Observations, reflections, quotes & intemperate thoughts...

Updated: Jul 25, 2019



An evolving collection of investment and trading thoughts, personal reflections, quotes and general life lessons gathered over many years of managing money, studying markets and raising a family. While some may seem very basic, others may be counterintuitive. Some are my own observations and conclusions, while some are quotes borrowed from others.


  • The first rule of investing: Check your ego at the door. There is no room for egos in this business.

  • Even the stocks of the largest, most seemingly stable companies in the world can experience bouts of significant volatility (and larger firms have larger tentacles meaning ripple/knock-on effects can be farther reaching).

  • Sometimes, even when you’re right…you’re not right until the market agrees with you.

  • Know when to hold ‘em, know when to fold ‘em. The rules of poker, investing and much of life.

  • "It’s only when the tide goes out that you find out who’s swimming naked.” --Warren Buffett

  • If a position becomes so uncomfortable that it keeps you up at night, cut the position (and your risk) in half. (Personal note—many people I meet seem unfamiliar with the idea of only selling part of a position as opposed to being all or none in a particular stock.)


Magnolia

  • Management: Do as I say, not as I do…not. There are countless instances of management teams encouraging the public to buy stock while they are simultaneously selling. I’ve often read that “insiders sell for a number of reasons, but they only buy for one—because they think the stock is undervalued.” Maybe true but still, sales should be looked at to make sure they are not unusual in timing, size, frequency, etc. Serial selling should at least say something about management’s focus and confidence in the company’s long-term trajectory.

  • Beware of highly-promotional management teams.

  • Be disciplined and follow your process. A stock price/investment may take more time to develop than originally thought, but if it has not violated the fundamental reasons for investment nor any other parameters you have set-up, don’t give up on it but maintain discipline.

  • Water the flowers and pick the weeds—try to avoid picking all of the flowers and watering the weeds. i.e. cut your losers and let your winners run or, know when to hold ‘em, know when to fold ‘em (again).

  • When you’re losing money, minutes feel like hours and days feel like months. It is important to maintain perspective and not get overly focused on short-term events. Bear markets are a fact of life reflecting the nature of a cyclical economy (and the many cycles contained within). They are unavoidable but can potentially be manageable. Bear markets can only be properly identified well after they have begun (possibly after they have ended). Bear markets can also be great sources of opportunity.

  • The longer your time horizon for an investment thesis, the more time you have to be right about the stock.

  • Dividends are real, buybacks are less real (buybacks create the illusion of earnings per share (EPS) growth by lowering the share count, not by growing the businses). While buybacks are a form of "returning capital to shareholders," management often buys their own stock at inflated prices and then suspend the buyback after shares plummet. Much worse when funded with debt.



Spalted oak burl/wart/outgrowth

  • “Plan, don’t forecast.” –Howard Marks

  • This is a business of trying to be “generally right,” not “perfectly right,” as it pertains to stock prices.

  • It’s OK to be wrong. It’s not OK to stay wrong.

  • Learn from mistakes and move on. Don’t spend too much time looking in the rear-view mirror or you’ll miss what’s right in front of you. No matter what happens you are always going to wish you had bought more of the ones you got right and had bought less/sold earlier on the ones that didn’t work (or had done something differently).

  • The economy and the stock market are two different animals. People often speak about them as if they are the same thing. While they are related and often have correlations, they do not necessarily send the same message at the same time (and often de-link at important points).

  • Similarly, a good company does not always make for a good stock price while a "good stock" does not necessarily accurately confer the quality of the underlying business.

  • If you lose 50%, you have to make 100% just to get back to even. Taken a bit further, if you lose 25% of your money, you need to make 33.3% to get back to even. If you lose 10% of your money, you need to make 11.1% to get back to even. If you lose 75%, you need to make 300% to get back to even.

  • "{It takes a lifetime to build a good reputation, but you can lose it in a minute.” - Will Rodgers

  • Diversify, diversify, diversify.

  • Never ever give up.

  • Bull markets and bear markets can truly be identified only with the benefit of hindsight.

  • Fear is not an investment strategy, though it can be a risk management tool.

  • Bull markets have historically lasted longer than bear markets.

  • Market bottoms have historically been more violent and perhaps easier to spot than tops (looking at the tape). Tops tend to be long, evolving processes while bottoms are generally formed after panic selling and widespread capitulation (i.e. rolling tops and "V-shaped" bottoms).

