Dealing with Uncertainties

It would be foolish, amid such uncertainty, to make overly confident predictions about how the world economic order will look in five years, or even five months.
(Neil Irwin)


Doubt is not a pleasant condition, but certainty is absurd. 
(Voltaire, 250 years ago)



Dealing with Uncertainties

The bottom line is clear:

• The world is an uncertain place.
• It’s more uncertain today than at any other time in our lifetimes.
• Few people know what the future holds much better than others.
• And yet investing deals entirely with the future, meaning investors can’t avoid making decisions about it.
• Confidence is indispensable in investing, but too much of it can be lethal.
• The bigger the topic (world, economy, markets, currencies and rates), the less possible it is to achieve superior knowledge.
• Even our decisions about smaller things (companies, industries and securities) have to be conditioned on assumptions regarding the bigger things, so they, too, are uncertain.
• The ability to deal intelligently with uncertainty is one of the most important skills.
• In doing so, we should understand the limitations on our foresight and whether a given forecast is more or less dependable than most.
• Anyone who fails to do so is probably riding for a fall.


Practise intellectual humility.

Reference:

In investing, uncertainty is a given – how we deal with it will be critical. Read Howard Marks’s latest memo, in which he discusses the value of understanding the limitations of our foresight and “investing scared.”

https://www.oaktreecapital.com/docs/default-source/memos/uncertainty.pdf

The limitations imposed by future uncertainty

“Attentiveness to limitations in the evidentiary basis” (or to the limitations imposed by future uncertainty) is a very important further concept. 


Dealing with future uncertainty

Here’s how Howard Mark discussed it in his book Mastering the Market Cycle:

Most people think the way to deal with the future is by formulating an opinion as to going to happen, perhaps via a probability distribution.

I think there are actually two requirements, not one.

• In addition to an opinion regarding what’s going to happen, 
• people should have a view on the likelihood that their opinion will prove correct. 

Some events can be predicted

• with substantial confidence (e.g., will a given investment grade bond pay the interest it promises?), 
• some are uncertain (will Amazon still be the leader in online retailing in ten years?) and 
• some are entirely unpredictable (will the stock market go up or down next month?) 

It’s my point here that not all predictions should be treated as equally likely to be correct, and thus they shouldn’t be relied on equally. I don’t think most people are as aware of this as they should be.



Realistic view of the probability that we are right before we choose

In short, we have to have a realistic view of the probability that we’re right before 

• we choose a course of action and 
• decide how heavily to bet on it. 

And anyone who’s sure about what’s going to happen in the world, the economy or the markets is probably deceiving himself.




It all comes down to dealing with uncertainty. 

To me, that starts with acknowledging uncertainty and having an appropriate degree of respect for it.


As I quoted Annie Duke this past January, in my memo You Bet!:

What good poker players and good decision-makers have in common is their comfort with the world being an uncertain and unpredictable place. They understand that they can almost never know exactly how something will turn out. They embrace that uncertainty and, instead of focusing on being sure, they try to figure out how unsure they are, making their best guess at the chances that different outcomes will occur.  (Thinking in Bets)




“I’m not sure.”

To put it simply, intellectual humility means saying
“I’m not sure,” 
“The other person could be right,” or even
“I might be wrong.” 

I think it’s an essential trait for investors; I know it is in the people I like to associate with.

Reference:

In investing, uncertainty is a given – how we deal with it will be critical. Read Howard Marks’s latest memo, in which he discusses the value of understanding the limitations of our foresight and “investing scared.”

https://www.oaktreecapital.com/docs/default-source/memos/uncertainty.pdf

Current Economic Issues: Fed Chair Jerome H. Powell

May 13, 2020

Current Economic Issues
Chair Jerome H. Powell

At the Peterson Institute for International Economics, Washington, D.C. (via webcast)


The coronavirus has left a devastating human and economic toll in its wake as it has spread around the globe. This is a worldwide public health crisis, and health-care workers have been the first responders, showing courage and determination and earning our lasting gratitude. So have the legions of other essential workers who put themselves at risk every day on our behalf.

As a nation, we have temporarily withdrawn from many kinds of economic and social activity to help slow the spread of the virus. Some sectors of the economy have been effectively closed since mid-March. People have put their lives and livelihoods on hold, making enormous sacrifices to protect not just their own health and that of their loved ones, but also their neighbors and the broader community. While we are all affected, the burden has fallen most heavily on those least able to bear it.

The scope and speed of this downturn are without modern precedent, significantly worse than any recession since World War II. We are seeing a severe decline in economic activity and in employment, and already the job gains of the past decade have been erased. Since the pandemic arrived in force just two months ago, more than 20 million people have lost their jobs. A Fed survey being released tomorrow reflects findings similar to many others: Among people who were working in February, almost 40 percent of those in households making less than $40,000 a year had lost a job in March.1 This reversal of economic fortune has caused a level of pain that is hard to capture in words, as lives are upended amid great uncertainty about the future.

This downturn is different from those that came before it. Earlier in the post– World War II period, recessions were sometimes linked to a cycle of high inflation followed by Fed tightening.2 The lower inflation levels of recent decades have brought a series of long expansions, often accompanied by the buildup of imbalances over time—asset prices that reached unsupportable levels, for instance, or important sectors of the economy, such as housing, that boomed unsustainably. The current downturn is unique in that it is attributable to the virus and the steps taken to limit its fallout. This time, high inflation was not a problem. There was no economy-threatening bubble to pop and no unsustainable boom to bust. The virus is the cause, not the usual suspects—something worth keeping in mind as we respond.

