A Quote by James P. Gorman
You will not see, in my career, the kind of returns this industry had in 2005 and 2006 for a very simple reason - the banks were undercapitalized, and returns are a function of earnings and capital.
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The ideal business is one that earns very high returns on capital and that keeps using lots of capital at those high returns. That becomes a compounding machine.
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.
I think there's an awful lot of twaddle and bullshit on EVA. The whole game is to turn retained earnings into more earnings. EVA has ideas about cost of capital that make no sense. Of course, if a company generates high returns on capital and can maintain this over time, it will do well. But the mental system as a whole does not work.
Mitt Romney was treated very unfairly. Mitt Romney didn't want to give his tax returns, because people don't understand returns that are complicated, and complex. And he didn't give it. He fought it, fought it, fought it, all the way into September. A month before the election, he gave his tax returns. And they picked out two items that were absolutely perfect. He did nothing wrong. And his returns are very much smaller than my returns.
My goal is to buy a company at a low multiple to normal earnings power several years out and that the company earns good returns on capital at that level of normal earnings. A holding period of more than one year also works quite well as the factors are persistent in years 2 and 3.
There's a Russia angle to all this, because remember, we don't have Donald Trump's tax returns. He did a very - relative summary, 104 page campaign financial disclosure. One year of tax returns, reportedly - we've seen the pictures, 12,000 pages. And tax returns are replete with his foreign interests, including, perhaps, his Russian interests. That may be the reason he doesn't want to turn over his taxes.
Immigrants aren't the reason wages haven't gone up enough; those decisions are made in the boardrooms that too often put quarterly earnings over long-term returns.
Catharsis returns us to the purpose for which were originally intended - to be called by God to do good - and thus ultimately returns us to ourselves.
CEOs are also chief capital allocators. This is a point Warren Buffett has repeatedly made: that the role management plays in allocating capital across businesses and boosting returns on that capital is a critical yet poorly recognized one.
I will release my tax returns. And that's against - my lawyers, they say, "Don't do it." I will tell you this. No - in fact, watching shows, they're reading the papers. Almost every lawyer says, you don't release your returns until the audit's complete.
What you pay for an investment is the single biggest determinant for how successful that investment will be. When equity prices are high, your returns will be lower. When they are cheap, your returns will be higher.
As an investor with small capital, one should prefer businesses that have high returns on capital and that require little incremental investment to grow.
...the dust returns to the ground it came from, and the spirit returns to God who gave it.
I always remind myself that what one observes is at best a combination of variance and returns, not just returns.
I ran back punt returns and kickoff returns, and I played a pretty good game.
Each day is born with a sunrise and ends in a sunset, the same way we open our eyes to see the light, and close them to hear the dark. You have no control over how your story begins or ends. But by now, you should know that all things have an ending. Every spark returns to darkness. Every sound returns to silence. Every flower returns to sleep with the earth. The journey of the sun and moon is predictable. But yours, is your ultimate ART.
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