Sunday Sermon: The Crossroads

Fools,

There are some real impressive people on Twitter, and the financial media, who post relentlessly about the idea that the individual investor cannot beat the market. They insist that the only way to beat the market is to 1) Get lucky 2) Act on inside/private Information.

Most of them, from what I can tell are extremely successful. They run funds that have hundreds of millions in assets if not billions. They make big money giving speeches at conferences around the world. They appear on CNBC and Bloomberg. They write columns. They have successful blogs and podcasts. They are quants. They have all the big data. They write reports. They build charts and graphs. You all know who I’m talking about. They seem like good guys - and yes, most of them are men. They brag pretty openly about their wealth. They post pictures of gorgeous sunsets on the beaches near their homes. They talk about skiing in Japan. And the Swiss Alps. They seem to be having a fantastic time. And of note, they don’t seem to be working that hard. For goodness sake they’re writing, posting, blogging, Tweeting and reading and podcasting 24/7!

I do not resent these guys. As they say in the hood, never knock another man’s hustle. I mean this sincerely. I think these guys shares tons of valuable information. More power to them.

But, BUT, (Buttocks!), - they speak with forked tongues. YE FOOLS! Forked be their tongues. They say - no one can beat the market. No one that is… but us. See the problem? See the fork? It’s big enough to pick up a pork sausage the size of the Empire State Building. (Back up G’s, I’m going old school here, when being a Fool meant mocking the absurdity of Wall Street’s “Wisdom.”)

These folks are in an existential crisis. They sense that the cat’s out of the bag. That they don’t know how to beat the market. So they make money just like our SaaS/Cloud companies. They create a model. They plug all their clients into the same funds. And they make money off individual investors subscribing to the model. Sure they make adjustments based on age and risk tolerance. But their product offerings make Chipotle seem like the Cheesecake Factory.

So what’s my point? As with politics, fear sells. Always has, always will. But note that even the noblest financial Wise men are now saying that the most important thing in all of investing is staying calm during big drops. This is gospel truth. But watch how much talk there is now about behavioral finance and psychology. What the Wise men are basically saying now is - you will panic in the crash. We won’t. So the incentive of the financial media is to overcomplicate, hype and TERRORIZE you out of your individual stocks. It is in their interest to promote index funds and long-term-buy-hold strategies because that is the easiest, lowest cost way for them to make the most money.

This is old news, you say? Yes. But what’s changed here is that I think we may have literally found the closest thing there is to a magic formula in the following combination:

Saul + David G. + SA/RB/Bert + this board + The NPI board all working together to find the best Cloud/SaaS stocks.

What I’m saying is I think we are at a Crossroads. I believe that what we have here, with this specific group of people, in this community, at this time, using this method and trusted resources is unprecedented. It’s extraordinary. Fools. This, right here, is the evolution of Fooldom. If Fooldom is Judaism, Saul is the Messiah. If not Saul who? If not this method, which? If not now, when? If not us, who?

I leave you with this question: don’t you think it’s odd how little attention Saul and these boards get in the broader financial media? How good must the performance be for how long before it’s on the cover of every publication? Or will it never be because… it could cost a lot of very powerful people a lot of money?

You. You reading this, Fool. This is a unique time. You’re at the crossroads. The confluence of Saul/Bert/David G/RB/SA/This community/Cloud/SaaS (okay and some other industries) may not happen again. But foundations are being shaken. Attention must be paid.

Above all, the most profound thank you to the heavy hitters here, we all know you are. And all lurkers, who take more than we give, should seriously consider stepping up our game in 2019.

Fool On,

Your Loyal Capital Appreciator,

BroadwayDan

PS: Special Bonus material. Sorry I have to get back to work…

  1. I no longer factor in how good the company I invest in makes me feel.
  2. I could not care less whether or not my family actually uses the product.
  3. Saul’s picks (and Tinker’s and Duma’s and Gaucho’s and Dreamers and Bear’s … ) are all in public. They get my respect. Any stock picker, on any podcast, who doesn’t lay out their picks and analyze them in public, is just clucking.
  4. It’s in the media’s interest to pick tons of stocks and hold them for generations. Don’t get snookered into thinking that holding automatically counts as mature/sophisticated. It may, sometimes. It’s not what I see happening here.
  5. Cloud/SaaS is without question the best business model I have ever seen.
  6. we got nothing to sell but the truth to each other. that makes us dangerous.

Anyway, I hope I have not riled anyone too much or insulted anyone. I do tend to go off horribly about every 7 years, sort of like IT. But this subject, our family fortunes, deserves candor. Anything less is an insult. Peace out y’all.

PSS -

“Puke Skywalker, but sound like Chewbacca when I talk
Full of such blind rage I need a seeing eye dog
Can’t even find the page, I was writing this rhyme on
Oh, it’s on a rampage, couldn’t see what I wrote I write small
It says ever since I drove a 79 Lincoln with white walls
Had a fire in my heart, and a dire desire to aspire, to Die Hard
So as long as I’m on the clock punching this time card
Hip hop (FOOLDOM!) ain’t dying on my watch”

Eminem - “Rhyme or Reason”

https://www.youtube.com/watch?v=MgePh_YJgrc

65 Likes

This is an interesting post BD. I can feel your passion.

