Spooky

Odd Lots has been on fire lately.

Because I was talking about investing capital in the frothy markets of 2021. I just using 3 year data as an approximation.

Sure, but if you look at the past three years BRK still outperformed VITAX / VGT and the S&P 500 by a big margin (my quick analysis doesn't include dividends so this will change things a little). And VITAX is 40%+ Apple and Microsoft so performance has been pretty close to the S&P 500. The individual names my friend was pitching totally tanked (looking at 3 year returns what was his biggest holding is down 54% while BRK is up 75%) and there were a tonne of early tech companies / SPACs down 90%+ from the 2021 period. People were not exactly being rational and buying a tech index. Really my point was that when people are counting BRK / Buffett out and market sentiment about the company is very negative it is generally a good time to buy.

I love it when this happens and the market narrative is that Buffett is washed up. That's when I try and buy as much as possible. Back during the 2021 craziness a friend of mine of who is an investment banker in the tech industry told me that Buffett and Berkshire were irrelevant. I just look at how everything played out since then and chuckle.

Good picks. Some media companies are getting the shit kicked out of them like Para. Also second US financial stocks. US small cap stocks also seem like a decent hunting ground.

Totally agree. They allowed the Rogers and Shaw merger to go through and the Telco space in Canada was already completely anti-competitive.

Thanks @gfp, I'll do some more digging. I've actually been wanting to read that Milton Friedman book as well!

Somewhat off topic - I've been thinking lately about something that Buffett said at the AGM with respect to the World War II period and the US federal government re-organizing the whole economy and government under direction from someone from Goldman Sachs to build its war time production. Does anyone have any good books or resources about this time period and the changes to the political system and economy that took place?

Stocks for the long run baby. Observing everything that has happened over the last few years just reinforces the view that no one can predict what will happen in the short term. The key is asset allocation and being invested in good businesses / assets over the long run. Always be buying the best thing in your opportunity set.

Agree that one of the government’s jobs should be to break up monopolies to promote healthy competition, otherwise part of the capitalistic system breaks down with some companies extracting monopoly rents and driving up the cost of living (just look at Canadian banking, Telcos, etc.). Personally I am also anti union - this hampers North American competitiveness versus countries like China. A big problem also seems to be regulatory capture where the winners / incumbents can dictate the regulation to stifle competition or give them advantages. An idea that I like would be to give everyone a trust account when they are born with something like the Vanguard total US ETF that no one can touch until they are 18+. This would give everyone a stake in the economy and shift peoples mindsets to having an ownership mentality.

Good post and I agree, this is a big contributing factor to the rise of populism across the political spectrum. Not really sure how we get out of this malaise, delegating economic policy to central banks and printing money has not really worked other than to inflate asset prices and drive further wealth inequality. Personally, my view is that there should be much more deregulation and free trade and governments should get out of the way to create the conditions for businesses and individuals to thrive rather than picking and choosing certain industries / companies to boost.

Combine this too with China's demographic challenges and it doesn't look pretty long term. I think people are underestimating the impact this will have on the world economy.

Ya I read a bunch of performance documentation that the S&P 600 has significantly outperformed the Russell 2000 and I think it is because the profitability requirement cuts out a lot of companies. (credit to @Spekulatius for pointing me in this direction) I went with the Vanguard one, VIOO

I agree, Buffett went extremely deep on finance / investment and Munger extremely broad on all the big ideas in the different disciplines. Together they cover everything!

I bought an S&P 600 ETF at a p/e of 12x. Think this will significantly outperform the magnificent 7 over the long run.

I think live lectures would be more engaging. Also heard great things about Bruce (his books are also really good, the value investing one and competition demystified).

I’m in NYC for work and it is bumping here, lots of energy and people. Also, I just ran into I just Stanley Druckenmiller at a restaurant in Midtown (the restaurant was packed).

Ya, definitely a few lessons to take away. I think the key is to gauge market psychology / sentiment and see if it lines up with reality. At one point sentiment reached lows that had not been seen since the financial crisis based just on fears of a potential recession happening with the WSJ running scary headlines each day although the conditions were nowhere near as dire as the crisis. This is the time when you have to be determined and brave and buy. Luckily I was able to allocate a lot of my salary to equities over the period. I agree with this, a lot of economic data is starting to deteriorate but the market is just gaining momentum. Saw an article that IPOs might be in the cards soon which is always a good indicator to be more cautious. Definitely feels like there will be some more volatility in the near future. Who knows, I'm just going to patient, build up some more spare capital and see if I can find some good opportunities.

So after completing this course I don't think that I would recommend it. Maybe it was just me and my learning style but I didn't find the video lectures to be very helpful. The textbook I referenced above was much better. There is a lot of good material provided in the course (lots of good papers by Michael Mauboussin especially) but the amount of extra material was much too extensive to read and digest properly in the short time frames provided if you are juggling work and other life commitments so it didn't feel like the course was very well designed / focused. I've re-organized the materials and have had them printed and bound to read through them and learn the way I prefer. You do get access to two teaching assistants / recent graduates from the Columbia MBA value investing program which was interesting. Also, there were what felt like hundreds of people taking this course so if you are looking for an edge over the crowd the course is probably just table stakes.

This was all so predictable. FOMO rules the markets now.

One other factor to add to the list is the jurisdiction / exchange of the target. Munger has expressed in the past that they much prefer to hold investments on the US exchanges. I don't think they currently own any Canadian listed companies.

Hahaha agreed.

I just keep thinking about Munger's statements that it is going to be much harder to build wealth going forward with the prices of everything so high now. I assume that he also subscribes in some degree to Dalio's thesis on the changing world order since he is heavily invested in China and has recommended buying Chinese companies over American companies given the price differences. Buffett is also pivoting somewhat to Japan as well as into oil investments. Maybe I'm reading too much into it but it could be a rocky road for US equity markets on the horizon.

I guess the question we should be asking is really where do things go from here and what is our best use of capital going forward. Can stocks / real estate as asset classes produce the same returns they have historically without the backdrop of 40 years of declining interest rates?

I'm in the other camp, mainly just due to the reality that home prices where I live in Toronto are out of reach for most people and some differences between the US and Canada (average price in the Greater Toronto Area is $1,182,000). However, I think there are real advantages to renting over owning and investing the difference in the market. The first is that here my rent increase is capped at 2.5% per year - my landlord is taking all of the interest rate risk (in Canada you can only get a fixed rate mortgage for 5 years). Also, maintenance expenses are all borne by the landlord and included in my rent. The washer and dryer needed to be replaced and the landlord replaced it. But the key thing is really flexibility. If I lose my job tomorrow I just need to give 60 days notice and I am out of here. There is also no idiosyncratic risk of having a majority of wealth tied up in a single somewhat illiquid / immovable asset. Also, in Canada you can't write off your mortgage interest from your taxes on your principal residence but you can if you borrow for investment purposes. I haven't been using any debt but this could be a huge tax benefit. Lastly, when I back tested the results of the TSX with dividends re-invested versus the growth in the average home value in Toronto, the TSX outperformed by 4X (and this doesn't take into account maintenance costs on a house). So there is the opportunity cost of tying up a good chunk of capital in a house. My results have been very good and I haven't even used any leverage, building my net worth from negative to over the price of an average home in 7 years. I also think the longer the time horizon the more this strategy will outperform as dividends get reinvested and the higher rate of compounding works its magic (i'm actually generating significantly positive dividend and interest income every month / quarter). The beautiful thing too is that in the long run at the end of the day I will have a portfolio / income stream that is not tied to any specific physical location giving me the flexibility to move or travel anywhere I like.