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> I think he says one thing to the crowd and does another thing in private.

He doesn't do anything in private as Berkshire has so much money all their moves are public and well known. The advice is true but fits another era, read his autobiography.

> People are searching among the crumbs now.

Yeah, the cigarette butts. He had ~$10 million by age 30. Incidentally he amassed this as the the son of a congressman, had a rich auntie, and was in very good social standing in a small wealthy town (Omaha). And it was 1960.

   By 1960, Buffett operated seven investment partnerships. He asked one of his partners, a doctor, to find ten other doctors willing to invest $10,000 each in his partnership. Eventually, eleven agreed, and Buffett pooled their money with a mere $100 original investment of his own.

I think it was his biographer, Alice Schroeder, who said that Buffett has never revealed his start to finish analysis for an investment. He's only talked about guidelines and principles, but it's like one thing to know F = m*a vs. how to design a bridge. Also, a lot of his money came from what was basically insider trading as a 20-something (chatting up CEO's and trading from that information).

Yep. He’s revealed in vague passing some guidelines for, say for instance, a discount rate to use, but it’s vague enough only to use as a rough estimate such that you arrive at a possible ballpark.

It also doesn’t help that DCF calculations are incredibly sensitive with respect to interest rates that had for some time been historically low.

It might be easier to calculate these days, but my findings from years ago informed me that these issues were beyond reading financial reports.

There’s a bigger problem of there simply just not being enough attractive companies at even fair rates.

Statistically, you can only buy earnings at so high of a price to meaningfully make a worthwhile return, and for a while now, those prices have been too high in comparison to the risk free rate.

I’m sure this has since changed due to current interest rates, but I haven’t bother to look simply because of the first problem.

>There’s too many people in that game.

There's too much money in the game. There's more capital invested than there are things to invest in at a reasonable rate of real returns. It needs to be clawed back but it's hard an unpopular to do. What we effectively need is a temporary effective progressive wealth tax that alters the exponent of wealth distribution, and that tax just needs to go "nowhere" instead of being reinvested in government programs. Carefully though because such an action has lots of side effects. The problem is whenever you propose such a thing there will be a long list of people with a long and varied list of reasons why this or something similar is insane. It is A) complicated and B) poorly understood so the discourse is usually just useless, which is reason #1 why it is hard.

I agree completely.

>They’ve almost entirely been speculative returns.

While that may be true to some extent (especially with the more popular stocks like, let's say... Tesla, the P/E ratio is through the roof, although it got a bit better in the last year or two), but I feel that stocks that pay dividends do have actual gains - in the form of dividends.

I personally prefer dividend stocks, because with the growth stocks you have to sell to get any profits or anything back, and I don't like to sell. Also, when the stuck is moving down, they usually still do pay dividends, which allows you to buy more of the stock at an even lower price.

In my opinion, it's much harder to inflate the price of the stock through the dividends, because those actually affect the company. They need to have that money to be able to pay it out to the shareholders.

Me too. I now look for companies that are fairly valued by my very simple definition, have consistent financials, and pay a big consistent dividend.

> with the growth stocks you have to sell to get any profits or anything back, and I don't like to sell

Why?

Share buyback instead of dividends has almost only advantages. It's more liquid, more tax efficient.

> it's much harder to inflate the price of the stock through the dividends, because those actually affect the company.

What do you mean "inflate"?

> They need to have that money to be able to pay it out to the shareholders.

But it's the same during a buyback...

The price of something is what people are willing to pay for it. Those formulas that you use to conclude their value is speculative are prescriptive and mostly antiquated. It is almost impossible to separate "real" from speculative value.

It really isn’t, and the math is quite literally comparable to calculating the coupon of a bond.

It’s people repeating this idea that math has suddenly changed within the last 20 years or something that is ridiculous.

Ok, then you use your math to buy stocks and I'll use my definition, which is the one accepted by everyone else. I'll gladly be here with the idiots making bank, buying my overpriced index funds while you wait for them to return to their platonic price.

> which is the one accepted by everyone else

The field of finance studies how to value various assets, beginning with fixed cash flows over time, and then introducing things like risk.

I can't find information about this field on Google. Can you point me to a reference that contradicts any of what I said?

https://en.wikipedia.org/wiki/Time_value_of_money

https://en.wikipedia.org/wiki/Valuation_using_discounted_cas...

Reductio ad absurdum: would you spend one million US dollars to make one dollar a year? No, that's clearly foolish.

Would you spend one US dollar to make a million a year? Of course, but what such investments would ever exist?

And so instruments which bare gains over time have some value, which is calculated by the means of cost of investment to returns over time.

If there are a market of such instruments, they can and will be in competition with each other.

This "things are only what people value them at" stuff is for the birds. Those other people you're talking about are actually calculating their investments. Others with such mentality will follow, not knowing what they're doing, and taking missteps when the goods are already gone.

What you think is "accepted by everyone else" is what you're seeing at face value. There are reasons behind actions. Those actions in and of themself have no meaning without context.

The mathematics of investment have never, ever changed in any meaningful way. The history of debts, interest rates, and returns have always fluctuated, but the math hasn't.

Anyone suggesting otherwise is uninformed.

The problem is that the future is uncertain, and price is guided by feelings and impressions. People think Tesla is a great company for a variety of reasons that have nothing to do with math. They trust Elon Musk, they think Tesla has a technological advantage, etc. Of course a lot of people also look at balance sheets and hard facts before making a purchase. The price of Tesla's stock is composed of the coordinated actions of all these people. It turns out that adhering to your narrow idea of value does not help you accurately predict the price of a stock, or even the market as a whole for that matter.

> It really isn’t, and the math is quite literally comparable to calculating the coupon of a bond.

There is no math that claims the price of a stock should be some form of discounted future cashflows since at least the 90s.

Since then, all models have been multifactor ones, with fundamentals (quality, value) being only one fragment of the market, sector and country residualized stock returns.

What `epups` is explaining to you is the basis of behavioral economics, which is the de facto current leading theory since its foundations were Nobel prized 20 years ago...

The easiest way to make money is to convince the government to print more of it, and then take a percentage cut of the distribution and growth of the money supply. The financial industry has been doing this for decades.