RS Weekly Update - Munger, Optimism & Watchlist
Picking up where we left off last week, here is tendency #13 in Charlie Munger’s take on the psychology of human misjudgment from Poor Charlie’s Almanack.
Tendency #13 – Overoptimism Tendency
Would you consider yourself an optimist or pessimist? I guess if I were forced to choose I would probably put myself in the pessimist category, but I would also have to qualify that with a dash of optimism here and there. My wife and kids for example help me see life as an optimist.
I was pretty much raised to prepare for the worst and then hope (and work) for the best. And in the grand scheme of things I wouldn’t change that either. I like being able to go into situations having done my best and then understanding that stuff happens. Life isn’t fair and things don’t always go your way. I try to make sure my kids understand this too. It is in fact possible to give something your all and then still come up short. But you pick yourself up and keep on going. So I guess there’s the optimist in me. I guess being a golfer for the better part of 34 years has something to do with it too.
But there is a point where we can be overly-optimistic. What Munger calls foolishly optimistic (note the little “f”). Like the person who goes in to buy a lottery ticket just knowing that this time (as with the last time) is their lucky day; they just know it. A simple assessment of the odds reveals this optimism as foolish. Of course you can look at it like I do and buy the lottery ticket knowing good and well there’s not a snowball’s chance in hell of winning. But remember, you can’t win if you don’t play; so sometimes I do. Only for giggles though.
It pays to know how your money is managed: http://bit.ly/m63Cke
One of the things I like about this company is that they just keep on coming out with press releases of new contracts being signed: http://yhoo.it/kN1COD
Back in January I started looking at St. Jude Medical (NYSE: STJ) after it popped up on a screen: http://bit.ly/iNLs7j I wish I had bought it then, but the price is creeping down a little again and the company still looks like it has a number of excellent prospects.
Another relatively new IPO, RealPage (Nasdaq: RP) is a really interesting business. The company provides on demand software solutions for the rental housing industry and has a tremendous market opportunity in front of it; that is if it can bring the goods. The stock looks awfully expensive, but I’ll continue to research while I wait.
Straight from the Onion