A Pirate Looks At Fifty by Jimmy Buffett

How many of Jimmy Buffett’s Big Eight (now the Big Ten) could you name? A few weeks ago I could’ve gotten two for sure, maybe three, I’m no Parrothead.  When I thought of “Jimmy Buffett,” I thought of MW’s story of listening to his greatest hits on cassette on their way to family vacation, with his mom reaching over to frantically fast forward whenever “Why Don’t We Get Drunk and Screw” came around.

In Mile Marker Zero I loved the origin story of Jimmy Buffett: down on his luck in Nashville, goes to Miami for a gig, only to find either he or the club owner got the dates wrong.  Stuck, he calls his friend Jerry Jeff Walker, whose girlfriend suggests they take the unexpected week and go down to Key West.  When Jimmy Buffett sees the lifestyle there he knows he’s in the right place and never turns back.

The Margaritaville retirement community was profiled in The New Yorker.  How many of the singer-songwriters of the ’70s have a retirement community based on their worldview? John Prine? Kris Kristofferson? Only one. At the Berkshire Hathaway annual meeting they sold a Jimmy Buffett boat. The man is a phenomenon. Why?

On a warm spring morning driving from Chapel HIll to Wilmington, NC in a rented Ford Escape armed with Sirius Satellite XM, I put on Parrothead Radio.  They were playing a live concert from March 2001.  “Before 9/11,” I thought.  The contagious fun of this man came through, and the joy of the audience. It’s strange since, can you even really picture Jimmy Buffett?  You can picture what kind of shirt he wears.  

He’s in that kinda shirt on the cover of the mass market paperback of A Pirate Looks at Fifty. On a sunny beach obviously.  Behind him is an enormous Albatross seaplane, the Hemisphere II. 

This is a travel book, and a great one.  I’d rank it up there with Bruce Chatwin’s The Songlines, which it references a few times.  I bet more of A Pirate Looks at Fifty is true.  I saved this book to read on the beach in Malibu – perfect setting. The book, leisurely, describes a trip around the Caribbean Sea to commemorate his fiftieth birthday, with stops in Grand Cayman, Costa Rica, Cartagena, St. Barts.  A treasure map opens the book, you can follow the voyage.  Along the way, Buffett tells of his rise and his adventures.  He desired to be a Serious Southern Writer, but that wasn’t him.  As a boy he was struck by a parade at Mobile Mardi Gras of Folly chasing Death.  That was him.  Catholicism plays a bigger role than you may suspect, with St. Louis Cathedral in New Orleans his home church, but plenty of bad behavior to balance the ledger.  A friend at Auburn teaches him the D and C chords on a guitar. He busks on the corner of Chartres and Conti in New Orleans.

My talent came in working an audience.

Buffett begins the book with four hundred words summing up his life to present. An excerpt:

I signed a record deal, got married, moved to Nashville, had my guitars stolen, bought a Mercedes, worked at Billboard magazine, put out my first album, went broke, met Jerry Jeff Walker, wrecked the Mercedes, got divorced, and moved to Key West. I sang and worked on a fishing boat, went totally crazy, did a lot of dope, met the right girl, made another record, had a hit, bought a bought, and sailed away to the Caribbean.

Having brought us up to speed, he gets going. This is a memoir more of flying and fishing than of music. Buffett is a pilot, and recounts many adventures in the air, usually flying somewhere to fish or surf.

In looking back, I see there wasn’t that much difference between Jimi Hendrix playing “The Star-Spangled Banner at dawn at Woodstock and Jimmy Stewart playing Charles Lindbergh in “The Spirit of St. Louis.”

Memorable meals are described: cucumber and tomato sandwiches at the brassiere on the Trocadero in Paris for example.  And bars: Buck Forty Nine, New Orleans; Trade Winds, St. Augustine; The Hub Pub Club, Boone NC; Big Pine Inn; The Hangout, Gulf Shores; The Vapors, Biloxi; Le Select, St. Barts. 

Of a visit to paintings of Winslow Homer and Frederick Edward Church:

I can’t put the feeling into words; the closest I can come is to say that the sights and sounds of such things may enter the body through the senses but they find their way to the heart, and that is what art is really about.  

Buffett says:

Anyone bellying up to a bar with a few shots of tequila swimming around the bloodstream can tell a story. The challenge is to wake up the next day and carve through the hangover minefield and a million other excuses and be able to cohesively get it down on paper.

Mission accomplished.


Warren Buffett on horse race wagering

And when the Buffett family moved to Washington, D.C., Warren just had one request for his dad:

“When we got to Washington, I said, ‘Pop, there’s just one thing I want. I want you to ask the Library of Congress for every book they have on horse handicapping.’ And my dad said, ‘Well, don’t you think they’re going to think it’s a little strange if the first thing a new Congressman asks for is all the books on horse handicapping?’”

But Buffett reminded his father of the help he gave him during the winning campaign, and pledged to be there for him again during his re-election. So Howard got Warren hundreds of books about handicapping horses.

“Then what I would do is read all these books. I sent away to a place in Chicago on North Clark Street where you could get old racing forms, months of them, for very little. They were old, so who wanted them? I would go through them using my handicapping techniques to handicap one day and see the next day how it worked out. I ran tests of my handicapping ability – day after day – all these different systems I had in mind.”

I was looking for someone who’d compiled up every reference Buffett and Munger made to horse race wagering, and I found it here, “DRF Legend Steven Crist on Value Investing and Horse Betting,” by Dillon Jacobs on Vintage Value. (Note that much of that quotes from The Snowball.)

Buffet on Value and DRF

Buffett noted that a bookie actually took action inside Washington’s Old House Office Building.“You could go to the elevator shaft and yell, ‘Sammy!’ or something like that and this kid would come up and take bets.”

Even Buffett himself did some bookmaking for guys who wanted to get down on the big races like the Preakness Stakes. “That’s the end of the game I liked, the 15 percent take with no risk,” Buffett said.

Buffett got along well with his high school golf coach, Bob Dwyer, and the two frequently rode the Chesapeake & Ohio railroad together from Silverspring, MD to Charles Town racetrack in West Virginia. Dwyer taught Buffett how to better understand the Daily Racing Form.“I’d get the Daily Racing Form ahead of time and figure out the probability of each horse winning the race. Then I would compare those percentages to the odds,” said Buffett, who bet from $6 to $10 to win. “Sometimes you would find a horse where the odds were way, way off from the actual probability. You figure the horse has a 10 percent chance of winning, but it’s going off at 15-to-1.”

That last part sounds a lot like Crist on Value, doesn’t it?

This method, looking for overlays, is at the heart of every serious book about horse wagering.

Going broke one day at Charles Town

One day, Buffett went to Charles Town by himself. He lost the first race and his performance went from bad to worse until he was down $175. Feeling depressed, he went to an ice cream shop and bought himself a sundae with the last of his money.

While eating, Buffett thought to himself that he had just lost more money than he made in a week.“And I’d done it for dumb reasons. You’re not supposed to bet every race. I’d committed the worst sin, which is that you get behind and you think you’ve got to break even that day. The first rule is that nobody goes home after the first race, and the second rule is that you don’t have to make it back the way you lost it. That is so fundamental.”

This was an important lesson that definitely influence Buffett’s investing later in life. You’re not supposed to be every race. Instead, just wait for the right pitch.

What Buffett and Munger both discovered is that making money in the stock market is much, much easier than making money at horse betting. For one thing, there’s no 14-25% track takeout. But it’s interesting how both markets teach similar lessons.


Buffett and Munger speak: Berkshire Hathaway 2021 oddities and highlights

Augy18400 for wikipedia

I always feel like I’m getting both nutrition and entertainment when I read the Berkshire Hathaway annual meeting transcript, found here at Rev.com

Asked about the morality of owning an oil and gas company like Chevron, Charlie Munger poses and then answers a strange hypothetical:

You can imagine two things. A young man marries into your family, he’s an English professor at, say, Swarthmore, or he works for Chevron. Which would you pick? Sight unseen? I want to admit, I’d take the guy from Chevron. Yeah.

