Money Concepts

Businesses have to do 2 things well: (1) Raise cash opportunistically, and (2) Deploy that cash intelligently. Raising cash can be done via issuing either debt or equity. A third option is to increase “float” — get customers to pre-pay for their orders, negotiate better payment terms with suppliers, etc. Each has its pros and cons. Managers have to choose wisely. Once cash is raised (or generated via business operations), it can be used in a number of ways. It can just be piled up on the Balance Sheet waiting for an opportunity to come along. Or it can be invested into new/ongoing business initiatives and projects. Or to make acquisitions. Or to pay down debt. Or to reward shareholders with dividends or buybacks. Again, managers have to choose wisely. All these decisions fall under the broad umbrella of “capital allocation”. In this episode, we'll go over the fundamentals — ie, how business managers should approach these decisions. We'll also discuss how we as investors can tell whether our portfolio companies' managers are making these decisions intelligently. Disclaimer: None of this is investment advice. Download the Callin app for iOS and Android to listen to this podcast live, call in, and more! Also available at callin.com

Charlie Munger likes to say: All I want to know is where I'm going to die, so I'll never go there. In that spirit, we want to know how companies typically die, so we never take our portfolios there. In this episode, we'll look at some of the common ways companies get into serious trouble, which sometimes ends up killing them. We'll also go over some strategies to make our own portfolios robust to such dangers. Disclaimer: None of this is investment advice. Download the Callin app for iOS and Android to listen to this podcast live, call in, and more! Also available at callin.com

Jim O'Shaughnessy has had a long and successful career as a “quantitative investor”, or “quant”. He's the founder of O'Shaughnessy Asset Management (OSAM), author of the wonderful book “What Works On Wall Street”, host of the lovely podcast “Infinite Loops”, and master of GIFs on Twitter. In this episode, Jim will tell us about his Wall Street days and share with us several insights he has gained over the years: - The fundamentals of “quant” investing, - The importance of probabilistic thinking, - How the internet is just getting started changing the world of business and investing — ie, The Great Reshuffle, - And much more! Disclaimer: NONE of this is investment advice. Download the Callin app for iOS and Android to listen to this podcast live, call in, and more! Also available at callin.com

Gautam Baid is the author of The Joys Of Compounding, a wonderful compendium of finance and investing wisdom drawn from a variety of sources. Gautam lives in the US. But he invests in Indian companies. He's super excited about India's long term economic prospects. To help US based investors take advantage of this India opportunity, Gautam is setting up a fund: Stellar Wealth Partners. In this episode, we'll chat with Gautam about some key ideas in his book, the opportunities he sees in India, and some fundamental principles of running a fund/managing other people's money. Disclaimer: None of this is investment advice. Download the Callin app for iOS and Android to listen to this podcast live, call in, and more! Also available at callin.com

As an active investor, what are all the different things we need to know? I think we need to know: - A bit of economics: the fundamentals of micro and macro economics: how economic incentives and constraints shape human behavior, the history of capitalism and its enormous power to create wealth for business owners, etc. - A bit about how businesses work: how they compound capital and generate returns for their owners, the magic of retained earnings, etc. - A bit about accounting and financial statements: how to read and interpret them, how to use them to distinguish wonderful businesses from so-so ones, how to read 10-Ks and 10-Qs, etc. - A bit of financial modeling: the basic math behind predicting and evaluating financial time-series, cash flows, IRRs, inflation adjustments, etc. - A bit of probability and decision making under uncertainty: the logic behind diversification and portfolio construction, intelligent re-balancing, the pitfalls of averages and expectations, the math of survival (Lindys vs Turkeys), statistical significance, distinguishing luck from skill, the fundamentals of intelligent risk management, etc. - And finally, a bit about our own psychology: common biases we tend to harbor, slow thinking vs fast thinking, survivorship bias, how fear and greed and envy shape our behavior in markets, etc. In this episode, we'll go over this “curriculum” — the various topics in it and how investors can efficiently learn these topics and put them to practical use. DISCLAIMER: None of this is investment advice. Download the Callin app for iOS and Android to listen to this podcast live, call in, and more! Also available at callin.com

In many modern companies, Stock Based Compensation (SBC) takes a bite out of earnings reported on the Income Statement. But since SBC is added back to earnings on the Cash Flow Statement, it has less of an effect on operating cash flow and free cash flow. Also complicating the issue are the different *kinds* of SBC and the rules to account for each: RSUs, options, performance related stock awards, vesting schedules, etc. And to top it off, many companies spend a lot of cash each year to buy back and retire their own shares — while at the same time issuing fresh shares to executives as SBC. So, to what extent is SBC a “real” cost to investors? How should we think about modeling SBC and predicting its impact on our long term returns? How do we examine the relationship between buybacks and SBC? In this episode, we'll explore some of these questions. DISCLAIMER: None of this is investment advice. Download the Callin app for iOS and Android to listen to this podcast live, call in, and more! Also available at callin.com

