Today I'm not going to talk about the latest in finance; I want to discuss something much more important. A couple of months ago was our anniversary, and I want to share something I believe is essential with you.
Let's start from the beginning. Three years ago, I decided to start this newsletter, and it has been one of the best decisions of my life.
Naval Ravikant and Tim Ferriss, among others, always say that the best way to know if you truly understand something is to write it down or explain it to someone else. This demonstrates that you truly grasp what’s behind it.
I must say this is absolutely true. I have been investing for over 14 years and, in the meantime, I have read hundreds of books on finance. I have worked closely in this world and know how it operates. Even some of my best friends and family work in finance. However, it wasn't until I started putting my ideas in writing that I truly realized the complexity of the financial framework.
I have always been a humble person, accepting my mistakes and investment styles that didn't really align with my worldview. I have documented all of this in over 350 publications throughout these years.
Part of that humility is reflected in my asymmetric portfolio: I know that I don't know everything. No one does. The difference is that I am aware of it and act accordingly.
Why do I say all this? For a simple reason: since 1971, everything changed in the financial world, the rules of the game changed. This had happened before, but humans are very short-term thinkers. Since that precise moment, it’s better to look at the stock market top-down instead of the pre-1971 method of down-top.
This is crucial because what has truly marked the rise in prices is scarcity.
Now, many might ask me: "What about stocks?" Stocks are an index of the liquidity of the markets, taking the dollar as a reference.
This is the simple reason why we have seen an average annual growth of 10% in the S&P 500.
In extreme cases like Argentina, where the currency devalues at a rate of 100% annually, we have seen the stock market yield one of the best results in terms of performance.
These, I believe, are the basic principles that guide the economy today.
Obviously, I think it’s possible to beat the market with individual stocks, but it’s more a game of chance than knowledge. Moreover, in this game of chance, generally when you play, you realize all this and, usually, psychology will play a trick on you.
Another thing that has helped me a lot over the years has been reading history, specifically the history of money. We are extremely rooted in what has happened in recent years and think that nothing like the Great Depression of '29 can happen again. However, when you look at things with perspective and understand that humans are likely to live around 150 years, you realize that it’s very likely that: 1. we will experience a similar crisis and 2. the world order will change.
Historically, cycle changes have occurred in periods of 100-200 years and the US has been the world power for around 100 years. Do the math and tell me what you think.
Similarly, reading history has taught me that there has never, I repeat, never been a currency that, when devalued to the extreme, did not disappear. Currently, we are at a global level of debt we have never seen before, and this can hurt us a lot.
Based on all these premises, I think it is really important to be prepared for all of them. It is necessary to have a medium-term vision of what might happen, but without stopping benefiting from all the bad practices being carried out.
It would be foolish not to take advantage of "free money."
Moreover, not taking advantage is a double-edged sword. Great wealth poorly managed has turned into nothing. Just ask post-World War I Germany, which saw its wealth destroyed and led to one of the worst episodes in history: Nazism.
I don't know your age, but this happened just the other day...
All this has allowed us to have asymmetric returns, just like the portfolio, and we have consistently beaten all indices with infinitely lower volatility.
I just want to thank all of you who have supported this journey, which began simply to put my thoughts in writing.
Now our portfolio in detail: