Bad!

My 4 year old daughter says this: "Bad!" 

She says it for anything she doesnt like or appreciate. It could be me sitting on the sofa, me holding her right hand instead of her left, her chonda coming slightly loose, her 1 year old sister walking away... 

I say 'Bad!' to 2 things nowadays:

1. The frenzy in the market

ZIRP ended, Ukraine got attacked (and has now invaded Russian territory - :|), Gaza has been attacked, China's 12 year Real estate and GDP pumping bubble has burst, some crytos and SPACs have been declared frauds, there are zombie CRE loans in the US market, Bangladesh's PM has fled the country, US 30 yr mortgage at 6.7% v/s 8.6% floating in India

And yet, we have Bitcoin at highs, Gold at USD 2700, Nvidia at $3T, Mazgaon at 90000 Cr, Suzy at 1 L Cr, Tent at 2.5 L Cr, Tomato for 2.2 L Cr, Dixy for 75k Cr, RE projects in India getting sold out in hours and days;

Of 900 Indian companies of more than 100 Cr mcap within 10% of alltime highs , 
550 are above 30 PE, 400 above 40 PE, and 264 above 60 PE and 119 above 100 PE!

There is a flurry of IPOs, QIPs, OFS with a lot of dodgy entities buying in, a lot of big funds and promoters selling, and weird small investors getting QIPs and Pre-IPO allotments.

After 2 years of being cautious, I guess I will say it again: Somebody's gonna get a hurt real bad.

And this time, it looks like a lot of retail investors have already gotten clobbered in the F&O mania, but many are still holding onto 120 PE good companies, and 30 PE rubbish companies... I see a lot of companies falling 80-100 %.

Of course, my portfolio is pristine!

 

2. We are forever elsewhere.

An episode in Seinfeld, where Elaine goes to a store to rent a video cassette of a movie recommended by ' Vincent '. She plans a trip to the store, browses through the wares, speaks to a friend, rents a cassette and puts it in her bag. At the end of the day, she plans to curl up in bed, and watch the movie - not knowing if it is bad or good - and surprise, its a good movie! The only disturbance through the movie was a phone call on a landline - she picks up the call and it is always a surprise as to who the mystery caller might be.

The paradox of choice and leisure means that we are often at rest - so, browsing in a store is no more leisurely than munching on chips at our bigger homes with big TVs and a choice of 500 movies and 200 TV shows to choose from. We know what we want to watch, because we already know the good reviews from the bad. 

We are not disappointed anymore... We know the best dish from the best restaurant comes to us within 30 minutes. If you want a coca cola, it is at your doorstep in 9 minutes flat. 

We can send a toothy guffaw smiley to a friend on whatsapp to convey that we are smiling even though we might not want to really meet this person.

When was the last time that someone was surprised to see you? Or you were surprised to hear from a friend? Or you pick up a book and oh! it turns out to be amazing! 

And all of the above is without mentioning the horror that is social media. 

Why am I looking at a 25 second video of 2 random people dancing? Am I not supposed to hold my baby by her arms? Microplastics in my salt? They/ Them - who is this person who is offended in a small town in the US... wait, do I care? Oh, so this is how my glutes are supposed to look...

Bad!

We were looking for leisure, comfort and entertainment.

We got it - and with that we got poor mental health, attention deficit, restlessness and dissatisfaction (because this was rated 97% on Rotten Tomatoes but it wasnt that good), alone-ness, distance from real connections and real conversations.

So, did we win?

Bad!!

Goals

My best old investment seems to have done 16% compounding for 10 years and it remains terribly undervalued. It was a sizeable investment and hence, the metric matters. 

Smaller investments have done better and worse than this.

 And yet, where I stand now is on the shoulders of all those losers and winners and not just this one investment.

 My current learnings are taking me to an appreciation for businesses that dont need incremental capital as they grow; and I know now that there are all kinds of creatures that win at the game...

