Klarman Holding 50 Percent Cash

[influx]

On 1/26/2025 at 2:24 AM, james22 said:

 

The answer is not in the readings.

 

 

 

We are all imperfect so is he Mr. Saylor, right?

Thinking from first principles should not lead to securities fraud ? This was after MIT

https://www.sec.gov/enforcement-litigation/litigation-releases/lr-16829

 

I apologize for the OT reply. It is about Seth and Baupost.

[influx]

On 1/28/2025 at 6:47 PM, Milu said:

So while I would fully agree that the purchase of that position was 100% luck, I would say that the conviction to hold a company for a long time through several 60-70% drawdowns, is maybe 50% luck, 50% skill 

 

How would you describe / analyze the skill part to hold TSLA? Could you please expand on that?

[influx]

Going back to Seth and the cash position at Baupost.

Don't you folks think its challenging to balance between the following:
1. the process that worked for a long time having high CAGR.
2. the evolving market structure over a relatively long period of time. I've been reading Michael Green for probably 5-6 or so years and I think he is mostly right. Einhorn started publicling citing his work in the last year or two, etc. We don't have to debate this here.
3. the need to adjust the process that worked (point 1) because of point 2.
a. the personal (or company) identity tied to the process that worked. I'll call it identity crisis (may not be the best word). I think Einhorn talked about this years ago (got divorced as well).
b. the decision to do deviate and do it in size (if feasible). I remember hearing about Dimitri Kofinas going all in with on shitcoins and similar with a very small % of his net worth. Doing that personally is one thing, doing that professionally and in size after one is Buffett or Klarman or Howard Marks (he is most credit though), is pretty much impossible, no?

The result is a high cash holding. Buffett has what a 3rd in cash/bills?

I think this is the struggle. And it ain't easy to balance as with many other things in life.
I think I am saying I feel for them LOL.

[Milu]

4 hours ago, influx said:

 

How would you describe / analyze the skill part to hold TSLA? Could you please expand on that?

I would describe it as follows.

 

You stumble into an asset through chance/dumb luck. The stock goes up 3x one year, stock crashes 50% next year, respected investors start calling it a bubble, EV market is described as just a phase on multiple news sources. Every day, week, month, you have to evaluate whether holding this. You really like the technology, support the CEO and the vision. Stock goes up another three times, you are sitting on a 10 bagger. Friends are telling you to get out now before it all goes up in smoke. Stock pull back 65% in another drawdown, people are predicting bankruptcy, "Just get out now, you've made 3 times your money which is amazing'. Technology keeps moving forward, stock goes up another 2 or 3 x. And so on and so on to today. Sitting on a 200+ bagger, same noise around taking money off the table, biggest bubble ever etc. I still have to make the same decision every week as to whether I believe in the vision or should get out. I think this is where 'some' skill lies. Could of course all go up in smoke tomorrow but as I've now I'm still holding.

[dwy000]

5 hours ago, Milu said:

I would describe it as follows.

 

You stumble into an asset through chance/dumb luck. The stock goes up 3x one year, stock crashes 50% next year, respected investors start calling it a bubble, EV market is described as just a phase on multiple news sources. Every day, week, month, you have to evaluate whether holding this. You really like the technology, support the CEO and the vision. Stock goes up another three times, you are sitting on a 10 bagger. Friends are telling you to get out now before it all goes up in smoke. Stock pull back 65% in another drawdown, people are predicting bankruptcy, "Just get out now, you've made 3 times your money which is amazing'. Technology keeps moving forward, stock goes up another 2 or 3 x. And so on and so on to today. Sitting on a 200+ bagger, same noise around taking money off the table, biggest bubble ever etc. I still have to make the same decision every week as to whether I believe in the vision or should get out. I think this is where 'some' skill lies. Could of course all go up in smoke tomorrow but as I've now I'm still holding.

I guess you could chalk that up to skill but none of the decision factors had anything to do with the value of the company.  It feels similar to HODL or crypto where you just believe in the underlying asset regardless of whether there's any rational intrinsic value underpinning it.  I guess there's some personal skill in not selling and holding on but it feels more like luck that the irrational value varied enough to bail you out. 

