All posts by Christopher J. Schwake

Learning to love quaran-TEA-ne

Sorry for the terrible pun, but during these times of stress something that I have found to be very relaxing is to drink a lot more tea during the day than I previously had. While I always enjoyed various black, green, and oolong teas (more on the different types later), I discovered vastly more types and varieties of tea that exist while locked up in my apartment these past two months. Fortunately there are many reputable companies selling tea online, allowing you to get your fix without having to leave the apartment (not like you could anyways). Let’s discuss the different types of teas, their characteristics, and some places that I have gotten really great teas from in the past two months.

The types of tea

Camellia sinensis is the humble plant that has provided humans with tea for thousands of years. Originally drank in ancient China, tea cultivation spread to Japan, India, Southeast Asia, and Africa. The Assam and Darjeeling regions of India produce vast quantities of black tea each year. The Japanese produce almost exclusively green tea, what is known as sencha, which has a distinctive aroma of freshly cut grass and a nice vegetal taste. What makes a green tea different from a black tea? A white compared to an oolong? It comes down to how long the picked leaves are allowed to oxidize before being heated, a process which denatures the enzymes present in the leaves halting the oxidation reaction. As oxidation occurs for longer, the leaves take on a darker color.

White tea: What is considered the most delicate and unprocessed form of tea, white tea usually consists of the earliest leaf buds of the tea plant that are picked and either dried right away or heated before drying. While there is no agreement among the tea growing community, white teas are typically not oxidized or rolled, creating much lighter flavors when brewed.

Green tea: Consisting of many varieties and processing methods, green teas are minimally oxidized and can be heat-inactivated through either steaming (typical of a Japanese sencha) or pan-roasted (common in Chinese green tea). These different methods impart greatly different final flavors and aromas in your cup. Green teas are typically very vegetal and grassy in flavor.

Oolong tea: Halfway between a green tea and a fully-oxidized black tea is oolong (or wulong). These can be either lightly oxidized or closer to fully oxidized. I have come across hundreds of oolong teas while shopping online, and I’m sure there are hundreds more. These are fascinating to me as you can experience so many different flavors and aromas based on where the tea was grown, how much it was oxidized, how it was heated, and the final rolling and drying. Oolongs are best for gongfu style brewing described below.

Black tea: Consisting of fully oxidized leaves, black tea is probably most familiar to Westerners. While produced in many tea growing regions around the world, I believe the majority of black tea is grown in India for the international markets. Most black tea is destined as “dust” for tea bags and large distributers, but there are many full leaf black teas with great flavors that don’t need milk or sugar to make palatable. I do enjoy Twinnings or Taylor’s for bagged breakfast teas, such as Scottish or Irish breakfast.

Pu’er tea: I had not heard of pu’er tea until just recently. This tea is fermented over various periods of time (decades is better) allowing bacteria and various fungi to do what they do best. This imparts complex earthy aromas and flavors from the tea. While I have only tried one pu’er tea that was produced in Malawi, I’m sure there is a rich variety of flavors that can be enjoyed. For me, I think it is more of an acquired taste. The pu’er I had smelled exactly like dirt in a forest, during a large storm, and there were definitely worms and fungus involved. The flavor was mild and not bad, but the smell took some getting used to.

How to brew tea

A gaiwan for gongfu cha brewing

Each type of tea requires different brewing processes to allow for the optimal flavor extraction without causing the tea to become too bitter from the tannins present in the leaves. A general rule of thumb is that for black and pu’er teas you must use water just off the boil. Let the leaves steep for 3-5 minutes. For oolongs the temperature varies depending on the oxidation level, but typically brew from 175-195 degrees Fahrenheit for 3 minutes or so. Green and white teas taste best at lower temperatures, from 160-176 Fahrenheit or even 150 for more delicate teas. The brew time can be from 30 seconds to 3 minutes depending on the type of tea.

Gongfu cha style: A brewing style that I learned about during my time in home confinement is the gongfu cha method. This involves a ritual preparation of the tea encompassing many short, low volume, steeping of the tea leaves. Traditionally, the leaves are brewed in a gaiwan, a vessel consisting of a saucer, cup, and lid. You use the lid as a strainer when you pour out the tea liquor. Naturally, I acquired such a device over the internet and love using it. This process allows you to focus on making the tea, experience how the flavors and aromas change during subsequent infusions, and achieve a feeling of calm and mental clarity I did not think possible during a PhD.

My favorite tea venders

I have bought tea from several venders and have enjoyed many different types that are mentioned above.

Harney and Sons King of Bai Mudan. Delicious sweet white tea

Harney and Sons are based out of New York and have an expansive selection of teas at a good price. I enjoy their Bai Mu Dan white tea, Scent of the Mountain Sencha, and Ali San Oolong.

What-cha is a UK-based company sourcing many great teas. I sampled many different teas from here, but my favorites were the Yunnan Pure Bud Golden Snail black tea, Obubu Kabuse sencha, Taiwan GABA oolong, and a Taiwan Mi Xiang honey black tea. The owner also includes a hand-written note with each order, which I think is a nice touch and shows his devotion to fair and sustainable tea trade.