Today I will briefly discuss the measures taken so far to offset the economic effects of the virus, and the path ahead. Governments around the world have responded quickly with measures to support workers who have lost income and businesses that have either closed or seen a sharp drop in activity. The response here in the United States has been particularly swift and forceful.

To date, Congress has provided roughly $2.9 trillion in fiscal support for households, businesses, health-care providers, and state and local governments—about 14 percent of gross domestic product. While the coronavirus economic shock appears to be the largest on record, the fiscal response has also been the fastest and largest response for any postwar downturn.

At the Fed, we have also acted with unprecedented speed and force. After rapidly cutting the federal funds rate to close to zero, we took a wide array of additional measures to facilitate the flow of credit in the economy, which can be grouped into four areas.

• First, outright purchases of Treasuries and agency mortgage-backed securities to restore functionality in these critical markets. 
• Second, liquidity and funding measures, including discount window measures, expanded swap lines with foreign central banks, and several facilities with Treasury backing to support smooth functioning in money markets. 
• Third, with additional backing from the Treasury, facilities to more directly support the flow of credit to households, businesses, and state and local governments. 
• And fourth, temporary regulatory adjustments to encourage and allow banks to expand their balance sheets to support their household and business customers.

The Fed takes actions such as these only in extraordinary circumstances, like those we face today. For example, our authority to extend credit directly to private nonfinancial businesses and state and local governments exists only in "unusual and exigent circumstances" and with the consent of the Secretary of the Treasury. When this crisis is behind us, we will put these emergency tools away.

While the economic response has been both timely and appropriately large, it may not be the final chapter, given that the path ahead is both highly uncertain and subject to significant downside risks. Economic forecasts are uncertain in the best of times, and today the virus raises a new set of questions:

• How quickly and sustainably will it be brought under control? 
• Can new outbreaks be avoided as social-distancing measures lapse? 
• How long will it take for confidence to return and normal spending to resume? 
• And what will be the scope and timing of new therapies, testing, or a vaccine? 

The answers to these questions will go a long way toward setting the timing and pace of the economic recovery. Since the answers are currently unknowable, policies will need to be ready to address a range of possible outcomes.

The overall policy response to date has provided a measure of relief and stability, and will provide some support to the recovery when it comes. But the coronavirus crisis raises longer-term concerns as well.

1. The record shows that deeper and longer recessions can leave behind lasting damage to the productive capacity of the economy.3 
2. Avoidable household and business insolvencies can weigh on growth for years to come. 
3. Long stretches of unemployment can damage or end workers' careers as their skills lose value and professional networks dry up, and leave families in greater debt.4 
4. The loss of thousands of small- and medium-sized businesses across the country would destroy the life's work and family legacy of many business and community leaders and limit the strength of the recovery when it comes. These businesses are a principal source of job creation—something we will sorely need as people seek to return to work. 
5. A prolonged recession and weak recovery could also discourage business investment and expansion, further limiting the resurgence of jobs as well as the growth of capital stock and the pace of technological advancement. The result could be an extended period of low productivity growth and stagnant incomes.

We ought to do what we can to avoid these outcomes, and that may require additional policy measures. At the Fed, we will continue to use our tools to their fullest until the crisis has passed and the economic recovery is well under way. Recall that the Fed has lending powers, not spending powers. A loan from a Fed facility can provide a bridge across temporary interruptions to liquidity, and those loans will help many borrowers get through the current crisis. But the recovery may take some time to gather momentum, and the passage of time can turn liquidity problems into solvency problems. Additional fiscal support could be costly, but worth it if it helps avoid long-term economic damage and leaves us with a stronger recovery. This tradeoff is one for our elected representatives, who wield powers of taxation and spending.

Thank you. I look forward to our discussion.


https://www.federalreserve.gov/newsevents/speech/powell20200513a.htm?fbclid=IwAR0ZrRkqMbUqbmzWnv4l5MG0Fwqns_nD1eThWL-PoRe5zSCWLdsHU5_uRX4

"Intellectual humility is a personality trait; may influence people's decision-making abilities in many arenas.

The topic of dealing with what you don’t know brings up a very important:topic of  intellectual humility.


“Intellectual humility” has been something of a wallflower among personality traits, receiving far less scholarly attention than such brash qualities as egotism or hostility. Yet this little-studied characteristic may influence people’s decision-making abilities in politics, health and other arenas, says new research from Duke University.



Intellectual Humility is the Opposite of Intellectual Arrogance or Conceit

As defined by the authors, intellectual humility is the opposite of intellectual arrogance or conceit. In common parlance, it resembles open-mindedness.  Intellectually humble people can have strong beliefs, but recognize their fallibility and are willing to be proven wrong on matters large and small, Leary said. (Alison Jones, Duke Today, March 17, 2017, emphasis added)


To get a little more technical, here are a couple of useful paragraphs from a discussion of the paper cited above:

The term, intellectual humility (IH), has been defined in several ways, but most definitions converge on the notion that IH involves recognizing that one’s beliefs and opinions might be incorrect. . . . 

Some definitions of IH include other features or characteristics – such as low defensiveness, appreciating other people’s intellectual strengths, or a prosocial orientation . . .



Core Characteristic of Intellectual Humility is Recognizing that one's belief maybe wrong

One conceptualization defines intellectual humility as

• recognizing that a particular personal belief may be fallible, 
• accompanied by an appropriate attentiveness to limitations in the evidentiary basis of that belief and 
• to one's own limitations in obtaining and evaluating relevant information. 

This definition qualifies the core characteristic (recognizing that one’s belief may be wrong) with considerations that distinguish IH from mere lack of confidence in one’s knowledge or understanding.



