Wow, I knew he was old, but had no idea he wasn't well. Aftermarket movement of BRK.A/BRK.B seems to be muted, so I guess right now investors aren't too worried about the future of Berkshire.
Most of the trades in that stock have been routed through dark pools (they don't hit lit exchanges), so even if there are (huge) trades you wouldn't necessarily see the price move.
>Today's Off Exchange & Dark Pool volume is 6,792, which is 98.11% of today's total volume.
Today's Lit volume is 131, which is 1.89%.
Over the past 30 days, the average Off Exchange & Dark Pool volume has been 97.51%.
The average Lit volume has been 2.49%.
No 99-year-old is "well" in absolute terms. A 99-year-old US man has only about a 66% chance of reaching 100: https://www.finder.com/life-insurance/odds-of-dying. A 95-year-old man has about a 16.5% chance of reaching 100, so he'd already done pretty well.
I wonder what killed him aside just being really old. he died at a hospital and not at home, so something must have happened. his last media appearance was on the 17th of nov 2023.
I just listened to the Acquired interview walking through the redwoods on Sunday. I am gutted because he talked about his 100th birthday celebration at the California club and joked how it was a full party with no invitations left. It broke my heart that he isn't around to celebrate and enjoy that experience.
I actually found that interview to be quite hard to listen to.
Charlie often interrupted the question, answered one that could have been asked, and then later on the interviewer (Ben or David) came around to actually finishing the question, and it turned out not to be the one that Charlie prematurely answered.
He also gave several answers that I didn't think were really insightful, of course YMMV.
I found this interview to be one of the least interesting to be ever published by Acquired.
This is one of his greatest. I wrote a nice summary of Poor Charlie’s Almanack back in 2021 which I’ve occasionally kept coming back to. I think today I‘ll revisit it with a sense of emptiness inside me. I’m sharing it here for others to enjoy: https://www.lostbookofsales.com/notes/poor-charlies-almanack...
I have a Munger quote on my corkboard behind my monitor, which I read every so often and try to embody:
> Feeling like a victim is a perfectly disastrous way to go through life... self-pity is not going to improve the situation... If you just take the attitude that, however bad it is in any way, it’s always your fault and you just fix it as best you can, I think that works
What you mean is probably 'as far as public billionaires goes'. And with regards to 'down to earth' like anyone of prominence they don't care about you or wouldn't help you in any way (and couldn't possibly). So we are not talking about the guy next door who lends you his saw and is already around for advice and a helping hand.
Don't think for a second they aren't selfish in their own way they would have to be in order to be involved and run an enterprise of that magnitude.
What does down to earth mean anyway? Most people probably think that it means you appear to be more like the common man and don't have the typical trappings of wealth (or if you do nobody knows about them).
> What you mean is probably 'as far as public billionaires goes'. And with regards to 'down to earth' like anyone of prominence they don't care about you or wouldn't help you in any way (and couldn't possibly)
That applies to any stranger. Basically, a billionaire is human like any other.
We do idolize Billionaire / celebrity too much, but these unkind takes don't help anyone.
> Don't think for a second they aren't selfish in their own way they would have to be in order to be involved and run an enterprise of that magnitude.
every human is selfish in their own way.
> What does down to earth mean anyway? Most people probably think that it means you appear to be more like the common man and don't have the typical trappings of wealth (or if you do nobody knows about them).
by your definition, he is down to earth. I would not define it like that, but i don't even know how to define it, but i would say that it correlates with not living for the apparatus or "big life" / hype / spend, and enjoying "small" things (ie, good and long lasting friendships, healthy family relations, simply enjoying a meal with people they care)
It's a fantastic read that can really help you understand why supposedly rational masses of people can end up being so wrong. In the tech world, it ends up being more relevant than one would like it to be.
It was revised and updated by Munger - it's better than the original because it has more experience and information. The old one is fine too, but is harder to read and a bit more dated.
Once you start observing the biases he has mentioned in the talk, you realise how vulnurable you are as a human to be co erced into making decisions which could be so wrong.
Human judgment is often flawed due to various psychological biases and tendencies hardwired in our brains through evolution, such as incentive-caused bias, consistency and commitment bias, and deprivation super reaction syndrome.
Figures like B.F. Skinner and Ivan Pavlov conducted important experiments demonstrating how reinforcement and conditioning shape human and animal behavior.
Marketing, advertising, and product design frequently exploit psychological tendencies like contrast effects, reciprocity bias, and social proof to influence consumer choices.
Board of directors are often ineffective at reining in CEOs due to psychological factors like commitment to prior decisions and not wanting to undermine authority figures.
Understanding psychological tendencies can help avoid being manipulated and make better decisions by considering disconfirming evidence and alternatives objectively.
Applying insights from psychology and economics together gives a more holistic view of human decision-making than either field alone.
Education should teach about these psychological tendencies so people can recognize their own biases and make more informed judgments.
Case studies of companies like Coca-Cola and mistakes of leaders like John Gutfreund demonstrate impacts of psychological factors consequentially.
Figures like Charles Darwin and Sam Walton applied self-awareness of psychological tendencies to achieve remarkable success and wisdom.
Secretive conventions and forcing priority on difficult tasks can help overcome natural human biases revealed through experiments.
Thank you for the link, it is an interesting read, and has a lot of funny quotes, stories and some interesting ideas. In the beginning I felt it was insightful, but by the end of the read I felt it was just a bunch of opinions based on personal anecdotes.
(disclaimer -- I'm obviously much less wealthy and successful than Munger)
That's referenced in this interesting blog post with some Munger quotes from ~10 years ago. For context Munger appears to have been centrally involved with Berkshire's various energy plays and investor-owned utility deals (a major fraction of their portfolio).
> "… running out of hydrocarbons is like running out of civilization. All this trade, all these drugs, fertilizers, fungicides, etc. … which China needs to eat with a population so much, they all come from hydrocarbons. And it is not at all clear that there is any substitute.
> "When the hydrocarbons are gone, I don’t think the chemists will be able to simply mix up a vat and there will be more hydrocarbons. It’s conceivable, of course, that they could but it’s not the way to bet."
That's in the context of his arguments about for ignoring any calls for 'energy independence' because it's better to preserve domestic resources for future emergencies.
Every now and then the mask fully slips and you see how many users here really think. Munger was famously anti modern tech and even called the internet a "net negative" for capitalism at one point in 2000, but it doesn't matter because he was rich. Also he made so much money that all the comments where he praised a brutal dictatorship are apparently no big deal, for example for cracking down on Jack Ma who dared to mildly criticise Xi's leadership.
Everything for that share price, Chinese people don't need human rights anyway.
i think it does matter. Also let me take a minute to disconnect the person - which anyone dying even at this age is tragic - from the persona that many people here seem to worship. Personally I don't think that he was a net positive for the hackers that are still around here but I may be wrong.
I really liked Charlie. His stance on China was wrong. People aren’t black and white. It’s a tragically small and uninteresting world if you can only learn from and admire people who never make a wrong step and who only ever agree with you.
