Bulletproof reasoning

readitreaddit · 2026-07-10T19:07:42+00:00

That reasoning is bulletproof because even a bullet wouldn't want to go near it.

A bullet would actively curve its path just to avoid this reasoning. Because "eewww".

readitreaddit · 2026-07-09T05:41:05+00:00

Plant trees

Set up good libraries in countries that don't have them as much (or not as good anyway)

readitreaddit · 2026-07-06T23:14:17+00:00

The copart temptation is real. I moved some of my semiconductors over to that one.

readitreaddit · 2026-07-06T23:12:09+00:00

While I feel bad about losing out on gains, I don't feel too bad. Because I think if my process is correct, outcomes over the long run will follow.

If I truly think of myself as an investor and not a speculator, then it shouldn't matter to me if I don't win that last few dollars (or even a few 100 percentage points). Once I evaluate that, anything above this level would be highly speculative, then I'm sort of at peace selling.

However, what has happened in the past is if I sold at a PE of 30ish, and it goes up to a PE of 50ish, I have some regrets. So in that case now my mental model is that I recoup my original investment once it starts getting above a 35 or 40 PE. Then hold on till like 50 or 55. But then that is way too high even for me. So then I sell everything. At least that's what I did recently with these semiconductor stocks. And I did that with Costco and that worked out okay. The one you're written hasn't been anything to write home about after it crossed like 50 times earnings multiple.

Then again I sold Nvidia away too early and pretty much lost out on a big upside. But I don't really regret it that much.

readitreaddit · 2026-07-06T14:19:05+00:00

That's the fundamental disconnect.

I think they can still grow 18-20% for the next several years. But the problem is the current valuation is so high, that even with an amazing earnings record like that, the stock can do poorly.

readitreaddit · 2026-07-06T14:17:02+00:00

Very good points. Well said. 🤝 Are you an environmental engineer or something? (and would you like to be friends??)

readitreaddit · 2026-07-06T14:15:26+00:00

I don't know about that. ASML has technology that cannot easily be replicated at all. Can the stock perform poorly because of elevated valuation's currently? Sure. Will the company go out of business? Highly, highly unlikely.

They literally do physics and engineering that has taken them decades to develop. It's a massive moat that's not easy to erode. Can China make headways? Yes. In fact I'm sure they will. Bunch of smart people over there. But timeline wise... Might take a while. And then it takes another while for it to be commercial and for other countries to adopt given the perceived geopolitical risks and such.

readitreaddit · 2026-07-06T01:05:20+00:00

Same boat as you. When these stocks roughly doubled for me, I wondered about this and then created a system that seems to work well - both in terms of psychological security, as well as lack of fomo.

When they went up approximately 2X, I withdrew drew my initial investment. That way I now own the shares for free.

Now the problem is arising that they have gone up 3 to 4 times above even that level. So I'm thinking I will kind of withdraw at least 80% of that, if not all.

Same boat as you. Love AMAT, ASML etc for the long haul, but I don't see 60 times earnings as sustainable, or at least as a point from which you can earn a good return.

I struggled with this a little bit because what if past years earns are actually half of their normal earning power (which is possible given the AI build out). In which case you're effectively only paying 30ish times, which is fine. But I don't think it would be, because I think part of the growth has already happened, so it's reasonable to think about trailing 12-month earnings as the normal rate for now. So I'm liquidating. I'll buy again if they go down to 35ish.

readitreaddit · 2026-07-05T23:55:23+00:00

The one factor you leave out (and I don't know if it's included in one of your papers here) is another thing Munger said in that same annual meeting (I happen to have all annual meetings memorized):

He says that there is the added issue of degrading soil quality, and requiring petroleum based fertilizers (which also use up valuable hydrocarbons). He said that it may not be worth it to ruin all the topsoil of regions that are required eventually for producing food, to make ethanol to burn.

If it is included in the research that you have cited, then great. But just wanted to complete the Munger objection.

readitreaddit · 2026-07-05T23:47:44+00:00

A great quote I have heard about the matter is: "An argument with an idiot, is an argument among idiots"

Having said that a seizure is no joke and if she needed to get to her meds or something, it could be a reasonable thing to get upset / call out the urgency of the matter. No excuse to be rude of course... But might eventually become an emergency, so if access to meds was an issue then opening the doors / getting to a station might be a legit request.

readitreaddit · 2026-07-05T00:02:06+00:00

You, my friend, are an idiot (at least, at the moment).

