ArjunGaur @ArjunGaur: "Simple Rules of Capitalism 1. Keep..."

United Kingdom

Simple Rules of Capitalism 1. Keep it Simple You can’t accurately describe how complicated the global economy is. There are more than 200 million businesses in the world. $300 trillion of Financial Assets. 90 trillion dollars of GDP. 200 countries, thousands of cultures and norms. With 8 billion people, a rough calculation shows there’s about 2 tons of pure Serotonin careening through the global economy at every moment. Economists try in earnest to model all of this in Excel. Wrapping your head around the global economy – predicting recessions, bubbles, GDP growth and the like – is nearly impossible. There are too many moving parts. But that doesn’t mean we should give up trying to understand it. It just means we should keep things broad and simple. 2. Principles One of my favourite quotes is from John Reed, who writes in his book Succeeding - When you first start to study a field, it seems like you have to memorise a zillion things. You don’t. What you need is to identify the core principles – generally three to twelve of them – that govern the field. The million things you thought you had to memorise are simply various combinations of the core principles. This is so applicable to Economics, where there are infinite details but a few core Principles that explain a lot of what’s going on. Here are the ones I often think about - - Most of what’s now awesome came from something that was once miserable. - Success has a target on its back and a bounty on its head. - Every successful business must eventually appease customers, employees, suppliers and shareholders. - People desire control over their time more than almost anything. - People resist change; economies resist stability. 3. Cycles A good rule of thumb from history is that the longer a boom or bust lasts, the stronger the forces are building up against it. There’s a reason for this: Booms cause people to discount room for error, while busts cause people to stockpile it. But people don’t think like that. We have short memories and poor imaginations, so the most common economic forecast of what will happen next is extrapolating whatever happened last. Bear markets breed pessimists, bull breed markets optimists. Consumer confidence peaked in 2000 and bottomed in 2009. Long-term government budget projections were staggeringly optimistic in 2000, and equally depressed in 2010. People forecast in straight lines, but markets push back against things attempting to stay the same, instead preferring cycles, waves, and new paradigms. 4. Conclusion How to invest through various cycles, waves, and new paradigms - Rather than betting big on one business, how about splitting it among many like $HBI (Hanesbrands Inc) $NTCT (NetScout Systems Inc.) $SBH (Sally Beauty Holdings Inc.) $PMT (PennyMac Mortgage Investment Trust) and $PRS.OL (Prosafe) bridgewater.brightspotcdn.com/dims4/default/c90a7c9/2147483647/strip/true/crop/1443x962+234+0/resize/840x560!/quality/90/?url=http%3A%2F%2Fbridgewater-brightspot.s3.amazonaws.com%2Ff1%2F17%2F0436759142f7b5254eaa3da2c5d0%2Feconomicmachine5.jpg I welcome you all to look at my Portfolio and add it to your Watchlist >> I look forward to growing with all of you : )

5 Mentioned

HBI

Hanesbrands Inc

NTCT

NetScout Systems Inc.

SBH

Sally Beauty Holdings Inc.

PMT

PennyMac Mortgage Investment Trust

PRS.OL

Prosafe