Value Options Letter

From 2000 to 2013, the S&P 500 returned zero percent. Thirteen years. Patience was the only thing you earned. Buy-and-hold breaks during sideways decades. Options-income doesn't. That's the pitch in one line. Weekly research → valueoptionsletter.com/free

BREAKING 🚨: Berkshire Hathaway $BRK.A is now underperforming the S&P 500 by the same margin it was during the run-up to the Global Financial Crisis 🤯👀

The best opportunities often appear during market panic 6 reminders to help you stay calm when stocks fall 1. Warren Buffett in the middle of the 2008 crisis: "I feel like an oversexed man in a harem." Bear markets are opportunities.

In 2009, Berkshire Hathaway share was down 50% from it’s peak. Charlie Munger was asked about how he felt about this. Listen to his Cold Blooded answer 🥶 Reporter: “How worried are you by the 50% decline in the Berkshire Hathaway share?” Charlie: “Zero. This is the 3rd time that Warren and I have seen our stock holdings fall by 50% or more.” “In fact, you should react with equanimity to market price decline of 50% or more in your portfolio at-least 2-3 times a century.” “If you don’t, you’re not fit to be a common shareholder and you deserve the mediocre results you’re going to get. 🔥

Chris Hohn: "A lot of people think [a good investment] is about growth or something new. Neither of those things, to us, matter by themselves." "The most important thing, for the type of investing we do, is high barriers to entry. The moats that Warren Buffett has talked about." (h/t @NicolaiTang1)

The $11 BILLION MAN! He rejected me 3 months ago, but I finally interviewed @BillAckman, one of the greatest investors of all time. I interviewed him in Beverly Hills, and I asked him how he got RICH and his best investment advice for people in business. I also asked him the best industry people should be looking to get into in today’s world, and his number one networking tip for people starting out. Lastly, I asked him for the best advice he’d give the younger generation.

"When investing, pessimism is your friend, euphoria the enemy." — Warren Buffett

"You have to make yourself as un-ignorant and as un-stupid as you possibly can.” “Rationality is your highest moral duty.” - Charlie Munger. 2017

This is Jeff Bezos’s hand-drawn sketch of the Amazon $AMZN flywheel from the 1990s! A few interesting points worth highlighting: 1️⃣ The customer is at the center of every arrow. Jeff Bezos didn’t draw shareholders at the center. He didn’t draw profits. He drew customer experience as the gravitational force that pulls every other piece of the system into orbit. 2️⃣ Every arrow is a cause and an effect. There is no starting point and no ending point. The flywheel is a closed loop where each piece strengthens the next, which strengthens the next, until the entire system becomes harder to displace with every revolution — strengthening the moat each time. 3️⃣ Lower cost structure feeds back into lower prices, which feeds the whole system. This is Nick Sleep’s scale economics shared framework drawn out years before Sleep wrote about it. Bezos understood that the cheapest way to win customers permanently was to take the cost savings of scale and give them back. ___ The reason this sketch is so cool is that it shows the entire competitive philosophy of one of the most important businesses of the last 30 years could fit on a napkin! Also, how about the patience and discipline to actually run the business this way for two decades while Wall Street demanded faster profits. Perhaps the most under-appreciated fact about Bezos is that he was customer-first from day one — even when it meant absorbing decades of Wall Street pressure to do otherwise. Credit to Nick Sleep for surfacing this in his Short-term vs long-term post. Link to the full piece below: igyfoundation.org.uk/short-term-v-l…

VOL is a publication, not an advisory service. We publish a framework, trade ideas with the math shown, and weekly commentary. We don't tell anyone how to size positions in their own portfolio. That distinction matters — for what we publish and what you should expect.

Coincidence? Equities have historically experienced sharp declines in the first three months of a new Fed chair’s tenure. It aligns almost perfectly with the seasonal mid-term cycle.

How expensive is the S&P 500 right now? Four ways to count. - Price/Sales: 3.5x (all-time high, higher than 2000) - Price/Book: 5.5x (all-time high) - Forward P/E: 26x (at the 2000 dotcom peak) - Dividend Yield: 1% (near a record low) Three of these are at levels last seen at the dotcom peak. The fourth one is the price you're paying for the privilege.

🔥 How long it takes for your money to double? Mohnish Pabrai a US based investor with net worth close to Rs. 1500 Crores explains.

In the twenty months leading up to the March 2000 peak: • Nasdaq 100: +290% • Berkshire Hathaway: -45% The greatest investor of all time underperformed the most exciting index of his generation by 335 percentage points in less than two years. Many sold Berkshire to buy tech. You know how the story ended. The Nasdaq crashed 80%. Berkshire recovered and kept compounding. By 2004, Berkshire was up 430% from the start of that period. The Nasdaq was up 270%. Buffett didn't change. The crowd did. The crowd lost.