Distinguishing Intellectual Humility from Uncertainty or Low Self-Confidence

IH can be distinguished from uncertainty or low self-confidence by the degree to which people hold their beliefs tentatively specifically because they are aware that

• the evidence on which those beliefs are based could be limited or flawed, 
• that they might lack relevant information, or 
• that they may not have the expertise or ability to understand and evaluate the evidence. 

(The Psychology of Intellectual Humility, Mark Leary, Duke University, emphasis added)

Reference:

In investing, uncertainty is a given – how we deal with it will be critical. Read Howard Marks’s latest memo, in which he discusses the value of understanding the limitations of our foresight and “investing scared.”

https://www.oaktreecapital.com/docs/default-source/memos/uncertainty.pdf

When do you allow for the possibility that you’re wrong? When does reason-based confidence turn into hubris and obstinateness?

Holding and adding to declining positions is only a good idea if the underlying thesis turns out to be right and things eventually go as expected.

• In other words, when do you allow for the possibility that you’re wrong?  
• When does reason-based confidence turn into hubris and obstinateness? 

Investor faces uncertainty in investing.  An investor having a sense of uncertainty is not a bad thing.


Howard Mark shared his experiences:

• “Investing scared” – a less glamorous term than “applying appropriate risk aversion” – will push you to
-   do thorough due diligence,
-   employ conservative assumptions,
-   insist on an ample margin of safety in case things go wrong, and
-   invest only when the potential return is at least commensurate with the risk.
In fact, I think worry sharpens your focus. Investing scared will result in making fewer mistakes (although perhaps at the price of failing to take maximum advantage of bull markets).


• When I started investing in high yield bonds in 1978, and when Bruce Karsh and I first targeted distressed debt in 1988, it seemed clear that the route to long-term success in such uncertain areas lay in limiting losses rather than targeting maximum gains. That approach has permitted us to still be here, while many one-time competitors no longer are.


• I can tell you that in the Global Financial Crisis, following the bankruptcy of Lehman Brothers, we felt enormous uncertainty. If you didn’t, there was something wrong with you, since there was a meaningful possibility the financial system would collapse. When we started buying, Bruce came to me often saying, “I think we’re going too slow,” and then the next day, “I think we’re going too fast.” But that didn’t keep him from investing an average of $450 million per week over the last 15 weeks of 2008. I think Bruce’s ability to grapple with his doubts helped him arrive at the right pace of investment.



The topic of dealing with what you don’t know brings me to a phrase I came across a few years ago and think is very important: intellectual humility.

Reference:

In investing, uncertainty is a given – how we deal with it will be critical. Read Howard Marks’s latest memo, in which he discusses the value of understanding the limitations of our foresight and “investing scared.”

https://www.oaktreecapital.com/docs/default-source/memos/uncertainty.pdf

Active investors have to be confident; to do better than most, you have to depart from the crowd.

Investing is challenging.   Active investors have to be confident.

Establishing and maintaining an unconventional investment profile requires acceptance of uncomfortably idiosyncratic portfolios, which frequently appear downright imprudent in the eyes of conventional wisdom.

To do better than most, you have to depart from the crowd. 


1.  Be greedy when others are fearful, be fearful when others are greedy

• All great investments begin in discomfort, since the things everyone likes and feels good about are unlikely to be on the bargain counter. 
• But to invest in things that are out of favor – at the risk of standing out from the crowd and appearing to have made a big mistake – takes confidence and resolve. 

2. Hold onto a position when it declines and add to it at lower prices

It also requires confidence to hold onto a position when it declines – and perhaps add to it at lower prices – in the period before one’s wisdom becomes clear and it turns into a winner.


3.  Holding a highly appreciated investment that still has upside potential (long runway)

And it takes confidence to continue holding a highly appreciated investment you think still has upside potential, at the risk of possibly giving up some of the gains to date.

Reference:

In investing, uncertainty is a given – how we deal with it will be critical. Read Howard Marks’s latest memo, in which he discusses the value of understanding the limitations of our foresight and “investing scared.”

https://www.oaktreecapital.com/docs/default-source/memos/uncertainty.pdf

It is very important to acknowledge what we don’t know.

In Praise of Doubt

It is very important to acknowledge what we don’t know.

First of all, if we’re going to out-invest the rest, we need a game plan. There are a lot of possible routes to success on which to base your process: in-depth research into companies, industries and securities; arbitrage; algorithmic investing; factor investing; even indexation. But if I’m right about the difficulty of macro forecasting, for most people that shouldn’t be it.

Second, and probably more importantly, excessive trust in forecasting can be dangerous to your financial health. It’s never been put better than in the quote that’s often attributed to Mark Twain, but also to several others:

It ain’t what you don’t know that gets you into trouble. It’s what you know for sure that just ain’t so.

Just a few words, but a great deal of wisdom.


No statement that starts with “I don’t know but . . .” or “I could be wrong but . . .” ever got anyone into big trouble. If we admit to uncertainty, we’ll investigate before we invest, double-check our conclusions and proceed with caution. We may suboptimize when times are good, but we’re unlikely to flame out or melt down. On the other hand, people who are sure may dispense with those things, and if they’re sure and wrong, as the quote suggests, the outcome can be catastrophic.

Reference:

In investing, uncertainty is a given – how we deal with it will be critical. Read Howard Marks’s latest memo, in which he discusses the value of understanding the limitations of our foresight and “investing scared.”

https://www.oaktreecapital.com/docs/default-source/memos/uncertainty.pdf

One of the biggest mistakes an investor can make is ignoring or denying his or her biases.