Interesting observation. I agree, seems like people, especially so called "hackers", don't want to follow the threads and externalities of these people as far down the causal chain as they would with say, I don't know, starfish reproduction or some other curio. To me, it seems like the most fertile ground for the awareness that billionaires aren't in a vacuum, that fundamentally greedy decisions make our planet worse off..reality has a complexity bias, and it doesn't take much to realize how much harm these people have caused.
I guess lots of people find
him interesting (see HN guidelines)
Charlie (and Buffett) are often recommended here for their mental models as their approach to investing and finance are very transferrable in startups/engineering. At the end of the day, large scale software engineering is mostly about managing risk, strategy, and corporate finance/value. Often, Poor Charlie's Almanack is recommended by my top Staff+ colleagues.
Genuinely sad to hear. His wit and sage advice will be missed. For anyone who has the means to visit a Berkshire Hathaway annual shareholder meeting, it's worth it at least once.
Pretty Sharp til the end. The fact that people were still listening to what he has to say about investing in Alibaba as recently as this month is actually pretty nuts (in an impressive way).
Was he? I listened to an interview of his a year or two ago and he didn't seem to be all that sharp at point. Amazingly sharp for a guy who was almost a hundred, sure, but not relative to a typical 80-year-old. He must have been amazing when he was younger, though.
I think it depends on what you mean by sharp. Quick? No, physical capabilities. His understanding of companies/markets/etc still were considered quite sharp by most investors I know.
time will tell. I don't think there is anything to vindicate here. Also, really smart people are wrong about a lot of things all the time - being wrong about one thing should not diminish your other contributions.
"wisdom"... It's a really great video, to illustrate something else. Humanity continues to progress and evolve, as time is the ultimate boundary to those in power - time empowers new generations to perceive the world from a fresh perspective.
Every plan should be on the table to provide more safe, affordable, community-oriented housing than is available today. Artificial light and ventilation in bedrooms are routine (e.g., every skyscraper in the winter) and should not have been a dealbreaker, especially if this is one choice out of many for the students.
"Imagine taking out much smaller student loans, to live in a space with vastly improved common areas, and having your own isolated space to sleep instead of having to share it with 1-2 others."
To be clear, I think the building is awful and fails at most of its stated goals, but I think the goals themselves were solid.
Munger was the guy who kept Buffet at least somewhat grounded. It's relevant because it's true.
Or Peter Thiel. Or Larry Ellison. Or Jack Dorsey. Musk is just the most relevant example.
We've taken the mahogany-and-tweed businessmen who realized that at some level they had a responsibility to not be _complete_ assholes to the society and systems that created them, and replaced them with business cult figures.
Would Munger and Buffet make layoffs despite having billions? Sure. But they actually _believed_ in the system and would work to protect it in a way that protected their interests as well as the interests of others. See how BH handled Goldman Sachs vs. how Peter Thiel handled SVB, or how Musk handled the takeover of Twitter.
How was buffet ungrounded? If anything he was too conservative and his real estate still has predatory loans. The recent gains from BH are due to new management to the tech industry from other managers.
in his early days, Buffett made is money by buying "cigar butts", the analogy being that you can pull a cigar out of the ashtray for free and get one more puff.
These were trash companies that Buffett could wring for one more dollar before they inevitably expired. The problem was that it didn't scale. Munger revolutioned Buffetts method by essentially teaching him to buy great companies are fair prices rather than fair companies at great prices.
Charlie Munger is one of the closest things to a "hero" I've ever had. Others have named them, but Poor Charlie's Alamanack or his Psychology of Human Misjudgement are both incredible.
I've made a point of seeing him at Berkshire Hathaway's annual meeting every last few years. He had many trials in his life but lived it well. His wit and wisdom will be missed.
Arguably the guy did nothing worthy of admiration. Sure he managed to multiply cashflow, but on my books that doesn't stand nearly to definition of hero.
Don't get me wrong - I enjoy his books and interviews perhaps like everyone else. He was incredibly smart character, no doubt about that. But hero?
Not OP but mr Munger and Buffet have also held steady course in an increasingly hype driven financial world.
And they've stayed course since the 60s!
For that alone they've become (cult) legends among small time investors. As a small time investor myself born in the 90s it is insane the amount of bullsh*t social media will push onto you regarding finance.
Their annual meetings where they answer questions are some of the only sane financial advice to be found on YouTube.
They did't do anything with the cash except piling it up and multiplying. By all means they could do that - don't get me wrong again, but that doesn't make them heroes, does it?
Their videos are by far _not only_ sane advice out there. They are good, but any decent book on the subject value much more.
He is a defacto investment hero. Berkshire Hathaway is reality in sea of insanity. They defined the strategy of finding companies with a good structure, good fundamentals, and a good product and capitalising them.
If you are looking for positive externalities to qualify "hero", he probably played a part in creating a large number of the companies you have ever heard of, employing millions and large part of the success of US markets today.
You’re overplaying your hand a bit here with the cult comparison. It’s becoming pretty obvious that you’re interested in making a case as to why Munger doesn’t deserve to be called someone’s hero, not that you’re here to learn. People have answered your repeated question pretty earnestly but you continue asking it again.
The GP is not trying to convince you that Munger ought to be your hero. Among investers, I can see why he'd be among the most admirable. That's all you need to understand to understand why someone that is not you might consider him a personal "hero".
I mean, half of Australia views Don Bradman as a hero and all he really did was play cricket very well.
Same with certain actors (Alan Rickman springs to mind), chess legends like Gary Kasparov, albeit on a smaller scale.
I think I understand what you're getting at - Charlie Munger didn't change the world the way, say, Jonas Salk did - but that doesn't mean that people aren't going to idolize him. He was at the top of his game, and incredibly bright and witty.
It’s understandable some people will idolise him - pretty much like they can do same for anyone else, no matter how big or small, benevolent or malevolent his/her impact is.
Was just wondering if there is objectively something justifying the definition or it’s deeply subjective.
His actions and the value he created helped to (or actively did) build countless companies, and millions of jobs. Services and products we are using every day. People that earned a living, kids and families enjoying a prosperous life - are all result of his actions.
Moreover, he taught and inspired many others do the same.
That's a hero in my book. Not some sports player, actor or worse - some politician - people are usually worshipping.
> They did't do anything with the cash except piling it up and multiplying. By all means they could do that - don't get me wrong again, but that doesn't make them heroes, does it?
They gave a lot of the cash to effective charities, thereby saving tens of thousands of lives. (I'd need to look up the exact number.)
Miles away from what you seem to have understood. Re-read that statement, and make an effort to understand it. It is very simple really: Charlie Munger was admirable after his wisdom - intentionally and purposely built.
Incidentally, your (delirious and disconnected - I speak of Being, "Being" which is opposed to "having" after at least Fromm, and you are there attempting to adapt what I wrote into concepts of theft) process seems to fall into that bias that Charlie Munger insisted on, of having embraced some judgement so tightly that it blinds you.
