A Quote by Charlie Munger
Everyone has the idea of owning good companies. The problem is that they have high prices in relations to assets and earnings, and that takes all of the fun out of the game.
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Stock prices are likely to be among the prices that are relatively vulnerable to purely social movements because there is no accepted theory by which to understand the worth of stocks....investors have no model or at best a very incomplete model of behavior of prices, dividend, or earnings, of speculative assets.
Stock prices relative to company assets are no better at signaling the likelihood of future earnings growth than they were the day the Titanic sank, and risk management is a good deal worse.
The intelligent investor should recognize that market panics can create great prices for good companies and good prices for great companies.
Imperfect substitutability of assets implies that changes in the supplies of various assets available to private investors may affect the prices and yields of those assets.
To economists, prices serve as crucial signals to producers and consumers. In a regulated market, the state sets prices high enough for private companies to cover their costs and earn a guaranteed profit for their investors. But in a deregulated market, prices should vary with demand and supply.
Polychain is investing in blockchain assets. We do not invest in private companies or hold shares in private companies. We invest purely in tokens or digital assets, and those include assets that people are familiar with, like bitcoin and ethereum, as well as very early-stage projects.
The big picture is: the main thing you should be concerned about in the future are incremental returns on capital going forward. As it turns out, past history of a good return on capital is a good proxy for this but obviously not foolproof. I think this is an area where thoughtful analysis can add value to any simple ranking/screening strategy such as the magic formula. When doing in depth analysis of companies, I care very much about long term earnings power, not necessarily so much about the volatility of that earnings power but about my certainty of "normal" earnings power over time.
Dragon's Lair' we played a lot as kids. It's a fun game to look at - it's not a very fun game to play. Everyone who played it as a kid had the same experience: It's outrageously expensive, it looks really cool, it draws you in like a magnet, and then it just takes your money and is very frustrating.
Sometimes it takes longer to create value, but if the companies generate more earnings, the stocks will ultimately reflect that.
One of the big problems with growth investing is that we can't estimate earnings very well. I really want to buy growth at value prices. I always look at trailing earnings when I judge stocks.
You can't tell me you can make any system or country work with low wages and high prices, and high wages with high prices don't mean anything when the prices eat up the wages and don't leave anything over.
I have one very basic rule when it comes to "good ideas". A good idea is not an idea that solves a problem cleanly. A good idea is an idea that solves several things at the same time. The mark of good coding is not that the program does what you want, it's that it also does something that you didn't start out wanting.
A young financial writer once brought ridicule upon himself by stating that a certain company had nothing to commend it except excellent earnings. Well, there are companies whose earnings are excellent but whose stocks I would never recommend. In selecting investments, I attach prime importance to the men behind them. I'd rather buy brains and character than earnings. Earnings can be good one year and poor the next. But if you put your money into securities run by men combining conspicuous brains and unimpeachable character, the likelihood is that the financial results will prove satisfactory.
The problem is, to have prices fall would work fine if we didn't have all these built in rigidities on downward prices, because then things don't adjust, and that's how we have recessions and depressions, is prices and costs don't adjust together and they get out of whack, and we end up with dislocations.
It's one of the fundamental principles of the stock market: When interest rates go up, stocks go down. And along with financial companies and cyclicals, technology companies - with their sky-high price-to-earnings multiples - should be among the biggest losers in an environment of rising rates.
The good thing about the dividend-paying stocks is, first of all you have stocks, which are real assets if we have some inflation. I think we're going to have 2%, 3% maybe 4%. That's a sweet spot for stocks. Corporations do well with that. It gives them pricing power. Their assets move up with prices. I'm not fearful of that inflation.
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