Did not know this about the origin of the rear view mirror:

Warren Buffett: (01:35:54)
Maybe that’s why they called it Marmon. And that we’re proud of the fact that the company in 1911 named one of the first Indianapolis 500. It also was the company that invented the rear view mirror. I’m not sure whether that was a big contribution to society. And certainly around your household rear view mirror, you don’t want to emphasize too much. But they, the car that was entered in Indianapolis 500, the guy who normally sat next to the driver and looked backwards to tell what the competitors were doing, he was sick. So they invented the rear view mirror. So let’s just assume that you had decided that autos were this incredible thing. And someday there’d be an Indianapolis 500 and someday they’d have rearview mirrors on cars. And someday 290 million cars would be buzzing around the United States or autos or trucks there.

On BNSF railroad:

15% of the interstate goods move on our railroad

Competition for BNSF, and for Geico:

This question comes from Glen Greenberg, it’s on the profitability of GEICO and BNSF. He said, “Why do these companies operate at meaningfully lower profit margins than their main competitors, Progressive and Union Pacific? Can we expect current managements to at least achieve parity?

Warren Buffett: (02:33:25)
Was it GEICO and-

Becky: (02:33:27)
BNSF.

Warren Buffett: (02:33:28)
Oh, actually, if you look at the first quarter figures, you’ll see that the Berkshire Hathaway/Union Pacific comparisons has gotten quite better. Katie Farmer’s doing an incredible job at BNSF, and it’d be an interesting question whether five years from now or 10 years from now, BNSF or Union Pacific has the higher earnings. We’ve had higher earnings in the past, Union Pacific passed us. The first quarter, you can look at and they think they’ve got a slightly better franchise. We think we’ve got a slightly better franchise. We know we’re larger than Union Pacific, we will do more business than they do. And we should make a little more money than they do, but we haven’t in the last few years. But it’s quite a railroad, I feel very good about that.

 And it’s a very interesting business, both Progressive and GEICO were started in the ’30s. I believe I’m right about Progressive on that, and we were started in ’36. We have had the better product for a long, long time, I mean, in terms of cost. And here we are 80, 85 years later, in our case, and we have about 13% or so of the market, whatever it may be, and Progressive as just a slight bit less. So the two of us have 25% of the market, roughly, in this huge market, after 80 something years of having a better product. So it’s a very slow changing, competitive situation, but Progressive has done a very, very good job recently. We’ve done a very, very good job over the years, and we’re doing a good job now, but we have made some very significant improvements.

Is Flo just more appealing than the Geico Gecko? Ajit Jain doesn’t think so:

Progressive has certainly done better, but when it comes to branding, GEICO is, I think, miles, excuse me, ahead of Progressive. And in terms of managing expenses as well, I think GEICO does a much better job than anyone else in the industry.

On interest rates:

I mean, interest rates, basically, are to the value of assets, what gravity is to matter, essentially. …

I mean, if I could reduce gravity, it’s pull by about 80%, I mean, I’d be in the Tokyo Olympics jumping. And essentially, if interest rates were 10%, valuations are much higher. So you’ve had this incredible change in the valuation of everything that produces money, because the risk-free rate produces, really short enough right now, nothing. It’s very interesting. I brought this book along, because for 25 or more years, Paul Samuelson’s book was the definitive book on economics. It was taught in every school and Paul was… he was the first Nobel a prize winner. It’s sort of a cousin to the Nobel prize, they started giving it in economics, I think, in the late ’60s, he was the first winner from the United States, Paul Samuelson. Amazingly enough, the second winner was Ken Arrow, and both of them are the uncles of Larry Summers. Larry Summers had the first two winners as uncles.

Weird, did not know that. Buffett goes on:

But if present rates were destined to be appropriate, if the 10 years should really be at the price it is, those companies that the fellow mentioned in this question, they’re a bargain. I mean, they have the ability to deliver cash at a rate that’s, if you discounted back and you’re discounting at present interest rates, stocks are very, very cheap. Now, the question is what interest rates do over time. But there’s a view of what interest rates will be based in the yield curve out to 30 years and so on.


It’s a fascinating time. We’ve never really seen what shoveling money in on the basis that we’re doing it on a fiscal basis, while following a monetary policy of something close to zero interest rates, and it is enormously pleasant. But in economics, there’s one thing always to remember, you can never do one thing, you always have to say, “And then what?”

Buffett goes on to invoke the St. Peterburg paradox.

On, basically, what’s cool about the stock market:

we’ve got the greatest markets the world could ever imagine. I mean, imagine being able to own parts of the biggest businesses in the world and putting billions of dollars in them and take it out two days later. I mean, compared to farms or apartment houses or office buildings, where it takes months to close a deal, the markets offer a chance to participate in earning assets on a basis that’s very, very low cost and instantaneous, huge, all kinds of good things, but it makes its real money if they can get the gamblers to come in because they provide more action and they’re willing to pay silly or fees and all kinds of things.

On the market as a casino:

Well, the stock market, we’ve had a lot of people in the casino in the last year. You have millions and billions of people who’ve set up accounts where they day trade, where they’re selling… Put some calls, where they, I would say that you had the greatest increase in the number of gamblers essentially. And there’s nothing wrong with gambling and they got better odds than they’ve got if they play the state lottery, but they have cash in their pocket. They’ve had action. And they actually don’t have a lot of good results. And if they just bought stocks, they do fine and held them.


But the gambling impulse is very strong in people worldwide, and occasionally it gets an enormous shove and conditions lead this place where more people are entering the casino than are leaving every day, and that creates its own reality for a while. And nobody tells you when the clock is going to strike 12:00, and it all turns to pumpkins and mice. But when the competition is playing with other people’s money, or if they’re playing foolishly with their own money, but the big stuff is done with other people’s money, they’re going to beat us. I mean, we’re not… that’s a different game and they’ve got a lot of money, so we’re not going to have much luck on acquisitions while this sort of a period continues.

Charlie Munger saying Bernie Sanders “has won,” but he didn’t mean it in a complimentary way:

MUNGER: And I think one consequence of the present situation is that Bernie Sanders has basically won. And that’s because with the, everything boomed up so high and interest rates, so low what’s going to happen is the millennial generation is going to have a hell of a time getting rich compared to our generation. And so the difference between the rich and the poor and the generation that’s rising is going to be a lot less. So Bernie has won. He did it by accident, but he won.

Charlie is asked, given high tax rates, what keeps him in California?

MUNGER: Well, that’s a very interesting question. I frequently say that I wouldn’t move across the street to save my children 500 million in taxes and stuff. So I have that, that’s my personal view of the subject, but I do think it is stupid for states to drive out their wealthiest citizens, the old people that don’t commit any crimes, they donate to the local charity. Who in the hell in their right mind would drive out the rich people? I mean, Florida and places like that are very shrewd and places like California are being very stupid. It’s contrary to the interest of the state.

I love the dodge here on a question about Bitcoin:

Yeah, I knew there’d be a question on Bitcoin. I thought to myself, “Well, I’ve watched these politicians dodge questions all the time.” I always find it kind of disgusting when they do it. But the truth is, I’m going to dodge that question because we’ve probably got hundreds of thousands of people watching this that own Bitcoin, and we’ve got two people that are short. We’ve got a choice of making 400,000 people mad at us and unhappy and/or making two people happy. That’s just a dumb equation. I thought about it. We had a governor one time in Nebraska, a long time ago. He would get a tough question, what do you think about property taxes or what should we do about schools? He’d look right at the person, and he’d say, “I’m all right on that one,” and he’d just walk off. Well, I’m all right on that one and maybe we’ll see how Charlie is.

A quality of a great business:

Well, we’ve always known that the green business is the one that takes very little capital and grows a lot, and Apple and Google and Microsoft and Facebook are terrific examples of that. I mean, Apple has $ 37 billion in property, plant, equipment. Berkshire has 170 billion or something like that, and they’re going to make a lot more money than we do. They’re in better business. It’s a much better business than we have, and Microsoft’s business is a way better business than we have. Google’s business is a way better business.

