.
The British government had set up psychiatric hospitals outside of the city in preparation for the toll these bombings would take on their citizens.
They sat empty.
In the face of a war that was literally brought to their doorsteps, the majority of the people in London never panicked.
5. Random Thoughts on the Crash As We Catch Our Breath – Ben Carlson
There are 156 companies that are down 40% or more this year. Eighty-six stocks are down at least 50%. And 40 have fallen 70% or worse this year alone.
You’ll recognize many of the industries represented here — airlines, cruise companies, casinos and energy stocks — as being the hardest hit. These companies are in the midst of a once-in-a-lifetime downturn.
Michael and I have received a number of questions from podcast listeners about the max amount they should keep in their company’s stock when it comes to retirement. There’s no perfect number but the answer is probably a number low enough that a 70%-80% decline doesn’t ruin your entire retirement plan.
Boeing is down roughly 70% in 2020.
United Airlines has fallen nearly 76%.
MGM is down 77%.
Royal Caribbean is down more than 83%.
The first quarter isn’t even over yet.
I’m sure there are plenty of employees who held all or most of their retirement assets in their company’s stock. They’re now living through Great Depression-level losses and who knows if these stocks are ever going to fully recover.
For every Amazon that makes their employees wealthy beyond their dreams, there are always going to be situations like this where companies get destroyed.
6. How to Fight Hindsight Bias – Michael Batnick
The situation worsens in terms of the virus spreading and its effect on the economy. This seems like fait accompli at this point, but maybe the market, even down 30%, still has not properly discounted what’s to come. We’ll look back in amazement at the levels of complacency and in some cases outright denial.
Or
The virus passes through our system quicker than expected, and the market has already discounted the worst case scenario. Stocks recover most or all of their losses over the next few months, quarters or possibly years. We’ll look back in amazement at the time when stocks fell 30% in a few weeks because of a temporary slowdown in the economy.
At this point, I wouldn’t be surprised if either scenario plays out. The problem is that whatever comes to pass will appear obvious after the fact.
“Well so what?” you might be wondering. Why is it a problem? Hindsight bias is a problem because it leads to overconfidence, which leads to more risk taking, which leads to bad decisions, which leads to lower returns.
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