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10-K Diver

Dec 27, 2021 • 17 tweets • 7 min read • Read on X

Folks, here's a recording of our latest Money Concepts episode -- where we discussed "Inflation" for an hour and a half.

If that's too long for you, no worries. Just scroll down. We've created a few ~2 minute "highlights" you can listen to.

callin.com/?link=tURmKhwt…

Highlight #1

The purpose of investing is NOT to grow our money.

It is to grow our *after tax purchasing power*.

More on this idea of growing after-tax purchasing power -- from Warren Buffett's 1980 Berkshire letter:

@SKNWilkinson

Highlight #2

Sir Steven Wilkinson shared with us his recollections of the 1970s, when he and his family lived through high inflation in the UK.

Astute observations on how governments and businesses tend to behave during inflationary times:

(h/t @SKNWilkinson, @goodandprosper)

Highlight #3

LIFO vs FIFO accounting during periods of high inflation

Highlight #4

Series I bonds: one way to protect part of our capital from inflation

@rationalwalk

More on Series I bonds:

Here's an excellent overview written by my friend, @rationalwalk:

rationalwalk.com/the-case-for-u…

Note:

I incorrectly said that Dec 31'st was the last date to buy $10K worth of these bonds for 2021.

The last date is actually Dec 29'th.

For more: freep.com/story/money/pe…

Highlight #5

Which businesses are immune to inflation?

ONLY those that can respond to inflation by:

a) raising prices, AND
b) earning higher returns on capital.

This is a "3 part" highlight.

Part 1 of 3:

Part 2 of 3:

Part 3 of 3:

For more insight, I recommend reading Warren Buffett's wonderful Fortune Magazine article: How Inflation Swindles The Equity Investor.

Buffett wrote this in 1977. It remains relevant today, and is one of the best pieces I've ever read on inflation.

Link: tilsonfunds.com/BuffettInflati…

Highlight #6

The impact of inflation on debt

Highlight #7

Basic macro-economics: the "negative feedback loop" between interest rates and inflation

Highlight #8

Businesses that have more control over their environment tend to be better protected against inflation.

It's far better to own a business that can *control* its environment than to own a business that's at the *mercy* of its environment.

Highlight #9

One of the great defenses, if you're worried about inflation, is not to have a lot of silly needs in your life.

-- Charlie Munger

That's the last one. I hope you enjoyed this highlights reel!

@getcallin

About Money Concepts

We're a virtual investing club. Our goal is to help each other become better investors.

We meet Sundays at 1pm ET via @getcallin, to discuss all things investing.

Join us. Get the app. Subscribe. Tell your friends.

It's FREE.

callin.com/?link=DftUtOET…

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Get a cup of coffee.

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Sep 11, 2022

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Imagine we have 2 companies, A and B.

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@10kdiver

Sep 4, 2022

1/

Get a cup of coffee.

In this thread, I'll walk you through a fundamental business concept that may be counter-intuitive to some of you:

Just because a business has made $1 of PROFIT, it does NOT mean the business's owners have $1 of CASH to pocket.

2/

To understand why, let's start with how PROFIT is defined.

PROFIT = SALES - COSTS

That is, we take all sales (or revenues) the company made during a quarter or year.

We back out all costs incurred during this period.

That leaves us with profits.

Seems straightforward.

3/

Here's the problem:

The way a "lay person" understands words like SALES and COSTS is completely different from the way an *accountant* uses these same words.

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2/

Imagine we're buying shares in a company -- ABC Inc.

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Suppose we buy ABC shares for $5 a share.

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