Part of me hopes (I guess selfishly) that this board and the unique cross-section of investing experience, technical experience, and paid resources we use here is never found by the broader public.

Not because I don’t want others the benefit from it, I do. Mostly because I’d fear that people who don’t stumble across this little-hidden corner of Fooldom naturally by either a. Being curious Fools or b. having friends who are regulars here that inspire them to come join the community in a respectful manner would eventually ruin the good thing we have going here.

Again, this is a bit of a selfish feeling and honestly, I don’t think it’s something we need to worry too much about because most of the financial media writes what we do (and what TMF does in a broader sense) off as “unrealistic, impossible, scam, whatever” because it goes against what 99.9% of all investing books and media is about.

It also can’t fill 18 hours of content every day on financial entertainment networks because there just ain’t that much to talk about when you’re not trying to grab attention to sell advertisements off of.

So I think… I agree with the basis of your post, but I’m not too concerned with that actually happening.

13 Likes

“leave you with this question: don’t you think it’s odd how little attention Saul and these boards get in the broader financial media? How good must the performance be for how long before it’s on the cover of every publication? Or will it never be because… it could cost a lot of very powerful people a lot of money?”

Keep on performing at these levels and it will be discovered and covered and exposed and the band wagon will play and at that time it will be essentially the beginning of the end, just as most things end.

Just my prediction. Great things can only go “undiscovered” for so long.

Like everything else, like Tulum for example. Once it’s “discovered”, it changes and the people that got there first are already moving on to some other place.

Enjoy it while it lasts.

Chris

9 Likes

“leave you with this question: don’t you think it’s odd how little attention Saul and these boards get in the broader financial media? How good must the performance be for how long before it’s on the cover of every publication? Or will it never be because… it could cost a lot of very powerful people a lot of money?”

Sermons are OT for me but this question has been answered by Warren Buffett, something to the effect: “If I only had $50,000 to invest I could get much higher returns.” Peter Lynch has also explained the various ways in which mutual funds shoot themselves in the foot. If you read Buffettology you’ll discover why Buffett uses a regular corporation as an investment vehicle instead of a specialized one like hedge or mutual funds (to evade regulation).

Denny Schlesinger

Buffettology: The Previously Unexplained Techniques That Have Made Warren Buffett The Worlds Paperback – June 8, 1999 by Mary Buffett

https://www.amazon.com/Buffettology-Previously-Unexplained-T…

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Guys - thx for responses. I agree with Captain, sermons OT. Right after posted I regretted it. Been under massive pressure at work. I vow more red meat contributions in coming weeks. Color is fun but I wanna help put dough in Fools pockets. Best, BD

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If you read Buffettology you’ll discover why Buffett uses a regular corporation as an investment vehicle instead of a specialized one like hedge or mutual funds (to evade regulation).

Quite the opposite. He has said investing through Berkshire the corporation (e.g., when buying National Indemnity) was the biggest mistake he’s made.

Cloud/SaaS is without question the best business model I have ever seen.

Not doubting this, but if you would be so generous, could you give a brief explanation as to why this is so? Thanks.

3 Likes

Not doubting this, but if you would be so generous, could you give a brief explanation as to why this is so? Thanks.

Commentcents33,

I have a bit of time right now so wanted to give you a quick response. The board would recommend you read the links (to the right or the bottom of your screen depending on your browser). I’d echo those comments and in particular please read about SaaS and why it is different this time. Email me directly if you’d like for any questions.

You’ll find there are reasons these companies are valued as such. Look at gross margins, revenue growth, recurring revenue among many others and you’ll see why the business model is different than what we are traditionally used to. SaaS businesses are based on CaC (Cost of Acquiring Customers) and LTV (Long Term Value).

There is much to read and to be cliche the journey is a big part of the process. Keep reading. Unfortunately, this board is too large for common questions. Seek out resources and let me know if I can help.

A.J.

1 Like

Quite the opposite. He has said investing through Berkshire the corporation (e.g., when buying National Indemnity) was the biggest mistake he’s made.

My conclusions need not match what Buffett says – he talks his book.

BTW, if I’m not mistaken, what he said was that buying Berkshire-Hathaway, the textile business, was the biggest mistake he’s made. The textile business was a big mistake. Running an investment fund as a regular (less regulated) corporation is genius.

Denny Schlesinger

2 Likes

what he said was that buying Berkshire-Hathaway, the textile business, was the biggest mistake he’s made

Either biggest, or first: Warren Buffett’s failures: 15 investing mistakes he regrets

https://www.cnbc.com/2017/12/15/warren-buffetts-failures-15-…

Buying Berkshire Hathaway
Purchasing Waumbec Textile Company
Investing in Tesco
…
Opting not to buy Amazon stock
Missing his chance to invest in Google
Overestimating select manufacturing, service and retail investments

1 Like