How your mind & emotions affect your health

Examples:

1) Pessimistic personality has higher correlation with disease

2) So does depression

3) So does a hostile mental attitude

4) Positive attitude increases life expectancy

5) Marriage improves life expectancy

6) Both number and quality of social relationships has positive correlation with good health

There's a 1 hour+ video covering this by UCSF's Kevin Barrows, MD here or here.

Author is also on Twitter 

2015 US Equity Market Performance: Lopsided

Looking only at the broad indexes, the losses were modest. The Dow fell 2.2% and the S&P 500 fell 0.7%. But only a few stocks did well. According to Bonner & Partners researcher Nick Rokke, on average, the 10 biggest stocks by market cap in the S&P 500 rose by a little less than 27% in 2015. On average, the bottom 490 were down by about 2%.

Excerpted from this source.

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Afterthought (added Jan. 10, 2016).

FANG's Valuation Multiples

Here are the trailing 12-month PE ratios for the so-called FANGs:

1) Facebook: 98 -- based on $97.33 share price as of Jan. 8, 2016 close
2) Amazon: 870 -- based on $607.05 share price
3) Netflix: 296 -- based on $111.39
4) Google (now Alphabet): 31 -- based on $730.91 share price

The first letter of each company's name, F + A + N + G = FANG.

Their combined PE ratio works out to 56. Derivation: Their aggregate market cap is $1.11 trillion. Their aggregate trailing 12-month earnings is $19.6 billion. Dividing results in 56.

One could also have worked with enterprise value (EV) to EBITDA ratios to reach the same conclusion, which is that these stocks are expensive. OK, here are their enterprise value to EBITDA ratios:

1) Facebook: 39
2) Amazon: 41
3) Netflix: 127
4) Google: 19

Their combined enterprise value to EBITDA ratio works out to 28. Derivation: Their aggregate enterprise value is $1.035 trillion. Their aggregate trailing 12-month EBITDA is $37.3 billion. Dividing results in 28.

More on their latest financials available on Yahoo.

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How expensive are these stocks? A reasonable PE ratio might be 10-25 ... A reasonable EV/EBITDA ratio might be 10-20 ... The implied overvaluation is therefore what? (A) 2-5X according to PE, (B) 0.5-3X according to EV/EBITDA. Taking the minimum, we get 0.5X overvaluation, at least. To eliminate a 0.5X overvaluation requires a 33% price drop.

For reference, the S&P500 closed at 1,922 on Jan. 8, 2016, down 6% from 2,043 on the last trading day of 2015. A 33% drop would put it at 1,281.

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On Concentration, Fear, and Motivation

from 

Novak Djokovic, Tennis Champion

The game of tennis is as much mental as it is physical. 

Novak Djokovic is a Serbian professional tennis player. (More on him at this link.)

His interview with the Financial Times was published in that newspaper on October 17, 2015. Here are some excerpts. 

They shed light on the mental aspect of the game and carry over to other parts of life.

(Blue font text has been copied verbatim from the article.)

On Concentration

So what does it feel like for him in the "clutch" moments, which have rather more at stake?

"The first thing is to make sure you are in the moment," he answers calmly. "That is much easier to say than to do. You have to exclude all distractions and focus only on what you are about to do. In order to get to that state of concentration, you need to have a lot of experience, and a lot of mental strength. You are not born with that. It is something that you have to build by yourself."

"If you can channel it the right way, fear will turn to strength."

On Fear

Did he ever actually feel fear on the court?

"Absolutely. Absolutely. Everyone feels fear. I don't trust a man who says he has no fear. But fear is like a passing cloud in the sky. After it passes, there is clear blue sky."

On Motivation

I [the interviewer] ask him how he keeps himself motivated.

"I can carry on playing at this level because I like hitting the tennis ball," he says simply. Are there players who don't, I ask? "Oh yes. There are people out there who don't have the right motivation.... You don't need to talk to them. I can see it. But I don't judge."

On his Record

His 10 Grand Slam career wins  put him seventh in the all-time list. At the age of 28, he is at the peak of his powers; in form, in demand, and in relentless pursuit of the two contemporary players who hold more titles than him: Rafael Nadal (14) and record holder Roger Federer (17). 

The thought occurs to me [the interviewer] that, rather than go down in history as the third man, he may actually transcend the archetypal qualities of both of his rivals: even more gracious than Federer, still steelier than Nadal.

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How Successful are M&A's?

• A 2011 study by KPMG found that only 31% of M&A deals completed between 2007 and 2009 added value. In the two years prior to that, it was 27%. Source.

• Global mergers and acquisitions valued at $4.9 trillion were announced in 2015, more than the 2007 peak. While there were 38,000 deals, over a tenth of the value was from the five largest deals. (Same source as above.) This works out to an average deal size of $116 million excluding the five largest.

• Beware of the M&A deal that doesn't take into account the business cycle. A case from recent history is Walter Energy, a company that mines the type of coal used in steel making. Its stock has fallen from $120 in 2010 to 1.25 cents. The company's bankruptcy hearing was last July. The company suffered from the falling price of coking coal, which stood at $230 per ton in 2010 and $100 per ton in 2015, same as 2005 prices. See article here.

Author is also on Twitter

2016 Financial Market Outlook

Please find links to two articles that appeared in the Financial Times on Jan. 2, 2016 expressing ideas and thinking regarding how 2016 might shape up.

It will be interesting to revisit these articles at the end  of 2016 and make a mental comparison.

• Unlikely suspects are in the swings for 2016, by FT reporters, Jan. 2, 2016

The top tail risks are China's economy slowing down and the US Fed's interest rate hikes.  Other tail risks involve Brazil, Brexit, and US-EU divergence.

The article also contains nice charts of

1. 2015 Chinese currency devaluation
2. 2015 crude oil price crash
3. 2015 stock market returns in US, Europe, and Japan
4. 2-decade build-up in EM (emerging market) debt

• Cheap stocks worth a try but base case is another 'blah' year, by John Authers, Jan. 2, 2016

The base case is for US stocks to go nowhere, but for EM and European stocks to rise.

The article also contains a chart showing how US stocks returned approximately nil in 2015 while US bonds performed only slightly better.

Author is also on Twitter

Bill Gross' December Investment Outlook

Link to Gross' December investment outlook. Please note that this link will cease to work after next month's outlook comes out. By then, hopefully this link could take you to the article.

In this report, Bill Gross compares the developed world's central banks' monetary policies of the past decade (i.e. quantitative easing and zero interest rates) to a losing gambler who doubles down in hopes of breaking even before going bankrupt.

Author is also on Twitter

The Debt Supercycle

Let's hear it from Kenneth Rogoff. Here's his article published in the Financial Times on Oct. 10, 2015.

This slowdown is a hangover not a coma.

Why should we listen to Rogoff? Because he is a Harvard professor and has studied 8 centuries of debt-laden financial crises in his 2011 book entitled This Time is Different.

Rogoff's profile on Wikipedia.

Author is also on Twitter.