Subject: Re: Spy down another 4 percent,
So here we are with no visibility more uncertainty than he's [H. Marks] seen in his lifetime and an overvalued market. This surely explains Buffetts large cash position.

One could also state this the dimaetrically opposite way; with no visibility and more uncertainty than he has seen in his lifetime, this is an ideal time to be overweight in equities: Raise the cash position when there is (1) a sense of inevitability that markets will keep rising (overconfidence), and reduce the cash position when (2) investors are stressed out and heading for the hills.

We are not longer in the environment of 1, but it seems we aren't really in 2 also - so we have moved from 1 to somewhere between 1 and 2. That could be a sound recipe to have a fairly neutral investment position.

The caveat is that market quotes in fact have not fallen much - despite that lurking universal sense of uncertainty. The S&P500 is still 7% higher than it was just one year ago. So we have a sense of ambivalence, some dismay, but perhaps not true fear yet (such as you observe when the market quote has fallen 50% or so).

Many are now assuming some sort of mild recession, but very few are mentally framing it a protracted recession, such as we had in the 1970s, 1980s and 2009. But even those 3 larger recessions only each went for 1.5 years (the market taking longer to return to its former real value). Still, even with these 1.5 year long recessions, that just don't have that much effect on the intrinsic value of your holdings.

Occasional broad market earnings declines are part of the unstable western economic system. There were in the past, and they will be in the future. Don't sweat over it too much. How much do recessions - even these 1.5 year long ones - relate to the value of your holdings? Not much. The value of what you own is the sum of really long-term discounted earnings streams, or put another way; your intrinsic value is a 15x multiple applied to the normalized earnings of everything you own 15 years into the future. What will those 15-year-away earnings be? Now, I can tell you what they are not. The earnings of what you own are not that impacted from the squiggles that the earnings go through in the middle.

What counts is the durability of our earnings and their growth. Think of firms that can be outcompeted unexpected with their current market position up for grabs (retailers), or firms relying on specific market conditions that can change (think niche-semi-conductors etc). These are the kinds of firms to avoid. Alternatively, tink of firms like Brookfield that have ridiculously predictable earnings streams that don't go out of date, nor suffer from competitive destruction that most firms have to put up with each year, and capable to reinvest earnings to expand compounding-style without having the market saturation problem such as Apple. Or think of firms like Berkshire that have a natural leveraging advantage in the business model (by exposing some of the investment float to equities) and hands-off shrewd-accountant-style that avoids VCVC (vulture capital vanishment culture).

I also can't help notice pretty good bargains around right now. Google stands out, which I wrote about here - https://www.shrewdm.com/MB?pid... - and Meta are interesting today also. I recently wrote about Meta here also - https://www.shrewdm.com/MB?pid...

- Manlobbi