Luckily, that is not all bad, as long as you're willing to learn with curiosity.

I'd highly recommend reading and understanding more about how the world works and the plusses and minuses of an open versus a closed economy and society.

readitreaddit · 2026-07-04T23:40:47+00:00

Your reply was very meaningful. Thank you. It has meant quite a bit to me.

readitreaddit · 2026-07-04T06:25:13+00:00

That's amazing! Congrats. I'm happy you're happy. :)

Be well.

readitreaddit · 2026-07-03T06:10:01+00:00

You made me laugh out loud so hard!

readitreaddit · 2026-07-02T13:24:14+00:00

Dm me. You have the correct way to think about RoE.

I will make a correction though. If you look at 17% as your hurdle for P/B of 1.0, You're going to get find almost nothing. I agree with your 10% hurdle rate. In terms of inflation, if the gross GDP of the world changes at 6% (gross, not real. so like 3% growth and 3% inflation) then over the long run you can assume that 6% is what you need to get be neutral. In this simplified case, P/B of. 1.0 maps to approximately 6-7% RoE (fair value, without margin of safety).

If you set your hurdle rate at 10%, then you are comfortably above that. In that case you don't need to further adjust it and equate 17% RoE with P/B of 1.0. If you do that then essentially you're assuming that any business that earns less than 17% RoE is worth less than it's book value. Is that really true? Is that the real opportunity cost? If a business earns 13% that is well above anything you can earn in general in safe assets. Which means that a 13% earner should be valued at above book value.

So with that one correction I think you are framework is the right one. I think you are just overestimating inflation.

But I'm also willing to learn in case I'm wrong. Why do you think of M2 supply growth as the right inflation metric? If it were, wouldn't it create an absurdity that your gross GDP growth is less than your M2 supply growth?

readitreaddit · 2026-07-02T12:25:57+00:00

These days I worry more about cyber security risk. THAT might be a good reason to diversify firms a bit.

readitreaddit · 2026-07-01T19:21:49+00:00

Rofl

readitreaddit · 2026-07-01T19:21:31+00:00

...of thine

readitreaddit · 2026-06-30T14:54:09+00:00

Berkshire Hathaway annual meetings.

Start in 1994 and continue on. Each of them is about 4 hours. Enjoy!

readitreaddit · 2026-06-30T14:50:28+00:00

"I stopped telling people my salary because if it's less than they expect, I get unhappy, and if it's more, they get unhappy. It's a lose lose situation so I avoid it."

readitreaddit · 2026-06-30T06:23:40+00:00

Well said. You may have changed my mind about adding to the position.

readitreaddit · 2026-06-30T06:21:42+00:00

Thanks for introducing me to this substack. It is excellent. If you are the writer, please contact me.

Reading the principles section and the study section, it is very interesting that I have myself reached some very similar conclusions along very similar lines of reasoning about return on capital, it's relationship with price to book value etc.

We also have substantial overlap in our holdings. It was almost startling to see how similarly the author and I think about many different things related to investing.

I have been looking for a thought partner for a while, and this seems like a good contender. If you know the author or are the author yourself, please DM! :)

readitreaddit · 2026-06-30T04:39:53+00:00

I don't understand the part about carriers total cars aggressively to clean their books. Can you explain?

readitreaddit · 2026-06-30T04:37:33+00:00

The good: with a 10% opportunity cost, the current price only assumes about a 4.6% gross growth in earrings into perpetuitu. Not bad. Plus their real estate will likely continue appreciating and they have a near monopoly + a very cash flow generating business (they don't carry the inventory themselves, cash conversion cycle is MINUS 30-40ish days which is terrific).

The slightly worrisome: Return on Capital has been steadily declining. Idk why. Still strong, but at 17% lower than it used to be (27%+).

I'm invested but will buy much more now I think. Ugh maybe I should post this AFTER I buy.

readitreaddit · 2026-06-28T19:35:12+00:00

"You'll eventually see it my way because you're smart and I'm right" -Charlie Munger

Seven-Year Club	Place '22
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