One of my more recent investments (and the result is shocking as I have just calculated it in this last minute) has done north of 40% compounding in the last 5 years; and this too seems undervalued to me. But more scarily, it looks peak-ily poised because that might be the nature of the business.

Of course, I leave out the 100% and 97% drops I have had in the past, and the 8 year 2x I have had... which have brought me to a respectable rate of wealth growth.

But these musings get me back to why I am playing this game...

Independence has been achieved. The safety cushion has been established. But the way here is the way forward; to feel the stones and keep walking along.

I need to remind myself that I'm here not to win.

I am here to play, and I will play this game on my terms. 

That, oddly, even a 10% CAGR is enough :|

That I better learn from the muddy puddles and broken stones from the past.

That my ego wants me to win, while my system 2 wants me to have fun.

And the risks I am cognisant of are those of health, family, politics, luck, society, war and natural disasters.

It's my fortune that I have to worry about little else.

Uncle kaun?

First it was raveena kaun? Kareena kaun? - when will we get past covid? When will the zirp end?

Now it’s uncle kaun?? - Putin and the changed world perspective along with inflation.

It is said that the more things change the more they remain the same.

Covid seemed like a game changer and then I could see that the worst case scenario would be a 1% population decline. that said what happened eventually was what we call shaped recovery. 

Global attitude towards the so called China factories changed and what is called the China +1 strategy came into being.  Meanwhile the world started caring about the environment and started moving away from fossil fuels.

And then the wind stopped blowing in the UK and there was a surge in gas prices because UK still needed energy and seemingly out Of nowhere Putin decided to attack Ukraine and Europe, which is hooked on to Russian fossil fuels, now has to make a choice and I guess it’s going towards the US and the Middle East.

Along with this China decided to be allied along with this Russia and that creates interesting problems ; is the west going to rely on India much more for its growth/investment/future needs or maybe China might Do an about face and become a friendly global player?

For one, it does seem That fossil fuels will have to make a comeback and Europe has to choose away from Russia

It also feels as though the global demand to put money to work means that said money has to come to India

After all you can’t ignore a 1.4 billion population For too long

Going back to how I started this post, I want to believe, the more things change the more they remain the same because Europe is crippled by indecision and China seems to be dealing with its mal- investment/ over investment problem and maybe the next 20 years might just be similar to the last 20 years and by this I mean that there will be technological change, there will be internet enablement of the world population and that eventually it is particular companies that end up doing well versus the narrative that X country is going to do well

Somehow I am biased because I really don’t know how this reflexive market will function without money finding its way into India

Also I think that inflation that is mentioned here is going to be transitory it can’t continue for too long.

As charlie has said: Who would’ve thought that General Motors would go bankrupt or Kodak would go bankrupt or Mao zedong’s China would one day be a global leader?

Covid ought to have united the world, and it seems as though it is as divided as earlier.

Is this the end of Putin’s Russia? Difficult to believe it can survive this. 

Notes:

If India’s system survives, Indian companies that cater to its local pooulation or to global b2b demand ought to thrive. 

Is India’s greatest bull market ahead of us?

Irrelevance

I have often found solace in physics. 

Is it the observer that exists, or is it the observed?

How big is the earth relative to the time/size of the universe? 

And how tiny can things get?

And in that mix, we have us - trying to watch random price movements of a few securities of a few companies which are mythical beings which provide 'stuff' to customers and make some mythical money , which we believe belongs to us.

And all this while we are busy decaying and going back into the universe, and our minds can only fathom these smallest of time increments and futures and pasts; our brains plague us with thoughts and visions of things which are not there and futures which may never happen and emotions which were never emoted.

When we say that it is our duty to 'do', I believe we are just 'going along with it...'; but what choice do we have? Except for the end game, there is no other way but to 'do'.

And this deed is what we have the option of choosing, along with how to fulfill it.

