The Trouble with Investment
The S&P 500 closed Friday at a new high for 2023, and finished up 0.2% on the week. The Nasdaq also saw a gain, as it rose 0.7% for the week.
This past week, the Invest Like the Best Podcast also released a conversation with John Collision and the late Charlie Munger that was recorded earlier this year as part of the new, abridged, and free online edition of Poor Charlie’s Almanack that was just published. In that conversation, Munger mentioned some of the difficulties of investing:
Charlie: The trouble with investment is most business is going to perish. It's like evolution. Over a scale of 300 years, practically, everything perishes. All the great retailers, 90% of them have perished in the last 100 years. And lots of other fields—Kodak perished, all kinds of big things that looked permanent.
And of course, successful investment, you want to anticipate things that are going to destroy businesses. For instance, as we sit here, over the last 100 years, the people that controlled the big brands reliably made more money, more easily, with less risk and downside than practically anybody else.
John: Brands like what? What's an example?
Charlie: Just any toothpaste. Procter & Gamble. You name it. But I remember when Ipana was a popular, fast-selling toothpaste and it went out. And it's gone, totally. And I think that there are forces in effect now that are going to make it harder for the people that control the big brands because these house brands like Costco has, and the other house brands, and the success of places like Aldi and so forth, I just think that there's more trouble coming to big brands than they've had in the last 100 years.
And if you're an investor, you should realize that even though you haven't seen it yet. And you wouldn't realize that modern big brands have a perish risk unless you were familiar enough with economic history to remember all the other things that perished that once looked investable and looked permanent and, of course, they weren't.
…I figure all investment as intrinsically damn difficult because, obviously, good ideas get bid to such high prices that they get dangerous just because there's no investment that is so good you can't ruin it by raising the price higher and higher—because none of them are worth an infinite amount of money.
That sums up much of the investing game—it’s hard. Business is hard. Making money is hard. It’s why so many investors choose to index and call it a day.
And it’s why many other investors, trying to do more than match the index, realize they can’t have an opinion on everything. They can’t invest in twenty new ideas a year. If they want to win, they need to be patient and wait for those handful of times when it makes sense to bet big.
Getting good at recognizing those few opportunities so that you’re right when you bet big is useful work. The pursuit of that kind of knowledge is how you gain experience. It’s how you stay around long enough to survive the waiting game so that, when the time comes, you can take a big, heaping trip to the pie counter.
“A few rare opportunities will come. You’ve got to learn how to recognize them when they come and not make too minor of a trip to the pie counter when the opportunity is available.” —Charlie Munger
Tweets of the Week
In Case You Missed it…
Watch Legendary Investor Charlie Munger’s Final Interview With CNBC (Full, Extended Interview)
When Should You Average Down? - by Ian Cassel
Graham and Doddsville Newsletter: Fall 2023
Value After Hours S05 E 45: Forensic analysis with Stephen Clapham (video)
Serial Acquirer: Successful Acquisition Strategies w/ Chris Mayer (video)
Activist Investor Bill Ackman on The David Rubenstein Show (video)
The JRo Show Podcast: Interview with Chris Bloomstran
The Meb Faber Show Podcast: Louis-Vincent Gave & Harris “Kuppy” Kupperman
The Jordan Harbinger Show Podcast: 930: Morgan Housel | The Power of Preparation Over Prediction
How Leaders Lead Podcast: Joe Moglia, former CEO of TD Ameritrade – Develop a coaching mentality
If you have not already upgraded your membership…
Avenel Financial Group, a merchant banking and advisory firm located in Charlotte, NC, launched a new business venture called the Co/Investor Club. The Co/Investor Club is a community of value-oriented investors that collaborate on investment opportunities and ideas. You are receiving this newsletter because you are a Free or Premium Member of the Co/Investor Club!
Chat with Mike
Whether you’re an executive with investment opportunities or a college student looking to network, we would love to chat with you! Email our Founder, Mike Pruitt, at mp@coinvestorclub.com with questions and ideas or schedule a meeting.
Don’t forget to follow us on social media too!
Twitter: @coinvestorclub1
LinkedIn: Co/Investor Club
For our disclaimer, please visit our website.
Have friends that want to join? The Co/Report is public, so feel free to share!
Thank you for reading. Co/Report grows through word of mouth. Please consider sharing this post with someone who might appreciate it.