Paul Tudor Jones

 Read this quote a few times in the past and it always rings so true:

There are two unpleasant experiences that every trader will face in his lifetime at least once and most likely multiple times. First, there will come a day after a devastatingly brutal and agonizing stretch of losing trades that you’ll wonder if you will ever make a winning trade again. And second, there will come a point when you begin to ask yourself why it is you make money and if this is truly sustainable. That first experience tests an individual’s grit; does he have the stamina, courage, guts, and smarts to get up and engage the battle again? That second moment of enlightenment is the one that is actually scarier because it acknowledges a certain lack of control over anything. I think I was almost 38 years old when one day, in a moment of frightening enlightenment, I knew that I really did not know exactly how and why I had made all the money that I had over the prior 17 years. This threw my confidence for a jolt. It sent me down a path of self-discovery that today is still a work in progress.

https://novelinvestor.com/paul-tudor-jones-the-mental-obstacles-of-investing/

It is a fitting quote not just about the market, but life itself. 

Magic Numbers

 Crossfit seems to be very fond of magic number of reps such as 21, 15, and 9 in a set. Or maybe triplets like 6, 7, 8. Or maybe even just a climbing sequence in 10, 20, 30. Investing seems to have some magical numbers too. Rule of 72 is 72 divided by a multiple would be the number of years it takes to double. The Rule of 10 Bagger would be 240 divided by a multiple would be the number of years it takes to 10x. 

The current 10 year treasury rate is a big number. Numbers are arbitrary other than the math in them. From my experience, I want a 6% risk-free as a planning hurdle. If a stock gets to a FCF yield of 15%, I am willing to back up the truck or 5% if it is growing like crazy. The yield should be EV, but the low interest environment has lowered those standards to market cap. Numbers are arbitrary and only mean as much as the standard we hold. I try to be like the rock in principle as opposed to swimming with the current in style, but hard truths are evidently hard to follow.

ESL

 I once made many mistakes with SHLD in my life, but that is another story for another day. I just read a short post on Lampert successes with AXP, IBM, AZO, and AN in his past.

 From 1988 to 2002, ESL’s gains averaged 24.5%, nearly double that of the S&P’s 13% annual return, with only one down year in 1991. AUM rose from a mere $28mm to $5bn, with prominent L.P.s including media mogul David Geffen, Michael Dell of Dell Computers, and Ziff Brothers Investments. Although he briefly contemplated retiring, Lampert compared himself to Michael Jordan, saying that people kept criticizing him, but he kept on winning [1, 2, 5, 6].

Trading at a little over $20 per share in 1997 when he began building his stake, Lampert ultimately exited this investment for between $500 to $600 per share in 2012 for a total of approximately $1.5bn. 

A 30x in 15 years is 25.5% CAGR. If he had held, AZO from June 2012 for 12 more years to today, it would have 8.41x for 19.4% CAGR. 

Moats in Networks

If you don't have a moat, you don't have a competitive advantage. If you don't have a competitive advantage, you have no edge. Networks are one type of moat. I just read a post on four types and wanted to journal it to remind myself:

1. Physical network like pipelines

2. Platform network like Windows or Android

3. Data network like NFLX or Google

4. Marketplace network like Amazon or Airbnb

It does not matter how big or small of a company you are looking at. It's fine to gamble, but to have an edge, you have to have a moat/competitive advantage.

Two 2024 Commencement Speech Takeaways

 Federer at Dartmouth

1. Effortless is a myth and discipline is a talent.

2. It's only a point as he won 54% of the points in his career.

3. Life is bigger than the court and you need a team as his partnership with Tony is called "Team8."

Seinfeld at Duke

Fascination is better than passion. Give up finding one thing. Just be willing to do your work as hard as you can with the ability you have. 

1. Make an effort.

2. Pay attention.

3. Fall in love.

Housing vs Stock Market

 Kyla Scanlon had a great article on housing: https://kyla.substack.com/p/why-we-have-a-housing-crisis

"($10,000 invested in equities in June 1974 would today be worth $2.4 million. If invested in housing, it would be worth $139,000 today.)"

Those would be a CAGR of 11.6% for 240x for equities and 5.4% for 13.9x for housing.  It is amazing that just double the CAGR for 50 years is not just a difference equivalent to double the difference in returns, but 17.2x MORE. I know which way I lean in this debate for a variety of reason, but this number does not reflect leverage or rent collected. (Pet peeve when people say you did not have to pay rent if you buy a house, but I suppose it depends on how you view an "investment") 

The leverage is a very powerful concept for real estate, but could be a double edged sword depending on interest rate and timeframe. The rents collected is a weaknesss compared to equitity dividends that can be compounded with reinvestming into the stock. (Real estate is a forever cigar butt at best in an analogy for its rents) In addition, the expenses of housing are often underestimated and with stocks, it is built in before you get the net income.

David Rubenstein

 I am currently reading The American Story by Rubenstein and have his other book on hold. I also love listening to his interviews with "leaders" on The David Rubenstein show. I think he is hilarious and hope his books and show provide a medium of knowledge. His guests vary from policy makers to CEOs and I am often left wondering do all these elites seek to deliver a message to the public through his show. I am not convinced that private equity is the "highest calling of mankind," or the benevolence of his guests, but I am grateful for the opportunity to reflect through their experiences.