🥦 Jake Taylor 🎉 Profile picture
Sep 28, 2020 14 tweets 2 min read Read on X
12 Munger quotes for your Monday enjoyment...
"You're looking for a mispriced gamble. That's what investing is. And you have to know enough to know whether the gamble is mispriced. That's value investing."
"It is an unfortunate fact that great and foolish excess can come into prices of common stocks in the aggregate. They are partly valued like bonds, based on roughly rational projections of use value in producing future cash...
But they are also valued partly like Rembrandt paintings, purchased mostly because their prices have gone up, so far."
"In terms of business mistakes that I've seen over a long lifetime, I would say that trying to minimize taxes too much is one of the great standard causes of really dumb mistakes." #topical
"The great lesson in microeconomics is to discriminate between when technology is going to help you and when it's going to kill you."
"Capitalism without failure is like religion without hell."
"I think democracies are prone to inflation because politicians will naturally spend--they have the power to print money and will use money to get votes."
"If we're going to prosper, we have to work... you can't vote yourself rich. It's an idiotic idea."
"There's a lot of leverage in those carry-trade games. Other people are more certain than I am that the aircraft can always be leased."
We didn't know when we were young which things to stretch for."
"After the South Sea Bubble, Britain outlawed public corporations--only private ones allowed. And they led the world for 100 years. A modest amount of liquidity will serve the situation. Too much liquidity will hurt human nature."
"One of the great defenses--if you're worried about inflation--is not to have a lot of silly needs in your life--if you don't need a lot of material goods."
"The best armor of old age is a well-spent life preceding it."

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More from @farnamjake1

Jul 28, 2021
On today's V:AH, we did a little math.
A recent survey of US retail investors showed they expect long-term equity returns to be 17.5% per year.

Let's walk through what it would take to get there.

The price of the S&P 500 today is ~4400.
EPS are at 131.5.

/1
EPS has grown at 2.3% CAGR for the last 10 years. (Peaked in Dec '19 at 147.5, btw)

Assume EPS grew at the same 2.3% per year for the next 10 years: 2031 EPS = 165.

In order to get 17.5% per year over the next decade, the price would have to 5x, going to 22,126.

/2
That means the P/E would have to go from 34x today all the way up to 134x in 2031. Umm... I guess if UST are at -15%? 🥴

Or we can invert:
Assume the 2031 P/E goes back to a historical mean of 15x. That would require EPS to jump from 131.5 today to 1,475, a 27.4% CAGR.

/3
Read 6 tweets
Dec 19, 2020
Arthur Robertson, industrialist who operated thru the Roaring 20s and Great Depression:
"In 1929, it was strictly a gambling casino with loaded dice. The few sharks taking advantage of the multitude of suckers. It was exchanging expensive dogs for expensive cats...
1/n
There had been a recession in 1921. We came out of it about 1924. Then began the climb, the spurt, with no limit stakes. Frenzied finance that made Ponzi look like an amateur. I saw shoeshine boys buying $50,000 worth of stock for $500 down. Everything was bought on hope."
2/n
"Durant owned General Motors twice and lost it twice... was worth way in excess of a billion dollars on paper, by present standards, 4 or 5 billion. He started his own automobile company, and it went under...
3/n
Read 10 tweets
Sep 27, 2020
"A great business at a fair price is superior to a fair business at a great price." --Charlie Munger

Let's walk through the mathematical proof of why Charlie is right, and also explore why this might be very dangerous advice. 😵 #sacrilege
Company A: earns $1/share, growing earnings at 20%, selling for 20x P/E.
We invest $100k to buy 5k shares.

Company B: earns $1/share, growing earnings at 8%, selling for 10x P/E.
We invest $100k to buy 10k shares.
After 10 years, Charlie is proven right.

An investment in Company A turns into $405k compared to $216k for Company B.

Low P/E "value investing" is dead!

... but what if we're a little wrong about the business?
Read 8 tweets
Sep 23, 2020
I would love to know what Buffett thinks about today's market, a topic he rarely discusses. The closest we can get is reading this HOF-worthy piece from 1999.

You're unlikely to read anything more important than this today.
"...valuing the market has nothing to do with where it's going to go next month or next year, a line of thought we never get into. The fact is that markets behave in ways, sometimes for a very long stretch, that are not linked to value. Sooner or later, though, value counts."
"During that same 17 years (1964-1981), the GDP of the U.S.--that is, the business being done in this country--almost quintupled, rising by 370%. Or, if we look at another measure, the sales of the FORTUNE 500 more than sextupled. And yet the Dow went exactly nowhere."
Read 18 tweets
Mar 20, 2020
YES! Realized a long time goal of interviewing my favorite living author @mattwridley a few days ago. Hopefully there's a lot of innovation happening in our isolation and we emerge stronger. His latest book didn't disappoint, get it in May.
fivegoodquestions.co/season-4/s4e20
Q1: What was the single most important event in the history of humankind and why?

Q2: Campfire, dung, whale oil, kerosene, “Edison’s” light bulb, CFLs, and LEDs. What are the sweeping innovation lessons we can draw from how humans simply light their homes?
Q3: Does the use of debt allow us to pull innovation from the future, similar to overclocking a computer?

Q4: What do past responses to health epidemics teach us about dealing with COVID-19?
Read 4 tweets
Jan 13, 2020
One year ago today I released my first book, The Rebel Allocator. I had no idea what to expect. Who writes a fictional coming-of-age story which teaches business lessons and appreciation for the role of capital allocation in society? (1/n)
The feedback I've gotten has been so lovely and made me glad I put myself out there, even though I felt like "flop" was a very likely outcome. :s

Funny launch day story...
(2/n)
I cleared my calendar for that Monday, planning to just dick around on twitter, have a leisurely lunch, and take a day & celebrate getting across the finish line.
I woke up early and took the dog out into the garage to feed her. Wait, why am I standing in a puddle?
(3/n)
Read 4 tweets

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