if you try to give it out, you get more back

Jaiden 2022-03-10 08:01:51

Warren Buffett and Charlie Munger are undoubtedly wise men who are greatly underestimated by contemporary people. I personally think their status should be at least as high as Russell and Hawking, because they have changed our view of the world. But in China, the investors I know either haven’t heard of it, or don’t believe their tricks, thinking that value investing (referred to as price investing) won’t work in China. Through this documentary, I summarize the Buffett I know.

The advantage of the documentary is that it clearly summarizes the main theories such as cigarette butt picking, insurance float, and moat, and it is accompanied by a good picture. The Solomon Brothers incident is also tense enough that it is difficult to create tension in a documentary, because it is often an afterthought that calms down and looks back, but this one did it.

Disadvantages:

1. Interviews are not at a conversational level.

Interviews include family, company, the Gates, and most importantly, Charlie Munger, using interview footage of the deceased wife. Without the CEO of Coca-Cola, for example, how would the companies he invests see him?

There is no way. Who can mine Buffett? Who can break his shell? Not talking about the death of the father, not talking about the departure of the wife. Interviewer I can think of, Barron's editor-in-chief or Michael Lewis?

2. Planning direction.

There are at least two ways to make a documentary about Buffett, one is to film his investment career, and the other is to film his emotions and career as HBO did, the unique way Buffett and his lover get along, and how to lead him to charity in the end.

HBO's novelty caters to most ordinary audiences, but it also misses most of the turning points in Buffett's investment career. More importantly, the director's understanding of Buffett, Munger, and price investing is still too shallow.

Details below:

1. Benjamin Graham and Picking Cigarette Butts

Why is it called picking cigarette butts? Because cigarette butts are the kind that have a little value, but most people don't like them. Buffett learned this trick from his grandfather. Every year, there are auctions in Omaha Square, and if an item is bid three times and no one buys it, it will pass in and be dropped to a very low price, just a little more than junk. Buffett's grandfather ran a grocery store, and his strategy was to buy this "semi-junk." Because of the square effect - when most auctioneers underestimate a commodity, all auctioneers will underestimate it, and the price of these commodities will drop dramatically in an instant, less than one-tenth of the actual value, which must be far below its actual value. So my grandfather bought it at a low price and sold it at a high price over time. Even if no one buys it, because the purchase price is too low, it will not lose much, in short, it will be a steady profit.

This is very similar to the investment philosophy of Graham, Buffett's mentor and a professor at Columbia Business School. Graham is a very peculiar investor, he doesn't see any company's management, he even thinks meeting them is harmful - it will affect his objective judgment. His daily job is to read financial reports, analyze balance sheets and cash flow, and find companies with low price-to-earnings ratios (that is, low market valuations). Graham said: "Mr. Market knocks on the door every morning and gives you a price. Sometimes this price is high, sometimes this price is low. All investors have to do is to have a value scale, buy when the price is lower than the value, and sell when the price is higher.

Graham will never touch stocks with high price-earnings ratios. The so-called cigarette butt is to buy unpopular stocks with low expectations and low prices. Last year, I saw that the price-earnings ratios of LeEco and Baofeng exceeded 100 times (which means that if you invest 1 yuan now, you can get it back in 100 years). Now many military enterprises are also so high. I don’t know what Graham would think when he saw it.

Complementing Justin's comments: "Graham doesn't even believe in price-earnings ratios. People who came from the Great Depression, what's the profit? This kind of thing may be gone all of a sudden. It's not reliable. He only looks at book value and price-to-book ratio. Really fundamentalist."

He later wrote a book called "Security Analysis," the value investor's bible. He brought Buffett into the business and taught him the philosophy of price investing. This is the first mentor outside the Buffett family.

The cigarette butt picking theory can also be seen:https://xueqiu.com/2858189581/50499473

It is very interesting to talk about the starting price. When I first heard about price betting, a friend told me: The theory of price betting is very simple and can be finished in ten minutes. But the interesting thing is that people who believe will believe it the first time they hear it, and people who don't will never believe it. Later, when I checked the information of the futures boss Liu Qiang, I found that he changed his belief in price investment in his later years (that is, a few years before jumping off the building), but the later operation method was obviously not the principle of price investment, so I think he should still not believe it. Not even Xu Xiang, I think they are all Livemore believers.

Graham and Buffett have an interesting conversation:

Warren, don't worry too much about making money, it won't change the way you live, it changes the way your wife lives. Our wives live differently. Just look, you and I are wearing the same clothes and going to the same cafeteria. So Relax.