The thought process through which most of us arrive at our view of the future is highly reflective of our biases. Given the unusually wide chasm between the optimistic and pessimistic cases at this time – and the impossibility of choosing between them based on facts and historical precedents (since there are none) – think about the role of bias.




Ignoring or denying your biases is a big mistake

One of the biggest mistakes an investor can make is ignoring or denying his or her biases. If there
are influences that make our processes less than objective, we should face up to this fact in order to
avoid being held captive by them.



Our biases may be insidious, but they are highly influential. 

Examples of "confirmation bias"

When I read articles about how difficult it will be to provide adequate testing for Covid-19 or to get support to small businesses, I’m pleased to see my wary views reinforced, and I find it easy to incorporate those things into my thinking.

But when I hear about the benefits of reopening the economy or the possibility of herd immunity, I find it just as easy to come up with counter-arguments that leave my concerns undented.


This is a clear example of “confirmation bias” at work:

• Once we have formed a view, we embrace information that confirms that view while ignoring, or rejecting, information that casts doubt on it. 
• Confirmation bias suggests that we don’t perceive circumstances objectively. 
• We pick out those bits of data that make us feel good because they confirm our prejudices. 
• Thus, we may become prisoners of our assumptions. (Shahram Heshmat, Psychology Today, April 23, 2015)

As Paul Simon wrote 50 years ago for the song The Boxer, “. . . a man hears what he wants to hear and disregards the rest.”



More examples of confirmation bias

• While I didn’t know the name for it, I’ve long been aware of my bias. In a recent memo, I told the story from 50 years ago, when I was Citibank’s office equipment analyst, of being asked who the best sell-side analyst on Xerox was. My answer was simple: “The one who agrees with me most is so-and-so.” Most people are unlikely to think highly of anyone whose views they oppose. So when we think about which economists we quote, which investors we respect, and where we get our information, it’s likely that their views will parallel ours.

• Of course, taken to an extreme, this has resulted in the unfortunate, polarized state in which we find the U.S. today. News organizations realized decades ago that people would rather consume stories that confirm their views than those that challenge them (or are dully neutral). Few people follow media outlets that reflect a diversity of opinion. Most people stick to one newspaper, cable news channel or political website. And few of those fairly present both sides of the story. Thus most people hear a version of the news that is totally unlike the one heard by those on the other side of the debate. When all the facts and opinions you hear confirm your own beliefs, mental life is very relaxed but not very enriching.

What’s the ideal? 

A calm, open mind and an objective process. 

Wouldn’t we all be better off if those things were universal?

Reference:

In investing, uncertainty is a given – how we deal with it will be critical. Read Howard Marks’s latest memo, in which he discusses the value of understanding the limitations of our foresight and “investing scared.”

https://www.oaktreecapital.com/docs/default-source/memos/uncertainty.pdf

Can you benefit from forecasts and extrapolations?

We have two classes of forecasters: 

• Those who don’t know – and 
• those who don’t know they don’t know.

Many believe that the future is unknowable.

Some favorite quotes on this subject. (The first one may be the greatest ever):

No amount of sophistication is going to allay the fact that all of your knowledge is about the past and all your decisions are about the future.
Ian E. Wilson (former Chairman of GE)

Those who have knowledge don’t predict; those who predict don’t have knowledge.
Lao Tzu

People can foresee the future only when it coincides with their own wishes, and the most grossly obvious facts can be ignored when they are unwelcome.
George Orwell

Forecasts create the mirage that the future is knowable.
Peter Bernstein

I never think of the future – it comes soon enough.
Albert Einstein

The future you shall know when it has come; before then forget it.
Aeschylus

Forecasts usually tell us more of the forecaster than of the future.
Warren Buffett



There actually are things we know about the macro future. 

However, this is an extreme oversimplification and not entirely correct. There actually are things we know about the macro future. The trouble is that, mostly, they’re things everyone knows. 

Examples include

• the fact that U.S. GDP grows about 2% per year on average; 
• heating oil consumption increases in winter; and 
• a great deal of shopping is moving on-line. 

But since everyone knows these things, they’re unlikely to be much help in the pursuit of above average returns. 

The things most people expect to happen – consensus forecasts – are by definition incorporated into asset prices at any point in time. 




Most forecasts – and especially macro forecasts – are extrapolations of recent trends and current levels.

Since the future is usually a lot like the past, most forecasts – and especially macro forecasts – are
extrapolations of recent trends and current levels, and they’re built into prices.

Since extrapolation is appropriate most of the time, most people’s forecasts are roughly correct.

But because they’re already reflected in security prices, most extrapolations aren’t a source of above average returns.




The forecasts that produce great profits.

The forecasts that produce great profits are the ones that presciently foresee radical deviations from the past. 

But that kind of forecast is, first, very hard to make and, second, rarely right. 

Thus most forecasts of deviation from trend also aren’t a source of above average returns.




Summary

So let me recap:
(a) only correct forecasts of a very different future are valuable,
(b) it’s hard to make forecasts like that,
(c) such unconventional predictions are rarely right, 
(d) thus it’s hard to be an above average forecaster, and
(e) it’s only above average forecasts that lead to above average returns.



So there’s a conundrum:

• Investing is the art of positioning capital so as to profit from future developments.
• Most professional investors strive for above average returns (i.e., they want to beat the market and earn their fees).
• However, according to the above logic, macro forecasts shouldn’t be expected to lead to above average returns.
• Yet very few people are content to invest while practicing agnosticism with regard to the macro future. They may on some level understand the difficulty entailed in forecasting, but their reluctance to admit their ignorance of the future (especially to themselves) usually overcomes that understanding with ease.
• And so they keep trying to predict future events – and the investment industry produces a large volume of forecasts.