And so I say, that investing is a means of entertainment and enrichment - and in that lies my north star. If I could shed my greed and envy and fear, I might just enjoy all this a lot more.

A few more decades to go - hope I play towards it.

Meanwhile, the everything bubble is real. And we just keep dancing along.

The coin mania, SPAC mania, EV and tech and 'no capital' mania will fade - history has proven it. 

But this should be very interesting indeed. 

Lets see how these Indian companies fare.

Notes: RE, Chemicals, Financials and Indian consumption.

 

Independent Thought

"It's not supposed to be easy; anyone who thinks it's easy, is stupid."
This confused me; yes, it was hilarious, but I couldn't figure out why it was funny.
In the middle of this COVID pandemic crisis, I really get it.
In fact, I have been 'getting it' for the last 2 years where drawdown after drawdown faced me in my investment portfolio.

And yet, I can humbly say that value investing works. Buying with a margin of safety works. And as my friend AR reminds me, (the same as I remind some of my people), the journey is supposed to be fun; and I must say that the fun is back.

In 2008-9 when the great recession struck, I was still in India, but I began reading about financial stuff, and one of the things that hit me was that the US GDP was $14T in 2010 or so.
As I write this, they are pushing $21T.

What I have often seen now is that people misunderstand GDP as a stock number, but is in fact a flow number; that country's revenue line is $21T or so; in the meanwhile, India went from $1T to almost $2.7T now - which is fabulous when it's measured in % change, but while the US increased its yearly output/ consumption by $7T; we managed to increase the annual output by $1.7T.

The way all this has influenced me has been:
I would like a substantial portion of my wealth to emanate from countries where capitalism is important, to where the best minds of the world are attracted and where the rule of law and recourse can be counted upon.

As I look back at these past years investing in India, I have seen the retrospective taxation by the GOI, I have seen a mass cancellation of mining and telecom licenses, an overnight eradication of hard currency from the system, a closet full of skeletons tumbling out (be it over-indebted loss making PSUs, fancy and sometimes trusted business names, companies with connections with the underworld, prominent business folk running away from India), a Chief minister of a state unilaterally cancelling a bunch of projects/ contracts that his predecessor entered into, and behind which those companies invested substantial amounts of money, a non-existent telecom player surreptitiously buying a pan-India telecom license from another company which is essentially bankrupt now - meanwhile, said telecom company is now the biggest in India and nobody mentions how it got a pan-India license, a complete and total illiquidity in the wholesale financing market for non-banks, a humungous backlog of bad loans by the public and private sector banks (which includes many cases of blatant fraud and complete oversight in other cases).

Many folk in the business circles call this a 'trial by fire'; a change in the way India will operate, where there is a fear of the law, where a businessman cant keep looting public money, where politicians are accountable, where the mythical magical Indian middle class will finally emerge, and how the companies that survive will reap and spread these benefits to the population.

The beauty of capitalism is that some companies adapt and continue chugging along, they manage to change with the times - by enabling a certain culture, or by borrowing cheap in the overseas markets, or by diversifying their field of operations, or by narrowing their focus on the things that matter - all the while figuring out how important people and balance sheets are.

COVID
The more things change, they more they remain the same.
There is a flurry of activity in webinars, politicos, news and the like about how life is going to change, about how there is a growing resentment towards China, how global supply chains will change, how a lot of these first world countries will make contingency plans to deal with such a pandemic again - and I believe that while things will change, the forces of the free market are so strong that it will be difficult for a country to begin erecting trade borders with tariffs/ embargoes.

Eventually, money flows to some of the best companies in their geographies/ fields; while this may be the new gold rush towards specialty chemical companies in India or SE Asia, only the better companies will thrive as has always been the case when market dislocations reach equilibrium.

What could be?
I wonder - is it high time that the Eurozone breaks up? I believe it has gone on for far too long. How can Portugal continue caring for Greece continue caring for Germany and so on?
How could it be that the US has the ability to pay 1% p.a. for 10 year money?  That said, how did Japan do it for all these decades?
As LL predicts, will China finally move towards a free-r market system where the government only plays the role of peace-keeper and co-ordinator? Could the RMB become a major international currency? May be the route to that will be after a strong devaluation in the RMB...