MEM Tea: Right in our own backyard located between Porter and Davis square is MEM Tea. I await some of their teas in the mail, but they have a great selection of teaware. I received some gongfu cha tea brewing essentials from them and the quality is good.

Rare Tea Company: Another UK-based company, the founder of Rare Tea searches the globe for unique and well, rare, teas that are unlike anything else. From here I have sampled teas from Malawi, Nepal, China, and Japan. They are truly unique and delicious but rather pricey for a graduate student. My favorites are a White Peony from Malawi, a Sofu Sencha (smells like summertime and happiness), and a silver tip jasmine white tea.

I hope you discover a new tea that you enjoy brewing and tasting to help you cope with the research shutdown.

COVID-19 and Your portfolio

Dow Jones Industrial Average, Feb-March 20th, 2020. Source: marketwatch.com

Investing in a time of turmoil

The uncertainty of the novel coronavirus pandemic has left global stock markets reeling, erasing gains from the past 3 years. Massive selloffs have occurred over the past month that have not been seen since the 2008 financial crisis. For those of us young enough to be long-term investors (many year horizon) this is not a time to panic sell. I would argue the opposite and to continue your monthly contributions practicing dollar cost averaging. I caution against trying to “catch a falling knife” in trying to time this market volatility with large sums of uninvested cash. This is a trial-by-fire for testing an individual’s tolerance to risk and unrealized loss, so do not throw money in now that you are not comfortable seeing potentially decline another 50% or more in the coming months. Even if that does occur, ride out the bump however long it lasts and eventually you will see the value increase. Historically, market downturns are followed by a recovery, and over the long term still provide the best returns on investment. While the past is no guarantee of future results, the two hundred years of US stock market history would indicate this is still the best way to generate wealth.

Anyone near retirement age should have already reallocated their assets to consist mostly of lower-risk fixed income securities as appropriate for their age. For those of you who have parents who are concerned by this crisis, assure them that unless they need their capital within the next few years, they should not sell holdings at a significant loss. The hit to the economy during this pandemic is uncertain but will definitely be deep. In the coming weeks, unemployment will skyrocket as most sectors grind to a halt. This is certain to continue for the coming months as more and more state-wide lockdowns will go into effect. However, the extent to which this is mitigated depends on the actions of Congress as they continue to debate different stimulus measures.

Choosing stock investments

So, what investments should be considered during this current market discount (and at all times when investing)? I would not feed into frenzy of any “hot stocks” because by the time you have heard about it in the media, they are likely already overvalued. Similarly, companies with promising COVID-19 treatments may end up disappointing investors. The principles I would recommend for those beginners wanting to invest a percentage of their savings would be to dollar cost average into an index fund that tracks the total stock market. These provide the safety of diversification that picking individual stocks do not. Essentially each month, no matter what the price of the fund is, buy the same dollar amount of that fund. Some months you can buy more when the price is low, and other months you buy less when the price is high. Over time, this averages to a lower cost-per-share than jumping in all at once. This is a great way to passively invest in stocks, as you don’t need to do deep analysis of a company that you want to invest in (and feel the pain when it turned out you were wrong). The S&P500 tracks 500 large companies in the US and SPY is a great low cost fund tracking it. Be sure to chose a fund with a low expense ratio (fees), and many popular ones can be found for under 0.1%. Anything charging over 1% eats away at your return and is not worth your money.

For those who want to be more active in their investments and buy individual stocks, you must do your homework. If you don’t want to take the time and discipline to invest in individual stocks, follow the investment strategy in the previous paragraph. Your principal will be much safer that way. There are two main schools of thought for picking stocks, technical analysis and fundamental analysis. Technical analysis looks at volume trends of buying and selling of shares and other metrics on how to predict which way a particular stock will move. In my opinion, this is essentially gambling and should not be followed. Fundamental analysis looks at the fundamentals of a business. All things from its financial health, growth prospects, dividend payments, management team, and advantage over competition are looked at. This is the best way to determine which companies have true staying power over the long run.

Fundamental Analysis and Value Investing

The best-known proponent of fundamental analysis is the investor Warren Buffet, who learned his strategy from the “father of value investing”, Benjamin Graham. Value investing seeks to buy stock at a safe discount, as the investor has determined this stock to be mispriced by the market in her favor. Eventually, she hopes the strong fundamentals of the company place it in the good graces of Wall Street and as more investors buy in, the share price increases. Value investing requires patience, as you could wait many years before your favorite picks become the favorites of Wall Street. But when they do, you will be happily rewarded.

