Ray Dalio in 2000, on the history of predicting the future:
"most people who experienced consistent reinforcement for 10 years were inclined to believe that this would continue indefinitely"
"At the end of the 60’s I remember most believed that managing an economy is like managing most things, we get better at it with time; it is why we could expect even lower volatility in the future.
This view was held just prior to the one of the most volatile decades ever."
"I feel my understanding of the world economy is reasonably intimate going back to the 1920’s, meaning that I believe that I have both an intellectual and visceral sense of what they were like."
"I have learned that dramatic change is the norm and to doubt the new era theories."
"As the fifties began, American psychology could be described as cautiously confident -- cautious because that was the instinct created by twenty years of depression and war, and confident because the United States was indisputably the most powerful nation on earth."
"In the sixties, Americans lost their cautiousness and kept their confidence"
"Americans believed that the economy could be turned into a sort of perpetual wealth machine."
"Going into the long bear market overinvested because of their tendency to extrapolate the past."
"Early in the 1970’s, Americans had never experienced inflation so they weren’t wary of it.
By the end of the decade, they were traumatized by it and assumed that it would never go away."
"Thirty years of prosperity and peace created a faith that our problems will be resolved."
"The eighties were almost exactly opposite the 1970’s as inflation hedge assets fell while financial assets rose, and the trade-off between growth and inflation that no one doubted, ceased to exist."
"to me the 1990s have been most like the 1920s"
"Stocks were great investments with broad ownership at the end of both decades.
There was unbounded optimism concerning the future and how easy it is to get rich by speculating in the market or working for new technology firms."
Nifty chart of Russian credit spreads around its debt default.
"Putin is a political unknown. He is 47 and truthfully has more experience as a technocrat than a politician."
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"It's like you have a cell phone and then somebody gives you the charger. Oh, I can get this thing up to a hundred anytime I want?!
"It doesn't feel like anything. Doesn't do anything. I don't get it. I don't understand it. But here's the difference: at 1pm that day, my head does not hit the desk like it used to. ... I sail through the day."
"The way I look at life, basically is it's exhausting. Being busy is exhausting. Doing nothing is exhausting. No matter what you do, it's exhausting.
Sleep is hit and miss, [transcendental meditation] is not. It's this thing that augments your need for rest.
"I would always say to the people that don't do it, I can't believe you stay up all day."
"A lot of stand up is analogies.
The phone charger is pretty tough to beat as an analogy because your phone charger never doesn't work.
And that's the great thing about TM. You never have to wonder. That's the big difference between sleep and TM. TM never doesn't work perfect."
"Trait #1 is the ability to buy stocks while others are panicking and sell stocks while others are euphoric.
When 1999 comes around and the market is going up almost every day, you can't bring yourself to sell because if you do, you may fall behind your peers."
Roughly: Investing -> returning capital -> liquidating assets.
Unexpected:
"We expected low or negative spreads between ROIC and WACC for companies newly listed, rising spreads as they mature, a decline in senescence.
What we found was nearly the opposite. The spread at the date of the IPO was high and narrowed before stabilizing."
Companies going public (selling equity to new investors) when return on capital looks most attractive (and is about to decline)?
Returns to shareholders on the other hand were most attractive for more mature companies.
Druckenmiller: "I am so tired of being a bear, and being labeled a bear."
But: Liquidity ⬇️
"Since it's taken so long, the Fed has ended up with a higher terminal rate. Inflation gets stickier the longer its in the system. That increases the probability of a hard landing."
"We always short the same way. ... I try and think of a situation 12 to 18 months from now and if I think the security prices are going to be less, I short.
Frankly, I'm not sure I've ever made money in shorts. I like it. It's fun, but you can get your head handed to you."
"When I was at Soros, I shorted $200 million worth of Internet stocks in March of 99. And in three weeks covered them at a $600 million loss. I lost $600 million on a $200 million investment in three weeks.
I was short 12 stocks. They all went bankrupt Every one of them."
ROIC and margins for companies with different moats by @mjmauboussin
"A company creates value when its ROIC is in excess of cost of capital. Stated differently, it makes a dollar worth of investment worth more than a dollar in market value.
The market broadly appreciates this, especially when growth is considered as an additional variable."
"Markets are akin to an ecosystem where investors fill various niches. Investors with a short-term horizon tend to focus on near-term metrics such as sales and earnings.
Investors with a long-term horizon focus on competitive advantage and the size of the market opportunity."
Like other great investors, Sam Zell used content as a form of leverage. His "guide to the risky art of resurrecting dead properties" earned him his nickname, the Grave Dancer.
"Some might see buying and creating value from others’ mistakes as a form of exploitation, but I see it as giving neglected or devalued assets new life.
Often in my career I’ve been the only bidder for them—the last chance for a resurrection."
"I’m not claiming to be altruistic— just optimistic, and confident that I can turn those assets around.
That, in my definition, is an entrepreneur. Someone who doesn’t just see the problems but also sees the solutions—the opportunities."