2. Munger

Munger is smart, eccentric, likes and hates, and is never kind to others. Buffett is like a good boy, no one hates him, and Munger has his own way all his life, but the two have become best friends for life. The annual BRK shareholders meeting is mainly about Buffett. When asked about Munger, he often said one sentence: I have nothing to add. When he bought Salomon Brothers, Munger didn't want to meet the board of directors at all. He felt that these investment banks were liars. Buffett, however, can turn the tide by serving as company chairman in the face of the biggest crises. I don't think it makes a difference, but Barthes is really the one who gets things and people done at the same time.

Another contrast is that at the beginning of the boom in value investing, academics from major business schools attacked the theory of value investing. In the face of Buffett's outstanding investment performance, they gave an example: 500 people toss a coin, each tossing 7 or 8 times, the total There is one person who is all positive. It means that Buffett is the one with the best luck. Buffett took out a series of records of his brothers and sisters, saying why these gorillas are all from the same village - why are they all Graham's disciples. Munger was too lazy to care about these people, Munger even looked down on Graham. lol

Graham taught Buffett to pick cigarette butts, Munger took Buffett to a higher level: buying stocks that are not so cheap but certainly worth buying. It's still value investing, but it's no longer just companies that are too cheap.

When playing the academic face, Buffett came up with another investment record of the same family, which is also an increase of more than 20% in 50 years. This man was another of Graham's students and his most loyal student, Schloss.

Complementing Justin's comments: "Graham was a director of a government employee insurance company when Buffett was young, so I deduce that he was meeting management...

(Schloss) high school student, Graham has always looked down on him and refused to give He had a chance and admired Buffett. Later, after Graham washed his hands, Schloss also made it himself, with a maximum of 1 billion US dollars. The problem with picking up cigarette butts is that there is no way to accommodate large funds. For example, if you have 100 billion US dollars, the cigarette butts should be at least 500 million US dollars. You have to buy 200 stocks every year, it’s too tiring.

Schloss is also very interesting, especially stingy, a Standard & Poor’s yearbook that looks at stock data is rubbing against his son, not giving money, hahahaha, it’s all this kind of guy, manage ten Hundreds of millions of dollars, a total of two employees, myself, son. They are all geeks, which are essentially the same as geeks in Silicon Valley.”

See: https://xueqiu.com/7462290789/85611117

Munger also likes to think, he does not give up any A little time to think, including waiting for traffic lights. This caused the green light to come on many times, and he was still thinking, stopped in front of the zebra crossing, and the driver behind him went crazy.

Munger's biography, "The Book of Poor Charlie," is much better written than Buffett's "Snowball," because the book is mostly Munger's own speeches and manuscripts. He has his own set of theories: the lollapalooza effect, which means that theories in the universe intertwine, reinforce each other and greatly amplify each other's effects.

Munger also has a very good quote, which he quoted from an advertisement for a machinery manufacturer: New production tools have been invented and manufactured, and those who have not yet purchased and used them are actually paying for the new tools.


3. The Washington Post

This was the key to bringing Buffett from Omaha to the big city, where he learned to deal with people. Of course, the Post also made him very, very much money. I'm not familiar with this part, so I won't write it.

4. Buffett's investment principles.

The first principle is to never lose money;
the second principle is to remember the first rule.

In fact, there are two more: never short, never use leverage.

It is easy to understand not to go short, because no matter how much the stock falls, that is, it falls to 0, the profit from short selling is 100%. But if the stock goes up and the U.S. doesn’t have a limit, the loss from short selling is infinite.

Leverage means you don't have any bullets left, and subsequent bullets are subject to others. This makes it impossible for you to buy high-quality stocks when you see them, and that's not counting the high interest on leverage itself.

The regulation of U.S. stocks is (now A-shares are also), if you hold more than 5% of the shares, you need to publicize them, and then communicate with the company's management. Therefore, many funds hold positions at 4% and 4.99%. They only make money and do not show the limelight. Buffett respects the management of the company very much. Now that China's large state-owned enterprises and Internet companies are acquiring, they are cleaning the management at every turn, including Ping An, Alibaba, and Baidu.

Buffett has done this once before. There is a furniture store across from his company (or a supermarket, I can't remember) doing very well. The founder was an old lady, and then the old lady retired and gave the company to her children. Buffett invested. Later, the old lady thought that the children were doing bad things, and the children did not let her take over, and Buffett did not support her. The old lady opened a new store directly next to the original store, and after a quick glance, everyone went to buy things from her. Buffett immediately knelt down, didn't talk to you at all, immediately relented, and promised the old lady that he would support her afterward.