My life
While the country around me is struggling with making ends meet, or trying to get back home, where 70% of rural India does not have access to running water (and the WHO can keep shouting 'please wash your hands) I am sitting in a privileged position where I am reaping the benefits of the work done by my ancestors.
What is my dharma towards the world?
There is a new being entering my life in 2-3 months, how will that bugger change me?
And how does all this tie-in with my investing style?

Lessons:
A more diversified portfolio.
A more stringent quality check on promoter quality.
Knowledge that more things can happen than will - the next crisis will be really different; it might actually be a crazy bubble in gold?
The relation between price and value is still sacrosanct; but the thing I need to learn is change in value over time and how Mrs. Market perceives companies where value is changing.

Do I own too many companies today?
Am I too lenient towards my smaller holdings, and I just let them run...?
Will Real Estate offer me the rewards I can imagine today?

Or - is the primary lesson that I cannot allow my sleep to be hindered, while I had this condition earlier too; I guess I was too naive. As is said, I should be able to learn by the time I get through the first 30 years or so.

My companies
Cheap, ready/ readying for the future, becoming stronger, have proven to be good at their work and will soon face new crises of their own.
Auto, Finance, Wealth, Chemicals, Consumer Brands, Real Estate, Pharmaceuticals - but the string running through them is: cheap, good runway, good balance sheets, global operations and yet - not very high on ROC.
Is this a big mistake? Or is it my inability to pay up? Or is it my inability to connect high ROC and low growth?

A thought that has stuck with me is: " My portfolio is the best." What this means is that each investor or fund manager surely believes that his or her portfolio composition is the best that could be done; and interestingly, the permutations that it throws up for the number of companies that are deemed investment-worthy is extremely high.
All of which implies that we can only do a certain amount of justice with the cards we have been dealt.
The smartest and most hard working or most experienced investors can still say that they have looked under far more rocks than the newbies, but there is simply a lack of time or initiative or luck with most of us.

And all this leads me to the superinvestors of Graham and doddsville. This is THE document which got me here and where WB postulated that all his fellow monkeys had their own set of companies and varying styles of investing but the central tenet was that things need to be bought with a margin of safety and that price is what you pay and value is what you get.

So, this is where I stand.
We are surely on the cusp of the next round of 10x and 100x in this country.
We are also relatively lucky that while the world is being extremely carefree about the perils of modern monetary theory, we have thus far reined in our looseness. 

While there are clouds of a strong devaluation of the rmb, or a break up of the euro zone or extremely high inflation or stagflation in the US, I can see that the Indian economic engine can surely find a way of finding niches and chugging along.

We are still on the ground floor when it comes to per capita wealth, and we still live in the country where the urge to pee in peace is greater than the urge to pray.


Dharma
To have fun while attempting to increase knowledge and wealth.
I am sure I'm going to do well, but as CM says, envy is the deadliest sin.
This COVID mania ought to pass.
We will soon have a bigger problem on our hands...

There and back again

Was I Buff T. Warren?
I dont think so; although the lure of 'great quality companies tend to do well' had been extrapolated far.
I remember my pangs of 'I missed it!'

Klarman was right in 1999 when he asked whether Buff T. Warren's portfolio looks an awful lot like Warren Buffett's... The lure of good quality companies got to WB too.
And if WB can go through it - well, we are but mere insects.


I remember thinking -
no damned Mutual fund owns Y company,
there is no decent report out about J company,
investors dont even know what C company really does,
investors thoroughly doubt W company's ability to grow without losses;
And hence, I believed that I am alright.

