Tuesday, January 01, 2019

Watch-outs and predictions in 2019

Image result for happy new year

One advantage of being a Christmas baby is that I get to reflect on the year on Christmas Day so it is possible for me to talk exclusively about the future on New Year's Day.

Instead of resolutions and goals, here are some cautionary statements entering the new year.

a) Don't talk about setting goals until you reviewed the ones you set last year

This insight came to me in a group chat with friends last week.

One guy was asking about what goals would we set for 2019 to which I then asked him what about the goals he set last year. The resulting silence was shocking and on hindsight, quite hilarious. You can almost hear a pin drop on Whatsapp.

It's a classic mistake. Even in business, there is no point setting KPIs if there is no way to monitor it throughout the year. A review will often flag many goals unmet and priorities altered. I think it's fine to miss a few goals but at least figure out why they were not met.

So I think it's nice to have goals and resolutions for 2019, but I think the first goal is to review your goals at end-2019. Otherwise no one will know how well you do. Least of all yourself.

b) Make sure your hardware matches your software

Another insight came from almost killing my Oneplus 2 phone. If a cheap 4 year old phone can run Android Pie, what is more important to a person ? Hardware or software ?

I know folks who spend quite a bit on sound systems. This is a hobby with no real upper limit. One of those financial crippling hobbies for rich people.

Surprisingly, when I ask audio aficionados about choice of music, I don't seem to get the same enthusiasm. The truth is that some people buy systems costing $15k and above just to play elevator music. The same way you pay $1,300 to buy a Pixel 3 XL just to Whatsapp your friends.

Of recent note, I have a new explanation for this behaviour.

This is a mismatch between a person's financial and cultural capital.

As your financial capital goes up, you have the money to pick up the best gear and gadgets that money can buy. However, your cultural capital may still be stuck in the 1980s. Developing cultural capital takes time and requires a lot of curation. You also need a relatively high openness to new experiences. For folks with a low openness to new experience, it becomes harder to pick up a new artist or musical genre.

Of course, it might actually be cool if you buy a top of the line AK Audio system just to play Rick Astley songs, but the same amount of time and effort can be used to cultivate a new kind of taste in music.

If you want to appreciate new forms of entertainment, where do you start ? I think 1843 magazine, the cultural variant of the Economist has suggestions on what kind of music to listen to.

As a 40-something, I am pretty closed minded to new things myself, but I am still trying.

c) Accept truths only if they are useful.

Not all truths are useful.

Of late, some gurus have been claiming that investing is more of an art than a science. As much as I hate this, I have to agree that this statement is largely true because even my own FK Stack suggests a personal and discretionary dimension to financial decision making.

Saying that investing is an art, even if true, is not useful. Worse, if you teach investing, it can be used as a cop-out to just explain why the student underperforms the market.

It is also a grievous insult to social science and humanities majors who study the Arts towards becoming useful to society.

I propose a better response against folks who claim that investing is an art.

Even in the humanities and the  social sciences, models exists to at least explain something. These explanations may not be complete so they need to be supplemented with other mental models.

Next time someone says that investing is an art, ask them for a number of models that may partially explain the phenomenon of out performance.

Suppose a "guru" says that finding an investment moat is an art. Don't let him off. Ask him for about 2-3 examples of companies with an investment moats and drill him until he can generalise a few traits about these companies. If you confront me, I might say that licensing barriers can constitute a moat. Alternatively, you can look for networking effects.

A real "guru" might be able to come up with a checklist to at least flag the moats a company can possibly have.

d) Finally, predictions for 2019

I now realise that by the end of the month I will be completely off with my market predictions, but it would still be fun to at least make a guess at this point of time.

I predict that markets will continue to trend downwards for 1H2019 and recover in 2H2019, with a final STI range from 3100 to 3200 at end-2019. However, investing in emerging markets should do well throughout the year as they are already very cheap.

Also Cryptocurrencies will either stay flat or do worse in 2019. They remain solutions looking for a problem and you might want to give the next ICO a miss.


  1. Haha, I'm trying to make my current LG phone last another 2 years at least. Currently just crossed 2 yrs mark. Can still last almost 48 hrs on a full charge with moderate emailing, bloomberging, news reading and web browsing. It was already considered a lowish end model when I got it in 2016.

    My half-arsed prediction is a bipolar version of yours --- markets experience a gut-wrenching crash in the first 5 months, followed by a freaking bull market melt up in the 2nd half.

    You'll probably get a barbell-shaped student population --- sell outs at the beginning & end of the year, with so-so numbers in the middle as shellshocked retails run from the markets.

  2. Actually, if I can get the barbell student population you predicted in 2019, it would have been a fairly good 2019 for me.

    I should have a second non-finance class by the middle of the year.