I thought this was funny. The question was re: Robinhood.

But they have attracted, maybe set out to attract, but they have attracted, I think I read where 12 or 13% of their casino participants were dealing in puts and calls. I looked up on Apple, the number of seven day calls and 14 day calls outstanding. I’m sure a lot of that is coming through Robinhood and that’s a bunch of people writing… They’re gambling on the price of Apple over the next seven days or 14 days. There’s nothing illegal about it. There’s nothing immoral. But I don’t think you would build a society around people doing it. If a group of us landed on a desert island, we knew that we’d never be rescued, and I was one of the group and I said, “Well, I’ll set up the exchange over and I’ll trade our corn futures and everything around it.” I think the degree to which a very rich society can reward people who know how to take advantage essentially of the gambling instincts of, not only American public, worldwide public, it’s not the most admirable part of the accomplishment. But I think what America has accomplished is pretty admirable overall. And I think actually, American corporations have turned out to be a wonderful place for people to put their money and save, but they also make terrific gambling chips.

Odd anecdote from Warren, Munger is talking about state lotteries (he doesn’t approve):

Charlie Munger: (04:40:03)
The states in America, replaced the mafia as the proprietor of the numbers game. That’s what happened.

Warren Buffett: (04:40:03)
Yep.

Charlie Munger: (04:40:03)
They pushed the mafia aside and said, “That’s our business, not yours.” Doesn’t make me proud of my government.

Warren Buffett: (04:40:03)
When I was a kid, my dad was in Congress, they had a numbers runner in the house office building, actually.

On the potential CP/KSU railway merger, which would strengthen a rival to Berkshire’s own BNSF:

In terms of the price that’s being paid, like I say, if you can borrow all the money for nothing, it doesn’t make much difference to people. This would not be being paid under a different interest rate environment. I mean, it’s very simple. There’s no magic to the Kansas City Southern. I think their deal with Mexico ends in 2047. It’s the number of carloads carried. I mean, it’s not going to change that much, but it is kind of interesting. There’s only two major Canadian, what they call Class I railroads, and there’s five in the United States. This will result in, essentially, three of the units being Canadian, four being U.S., which is not the way you normally think of the way the development of the railroad system would work in the United States.

We looked at buying CP. Everybody looks at everything. We would not pay this price. It implies a price for BNSF that’s even higher than what the UP is selling for. But it’s kind of play money to some degree, I mean, when interest rates are this low. I’m sure from the standpoint of both CP and CN, there’s only one K.C. Southern. They’re not going to get a chance to expand. They’re not going to buy us. They’re not going to buy the UP. The juices flow, and the prices go up.

Charlie Munger: (03:37:15)
They’re buying with somebody else’s money.

Warren Buffett: (03:37:18)
Yeah. It’s somebody else’s money, and you’re going to retire in five or 10 years. People are not going to remember what you paid, but they’re going to remember whether you built a larger system. The investment bankers are cheering you on at every move. They’re just saying, “You could pay more.” They’re moving the figures around. The spreadsheets are out, and the fees are flowing.

The juices flow, indeed.


Buffett bits (and Munger)

Did not watch, but read a transcript of this year’s Berkshire Annual Meeting. Even though he tends to repeat himself, especially once you’ve gone over a few of his letters, there’s something comforting and eternal about going over the wisdom again, like reading The Bible.

 

Is there simpler investment advice?

I would love to talk to Ajit Jain for a few minutes:

I didn’t know about this event:

from the National Archives:

The morning after was an archivist’s nightmare, with ankle-deep water covering records in many areas. Although the basement vault was considered fireproof and watertight, water seeped through a broken wired-glass panel in the door and under the floor, damaging some earlier and later census schedules on the lower tiers. The 1890 census, however, was stacked outside the vault and was, according to one source, “first in the path of the firemen.”(11)

Could be a good clue in a National Treasure style mystery.

Speculation and rumors about the cause of the blaze ran rampant. Some newspapers claimed, and many suspected, it was caused by a cigarette or a lighted match. Employees were keenly questioned about their smoking habits. Others believed the fire started among shavings in the carpenter shop or was the result of spontaneous combustion. At least one woman from Ohio felt certain the fire was part of a conspiracy to defraud her family of their rightful estate by destroying every vestige of evidence proving heirship.(15) Most seemed to agree that the fire could not have been burning long and had made quick and intense headway; shavings and debris in the carpenter shop, wooden shelving, and the paper records would have made for a fierce blaze. After all, a watchman and engineers had been in the basement as late as 4:35 and not detected any smoke.(16) Others, however, believed the fire had been burning for hours, considering its stubbornness. Although, once the firemen were finished, it was difficult to tell if one spot in the files had burned longer than any other, the fire’s point of origin was determined to have been in the northeastern portion of the file room (also known as the storage room) under the stock and mail room.(17) Despite every investigative effort, Chief Census Clerk E. M. Libbey reported, no conclusion as to the cause was reached.

previous coverage of Buffett and Charlie Munger.

Charlie Munger unfortunately couldn’t be in Omaha, but looks like he had interesting things to say as always at the Daily Journal annual meeting in February:

Question 28: You talk frequently about having the moral imperative to be rational. And yet as humans, we’re constantly carrying this evolutionary baggage which gets in the way of us thinking rationally. Are there any tools or behaviors you embrace to facilitate your rational thinking?

Charlie: The answer is, of course. I hardly do anything else. One of my favorite tricks is the inversion process. I’ll give you an example. When I was a meteorologist in World War II. They told me how to draw weather maps and predict the weather. But what I was actually doing is clearing pilots to take flights.

I just reverse the problem. I inverted. I said, “Suppose I wanted to kill a lot of pilots, what would be the easy way to do it?” And I soon concluded that the only easy way to do it, would be to get the planes into icing the planes couldn’t handle. Or to get the pilot to a place where he’d run out of fuel before he could safely land. So I made up my mind that I was going to stay miles away from killing pilots. By either icing or getting him into (inaudible) conditions when they couldn’t land. I think that helped me be a better meteorologist in World War II. I just reversed the problem.

And if somebody hired me to fix India, I would immediately say, “What could I do if I really want to hurt India?” And I’d figure out all the things that could most easily hurt India and then I’d figure out how to avoid them. Now you’d say it’s the same thing, it’s just in reverse. But it works better to frequently invert the problem. If you’re a meteorologist, it really helps if you really know how to avoid something which is the only thing that’s going to kill your pilot. And you can help India best, if you understand what will really hurt India the easiest and worst.

Algebra works the same way. Every great algebraist inverts all the time because the problems are solved easier. Human beings should do the same thing in the ordinary walks of life. Just constantly invert. You don’t think of what you want. You think what you want to avoid. Or when you’re thinking what you want to avoid, you also think about what you want. And you just go back and forth all the time.

How about this:

Question 30: My question is about electric vehicles and BYD. Why are electric vehicles sales at BYD down 50 to 70 percent while Tesla is growing 50 percent? And what’s the future hold for BYD?

Charlie: Well, I’m not sure I’m the world’s greatest expert on the future of electric vehicles, except I think they’re coming generally and somebody’s going to make them. BYD’s vehicle sales went down because the Chinese reduce the incentives they were giving to the buyers of electric cars. And Telsa’s sales went up because Elon has convinced people that he can cure cancer. (laughter)

And then by Question 33 he really gets going.

 Lots of luck if you’re an impulsive person that has to be gratified immediately, you’re probably not going to have a very good life and we can’t fix you. (laughter)

Buffett is like beer, Munger is like whiskey.

(via latticeworkinvesting)


Warren Buffetts, real and fake

These dudes started a fake Warren Buffett account on a bet, and within a few days it was retweeted by Peggy Noonan, Kanye, etc.

Impressed with how generic and bland the advice was.