So in the end, I have to believe that Mrs. Market is simply depressive.
And as is often believed about depression - no bother! just go for a nice comedy and things will be fine - Mrs. Market's depression has no firm rationale.
As I often tell my wife - 'When you gotta go, you gotta go!' - and then she complains about me being in there for an hour.


I was ready for this I believe. (And yet I was fully invested!)
I started making a folder called 'DONT PANIC' (inspired by Hitchhiker's Guide to the Galaxy) in Aug 2016 when too much money was made too fast.
I have not needed that folder until this week.

And the last 2 weeks' events reminded me of something Arpit had may be said: "All money made in the stock market is only a short term loan ready to be called back".

CM has often said "If you are not ready to take a 50% drawdown, you should not be investing"

Now, as Howard Marks often says: We may not know where we are going, but it's very important to know where we are. I guess he meant it about the investing philosophy.

Where are we now?
- In a country that adds may be 13m + net people a year
- Where people still have to buy their first homes
- Full of extremely young people which may cause odd social problems
- But somehow, everybody is getting access to the internet
- Very high savings rate in the country
- A very good ecosystem to service the world (mfcg and services)
- A nominal GDP growth rate of 11-12%+
- A formalisation of people's way of living - identity, credit, electricity, etc
- An irritable world leader who should be thrown out 6 years from now for sure.
- Overcapacity and bubble in the 2nd largest economy in the world
- Slightly higher oil prices
- A more competitive rupee that harms our import bill but makes our export bill awesome



"Risk for them is not being stupid but looking stupid."
I look stupid right now.
But this seems like the point of least risk.
Seems.

Seeing the forest

As I try to make sense of why my portfolio has done so well, I realise that my concentrated portfolio has done well because of luck, and a very strong tide.

It's easy to say that my chosen X company has done well, performed well, and is building a foundation for future growth; but when I see the forest, I notice (almost all of a sudden and rather scarily) that too many companies have grown manifold.

It reminds me of the 2010-2012 time frame when people looked back at the 2004-2008 boom and said that you could throw darts to choose your companies and you would have doubled and tripled your money in quite a few names.
Pharma, housing finance, finance, textiles, chemicals, consumer products (but not FMCG), some auto, agrochemicals - a ridiculously large number of companies have been priced very strongly - and at times those prices seem to reflect true value, and in other cases they have gone way beyond their optimistic values.


And yet, infrastructure, telecom, hospitality, some auto, public sector banks, have performed rather poorly - - here, the prices seem to reflect the capital destroying capabilities of these companies.



The question is: Will today be a day when I will look back and say - man, this was never sustainable, and I was being too rosy about my own companies and it was all luck
Or
yeah, sure, there was a big correction but quite a few companies became stronger through the ensuing period even though I was lucky to have made returns up until this period.


The tide is bound to go out.
I have to focus on keeping my focus on the facts.

The Long Game

The universe of things that have not come to pass
And
The work that goes into eventual greatness

These 2 profound models of thoughts go a long way into making us more humble about who we are and how we can be.

Dilip Sanghvi did not become worth USD 17 B worth overnight.
Avanti Feeds, Symphony Coolers and Just Dial have a limit to their short term voting machine based success.
Quality companies bought at rich valuations are good for investors only with hindsight - there are companies which were deemed quality and they then faltered. 

This post on Farnam street and the video in it makes me think of:
1. The effort it takes into becoming better and eventually, great.
Zuckerberg was lucky and brilliant.
Most of us are not.

2. The effort it takes towards creating an enduring corporation
Unless one has a brilliant product or service, it takes a lot of human power and ingenuity to create an organisation that succeeds. Read Dream Big - the story about 3G Capital.
Buffett started super early, was super smart and incredibly focused - and even then he made countless mistakes.

And here we are. Children of the internet age.
We believe that if we read a few books, and read letters written by great investors, we can find outstanding companies and compound capital for many years.
We believe that 1-2 years into the business, we will have garnered a lot of information to make our decisions sound.

