Nevstar Links 21 February 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 21st February which is the anniversary of a couple of important geo-political events. In 1965, Malcolm X was assassinated and in 1972 President Nixon arrived in China for his ground-breaking talks. But the most important milestone in the Nevstar's humble opinion is a musical one. On this day in 1981, Dolly Parton notched the biggest hit of her career, when the song "9 to 5" reached #1 on the Billboard Hot 100 chart. The song, which is an absolute cracker, accompanied the ground-breaking movie of the same name. Dolly wrote and performed the song which garnered Oscar and Grammy nominations while also starring in the terrific film alongside Lily Tomlin and Jane Fonda.
Onto the links for the week including articles on tariffs, trading, and tough situations.
When Are Tariffs 'Good'?
Perhaps the word of 2025 so far is "tariff" with the current U.S. President extolling their virtues and claiming they are a cure for all matter of economic ills. Economists are generally opposed to tariffs which hinder free exchange. But is there ever an economic case for tariffs? Noahpinion provides an interesting overview of the various rationales used.
"In a world of increasing returns, the winning companies make a lot of profit, and smaller companies don't. A country might therefore be able to increase its wealth by using tariffs to guard its own 'national champion' companies. Basically, the idea is to use tariffs to reduce the scale of foreign companies by denying them your domestic market. This will allow your own country's national champions to outcompete their overseas rivals, which means they'll capture more of the profit to be had in the market."
See also: Back to the Future - A Devon Fund's Analysis of the Impact of Trump's Tariff Policy
Surviving Market Falls
An interesting list of 13 time tested strategies for dealing with the unexpected market drawdown that all investors are inevitably going to face. Investing is easier in theory than practice because we must constantly battle our emotions.
"You sell because you're scared, or you jump back in too quickly because you want to catch the rebound. Either way, you end up hurting yourself. The real skill is learning to be okay with not knowing."
Is 24 Hour Investing Positive or Negative For Investors?
US Broker Charles Schwab recently announced that it was expanding its trading hours to allow all retail investors to trade a wide range of securities 24 hours a day, five days a week. While lowering barriers to entry is generally a positive, is the ability to trade anytime actually helpful for investors? Remember, nothing good happens after 2am!
"With Schwab's changes, investors will no longer have a time buffer to help curb their reaction to recent events. When they have a trade idea at 8 p.m., they are no longer forced to 'sleep on it.' The ability to trade on a whim may prompt investors to act on gut reactions, whereas investing decisions should depend more on careful consideration and fundamental analysis."
2035: An Allocator Looks Back Over The Last Ten Years
Interesting think piece from the irreplaceable Cliff Asness, founder of AQR Capital and one of the smartest investors of this or indeed any generation. With tongue firmly in cheek, he provides a 'review' of the ten year period from 2025 - 2035 and how their asset allocation fared. Some genuinely helpful insights as to where best to apply capital in 2025.
"It turned out that, just as we thought, the U.S. really did have the best companies (most profitable, most innovative, fastest growing) and this indeed continued in this last decade. But it also turned out that paying an epic multiple for the U.S. compared to the rest of the world mattered somewhat more than we thought, and international diversification, as we knew it would one day, did eventually work."
Do Something: A Solution For Tough Situations
Not necessarily investment related but one of the most interesting blogposts I came across this week was this one providing a framework for dealing with tough decisions in challenging times. Sometimes, planning is over-rated, just do something!
"Planning gives us the illusion of control. But the more time we spend analysing options, the less time we spend actually doing something that makes progress. We hit a point of diminishing returns - the paradox of choice."
Quote of the Week
"You've got to guess at worst cases: my rule of thumb is double the worst that you have ever seen."
Cliff Asness
That is all for the Nevstar Links this week. Please share this with anyone that you think might be interested in reading it.
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Have a great weekend.
The Nevstar
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Neville Giles
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