Returning to what I expressed: people «not well off», in wisdom, they met somebody «way better», in wisdom - which is a core point in the «achievement» in question -, and through their own effort, facilitated by gifts, «take part of the wealth». With a collective gain.
My original reply was faithful to your question: "what did he do in life worth of admiration", to which you have been replied: "he built himself well". And he shared that achievement generously. Other matters like faults are contextual to different questions.
>Arguably the guy did nothing worthy of admiration.
Hm, isn't that a purely subjective thing? And did he really did nothing worthy of admiration? Isn't it admirable to be great at your job? To write books that people read and enjoy, and draw inspiration from?
That’s why i put the word “arguably. Because it seems to be debatable and naturally i would like to hear the other side.
Clever and smart scammer is extremely great at his job sending people into poverty. Absolutely great at the job. Is it admirable? I’ll leave the judgment to you.
I feel like you're just trying to understand someone else's position, but you're coming across as very militant. Tangential: do you disagree that someone could consider an athlete a personal hero?
>Clever and smart scammer is extremely great at his job sending people into poverty. Absolutely great at the job. Is it admirable? I’ll leave the judgment to you.
You did the opposite of leaving the judgement for me.
You wanted to argue that he did nothing worthy of admiration - so it would be interesting to hear the reasoning (if any) behind that. He lived 99 years, are you sure he did nothing worthy of admiration in his life? I know nothing about the guy but I can see on wikipedia that he was at the top of his class at Harvard. Isn't that potentially admirable? What about him providing free legal aid while being a student? Nothing worthy of admiration? Are you sure that none of his family members didn't find him admirable? His neighbours or colleagues?
Again, saying that he never have done anything admirable is a pretty strong claim that you have failed to argue for.
Could be a case of mismatched focuses. If someone is focused on tech, they might idealize Musk or Jobs. If someone has roots in the financial realm, they might thing Buffet is their hero.
That’s why I’m asking. Is it possible you can’t understand why Munger is a hero to some because you don’t live in that world?
For the record my heroes are Steve Irwin and my Aunt Patty, so it’s also completely subjective and highly contextual.
> Is it possible you can’t understand why Munger is a hero to some because you don’t live in that world?
Absolutely so. That’s why i am wondering if those people who consider him as a hero can explain reasons. Loving making money is a legitimate reason - no problem with that, everyone has own goals in life.
My heroes, if you will, happen to be regular people, whose names won’t tell you anything, so I hope you kindly excuse me on that.
Again, there’s arguably nothing wrong with idealising, however by definition it rarely has anything to do with real life qualities. Again, nothing wrong with it.
Specifically, this paragraph is the general way I was thinking about:
"Munger’s hero was Benjamin Franklin, whom he admired for his curiosity, ingenuity and wit. Munger’s own common sense, biting humor, pathological bluntness and disdain for conventional wisdom made him a celebrity among investors"
For me, personally, it was the way that he lived his life, was extraordinary brilliant, a polymath, and changed multiple fields of study (investing and arguably behavioral psychology.) He has not only directly created jobs, as others have stated, of millions, but has also indirectly altered the lives of millions for the better. He is one of the greatest minds in investing and he freely educated millions on his methods.
At the same time, he had some incredibly rough times and bore it with grace. For me, setting this type of example is also noteworthy. There are also the small things -- people who have been around him, he's incredibly respectful on an individual basis, always showed up early, and in general, lived in a way that I aspire to living.
The unfortunate aspect of what you are positing is that we cannot capture the opportunity cost of Munger’s actions, and so therefore your argument cannot be disproved. As a corollary, I also wonder if Bill Gates’ shepherding of his personal charities is actually any better than the alternatives. Lionizing ultra-capitalists represents an opportunity lost for a more wholistic and democratic economic system. Glad you found someone to motivate you to work smarter.
Whenever I want to give an example about American capitalism...I always look to Buffett and Munger as examples. These are people who invested and created long-term value for shareholders, building up economies along the way.
The antithesis of crypto bros selling tulip bubbles and some tech companies selling overpriced stocks based on hype. We need more Mungers in the world as the current gen die of old age.
What? This sounds like it waz a company that ran a loyalty program for retailers. How is that anything like a tulip mania? Sounds like jist a normal, legit business
They invested in opportunities that provided value for them, but this not the same as value investing. They got special deals on stocks unavailable to ordinary investors, like in 2008.
That is a good question. With Gen Z being trained to only be interested in get rich quick schemes and having a TikTok attention span, we may never see another great pure fundamentals investor for a long time.
"The youth of today love luxury; they have bad manners, contempt for authority, disrespect for elders, and love talking" ~ Socrates, 432 BC.
The only older than elders writing off the youth is the youth proving them wrong. Let's hope some follow Charlie's quote instead: "If you've got anything you really want to do, don't wait until you're 93. Start now, and don't stop!"
You do realize that societies rise and fall, right? Greek culture was falling from its golden age around the time of that quote (regardless of who actually said or wrote it). Things would soon get so bad Plato recommended his disciples drop out of society into a sort of monasticism.
You have to remember that Bogle/Munger/Buffet all gained prominence when value investing wasn't a thing and investing of any kind was wildly out of reach for the common man. Today anyone can go online and buy VTI in minutes. Every financial advisor and 401k plan recommends index funds by default, and it is how the vast majority of people and organizations store their wealth. It doesn't need any more cheerleaders or icons. It had simply become synonymous with investing at large.
Value investing has very little to do with investing in ETFs/indexes. By definition, investing in an ETF can't be value investing, because value investing is about picking (yes, picking) stocks that are undervalued. And that implies going against the market. The complete opposite in buying into the market through an ETF.
VTV (to name the biggest one) has been consistently either tracking below or severely underperforming the S&P. If there is value to be found, that's not there.
Value investing is “an investment paradigm that involves investing in stocks that are overlooked by the market and are being traded below their true worth”.
Correct me if wrong, but I don’t think index funds come under that paradigm.
It depends on how the index is constructed. A market cap index cannot be value investing. A market sector index is almost surely not value investing (unless that entire sector is undervalued).
An index constructed specifically using value measures as the criteria for inclusion can be (at least arguably so).
But then also a fund or an index fund or an Index ETF wouldn't be complete without ethical review for the sustainable competitive advantage given e.g. GRI+#GlobalGoal sustainability reports.
When you own enough of a company to bring in a new team.
I think the larger point is that public capital markets have become steadily more efficient. There are no "value stocks" anymore because nothing is overlooked by the market, those old opportunities have been arbitraged away. Modern computing systems have made it practical to look at every stock every day, so all stocks now trade at their "true worth" because all publicly available information gets instantly priced in.
Now pretty much the only way for investors to (legally) beat the market is to do proprietary research in ways that others can't easily copy. You need information that no one else has.
As a counter-argument, you usually need to read a lot into the reported numbers, for example read the 10K notes for multiple years in the past. That's the only way to know that the 3B in assets showing up on the balance sheet for "goodwill", to use one easy example, are not really worth 3B. There are many more-nuanced factors that work alike. The reported numbers are what the accountants think might fly under GAAP, and the accountants work for the CEO, who has a say in the accounting "intent".