  • "The stock market has predicted 9 of the last 5 recessions."

  • Economists (and the stock markets) have correctly predicted 10 of the last 4 recessions. --not sure who gets credit for this one--I think it's an amalgamation.

  • The Trend is your Friend (..until it's not.)


A piece of (later identifed) walnut tossed on the side of the road. This piece contains some very nice figure/quilting. Hidden in plain sight, left for dead on the side of the road...

  • Consider that trend may be more important than level. Level tells you where you are, trend tells where you are going and thus represents future change.

  • "Skate to where the puck is going, not where it has been." - Wayne Gretzky

  • The Market “hates uncertainty”…yet the Market also “climbs a wall of worry.” Go figure.

  • The “Rule of 72” and “2 to the 10th”:

72/rate of return = # of years needed to for the value of an investment to double.

2^10 = ~1,000x. (2x2x2x2x2x2x2x2x2x2). If something doubles 10x, you have made ~1,000% return.

  • "The Wage/Price Spiral" – This is the name of a particular toxic brew that keeps the Fed up at night and can become a major market headwind. As wages go up, companies can raise prices more easily. As companies raise prices and bring in more revenues, they can pay higher wages. This can quickly lead to "overheating" of the economy and can jolt inflationary pressures higher, forcing the Fed to tighten monetary policy (sometimes aggressively) to keep inflation in check.

  • Buy the Rumor/story, Sell the News/fact.

  • Don’t take a knife to a gunfight.

  • Don’t try to catch a falling knife (or gun for that matter).

  • Try to buy weakness, sell strength. If you buy strength and sell weakness you increase the odds of buying at the top and selling at the bottom. (Easier said than done).

  • Sometimes the smartest move is not to move at all.

  • Large mergers get lots of hype (most mergers do) and the buyer stock can perform well at first. Truthfully, mergers (large ones especially) can be extremely challenging—synergies may be overestimated, cultures may clash, integration may be more complicated, consumer preferences may change, spreadsheet assumptions may be way off.

  • It is amazing how close my “uncle point” often is to a near-term floor in a stock price.

  • Beware of financial engineers selling untested (or “back-tested”), structured products (Collateralized Debt Obligations, Credit Default Swaps, “Smart” anything…)

  • Stay in your lane and resist the temptation to chase the shiny objects (they usually have sharp edges!)

  • There is no bulletproof strategy. Every single strategy has pros, cons, risks and vulnerabilities (both known and unknown).

  • Simply being cheap does not make something a compelling investment. Similarly, being expensive does not necessarily make something a poor investment. Put differently, valuation alone is a poor rationale for an investment decision.


Rough-turned/drying/future bowls

  • Passive vs. active—what’s the difference between 1% of your portfolio going down 100% and 100% of your portfolio going down 1%? This is a thought-provoking question about risk, diversification and tax management.

  • “If everybody indexed, the only word you could use is chaos, catastrophe. The markets would fail.” - John Bogle

  • CNBC is mostly a distraction. They treat investing like a sport.

  • I don't try to "beat the market" because I don't believe fiduciaries should play games with their clients' money.

  • There is a significant over-reliance by policymakers on the short-term action of the stock market as a policy validation tool.

  • Don't chase performance and don't chase consensus (don't try to be like everybody else). Chase your passion.

  • Make sure your life has balance.

  • Learn from your elders, for they have wisdom. Learn from your children for their imaginations know no bounds. My children have taught me more about patience than I could've imagined (and they've learn from their elders that patience does indeed have boundaries…that can be pushed). :)

  • Don't try to be something you're not.

  • "Taste your words before you spit them out." --Andy Card

  • "If it's obvious, it's obviously wrong." --Joseph Granville



Spalted pecan
  • "If you surround yourself with good people, you will be a success. And if you don't concern yourself with who gets the credit, your organization will be a success." --Dad

  • "In the real world, things generally fluctuate between "pretty good" and "not so hot." But in the world of investing, perception often swings from "flawless" to "hopeless."" --Howard Marks

  • Fools rush in...

  • The move from "bad" to "less-bad" is much more powerful than the move from "good" to "great."

  • Faster does not equal better.

  • "Believe half of what you see and none of what you read." --Dad

  • "I skate to where the puck is going to be, not where it has been." --Wayne Gretzky

  • "A lack of planning on your part does not constitute a crisis on my part."



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