Food: Neighbourhood kitchen reopens
The neighborhood kitchen finally reopened after closure for 5 months. The previous vendor decided to quit, so there is now a new operator. We showed support this weekend, ordering both lunch and dinner. I especially like the stewed beef and ginger chicken which we had for dinner. The fried noodles were very good too, though the sauce could have been more savory.
Love: Being a decent human being
The 2020 July/August issue of The Atlantic carries a very thoughtful story by Anne Applebaum: History Will Judge the Complicit.
It detailed the different ways that elites and the masses justify their support for regimes and leaders that exhibit through their behaviors that they clearly hold very different values to the said elites and masses. The most popular 7 rationale people gave themselves are:
- We can use this moment to achieve great things;
- We can protect the country from the president;
- I, personally, will benefit;
- I must remain close to power;
- LOL nothing matters;
- My side might be flawed, but the political opposition is much worse; and
- I am afraid to speak out.
The author proceeded to give examples of how bad leaders managed to misrule, sometimes for a very long time and with popular support. These examples include the current US presidency and session of congress, communist eastern Europe and parts of South America.
The author closed with a thought from Władysław Bartoszewski, who was “a member of the wartime Polish underground, a prisoner of both the Nazis and the Stalinists, and then, finally, the foreign minister in two Polish democratic governments”.
“… he summed up the philosophy that had guided him through all of these tumultuous political changes. It was not idealism that drove him, or big ideas, he said. It was this: Warto być przyzwoitym—“Just try to be decent.” …”
History Will Judge the Complicit
Here’s a thought – instead of nationalistic patriotic education, how about a core civic syllabus that plants the seed of being a decent human being in the minds of our young ones?
Growth: 340 ways to develop character strengths
One thing really leads to another. I was on one of my daily runs when I listened to one of my usual podcasts. The guest for that particular episode turned out to be Dr Laurie Santos, a Yale professor who runs a very popular course on happiness at Yale University. She mentioned that a version of that course is also available on Coursera. I signed up and was tasked to assess my character strengths for my week one assignment.
According to The VIA Institute on Character, character strengths can be categorized into six broad virtue categories, which are universal across cultures and nations. These are Wisdom, Courage, Humanity, Justice, Temperance and Transcendence. Further:
“Every individual possesses all 24 character strengths in different degrees, giving each person a unique character strength profile. When you know your strengths, you can improve your life and thrive. Research reveals that people who use their strengths a lot are 18x more likely to be flourishing than those who do not use their strengths.”
To make it practical, the course suggested different ways of using one’s character strengths. I thought Tim Ferris, with his list of “17-Questions-That-Changed-My-Life”, was good at creating lists. The UPenn professors upped Ferris 20x with this list of 340 ways to use the character strengths.
Investment: 7 asset classes retail investors should beware of
Renaissance Technologies made the headlines again this week, with the FT reporting the hedge fund lost 20% this year. As the comments in the story rightly pointed out, the losses the article referenced pertained to one of the Renaissance’s funds still open to outside investors. The article made no mention, however, of the flagship Medallion Fund, which has been closed to outside investors since 2003 and was reported to have generated annual returns of 39% p.a. from 1988 to 2018. This performance, according to the book The Man who Solved the Market by Gregory Zuckerman, trumped that of George Soros, Steven Cohen, Peter Lynch, Warren Buffett, and Ray Dalio.
Earlier this year, another FT article reported that Medallion had started to dabble in Bitcoin. The newspaper cited WSJ’s report on Medallion’s performance:
“The Medallion fund is on track for its best year, the Wall Street Journal reported on Friday, despite a volatile market that has affected Renaissance’s other funds, which have posted some of their worst quarters ever.”
FT 2020 Apr 18th: Flagship Renaissance fund dabbles with bitcoin
The thing that attracted my attention about the bitcoin report, however, is less of the fund’s performance, than the fund manager’s treatment of its outside investors. The fund’s filing with the SEC stated that:
“Bitcoin and futures based on bitcoin are extremely volatile, and investment results may vary substantially over time. These instruments involve substantially more risk and potential for loss relative to more conventional financial instruments. Investments of this type should be considered substantially more speculative and significantly more likely to result in a total loss of capital than many other investments.”
It went on to list 12 risk factors that could “materially and adversely affect the value of the Fund’s investments.” Renaissance approach to these risk is to expose only its management and staff to it, and not to expose its external investors as yet. I understand there is a risk that I overestimate their altruism in the action. For the time being, I would grant the benefit of the doubt.
I find this approach to treating investors refreshing. In the financial services industry that I am familiar with, the typical management preference for allocating risk assets is to push as much of these as possible to external investors, to minimize the potential adverse impact to shareholders. The calculation is simple: whether an asset wins or loses, the firm charges a fee that goes straight to shareholder pocket after expenses. Should an asset turn out to be a hit, shareholders can take a further cut from retained exposure and/or additional performance fee. Should an asset turn out to be a lemon, the bulk of the losses are borne by external investors, leaving the firm intact to face another challenge for another day.
The asymmetry of the heads-I-win, tail-you-lose approach is especially stark when the external investors involved are retail. These typically are less informed about asset classes such as hedge funds and private equity funds. Regulators in developing economies wisely impose a heavy hand, and restrict the exposure that retail products have to such asset classes. More developed markets adopt a caveat emptor approach. In these markets, retail clients sign on forms that say they understand the risks. I seriously doubt the extent of understanding about hedge funds and private equity funds a 50-year-old civil servant who had been a nurse or teacher all her life might be able to distill from a 30-minute sales session with a mutual fund or insurance salesperson. Nevertheless, that signature is sufficient for the vendors to claim to have discharged their responsibilities to understand the customers’ financial needs and risk appetite.
If you are in such a market and looking to invest via some funds or insurance products, please watch out for the following keywords in the list of assets your investment might be exposed to:
- Hedge funds;
- Private equity funds;
- Collateralized Loan Obligations (CLOs);
- Structured products;
- Subordinated bonds;
- Derivatives; and
- Capital securities.
Awe: Titan pulling away from Saturn
While I have been preparing for my daughter to eventually leave home and become independent, it seems that a moon of a planet in the solar system has also been gathering momentum to spiral further away from its planet. Through a process known as resonance locking, Titan is migrating away from Saturn at a rate of 11 centimetres per year. I wonder when it would break free of Saturn’s gravitational pull.