The worship of Buffett as an oracle is not just a US phenomenon.  If anything it may be stronger in Asia.  In Korea in 2007, I saw subway vending machines selling biographies of Warren Buffett.  In this video, being interviewed by a Chinese magazine, you can see Warren Buffett’s partner, Charlie Munger, attempt to explain why he thinks he and Buffett are so popular in China.  He suggests that it’s because much of their advice is very Confucian:

Actual Warren Buffett’s advice is free and very available.  You can read all of Berkshire Hathaway’s letters to shareholders, which are funny and interesting at times (the better you are at skimming the boring parts, the more enjoyment you will get out of them).  You can see everything he invests in — he legally has to tell you!

Investing is simple, but not easy

is a quote often attributed to Buffett, though I myself cannot find the original source for it.

Buffett himself was asked about the fake account on CNBC:

QUICK: BUT THERE WAS A FAKE TWITTER ACCOUNT, A FAKE WARREN BUFFETT TWITTER ACCOUNT THAT WENT FROM 20,000 FOLLOWERS TO 200,000 FOLLOWERS IN 24 HOURS BY TWEETING OUT ALL KINDS OF PITHY SORT OF SOUND ADVICE, THINGS THAT FOLKSY SAYINGS THAT SOUNDED LIKE IT COULD HAVE COME FROM YOU. WHY DON’T YOU TWEET MORE OFTEN?

BUFFETT: WELL I JUST DON’T SEE A REASON TO. I PUT OUT AN ANNUAL REPORT, AND I DO NOT HAVE A DAILY VIEW ON ALL KINDS OF THINGS. AND, AND MAYBE I’VE GOT A GUY IN THIS COPYCAT OR IMITATOR, MAYBE HE’S PUTTING OUT BETTER STUFF THAN I WOULD. SO IF HE PUTS OUT GOOD ADVICE, I’LL TAKE CREDIT FOR IT.

QUICK: WE HAVE SEEN SOME CEOs WHO LIKE TO TWEET VERY FREQUENTLY, INCLUDING ELON MUSK.

BUFFETT: YES.

QUICK: HE’S CERTAINLY SOMEBODY WHO TWEETED A LOT. WHAT DO YOU THINK ABOUT PEOPLE WHO TWEET A LOT?

BUFFETT: I DON’T THINK IT’S HELPED HIM A LOT. NO, I THINK IT’S — WELL, IT’D BE PARTICULARLY DANGEROUS TO START COMMENTING ON BERKSHIRE DAILY, WHICH I NEVER WOULD DO. I WON’T DO IT WITH YOU. BUT I THINK THERE’S OTHER THINGS IN LIFE I WANT TO DO THAN TWEET. I MEAN, I’M NOT THAT DESPERATE FOR SOMEBODY TO HEAR MY OPINION ON THIS.

This aspect of Buffett is much celebrated:

It’s sometimes forgotten or overlooked that he also owns a $7.9 million house in Laguna Beach.

Though in fairness he bought it in 1971 for $150,000.


Why Ben Graham wouldn’t hire Warren Buffett

If you read anything at all about investing, pretty soon you will hear about Ben Graham, father of value investing and teacher of Warren Buffett.

Young Warren Buffett got an A+ in Graham’s class at Columbia Business School, and would later work for Graham.  But when he first asked Graham for a job, in fact offered to work for free, Graham (born Grossbaum) wouldn’t hire Buffett.  Why?  The story in Buffett’s own words:

I’d never heard that one before.  It’s in:

Later, Graham would hire Buffett, and he got to wear the signature gray jacket that absorbed ink stains from writing down rows of figures.

I found this book more compelling than I expected.  By the time Buffett was in tenth grade he owned a forty acre farm in Nebraska he’d bought with paper route money.  You can read an interesting interview with author Alice Schroeder here:

Miguel: Give us advice to becoming better communicators.

Alice: Well…this is not anything profound. But you see that he uses very short parables, stories, and analogies. He chooses key words that resonate with people —that will stick in their heads, like Aesop’s fables, and fairytale imagery. He’s good at conjuring up pictures in people’s minds that trigger archetypal thinking. It enables him to very quickly make a point … without having to expend a lot of verbiage.

He’s also conscientious about weaving humor into his material. He’s naturally witty, but he’s aware that humor is enjoyable and disarming if you’re trying to teach something.

And here’s Michael Lewis reviewing the book.

Ben Graham by the way ultimately got kinda bored of investing and retired to California where he had a relationship with his late son’s girlfriend.

A great detail:


Warren Buffett on why Coke is so good

jump to 6:42:

(h/t Naval Ravikant.  )

Ended up watching this whole Buffett Q&A.  If you watch other Buffett talks he does tend to repeat himself.  This one is good.

Interesting to me how much Buffett talks about two companies, See’s and Coca-Cola, that have an emotional connection to the consumer.  The results of that might be in the balance sheet, but the reason is beyond numbers.  A genius of Buffett to combine cold technical investment analysis with being, like, the ultimate late 20th century American consumer.

As for Coke, the only new drink I know of that people drink five or six of a day is:

 


Highlights from Warren Buffett’s 2018 letter

Another good one drops from Warren Buffett and the Berkshire Hathaway team.

In America, equity investors have the wind at their back.

We’ve learned a great deal here at Helytimes from studying Buffett’s writings.  Here’s a writeup on the 2017 letter and on the 2016 letter and from a book of quotes from his letter.

A highlight from this year, worth noting:

The $65 billion gain is nonetheless real – rest assured of that. But only $36 billion came from Berkshire’s operations. The remaining $29 billion was delivered to us in December when Congress rewrote the U.S. Tax Code.

Did not know about the stake in Pilot Flying J:

How did Warren Buffett get so rich?  Some answers he will tell you.

  • By gathering money, eventually including the enormous pools of money (“float”) collected by insurance companies like GEICO
  • Using the money to buy shares of businesses with a durable competitive advantage (here’s a critical take on what that can mean)
  • Never selling anything so that he’s never taxed on the gains and the results compound and compound.

For the last 53 years, the company has built value by reinvesting its earnings and letting compound interest work its magic.

(Also he just seems to have an intuitive and unusually focused mind for business:

As a teenager, he took odd jobs, from washing cars to delivering newspapers, using his savings to purchase several pinball machines that he placed in local businesses.

Also he did some arbitrage things I don’t understand.)

In this letter, he discusses the result of a bet he made that an unmanaged index fund would beat selected hedge funds over a ten year period:

I made the bet for two reasons: (1) to leverage my outlay of $318,250 into a disproportionately larger sum that – if things turned out as I expected – would be distributed in early 2018 to Girls Inc. of Omaha; and (2) to publicize my conviction that my pick – a virtually cost-free investment in an unmanaged S&P 500 index fund – would, over time, deliver better results than those achieved by most investment professionals, however well-regarded and incentivized those “helpers” may be.

Addressing this question is of enormous importance. American investors pay staggering sums annually to advisors, often incurring several layers of consequential costs. In the aggregate, do these investors get their money’s worth? Indeed, again in the aggregate, do investors get anything for their outlays?

More:

A final lesson from our bet: Stick with big, “easy” decisions and eschew activity. During the ten-year bet, the 200-plus hedge-fund managers that were involved almost certainly made tens of thousands of buy and sell decisions. Most of those managers undoubtedly thought hard about their decisions, each of which they believed would prove advantageous. In the process of investing, they studied 10-Ks, interviewed managements, read trade journals and conferred with Wall Street analysts. 13 Protégé and I, meanwhile, leaning neither on research, insights nor brilliance, made only one investment decision during the ten years. We simply decided to sell our bond investment at a price of more than 100 times earnings (95.7 sale price/.88 yield), those being “earnings” that could not increase during the ensuing five years. We made the sale in order to move our money into a single security – Berkshire – that, in turn, owned a diversified group of solid businesses. Fueled by retained earnings, Berkshire’s growth in value was unlikely to be less than 8% annually, even if we were to experience a so-so economy.

Fewer good jokes this year, in our opinion, but also fewer dire warnings.


