I’m at a wedding this weekend with my college roommate and fraternity brother. My wife is in for one heck of a ride. Stories to follow.
In other news, now that the weather has turned I put the training tire back on my bike and set-up the old pain cave down in the basement (pic attached). Huge kudos to Steve Mitchell for the Netflix login.

Charlie's Training Bike

Palm Valley Capital Letter 3Q21

Palm Valley Capital Fund(PVCMX) Third Quarter 2021Commentary

In today’s day and age of curated newsfeeds and group-think, I do my best to seek out alternative viewpoints. I believe having a wider understanding and a more varied perspective improves the overall investment process. Contrarianism for the sake of contrarianism is a little annoying and also not always value-additive (looking at you ZeroHedge). Sometimes the consensus view does make sense and is correct! I’ve been following Palm Valley’s letters for a year or so and have found their research original and thought-provoking.

  • 50% of non-Financial Small Caps are unprofitable
  • This little table they include does a good job illustrating how success can be fleeting or durable. Most of the GameStop/AMC/WallStreetBets phenomenon falls into the lower left…

Palm Valley Process Table

  • On maintaining amount of cash…. “We manage risk by selling stocks when they reach our fair value estimates and buying them when they trade at a discount to intrinsic value. During periods of speculative excesses, this results in fewer positions and more cash. Cash is the bottom-up outcome of our strategy when undervalued equities are scarce.”
  • They don’t mince words on inflation either…
    • “In August, the Bureau of Labor Statistics (BLS) reported a 2.1% year-over-year rise in Rent and a 2.6% annual increase in Owners’ Equivalent Rent. This is a fantasy.”
  • I’m not sure about the connection between fighting animals and investing but I appreciate the unorthodox data.
    • I surveyed the investment team…
      • “where is the field of battle?”
      • “do I get weapons?”
      • “how big is the crocodile?”

Morgan Housel is terrific.

Read his book: The Psychology of Money: Timeless lessons on wealth, greed, and happiness.

If you’re not following him on Twitter you should start. I love these sort of comments that put things in perspective, particularly for clients who watch too much news.

Housel Tweet

Investing Lessons of Poker

Getting Schooled in Risk: The Lessons of Poker

I used to work with two guys who played professional poker at one point. One of the guys would describe how he eventually started to see through both his hot and cold streaks and see the game in terms of time rather than wins and losses.

  • Find the risk everyone else hates. It’s simple, not easy and requires “preparation, discipline, and the ability to suffer pain in the short run.”
  • “You have to grind it out and manage to stay in the game until you get that big hand with serious positive EV.”
  • “You can’t give advice to anyone unless you know their entire portfolio, their assets, their liabilities, the things they need to spend on now and in the future, their ability to withstand loss of income and psychological stress from asset values rising and falling.”

No thanks. I don't have the bandwidth for more of this.

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