Reference:

In investing, uncertainty is a given – how we deal with it will be critical. Read Howard Marks’s latest memo, in which he discusses the value of understanding the limitations of our foresight and “investing scared.”

https://www.oaktreecapital.com/docs/default-source/memos/uncertainty.pdf

The challenge lies in trying to be above average in assessing the future. Why is that so hard?

First of all, forecasting is a competitive arena. The argument for the difficulty of out-forecasting
others is similar to the argument for market efficiency (and thus the limitations of active
management).

• Thousands of others are trying, too, and they’re not “empty suits.” Many of them are educated, intelligent, numerate, hard-working, highly motivated and able to access vast amounts of data and computing power. 
• So by definition it shouldn’t be easy to be better than the average.

In addition, since economics is imprecise, unscientific and inconsistent in its functioning,  there can’t be a method or process for forecasting that works consistently. 

• To illustrate randomness, I say that if, when I graduated from business school, I was offered a huge budget, an army of PhDs and lavish financial incentives to predict the coin toss before each Sunday’s football games, I would have been a flop. 
• No one can succeed in predicting things that are heavily influenced by randomness and otherwise inconsistent.

So forecasting is difficult for a large number of reasons, including

• our limited understanding of the processes that will produce the future, 
• their imprecise nature, 
• the lack of historical precedent, 
• the unpredictability of people’s behavior and 
• the role of randomness, and 

these difficulties are exacerbated by today’s unusual circumstances.

Reference:

In investing, uncertainty is a given – how we deal with it will be critical. Read Howard Marks’s latest memo, in which he discusses the value of understanding the limitations of our foresight and “investing scared.”

https://www.oaktreecapital.com/docs/default-source/memos/uncertainty.pdf

Health DG Disputes Workers’ Covid-19 Mass Testing

By CodeBlue


Dr Noor Hisham Abdullah says workers are still exposed to Covid-19 infections in the community even after testing negative once.


KUALA LUMPUR, May 11 — Widespread testing of employees before returning to work is redundant as they will still be exposed to possible Covid-19 infection from their community, the Ministry of Health (MOH) said today.

As the nation enters into the second phase of the Conditional Movement Control Order (CMCO) effective from May 13 to June 9, some medical experts from the Malaysian Medical Association and Universiti Malaya have questioned workers’ Covid-19 mass screenings, pointed out that people can still get infected after clearing a single test.

“If we screen employees, then they go to work, they would still be exposed to the community the next week. So, the question is how many times do we have to test?

“They are exposed to the community every day and the coronavirus is in the community,” said Health director-general Dr Noor Hisham Abdullah at a press conference today.

He reiterated MOH’s targeted testing strategy, saying that there are eight target groups for coronavirus testing as of yesterday.

“If we do an Enhanced Movement Control Order (EMCO) in certain areas, we will screen everyone there, whether citizens or not,” explained Dr Noor Hisham, regarding MOH’s targeted testing strategy.

He also noted that sporadic Covid-19 infections from surveillance of flu-like have been decreasing, with cumulative unlinked coronavirus cases at 207. In a period of weeks, health authorities only detected three coronavirus cases from the monitoring of influenza-like illness and severe acute respiratory infections.

“As per our targeted approach, locality and target groups, we look at jemaah tabligh, tahfiz schools, EMCO; now we look at clusters or targets like the markets,” said Dr Noor Hisham, adding that MOH was also planning to increase coronavirus screening for people undergoing surgery.

• Dr Noor Hisham reported that only six out of 8,528 pre-surgery cases were positive for Covid-19, or 0.1 per cent. 
• On the community screening of 5,433 individuals in Selangor, positive Covid-19 cases are only 10, which is a 0.18 per cent positivity rate. 
• In terms of screening at several markets, to date, 25,034 have been screened with only 183 positive, which is a 0.7 per cent positivity rate. 
• Malaysians returning from overseas are also tested for Covid-19, with a positivity rate of below 1 per cent.

“If there is an outbreak, if there is an increase in cases at one place, such as a factory, then we will take action,” he said.

“Now, we only screen

• those with positive symptoms, or 
• the asymptomatic who have close contact with positive cases.”

Health authorities have previously reported Covid-19 clusters at a factory in Pedas, Negri Sembilan; a construction site in Ampang here; another construction site in Setia Alam, Selangor; and a security guard cluster at a shopping centre in Cheras.

MOH today reported 70 new Covid-19 cases, including 31 infections among foreign nationals and 13 imported cases. Twenty Covid-19 patients are still in the intensive care unit (ICU), including seven on ventilator support. One new death was reported today.

The Social Security Organisation (Socso) said Saturday that Covid-19 testing, which it provides for free to contributors through its Prihatin Screening Programme, is only compulsory for

• foreign workers in the construction sector or
• those working in coronavirus red zones.

https://codeblue.galencentre.org/2020/05/11/health-dg-disputes-workers-covid-19-mass-testing/?fbclid=IwAR1kNc2eb3HjnvwDavi3QfLlDt-e10uSA0UIietBg6qevqhYoYo26Q-ydYs

A simple approach to the present bear market (fair value, bargains, value traps)

So the stock market has gone down the last few weeks.  You as a value investor is excited, searching for companies to invest for the long term.. 

Here is a very simple way to look at the businesses that are in the stock market:

1.  Those that are still fairly valued, even though the prices are lower than before (FAIR prices).
2.  Those that are under-valued (BIG bargains at present day prices).
3.  Those that are value traps (the values of these companies may go down to zero, therefore these are BAD bargains here;  avoid, avoid and avoid.)