You can read hundreds and hundreds of pages from many books and take many classes on how to learn fundamental analysis. Personally, I feel a great starting off point for those who are interested is to read Ben Graham’s, The Intelligent Investor. My perspective on investing, risk, and emotional responses were completely changed for the better after reading that book. Honestly if I had not read this only a few months ago, I probably would have sold my investments completely at the first whiff of this virus. (I believe time in the market is superior to timing the market). Briefly, the definition Graham gives for investment is the following:

  1. Investment, upon thorough analysis, promises safety of principal and a satisfactory return. Not meeting these requirements is speculation
  2. An investment operation is one that can be justified on both qualitative and quantitative grounds.

In another earlier work by Graham, Security Analysis, he sets criteria that should be met by a company before consideration of purchasing their stock:

  1. a suitable and established dividend return
  2. a stable and adequate earnings record
  3. a satisfactory backing of tangible assets

Essentially this boils down to the company should distribute profits (and they should have for many years prior), they actually have earnings, and their debt does not exceed their assets. If you follow the advice in The Intelligent Investor you will do well. If you want to speculate, avoid doing so with more than you are comfortable seeing disappear to zero. I would strongly urge against gambling with all derivatives (buying on margin, puts, calls, futures etc.) unless you REALLY know what you are doing and are also ok with losing your initial investment, or in some of those cases, owing MORE than you originally had.

Where can you buy stocks?

After putting down your copy of The Intelligent Investor and carefully analyzing a stock that looks attractive to you, you decide to go ahead and buy that stock. But how is this accomplished? Today it is even easier to buy and sell stocks than in the past. A stock broker is authorized to handle this task and there are many companies offering this service online. Fortunately many commission fees for doing this have been eliminated. Some popular brokers are TD Ameritrade, Fidelity, Vanguard, and E-Trade. These companies have different minimum investment amounts so be careful to check the requirements before choosing.

Conclusion

Many of us are not trained in finance, economics, or security analysis (I certainly am not), but I hope that investing does not have to be scary to those in other disciplines and is seen as a valuable way to grow wealth over the long run. It is fun to learn more about a field completely different than your own. This could also be a good skill for scientists, as familiarizing yourself with a prospective company’s 10-K filing (yearly financial report) will teach you a great deal about that company and if they have the financial health to ensure you don’t need to look for a new job in 6 months. This only applies to publicly traded companies however. Startups and established private companies don’t have to disclose as much to the public. Whether or not you decide to take a passive or active approach, you will be able to achieve your financial goals through sound and disciplined investment.

Disclaimer: These views are my own and I am not qualified to give financial or investment advice. Please seek out certified financial planners from trusted institutions. I own shares in SPY and other individual stocks and index funds as of this writing.

2019 novel Coronavirus: The latest zoonosis

A new coronavirus has made the jump from its animal host into the human population from what is believed to be an animal market in Wuhan, China. Reminiscent of the coronavirus responsible for the SARS (Severe Acute Respiratory Syndrome) outbreak during 2002-3, this virus is making headlines around the world. As of this writing, it has already infected and killed more people in China in the past three months than the entire SARS outbreak. The current infected count is over 28,000 people with over 560 deaths, all but two of which are in China. While the risk to people outside of China is minimal at this time, the outbreak must be monitored carefully as reports of human-to-human transmission are being confirmed. Because this is a new outbreak, very little is known about this virus and rumors and unsubstantiated claims are running rampant in online communities. We must remember not to panic and rely on factual information from the Chinese and US CDC (Centers for Disease Control and Prevention) and WHO (World Health Organization).

Coronaviruses are a large family of viruses which circulate among animals such as camels, cats, and bats. The 2019- novel coronavirus (nCoV) is most similar to SARS, but is a different virus to that which causes SARS or MERS (Middle East Respiratory Syndrome). The 2019-nCoV causes respiratory illness in people with the potential to spread from person-to-person, although it is unclear on how easily this happens. Based on how other coronaviruses behave, 2019-nCoV transmission is most likely through respiratory droplets from infected individuals, as well as surface transfer to mucosal membranes. Reports of symptoms include fever, cough, shortness of breath, and in severe cases pneumonia in both lungs. Onset of symptoms can occur anywhere between 2-14 days after exposure.

An international response is mounting to contain the spread of this virus, and the WHO has declared this outbreak a public health emergency of international concern (PHEIC), the sixth time they have done so. There have been confirmed cases in 24 countries around the world. Airlines are restricting flights to and from China, and the United States is barring individuals who recently visited China from entering the country. There are similar travel restrictions in Australia, Japan, and Taiwan. Vaccine development is already underway in several countries with testing reported to begin as soon as this summer. A group at the National Institutes of Health (NIH) is targeting the spike proteins that the virus uses to attach to its host cell receptor, ACE2. Although, any vaccine is still a year away at minimum, so we must rely on a swift response from the global community in identifying new cases and blocking routes of transmission if we are to stop this from becoming the next pandemic.

This situation is evolving rapidly, and infection counts and deaths may increase each day. Travel restrictions and policy are likely to change rapidly as well.

For the most up to date information please see the CDC website here: https://www.cdc.gov/coronavirus/2019-ncov/index.html

And at the WHO here: https://www.who.int/emergencies/diseases/novel-coronavirus-2019