Nevstar Links 01 August 2025
Welcome back to the Nevstar Links, your guide to some of the best articles on markets and investing available on the internet.
Today is Friday 1st August and it is another auspicious day in music history. At exactly 12:01am on 1st August 1981, a new cable TV channel was launched - Music Television or MTV. The launch heralded a massive shift in how music was played, discovered and consumed with focus shifting from audio to video. Music videos became essential marketing tools and the artists who embraced the new era came to dominate the pop charts in the years to come. But what was the first ever music video played on MTV?
It was Video Killed The Radio Star by English New Wave band, The Buggles.
Isn't that ironic, don't you think.
Great set of links this week including articles on illusions, investing, and indexes.
Going to Extremes
Excellent blogpost from Humble Dollar exploring the emotional roller coaster that individual shareholders can experience investing into individual companies. The massive drawn-downs and the angst they engender is what makes individual share investing such a difficult way to reliably build wealth over time and why a diversified portfolio is the best option for most investors.
"It's hard to remember, but Apple dropped 83% at one point. Nike once lost 66%. Even Nvidia, which was the best performing stock over the past 20 years through 2024, lost more than 90% at one point. And most notably, Amazon was once down 95% from its prior high."
The Illusion of Safety - No Asset Is Safe But Some Lose Less
Terrific educational piece looking at how to invest if you are primarily concerned with not losing your money. It seems obvious but in reality, the safest option is potentially ruinous for your long term financial health. Cash is the safest asset in the short term but arguably the least safe in the long term. So what asset is the best to hold long term if you are worried about losing your capital?
"In the 1940s and early 1950s, during a period of financial repression, interest rates were held artificially low while prices crept higher. This was done to bring down the debt of the governments that were heavily indebted after World War II. Savers witnessed a real loss in purchasing power of more than 40%."
CBA and the Index Conundrum
One of the major stories in domestic markets recently has been the sensational performance of Commonwealth Bank. This well-run but ultimately low growth utility-like business is now trading at an eye-watering valuation and is by some measures, the most expensive bank in the world. The culprit is partly our old friend - passive investing as superannuation funds take money from active managers and add to passive managers who buy more CBA. Andrew Brown of East 72 investigates and elaborates on this indexing madness and finds some interesting historical parallels.
"News Corp ordinary shares advanced from $11.34 at end October 1999 to a peak of $26.20 on 22 March 2000 - a 96% gain. For a brief moment in time, News Corp represented over 17% of the All Ordinaries index, whilst trading on a forward P/E in the 70's, and with its near $100 billion market capitalisation at the time, was priced at more than the entire listed resources sector."
Is Ferrari Actually A Car Company?
Wonderful blog post from the Collaborative Fund about the business model of the legendary car marker - Ferrari. With some of the highest margins in the industry, Ferrari has separated itself from most of its automotive peers partly by having a different focus. Ferrari is actually not a car company; it's a luxury good company and these have a much different approach to supplying the market.
"Because more is almost always considered better. Size, scale, and growth are seductive. It is what attracts new investors and fresh capital. It is what grabs attention and headlines.
The trouble is that size and growth isn't necessarily synonymous with strong performance."
How We Invested Before The Internet
Really fun piece looking at the mechanics of investing before the evolution of online internet brokers and most recently share trading applications. Fun walk down memory lane but also contains some lessons for today's investors. Just because you can trade exotic options frequently and cheaply, doesn't mean that you should.
"The 90s retail investor operated in an environment of severe information disadvantage. Professional research was largely the domain of institutional investors and wealthy individuals who could afford premium services. Most retail investors relied on newspaper financial sections, monthly magazines like Money or Forbes, and basic broker reports that often arrived days or weeks after institutional investors had already acted on the same information."
Quote of the Week
"In skating over thin ice our safety is in our speed."
Ralph Waldo Emerson
Neville Giles
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Have a great weekend.
The Nevstar
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