Price is NOT value.   Price is what you pay, value is what you get.

You are looking to buy GREAT COMPANIES AT FAIR OR BARGAIN PRICES.

You are also looking to buy GOOD COMPANIES AT BIG BARGAIN PRICES.

You should avoid buying GRUESOME COMPANIES AT ANY PRICES (VALUE TRAPS).


Wishing you success in your investing.  

Dangerous traps to be avoided

Temptation from friends, office colleague or neighbors

“Hey bro, today I made 10,000 from the stock market”! You may find similar kind of statement from your friends or office colleague or neighbors. During bull market, such comments are quite common. The fact is that your friend won’t share the incident when he lost 10,000 from stocks. It gives us immense pleasure in sharing our achievements. On the contrary, sharing failure is shameful and hard.

Similarly in the stock market, it is a matter of immense pride to “earn 10,000”. Sharing such statement gives us much more delight than to earn it. On the other hand, nobody wants to share or accept his failure.

So, a statement like “I made 10,000” is just a single part of the story. Don’t jump into the stock market just because of such “partial information”. Don’t get excited with your friend’s success story. Don’t follow stock recommendations based on such stories over social media (Facebook, Whatsapp etc)


Temptation from your broker –

Your broker will offer reduced brokerage for frequent trading or large volume trading and is always ready to offer high margin money for trading. They may try to convince by saying “You have 20,000 in your trading account. Not an issue, you can buy shares worth 50,000 and sell it within 3 days to pocket more profit. Planning for intraday, well you can trade worth $$  – many brokers offer such terms. What they don’t mention is “earning for them” not “earning for you.” Apart from these, you may also receive SMS alerts or email alerts as trading tips from your broker. Have you ever seen, your broker offering any investment idea that is for 2-3 years holding period? They can’t offer because their broking business will dry up if you buy today and hold them for 2-3 year. On the contrary, wealth can only be created over the long run. In the short run, frequent trading can only increase your chances of losing money and increase broker’s earning.


Temptation from so-called analysts –

During bull market (while the market goes up) any Tom can consider themselves as an equity analyst. With the advent of internet, you will find thousands of self-claimed analysts over social media (Facebook, Whatsapp etc)  Whenever the market goes up, you will find television, newspapers, websites flooded with stock tips. Almost every analyst will draw a rosy picture and encourage you to invest in stocks. Surprisingly, the same analysts elope during a bear market (when the market goes down). The worst part is that during bear market these analysts will even mention avoiding stock market, fearing that it may fall further. The reality is that during the bear market, quality stocks are available at a cheap rate, and thus it is one of the best times to invest. Moreover, if you select quality stocks then overall market movement rarely matters. High quality businesses are always poised to do well in any  market situation. Don’t get carried away by any analysts.


Temptation from stock tips provider –

Nowadays, it is common to get phone calls, SMS alerts from various stock tips provider. Eye catching advertisements are so popular.  Remain alert whenever you notice high return promises. Many trading tips provider claim 50%+ monthly return from their trading strategy. If that would be the case then today every billionaire would be creating their fortune from stock trading. Reality says something different.



Overconfidence-

Suppose, you started investing during a bull market and successfully earned 45% return at the end of first year. All your purchased stocks were performing well. In such a situation, you may start thinking that you have mastered the subject very well. As the market moves up, so moves your confidence level, you keep on increasing your investment amount. You are now too aggressive. Suddenly market crashes and there comes a prolonged bear market. It is the bear market that separates intelligent investors from others. Don’t get lured and invest aggressively if you find your portfolio giving above average return during a bull market. The stock market doesn’t move linearly. It’s quite easy to make money during the bull run but difficult during the bear period. To become a successful investor, you need to learn the art of making money across all market situations.

Why paid trading tips are sometimes more dangerous?

Why paid trading tips are sometimes more dangerous?

You can lose your investment amount from free trading tips but what about paid tips. Surprisingly paid tips can make you suffer more because in this you not only lose your invested amount but also your subscription amount.

Just conduct a basic Google search. You will find several trading tips provider showcase fabulous past performance, promise 50%-100% monthly return and offer 2-3 days free trial.


Any stock tips provider can trap you from offering 4 days free trial tips.

Now, let’s see how this scam actually works. Initially I had 5,000 subscribers. I divide them into two groups (2,500 each) – Group A and Group B. I send “Buy” call to Group A and “Sell” call to Group B. Now, either the stock price will move up or down. So, one of them will be surely correct. I already noted which one is correct. The stock moved up, so “Buy” call to Group A was correct. I retain Group A and discard Group B. Now I have 2,500 subscribers (Group A) and repeat the process. Divide the 2,500 into two groups, send “Buy” call to one and “Sell” call to another. One must be correct. I again retain the correct one and discard the group that received wrong trading call. I repeat the same process for 4 consecutive days and end up with a group of 312 people who received all 4 correct tips. You may be the one among those 312 people.

Now, you can imagine how people get trapped into this scam. 

I can easily reach out to those 312 “Target” subscribers over phone call for follow-up and final subscription payment. Out of 312 even if 50% i.e. 156 subscribers finally opt for paid 6 months subscription, then also I can easily earn their huge fees. So, earning big money  based on nothing rather simply cheating others is a serious deal and an easy task. The beauty of this strategy is after getting 1 wrong call the same person is not receiving further calls. Out of the 5,000 group 312 subscribers are getting right on every occasion and it becomes very easy to trap them.



In real life you will find many trading tips provider claiming 90%- 95% success ratios. 