To test whether markets are perfectly efficient, just look for large movements over time. If a stock goes up 20% in a year, the market might have undervalued it last year, or is overvaluing it this year. It's unlikely the it was correctly valuing it at both times. In the absence of a Covid-19 pandemic, act of god, etc. of course.
You could say that the market just takes "investor sentiment" into account, and is therefore still efficient. But value investing is a strategy that looks for misplaced investor sentiment and exploits it. If that's the way you define an efficient market, than I'd say an efficient market is no obstacle to a value investor.
> If a stock goes up 20% in a year, the market might have undervalued it last year, or is overvaluing it this year. It's unlikely the it was correctly valuing it at both times. In the absence of a Covid-19 pandemic, act of god, etc. of course.
Or the company has grown its revenue by 20% in 1 year which isn't necessarily unheard of. Or they significantly beat the expectations of analysts / their own guidance. In all of those cases the stock could have been correctly valued & still experienced growth.
>To test whether markets are perfectly efficient, just look for large movements over time. If a stock goes up 20% in a year, the market might have undervalued it last year, or is overvaluing it this year. It's unlikely the it was correctly valuing it at both times. In the absence of a Covid-19 pandemic, act of god, etc. of course.
It's not the investment thesis, it's a thought experiment to test market efficiency. It's a test to see whether markets are always efficient, and to me demonstrates that they are not, and that value investing might be an interesting thesis to pursue still.
People have been saying for decades that value investing is not possible since the market is too efficient. My point is that it is not efficient enough to prevent value investing from being a successful strategy.
The efficient market hypothesis has been dogma for about half a century, but there's a lot of academic research showing that value and various other factors outperform anyway. There are all sorts of structural and psychological reasons they might persist; e.g. a short-term bias among fund managers, who tend to lose investors if they underperform a few quarters.
The research does say that value doesn't work quite as well as it did decades ago.
There is no reliable evidence that value investing still outperforms the market on a risk-adjusted basis. Everyone knows the trick now so the trick no longer works.
There's no reliable evidence that it doesn't, either. Value has never been something that works all the time. You have to put up with lagging performance when growth stocks are ascendent, which could be a reason that value keeps working in the long term. Time will tell whether it has its day again.
This doesn't happen any more. Back then you could find companies with a cap that was LESS than the money they had in the bank. Those were no brainer deals.
This strategy was actually pioneered by buffets mentor Benjamín graham. By just blindly following a formula you would do value investing by calculating NAV vs market cap.
Buffet took it one step further. He calculates another type of value called intrinsic value and that relies on other factors rather not just the ratio of assets to cap. Part of it relies on consistency of revenue, growth and qualitative aspects of the business as well.
> This doesn't happen any more. Back then you could find companies with a cap that was LESS than the money they had in the bank. Those were no brainer deals.
For a while, Yahoo was famously worth less than its stake in Alibaba. But it was also not clear whether shareholders could get management out of the way to stop destroying value.
> This doesn't happen any more. Back then you could find companies with a cap that was LESS than the money they had in the bank. Those were no brainer deals.
Plenty of companies trade at a discount to book value. I found over a thousand with a stock screener.
> Every financial advisor and 401k plan recommends index funds by default, and it is how the vast majority of people and organizations store their wealth. It doesn't need any more cheerleaders or icons. It had simply become synonymous with investing at large.
This is passive investing, not value investing.
Value investing is very much active investing, otherwise how would you select the undervalued assets?
Value investing is about finding undervalued companies and buying them while avoiding the properly valued or over valued companies. It has nothing to do with ETF's or index funds.
EDIT: My hobbyist, lay understanding, this is not investment advice, I likely have errors in my understanding
I've seen Growth and Technical investing be contrasted to Value. Growth being looking for companies which have not actualized revenue goals but appear to be able to do rapidly(they're growing, look for the ones that grow fastest), Technical is looking at trends and patterns (they're trending, catch the trend and get off before others do).
In my lay understanding Value investing looks for margins of safety through companies which are worth more on the books than they're shares are selling for, or where their cashflows make them look attractive relative to bonds of their equivalent grade. An example might be if AAPL took a nose dive and was selling for less than $167B (which is their cash on hand) that'd be an excellent Value play.
Or assume their equivalent bond rate was Single-B (Currently 9.5%) and their Price to earnings rate was less than 10.5 --> Buying AAPL would be similar to buying a Grade B bond for less than the current market rate.
Growth is about future value, which is subtilty different from what you said. You make predictions on what the company will earn in the future.
Value by contrast is looking at current earnings.
Both are predictions of the future value, one just weights the current earnings high. While you often have a bias to one, generally you should consider both. Don't buy current income if growth says the company will collapse. Don't buy growth if the company won't grow to support the value in the future.
Most people buy exciting stocks, not cheap stocks (cheap relative to intrinsic value).
Value stocks are by definition boring and unknown. Think iron ore mines, regional banks, house builders, carpet makers, and other yawn-fest-profit-machines.
If it's well known and great value, it's got to be boring. For the most part, they're just completely unknown though - most people could name maybe 5 public companies, nevermind 100.
Former Financial Advisor [This is not personal financial advice]:
Stock prices go up and down, but usually your goal is to buy stocks low and sell them high.
Growth investing looks to trending sectors and companies and lets say 'bets' on a certain future playing out and thus being good for certain companies.
Value investing is an investment strategy where you deep dive on the financial fundamentals of a company and determine your own measure of worth, or what is sometimes called a fundamental value. In essence your own financial calculations give you a fundamental value that you think the stock is "actually" worth.
Having done this for a number of companies you then keep track of the market, and when, and only when, the stock price drops below your own fundamental value price then you buy.
Munger and Buffet would pair this approach to also planning to hold the stock for the long term and see themselves as owning part of the business over many years.
Often a stock might drop when the growth story turns against it (eg. AI is more exciting than crypto stories now), and this is likley when Value investors would get into a stock as it was now below their fundamental valuation and hence predicted on their models to go back up over time.
Mutual fund managers can often be classified as having a value or growth or index approach (and others). And for most normal investors it's usually good advise to take advantage of diversification and back a few different approaches in building a long term focussed portfolio.
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Value investing is a strategy. Index funds are a vehicle. The two can and do coexist, even more so than any other such pair because their risk profile (conservative) and time horizon (long term) are so well aligned.
Exactly. What makes it index investing is low fees and simple, objective stock selection without human judgement. There are various well-studied criteria for value stocks.
An S&P500 index does stock selection too, it's just picking large-cap stocks instead of value stocks.
Large/Small are not correlated to value/growth. I for instance, invest pretty much all my money on ETFs such as ISCV, that invest on companies that fit the small and the value criteria. Over the decades, these two factors combined seemed to be the ones that on average gave the most returns.
The term "value investing" is confusing because it is used in two different ways:
The first way it's used is to describe buying stocks that are cheap relative to their current financial characteristics (price to book, price to earnings, price to FCF, etc). This approach is usually contrasted with "growth", which would refer to investing in companies with a compelling thesis and bright future ahead of them.