Warren Buffett

New Berkshire Hathaway letter is out.  Free insight and humor for capitalism’s cheery uncle, a great read every year, even if I understand at most 1/12 of it.

wb-1

 

Sunny American optimism:

wb-2

The infectious, enthusiastic amateur style of writing reminds me of Bill James:

wb-3

wb4

Some of the companies Berkshire owns:

wb5

coke

9.3% of your Coke is Berkshire’s.

An unlikely hero:

wb6

Jack Bogle founded Vanguard, and created a simple, low cost index fund for everyday investors.

bogle

found that at JL Collins impressive website.

Buffett tells you, in simple terms, how to get rich:

wb7

Why people don’t do that:

wb8

On the other hand here’s the S&P 500 chart since 1980:

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Doesn’t look like a washtubs moment to me.

Over at marketplace.org, Allan Sloan points out some of the things Buffett leaves out:

Allan Sloan: Two things are missing. One was how wonderful the management of Wells Fargo was, which he wrote the previous year. The second thing is he lavished praise on this company called 3G, what’s known as a private equity company, from Brazil, which manages a company called Kraft Heinz, which is Berkshire Hathaway’s biggest investment. And what it does is it goes around, it buys companies — now with the help of a lot of financing from Berkshire Hathaway — it fires zillions of people, the profits go up, and then after a while, it goes out and buys another company and does the same thing.

Buffett makes me think of Andrew Carnegie, a zillionaire of a hundred years ago who also had some kind of public conscience.  If some percentage billionaires weren’t also lovable characters like Buffett, would capitalism collapse?  Does his dad humor, like Carnegie’s library building, plug a dyke that holds back revolution?

carnegie

At the Berkshire Hathaway shareholders conference, you can challenge table tennis champ Ariel Hsing:


Buffett

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Warren Buffett’s advice always sounds simple, which isn’t the same as easy to follow.
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Loved the doc about him on HBO.  The first scene is him advising high school kids to take care of their minds and bodies.  The second scene is him in the drive-through line at McDonald’s.


Jeff Bezos citing Warren Buffett

From this old Fast Company article (worth reading).  Bezos is talking about getting investors who understand Amazon is playing a long-term strategy.  But of course it goes beyond:

“With respect to investors, there’s a great Warren Buffettism,” he says. “You can hold a rock concert and that can be successful, and you can hold a ballet and that can be successful, but don’t hold a rock concert and advertise it as a ballet.”


How To Be Rich by J. Paul Getty

Couldn’t resist purchasing this handsome volume in the bookstore of the Getty Center (cheers to MLo for the invitation). I like that the title isn’t “How To Get Rich” but “How to BE Rich.”

On page 2 he gives away one of the formulas: have a rich dad!

I’ll report back when I finish the volume. First: Jimmy Buffett’s autobiography.


I am in a game

the game is very very easy if you have the right lessons in your mind.

Buffett says that to succeed at the game you need an IQ of about 120, but more than that is a hinderance.

Nothing shocking in Warren Buffett’s interview with Charlie Rose if you are a Buffett student. He drinks a Coke. That this interview exists is perhaps the most interesting thing: Charlie Rose is back? In this form? It’s not shot like Charlie’s PBS show.

Could this room be more generic?

Warren:

I think about what the company’s gonna be worth in 10-12 years.

and:

most of them [Berkshire investors] give it away when they get through

What does “get through” mean here? Die?

Buffett mentions pitching some doctors at a place called The Hilltop House in Omaha. Sadly it no longer exists, I find this photo of it on the post “I Wish I Could Have Gone To: Hilltop House” on MyOmahaObsession and I share the sentiment.


Xth

The ten year anniversary of Helytimes rolled around without our really noticing.  We started this website* in February 2012.  The posts from that month are as clear a reflection as there is of the idea (extinct links and lost images are a curse but come w/t/territory).

There wasn’t a master plan.  “I should know something about writing for the Internet.” The directness is powerful (and frightening): what writer of the past wouldn’t have dreamed of an instantaneous worldwide publishing platform you could control? A piece published on Helytimes generates a link that’s as accessible as a link to The New York Times. How could we not try that? Authors had websites; I’d published two books and hoped to do more.  The magic of putting up pieces that entered the great Google library, the creation of a personal wondermuseum, it seemed fun.  

A strong sense memory lingers about the day of origin: I was in my office on the TV show The Office. Across the hall was my college Alison Silverman. Our offices were in an annex trailer in the parking lot, which often roasted in the sun. Inside between our offices was a treadmill people sometimes used. That was a funny time and place. I told Alison I was thinking of starting a blog and I remember not having any reaction at all. It was like I said I’d had a salad for lunch. But what was I expecting?

WordPress provided the structure. I’m not sure I’d recommend WordPress, it feels flimsy, it feels like it could collapse tomorrow. GoDaddy sold us the URL. Although GoDaddy’s name and TV ads make it seem ridiculous, they are really dependable, we’ve never had a problem. I copied a simple design template my cousin was using and off we went.

Since then we’ve published 1,624 posts.  Some of the most popular are:

– a guest post by Hayes about a local political issue, No on Measure S (No prevailed, and thank goodness). This post shows the value of possessing an easy distribution platform

– a post about the alleged subject of Gordon Lightfoot’s song Sundown. People Google this person and find the site, it’s celebrity gossip.

– a comparison of the UK in size to California. Another Google inbounder.

Mountaineering movies on Netflix (needs updating, The Alpinist and 14 Peaks both great)

– an investigation of whether the last joke Abraham Lincoln heard was funny

– a consideration of how a mosaic at Disney World was made by Hanns Scharff, one of the Luftwaffe’s top interrogators (and revealing insights in interrogation)

– a look into the darkness of Donald Trump’s father and the destruction of Coney Island

Some posts about JFK were also quite popular, as was a post about The White House Pool.

Anything about Warren Buffett and Charlie Munger will pop.  

Anything about writing or writing advice from other people will move the needle.

We consider Record Group 80 to be kind of a signature post.

Ten years as an amount of time is significant.  We once heard an interview with Joseph Campbell, he was talking about a young student who was asking Campbell about whether he thought he, the student, could make it as a writer.

Well, can you go ten years without making it?

was Campbell’s question. A good question to ask.  

What would “making it” mean?  We don’t profit off this website, but it’s very valuable as as storehouse of material that caught our attention. And it feels contributive.  It’s brought about many connections and friendships of great value, even if you can’t put a price on them.  

Once I was talking to a guy who knew a thing or two about SEO and metrics and online business about the site. He suggested we should pick any one specific niche and go deep, make that our thing. For instance, “Navy photos.” But that’s not the idea (and it would be boring).

Once I was talking to a successful Hollywood type guy who’s a reader of Helytimes. I asked him what I should do to get more readers. He looked at me like I was kind of an idiot.

Write about the Kardashians

he said.

That’s not the idea here either.

This isn’t any kind of business. During the lifespan of this website we published a book, wrote several other books, wrote lots of television, co-hosted hundreds of episodes of The Great Debates. This is a straightup side project. But sometimes that’s where the life is.

My life times out so my growing up parallels the Internet growing up. My age 18 was close to the Internet’s age 18. So I followed and tracked the rise of what we unfortunately have to call blogging. 

Andrew Sullivan was an early one. Blogging eventually burned him out and he had to stop.  Matt Yglesias was my near contemporary in college (I don’t think I ever met him).  He seems built to be a blogger and has made a job of it.  That takes stamina, focus, and drive we don’t have.

Hot takes aren’t the game around here. Unless they’re hot takes on something from like the 15th century

We maintain this site out of desire to clean out the brain-attic, to keep an independent publishing vector open, to settle anything that’s gnawing at us, to share (and clear the mind of) passions, obsessions, curiosities and discoveries.  

Over the years we’ve had a worldwide readership, lured in some surprising customers, lost one contributor to death by tragedy, and had some touching comments.  The funniest people reach out to us. Usually about content we never would’ve thought anyone would care about. 

We made a scratchmark on the cave wall, which, what else are we here for?  

So, onward!  Thanks for reading, we really appreciate you.  

* the word blog just isn’t a winner, is it folks?


