In 2008, Charlie Munger held the legal monopoly required to kick families out of their homes.
His newspaper, the Daily Journal, printed the mandatory court filings banks needed to finalize foreclosures in California.
When the subprime mortgage collapse hit, defaults exploded. The paper was flooded with notices, pulling in millions of dollars in unexpected cash almost overnight.
The board realized they had absolute leverage. Banks legally had to publish through them, regardless of cost. They could double advertising rates tomorrow and pocket tens of millions more in pure profit. Nobody could stop them.
Munger shut the idea down immediately.
He refused to raise rates by a single penny.
He told the room he could already see the headline: "Charlie Munger, billionaire, raises prices while families lose their damn homes."
Most investors treat pricing power as a mandate to take everything they can get away with. Munger walked away from tens of millions because he lived by a rule Wall Street usually forgets:
"The hardest skill in business is not figuring out how to squeeze the last dollar out of a room. It is having the discipline to leave it on the table so you are invited back for the next thirty years."
The stock market is a theater where you can only leave your seat if someone takes it. During a fire, how much will they pay you for it?
Mohnish Pabrai, founder of Pabrai Investment Funds and author of The Dhandho Investor.
Mohnish Pabrai explains:
"You go to watch a play. This theater has special rules: you can only leave your seat if somebody else takes it."
"There's smoke in one corner, the fire alarm goes off, everyone rushes to the exit."
"You paid $50 for that seat. How much would somebody pay you to take it? Not $50. Not even $1."
"That is the stock market, because every share has to be owned by someone."
"Investors run to the exit, somebody else is buying those shares and walking in — same information."
"'You're running out of the theater? I'm gonna go in. The smoke doesn't bother me.'"
"We are looking for theaters with an illusion of smoke. Not real smoke."
"When you have a mass exodus, the baby's gonna get thrown out with the bathwater."
Chris Hohn on choosing public markets: companies generally keep their best businesses instead of selling them to private equity.
"In private markets it's very hard to execute a deal. You might go for years without doing a transaction."
"It's more process-oriented than investment analysis."
"Given my psychological makeup, which is impatient, I didn't have the patience for it."
"My aptitude is not really process, it's analysis."
"Companies don't sell the best businesses in the world to private equity generally. They keep them."
"Almost by definition, you were buying inferior businesses in private markets."
"Public markets had better quality businesses than you'd find in private."
"It’s much harder to be an entrepreneur in the private market than in the public markets."
🚨 MILTON FRIEDMAN (1978): Milton EDUCATES liberals at Stanford on a FREE SOCIETY:
"I'm afraid you read the book cover to cover but not line by line."
"A free market economy is a necessary but not a sufficient condition for a free society."
"A market makes people pay for what they get. It makes people responsible.""
Why don't liberals put their own money where their mouths are?
They always want someone else to pay for their utopian fever dreams.
Continue with some REIT analysis. High yields on long term bonds are starting to provide attractive opportunities in long duration assets. This one is an interesting UK residential REIT operating at scale. The balance sheet is a more risky one but there is a common sense path in front of the the management to add value to shareholders.
I am interested in underperformers. At the moment staples and real estate (REITs) look quite appealing. Below you can look at different sector performance relative to S&P500 for the last 365 day period.