A second way the term "value investing" is used is to describe the approach of Buffett/Munger where the investor compares the current price to the present value of the future cash flows and seeks a margin of safety above that.
You can do passive investing in the first approach. Just go buy ETFs that weight towards value metrics, like Vanguards $VTV value ETF. You can't really do passive investing in the second approach, aside from investing money in the funds of people who do that for you.
You’ve just described the same thing twice. You have a model for how to value a company, and you look for examples of market inefficiencies. Buffet/Munger initially took advantage of the fact that there used to be much more opportunity to find these inefficiencies, because information was used much more inefficiently (via mountains of paper records). That’s not the case any more with huge amounts of digital information available along with the technology to process it as quickly as it becomes available.
So-called "value ETFs" mostly don't contain stocks that I consider value stocks. A value stock's price at the time of purchase must be below the historical average market P/E multiple, with a reasonable growth rate expectation and analyst forecast. It should not have a high LT debt-to-capital ratio, and it should pay a stable dividend. If you look into those "value ETFs," there is a lot of garbage. Some companies from their portfolio were good value stocks many years ago, but they still keep them in the portfolio now, even though growth and expectations have deteriorated substantially. As a passive ETF investor, you would end up much better with a simple SPY/SPX or even BRKB than with those so-called value ETFs. Just compare the charts if you don't believe me.
Here is what Buffett says about value investing (in his 1992 BRK shareholder letter):"In addition, we think the very term “value investing” is redundant. What is “investing” if it is not the act of seeking value at least sufficient to justify the amount paid? Consciously paying more for a stock than its calculated value—in the hope that it can soon be sold for a still-higher price—should be labeled speculation (which is neither illegal, immoral nor—in our view—financially fattening).
Whether appropriate or not, the term “value investing” is widely used. Typically, it connotes the purchase of stocks having attributes such as a low ratio of price to book value, a low price-earnings ratio, or a high dividend yield. Unfortunately, such characteristics, even if they appear in combination, are far from determinative as to whether an investor is indeed buying something for what it is worth and is therefore truly operating on the principle of obtaining value in his investments. Correspondingly, opposite characteristics—a high ratio of price to book value, a high price-earnings ratio, and a low dividend yield—are in no way inconsistent with a “value” purchase."
In addition to getting in on the 'value investing' train early, they built their fortunes because they were there with capital in the 1960s, the best time to begin a 'buy and hold' strategy.
Back in the '60s and '70s, stock market capitalization grew roughly in line with GDP. But from the 1980s onwards, it grew at a level that far outpaced GDP growth [0]. So investors who were already wealthy in the '60s had the capital necessary to take advantage.
Many "financial advisors" will put you in funds with high expense ratios that give them a good sales commission, then take another 1% of assets under management on top. Eventually people wise up and move elsewhere.
> investing of any kind was wildly out of reach for the common man
Oh baloney. I signed up for a Schwab account and started buying stocks at my first job long before the internet. My dad started buying stocks in the 1940s on his military pay (never much). Elevator boys were famously buying stocks in the 1920s.
All the "reach" required was some get-up-and-go to sign up for a brokerage account. It didn't cost anything. They didn't check your tax returns or do a credit check.
The whole point of the stock market was to sell stock to anyone who would buy it.
So that is about $3k in todays money you had laying around and could risk. Are you sure you are well attuned what is within the reach of the common man?
In the annual letter to shareholders on 2014, it was suggested that both [Ajit] Jain and Greg Abel could be appropriate successors for Warren Buffett as CEO of Berkshire Hathaway.
I found this out the hard way when I saw an email from vanguard saying they would be charging me $25/year/fund unless I signed up for e-delivery AND moved all my accounts over to their brokerage.
Vanguards death by a thousand nickle-and-diming-cuts has begun.
Yes. I got that too. I don't want their brokerage, just their funds. I'm paying the $25/year fee. I want separation of functions, for security reasons.
i find it funny how the bryan johnsons of the world take like 123 pills every day and optimize all the fun out of life and we still dont really really know if it works or not
and then old geezers like munger and buffett do whatever the hell they want and outlive everybody
genetics. they matter a ton . read the bios of really old people (100+ yrs old) and nothing really stands out beyond having a lot of family member who also lived a long time. I think a low-stress lifestyle helps a lot too.
Commenting only on their professional lives. Their investment strategy was generally not a high stress one, they clearly enjoy their work so one could assume their professional lives were generally low stress.
This is a fair point. If you exclude the early part of his life, working as an asset manager is easy work. Most jobs are much more stressful. Basically, you sit around and read annual/quarterly reports and try to find the next company to buy. To be clear, this type of asset management is similar to private equity. They are buying whole companies. This business is much lower volatility than buying/selling stocks for fund management. Also: Fewer transactions. So I would say the 2nd half of his life was low stress (outsider's view, of course).
They lived frugal lives, with everything needed covered for probably 10'000 years ahead. Large families, plenty of friends and a lot of wisdom. Yeah, I think Charlie and Warren's life's have way less stress than most people do.
Jack LaLanne died at 96 years old, yet my grandpa who's eaten tons of Taco Bell for most of his life is alive at just a hair from that age. I wonder what people will think about the obsession with "longevity" in the likely outcome of David Sinclair or Andrew Huberman dying in their 80s or earlier.
There a tribe in Ecuador with reduced height studied by Walter Longo etc. They have a mutation in their growth hormone receptor, that means that they experience less effect of human growth hormone, hence reduced height. And their lifestyle is rather unhealthy: alcohol, smoking, sugars, junk food, obesity etc. Yet they rarely experience diabetes, cancer etc probably due to reduced mTOR pathway activation.
In the context of this specific post regarding Charlie Munger, you can't say that it's genetics unless you measure specific genes. He could be 100x Bryan Johnson, but Bryan Johnson at least makes his protocols open for use. And Munger didn't even bother to make a genetics test with his curiosity, thus providing no essential value to human civilization.
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[ 3.1 ms ] story [ 357 ms ] threadI don’t know if it’s right or wrong but regardless, it’s extremely interesting as far as assertions go.
>BRK.A Off Exchange & Dark Pool Summary
>Today's Off Exchange & Dark Pool volume is 6,792, which is 98.11% of today's total volume. Today's Lit volume is 131, which is 1.89%. Over the past 30 days, the average Off Exchange & Dark Pool volume has been 97.51%. The average Lit volume has been 2.49%.
https://chartexchange.com/symbol/nyse-brk.a/exchange-volume/
So you're saying I (or whoever) can can buy shares for less in one of the "dark pools" and sell them on the market and make free money?
It doesn't matter if the trade happens on or off book, it all gets reported nearly instantly anyway.
So you're saying there is an arbitrage opportunity and you can literally make free money? Because that doesen't make much sense..
You might not see all the trades immediately, but they are still reflected in the price with minimal delay.