Munger and Lee Kuan Yew: Figure Out What Works and Do It

Charlie Munger, age 97, recently held forth at the annual meeting for Daily Journal Company. Blunt and entertaining as ever. “Amateurs talk about Buffett, professionals talk about Munger” as the old saying goes.

Our long fascination with Munger has been a frequent topic on this site, resulting in some wonderful communication and connection with the secret world of Mungerists out there.

Munger was asked a question that got me thinking. It was about the founder of modern Singapore, long time prime minister, Lee Kuan Yew:

Question: Charlie, you have been a long-time admirer of Singapore and Lee Kuan Yew. You once said to study the life and work of Lee Kuan Yew. You are going to be flabbergasted. I would be curious to know how you started your interest in Singapore and Lee Kuan Yew. Have you met Lee Kuan Yew in person? And if there is one thing the world could learn from Singapore, what would that be?

Charlie Munger: Well, Lee Kuan Yew had the best record as a nation builder. If you’re willing to count small nations in the group, he had probably the best record that ever existed in the history of the world. He took over a malarial swamp with no army, no nothing. And, pretty soon, he turned that into this gloriously prosperous place.

His method for doing it was so simple. The mantra he said over and over again is very simple. He said, figure out what works and do it. Now, it sounds like anybody would know that made sense. But you know, most people don’t do that. They don’t work that hard at figuring out what works and what doesn’t. And they don’t just keep everlastingly at it the way he did.

He was a very smart man and he had a lot of good ideas. He absolutely took over a malarial swamp and turned it into modern Singapore—in his own lifetime. It was absolutely incredible.

He was a one party system but he could always be removed by the electorate. He was not a dictator. And he was just so good. He was death on corruption which was a very good idea. There’s hardly anything he touched he didn’t improve.

When I look at the modern Singapore health system, it costs 20% of what the American system costs. And, of course, it works way better than our medical system. That’s entirely due to the practical talent of Lee Kuan Yew. Just time after time, he would choose the right system.

In Singapore, you get a savings account the day you’re born. If you don’t spend the money, you and your heirs get to spend it eventually. In other words, it’s your money. So, to some extent, everybody buying medical services in Singapore is paying for it themselves. Of course, people behave more sensibly when they’re spending their own money.

Just time after time he would do something like that. That recognized reality and worked way better than what other people were doing. There aren’t that many people like Lee Kuan Yew that have ever lived. So, of course, I admire him. I have a bust of Lee Kuan Yew in my house. I admire him that much.

Sometimes Munger’s harsh rationality has an edge that makes me a little uncomfortable. The unabashed admiration of Singagore’s Lee Kuan Yew is an aspect of that. I’ve never visited Singapore. I’d like to, and see these weird tree buildings and eat the street food. In my travels I’ve met several people from Singapore. What discussion we had of Lee Kuan Yew was pretty ginger, because I’m too ignorant to have much of an opinion, because it’s polite to be sensitive when discussing another country’s main founding guy, and because, well, I get the sense in Singapore you don’t really criticize Lee Kuan Yew. Though LKY is dead, his eldest son is still in charge. That sense that we’re dealing with a bit of an authoritarian is what makes me uncomfortable.

Thomas Meaney has a review of Michael Barr’s history of Singapore in the LRB which gives me just the kind of context I need.

Lee Kuan Yew, by contrast, made no such attempt. ‘That’s the end of the British Empire,’ he told one of his classmates at Raffles College when the first blasts were felt over the city. Lee, then in his late teens, not only learned Mandarin and Japanese during the occupation, but worked as a translator of Allied news reports for the main Japanese propaganda bureau in the Cathay Building. A few floors down, Yasujirō Ozu, freshly arrived in Singapore, produced propaganda about the Indian National Army’s fight against the British Empire. ‘The three and a half years of Japanese occupation were the most important of my life,’ Lee wrote in his memoirs. He admired the ruthlessness of the Japanese, and believed it had toughened up his generation. The efficiency of their brothels impressed him. Spotting the head of a Chinese looter hanging from the marquee of a movie theatre, he thought: ‘What a marvellous photograph this would make for Life magazine.’

how about this?:

The key was to make Singapore appealing to US investment by ensuring laws favourable to corporate capital, and prioritising economic prerogatives over political freedom. With no local capitalist class to discipline the workforce, independent Singapore resorted to what Christopher Tremewan calls ‘forced proletarianisation’. The city-state’s notorious public order laws – lashes and prison for spitting, graffiti and public urination; swift execution for drug possession – were part of a breakneck effort to make Singapore’s citizens the most cowed and reliable semi-skilled workforce in Asia. ‘Disneyland with the death penalty’ was the way William Gibson described it. Free hospital care – which scandalised Milton Friedman when he learned of it – was ended. Lee consolidated all the trade unions into a single union under his control. With the Central Provident Fund, he could force workers to save part of their salaries for retirement, adjusting amounts at will, which allowed him to raise and lower wages in co-ordination with the needs of foreign industry. American corporate elites marvelled at such a partner. Lee personally escorted visiting CEOs around the island. The result was a boom of massive proportions, with Singapore leading the region in electronics assembly, ship repair and food processing. Full employment was achieved within a decade.

I don’t want anyone making me cowed, even if I am at best semi-skilled.

Here is Balaji Srinivasan on the Tim Ferriss podcast, articulating why CEO types seem to like LKY so much:

What Lee Kuan Yew did, really, the reason I think he’s so important, is I think he’s a piece of the 21st century that fell into the 20th, to paraphrase. Basically, I think he was the first startup CEO of a country, of a city state. And I think we’ll see a thousand more like him.

So he’s a very important person to study, his life and history, because here’s the thing: he did what he did with minimal coercion. He’s not famous for winning some giant violent conflict. He’s not famous for some activist movement. He stands for delivering results. That’s actually really, really interesting. He’s famous for boosting prosperity and zero-to-one-ing a society. He was really a lion, really a great guy.

But what about the collaborating with the Japanese?

In any case, I am trying to figure out what works in my own life, and do it. Munger’s right, it’s not that easy! Of course, there’s a question of how we’re measuring what works.” Posting thought-provoking stuff here on Helytimes works, that’s for sure, so I’ll keep doing it. Let us know what you think! We’re working to keep the posts “medium length.”


Value investing, growth investing, and vibes investing

or

The Vibes Speculator

You hear about two schools of investing. Value investing, and growth investing. First, value investing.

Value investing involves generating a number for what a company’s intrinsic worth might be, comparing that number to the price the company’s shares are trading for on the stock market, and buying when there’s a discount (plus a margin of safety to account for the risk). You want to buy stocks that are cheap, on sale, and wait for their prices to return to what they should be.

Howard Marks, in his new memo “Something of Value” for Oaktree Capital, has a great definition of value investing, and we’re taking that as our text today. We would quote it extensively, but there’s a stern disclaimer on it. After an email correspondence with Oaktree Capital, I appreciate their denial of my request for permission to use lots of quotes in this piece.

We encourage third parties that are interested in sharing Howard’s memos with an audience to write their own summary/article about the memo and then link to the memo in its entirety on our website. Howard’s memos are meant to be read/viewed in their entirety and removing specific quotes can lead to them being taken out of Howard’s intended context. Also, as we operate in a highly regulated business, we are required to include our legal disclosures to Howard’s writings, and removing portions of his writing without the disclosures attached goes against our internal policies.

as Leia Vincent of Oaktree put it to me in an email. I see their point.

Check out Marks summary of value investing, paragraph four.

investing was pioneered by Benjamin Graham, whose teachings were transcribed by David Dodd, Graham taught Warren Buffett. There’s a lot to love about value investing. It’s bargain hunting. It almost feels virtuous. You must be rational to be a value investor. You must have emotional discipline as the market goes up and down.

Value investing is widely preached. Aswath Damodaran of NYU, who wrote a little book on the topic, will teach you on YouTube. Shawn Badlani spoke about his training as a value investor on episode 8 of my podcast, Stocks: Let’s Talk.