Interestingly all of them are claiming 90%-95% or even 100% success ratio and showcasing fabulous past performance. Subscription fees are always on higher side.

Next time onwards, if anyone mentions such bullshit like “90%-95% accurate trading tips for 50%+ monthly gain with 2 days trial”, simply ask why you guys don’t trade on your own. If your calls are so accurate then what’s the necessity of selling tips. If they still keep on talking rubbish, simply disconnect the call.

Why free trading tips are dangerous?

In your real life, do you get any quality products/service at free of cost? Nowadays, you need to pay even for pure drinking water!

1.   Why someone will provide money making ideas (stock tips) at free of cost? 

• Their motive is to bring back their existing customer.  
• None of them are doing charity. 
• None of them have the motive of making you rich. 

2.   You will get dozens of free trading tips each day.

• Your broker is also eager to provide trading tips at free of cost. 
• Moreover, dozens of websites offer bunch of new trading ideas everyday totally free of cost. 
• Including Facebook and Whatsapp groups, the list of free trading tips provider would be very long. 

3.  Let’s have a detailed look on their motive –


Motive #1 – Many operators provide free trading tips after offering the same to their paid clients.

Thus, stock price gets manipulated which in turn helps only their paid clients. Suppose I have two websites; freetips.com and paidtips.com. One is for providing tips to paid clients and another for free clients. However clients don’t know that both the websites are operated by the same person (or same group of people). So, what I am doing is, I am offering tips to my paid clients first. After their  purchase, I am distributing the same to free subscribers.

While, free subscribers start buying the same stock, the price starts moving in upward direction. Exactly at the same time, I am recommending “Profit Booking/Exit” call to paid clients. Thus, free subscribers get stuck at the top. So, my paid subscribers are getting good return at the cost of free clients. My motive is to collect more subscription fees from paid clients!  This way one can easily manipulate the price of lesser known stocks (specially, midcap and small cap stocks).


Motive #2 – Operators often offer free tips just to have a smooth exit at hefty profit.

The company is in microcap category and I didn’t hear the name before than that. Trading volume was much higher on both the days and stock price appreciated a lot. The pattern suggested that the operator had sent the same SMS to thousands of retail investors and many of them purchased the stock. The most surprising fact is that on those days three operators sold quantities worth of the same stock. So, operators were selling a particular stock and simultaneously sending SMS to thousands of retail investors to buy for “sure-shot” target of doubling the money!

In the next 10 days the stock was hitting lower circuit continuously and stock price reached to below a fraction of the previous price. There were no buyers for the same and as a result it got stuck in lower circuit. Thousands of retail investors got stuck lost around 90% or more and expressed their anger.

Nobody is there to save them. With the advent of mobile phone and internet such practice is quiet common. Be careful from the next time if you receive such SMS!



4.   Why paid trading tips are sometimes more dangerous?

You can lose your investment amount from free trading tips but what about paid tips. Surprisingly paid tips can make you suffer more because in this you not only lose your invested amount but also your subscription amount. 

Short-cut to figure out fake stock tips provider

Be aware of trading tips provider.

• Trading includes intraday, short term, Futures and Options. 
• Be aware of high return promises. 50%+ monthly return promise is the almost sure-shot sign of fraud. 

You should only choose equity advisors who provide investment tips with detailed logic and proper report on the company.

Most trading tips providers don’t provide any logic. They just mention “Buy with target and stop loss”. Ask them what is the rationale behind the call? Find out whether you are getting any satisfactory answer or they are just avoiding it?

Don’t get fascinated by the fabulous past records and few clients’ testimony. Those can be false also. 

Various new methods are coming day by day to trap innocent investors. So, always be aware.

Investing in high quality stocks for the Long Term

Investing in high-quality stocks and holding them for the correct period is the only way to create wealth. This statement is easier to say than to execute. Here come the obvious questions –

1. What do you mean by “high-quality stocks”?
2. How to select high-quality stocks?
3. How to separate quality business from others?
4. What is the correct holding period?
5. When to buy and when to sell a stock?
6. How to construct my portfolio?

Forget about intraday; short term trading, Futures & Options. Remember, there is no shortcut to earning quickly. Every quick-money makings tricks are eventually money-losing tricks.

‘Fortunes are going to be made’ — Suze Orman on investing amid the coronavirus pandemic

Published: May 4, 2020

‘I can guarantee you that if you stay in and you just stick with it, three years from now you will be very, very happy that you did’  Suze Orman

Celebrity financial adviser Suze Orman isn’t for everybody. She once told MarketWatch that “there are people that hate my guts. You don’t even want to know the things they say.”

But there’s no denying that her common sense brand of money management has resonated with her devoted fan base over the years. Lately, with many in that fan base struggling to navigate the coronavirus pandemic, she’s been hitting the media circuit to address just some of the issues.

During a CNN segment that aired on Saturday, Orman was asked by a viewer how to approach investing in the stock market in the face of the historic volatility.

Here’s her answer:

‘Let’s just assume you have an eight-month emergency fund. Let’s assume you have no credit card debt. Let’s assume that you still have money coming in. You should be dollar-cost averaging every single month into the stock market.’

In other words, she’s advising those without more-pressing obligations to take a specific sum of money and invest it every month into something like the Vanguard Total Market ETF VTI, +0.38% .

“If you do it month in and month out and you have at least three five or 10 years or longer until you need the money you will be happy,” she continued. “If you need money within a year it’s not money that belongs in the stock market. Take it out now.”