Last year's U.S. election was the same.




The whole state supports Trump (red), only the blue Omaha (Buffett's residence) stands alone for Hillary. But after the election, Buffett did not hold back at all, unlike The New Yorker and The New York Times, who were still stubborn, and immediately went to show their loyalty.


5. Buffett's annual letter to shareholders.

This may be the best material to study Buffett, and the documentary only mentions one sentence. Buffett's philosophy has changed a lot in his early years and now.

6. The Internet Bubble

The Internet boomed in the 1990s, but it became Buffett's most difficult time. Because Buffett does not believe in the Internet, Internet companies have high price-to-earnings ratios, unclear profit models, and weak cash flow. Why invest? As a result, one Internet company went public, and Buffett was suddenly regarded as an old-fashioned and decadent representative, and the pressure was very high.

There is a very well written article: https://xueqiu.com/6146070786/25511340 "This was the most difficult period of Buffett's life. In the summer of 1999, Time magazine publicly shamed Buffett on the cover: "Warren, what What went wrong? "Warren Buffett is one of the biggest bears on dot-com stocks, but it looks like he's been wrong this time around. Beginning in the second half of 1999, dot-com stocks seem to be the only hot stock. Coca-Cola? Sounds like It seems to be a term from the last century.”

Of course, last year’s announcement revealed that Buffett had invested in Apple. Previously. The only tech stock Buffett has invested in is IBM, and that's after IBM specializes in corporate services and its profits stabilize.


7. Morality

As an agnostic, Buffett should be a person with a low sense of morality, but he is very good at using morality to give himself an advantage (non-pejorative). For example: There is a cameo of Ba in "The Barbarian at the Door". The tobacco company wants Buffett to come forward to buy it. Buffett said: I am no longer short of money, so I don't want to do tobacco business, which will affect my reputation.

Buffett does this, I think it still serves the first purpose - making money. Gossip, arrogance, or a bad reputation can affect efficiency. Although I don't care, I can't guarantee that the people I deal with don't care.

Of course Buffett didn't do anything wrong. If his relationship with his wife and ex-wife (actually, both of them love him, and he loves both of them), if it is placed on the heads of ordinary stars, the damage to the image is probably equivalent to the feminist Yu Han Han.

I was moved by a quote from Buffett in the film. Buffett said when he and his deceased wife were separated but not divorced during their lifetime: love is a strange thing. If you try to give it out, you get more back.

8. American Confidence

In the end, Buffett is all about being born in America, the most free and prosperous country in human history. After the 2008 financial crisis, many people were bearish on the United States. At that time, many media said that the G2 was over. China saved the United States and the world. It would surpass Japan in a few years and catch up with the United States in a few years. Many Americans don't believe it anymore. now what? The United States is the fastest recovering country.

That year, Buffett made a bet with some young star fund managers: Buffett invests in index funds (such as the S&P 50, similar to the CSI 50, blue-chip stocks), funds that do not need to be managed; star managers choose by themselves, Compare returns after ten years. The stake is $1 million. Now, nine years later, Buffett is far ahead, saying he is willing to bet another decade.

Whenever the market fluctuates slightly, Buffett asks: Do you still have confidence in the United States? Do you think the US economy will grow or decline in the future? The answer is always yes, growth.

This also gave birth to Buffett's extremely domineering assertion: "In the face of untapped treasures, the wealth that has been unearthed on American soil pales in comparison. Indeed, in the past 238 years, who can make money by shorting the United States?"

(In his most recent annual letter to shareholders, Buffett said the "Mother Lode" of opportunities ran through America. Buffett added, "The treasures that have been uncovered up to now are dwarfed by those still untapped." He also asked, "Indeed , who has ever benefited during the past 238 years by betting against America?")


As for China, when the naughty Munger mentioned his hobby playing bridge, he commented: Playing poker is a good way to train the mind, I Learned a lot from playing bridge. I heard that the Chinese have been playing poker since they were children, thanks to their socialism. I can't imagine to what extent the state will develop when they implement the capitalist system.

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Extended Reading

Becoming Warren Buffett quotes

  • Howard Buffett: When he wrote the letter to us, he put something in that letter that was incredibly important to me, which was exactly how our foundation behaves, which is, if you're gonna try to bat a thousand, you won't do very many things that are important. But if you're willing to basically strike out a few times, you can really change something big.

  • Warren Buffett: In my entire lifetime, everything that I've spent will be quite a bit less than one percent of everything I've made. The other 99% plus will go to others, because it has no utility to me.