We live in uncertain and volatile times. Throughout history, stock markets have bounced around a lot. They go up and down sharply — day to day, week to week, month to month, year to year. Such volatility is a *feature* of stock markets, and it's mostly outside our control. And yet — despite all this volatility — over long periods of time, the US stock market has been a tremendous engine for wealth creation. As investors, we should do our best to harness this wonderful wealth creation potential of stock markets — while at the same time not letting ourselves get affected too badly by day to day volatility. This is only possible if we position our portfolios for *survival*. That is, we should be able to comfortably survive “short term” volatility long enough to build “long term” wealth. Unfortunately, too many investors turn short term *volatility* into long term *risk*. That is, they make mistakes that cause them to lose their capital *permanently* during periods of volatility. What are some of these mistakes, and how can we avoid them? That's the subject of this episode. Disclaimer: None of this is investment advice. Download the Callin app for iOS and Android to listen to this podcast live, call in, and more! Also available at callin.com

Many companies try to take advantage of leverage. That is, they try to use “other people's money” to boost returns for their owners. This can be a powerful strategy during good times. But it can backfire during bad times. In this episode, we'll discuss: 1) Various kinds of leverage — for both individuals and businesses, 2) The power of leverage to transform ordinary business propositions into extraordinary ones, 3) The perils that come with various kinds of leverage — debt covenants, reduction in margin of safety, etc. And, 4) How much leverage is OK, and how to tell whether a company is employing leverage judiciously. Disclaimer: NONE of this is investment advice. Download the Callin app for iOS and Android to listen to this podcast live, call in, and more! Also available at callin.com

Q: What do long term shareholders of a business ultimately care about? A: They care about how much cash they can take out of the business over time. But this may not be accurately reflected in the “Net Income” line at the bottom of the business's Income Statement. In this episode, we'll discuss 2 concepts that possibly reflect a business's economic reality better than Net Income: Owner Earnings and Free Cash Flow. Understanding these concepts can give investors powerful insights into a business's economic characteristics. This can in turn help investors, (a) identify wonderful businesses, and (b) figure out a good price to pay for them. Disclaimer: This is NOT investment advice. Download the Callin app for iOS and Android to listen to this podcast live, call in, and more! Also available at callin.com

Many of us are worried about inflation. We see prices rising all around us. We're wondering if our incomes can keep up. To add to our worries, the US stock market isn't doing too well at the moment. The S&P 500 almost crossed over into bear market territory (20% down from its high) this week. So, while our savings are losing their purchasing power (due to inflation), our investments seem to be losing value *even faster*. Against this backdrop, what are some strategies we can adopt to safeguard ourselves financially? For most of us, the path to financial independence consists of earning consistently, saving diligently, and investing these savings intelligently. When inflation is high, all 3 become difficult. In this episode, we'll discuss some strategies we can use to position ourselves and our portfolios to weather high inflation. Disclaimer: NONE of this is investment advice. Download the Callin app for iOS and Android to listen to this podcast live, call in, and more! Also available at callin.com

Warren Buffett likes to say that he's a better investor because he's a business operator, and a better operator because he's an investor. In other words, operating businesses and investing in them are complementary skill-sets that reinforce each other. In this episode, Ali Ladha (@AliTheCFO on Twitter) joins us to discuss these complementary skills. We'll talk about why it's important for both operators and investors to deeply understand: - How businesses work, - How money flows in and out of businesses, - The fundamental principles of accounting, - Things that good business operators worry about: inventory management and turnover, supply chain efficiency vs fragility, the timing of cash flows, etc. - Things that good investors worry about: return on invested capital, earnings vs cash flows, payables vs receivables, management compensation and incentives, etc. We also discuss a cohort based course that Ali and I are creating — to help both investors and operators improve their decision making skills by understanding each others' perspectives on these topics. Download the Callin app for iOS and Android to listen to this podcast live, call in, and more! Also available at callin.com

Active investors must be able to read and analyze 3 key financial statements: The Balance Sheet, The Income Statement, and The Cash Flow Statement. Of these 3, new investors usually find The Cash Flow Statement to be the most confusing. In this episode, we discuss what The Cash Flow Statement is, how to interpret each line item in it, and what key insights we can gain about a business from its Cash Flow Statements. Download the Callin app for iOS and Android to listen to this podcast live, call in, and more! Also available at callin.com