Back in late February, when the Dow Jones Industrial Average DJIA, +0.11% had dropped more than 1,000 in a single session on fears of what the coronavirus could do to the U.S. economy, Orman raised a few eyebrows when she said “I rejoice” in the face of such pullbacks.

She used the opportunity to again push her case for dollar-cost averaging.

“The higher the market goes, the shares cost more, the less shares their money buys, the less money they make, in the long run,” she told CNBC. “With this dip, if it continues to go down, they should just stay the course and actually be quite happy because the market is still incredibly high.”

One month and a brutal stretch of market losses later, the New York Times best-selling author returned to CNBC in late March to urge investors to stick with the plan.

“You will never, ever, know the bottom. You will never, ever, know the top,” she said. “Fortunes are going to be made out of this time. So just stay calm. I can guarantee you that if you stay in and you just stick with it, three years from now you will be very, very happy that you did.”

Here’s Orman talking financial stability in a recent appearance on the Tamron Hall Show:


Orman, of course, is not alone in pushing the time-tested dollar-cost averaging approach.

For instance, Kimberlee Orth, the Ameriprise private wealth adviser who was ranked No. 2 in the U.S. among her peers in 2019 by Barrons, recently urged investors to stick with the same plan.

“If you were already in the market on Feb. 1 or March 1 or April 1, and you watched the market go down and those resources are allocated to a long-term goal and your risk tolerance is still suitable,” she said, “there’s no need to change that because the market is eventually going to go back up.”

Stocks took a hit early in Monday’s session, with the Dow off more than 1%, while both the S&P 500 index SPX, +0.42% and the tech-heavy Nasdaq Composite COMP, +1.22% also traded lower.

https://www.marketwatch.com/story/suze-orman-on-investing-in-the-stock-market-amid-pandemic-just-do-it-2020-05-03?mod=mw_latestnews&link=sfmw_fb&fbclid=IwAR2ug76ODx0mcvhLHoxWzy2jkysspaPIq-ju7ayxT8YSpLjVgA69eJeFn70

ABEL SHARES THE STAGE at Berkshire Hathaway's 2020 Shareholder Meeting

Berkshire Hathaway's 2020 Shareholder Meeting


Abel stood in for longtime Vice Chairman Charlie Munger, 96, who normally joins Buffett to answer shareholder questions.

Buffett said Munger was in "fine shape" and "good health," and looked forward to attending Berkshire's 2021 annual meeting.

Vice Chairman Ajit Jain, 68, who oversees Berkshire's insurance businesses and is also considered a possible CEO candidate, was also absent from the meeting.

Abel lives closer to Omaha than Munger and Jain.

Berkshire has said its board of directors knows who would become CEO if Buffett died or became incapacitated.

Buffett's eldest son Howard would likely become non-executive chairman, and portfolio managers Todd Combs and Ted Weschler could succeed Buffett as chief investment officer.

Abel told investors "I don't see the culture of Berkshire changing" after Buffett and Munger are no longer there.

He also said Berkshire was likely to expand its workforce, which totaled 391,539 people at year end, even though some businesses have furloughed employees and cut salaries since the pandemic began, and could start resorting to layoffs.

Berkshire wouldn't be alone.

Nationwide jobless claims have since March 21 totaled about 30.3 million, or 18% of the workforce, a level not seen since the Great Depression.

Abel nonetheless said that in five years, "we see our employment numbers being far greater than they are today."

Shareholders also elected Kenneth Chenault, a former chief executive of longtime Berkshire holding American Express Co , to Berkshire's board, making him the company's first African American director.

  - Reuters

Warren Buffett says Berkshire is reversing course on airlines – again

Mon, 4 May 2020

Berkshire Hathaway's 2020 Shareholder Meeting


The billionaire investor said Berkshire Hathaway Inc completely exited its stakes in the four major US airlines. The sales of shares of Delta Air Lines Inc, Southwest Airlines Co, American Airlines Group Inc and United Airlines Holdings Inc made up most of the company’s US$6.5bil in equity sales in April.

During his live-streamed annual meeting, Buffett said the business has fundamentally changed following the economic fallout from the coronavirus pandemic. He declined to blame the performance of the airline executives, saying they’ve done a good job of raising money to get through the crisis.

“The world changed for airlines and I wish them well, ” Buffett said Saturday. He clarified that he made the decision and that he lost money on his investments. “That was my mistake.”

Buffett’s had a complicated relationship with the airline industry over the years. After a troublesome investment in USAir, Buffett joked that he would call an 800 number to declare he was an “air-o-holic” if he ever got the urge to invest in airlines again.

Then in 2016, Berkshire dove into the industry again, amassing stakes in the four largest US airlines. At the end of 2019, those stakes amounted to almost US$10bil. Buffett’s renewed faith in the industry prompted speculation that he might one day own one of the carriers.

But now, he’s cut those investments again. Berkshire disclosed in April that it had at least trimmed its Delta and Southwest stakes, both of which had previously been above a 10% ownership level.

“The airline business - and I may be wrong and I hope I’m wrong - but I think it’s changed in a very major way, ” Buffett said. “The future is much less clear to me.”

The disclosure was among the most significant at the annual meeting, which was notable for its different feel this year as the event that usually draws tens of thousands was done was hosted virtually.

Buffett, 89, shared the stage with a top deputy, Greg Abel, who runs Berkshire’s non-insurance operating units. Vice-chairman Charlie Munger, 96, didn’t join, though Buffett said his long-time business partner was in good health.

Buffett said he didn’t know how consumer travel habits will change after the pandemic subsides, but any reduction in travel could leave airlines with higher-than-necessary fixed costs. Any impact could filter down to suppliers like Boeing Co.

- Bloomberg