The Digest #120

Published on June 7, 2022

“We have a stock market which some people use like a gambling parlor. And the transactions of the people who love the gambling parlor aspect of the business and those who want to make long term investments, to take care of their old age and so forth…I mean, muddle that in one market and it goes out of control because the stock market becomes an ideal gambling parlor activity. I don’t think that ought to have been allowed, either. If I were the dictator of the world, I would have some kind of a tax on short term gains that made the stock market very much less liquid and drove out this marriage of gambling parlor and legitimate capital development of the country. It’s not a good marriage, and I think we need a divorce”

— Charlie Munger


The Coca-Cola Company in 1923 by Jacob McDonough, June 1, 2022. From its founding in 1886 through 1917, the Coca-Cola Company posted thirty-one straight years of growth in syrup sales. Following a decline in 1918 due to wartime sugar rationing and a bounce back in 1919, growth stalled again, falling for three straight years. This article takes a look at the company’s 1923 annual report. Was the soda market saturated in the early 1920s or was the decline in growth a temporary situation that would be followed by a resumption of growth? Of course, we know the answer today, but it was not necessarily obvious in 1923. (McDonough Investments)

A Very Ordinary Life: Some thoughts on hyperinflation by Rudy Havenstein, June 3, 2022. Following his Twitter ban, Rudy started posting on Substack and Reddit. This article includes a number of excerpts from books discussing the German hyperinflation of the early 1920s. “During the inflation the wage rates changed every day, and then, at the height of the inflation, twice a day. At the end of the day you got your day’s pay. You had to spend it right away because the next day your cash would be worth a half or less of what it was the day before. The stores stayed open late just for that. They were trundling truck loads of cash back and forth from the banks to the factories every day. Whatever money anyone had managed to save was completely lost.” (A Havenstein Moment)

Jeremy Grantham: This Market Feels Like The 1970’s by Johnny Hopkins, May 31, 2022. Excerpt from a recent interview: “Phase Two, which I really worry about, is this whole thing morphing into what I call the 1970s. Underlying inflation as an everyday topic once again. It may not be spiking, in the ‘70s it came and went, came and went, came, it was always part of the background discussion. And that’s what I think it will be now for quite a long time, several years, and similarly interest rates were always a worry in the 1970s and they will be a worry for quite a few years to come.” (The Acquirer’s Multiple)

Sitting on the Tarmac in The Land of Stoicism by Vitaliy Katsenelson, June 1, 2022. “As Marcus Aurelius succinctly put it, “You have power over your mind – not outside events. Realize this, and you will find strength.” I could have thrown a fit, complained, gotten agitated. Other than losing more of my hair (which is already facing imminent extinction) and ruining the mood of my kids and everyone around me, I wouldn’t have changed anything by such behavior. The gate would open when air traffic control decided it was safe for other planes to take off. We would either go to the opera or we wouldn’t; either way, the money I spent for the tickets was already gone.” (Contrarian Edge)

Credit Unions and Banking Groups Warn of “Devastating Consequences” of a U.S Central Bank Digital Currency By Pam Martens and Russ Martens, May 31, 2022. This article contains several excerpts from a trade group letter to the House Financial Services Committee. “Contrary to the assertions of some CBDC proponents, a U.S. CBDC is not necessary to ‘digitize the dollar,’ as the dollar functions primarily in digital form today. Commercial bank money is a digital dollar, and is currently accepted without question by businesses and consumers as a means of payment.” (Wall Street on Parade)

I Rented an Electric Car for a Four-Day Road Trip. I Spent More Time Charging It Than I Did Sleeping by Rachel Wolfe, June 3, 2022. This is a very amusing account of a road trip between New Orleans and Chicago in a Kia EV6. To put it mildly, things did not go precisely as planned. Fast charging infrastructure is likely to grow in the coming years, but for the foreseeable future, it seems like owners of electric cars would be better off renting a gasoline powered vehicle for their next road trip. (WSJ)

Tesla files plans for diner/drive-in theater supercharger by Jameson Dow, May 21, 2022. The idea of providing superchargers at locations where people are likely to spend a couple of hours makes a lot of sense and this looks like an interesting design. If you could just plug in your car wherever you happen to go on errands, the range anxiety problem might disappear for city drivers and commuters. (Electrek)

