Saturday, December 10, 2016

Tools for Titans #1 : Chris Sacca

[ I am starting a series on Tim Feriss's latest book Tool for Titans which has a section on becoming wealthier in life. There will be no full summary of the section, just a discussion of the key points. I encourage readers to pick the book up to join the discussion on this blog. ]

Chris Sacca is an early stage investor and is the first person mentioned in the Wealth segment of this book.

a) What i like - Sweet and Sour Summers 

Chris mentioned the way he was brought up as a kid. During his summer holidays, his parents would find him a decent industrial attachment where he was able to learn a lot and be treated very well. Subsequently, he would then be made to work in a horrible job where he was ragged. In this way, he learned that there are great opportunities in this world but a person can end up with really shit jobs if he was not careful.

We have a system which is close to what Chris went through, its called NS but there are no cushy internships here unless a parent can pull some strings for you.

b) What's worth debating about - Are you on the offense or defence?

The idea of offence or defence in personal finance is a false dichotomy but has some utility.

In my view, an offense strategy works on increasing your revenue while a defensive strategy works on containing costs. Many of us bloggers are biased towards defence because costs are easier to control but both strategies are important to expand our range of savings.

c) What I dislike - Good stories always beat good spreadsheets

This probably applies in the world of private equity where spreadsheets tend to be projections and there are not much revenues to speak of. It is entirely possible to invest without stories, which introduces its own bias. Numbers are critical when investors look at publicly listed companies.

A good screen filter backtest on Bloomberg can have a dramatic improvement over ETF returns. For example, it is possible to have extra returns if you filter for low P/B ratios and high dividend yields in your investments. One latest filter I tested returned 19% over 10 years with a Sharpe ratio of 0.91 after reading a academic article on the strategy - I can't share so much of it right now but will talk about it later.

I actually recommend being skeptical of most investment stories.

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