[TwoCitiesCapital]

9 hours ago, influx said:

Going back to Seth and the cash position at Baupost.

Don't you folks think its challenging to balance between the following:
1. the process that worked for a long time having high CAGR.
2. the evolving market structure over a relatively long period of time. I've been reading Michael Green for probably 5-6 or so years and I think he is mostly right. Einhorn started publicling citing his work in the last year or two, etc. We don't have to debate this here.
3. the need to adjust the process that worked (point 1) because of point 2.
a. the personal (or company) identity tied to the process that worked. I'll call it identity crisis (may not be the best word). I think Einhorn talked about this years ago (got divorced as well).
b. the decision to do deviate and do it in size (if feasible). I remember hearing about Dimitri Kofinas going all in with on shitcoins and similar with a very small % of his net worth. Doing that personally is one thing, doing that professionally and in size after one is Buffett or Klarman or Howard Marks (he is most credit though), is pretty much impossible, no?

The result is a high cash holding. Buffett has what a 3rd in cash/bills?

I think this is the struggle. And it ain't easy to balance as with many other things in life.
I think I am saying I feel for them LOL.

 

The other thing I'd add is that value investing has traditionally rewarded going AGAINST the herd and standing into the wind. 

 

So the tech stuff probably looked quite familiar  as a traditional play to avoid. And they'd have to not only do 180 on types of valuation metrics that they're using/companies they're investing in BUT they'd also have to be comfortable being long the most crowded trades for years on end by joining with consensus. 

 

Its tough. I owned Google for a bit but sold WAY to early. I acknowledge that mistake, but still can't come around to buying Tesla or Apple because they still don't make sense to me even if I acknowledge I've been wrong on them in the past. 

[Milu]

46 minutes ago, dwy000 said:

I guess you could chalk that up to skill but none of the decision factors had anything to do with the value of the company.  It feels similar to HODL or crypto where you just believe in the underlying asset regardless of whether there's any rational intrinsic value underpinning it.  I guess there's some personal skill in not selling and holding on but it feels more like luck that the irrational value varied enough to bail you out. 

The hard thing to do for traditional value investors is to calculate the value of something that has zero earnings or is losing money. Many spent years dismissing amazon because it lost money for essentially 10 years. It doesn't easily fit into a P/E multiple because there was no E. It still must have had some value at the time. I assume most people who invested could see the trends playing out and how amazon was beginning to dominate the retail space, could probably see all the money they were spending each month on packages, liked what they heard about from Jeff Bezos and his vision. Liked the optionality of having multiple other industries they could expand into (AWS, Satellites, Groceries etc). As I said previously I mostly invest in companies that do follow more traditional valuation metrics, but I think it's not the worst idea to put small portion into things you believe in that don't necessarily fit the mould. It could broaden an investor's toolkit, payoff in spades if it works out, and result in a small loss if it doesn't.

[thepupil]

4 minutes ago, Milu said:

and result in a small loss if it doesn't.

this is true at cost, but not true at market value, once successful. This is why it is so hard to hold on huge winners, as you have done. I couldn't do that. 

Edited Friday at 04:12 PM by thepupil

[Milu]

9 minutes ago, thepupil said:

this is true at cost, but not true at market value, once successful. This is why it is so hard to hold on huge winners, as you have done. I couldn't do that. 

Yes I suppose that's true. I've mentioned before that I did sell 20% in 2021. It's definitely challenging to hold on to the big winners, especially if they don't have the current fundamentals to back it up. Holding Meta is probably a lot easier for me, as they have continually growing earnings and a multiple that isn't crazy. I could just be one of those suckers who has drunk the Musk koolaid but I do genuinely believe they will solve self driving, and that Optimus does have the potential to be their biggest product of all time. But I also am open to the possibility of being wrong.

