This Week I Learned #95

“Go to bed smarter than when you woke up”
— Charlie Munger

2020-03-23

  • Men Faber’s simple and hard truths on building wealth and what one needs to be aware of. 

  • “….to outperform the indexes and hit the big returns you need to be weird, concentrated, and different"

  • "Be prepared to experience large drawdowns. There are no safe assets"

  • "...look into investing in public markets, angel investing and entrepreneurship. No option is fast and without risk."

  • https://mebfaber.com/2020/03/03/the-get-rich-portfolio/

2020-03-24

  • Some simple points to keep in mind when investing in a bear market with Gavin Baker. A specific focus on debt/leverage/healthy BS

  • "3x debt to EBITDA was a bright line in the last downturn and one did not want to be above it”; look at covenants for leveraged companies

  • "FCF multiples over EV/Sales. Profit first."

  • "pays to panic early or double down late"

  • "Management teams that cut expenses first are advantaged as it is an area under the curve problem. The earlier the cuts, the less deep they have to be and the better positioned the company is for the recovery. Bad management teams cut late and deep, which leads to them really suffering in the upturn"

  • https://medium.com/@gavin_baker/thoughts-on-navigating-a-bear-market-65cb719b4843

2020-03-25

  • Howard Marks’ memo on market bottoms. 

  • "When everyone goes to cash… that’s probably near bottom. When people are done telling and are in their most liquid positions. Markets dipping and rebounding indicate we have yet to hit absolute points of pessimism. Optimism exists."

  • "What do we know? Not much other than the fact that asset prices are well down, asset holders’ ability to hold coolly is evaporating, and motivated selling is picking up."

  • "“The bottom” is the day before the recovery begins.Thus it’s absolutely impossible to know when the bottom has been reached . . . ever."

  • "The more you want to garner potential gains and don’t mind mark-to-market losses, the more you should invest here. On the other hand, the more you care about protecting against interim markdownsand are able to live withmissing opportunitiesfor profit, the less you should invest."

  • "But is there really an argument for not investing at all? In my opinion, the fact that we’re not necessarily at “the bottom” isn’t such an argument."

  • https://www.oaktreecapital.com/docs/default-source/memos/weekly.pdf

2020-03-26

  • “The investor’s chief problem—and his worst enemy—is likely to be himself. In the end, how your investments behave is much less important than how you behave.” -Ben Graham

  • "The purpose of the margin of safety is to render the forecast unnecessary." - Ben Graham.

2020-03-27

  • “I’ve heard Warren say a half a dozen times, ‘It’s not greed that drives the world, but envy,’” Charlie Munger.

 
Daniel LeeOMD VenturesTWIL