Focusing on the long term, and staying away from stories of greatness and potential treasures - companies that go 10x in 2 years - go a long way towards ensuring long lived success.

Btw, I had said no to Avanti Feeds 2 years ago at 100 a share because the risk of the company going kaput was too great. Was I right or wrong?
It's at 1100 a share today, and worth more than 1000 Cr.

Sentiments

All outstanding shares of a company are owned by some entity or the other. All of them. Hence, most of these entities want the quoted share price to go higher. What about a person who founded the company 20 years ago? If he is cash-wealthy, I assume that he doesn't care too much about the share price.

Oddly, there are always naysayers who believe that the price will go down or that it will advance much less than that of other companies.
Oddly, at times there are investors who don't care much about the quoted share price as long as what is offered is substantially below the company's intrinsic value.

And such is the market. It is made of creatures, all of whom have different beliefs, desires and demands. Somehow, these three tend to interact with each other. Analysts, traders, bankers... all of them tend to have opinions. Most of them tend to believe that a well-managed company with a good product will do good in the long run. However, the most that investors tend to hold on to is for 5 or 7 years. Greed and fear start playing with them and they ache to sell out before they believe that prices will drop.

People are weird. They focus on the short term and they let feelings interfere with unemotional decisions. It's important to shut out the noise and jive to one's own rhythm.

Butts and Abstinence

One of the most important things in investing is to protect one's downside - the reason is that a single bad year can ruin compounding prospects.

1. If the market values a company at USD 100 Mn and your analysis pegs the value north of USD 150 Mn... is it a good buy?
2. If the market values a company at USD 100 Mn and your analysis pegs the value at USD ~80 Mn... is it a good buy?

Question 1:
What if the company is Kodak in 2003?
What if the company is Apple in 2002?

Question 2:
What if the company is Archer Daniels Midland in 2007?
What if the company is IBM in 2011?

My point here is that there is no absolute rule just based on valuations. It's hard enough coming to a range of values for a company. It's rather difficult peering into the future. Oddly, investing is primarily about the future because that is when your potential value will be realised.

The philosophy used by WB towards the beginning of his career was the classic Graham and Dodd Cigar Butt investing with an both eyes on Margin of Safety. He would invest in a company like Kodak and wait for the market to come up to his confident valuation numbers. Luckily, he was rather smart and therefore hit quite a few homeruns - somewhere along the way he bought into disasters such as Berkshire Hathaway, Dexter Shoes, US Air and of course, Solomon Brothers.

A few key things make investments disasters even though one may have entered with a margin of safety:
1. Management
2. Industry dynamics
3. Business Environment
4. Currency
5. Corporate Governance

By far, the most important are management and corporate governance, and more important that this is corporate governance. One should see what went wrong with BRK's Solomon investment - it is plausible that BRK may never again enter that sector unless if in the form of a superior security, e.g. preferreds in Goldman Sachs.
Once, a margin of safety has been established, it is essential to understand how the company is going to realise its full potential. What if it is as culturally and managerially broken as Kodak or Yahoo! ? Odds are that the company's management will indulge in thumb-sucking while money is being burned away in sustaining an unsustainable business operation.
The problem with the cigar butt investing approach is that the one last puff may take a long time to be realised unless one can influence the board or the management.

How did WB manage to invest in IBM at a supposed 3x book value? It is quite contrary to the margin of safety approach... or is it? WB bought into Coca Cola when it was near its then all time high (in 1988-89) - what led him to do this?
Sustainable competitive advantage or Moat.
How difficult is it for another company(ies) to enter my investee company's business domain?
How easy is it for my investee company to build on its business and pricing power?
Can IBM be seriously challenged in its domain expertise and reliability? Is its consumer loyalty questionable?
Can Parle increase prices of its Bisleri bottled water without driving consumers away? Does it have a brand that is blindly relied on?
The question for smaller companies is: Is the management sincere about keeping progress and innovation uninterrupted? Is the management careful and caring with respect to its investors and employees? Is it in a sector where it really knows what it's doing? How good is the competition that surrounds it?

