Lessons From a Buffett Believer - by Jason Zweig (LINK) [Related: Notes from the Markel Omaha breakfast]
Earlier this month, a crowd filled an auditorium to attend a corporate annual meeting at which a folksy investor spoke about his company and the secrets of success. But they weren’t in Omaha to hear Warren Buffett talking about Berkshire Hathaway; this crowd came to the Altria Theater in Richmond, Va., for the annual meeting of Markel Corp.John Hempton on his visit to Hanergy while in China about six weeks ago (LINK)
Hussman Weekly Market Comment: Voting Machine, Weighing Machine (LINK)
“Sit down before facts like a child, and be prepared to give up every preconceived notion, follow humbly wherever and to whatever abysses Nature leads, or you shall learn nothing.”
Thomas Huxley
The greatest miscalculation in my career as an investor has been to underestimate the lengths to which the miscalculation of speculators can extend. I’ve had to correct that error twice, and even if the completion of the market cycle ultimately made the error irrelevant, the challenge was excruciating in the midst of the market cycle, at least until it was fully addressed. The fact is that valuations drive long-term returns, but over shorter horizons, stock prices are the result of whatever investors collectively believe, however reckless or detached from historical evidence those beliefs may be. As long as enough market participants are attached to the idea that risk is their friend (or enemy) regardless of the price, there is no natural limit to how overvalued (or undervalued) stocks can become. There is only one way to address this: measure investor risk preferences directly through observable market internals. Don’t expect an overvalued market to crash until internals deteriorate; don’t embrace an undervalued market too aggressively until internals improve.
It’s a lesson that value-investors have learned and re-learned throughout history. Even the legendary value investor Benjamin Graham discovered it, in his case by becoming constructive far too early during the market collapse of the Great Depression. The collective risk preferences of investors rule the short run, but valuations ultimately rule the long run. Graham famously summarized that lesson in one sentence: “In the short run, the market is a voting machine but in the long run, it is a weighing machine.”
Oil Becoming ‘Mundane Return-on-Capital’ Business to Chanos [H/T Will] (LINK)
Quote on Shake Shack's current valuation:
Consider this: Wendy’s has 95 times as many units. It is 12 times Shake Shack’s size in terms of revenue. Yet, in terms of market cap, they are relative equals. As of now, Shake Shack has a market capitalization of $3.44 billion. Wendy’s: $4.18 billion.Walter Isaacson: TWO-MINUTE EXPLANATION OF EINSTEIN’S THEORY OF RELATIVITY (LINK)
John Nash’s mind left a beautiful legacy (LINK)
Related documentary: A Brilliant MadnessCicero on Living a Stoic Life (LINK)
Book of the day [H/T Ryan Holiday]: The Inner Citadel