A lot of people ask me: how can I learn the fundamentals of probability? And having learned them, how can I apply them to investing? This week's guests — the father-son duo, Henk Tijms and Steven Tijms — can help answer this. Henk (the father) has been teaching probability for decades. He not only understands the concepts really well; he also knows how best to teach them, what examples are most effective in getting the point across, what common mis-conceptions and mis-understandings people usually have about probability, etc. Henk has written many books on probability. My favorite is “Surprises In Probability” — which explains some of the most counter-intuitive things about the subject that trip people up. Steven (the son) did not have much formal training in probability. But he managed to figure out for himself the key concepts. Then he wrote a book — Chance, Logic, and Intuition — to help a layman understand these concepts. Download the Callin app for iOS and Android to listen to this podcast live, call in, and more! Also available at callin.com

In this episode, we'll discuss the biggest financial decision most of us will make in our lives: buying a home. What are the pros and cons of owning a home vs renting it? What financial and non-financial factors should we consider while making this super important decision? Download the Callin app for iOS and Android to listen to this podcast live, call in, and more! Also available at callin.com

Chris Bloomstran runs a fund called Semper Augustus Investments Group. He is a very thoughtful, prudent, and value-oriented investor. Over the years, he's experienced all kinds of different markets — the dot com boom and bust, the great financial crisis of 2008-09, etc. And through all this, he has stuck to his principles and processes. Chris is one of the world's leading experts on Berkshire Hathaway — the super successful conglomerate run by Warren Buffett. Chris has been following Berkshire for decades now, and Berkshire constitutes a significant part of Semper Augustus's portfolio. In this episode, Chris will help us understand Berkshire Hathaway: how the company works, how it is run, its various subsidiaries and key economic drivers, its intrinsic value, key investing principles we can learn from it, etc. Download the Callin app for iOS and Android to listen to this podcast live, call in, and more! Also available at callin.com

Nick Maggiulli is a great number cruncher and story teller. He applies these skills to analyze various kinds of financial data — to learn lessons we can all use to improve our financial decision making. Nick then beautifully narrates these lessons to his worldwide audience — for free — through his website, Dollars And Data (https://ofdollarsanddata.com). Nick has now written a book (Just Keep Buying) summarizing the most important of these lessons. For most of us, achieving financial independence is about doing 2 things reasonably well: 1) Saving, and 2) Investing Nick's book shows us, simply and clearly, how to do both of these effectively — while also enjoying life and not getting stressed due to money issues. In this episode, Nick will help us explore these themes in detail. Download the Callin app for iOS and Android to listen to this podcast live, call in, and more! Also available at callin.com

Options are NOT for everybody. But before deciding whether they're right for us or not, it's a good idea to learn the fundamentals: 1) What is an option? 2) What are the different kinds of options — calls and puts, American and European options, etc.? 3) What are the pros and cons when we buy options, and when we sell them? 4) What are some common mistakes that can blow us up, and how do we avoid them? 5) How do investors commonly use options — to protect portfolios from big drawdowns, to generate income, to bet on specific events, etc.? And, 6) How are options treated for tax purposes? In this episode, we'll cover these basics. In short, I want to make this “the episode I wish I had” when I first started dabbling in options. Download the Callin app for iOS and Android to listen to this podcast live, call in, and more! Also available at callin.com

In this episode, we'll analyze a card-counting game called The Devil's Card Game. This exercise can teach us many key concepts related to economics, investor and market psychology, and probability. The game goes like this: suppose we have 11 cards in front of us: 10 “double” cards and 1 “devil” card. The “double” cards all have a 2 written on them. The “devil” card has 1/2048 written on it. The cards are thoroughly shuffled, and we get to pick them one by one. So, we know all the cards in the deck, but we don't know which *order* we'll get them in. All possible orders are equally likely. And there's no “replacement”; once we pick a card, it's put aside, NOT returned back to the deck. So, each time we draw a “double”, the odds of the next card also being a “double” could go down. We start with $1M. Each time we pick a card, our money gets multiplied by the number written on the card. So, if we get a “double” card, our money doubles. And if we get the “devil” card, our money gets divided by 2048. At any time, we're free to stop picking cards and walk away with whatever money we have. What should our strategy be for playing this game? When should we walk away? Some questions to ponder: 1) Does it matter whether the initial $1M is our own hard earned money or “house” money? 2) Would our strategy for playing the game change if the initial sum were $1 instead of $1M? 3) If our sole objective were to maximize the *expected value* of the money we walk away with, what strategy would we play? 4) If we were to play this game in real life, would we adopt “expectation maximization” as our strategy? 5) How does the game look from the standpoint of our counter-party? Is it more favorable to them or us — assuming the initial $1M comes from us? 6) How do we expect most market participants to play this game? Would they use a strategy different from ours? 7) Extending the game: What if we could decide *how much* to bet on each card just before drawing it? In this case, only the portion of money that we bet is multiplied by the card we draw. Any “un-bet” money stays intact. Some key concepts we can learn from this exercise: 1) The “House Money” effect, 2) “Prospect Theory” and Loss Aversion, 3) The Marginal Utility of money, 4) Expectation Maximization, 5) Expected Utility Maximization, 6) Kelly Style Betting, 7) Markowitz Style Betting, 8) The fundamentals of Card Counting, etc. Download the Callin app for iOS and Android to listen to this podcast live, call in, and more! Also available at callin.com