 

I find the die-hard Tesla or Bitcoin bulls a bit too overconfident in their beliefs as there are no guarantees in life so I try to be cautiously optimistic. I actually don't like talking about or defending a position too much as I like to remain flexible to change my mind at any point. 

[james22]

49 minutes ago, TwoCitiesCapital said:

The other thing I'd add is that value investing has traditionally rewarded going AGAINST the herd and standing into the wind. 

 

If the drunk at the party had been bragging about his Berkshire/Fairfax gains, I'd have been quicker into tech.

[villainx]

7 hours ago, Milu said:

Stock pull back 65% in another drawdown, people are predicting bankruptcy, "Just get out now, you've made 3 times your money which is amazing'.

 

I wonder if the "skill" is to add at these times?

[Gregmal]

Few things have cost investors more money than the OCD “need” to know or rationalize an exact valuation. Classic forest for the trees situation. Which is hilarious in the context of the fact that forward projections by nature are just guesses to begin with. So in its purest form, a lot of investors screw themselves by demanding something that’s not possible lol. Often times you just need to be directionally in the ballpark. 

[dwy000]

2 minutes ago, Gregmal said:

Few things have cost investors more money than the OCD “need” to know or rationalize an exact valuation. Classic forest for the trees situation. Which is hilarious in the context of the fact that forward projections by nature are just guesses to begin with. So in its purest form, a lot of investors screw themselves by demanding something that’s not possible lol. Often times you just need to be directionally in the ballpark. 

I don't think anyone's arguing the need for an exact, or even approximate valuation.  But if the same arguments are being made for holding at $100 and $400 (for Tesla), or $10,000 and $200,000 (for bitcoin) then valuation isn't even playing a role in the price.  It's just a backward rationalization.

[Gregmal]

22 minutes ago, dwy000 said:

I don't think anyone's arguing the need for an exact, or even approximate valuation.  But if the same arguments are being made for holding at $100 and $400 (for Tesla), or $10,000 and $200,000 (for bitcoin) then valuation isn't even playing a role in the price.  It's just a backward rationalization.

What Tesla and BTC have in common is that a lot of people have made up their minds that "theyre worthless" based on shoddy work thats fueled not by rationality, but by bias. So it doesnt matter what the price is, they keep making the same arguments, and as it continues to go against them, they look not in the mirror, but throw their hands up and blame the market, make the same excuses and make fun of the people whom are on the right side of the trade. Its pure ego.

 

If the reasons something is appreciating continue to exist, the asset will continue to appreciate, plain and simple. People literally did the same shit with Amazon for two decades before finally coming around post covid. They did the same for Netflix for 15 years. Same for Costco. If all one is doing is demanding a clear cut PE multiple to fit inside a box, many times theyre gonna be left in the dust cuz the market doesn't always work like that. And even then, with a turd that fits neatly into a PE multiple box, they get something like IBM and fuck it up. 

[cubsfan]

1 hour ago, Milu said:

The hard thing to do for traditional value investors is to calculate the value of something that has zero earnings or is losing money. Many spent years dismissing amazon because it lost money for essentially 10 years. It doesn't easily fit into a P/E multiple because there was no E. It still must have had some value at the time. I assume most people who invested could see the trends playing out and how amazon was beginning to dominate the retail space, could probably see all the money they were spending each month on packages, liked what they heard about from Jeff Bezos and his vision. Liked the optionality of having multiple other industries they could expand into (AWS, Satellites, Groceries etc). As I said previously I mostly invest in companies that do follow more traditional valuation metrics, but I think it's not the worst idea to put small portion into things you believe in that don't necessarily fit the mould. It could broaden an investor's toolkit, payoff in spades if it works out, and result in a small loss if it doesn't.

 

100%

[Sweet]

44 minutes ago, Gregmal said:

What Tesla and BTC have in common is that a lot of people have made up their minds that "theyre worthless" based on shoddy work thats fueled not by rationality, but by bias. So it doesnt matter what the price is, they keep making the same arguments, and as it continues to go against them, they look not in the mirror, but throw their hands up and blame the market, make the same excuses and make fun of the people whom are on the right side of the trade. Its pure ego.