Acquired podcast got to do one of (possible the) last interviews with him a month ago for anyone looking for recent content from him: https://www.acquired.fm/episodes/charlie-munger
Also Stripe Press is releasing just next week a book (technically re-release of an older book) on his collected thoughts: https://press.stripe.com/poor-charlies-almanack
"TRUE G IS IF YOU DIE AT AGE 99 AND THEY STILL WAIT UNTIL AFTER THE CLOSE FOR THE ANNOUNCEMENT."
[1] https://x.com/INVESTMENTSHULK/status/1729608350751449218?s=2...
Charlie often interrupted the question, answered one that could have been asked, and then later on the interviewer (Ben or David) came around to actually finishing the question, and it turned out not to be the one that Charlie prematurely answered.
He also gave several answers that I didn't think were really insightful, of course YMMV.
I found this interview to be one of the least interesting to be ever published by Acquired.
> Feeling like a victim is a perfectly disastrous way to go through life... self-pity is not going to improve the situation... If you just take the attitude that, however bad it is in any way, it’s always your fault and you just fix it as best you can, I think that works
As the discussion here is veering off topic, I think we may as well merge this subthread into that thread and magically make them all on topic again.
https://www.youtube.com/watch?v=pqzcCfUglws
Don't think for a second they aren't selfish in their own way they would have to be in order to be involved and run an enterprise of that magnitude.
What does down to earth mean anyway? Most people probably think that it means you appear to be more like the common man and don't have the typical trappings of wealth (or if you do nobody knows about them).
That applies to any stranger. Basically, a billionaire is human like any other.
We do idolize Billionaire / celebrity too much, but these unkind takes don't help anyone.
> Don't think for a second they aren't selfish in their own way they would have to be in order to be involved and run an enterprise of that magnitude.
every human is selfish in their own way.
> What does down to earth mean anyway? Most people probably think that it means you appear to be more like the common man and don't have the typical trappings of wealth (or if you do nobody knows about them).
by your definition, he is down to earth. I would not define it like that, but i don't even know how to define it, but i would say that it correlates with not living for the apparatus or "big life" / hype / spend, and enjoying "small" things (ie, good and long lasting friendships, healthy family relations, simply enjoying a meal with people they care)
Munger and Buffet do seem to fit that.
It's a fantastic read that can really help you understand why supposedly rational masses of people can end up being so wrong. In the tech world, it ends up being more relevant than one would like it to be.
A transcript of the original speech at Harvard, June 1995, should be e.g. at
https://jamesclear.com/great-speeches/psychology-of-human-mi...
A recording of the original speech is at
https://www.youtube.com/watch?v=Jv7sLrON7QY
Youth really is fleeting.
So is all of life.
Signed, a 60 year old
As an aside, it does aggravate me that so many companies have reverted back to the 2 digit year after going through so much Y2K refactoring.
http://www-personal.umich.edu/~venky/teach/Munger-misjudgmen...
Will try the original long form content.
Also this is such a low effort post … feeding text into an algorithm and pasting the results.
https://fs.blog/energy-independence-is-a-terribly-stupid-ide...
> "… running out of hydrocarbons is like running out of civilization. All this trade, all these drugs, fertilizers, fungicides, etc. … which China needs to eat with a population so much, they all come from hydrocarbons. And it is not at all clear that there is any substitute.
> "When the hydrocarbons are gone, I don’t think the chemists will be able to simply mix up a vat and there will be more hydrocarbons. It’s conceivable, of course, that they could but it’s not the way to bet."
That's in the context of his arguments about for ignoring any calls for 'energy independence' because it's better to preserve domestic resources for future emergencies.
Everything for that share price, Chinese people don't need human rights anyway.
i think it does matter. Also let me take a minute to disconnect the person - which anyone dying even at this age is tragic - from the persona that many people here seem to worship. Personally I don't think that he was a net positive for the hackers that are still around here but I may be wrong.
Charlie (and Buffett) are often recommended here for their mental models as their approach to investing and finance are very transferrable in startups/engineering. At the end of the day, large scale software engineering is mostly about managing risk, strategy, and corporate finance/value. Often, Poor Charlie's Almanack is recommended by my top Staff+ colleagues.
Multibillionaire hubris is truly something else.
If it's from rich people it's hubris. If someone less famous who got what they wanted it's cool.
To be clear, I think the building is awful and fails at most of its stated goals, but I think the goals themselves were solid.
My eyes popped the first time I learned what my American colleagues paid for their education.
Internet: "how fast can I make this about Elon Musk?"
Or Peter Thiel. Or Larry Ellison. Or Jack Dorsey. Musk is just the most relevant example.
We've taken the mahogany-and-tweed businessmen who realized that at some level they had a responsibility to not be _complete_ assholes to the society and systems that created them, and replaced them with business cult figures.
Would Munger and Buffet make layoffs despite having billions? Sure. But they actually _believed_ in the system and would work to protect it in a way that protected their interests as well as the interests of others. See how BH handled Goldman Sachs vs. how Peter Thiel handled SVB, or how Musk handled the takeover of Twitter.
These were trash companies that Buffett could wring for one more dollar before they inevitably expired. The problem was that it didn't scale. Munger revolutioned Buffetts method by essentially teaching him to buy great companies are fair prices rather than fair companies at great prices.
https://news.ycombinator.com/newsguidelines.html
I've made a point of seeing him at Berkshire Hathaway's annual meeting every last few years. He had many trials in his life but lived it well. His wit and wisdom will be missed.
Arguably the guy did nothing worthy of admiration. Sure he managed to multiply cashflow, but on my books that doesn't stand nearly to definition of hero.
Don't get me wrong - I enjoy his books and interviews perhaps like everyone else. He was incredibly smart character, no doubt about that. But hero?
Not trolling, genuinely curious.
And they've stayed course since the 60s!
For that alone they've become (cult) legends among small time investors. As a small time investor myself born in the 90s it is insane the amount of bullsh*t social media will push onto you regarding finance.
Their annual meetings where they answer questions are some of the only sane financial advice to be found on YouTube.
They did't do anything with the cash except piling it up and multiplying. By all means they could do that - don't get me wrong again, but that doesn't make them heroes, does it?
Their videos are by far _not only_ sane advice out there. They are good, but any decent book on the subject value much more.
If you are looking for positive externalities to qualify "hero", he probably played a part in creating a large number of the companies you have ever heard of, employing millions and large part of the success of US markets today.
Would you kindly clarify what “defacto investment hero” means? Hopefully not in cult-like definitions.
To be clear, i am not looking for any positive externalities, just wondering what he did to warrant being called a hero. That’s it.
"a person who is admired for their courage, outstanding achievements, or noble qualities. "a war hero" ".
With not much imagination I bet you could place him in one of the categories.
Nothing wrong in that at all.
Same with certain actors (Alan Rickman springs to mind), chess legends like Gary Kasparov, albeit on a smaller scale.
I think I understand what you're getting at - Charlie Munger didn't change the world the way, say, Jonas Salk did - but that doesn't mean that people aren't going to idolize him. He was at the top of his game, and incredibly bright and witty.
