Friday, November 13, 2015

Recent Reading

In breaking this blog's tradition of not delivering on promised posts, I will now write down my thoughts on the books, as some would recall, I had mentioned to be on my near term reading list a couple or so months ago.

(1) "On Thinking For Oneself" (Schopenhauer)

This essay is one I found very, very perceptive. And it's not even that long, so I'd highly recommend reading the essay itself rather than some random blogger's review of it. But in any case, let me restate the gist of the essay: The mind needs alone time. This insight is probably a lot more relevant today than in those presumably simpler times when Schopenhauer wrote the essay. For those who have read Schopenhauer otherwise, it is hard not to notice the patterns in this essay, too, that borrow ideas from Upanishads and Vedic philosophy (or Vedanta, if you prefer that term). He contends that making your mind work too hard and too often can be counter-productive: if you keep studying one thing after another, when do you think in peace about what you've read? The mind needs time to assimilate and mull over what it has consumed; it is only by this process that you internalize concepts to such level of comfort that you can think in an original way about them without distorting the fundamentals, and that is when you really 'own' or 'know' the concept; without it you merely 'borrow' it, or 'believe' it. Upanishads say something very similar when they state that the way to truly 'know' is by going through the stages of 'shravan', 'manan' and 'dhyaan' (in English: reading/listening, mulling it over in your head, and then meditating upon it). Anyway, I'll leave you with that. If you're interested: here's the full essay:

(2) "Expected Returns" (Ilmanen)

If you're interested in Empirical Finance, this book is what I would call "most value per unit time", and it's no small feat given there are more than 500 pages here. To 'review' it would be rather preposterous of me, for I have studied finance not nearly as deeply as Antti Ilmanen, so all I can say is: I learned a lot reading this book. If you really want to understand at a fundamental level why prices of securities are what they are, and why they move in ways that they do, this I think is the best 'big picture' book for that I've ever read. It's not an introductory text, so if you're very, very new to this stuff, the CFA Level 1 material would be an appropriate pre-requisite for you before you start on this book, although I will say that you'll be surprised how much this book can magnify your understanding with even that little prior background. I would like to think that I have a much more rigorous education in Empirical Finance than what CFA affords, but even for me (and possibly those much more seasoned than me) this book is a treasure trove. There are pearls of wisdom on every other page. The book is probably not as mathematically rigorous as a text-book, but that is because it doesn't aim to be. It aims to develop intuition and understanding, and does an amazing job of it. Mathematical rigor is often more useful later on, once you have the necessary understanding to think of ideas, and are working on "testing" the ideas out. When what you seek is that level of mathematical rigour, a canonical book would be Cochrane's "Asset Pricing". But there's another caveat: To really be rigorous, you will have to get your hands dirty and collect, clean, organize data, write code, and run statistical tests on your own: merely reading Cochrane's book will not cut it for you. And that's nothing against his book: it is just that you can only learn by doing.

* * *

This is all I'm willing to say for now. I've also read 'Efficiently Inefficient', 'Fault Lines' and "Vivekachoodmani' so far, but haven't thought through them enough in leisure that I would feel sure I know something about their contents well enough to comment about them (refer back to review 1 of this post - now you know why I covered that first). I will write something on those books next. I'll most likely add stuff to the two books I already covered above as I 'mull over them' more as time passes. 

Wednesday, November 11, 2015

Diwali wishes to those who read this blog

Happy Diwali everyone.

No, really. This is not a post. This is just to wish you guys.

Hope you have a lovely Diwali, and hope you eat lots of peanuts in the winter sun in the coming days. Of course, this only goes for those of you who are in India.

If you're in the US, on the other hand, although I don't think you are, I hope you find a parking spot under some shade so you don't have to shovel everyday to uncover your car from under the snow.

If you're neither in India, nor in the US, who are you and why do you care about Diwali? Let me know. For you, I don't know what to wish, except recount the famous words of the great modern day philosopher and sage Salman Khan: "do whatever you want to do man".

Sunday, November 1, 2015

Important news that the popular media omitted - 1

In the past couple of weeks, there have been developments that IMHO are rather important but that, not all that surprisingly, aren't anywhere to be found on the news channels, even though they do have some modest print and digital representation. I'm thinking since this happens on a regular basis, I'll make this a regular feature on the blog.

So the 2 things I find most under-represented this week are:

(1) India started accepting gold deposits as if it were money, that is, you can earn interest on it. Gold had lost much of its legitimacy as money globally after the abandonment of the gold standard, but it looks like it is making a comeback, and India is at the helm! Now Warren Buffett can no longer say that there is no way to value it (the interest payments take away the abstraction by a great deal), or that 'civilized people don't buy gold'. Well, he still might say that. In any case, it is a very interesting experiment and deserves to be watched closely.

(2) India's states can now issue debt in the capital markets accessible to foreign investors. I believe it opens many doors, though prudence will be needed on the part of the state governments as not every open door should be walked through. I'll be watching closely.

Thankfully, TV channels did report the move away from China's well-known one child policy.

Sort of tangential, but since I'm vaguely criticizing news channels, here's an astute piece on why news can be harmful. Though, unlike me, it isn't quite concerned about errors of omission.