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Another investing letter worth reading

Every year, I read Warren Buffet’s letter to the shareholders of Berkshire Hathaway. It’s entertaining to read and offers a glimpse into his approach to investing and, in many ways, life. (and I ogle at the dividend yield of his stock holdings)

Today I want to share another letter, this one by someone who is also very successful but perhaps not as well known – Howard Marks.

I’m suggesting it because it offers a good framework for understanding the what and why behind investing in a low interest rate environment. He offers his opinions and predictions, or more accurately a series of probable outcomes, and it’s a good framework to understand what the future might hold.

Coming Into Focus [Howard Marks, Oak Tree Capital] – “In this way, low rates make risk aversion a challenging thing to practice and risk taking much more palatable. The alternative is to accept today’s lower promised returns. But most people opt for the former, and that means risky asset classes become crowded with eager capital, something that’s not beneficial for risk-adjusted returns. Bad things tend to happen when FOMO – the fear of missing out – takes over from risk aversion, or the fear of losing money.”

How My Investing Has Changed After Financial Independence [Physician on Fire] – “I recently read Dr. Bill Bernstein’s The Investor’s Manifesto. Dr. Bernstein, a retired neurologist, financial historian, prolific author, and manager of ultra high net worth investors, is famous for saying ‘If you’ve won the game, stop playing.’ What he means is, if you have all the money you need to live the life you want, why not dial down the risk and shift your investments to safer, less volatile assets, i.e. more bonds and fixed income instruments, and a lower percentage of stocks.”

How to waste your career, one comfortable year at a time [Valley Girl Newsletter] – “A friend of mine told me this story about wild ducks — Wild ducks migrate in the winter not because of the cold but because of the food. If you feed them, they won’t migrate. Keep feeding them for a few years in a row, still won’t migrate. Then stop all of a sudden, they won’t migrate, and they’ll die. The moral is that you can tame wild ducks, but you can’t wildify tamed ducks (that’s why there isn’t even such a word as wildify). So you have to be careful not to lose that hustle.”

A Brief History of Word Games,/a> [The Paris Review] – “When I began to research the history of crosswords for my recent book on the subject, I was sort of shocked to discover that they weren’t invented until 1913. The puzzle seemed so deeply ingrained in our lives that I figured it must have been around for centuries—I envisioned the empress Livia in the famous garden room in her villa, serenely filling in her cruciverborum each morning­­. But in reality, the crossword is a recent invention, born out of desperation.”

See you tomorrow Apexian!