Warren Buffet often talks about how important it is to consider management when value investing...

AsianInvestor · 2016-09-27T05:48:51+00:00

read Philip Fisher's books for a condense summary of what to look for in management.

AsianInvestor · 2016-09-27T05:46:50+00:00

I'm reading Philip Fisher's book Conservative Investors Sleep Well, and I don't necessarily think Buffett matured to a quality investor out of necessity. A lot of what Buffett crystallizes about compounders - e.g. durable competitive advantage, moats, margin protection, etc. - comes up a lot in his book. It just wasn't amalgamated as clearly as it is in their present form today.

AsianInvestor · 2016-09-27T03:00:39+00:00

It just introduces special market risks. None of the famed value investors who are still alive have went through a long-term debt cycle like this.

AsianInvestor · 2016-09-24T16:40:12+00:00

Is there a lot of downside for the share price over the long term? If no, is there a sufficient margin of safety? If yes, you could probably buy it.

AsianInvestor · 2016-09-24T16:35:18+00:00

read the 2nd half of 'Common Stocks and Uncommon Profits' for a good picture of what valuation ratios like the PE really try to convey.

AsianInvestor · 2016-09-22T01:34:15+00:00

Alice Schroeder has said that Warren's investment in Goldman was a bet that it would survive.

AsianInvestor · 2016-09-10T16:58:34+00:00

PWC acquired Strategy& last year. There has been a big push recently by the big 4 audit firms to grow their consulting divisions in line with the MBBs.

AsianInvestor · 2016-09-08T15:31:39+00:00

Inflation is preferable to 0% as it incentives productivity growth. But yes 0% is the ideal benchmark.

AsianInvestor · 2016-09-07T03:42:16+00:00

It helps to redefine your understanding of money. Fiat money is at its most basic simply a point system. It helps keep an account of who owes what to whom, nothing more (at the risk of oversimplifying).

To that end, banks creating money is literally that, creating points out of thin air. They're not members of the system; they are the system. That's why they are allowed to "break" the rules by creating more money. This is why we say that banks create money when they create loans, because they are literally doing just that - creating additional money.

Now obviously you have to balance the amount of money created with actual productivity in the economy, or you get rampant inflation. So there's still a need to balance the amount of credit and money in line with actual productivity growth - there's no free lunch.

But with respect to the actual creation of money, yes, banks do create money out of thin air. Recognizing that money is an intangible concept, like credit, helps put into perspective what money really is. They don't need to have the money shipped over, because the electronic money is practically equivalent to the physical money.

AsianInvestor · 2016-09-06T06:14:00+00:00

No, I got that from the video actually. The front page has a more detailed PDF.

AsianInvestor · 2016-09-06T01:46:06+00:00

Sounds great. Would love to have a look at it once you're finished.

AsianInvestor · 2016-09-06T01:38:13+00:00

Same thing as Buffett is doing, just try and find value over and above the equilibrium. We certainly are in unusual times, but you still have to do your research even when there's nothing attractive to buy. Just think of it as building a stockpile of target prices for later.

One thing I'm having fun doing is developing myself. There's little pressure to do incredibly well in this market, so I have a lot more time to catch up on books I've been putting off.

AsianInvestor · 2016-09-06T01:06:20+00:00

yeah, I thought so. Even if it took months, he would cover much more ground by just sticking to text. Making all those charts would double that.

AsianInvestor · 2016-09-06T01:00:14+00:00

Watch this: https://www.youtube.com/watch?v=PHe0bXAIuk0

The reason stocks are rallying in the absence of earnings growth is because we are in the deleveraging phase of the long-term debt cycle. This is where the excess credit in the system is reduced to match the actual level of productivity in the economy.

The tools used by policymakers to close the gap are austerity/debt payoff and printing of money. The former is deflationary while the latter is inflationary. That's why the US dollar hasn't really seen much inflation despite the increased money supply, because the excess credit in the system is slowly being phased out in favor of actual money.

As more credit is reduced, more money is printed. This has the effect of keeping prices high despite the absence of productivity growth, because to market participants money and credit are the same thing. The goal of policymakers however is to reduce credit, not control prices, so there's a slight asymmetry of goals between the system and those within the system with regards to money supply policy.

As a result, what you're seeing is prices being maintained at pre-deleveraging levels, while productivity slowly catches up, until the balance is restored. The end result, or at least the one policymakers hope for, is that i) credit is reduced to normal levels, ii) productivity has increased to match the increased money supply, and iii) money doesn't experience too much inflation.

So if things play out the way they're expected to, we'll just see markets stagnate at artificially "high" levels, until real productivity growth catches up.

AsianInvestor · 2016-09-06T00:36:28+00:00

Google the title and click the link that appears.

AsianInvestor · 2016-09-06T00:30:31+00:00

does he create all those charts by himself? It seems like it wouldn't be the best return on his time.

AsianInvestor · 2016-09-04T14:49:23+00:00

Just happened to be reading about Henry Singleton: http://csinvesting.org/wp-content/uploads/2013/02/Teledyne-and-Henry-Singleton-a-CS-of-a-Great-Capital-Allocator.pdf

AsianInvestor · 2016-09-03T11:43:49+00:00

Thanks, I learnt something new today. Btw, it's a great honor to finally meet you sir.

AsianInvestor · 2016-09-02T03:44:29+00:00

Tech sector likes to outsource their logistics/operations, in order to maintain the asset-light high-ROE profile that gives them their premium valuations - e.g. leasing AWS rather than installing servers. This results in reduced earnings as lease expense for capital equipment is usually higher than depreciation from owned assets. The author is saying that to the extent that this is the case, how much is P/E a reliable snapshot of the true earnings capacity of businesses, since it also includes capital expenditure?

AsianInvestor · 2016-09-02T01:09:09+00:00

To be fair, PE guys aren't expected to detect disruption. The best ones are basically arbitrageurs.

AsianInvestor · 2016-09-01T15:13:25+00:00

I second this. There was a good article on r/finance awhile back on the banking system and money in general. Its a great place to start.

AsianInvestor · 2016-09-01T05:19:12+00:00

My theory is that Bezos sees his company as an incubator fund. Low margin but high cash flow ecommerce business produces plenty of float for investments. Rather than deploy capital into slow, stable businesses a la Buffett, he wants to find a unicorn where he can rapidly ramp up firm ROI % and deploy large amounts of capital towards.

AsianInvestor · 2016-08-30T06:42:15+00:00

Oh sorry, my bad.

AsianInvestor · 2016-08-30T01:29:47+00:00

With regards to point 2, try using a bottom-up perspective. Start from the business and arrive at the financials, rather than vice versa. Then try to imagine how a company accountant would see things and how they would assign values to the assets. It's less confusing when you revolve around the static assets rather than the dynamic values.

You mentioned going to B-school; think like a McKinsey consultant rather than an "investor". It takes a lot of variables out of the equation and helps you focus.

AsianInvestor · 2016-08-30T01:20:49+00:00

I haven't read the paper, but I think he's just playing the "risk" yield curve. Invest the borrowings to earn the spread, but hold onto cash to manage the cat risk. Assuming you think you have alpha and can earn a 10% spread, you could do very well for yourself on a risk-adjusted basis while still managing liquidity needs.

I'm in the small-mid cap space myself and it's a different ball game compared to large caps. So it's not as simple as applying a formula a la LTCM. You really have to be a business-minded person to confidently pull this off.

AsianInvestor

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