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Funny money - Notes from youtube

notes, money5 min read

Below notes are taken while listening to youtube videos.

Date : 30/September/2020

Viewing stocks as bonds, Talks at Google, Donald Yacktman

We like to buy beach balls being underwaterderwater with water levels rising.

Investment Goals

  • Protect capital against:

    • Permanent loss of capital
    • Inflation
  • Grow capital by:

    • Making double digit returns over time
    • Exceeding the S&P 500 Index return from market peak to market peak
  • In order to protect capital, you need to invest, equities gives higher rates of return

  • Measure ourselves over a period of time that's appropriate, we feel real way to measure yourself is over a very long time period important one and we believe from one market peak to another market peak.

Investment Strategy: Desired Investment Attributes

  1. Good Businesses that Dominate the industry
  2. Shareholder-Oriented Management
  3. Low Purchase Price
  • Good businesses

    a. Business with high ROTAs( returns on tangible assets) b. Example consumer staples, low price used on regular basis. They have edge because they can manage capital much efficiently. c. High market share and keeping the capital working you can make lots of money. d. Eg: John Deere tractor business 17 years life cycle whereas toothpaste lasts only a month. So consumers companies handle well.

    Investment Strategy : Good businesses

    • Media - Ad business, close economy and low capital
    • Utilities - Only way to get ROE up because you have low ROA is to leverage it. Need to have steady cash flows. Problem during depression they will go bankrupt.
    • One thing to know about investment business is, you are almost wrong always to some degree, nobody buys everything at bottom and sells everything at top. So it's a business to stay humble.
  • Shareholder-Oriented Management

    Investment process of management of the company, when you buy equity, some part you get as dividend and other retained by management for reinvestment that's the wildcard. For long term second part is more important as it gives you more return. Management has 5 basic options on how to use the retained money,

    1. Put money back in business, R&D ( marketing, distribution, cost reduction, sales). Marginal ROR on new incremwntal growth is excellent. When companies have excess cash which they can't absorb, they start examining 4 other options.
    2. Dividends
    3. Sitting on cash( when you don't see opportunity sit on it )
    4. Acquisitions
    5. Buyback - Shareholders who have the stock get bigger piece of earnings
  • Low Purchase Price

    • Nobody can't predict the future, more predictable the company is narrower the range is and less predictable wider the range is. Have biggest holding on which you have strong confidence. Element is find great businesses at low price and hold for longer periods with patience.
    • It's really important to be focused and patient. There is a narrow difference between being determined and stuborn. If at the end of the day you are right you are determined. In a long horizon of time it really makes a difference and it really does separate us from so many people out there.
    • There is tremendous pressure in this business for short time results and horizon time is 3 years in a underperforming market.
    • High quality stocks ( AAA rated ) tend to hold better during crash, you can sell some of those to buy companies with ratings A or AA which has more upside potential. (Always have cash reserve ). This can dramatically increase your ROR.
    • Lots of reasons for insiders to sell stock but only one reason to buy stock from personal money. ( Philip Morris & Carlos Slim )
    • Retail is a tough business
    • Amazon has a unique business
    • Apple has niche business model but if there is a another product with 60-70% same feature with 2/3 of cost or half cost that's the one to go.
    • Short term is the voting machine and long term is the weighing machine. 70% are moment investors they buy what is good with thrusts it's gonna be better.
    • Financial stocks are low return on assets as they make money through leverage that makes them very vulnerable.
    • Buy during crash, industry shortfall( 93 health care Clinton, drug and Pharma was taking a hit)
    • Be protective and aggressive at the same time

Date : 29/September/2020

Wealth building with one thing & millionaire series, google talks, Jay Papasan

Self-Assessment Make a careful exploration of who you are and the work that you've been given, and sink yourself into that Don't be impressed with yourself. Don't compare yourself with others. You must do your creative best with your own life.

One thing. Idea of one thing is that you have clear priority. If you align your priorities over time. You get huge momentum and leverage in your actions. 2inch domino can knock down Eiffel tower.

Domino

Compound interest is the eighth wonder if the world. Good habits, diet, financial habits compound. Live on less than I earn and invest the rest. Positive habits and negative habits define us and being aware of them and purposeful in building them is one of the powerful thing you can do. If you start working for your habits, whats beautiful is quickly they will start working for you. Success is sequential not simultaneous. Look at your to-do list on weekly basis and prioritze them. In the todo list always prioritise by numbering them. Work on the one.

What is your WHY

  • Why is that goal important to you
  • What will accomplishimg that goal do for your life ?
  • What will happen if you do not accomplish this goal ?

Domino

  • Go into the future work backwards
  • Investment should earn atleast 3.5% annually, lower is dead money, it's losing its value.

Four conditions of money Impact of various interest rates over time Path of money

Habits of the Wealthy

  • Write down their goals
  • Focus on a single purpose
  • Don't procrastinate (& are action oriented)
  • Wake up three hours before they have to be at work
  • Read 30 minutes a day
  • Read 2 or more educational books per month
  • Network 5 hours or more each month

Date : 30/September/2020

Top 10 rules of Warren Buffett
  1. Don't get hung up on mistakes. Tomorrow is another day, go for the next thing.
  2. Don't sleep walk through life.
  3. Paint what you want. You got the brush and canvas is unlimited.
  4. Think independently.
  5. Be in a good environment and friends.
  6. Defining your circle of competence is the most important thing in investing. Understand the economic characteristics of a business.

    “I’m no genius. I’m smart in spots—but I stay around those spots.”
    — Tom Watson Sr., Founder of IBM

  7. Assigning yourself right story and go write the story.
  8. Public speaking & Bring the best out of people are good talents need to have.
  9. Need to have emotional stability
Top quotes of Charlie Munger
  1. Take a simple idea and take it seriously.
  2. People calculate too much and think too little
  3. The big money is not in the buying or the selling, but in the waiting.
  4. What are the secrets of success? – one word answer: "rational"

    rational : based on or in accordance with reason or logic.

  5. Knowing what you don’t know is more useful than being brilliant.
  6. If something is too hard, we move on to something else. What could be simpler than that?”
  7. Remember that reputation and integrity are your most valuable assets — and can be lost in a heartbeat.
  8. Spend each day trying to be a little wise than you were when you wake up.

Date : 01/July/2020

Wealth Is What You Don’t Spend, Morgan Housel
  • Learning to contently live with less has the same effect as growing your income
  • Money is often a negative art.
    • It has a lot to do with the actions you don’t take and things you avoid.
  • Everything has a price, and prices aren’t always clear. 
    • The price of exercise(fitness) isn’t just the workout; it’s avoiding the post-workout appetite. Same in finance. The price of building wealth isn’t just the trouble of earning money; it’s avoiding the post-earnings urge to spend what you’ve accumulated.