1/ Since "liquidity" has been the buzzword these days, here's an anecdote and a powerful lesson from history about printing unlimited amounts of money. Story time. #fintwit

1/ Howard Marks once said that before buying an asset, above anything, he wants to know “the amount of optimism that’s in the price.”

All investors can do this with a handy tool: The Reverse DCF.

I'll also leave a download link to my compact DCF Model at the end of this thread.

2/ We all know a regular DCF. But's what a "Reverse DCF"?

If we consider that a DCF is a Linear Equation, we could say the 'X' (The unknown variable) is the Intrinsic Value.

In a Reverse DCF, we start with the Market Price and try to find some other variable, say Sales Growth.

3/ Let's start by taking an example: VST Industries, a Cigarette-maker based in India.

I valued them on my blog a while ago. I'll be retaining the old assumptions, but using the latest financials.

So please note that the Valuation isn't accurate

4/ This is a "Regular DCF" of VST Industries. The Assumptions I've made indicate an Overvaluation.

The Intrinsic Value is Rs. 3,012, but the Market Price is Rs. 3,492.

Let's not dwell on whether this is correct, since we discussed earlier that this isn't an accurate Valuation.

5/ If we want to do a "Reverse DCF" instead, we need to pick a different variable to 'find'. Say, I will pick the Sales Growth numbers.

I will now remove the Sales Growth numbers from the Model and assume that Sales Growth is the same across the years for ease of calculation.

@abhishec_s @Sanjay__Bakshi The most rational course of action is to buy below your expected value, hold when it's between your expected value and overvalued zone and sell above overvalued zone (No in-betweens or holding extra cash).

But there are many impediments in executing each step.

1/ There are a ton of books about Financial & Fundamental Analysis, Scuttlebutt and Technical Analysis. But there aren't many books 'taking risk'.

Among the few that exist, 'Zurich Axioms', written in 1985, is the best. Here are my key takeaways from the book.

2/ A bit about Max Gunther's (The Author) background. He was an Anglo-American journalist and writer, who wrote 26 Books.

His father, Franz Heinrich, was the New York Head of Schweizerischer Bankverein, which later merged into the famous Union Bank of Switzerland (UBS).

3/ The 'Zurich Axioms' were a set of unwritten rules followed by a informal group of Swiss Bankers and Traders who used to socialize around Wall Street after World War II. Mr. Heinrich was one of the founding members.

Max Gunter formalied these 'Axioms' by writing about them.

4/ There are 12 'Major Axioms' and 16 'Minor Axioms' (Corollary to the Major Axioms) in the book.

But remember, this is MY key takeaways from the book and not an exact summary. So you might find quotes, phrases and links inserted here and there by me (Not from the Author).

5/ Axiom #1: In order to earn returns, you must take risk. Risk will make you worry.

Risk-taking and worrying go hand-in-hand. If you're not worried about an investment, you're not taking risk.

Spend half your energy towards earning an income and the rest towards speculation.

1/ I've Valued 150+ companies using the Discounted Cashflow (DCF) Model. Far be it for me to say I am an expert. But if you've done this as much as I have, you start noticing certain patterns.

Here are 10 lessons I've learned from using the Discounted Cashflow Model.

2/ Every investment decision you make follows a Discounted Cashflow calculation.

You let go of X today to earn Y in the future. You wouldn't do that if you didn't expect to earn an expected amount of returns (r).

Nobody wants to let go of X and get back X years down the line.

3/ When you invest in a company, you hold claim over the Assets and the Profits of a Company. Without diluting your ownership, Assets and future Profits are generated out of one thing and one thing alone: Free Cash Flow to Firm.

FCFF is the treasure at the end of the rainbow!

4/ Combining the above two observations, a company may not always make Profits in the present. In fact, if it's a young company or in a new market, losses are a given.

Eventually though, future profits should be large enough to offset or overtake all the past losses in PV terms.

5/ For most companies, generating Returns falls in a spectrum: Have high Margins and generate lower Sales in relation to Capital Employed Vs. Turn Assets faster but have low Margins (Or somewhere in between).

For Indian context, compare the Business Models of D-Mart Vs. NESCO.

