Wednesday, June 23, 2010

Quotes from the Grind

I was shocked one day when I heard this very wealthy, semi-retired salesman say this about his children:

"I love my kids, but I don't respect them."

He said it several months ago, but it has stuck with me as a reminder that no wealth can compensate for a disappointing household. It has also served as a reminder that perceived wealth is the ultimate corrupter of our youth.

The analogy my Dad likes to use is that if you have kids, and you have money, you shouldn't drive a nice car. Not because you can't pay for it, but because you can't afford it. It sends the wrong signal (or "data point" as my old NY mentor would say) to your children. Instead of learning about the hard work and discipline it took to earn the car, your children learn complacency and entitlement. And it's not like you just wake up one day, and find out that your children are brats. It takes years of constant reminders, cars, vacations, clothes, credit cards, phones... it all adds up to a bill your children ultimately pay as they struggle to adapt to a world without handouts or the required skills (industriousness and passion) to survive . That's not to say that you shouldn't have nice things in your life, but be careful on what you let your children see and experience.

My 2nd favorite quote, came much more recently.

With summer time comes summer interns. I was working with a summer intern who also happens to be a 30 something year old MBA student from one of the top 10 business schools in the U.S. I attempt to be a good mentor. I start by showing him how to do certain short-cuts in excel after he bungles a first, second and third attempt at putting together a basic financial overview. After about 2 minutes he laughs and says, "don't you see the humor in this," [I look at him quizzically] "Here it is, I'm 30 years old, and you're teaching me how to use excel."


Great, lesson over. I can go back to my work and you can figure this shit out on your own.

Instead I responded, "when I started here I never used excel, so you clearly have the opportunity to learn a lot in a little time."

And oh, go fuck yourself.

Monday, June 21, 2010


The creaking in my apartment is starting to get a little unsettling. I'm sitting at my desk, and then I can hear a creak move across one wall, and run through the apartment.

Friday, June 11, 2010

Stormy Weather Ahead...

I would like to preface this entry by paraphrasing what WEB has already stated multiple times: I have no idea what the stock market will do in the near term (day, month or years).

That said, I'm currently working to prepare for a crash. I'm doing this because I expect it to happen soon, and I need to be prepared to act when the opportunities exist.

This means building a shopping list of ideas to buy at 6x or under free cash flow (its like buying a bond with a 16% interest rate that's either paid to me or is reinvested into the company) and finding companies that have the liquidity to weather a terrible downturn involving many years of stagnation or declining revenue. If the investment also happens to be a good company that's growing with high returns on invested capital, that's great, but I don't need to have it. If a stock doesn't have the two key qualities (low P/FCF and liquidity), I'm not interested.

While it is exhilarating, I'm a little drained mentally and emotionally as I've been working on this list in any free time I have (excluding time at work or with the fiance) pretty much for a month now (and less diligently for the last year).


My personal return in 2008 and 2009 was over 50% each year largely through a combination of good fortune and preparation. In November 2008, one idea that I had been following for a year fell in my lap, dropping 70% in 1 day on hogwash headlines. The market overreacted, and I put 30% of my assets in the stock. Other than this one pick, I effectively sat in cash most of the crash, with my eyes focused almost entirely on this one idea. In retrospect, while I beat the market, I did not succeed (a la Wooden - doing the best in which you are capable). Had I been better prepared I would have invested the remaining 70% of my portfolio in the opportunities available at the time which included some companies trading for 2-4x normalized free cash flow. Instead I froze. I had never made a bet so big and I needed inactivity.

This next crash I must be better prepared. I need more ideas and I want to be fully invested when everyone else is panicking. I need to emotionally brace myself for a down year as I average down into my cheapest positions. I've learned so much since then, and the stakes are so much higher now.

Saturday, June 05, 2010

Lincoln's Career

As I was rereading one of John Wooden's books, I came across this passage on Abraham Lincoln's career:

Born 1809
Failed in business 1831
Defeated for legislature 1832
Failed in business again 1833
Elected to legislature 1834
Sweetheart died 1835
Had nervous breakdown 1836
Defeated for speaker 1838
Defeated for elector 1840
Defeated for congressional nomination 1843
Elected to Congress 1846
Defeated for Congress 1848
Defeated for Senate 1855
Defeated for Vice President 1856
Defeated for Senate 1859
Elected President of the United States 1860

"The model Mr. Lincoln gave us with his persistence is one we can remember in the face of our own setbacks. And what is most wondrous of all is that persistence is a quality that we ourselves control. You, and only you, can decide whether you will stay the course." - John Wooden

In Memory of John Wooden

"I am a biography nut myself, and I think when you're trying to teach the great concepts that work, it helps to tie them into the lives and personalities of the people who developed them. I think you learn better economics if you make Adam Smith your friend. That sounds funny, making friends among the eminent dead, but if you go through life making friends with the eminent dead who had the right ideas, I think it will work better in life and work better in education." - Charlie Munger (pg. 136 of Damn Right)

On June 4th, 2010, John Wooden passed away. While I am happy that he will be reunited with Nellie, his childhood sweetheart of 60 years, I am also sad and a touch scared.

In some ways its like building a bridge. Upon completion, you remove the support beams to see if it can stand on its own. My life was built on the collective wisdom of a few role models, and when they pass, as they will in time, I must stand on my own, in living and practicing their life lessons.

Below are a few of my favorite quotes or writings of John Wooden:

"I am just a common man who is true to his beliefs."

"I am happy my teams at UCLA and elsewhere did well and we earned a measure of recognition. But all of this is nothing compared to my family: Nellie, our two children, our seven grandchildren, and all ten of our great-grand children. All that love is immeasurable."

"True success is attained only through the satisfaction of knowing you did everything within the limits of your ability to become the very best that you are capable of being."

Remember this your lifetime through -
Tomorrow, there will be more to do
And failure waits for all who stay
With some success made yesterday.
Tomorrow, you must try once more
And even harder than before.

How much more pleasant this world would be if we magnified our blessings the way we magnify our disappointments - Unknown

No written word
nor spoken plea
Can teach our youth
what they should be.

Nor all the books
on all the shelves.
It's what the teachers
are themselves. - Unknown

"I have prepared for death all my life by the life I lived" - Socrates