It’s understandable some people will idolise him - pretty much like they can do same for anyone else, no matter how big or small, benevolent or malevolent his/her impact is.
Was just wondering if there is objectively something justifying the definition or it’s deeply subjective.
Guess I grasped the answer by now
Moreover, he taught and inspired many others do the same.
That's a hero in my book. Not some sports player, actor or worse - some politician - people are usually worshipping.
RIP Charlie Munger.
They gave a lot of the cash to effective charities, thereby saving tens of thousands of lives. (I'd need to look up the exact number.)
Being. Being well is an achievement.
What you come up to be is something you do - you develop it.
Now I am doing much better. And seems to be an achievement per your statement.
Does that make me a hero? Or even just a decent human being?
Being well is not much of achievement if we don't look at bigger picture - how it was made and if it was put to work at greater good.
Miles away from what you seem to have understood. Re-read that statement, and make an effort to understand it. It is very simple really: Charlie Munger was admirable after his wisdom - intentionally and purposely built.
Incidentally, your (delirious and disconnected - I speak of Being, "Being" which is opposed to "having" after at least Fromm, and you are there attempting to adapt what I wrote into concepts of theft) process seems to fall into that bias that Charlie Munger insisted on, of having embraced some judgement so tightly that it blinds you.
Returning to what I expressed: people «not well off», in wisdom, they met somebody «way better», in wisdom - which is a core point in the «achievement» in question -, and through their own effort, facilitated by gifts, «take part of the wealth». With a collective gain.
My original reply was faithful to your question: "what did he do in life worth of admiration", to which you have been replied: "he built himself well". And he shared that achievement generously. Other matters like faults are contextual to different questions.
Hm, isn't that a purely subjective thing? And did he really did nothing worthy of admiration? Isn't it admirable to be great at your job? To write books that people read and enjoy, and draw inspiration from?
Clever and smart scammer is extremely great at his job sending people into poverty. Absolutely great at the job. Is it admirable? I’ll leave the judgment to you.
I feel like you're just trying to understand someone else's position, but you're coming across as very militant. Tangential: do you disagree that someone could consider an athlete a personal hero?
You did the opposite of leaving the judgement for me.
You wanted to argue that he did nothing worthy of admiration - so it would be interesting to hear the reasoning (if any) behind that. He lived 99 years, are you sure he did nothing worthy of admiration in his life? I know nothing about the guy but I can see on wikipedia that he was at the top of his class at Harvard. Isn't that potentially admirable? What about him providing free legal aid while being a student? Nothing worthy of admiration? Are you sure that none of his family members didn't find him admirable? His neighbours or colleagues?
Again, saying that he never have done anything admirable is a pretty strong claim that you have failed to argue for.
Genuinely wondering who your heroes are?
Could be a case of mismatched focuses. If someone is focused on tech, they might idealize Musk or Jobs. If someone has roots in the financial realm, they might thing Buffet is their hero.
That’s why I’m asking. Is it possible you can’t understand why Munger is a hero to some because you don’t live in that world?
For the record my heroes are Steve Irwin and my Aunt Patty, so it’s also completely subjective and highly contextual.
Absolutely so. That’s why i am wondering if those people who consider him as a hero can explain reasons. Loving making money is a legitimate reason - no problem with that, everyone has own goals in life.
My heroes, if you will, happen to be regular people, whose names won’t tell you anything, so I hope you kindly excuse me on that.
Again, there’s arguably nothing wrong with idealising, however by definition it rarely has anything to do with real life qualities. Again, nothing wrong with it.
Specifically, this paragraph is the general way I was thinking about: "Munger’s hero was Benjamin Franklin, whom he admired for his curiosity, ingenuity and wit. Munger’s own common sense, biting humor, pathological bluntness and disdain for conventional wisdom made him a celebrity among investors"
For me, personally, it was the way that he lived his life, was extraordinary brilliant, a polymath, and changed multiple fields of study (investing and arguably behavioral psychology.) He has not only directly created jobs, as others have stated, of millions, but has also indirectly altered the lives of millions for the better. He is one of the greatest minds in investing and he freely educated millions on his methods.
At the same time, he had some incredibly rough times and bore it with grace. For me, setting this type of example is also noteworthy. There are also the small things -- people who have been around him, he's incredibly respectful on an individual basis, always showed up early, and in general, lived in a way that I aspire to living.
the recent Stripe Press release-
Poor Charlie's Almanack: The Essential Wit and Wisdom of Charles T. Munger
https://news.ycombinator.com/item?id=38384587
RIP
The antithesis of crypto bros selling tulip bubbles and some tech companies selling overpriced stocks based on hype. We need more Mungers in the world as the current gen die of old age.
Not directly comparable to crypto but an alternate method of investment.
https://pbs.twimg.com/media/B5-lDJWCUAAwfya?format=jpg
Munger is gone, Bogle is gone, Buffett is 93. Who takes up the mantle of value investing now?
The only older than elders writing off the youth is the youth proving them wrong. Let's hope some follow Charlie's quote instead: "If you've got anything you really want to do, don't wait until you're 93. Start now, and don't stop!"
Correct me if wrong, but I don’t think index funds come under that paradigm.
An index constructed specifically using value measures as the criteria for inclusion can be (at least arguably so).
Click on "value indexes" here: https://www.crsp.org/indexes/ to see some underlying value indexes, and funds like this one track the Large Cap version of it: https://fundresearch.fidelity.com/mutual-funds/summary/92290... (perhaps not surprising, the fund's largest holding is Berkshire B shares)
https://github.com/openlink/Virtuoso-RDFIzer-Mapper-Scripts/...
/? query XBRL https://www.google.com/search?q=query+xbrl
https://github.com/topics/xbrl
But then also a fund or an index fund or an Index ETF wouldn't be complete without ethical review for the sustainable competitive advantage given e.g. GRI+#GlobalGoal sustainability reports.
When you own enough of a company to bring in a new team.
https://pandas-datareader.readthedocs.io/en/latest/remote_da...
Now pretty much the only way for investors to (legally) beat the market is to do proprietary research in ways that others can't easily copy. You need information that no one else has.
To test whether markets are perfectly efficient, just look for large movements over time. If a stock goes up 20% in a year, the market might have undervalued it last year, or is overvaluing it this year. It's unlikely the it was correctly valuing it at both times. In the absence of a Covid-19 pandemic, act of god, etc. of course.
You could say that the market just takes "investor sentiment" into account, and is therefore still efficient. But value investing is a strategy that looks for misplaced investor sentiment and exploits it. If that's the way you define an efficient market, than I'd say an efficient market is no obstacle to a value investor.
Or the company has grown its revenue by 20% in 1 year which isn't necessarily unheard of. Or they significantly beat the expectations of analysts / their own guidance. In all of those cases the stock could have been correctly valued & still experienced growth.
If you say that value investing still works then where is the evidence?
This is technical analysis not value investing.
People have been saying for decades that value investing is not possible since the market is too efficient. My point is that it is not efficient enough to prevent value investing from being a successful strategy.