A High Percentage of Consumers Really Don’t Understand Percentages by Lisa Ward, May 27, 2022. Some disturbing findings from a recent study: “The authors found that mistaking relative change for relative size affected purchasing decisions. Participants thought that it was more likely that someone would upgrade their phone if the new phone battery had 92% more battery time than if the phone had 108% more battery time.” (WSJ)

Different Kinds of BS by Morgan Housel, June 1, 2022. “The amount of publicly accessible information today would have seemed unfathomable 10 or 20 years ago. What used to be hidden is now free and abundant, from financial information to global news to insight into how millions of people live on social media. But are we actually better informed? Are we making decisions? Less susceptible to bad ones? Sometimes yes. But often the answer is no, or we’ve gone backwards, and part of the reason is that information turns into bullshit as easily as ice turns into water.” (Collaborative Fund)

Full Transcript of Daily Journal’s 2022 Annual Meeting by Richard Lewis, June 3, 2022. This transcript includes a number of links to resources related to the topics discussed during the meeting. There are also transcripts for the 2016-2021 meetings. This is a great resource. (Latticework Investing)


Aswath Damodaran – Making Sense of the Market, May 31, 2022. 1 hour, 55 minutes. “To understand inflation, I think we’ve got to break it down into two components. Now, one is what I call expected inflation. Expected inflation is something that we can build into our financial assets. So, if you’re buying a bond, if you expect inflation to be 5%, you set the coupon rate at seven or 8% to cover inflation. Expected inflation to me is the more benign part of inflation. The part of inflation that’s deadly is unexpected inflation, which is inflation coming in higher or lower than expected. When inflation is unexpected, you’ve not had a chance to adjust to it. … When inflation comes in above expectations, it’s devastating, because you never had a chance to build it into prices, you have a mad scramble going on adjusting prices to reflect the new inflation.” (Invest Like the Best)

Rajeev Agrawal on Poor Charlie’s Almanack, May 30, 2022. 1 hour, 17 minutes. I particularly enjoyed the discussion of the psychology of human misjudgment“Rajeev Agrawal is the Fund Manager & Managing Partner at DoorDashi India Fund. For this episode, Rajeev has picked one of our favorite books – Poor Charlie’s Almanack – with wisdom from Charlie Munger, compiled by Peter Kaufman.” (Investing by the Books)

How Political Language Is Engineered with Drew Westen and Frank Luntz, June 2, 2022. 37 minutes. Two masters of the political game discuss how voters can be easily manipulated. “Democracy depends on our ability to choose our political views. But the language we use to talk about political issues is deliberately designed to be divisive, and can produce up to a 15-point difference in what we think about those issues. As a result, are we choosing our views, or is our language choosing them for us?” (Your Undivided Attention)

Luke Burgis: The Power of Mimetic Desire, May 31, 2022. 2 hours, 14 minutes. “Is there really a straight line between you and the things you want in life? Entrepreneur and educator Luke Burgis goes deep on how understanding mimetic desire can help you better connect the dots between where you are now, and where you want to go. Burgis breaks down the theories behind mimetic desire and the teachings of René Girard, why all of our behaviors are imitative, why we desire things we don’t need, and why this all leads to missing out on aspects of life that are far more meaningful and valuable.” (The Knowledge Project)

Introduction to Mimetic Theory

This is a terrific introduction to René Girard’s Mimetic Theory. It is the first installment of a lecture series given by Johnathan Bi and David Perell. There is also a full transcript of the lecture. 

Although I have not read any of Girard’s work, the concept of mimesis seemed intuitively obvious the first time I was exposed to it a few years ago. Mimesis is clearly hardwired into human beings, and we must try our best to understand it when we see it in ourselves and in others. Only by understanding mimetic desire can we attempt to counter its negative effects.

We are warned that internalizing Girard’s apocalyptic view of the world could be disconcerting, but I would rather not live in denial regarding risks, particularly given that we are closer to nuclear Armageddon than we have been in many decades.

The SEC Ridicules Meme Stock Investors

I hardly knew whether to laugh or cry when I saw these videos created by the SEC that ridicule meme stock investors. The videos are both in poor taste and entirely tone deaf when it comes to the SEC’s record of failure as a regulator. 

Caveat Emptor.

Pam Martens and Russ Martens:

We’ve been carefully observing the Securities and Exchange Commission for the past 37 years. This is the first time that we have ever witnessed the SEC heaping humiliation on the investing public – the investing public that it is paid by the taxpayers of America to protect from the scams that it has allowed to proliferate.

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The Digest #120