As an investor, the difficulty with these questions (or may be the ease!) is that answers can be substantiated only over a period of time; often, gut instinct needs to be strong and no numbers can support you in answering these questions.

Going back to Margin of Safety. It is essential because a good company at a bad price is worse than a good company at an OK price. May be it is better to buy into IBM at a 20% overvaluation than it is to buy into Netflix at a 60% overvaluation. The trouble is that there are many non-quantifiable attributes to a company which cannot be incorporated into a numerical value.

Lethargy bordering on sloth is more important than people think it is.

Pricing

What would we do without the stock market? Would the world we fundamentally different? An interesting thing to think about is the crash of 1929 - the quoted prices of equity securities would usually be higher than a price one could transact at. (Yes, I ended with a preposition and now I'm not going to change it!).
How can share prices change so dramatically over extremely short time spans and not as dramatically over very long spans of time, e.g. 15% compounded for 8 years as opposed to 40% - 100% swings within a year?

What if I had a company that needed some equity (permanent) capital to support the business, and I went to an investor to get some money? (The year is 2027) That investor would say, "I need periodic updates and financials and meetings to ensure smooth functioning." OK. As the owner of this company, until the time I go to this investor, I don't care about the 'value' of my company; I care about profitability and cash positions.
When I do go ahead and transact with this investor, it is then that I care about the 'value' of my company because that influences how much of my company he will be owning post-transaction.
Now, assume that this owner has 23.54% of my company's shares and it has been one month since the signing and everything is hunky-dory; do I care about the 'value' of my company? May be. Three years thence, and without any further requirements for myself or for my investor buddy, I still ought to not care about the value of my company. Fifteen years hence, I have a huge-ass fight with my wife and she wants to wrest my entire stake from me! Sadly, she wins the case because she had forged the papers!! It is up to me to derive a good value for my stake because beyond a threshold, the remainder belongs to me. It is now that I care about the value of my Company. Assume that this is the year 2045. However, my investor still doesn't care about the value of his stake (the management of my company is luckily still very able.) because he wants to cash out after a further 15 years.

We should agree here that the value of my Company was largely irrelevant throughout the span that I held a stake in it.

Now for some woodoo!!! The investor looks like a really hot guy and has dozens of hot women around him. So, when I sign the document for the 23.54 %, I move into his body and he moves into mine! Funky eh? Since he owns the majority of the company, he wants to cash out a bit more... he goes to the public market after 3 years and sells a portion. Let's say he now owns 40%, I own the 23.54% and the public owns the rest. His wife (who was originally my wife, curse the bit*h!) does exactly what I had described above in the year 2045. Since the Company is performing well and I am happy with my other cash flows (and the hot girls in my life) I don't wanna sell.
Now, I have been able to see the fluctuating value of my company from the year 2027 onwards. Do you still agree that it made no material difference to my life?

What do you care what other people think?

The Long Term

It's interesting how quarterly projections are 'made' or arrived at, without much knowledge of cash flows.
It's also interesting how moods, sentiments and irrationality affect the price at which one can - theoretically - buy or sell a company, or rather, portions of a company.
It's amusing that professional fund managers are servants to the whims of investors in terms of unforseen or immediate events or limited time horizons; a typical case being that of a private equity fund. They typically have 4-7 years to get in and out of 'investments'.

Do I trust this Company's management based on what I can hear, see or judge?
Do I believe that this Company is interested in making its shareholders and employees richer over a period of time?
Do I largely understand what this Company does and how it is positioned to navigate through/ around obstacles?
Do I believe that this Company is going to do substantially better than most other companies over the long haul?
Do I believe that the price is to my liking?

Note: WB bought into KO in 1988. WB has bought into IBM over the last few months (2011) - USD 10.7 Bn worth of shares for a 5.5 % stake, 64 million shares.