CEO of Farnam Street.
Value: After Hours.
Author of The Rebel Allocator.
@5_GQs & Hikecast.
Nature, adventure, books.
n=1
Never investment advice.
Jul 28, 2021 • 6 tweets • 1 min read
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
Dec 19, 2020 • 10 tweets • 2 min read
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
Sep 28, 2020 • 14 tweets • 2 min read
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."
Sep 27, 2020 • 8 tweets • 2 min read
"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.
Sep 23, 2020 • 18 tweets • 3 min read
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."
Mar 20, 2020 • 4 tweets • 1 min read
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?
Jan 13, 2020 • 4 tweets • 1 min read
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
