Crude Oil and Commodity Prices
Not only with the development but with Brent and his oh so charming wife, Erin and of course he is as well!! Visit an archaeological site. A real-life example would be helpful.
Analysis and Opinion
But, I always maintain a healthy amount of paranoia about what can go wrong. You mentioned a very important point about maintaining a healthy amount of paranoia about what can go wrong. How do you bring that into your investment process? Every organization is challenged in numerous ways and comes with complexity, politics, and disorder.
Thinking otherwise is folly. It can be market position, customer entrenchment, brand, or a rare type of expertise. And of course, the purchase price matters. In practice, we spend considerably more time analyzing what could go wrong than what we think might go right. If we take care of the losers, the winners take care of themselves. We also use checklists and always seek outside counsel to give us a fresh perspective.
There are two challenges almost all successful organizations experience: As the company becomes successful, the environment breeds over-confidence.
Numbers must be hit and steel is taken out of the bridge. Debt is used liberally. The culture transitions from supportive and open to closed and transactional. We try to avoid these pitfalls through maintaining humility, a long-time horizon, disciplined reinvestment strategies, aligned incentives, and high opportunity costs.
We centralize capital deployment and set a high bar for re-investment. Our goal is to steadily compound returns over a very long period while maintaining a diversified portfolio and cash balances that let us operate comfortably, and be a buyer, during challenging times.
What are some of the characteristics you look for in businesses you are looking to own that can help you build such a machine? A checklist of points would be useful here. As for characteristics that we look for, it all comes down to the quality and durability of the moat compared to price.
How do you think about valuations? Because of our structure and having not raised outside capital, there is no difference between my personal portfolio and adventur. We like to choose between very good opportunities and excellent ones. Is it susceptible to disruption?
What are the sources of their competitive advantage and how durable are they? What can go wrong and still have this work out? Simple processes often work out better than complex one. I can vouch for that from my personal experience as an investor. Anyways, while you own private businesses, do you have a laid-out exit strategy? Our default is permanence. We buy with no intention of ever selling and operate the companies to maximize long-term value.
We believe this gives us a tremendous competitive advantage over a traditional private equity strategy. Anyways, how do you think about position sizing?
Which side are you on — concentration or diversification? Plus, we maintain plenty of cash to weather a storm, or two. When you look back at your investment mistakes, were there any common elements of themes? A real-life example would be helpful.
All my biggest investment mistakes have a common theme — people. We insist on partnering with leadership that is high-integrity, kind, and long-term oriented. In fact, there are plenty of terrible businesses run by wonderful people. There are ten thousand ways leadership can harm owners, and it only takes a couple to inflict real damage. Plus, the time commitment necessary to watch someone closely is enormous.
My biggest gains in decision-making have come from absorbing the mental models that carry the heavy freight, learning from my mistakes, and surrounding myself with smart, intellectually curious people who will speak truth. All three are simple, but never easy. The big ideas, like probability, opportunity cost, and margin of safety are inescapably important.
Most people try to cover up their mistakes, explain them away, or blame others. Those are defense mechanisms that allow us to look in the mirror and sleep at night. The problem is that they dramatically distort reality and lead to a form of self-induced blindness. Reality is what it is, and no amount of wishing will change it. Surrounding yourself with top-notch people is the most important.
We are an average of our ten closest relationships. If you think about it that way, it will change your life. I think about risk all the time and far more than returns. If you take care of risk, the returns will take care of themselves. Embrace risk mitigation and your upside will necessarily suffer. Risk is not uncertainty. It is not volatility. At its core, risk is the likelihood and magnitude of permanent loss.
It is the probability of a collision between a detrimental event and a lack of planning, resulting in a permanently negative outcome of some potential size. We look at buckets of risk for each investment and try to mitigate them to the level that makes sense based on the probability of expression and the magnitude of the potential result.
Here are the types of risk we frequently explore:. Study great investors and try to understand why they behaved the way they did. Wade in slowly and be cautious. When you make mistakes, pay close attention and learn. If you experience immediate success, chalk almost all of it up to luck. If you were to give away all your books but one, which one would it be and why?
Seeking Wisdom by Peter Bevelin is excellent. Their durability and adaptability have created an unparalleled track record. He made his fortune in Duty Free Shoppes, then spent most of his life anonymously giving it all away. The way he invested his wealth is something to admire.
Briefly, what would you write in a letter to yourself, so that you could begin relearning everything starting the next day? You lost your memory. You have a wonderful family. Treasure and prioritize them. By the time you get up to speed professionally, circumstances likely will have evolved. Always be willing to change your mind when the facts change. Here are a few things you had learned: Avoid sugar and processed carbs.
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