"Millions? Than what?" Happy New Year Everyone.

An American tourist was at the pier of a small coastal Mexican village when a small boat with just one fisherman docked.
Inside the small boat were several large yellowfin tuna. The tourist complimented the Mexican on the quality of his fish and asked how long it took to catch them.
The Mexican replied, “Only a little while.”
The tourist then asked, “Why didn’t you stay out longer and catch more fish?”
The Mexican said, “With this I have more than enough to support my family’s needs.”
The tourist then asked, “But what do you do with the rest of your time?”
The Mexican fisherman said, “I sleep late, fish a little, play with my children, take siesta with my wife, Maria, stroll into the village each evening where I sip wine and play guitar with my amigos, I have a full and busy life.”
The tourist scoffed, ” I can help you. You should spend more time fishing; and with the proceeds, buy a bigger boat: With the proceeds from the bigger boat you could buy several boats. Eventually you would have a fleet of fishing boats. Instead of selling your catch to a middleman you would sell directly to the processor; eventually opening your own cannery. You would control the product, processing and distribution. You could leave this small coastal fishing village and move to Mexico City, then Los Angeles and eventually New York where you could run your ever-expanding enterprise.”
The Mexican fisherman asked, “But, how long will this all take?”
The tourist replied, “15 to 20 years.”
“But what then?” asked the Mexican.
The tourist laughed and said, “That’s the best part. When the time is right you would sell your company stock to the public and become very rich, you would make millions.”
“Millions?…Then what?”
The American said, “Then you would retire. Move to a small coastal fishing village where you would sleep late, fish a little, play with your kids, take siesta with your wife, stroll to the village in the evenings where you could sip wine and play your guitar with your amigos.”

Most Useful & Universal Mental Models

So what is a mental model? It is a process or way of thinking for solving a problem through using a representation of the environment. Because there are different ways to represent the environment and use intuition, there are alternative mental models. Some are focused on specific tasks while others may be more general. 

The great chart below provides a number of examples of effective mental models. Some are easily employed for investment decisions while others may help with productivity and work flow.

This weekend spend some time with people you love, you'll never regret it !

         love, joy, peace, patience, goodness, kindness, faith, mildness and self-control,                 to all

Equities versus Commodities

Equities are overvalued! Bonds are overvalued! In the minds of many investors everything is overvalued given central bank distortions, yet there may be an exception. Look at commodities. The difference between financial and real asset could not be larger. Financial assets have steadily moved higher while commodities have fallen or at best moved sideways relative to risky stocks in the last 5+ years. This relationship has applied to all equity indices around the world to varying degrees. 

One can argue that commodities are more closely tied to current economic growth while equities are tied to valuations of long-term discounted cash flows as one explanation. Equities have positive carry while commodities as measured through futures have seen mixed carry with market contango for the last few years; however, there are now switches to backwardation in some markets. The business cycle relationship with commodities suggests that these real markets peak late in the cycle not when there is a new surge in growth. Still, on a relative performance basis, commodities as an asset class looks like a better value.