Intelligent_Investor

I think some of the great Chinese companies have a chance plus there's a margin of safety due to the geopolitical uncertainties right now. The top American companies are trading at a premium so not exactly a margin of safety. Tencent I feel is probably the best bet for a relatively longer term compounder with an almost impenetrable moat.

A lot of it is simply the math of compounding. If a company is able to compound equity at 20% a year for decades, its damn near impossible to overpay for it based on near term multiples. 35x earnings on a company that compounds at high double digits for several decades is not expensive, if the moat doesn't collapse.

The issue is that there is a Washington pun right now, which is much more powerful than any Fed put. If we get into a recession Washington will just print another couple of trillion dollars to get us out of it. Congress hasn't shown any willingness to temper spending and their solution to every crisis seems to be just print their way out. This implies 3 things: 1) Long term monetary devaluation 2) Higher required return on gov't debt 3) Consumer spending and thus corporate earnings will likely have a floor making equities more attractive. We are very much TINA right now

As Munger has said before the best time to sell is when your thesis has changed/no longer is likely to be true. For a net-net that will likely be in a few years, but for a compounder like Coke that might be decades.

4 handle on the 30 year

Buying more SIG, probably gonna start stretching maturities on bonds sooner.

Treasury yields are popping, 30 year bond now at a 4 handle, this could be very good for FFH

They won't, AAPL FCF growth is like 6-7%, at a 3% FCF yield you are still looking at high single digit % return for AAPL

The striking down of the student loan forgiveness should help somewhat with inflation. Less money in people's pockets = less spending

We're in a weird state right now where the fed is trying to fight against the fiscal policy excesses from Washington during the 2020-2021 period as well as the impacts of the Ukraine war while simultaneously trying to avoid killing the middle class. But so much of the stuff that is going on in regards to inflation is out of control of monetary policy - you can't get out of a war or housing supply issues by raising rates, but that's what they are up against now. When rents/home prices have basically gone up and to the right at a double digit % annually clip for 3 straight years with no end in sight due to massive supply shortages, its not surprising that core inflation is still holding up despite heavy rate increases. I just don't see a way the fed can hike its way out of the housing issue without it naturally resolving itself.

Kodak, Polaroid, Sears and others did go to zero, but had you bought an evenly weighted basket of the Nifty Fifty at its very peak in 1972 and held to today, you still would have outperformed. Most people only look at the huge crash and not the longer term compounding of a lot of these businesses. There's at least 5 or 6 hundred baggers on that list and a lot that came really close even if you start from the peak of the nifty fifty. If you bought all of the nifty fifty in 1972 and held for the last 51 years you would very fucking rich right now and have done better than just owning an index fund. The huge winners made up for all the zeros, just like within Berkshire and within the S&P 500. Keep in mind, I'm not saying I would buy those companies at the price, just that even at ridiculous looking valuations, they still did way better than average companies.

Fair points regarding growth, but meta at 9x FCF, GOOGL at low teens FCF, and AMZN at ~25x normalized operating profit at the beginning of the year isn't anywhere close to the nifty fifty valuations. Even MSFT and AAPL at the time were trading at >4% earnings yield with >10% FCF/Share growth which is still more attractive than a 4.5% zero growth 10 year treasury. Even with the nifty fifty had you bought McDonald's or Coke at like 60x earnings and owned for 2 or 3 decades you still would have beaten the S&P 500. I just don't think automatically writing off a good business as being unable to continue to produce good returns because its optically expensive is a logical conclusion (doesn't mean I'd buy them at this price, but that's a different analysis).

When it comes to the big 7, their performance isn't surprising considering quite a few of them were way too cheap at the beginning of the year. Yeah Meta has more than doubled but that was because it shouldn't have been trading at sub-100 in the first place. Of the 7, 6 are objectively amazing businesses (Tesla the only exception), and of those 6, 3 were very cheap at the beginning of the year (AMZN, GOOGL, META). AAPL and MSFT are/were also reasonably priced relative to their quality. NVDA is really the only one that has run up a lot on AI hype, but their AI offerings are probably the best in the world right now so not entirely unjustified. I don't think its impossible that great businesses stay great for decades - CocaCola, AMEX, Walmart, Home Depot and a lot of other businesses have been top performers for way longer than big tech has.

Imo inflation, at least the parts the Fed can control is pretty much done and dusted, what remains is shit like energy and housing (supply issue) which the Fed doesn't really have any control over. Food/grocery prices have round tripped back to approximately where they were pre-pandemic in many items (still high in many items, but prices are starting to fall as well, or have peaked already), job market has done a 180 and cooled, while in many places as layoffs have begun, banks are pulling back on credit issuance, and cracks are beginning to show in the RE markets. The biggest risk right now is stimulative fiscal policy and a congress/Biden administration that seems to be open to running an unlimited deficit to subsidize the American people. If congress pumps out trillions in stimulus as soon as the economy slows, that's going to generate more inflation than any QE the fed does, just like we saw with the post pandemic stimulus.

When the S&P was at 3500 people were saying it was going to 2300 even on this forum lol fear really does spread like wildfire

We call them MAGMA now

4% is fine, I'm just a paranoid value investor who always wants an excessive margin of safety lol

However much annual income you need pre-tax and multiply by 50, so you are essentially assuming a 2% withdrawal rate on your investments. So if you think you need 150K/year you would need 7.5M I think this withdrawal rate is sufficiently low to provide a buffer if stuff goes wrong/you have an unexpected expense. While you might be able to get away with say 1 or 2 million, one large, unexpected expense and most of your wealth is gone and you need to go work again.

It's not the number that counts, its the severity. 1992 was a very inactive season (only 7 storms, 4 hurricanes, and 1 major hurricane), but the major hurricane was Andrew which was the costliest Atlantic hurricane for a long time. Now, even 30 years later no one talks about 1992 as an inactive season, all anyone remembers is Andrew leveling Miami. Even if there isn't that many hurricanes if we get "the big one", the impacts will be catastrophic and cause losses to the insurance industry

I believe they bought JEF just for the VTS spinoff actually. Looks like they reduced their stake in JEF

So my company's version of MS Teams now has an official GPT-4 Virtual Assistant. Pretty powerful in terms of what you can do with it

Sold a May maturing treasury bond and bought a 6 month brokered CD with 5.15% interest rate in my IRA

Bought a 5% 17month CD from my Credit Union. Currently higher than any of the treasury rates

Adding IDFB as long as this Risk Arb spread remains this wide

Is it really putting people out of work if its just restoring equilibrium in the labor market though? I find it very hard to say that people making $300k in a non-earnings generating shitco losing their jobs is bad for the economy in the long run. People acting like the job losses is all in low-income stuff when its the exact opposite, its the high-income people working in jobs that create little to no value that are losing their jobs as the tide turns from wretched excess to a more normal state of being.