"Predicting rain doesn't count. Building arks does." - Buffett
Macros are hard. I cashed out of my bet on RFP last year. I topticked it in May 2021 at ~$16 at about a third of my position. The final 2/3rds in August when I panick sold at $11.50 because I was worried about the lumber price. I got lucky. Lumber was an optionality of the original thesis. It was a favorable outcome for the bet once again. Unfortunately, I sunk most of the capital by beginning to use margin, shorting TSLA, and China. I was extremely worried about the valuation of the US market and inflation and thought the three would protect my portfolio. I still took on way too much risk for the reward says hindsight.
Maybe I should have just held on to cash as I had life needs. The eternal question of utility value vs. expected value. I have always trained myself to always go for expected value, but as I grow older, does it really matter the return on the capital rather than the return of capital.
Finally, ask yourself why you want to beat the market anyway. I once interviewed dozens of residents in Boca Raton, one of Florida’s richest retirement communities. Amid the elegant stucco homes, the manicured lawns, the swaying palm trees, the sun and the sea breezes, I asked these folks — mostly in their seventies — if they’d beaten the market over the course of their investing lifetimes. Some said yes, some said no. Then one man said, “Who cares? All I know is, my investments earned enough for me to end up in Boca.”
It was in July that I made most of the bets. The road not taken would have been a big position on MO at $48 (3.72 dividend for 7.75%), IMKTA at $60, and SFM $25. As of today, those would have been $55, $96, and $31 missing about a mean of 33% in returns vs. drawing down close to 60%. (Life comes at you fast.)
Those would have been protection for my worries on inflation at a low risk, albeit boring. I chose to be fancy as I still think I learn more the way I went about, but expensive as it is now. Pain = Growth. Maybe still young enough to feel that way.I made the BABA bet not just because of Charlie. I fell in love with the narrative of the TAM, the business models (Helmer's powers of scale, network advantage, and cornered resources). I thought China would be a hedge on the high valuations on US market and the headwinds of the inflation/deficit. I thought the fine BABA paid meant the CCP extracted their pound of flesh. I thought on a $200 entry x 2.72 billion shares for a market cap of 540 billion dollars was a decent price after backing out of the cash/investments to get a yield of 30b/480b conservatively for a 6.25% yeild on a growing company (I will post more on the other side of my China bet of ATHM in another post as it deserves a detailed dive). I forgot that cash flows are not predictable and maybe I didn't understand how not durable their competitive advantages would be if CCP decides to cap their growth or if the US negative sentiments might force a delisting/decoupling. It's hard to factor in Macro or try to factor it in even though in the end it does matter. Like clutch hits, there are definitely clutch hits but no clutch hitters.
Enough ruminating on the past. The possible mistakes that were made and lessons that can be drawn can't be dwelled on forever. Most importantly, can't be trapped in the past and need to live life forward.
“I know a lot of people have very strong and definite plans that they've worked out on all kinds of things, but we're subject to a tremendous number of outside influences and the vast majority of them cannot be predicted. So my idea is to stay flexible.”
Henry Singleton
I need to focus on the most important thing. Compounding. Can't stop. Consistency. Continuation. I will keep reading to prepare for that opportunity even with low capital presently. I will continue to write and transcribe my thoughts to strengthen those preparations. I will continue to connect those strengths. I will continue growing.