 

If the reasons something is appreciating continue to exist, the asset will continue to appreciate, plain and simple. People literally did the same shit with Amazon for two decades before finally coming around post covid. They did the same for Netflix for 15 years. Same for Costco. If all one is doing is demanding a clear cut PE multiple to fit inside a box, many times theyre gonna be left in the dust cuz the market doesn't always work like that. And even then, with a turd that fits neatly into a PE multiple box, they get something like IBM and fuck it up. 

I agree with the principle of what you saying but I don’t think Bitcoin or even Tesla are much like Amazon.

 

Bitcoin in particular.  It could be 1 million or 1 dollar per coin and both would make sense because it’s what buyers are willing to pay.

 

Musk was roundly mocked for some of the shit he was saying at his recent call.  It’s always been a cultish stock so it’s no surprise the stock didn’t drop.

 

When these cult invests saying things like valuations doesn’t matter may be true right now and most of the time.  But when markets correct they their ports get wrecked.

 

[Gregmal]

2 minutes ago, Sweet said:

Bitcoin in particular.  It could be 1 million or 1 dollar per coin and both would make sense because it’s what buyers are willing to pay.

Sure if youre not paying attention to the drivers of what took it from $10k to $100K it will never make sense to you. The unsophisticated and arrogant explanation for why it went 10k-100k is "its a bubble/cult/whatever"...however if you identify the reasons...hint, things like increased adoption, general disdain and lack of trust of government tied currencies, etc...you can start assessing realistic future expectations and directionally get more comfortable with stuff. Same as Ive been saying forever with Costco...will it be bigger or smaller going forward? Do they have pricing power? Do people value their relationship with the company? Are there free options on new ventures or business lines? This stuff is fairly easy TBH. If we wanna talk about a cult, the biggest one Im aware of is the ones whom insist on easily defined cashflows and regularly tout Buffett. I dont worry about cults or non cults I just try to make money. Luck, skill, genius or stupidity, the profits dont discriminate. 

[Gregmal]

The greatest farce in the world is the notion that in order for something to have value, it needs to have a near term cashflow, and that cashflow needs to be easily arrived at. 
 

That's why for instance, when say Steve Ballmer paid $2b for the Clippers, you had the reactions you did, and guess what? All those super intelligent, educated hot takes were embarrassing in the context of “if you’re so smart how did you miss something so obvious?”. 

[73 Reds]

Just now, Gregmal said:

The greatest farce in the world is the notion that in order for something to have value, it needs to have a near term cashflow, and that cashflow needs to be easily arrived at. 
 

That's why for instance, when say Steve Ballmer paid $2b for the Clippers, you had the reactions you did, and guess what? All those super intelligent, educated hot takes were embarrassing in the context of “if you’re so smart how did you miss something so obvious?”. 

Very true, which explains lofty prices paid for many things that produce little or nothing at all.  I view BTC a bit differently, nothing extraordinary like a collectible, some utility, but (for me) the price is not commensurate with the any degree of utility I can envision.  Therefore, an easy pass.  That said, I'd have no problem with the set-it-and-forget-it (Rip Van Winkle) portfolio suggested by Vish Ram consisting of nearly equal parts VOO/QQQ and a little Crypto.

[dwy000]

8 minutes ago, Gregmal said:

The greatest farce in the world is the notion that in order for something to have value, it needs to have a near term cashflow, and that cashflow needs to be easily arrived at. 
 

That's why for instance, when say Steve Ballmer paid $2b for the Clippers, you had the reactions you did, and guess what? All those super intelligent, educated hot takes were embarrassing in the context of “if you’re so smart how did you miss something so obvious?”. 

I don't see a lot of people arguing that things need near term cash flow to be valuable. That undermines the entire venture capital industry as well as AI and anything where the upfront costs lead to long term value potential.  But it also doesn't mean it's a buy at any price whatsoever.  And the only thing worse than people making granular analysis about the minutae of next years cash flow is people looking at the price today and twisting themselves into knots to justify why that price is rational and it will be worth more down the road.  Cathy Woods has made a career off of this.  And when it works they claim it was genius not just riding momentum.  When it doesn't work they claim it's an even better bargain now. 