The US election news has largely overshadowed a seismic moment in global finance: Ant, a fintech company that spun out of Alibaba/Alipay, was scheduled to have the world's largest IPO, topping even Aramco, the Saudi sovereign wealth fund.

Then Chinese regulators canceled it.

1/

As @yvessmith writes in her excellent @nakedcapitalism breakdown, the consensus narrative on this is capricious Chinese regulators changed their minds and jerked the rug out from under Ali's billionaire owner Jack Ma.

The reality is a lot

To understand it, you need to understand the difference between the Chinese and American "money story." In the US, there is widespread, unquestioning faith in the fairytale that money predates the state and is separate from it.

3/

In this story, people come together to trade but are plagued by disparate goods: if I want to pay for your chickens with a cow, how do you make change? They spontaneously decide that something (gold?) is money and price their cows and chicks in it.

4/

Then, governments come along tax our gold away, and then to add insult to injury, governments abandon gold and insist that paper is as good as gold, print too much of it and crash the economy!

This probably sounds familiar to you, but it's just not true.

5/

Why do we track institutional footprints? 🐘 (Thread)

Large institutions like mutual funds, hedge funds, banks, insurance companies, trusts, etc. amount for over 75% of all volume. These institutions move the market, not you and I.

It makes sense that if these guys are moving the markets, we would ideally want to buy the same stocks they are buying, but before they buy them? Right?

So, let’s get a clear understanding of how and why this is so important and what this might look like behind the scenes.

For starters, let’s discuss what we mean by a large institution. In this case, we are referring to the many funds, pensions, trusts, etc. that are responsible for managing tens, if not hundreds of billions of dollars.

Hence, they easily attract and can afford to retain the planet’s top talent, not to mention, their research budgets are enormous.

They have access to information and resources that the retail crowd simply does not, and if they did, it would likely be extremely unaffordable.

A thread on an interesting report by Goldman Sachs' Peter Oppenheimer, the bank's chief global equity strategist. He points out that Goldman's "Bear Market Risk Indicator" is looking ominous.

There are three factors that suggest that the recent stability could evaporate and that equities are "about to enter a sustained bear market", Oppenheimer says.

First is the fact that growth, inflation and interest rate outlook is unfriendly for equities.

Second is that greater volatility, such as multiple corrections and new peaks (which we've seen in 2018) tend to presage a full bear market.

Here is Goldman's data showing how falls and bounces tend to come ahead of "the dramatic final fall".

Originally posted Jan 5th - https://t.co/Vim3JlOtlZ

FULTON CO.

We're looking at "book votes." That is, people who are marked as having voted in the voter rolls. This is how Floyd County was detected - you had an excess of voters in the book vs. what was recorded on machines.

Jan 5th I mapped the book votes visually at a precinct level and found curious correlations that bears public scrutiny.

Screencaps are not from a public site, but underlying data given is real, public, and verifiable.

We'll be taking a precinct-by-precinct look at Fulton county excess votes. Excess meaning more recorded votes than book.

Fulton has 10K+ excess votes. This has been blamed on stale record keeping. At a precinct level, there are 14700 "excess" votes and 3900 "missing" votes.

This is a precinct map of Fulton County. There'll be a lot of data, so refer to these maps over and over until you understand. Here, the red and yellow/orange areas are where the most excess votes are (by ratio).

And for background context - this is a map showing where Trump votes are. This is a *relative* coloring not an absolute coloring (otherwise it'd be all blue). Fulton is strongly Democratic so the red areas are actually like 55% Trump at best whereas the blue areas are <5% Trump.

This is premature, but I want to walk you though why some of the charges coming through are incredible significant. This is one of the recently unsealed complaints.

1512(b) is a very, very strong crime. Section 1512 is about obstruction of the administration of justice. The statute is supposedly about disrupting court proceedings, but it's broader. The way it's written, Congressional Proceedings count.

The statutory maximum for a single violation of 1512(b) is 20 years in prison. That's a lot. Most related federal crimes—231 civil disorder, 2101 riots—are only 5 years on the top end.

But that's not all.

See, federal sentencing is done via a complicated formula that computes sentencing guidelines.

Sentencing guidelines are based on the statute, the elements of the criminal offense, and the defendant's criminal history. It also factors in things like if the defendant takes responsibility, and takes a plea deal, etc.