Common stocks, bonds, active investing and the power of compounding
Almost all investors will know about compounding. But, it’s hard to get through your head what it can really do.
common stocks
There is lots to read while we are away
When I started investing just over 50 years ago, I read that over the long-haul stocks outperform bonds. Over the years, with all the ups and downs of the stock market, I’ve never had any reason to doubt that. But, the majority of publicly traded U.S. stocks underperform Treasury bills. That doesn’t mean you have to identify the next Magnificent Seven. The vast majority of wealth creation comes from a reasonably sized cohort of successful companies
Market (In)Efficiency and beating the market
Behavioral inefficiencies are likely the most enduring because human nature has not changed much over time and is unlikely to change much in the future.
Collaboration – with diverse views – leads to better investing insights
Ideas based crowd source project to improve Nuggets of Investing Wisdom for everyone
A curated reading list while we are away
The single greatest misapprehension I’ve seen by common stock investors in recent years, including many professional money managers, is to misunderstand the impact of company investment in intangibles of lasting value.
The world has changed. The biggest shift in the world of business in the last forty years has been the swing in company capital investment away from tangible assets and towards intangible assets. This has had a major impact on metrics such as earnings, price/earnings, book value of equity, ROC, ROE, CAPE and several others.
Tariffs and their long-term impact on the stock market
As with the British Corn Laws in the early 19th century, tariffs will raise prices for consumers while profiting business owners, even those whose operations cannot compete on a level playing field with global competition. It’s amazing to think that U.S. consumers will probably face higher prices than consumers all over the world. Trump’s billionaire cronies will do just fine. The average American will not.
Legendary investors’ approach to market plunges
Like rainy days, we simply have to prepare ourselves and put up with them. And like rainy days, if we are in the umbrella business, we can take advantage of them.
My thoughts on the Buffett Indicator – current Market Cap to GDP
The best cash flow measure is Warren Buffett’s Owner Earnings. If that is increasing faster than GDP, the fair value of companies will increase faster than GDP
Owning an equal part of every business in town
Buffett is right for an actively managed portfolio and Greenblatt is right for a passive portfolio
The price of risk in equity markets
Mr. Market demands a very high expected return before he will invest in stocks. Whereas Mr. Bond suffers money illusion.
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