Lecture Notes: Investing Philosophy and Economic Insights

Introduction

• Personal anecdote of picking stocks at age 11.
• Misunderstanding stock market dynamics initially.

Early Investment Approach

• Focused on predicting stock movements.
• Read extensively on technical analysis (e.g., Edwards and Magee).
• Realization at age 19/20 after reading Ben Graham's works.
• Shifted perspective from stocks to businesses.

Key Insights from Ben Graham

• Importance of viewing stocks as ownership in businesses.
• No longer concerned with short-term price movements.
• Emphasis on long-term value of businesses.

Investment Philosophy

• Core Beliefs:
  • Invest with a long-term view (10-20 years).
  • Prefer acquiring businesses rather than stocks.
  • Happiness derived from understanding and managing investments.
  • Embrace market downturns to buy more at lower prices.
• Mental Orientation:
  • Most investors misunderstand the stock market.
  • Focus should be on the intrinsic value of companies over time.

Personal Investment Experience

• First significant investment: City Service Preferred on March 11, 1942.
• Maintains at least 80% of net worth in American businesses.
• Values simplicity in personal ownership—only essential properties for personal use.

Economic Progress and Wealth Distribution

• Current wealth and income distribution in the U.S. has improved significantly.
• Access to better resources (medicine, education, technology) has increased.
• Reflection on how living standards have changed since the time of John D. Rockefeller.
• Comparison of modern conveniences versus historical context.

The Role of Capitalism and Government

• Capitalism as a system that enhances productivity and living standards.
• Government should guide and regulate capitalism without hindering it.
• Continuous evolution of economic systems and improvements over time.

Historical Context and Future Outlook

• Acknowledgment of past challenges (civil wars, depressions, pandemics).
• Confidence in the resilience of the economy and society.
• Assertion that long-term investment strategies like index funds (e.g., S&P 500) are effective.

Conclusion

• Importance of understanding that investing is about owning a share of a business, not merely trading stocks.
• Acknowledgment of the limits of knowledge in stock selection, as emphasized by Jack Bogle.