Value investing thinking has served Shawn pretty well. Every investor would be wise to study valuation.

As Marks acknowledges though, value investing has significant downsides. You’ve got to do a lot of calculating of discounted cash flow for one thing. Math, which is maybe not that hard, but tedious. There are computers, which can help you with the math. I like Guru Focus (you gotta pay to be a member) which can do shorthand estimates for you, like this one for Tesla:

but that can only get you so far, and it also reveals another problem. Value investing has imbedded in it both an attraction for the rational and a torture for them: stocks aren’t always trading for what they should be worth.

That is, their price isn’t always what it “should” be. That’s supposed to be an advantage, if you buy them when they’re cheap, and wait for the equilibrium that must come, when their true value will be revealed.

But what if that never happens? Consider the angst of Value Stock Geek, a smart writer on this subject. How long do you wait for the stock to achieve the correct price?

Not only that, but for all that math, you’re still just guessing! All your calculations are only as good as your inputs, some of which are guesses!

Plus, you’re competing against Warren Buffett, Munger, Aswath Damodaran, Shawn, Value Stock Geek, and literally one million other people. Wall Street has been sucking off physicists, computer scientists, “quants” of all kinds, taking them away from useful work and putting them into complex valuation shops. Their computers are faster, more powerful, and more expensive than yours, I guarantee. Their computers blow your puny computer out of the water. They’ve got an Alienware Aurora R11 with Intel Core i9 10900KF and an Nvidia GTX 1650 Super – RTX 3090, with 2TB M.2 PCIe SSD + 2TB SATA HDD and you’ve got an Epson 512K with 5.25 inch floppy disc. Who’s gonna kill if you’re playing Red Baron?

So much for value investing.

Then there’s growth investing.

The story of Marks’ memo is of how spending time during the pandemic with his son Andrew has opened his eyes to the second major school: growth investing. Marks memo describes how now he has his son Andrew living with him, and Andrew is opening his eyes to the thinking of a growth investor.

Growth investing is about assigning a valuation to a company that may not yet have shown its value, but whose growth, as measured by one metric or another, has a potential to grow into cash flows of great value.

Recently, growth chasing has worked out very well. The one quote I’ll lift from Marks:

the performance of value investing lagged that of growth investing over the past decade-plus (and massively so in 2020)

It’s easy to understand why that might be. The speed at which the fast growing companies grow is almost incomprehensible. In 2002 the so-called facebook at Harvard was a physical book the college handed out with pictures of faces in it. In 2020, eighteen years later, one young person’s lifetime, $FB has two point five billion people using it every month. Facebook has swallowed up billions of dollars in advertising, helped wipe out at least two thousand local newspapers, and influences world events, from elections in the USA to ethno-religious violence in Burma.

Scary stuff, if you’re an innocent citizen. Groovy if you’re a shareholder of Facebook (I am not).

Or take Amazon:

For a sense of scale, it took Amazon more than 14 years—58 quarters after its May 1997 initial public offering—to make, cumulatively, as much profit as it produced in the latest quarter alone. Keep in mind that Amazon consistently lost money for its first several years as a public company.

(first article when I Google “when did Amazon finally make a profit?” ) From Wikipedia:

The company finally turned its first profit in the fourth quarter of 2001: $0.01 (i.e., 1¢ per share), on revenues of more than $1 billion. 

A traditional value investor would not have been into Amazon in 2001.

The endgame for growth investing is you grow so big you’re the biggest animal in the pond and you have no competitors, only, in this pond example, small frogs to amuse you, and minnows to tickle your feet, and perhaps birds, and someone (local villagers? customers?) just keeps bringing you food because they have to. Or even want to? Or because of a curse? The example fails at this point but you get the idea.

Picking those winners can be hard. You need to choose what metrics of growth to focus on. The important metric may not be how much money you’re making. This seems to defy logic and economics and years of Wall Street lore, but that is how the market has reacted. The word is out that even if a company is not only not making money but is losing more and more money, that can in some cases be fine, that can still be fine, as long as they’re swallowing market share.

(This has created some funny wins for the consumer, like MoviePass).

So: value and growth. Marks’ memo is lucid well-expressed thinking on how his thinking is evolving about the blend of these two schools.

i just read the memo and agree, it is really good.  love the idea that value investing just means buying something for less than it’s worth, even if that thing you’re buying is a fast growing company with a high current p/e multiple.

Now, there’s also technical investing, which seems to be people studying candlestick charts, and then trying to reverse-divine the algorithms that make automated trading decisions in Flash Boys style scenarios. I admire these folks, and there’s probably something to it, but it’s not for me.

There’s also momentum investing, where you chase where you think the herd is going, based on anything from complex systems of pattern recognition to just what people seem to be talking about and what’s in the headlines. I used to study this school, and it’s very fun.

What I’d like to propose is a new school.

Vibes Investing.

Vibes Investing we discussed on episode 7 of Stocks: Let’s Talk, with the legend Liz Hall.

We believe Vibes Investing has a bright future.

Is vibes investing even investing? Is growth investing investing? Most definitions of investing say something about “an expectation of achieving a profit,” or “a reasonable expectation.” What we’re talking about here may be something more like speculating. A different and perhaps equally noble pursuit.

The vibes speculator would not compete against the quants and the computers. The vibes speculator would look for signals the computer couldn’t see, invisible, unquantifiable signals. The vibes speculator would look for growth, but not according to any metric that might be spotted by a million growth investors. The vibes speculator would feel the growth.

I’ll have more to say on the topic of vibes speculating. I’ve considered launching a prestigious and expensive newsletter, The Vibes Speculator. Or perhaps a small book on the topic. I’m not sure if the book would be in the category “business” or “humor.”

If you control a budget at a well-funded company I’d consider giving a talk on vibes speculating for an extravagent fee.

If you have thoughts on vibes speculating, get in touch. It’s an exciting conversation.

(Disclaimer: none of what I say is investment advice of any kind. These are the musings of an enthusiastic amateur. If anything the sign that amateurs are talking about the stock market is a classic signal of a market top.)


Top 8 of 2020

We’re pleased with our small, distinguished, growing audience. These were our most popular posts of the year.

Primary Tensions

about how JFK spent the night before the 1960 Wisconsin primary. Somebody wrote in to correct me that the movie in question was more like “sexploitation” than porn, but “porno” is the word Bradley used.

The Supernova Petroglyph

grateful this year that we got a chance to see Chaco Canyon, walking the site only increased the fascination

One Two Three Four: The Beatles In Time by Craig Brown.

The book has been released here as 150 Glimpses of the Beatles. What’s great about Craig Brown is that he goes to the sources, the primary sources, and tells you not just the details of the incident, but the historiography, the story of the story.

Buffett Bits (and Munger)

always a popular top.

Daniel Vickers

another inspiration. Got a beautiful note from Vickers’ daughter which was really touching, glad we could add to the information available about this remarkable man.

The Wanderer’s Hávámal by Jackson Crawford

Glad to be introduced to this stunning work in a readable translation. Why not let the Norse gods advise you on how to conduct yourself when you travel?

The Illusion of Choice.

This is just an image we found somewhere else, it’s illuminating.

Couple others that found their way: Marilyn Monroe gossip, How to Read A Racing Form, and Conversations With.

We had a nice guest post this year, Founding Documents by Billy Ouska. We’d love to have more of those in 2021.

Hope you’re all keeping well and safe.


Mile Marker Zero: The Moveable Feast of Key West by William McKeen

This is a book about a scene, and the scene was Key West in the late ’60s-’70s, centered on Thomas McGuane, Jim Harrison, Hunter Thompson, Jimmy Buffett, and some lesser known but memorable characters.  I tried to think of other books about scenes, and came up with Easy Riders, Raging Bulls by Peter Biskind, and maybe Astral Weeks: A Secret History of 1968 by Ryan H. Walsh, about Van Morrison’s Boston.  Then of course there’s Hemingway’s A Moveable Feast, referenced here in the subtitle, a mean-spirited but often beautiful book about 1920s Paris.

