The River -- Thich Nhat Hanh

This is my summarized version of the short essay, The River, by Thich Nhat Hanh


Once there was a beautiful river. She was happy.

One day, she noticed clouds floating in the sky. She loved the clouds and wished to possess one. She chased the clouds but could not reach them as they were high in the sky.

A strong wind came one day and blew all the clouds away. The sky was empty. The river was sad as she was used to chasing after clouds. She wanted to die as there was nothing for her now.

One night, she looked deeply into herself and suddenly realized that clouds were made of water and that she herself was water.

The next morning, she saw the blue sky for the first time. She had never noticed it as she was only interested in the clouds.

That afternoon the clouds returned. She said hello to them. When the clouds wanted to go away, she said goodbye. She now no longer wanted to possess them.

That evening she opened herself to the sky and received the image of a full moon.

She realized that everything beautiful is already there. There is nothing to chase after.

Just do it

I always wondered why somebody did not do something about that,

then I realized I was somebody.


-- Lily Tomlin

Basic Concepts of Value Investing

Cannot remember where I got these from:

1. No market participants is assumed to be crazy or stupid.

2. Value is a dynamic concept.

3. Market price is NOT something to predict but something of which to take ADVANTAGE of.

4. There is NO general risk; only SPECIFIC RISK.

5. Every investment has something wrong with it.

Titanic and Noah's Ark

Titanic was built by professionals and steered by professionals.

Bloated egos (too big to fail) and distracted sailors (not monitoring closely) saw the Big Ship end in sorrows.

On the other hand,

The Ark was built by amateurs. Filled it with the right stuff and have faith.

Benjamin Graham -- words of wisdom

“I want to say that at least half of all the pleasures that I have enjoyed in life have come from the world of the mind, from things of beauty and culture in literature and in art. All this is offered to everybody, virtually free of charge, except for the interest to start and the relatively slight effort to appreciate the riches spread out before you …. take that initial interest, if possible: make that continued effort. Once you have found it – the life of culture – never let it go.”

Benjamin Graham, at his 80^th birthday party, La Jolla, California

Karl Popper -- The Logic of Scientific Discovery

The Logic of Scientific discovery:

3 conditions:

1. the Starting conditions
2. the Reversible Hypothesis
3. the Ending conditions

3 applications:

i. the explanation

ii. the prediction

iii. the back testing

If you are given (a) and (c), you try to do (i) using (b).

If you are given (a) and (b), you try to do (ii) to find (c).

All these based on (b) being a reversible hypothesis and that the hypothesis itself does not affect the outcome of (c).

It is easier to apply in natural sciences. Examples, clean room, controlled experiments.

The usage in social sciences, especially in Economics and Finance, is doomed with complications and abuses.

Example, the Hypothesis of Singapore having 6.5 million in population and ending with prediction of huge demands in highly priced condominiums is to me a “tainted experiment”.

Stability leads to leverage that leads to instability

“Investment must be financed, and how it is financed makes a difference. As the portion of investment that is externally financed grows, fragility increases. However, leveraging by using external funds increases profits so long as things go well. In a run of good times, such as those experienced in the early post-war period, most undertakings are successful. This encourages greater leverage, and margin of safety are reduced as the value of liquidity in such a period declines. Financial relations become more complex, with more layers of debts are interposed between income generation and income receipt. If one debtor defaults, a snowball of defaults can result since each creditor is also a debtor to some other creditor – and so on up through a long chain of commitments. To the extent that the institutional structure and swift intervention can constrain the crisis, risky financial practices are validated and still riskier innovations are encouraged. Fragility will rise on a long-term trend, with increasingly severe financial crises. If deep recessions can be avoided, the system is never cleansed of excessive debt – what Minsky termed “financial simplification” that used to occur in depressions, when all debt is wiped out and only equity ownership remains.”

Excerpt from the Introduction to “John Maynard Keynes” by Hyman Minsky