The research does say that value doesn't work quite as well as it did decades ago.
This strategy was actually pioneered by buffets mentor Benjamín graham. By just blindly following a formula you would do value investing by calculating NAV vs market cap.
Buffet took it one step further. He calculates another type of value called intrinsic value and that relies on other factors rather not just the ratio of assets to cap. Part of it relies on consistency of revenue, growth and qualitative aspects of the business as well.
For a while, Yahoo was famously worth less than its stake in Alibaba. But it was also not clear whether shareholders could get management out of the way to stop destroying value.
Plenty of companies trade at a discount to book value. I found over a thousand with a stock screener.
This is passive investing, not value investing.
Value investing is very much active investing, otherwise how would you select the undervalued assets?
Value investing is about finding undervalued companies and buying them while avoiding the properly valued or over valued companies. It has nothing to do with ETF's or index funds.
I've seen Growth and Technical investing be contrasted to Value. Growth being looking for companies which have not actualized revenue goals but appear to be able to do rapidly(they're growing, look for the ones that grow fastest), Technical is looking at trends and patterns (they're trending, catch the trend and get off before others do).
In my lay understanding Value investing looks for margins of safety through companies which are worth more on the books than they're shares are selling for, or where their cashflows make them look attractive relative to bonds of their equivalent grade. An example might be if AAPL took a nose dive and was selling for less than $167B (which is their cash on hand) that'd be an excellent Value play.
Or assume their equivalent bond rate was Single-B (Currently 9.5%) and their Price to earnings rate was less than 10.5 --> Buying AAPL would be similar to buying a Grade B bond for less than the current market rate.
Value by contrast is looking at current earnings.
Both are predictions of the future value, one just weights the current earnings high. While you often have a bias to one, generally you should consider both. Don't buy current income if growth says the company will collapse. Don't buy growth if the company won't grow to support the value in the future.
Value stocks are by definition boring and unknown. Think iron ore mines, regional banks, house builders, carpet makers, and other yawn-fest-profit-machines.
Stock prices go up and down, but usually your goal is to buy stocks low and sell them high.
Growth investing looks to trending sectors and companies and lets say 'bets' on a certain future playing out and thus being good for certain companies.
Value investing is an investment strategy where you deep dive on the financial fundamentals of a company and determine your own measure of worth, or what is sometimes called a fundamental value. In essence your own financial calculations give you a fundamental value that you think the stock is "actually" worth.
Having done this for a number of companies you then keep track of the market, and when, and only when, the stock price drops below your own fundamental value price then you buy.
Munger and Buffet would pair this approach to also planning to hold the stock for the long term and see themselves as owning part of the business over many years.
Often a stock might drop when the growth story turns against it (eg. AI is more exciting than crypto stories now), and this is likley when Value investors would get into a stock as it was now below their fundamental valuation and hence predicted on their models to go back up over time.
Mutual fund managers can often be classified as having a value or growth or index approach (and others). And for most normal investors it's usually good advise to take advantage of diversification and back a few different approaches in building a long term focussed portfolio.
An S&P500 index does stock selection too, it's just picking large-cap stocks instead of value stocks.
That's not completely true. The indices can involve plenty of human judgement, the S&P500 does, for example.
Yes, that's correct. They are orthogonal concepts.
The first way it's used is to describe buying stocks that are cheap relative to their current financial characteristics (price to book, price to earnings, price to FCF, etc). This approach is usually contrasted with "growth", which would refer to investing in companies with a compelling thesis and bright future ahead of them.
A second way the term "value investing" is used is to describe the approach of Buffett/Munger where the investor compares the current price to the present value of the future cash flows and seeks a margin of safety above that.
You can do passive investing in the first approach. Just go buy ETFs that weight towards value metrics, like Vanguards $VTV value ETF. You can't really do passive investing in the second approach, aside from investing money in the funds of people who do that for you.
Whether appropriate or not, the term “value investing” is widely used. Typically, it connotes the purchase of stocks having attributes such as a low ratio of price to book value, a low price-earnings ratio, or a high dividend yield. Unfortunately, such characteristics, even if they appear in combination, are far from determinative as to whether an investor is indeed buying something for what it is worth and is therefore truly operating on the principle of obtaining value in his investments. Correspondingly, opposite characteristics—a high ratio of price to book value, a high price-earnings ratio, and a low dividend yield—are in no way inconsistent with a “value” purchase."
Excerpt from (my non-monetized blog): https://sileret.com/projects/buffett-shareholder-letters/199...
Original 1992 shareholder letter here: https://www.berkshirehathaway.com/letters/1992.html
Back in the '60s and '70s, stock market capitalization grew roughly in line with GDP. But from the 1980s onwards, it grew at a level that far outpaced GDP growth [0]. So investors who were already wealthy in the '60s had the capital necessary to take advantage.
[0] The Big Bang: Stock Market Capitalization in the Long Run, 2022: https://doi.org/10.1016/j.jfineco.2021.09.008
Oh baloney. I signed up for a Schwab account and started buying stocks at my first job long before the internet. My dad started buying stocks in the 1940s on his military pay (never much). Elevator boys were famously buying stocks in the 1920s.
All the "reach" required was some get-up-and-go to sign up for a brokerage account. It didn't cost anything. They didn't check your tax returns or do a credit check.
The whole point of the stock market was to sell stock to anyone who would buy it.
Historically you typically bought shares in blocks of 100 and the transaction fees were also meaningful.
You couldn't easily buy 1 share of a $20 stock. If you had to buy 100 shares @ $20, that's $2,000 - in 1970 that was a lot of money.
Now, of course, you can buy fractional shares with no transaction fees. (Ignoring things like payment for order flow, etc.)
I also had an ancient car and a cheap apartment, and didn't spend money on booze.
Average new car prices were $14,000 in 1982. I bought my car for $800. So yeah, I'd say investing $1,000 was well within common man finances.
Seth Klarman
David Einhorn
Howard S. Marks
Joel Greenblatt
There are alot of famous and very good value investors who are at the top of their game right now.
Bogle was not a value investor. He was a low(er)-costs advocate (and not even necessarily passive/index investing: e.g., Vanguard has active funds).
There were very, very few people who could do what he did.
Why would it be important that a particular flavour of investor (wealth accruer) is around?
I found this out the hard way when I saw an email from vanguard saying they would be charging me $25/year/fund unless I signed up for e-delivery AND moved all my accounts over to their brokerage.
Vanguards death by a thousand nickle-and-diming-cuts has begun.
and then old geezers like munger and buffett do whatever the hell they want and outlive everybody
People with good longevity genetic don't pay the price as much for their behavior, so they indulge in it and stand out.
But most people don't have that, and can only emulate a little their epigenetic by exercice, diet, etc.
In the context of this specific post regarding Charlie Munger, you can't say that it's genetics unless you measure specific genes. He could be 100x Bryan Johnson, but Bryan Johnson at least makes his protocols open for use. And Munger didn't even bother to make a genetics test with his curiosity, thus providing no essential value to human civilization.