I was drawn to this book after I heard Walter Kirn talking about it on Bret Easton Ellis podcast (McGuane is Kirn’s ex-father-in-law, which must be one of life’s more interesting relationships).  I’ve been drawn lately to books about the actual practicalities of the writing life.  How do other writers do it?  How do they organize their day?  What time do they get to work?  What do they eat and drink?  How do they avoid distraction?

From this book we learn that Jim Harrison worked until 5pm, not 4:59 but 5pm, after which he cut loose.  McGuane was more disciplined, even hermitish for a time (while still getting plenty of fishing done) but eventually temptation took over, he started partying with the boys, eventually was given the chance to direct the movie from his novel 92 In The Shade.  That’s when things got really crazy.  The movie was not a big success.

“The Sixties” (the craziest excesses bled well into the ’70s) musta really been something.

On page one of this book I felt there was an error:

That’s not the line.  The line (from the Poetry Foundation) is:

The best laid schemes o’ Mice an’ Men
          Gang aft agley,
but maybe I’m being a hopeless stickler and we can translate Burns from Scots into English whenever we feel like it.
After that small bump, I got swept up in the rhythm and the fun of this book and enjoyed it very much.  A vacation in book form.  From this book I learned that it was Jerry Jeff Walker who introduced then-failing country singer Jimmy Buffett to Key West, when Buffett went to Miami for what he thought was a gig, found out he wouldn’t be playing for two weeks, so the two of them took an impromptu road trip.

Part of what these writers found special about Key West, beyond the Hemingway and Tennessee Williams legends, was it just wasn’t a regular, straight and narrow place.  Being a writer is a queer job, someone’s liable to wonder what it is you do all day.  In Key West, that wasn’t a problem.

Key West was so irregular and libertine that you could get away with the apparent layaboutism of the writer’s life.

Some years ago I was writing a TV pilot I’d pitched called Florida Courthouse.  I went down to Florida to do some research, and people kept telling me about Key West, making it sound like Florida’s Florida.  Down I went on that fantastic drive where you feel like you’re flying, over Pigeon Key, surely one of the cooler drives in the USA if not the world.

The town I found at the end of the road was truly different.  Louche, kind of disgusting, and there was an element of tourists chasing a Buffett fantasy.  Some of the people I encountered seemed like untrustworthy semi-pirates, and some put themselves way out to help a stranger.  You’re literally and figuratively way out there, halfway to Havana.  The old houses, the chickens wandering, the cemetery, the heat and the shore and the breeze and the old fort and the general sense of license and liberty has an intoxicating quality.  There was a slight element of forced fun, and trying to capture some spirit that may have existed mostly in legend.  McKeen captures that aspect in his book:

 

Like McGuane, I found the mornings in Key West to be the best attraction.  Quiet, promising, unbothered, potentially productive.  Then in the afternoon you could go out and see what trouble was to be found.  Somebody introduced me to a former sheriff of Key West, who helped me understand his philosophy of law enforcement: “look, you can’t put that much law on people if it’s not in their hearts.”

I enjoyed my time there in this salty beachside min-New Orleans and hope to return some day, although I don’t really think I’m a Key West person in my heart.  I went looking for photos from that trip, and one I found was of the Audubon House.

After finishing this book I was recounting some of the stories to my wife and we put on Jimmy Buffett radio, and that led of course to drinking a bunch of margaritas and I woke up hungover.

I rate this book: four and a half margaritas.

 

 


The statement is not only humorous, but also it is literally true

Tired: Buffett

Wired: Sir John Templeton

(Inspired: Charlie Munger)


What is up with the stock market?

The US unemployment rate is 14.7%, the worst since the Depression.  Here in LA County it’s 24%.  We’re not supposed to leave our houses for non-essential purposes or go to the beach.  Every bar is closed, almost every store is closed.

And yet the “stock market” is not really down that much.  Here is a one year chart of the S&P 500, which The Wall Street Journal often uses as a standard benchmark for “the stock market.”

Actually a little higher than it was same time last year.

How can this be?

There are many explanations offered by people better informed than me.  Here is Gunjan Banerji’s take in WSJ, and Joe Weisenthal in Bloomberg.

Both point out:

  • the belief in a v-shaped or “Nike swoosh”* recovery
  • the Federal Reserve keeping interest rates at close to zero
  • the Federal Reserve buying $2.4 trillion in government debt, and indicating it would buy more, making it clear that the government can inject essentially infinite money into the economy, “backstopping” everything.

As an amateur enthusiast on this topic, I’d like to offer some additional explanations.

  • The stock market is rigged to go up.  This is just a sort of understood but rarely stated fact.  The stock market is one of the few measures the President cares about.  Every tool at the disposal of the administration and at the supposedly independent Fed is used to keep the stock market up.

 

  • The stock market by definition is big, public companies.  These are the S&P 500 companiesBig companies are benefitting from the demise of their various small competitors.  Big companies can survive by taking on debt in ways small businesses can’t.  They did a great job getting a chunk of the federal money made available.  Consider if I have Steve’s Burger Stand.  I just don’t have the bureaucratic ability, relationships, time, to get a loan the way Shake Shack did.  If anything, are huge companies are seeing their small scale competitors destroyed?
    • Kind of an addendum to the last one: the federal government gave out the free money via big banks like Wells Fargo, Bank of America, BlackRock which themselves are part of the S&P 500!  Big boys feed first!

 

  • Money has nowhere else to go.  The Fed’s actions reduce the benefits of alternative investments like bonds or just putting your money in the bank.

 

  • Trading has become free! I feel crazy that this never gets mentioned.  Starting with Schwab (I think?) last fall, and then flowing on to competitors, trading stocks became free.  Instead of $8 or $4 to trade stocks, it’s free!  You might think this might’ve just created more volatility, maybe it did, but once the barrier to entry for the retail investor is zero, it’s as easy to flow your extra money into the stock market as it is into the bank.  This is, in my opinion, a dangerous or at least explosive change that hasn’t really been reckoned with.  See what Robin Hood is up to.  It might be as easy to bet your money on Tesla or Amazon as it is to tuck it away in the bank.  It’s frictionless, it can be done on your phone.  That might be dangerous!

 

  • There’s nowhere else to gamble.  Again, I feel crazy that this is never acknowledged as a factor.  Consider that Americans spend something like $100 billion on gambling a year.  At the moment, there’s nowhere to do that!  Casinos are closed.  Sports are stopped.  I do not think it’s unreasonable to imagine there are billions of dollars in gambling money going into the stock market as simply a place to gamble and trade.  See Dave Portnoy of Barstool Sports, who personally injected half a million dollars.

I’m not here to make predictions.  It’s probably a cognitive bias to believe the stock market “deserves” to go down, but that’s what I believe.  Then again, when you think about the stock market, it’s not just rich assholes, it’s like the pensions of firefighters and teachers.

Is it possible that the stock market is not calculating the biggest risk, some kind of massive social upheaval coming from disgust at this system?  The stock market is not built to calculate “what if we ruin society, make things so unequal and so unfair and grotesque that this system no longer functions?”

Maybe that’s “baked in” as they say.

So said Warren Buffett at the annual meeting.  Happened to be reading this speech by Stanley Druckenmiller from 2015 which I found on Valuewalk:

Remember your competition:

This chart is illuminating:

It’s good for me to write about the stock market, because I’m guaranteed to get an email saying something like you stupid clown you don’t understand anything.  But the more I study the stock market, the more convinced I am that sometimes the experts, overwhelmed by information, become blind to the obvious.  Consider this case reported by Bloomberg as a representative example.  Do you really need to use a machine-reading program to determine that things are looking a bit grim?

There’s the famous story about Joe Kennedy knowing it was time to sell when the shoeshine boy gave him stock tips (bullshit, he was insider trading).  What if you’re the shoeshine boy?

* I don’t understand the Nike swoosh recovery idea.  Isn’t the long part of the swoosh roughly equal to the short part?  So in a swoosh recovery, wouldn’t we just take a very long time to get back to where we were?  and that’s the optimistic take!