1/ Thread: $GOOG 4Q'20 Update

For the first time, GOOG segmented its cloud revenues/income separately, and overall revenue was >20% in 4Q which led to +7% after-hours reaction yesterday.

Here are my notes from earnings/press release.

1/ Peter Bevelin, who has written books like “Seeking Wisdom: From Darwin to Munger,” provided me with a rough transcript of the Charlie Munger talk from yesterday. I did some clean up and editing and focus on points I didn’t make in my tweets yesterday.

2/ “All successful investment involves trying to get into something where it's worth more than you're paying. That's what successful investment is. There are a lot of different ways to find something worth more than you're paying. You can do what Sequoia does [e.g, in VC]."

3/ “Good investing requires a weird combination of patience and aggression and not many people have it. It also requires a big amount of self-awareness about how much you know and how much you don't know. You have to know the edge of your own competency."

4/ "A lot of brilliant people are no good knowing the edge of their own competency. They think they're way smarter than they are. Of course, that's dangerous and causes trouble.” Charlie Munger

5/ “When I was young, there was practically nobody involved in investing and they weren't very smart. Now almost everybody's smart. A good proportion of the people in investing are sucked into finance by the money. That's an important development. I don't welcome it at all."

Ten MF mistakes I recommend you avoid...

1. Too much love

A fund does well. You fall in love with the fund house. You have a large mid and small cap scheme from them. They all tank together! Diversify. And remember being good at one thing doesn’t make you good at the other.

2. One for all

Applying the same metrics to judge different asset classes. What matters to equity funds doesn’t matter to debt funds. Arb funds are fully hedged - the individual stocks don’t matter, they do in equities. Understand what matters for each asset class.

3. Perils of passive

Assuming all passive funds are good because they are cheap. There are terrible passive funds out there too. They track bad indices. Or they track good ones but have a lot of tracking error. Passive requires its own set of research.

4. Apples and kiwis 🍎 🥝

We have categories in MF but sadly all funds in a category are not comparable. Just because a website compares them doesn’t mean you should look beneath. BAF categories have funds that are static, dynamic bond funds have rolldowns. Just an example.

Mega Thread on Personal Finance 101

👇👇👇

Rule of 72 (Double Your Money)
Rule of 114 (Triple)
Rule of 144 (Quadruple)
Rule of 70 (Inflation)
4% Withdrawal Rule
100 - Minus Age Rule
10, 5, 3 Rule
50-30-20 Rule
3X Emergency Rule
40℅ EMI Rule
Life Insurance Rule

♻ Rule of 72

No. of yrs required to double your money at a given rate, U just divide 72 by interest rate
Eg, if U want to know how long it will take to double your money at 8% interest, divide 72 by 8 and get 9 yrs

At 6% rate, it will take 12 yrs
At 9% rate, it will take 8 yrs

📋Rule of 114

No. of years required to triple your money at a given rate, U just divide 114 by interest rate.

For example, if you want to know how long it will take to triple your money at 12% interest, divide 114 by 12 and get 9.5 years

At 6% interest rate, it will take 19yrs

🗒️ Rule of 144

No. of years required to, quadruple your money at a given rate, U just divide 144 by interest rate.

For eg, if U want to know how long it will take to quadruple your money at 12% interest, divide 144 by 12 and get 12 yrs

At a 6% interest rate, it will take 24yrs

🗒️ Rule of 70

Divide 70 by the current inflation rate to know how fast the value of your investment will get reduced to half its present value.

The inflation rate of 7% will reduce the value of your money to half in 10 years.

Does increase in Inflation & hence interest rates lead to a fall in equity? While theoretically yes, practically the last 20 years of data shows otherwise

Please ‘re-tweet’ 🧵& help us educate more retail investors

#Investing

Lets start with basic, y does inflation ⬆️?
Most feel bcoz of higher demand & lower supply but that’s nt the only factor. Imagine there is a shortage of laptops wrt the demand, but there is no liquidity in the market (people don’t have monies) will the price of laptop ⬆️? No

So, Inflation takes place because the demand supply situation is accompanied by high liquidity, people have the monies to spend and hence the price goes up. Inflation does not take place only because of the demand supply gap (3/n)

Its RBI’s job to keep inflation under check. What role does RBI play? RBI is comfortable keeping Inflation between 2-6% currently. So if Inflation is increasing, how can RBI control it? Can RBI do anything to demand & supply? Nothing (4/n)

So the only tool available with RBI to control inflation is controlling liquidity. If RBI is able to reduce liquidity in the market, less money will chase the goods and hence Inflation can be expected to stabilize. (5/n)