1999. The headlines about Warren Buffett: "Has Warren Buffett lost his touch?" "Buffett's oracle status questioned." "Berkshire Hathaway's slump casts shadow on Buffett legend." "Former high-fliers take a Buffetting." The greatest investor in history was being publicly written off. Not because his businesses were failing. Because the journey looked terrible relative to what was fashionable. Five years later, Berkshire was up 430%. The Nasdaq had collapsed 80%. The next time you see a headline calling a great investor finished, remember: headlines describe the weather. They almost never describe the destination.

Value option expert @TimTravisValue joins @farnamjake1 and me on Value: After Hours LIVE TODAY at 1.30pm E / 10.30am P / 5.30pm UTC / 4.30am AEDT Watch it on the Acquirers Podcast channel: youtube.com/channel/UCJ27F………… Subscribe to be sent a reminder: youtube.com/channel/UCJ27F…

Warren Buffett on Mr. Market and stocks selling at silly prices: “The beauty of stocks is they do sell at silly prices from time to time and that’s how Charlie and I have gotten rich… In the market you’re going to have a partner named Mr. Market, and the beauty of him as your partner is that he’s kind of a psychotic drunk and he will do very weird things over time.” ___ Mr. Market is not telling you what your business is worth. He’s offering you a price — every day, on thousands of businesses — and most of those prices are wrong in some direction. Some days he’s euphoric and will pay you 60x earnings for a business worth 20x. Some days he’s terrified and will sell you a great business at 12x because the latest headline scared him. The investor’s job is not to listen to Mr. Market. 𝐓𝐡𝐞 𝐢𝐧𝐯𝐞𝐬𝐭𝐨𝐫’𝐬 𝐣𝐨𝐛 𝐢𝐬 𝐭𝐨 𝐤𝐧𝐨𝐰 𝐰𝐡𝐚𝐭 𝐭𝐡𝐞 𝐛𝐮𝐬𝐢𝐧𝐞𝐬𝐬 𝐢𝐬 𝐰𝐨𝐫𝐭𝐡, 𝐢𝐠𝐧𝐨𝐫𝐞 𝐭𝐡𝐞 𝐝𝐚𝐢𝐥𝐲 𝐧𝐨𝐢𝐬𝐞, 𝐚𝐧𝐝 𝐨𝐜𝐜𝐚𝐬𝐢𝐨𝐧𝐚𝐥𝐥𝐲 𝐭𝐚𝐤𝐞 𝐚𝐝𝐯𝐚𝐧𝐭𝐚𝐠𝐞 𝐨𝐟 𝐡𝐢𝐬 𝐦𝐨𝐨𝐝 𝐬𝐰𝐢𝐧𝐠𝐬 𝐰𝐡𝐞𝐧 𝐭𝐡𝐞 𝐩𝐫𝐢𝐜𝐞 𝐡𝐞 𝐨𝐟𝐟𝐞𝐫𝐬 𝐝𝐢𝐯𝐞𝐫𝐠𝐞𝐬 𝐦𝐞𝐚𝐧𝐢𝐧𝐠𝐟𝐮𝐥𝐥𝐲 𝐟𝐫𝐨𝐦 𝐢𝐧𝐭𝐫𝐢𝐧𝐬𝐢𝐜 𝐯𝐚𝐥𝐮𝐞. 𝙏𝙝𝙚 𝙢𝙞𝙨𝙩𝙖𝙠𝙚 𝙢𝙤𝙨𝙩 𝙞𝙣𝙫𝙚𝙨𝙩𝙤𝙧𝙨 𝙢𝙖𝙠𝙚 is reversing the relationship. They treat the daily price as a verdict on the business rather than an offer they’re free to ignore. When the price drops, they assume the business has deteriorated. When the price rises, they assume the business has improved. Most of the time, neither is true. Your edge (psychological) is not predicting Mr. Market. It is recognizing him for what he is — a psychotic drunk with a quote machine — and waiting patiently for the moments when his mood gives you a gift. ___ 🎙️ Berkshire 2012 Annual Meeting | CNBC Warren Buffett Archive

Charlie Munger on how to handle market volatility: “If you’re going to invest in stocks for the long term or real estate, of course there are going to be periods when there’s a lot of agony and other periods when there’s a boom… As Kipling said, treat those two impostors just the same. You have to deal with daylight and night…does that bother you very much? No. Sometimes it’s night and sometimes it’s daylight. Sometimes it’s a boom. Sometimes it’s a bust. You just have to learn to live through them.”

Warren Buffett: “Interest rates are to asset prices what gravity is to the apple. When there are low interest rates, there is a very low gravitational pull on asset prices.” For higher rates, the opposite is true. Buffett’s primer on their relationship to investments & “The Yardstick Effect”:

The strategy isn't the risk. The position is the risk. A leveraged OTM tech-call lottery and a cash-secured put on a $9 dividend-payer at a $6 strike are both "options trades." One is gambling. The other is patience with a paycheck.

"Options are speculative" is a half-truth. Buying out-of-the-money calls hoping a stock doubles in three weeks — sure, that's speculation. Selling puts on a business at a strike you'd happily own it at — that's a structured entry order with paid waiting.