 

Hey if you can make money riding momentum, more power to you! Richard Dennis and the like made fortunes that way. But if you can't rationally explain the reason you think it's a buy at today's price then you're not investing, your gambling.

 

Sports teams are a different animal.  They're ego purchases so you're not valuing a team independently, youre valuing how badly a really, really rich person wants a trophy asset. 

[Gregmal]

12 minutes ago, 73 Reds said:

Very true, which explains lofty prices paid for many things that produce little or nothing at all.  I view BTC a bit differently, nothing extraordinary like a collectible, some utility, but (for me) the price is not commensurate with the any degree of utility I can envision.  Therefore, an easy pass.  That said, I'd have no problem with the set-it-and-forget-it (Rip Van Winkle) portfolio suggested by Vish Ram consisting of nearly equal parts VOO/QQQ and a little Crypto.

Exactly, this is why the no called strikes aspect is important. Don’t like it? Don’t understand it? Great, move on! For some reason a lot of people can’t move on. 
 

If investing was as simple as who could read the most books or apply the most plain vanilla doctrine there would be no point. Qualitative is 90% of the game. 

[Sweet]

30 minutes ago, Gregmal said:

Sure if youre not paying attention to the drivers of what took it from $10k to $100K it will never make sense to you. The unsophisticated and arrogant explanation for why it went 10k-100k is "its a bubble/cult/whatever"...however if you identify the reasons...hint, things like increased adoption, general disdain and lack of trust of government tied currencies, etc...you can start assessing realistic future expectations and directionally get more comfortable with stuff. Same as Ive been saying forever with Costco...will it be bigger or smaller going forward? Do they have pricing power? Do people value their relationship with the company? Are there free options on new ventures or business lines? This stuff is fairly easy TBH. If we wanna talk about a cult, the biggest one Im aware of is the ones whom insist on easily defined cashflows and regularly tout Buffett. I dont worry about cults or non cults I just try to make money. Luck, skill, genius or stupidity, the profits dont discriminate. 

The low P/E ‘value investor’ ‘contrarian’ cult is a thing too no doubt, it’s not a bigger cult than cryptocurrency though.

 

I don’t know why some value investors rule out high PE stocks and claim it’s not value investing just because they can’t understand how growth warrants a much higher PE.

 

The lack of trust of government currency, banking system, and a kind of anonymity - it has a utility but it doesn’t have a number.  These qualities can be found in nearly any serious crypto.  The number it is ‘worth’ can be a million dollars or one dollar.

 

Regarding Costco, will the company be bigger in ten years - absolutely.  Will the stock price higher, at 50x who knows.

[Sweet]

23 minutes ago, Gregmal said:

The greatest farce in the world is the notion that in order for something to have value, it needs to have a near term cashflow, and that cashflow needs to be easily arrived at. 
 

That's why for instance, when say Steve Ballmer paid $2b for the Clippers, you had the reactions you did, and guess what? All those super intelligent, educated hot takes were embarrassing in the context of “if you’re so smart how did you miss something so obvious?”. 

Literally nobody says this shit Greg.  What are you talking about?

[Gregmal]

2 minutes ago, dwy000 said:

Sports teams are a different animal.  They're ego purchases so you're not valuing a team independently, youre valuing how badly a really, really rich person wants a trophy asset. 

Yea, but in a way it’s as simple as looking at the asset, looking at the wealth disparity in society, and answering simple questions like will it continue and will it be worth more, or less in the future. No complex business school excel models needed. 

[Gregmal]

1 minute ago, Sweet said:

Literally nobody says this shit Greg.  What are you talking about?

Uhm, the thread…lol. The topics of stuff ranging from Bitcoin and Tesla to Amazon, Costco, Netflix…the gazillion cases made over the years about their valuations, most of which were predicated on “how much money they’ll earn next year”.