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1/ Some thoughts on recent results in the stock market. If you are an investor (as opposed to a speculator) remember that you are buying partial stakes in *businesses.* Would you be comfortable owning the business for years to come if there were no stock price?
2/ Being a thoughtful business analyst requires understanding the basic unit of analysis. You want the operations to create value, which means that investments (tangible or intangible) earn a return > the cost of capital. Profits per se are not the key, it's unit economics.
3/ Be mindful to separate fundamentals (how the business is likely to perform) from expectations (what's priced into the stock). This is very hard to do when stocks move up or down a lot in a short period. Assess where expectations are mispriced. www.expectationsinvesting.com
4/ Recognize that lower asset prices, all things being equal, imply higher expected returns. Real yields are up. Important for the marginal dollar to invest. elmwealth.com/stop-worrying-and-love-the-bomb/
5/ It's easy to get drawn into focusing intently on macro. And there is no shortage of pundits telling you what will happen next. But there's a large literature that shows that experts are poor predictors. Be macro aware and macro agnostic. Think probabilistically. No one knows.
6/ COVID was an exogenous shock that made it really hard to manage companies and investment portfolios. We are now seeing the impact of management actions during COVID, some of it good and some of it not so good. But the shock was a real management challenge.
7/ Warren Buffett recommends reading 3 chapters on investing, and this is not a bad time to revisit them. Chapter 8 (Mr. Market metaphor) and Chapter 20 (Margin of Safety) in Graham's The Intelligent Investor, and Chapter 20 (Expectations/behavioral) in Keynes's General Theory.
8/ Robert Sapolsky is one of the world's experts on stress. He notes that the stress response is "generally shortsighted, inefficient, and penny-wise and dollar-foolish." Stress shortens your time horizon, which can be deleterious to long-term thinking. www.amazon.com/Why-Zebras-Dont-Ulcers-Third/dp/0805073698/

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2/ Listen to @mjmauboussin A LIFELONG LEARNER who has in turn taught many of the great capital allocators of our time––and amplifies TIMELESS tactics + logic proven correct over + over

Great thread Michael!