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Newsletter: Expectations

(Volume 1, Issue 24)

Quote of the week

"Always take sides. Neutrality helps the oppressor, never the victim. Silence encourages the tormentor never the tormented." - Elie Wiesel, Nobel Laureate


Three recent articles

1. Every one of Howard Marks's memos contains golden nuggets of wisdom and perspective. His latest, Coming Into Focus, explains why today's environment is a non-cyclical anomaly. He views fiscal and monetary policy responses as brilliant (though imperfect) but the path to recovery hinges on the world's success in overcoming COVID-19. All this should weigh on future expectations and remind everyone to (re-)calibrate risk tolerance.

2. Peter Zeihan, geopolitical strategist, publishes his thoughts on a range of global, economic, political and trade trends at Zeihan on Geopolitics. Over the past several weeks, he has posted short video clips on a range of timelines on the COVID-19 pandemic (best case, worst case), brewing trade crises (video dispatch), China-US challenges (video dispatch).

3. Nick Wignall writes practical explanations and approaches to understand how the mind works, reinforces habits and affects day-to-day interactions. Recently he unpacked the root causes and effects of the Overthinking habit. Overthinking is the "habit of applying analytical thinking and problem-solving in a situation where it is unhelpful or unproductive." In many situations analytical thinking is a good thing. But too much of a good thing can also be counterproductive.


Topic of the week: Expectations

When multiple wise men give similar advice independently, that usually is a signal to pay attention and seriously think about that advice.

Three wise men -- Charlie Munger, Warren Buffett, Howard Marks, Phillip Moffitt -- have spoken about "expectations" in different contexts:

  • Charlie Munger at the Daily Journal annual shareholder meeting in February 2020 was asked for life advice by several students. Mr. Munger replied, "My best advice, I think you would be happier if you reduced your expectations."

  • Howard Marks's recent memo Coming Into Focus (mentioned above) illustrates a shift in the "Capital Markets Line". The drop in interest rates over the past twelve months has caused prospective returns of all asset classes to decline. In the context of investments, he says to expect prospective returns to be "lower in the absolute".

  • Warren Buffett has said on a number of occasions: "What's the secret to a happy marriage. If it's not looks, nor intelligence, nor money -- it's low expectations."

  • Phillip Moffitt, former Editor-in-Chief of Esquire magazine, writes in his book, "Expectations hold your present sense of well-being hostage to a future that may or may not happen."

Food for thought: are expectations a contributor or detractor to happiness and success?

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