As investors, we must learn how to judge the quality of a business by reading its financial statements: 1) the Balance Sheet, 2) the Income Statement, and 3) the Cash Flow Statement. In a previous episode, we covered why and how to read a company's Balance Sheet. In this episode, we'll go over the Income Statement: what it is, how to read it, what insights we can glean from it about a company, etc. Download the Callin app for iOS and Android to listen to this podcast live, call in, and more! Also available at callin.com

Cockroaches aren't cuddly. But they do 2 things well that we also want out of our portfolios: 1) They're really hard to kill, and 2) They compound fast. These words are from Taylor Pearson and Jason Buck. They run a fund called the Mutiny Fund. Taylor and Jason believe that their Cockroach Portfolio is built for *maximum* survival, and to produce good returns without major drawdowns, (almost) no matter what economic conditions prevail in the future. This relies on 2 foundational concepts: negatively correlated bets and periodic re-balancing. Taylor and Jason implement these concepts using volatility strategies (eg, trading VIX futures). In this episode, Taylor and Jason will walk us through the fundamental principles behind constructing robust portfolios, and how to put these principles into practice. Download the Callin app for iOS and Android to listen to this podcast live, call in, and more! Also available at callin.com

Riz is a high quality business analyst: very intelligent and knowledgeable, as well as humble and thoughtful. You may know him as Mostly Borrowed Ideas (@borrowed_ideas) on Twitter, where he has ~86K followers. Riz makes his living by running a newsletter (MBI Deep Dives). Each month, Riz picks a company, does a detailed analysis and valuation of its business, and sends this out to 1500+ paying subscribers. He's built this business from scratch. In this episode, Riz will tell us about his newsletter business: how he came to found it, its revenues and margins, capital requirements, free cash flow, the competitive landscape and key risks involved, etc. Also, Riz will share with us his methods for researching companies, analyzing their economic prospects and management quality, valuing them via Reverse DCFs, etc. Don't miss this episode! It's a wonderful chance to learn from a super sharp fellow who spends all his time thinking about and analyzing businesses. Download the Callin app for iOS and Android to listen to this podcast live, call in, and more! Also available at callin.com

Jimmy Soni is an author who has written two books I love — one about the great scientist Claude Shannon (A Mind At Play), and one about the founding of PayPal and life in Silicon Valley during the early days of the internet (The Founders). In this episode, Jimmy walks us through some of the salient points in both books: the driving forces behind creativity and innovation, what shapes culture at a company, how successful startups work, etc. Jimmy has great stories and great insights. Don't miss this one! Download the Callin app for iOS and Android to listen to this podcast live, call in, and more! Also available at callin.com

Professor Aswath Damodaran is possibly the world's foremost authority on valuing companies. He's also one of my heroes. He not only understands his subject really well; he also helps millions of people around the world (students, business managers, investors, etc.) understand and appreciate its intricacies. Charlie Munger once said, “The best thing a human being can do is to help another human being know more”. Prof. Damodaran lives this principle every day. In this episode, we join Prof. Damodaran to explore some fundamental valuation concepts relevant to investors: - how to value different kinds of businesses, - core ideas behind DCF calculations, - discount rates and equity risk premiums, - cost of equity capital, - how to value optionality in businesses, - how to grapple with uncertainty when valuing things, etc. Prof. Damodaran also shared his views on a few topics not directly connected to valuation: - the incentives that Venture Capitalists have, - Environmental, Social, and Governance metrics, - the future of education and universities, etc. Don't miss this rare opportunity to learn from the very best! Download the Callin app for iOS and Android to listen to this podcast live, call in, and more! Also available at callin.com

Brian Feroldi is a wonderful financial educator. His mission is “to spread financial wellness”. And he does so by helping people understand fundamental investing concepts — via Twitter, YouTube, an email newsletter, podcast appearances, etc.. Brian has now written a book: Why Does The Stock Market Go Up? This book explains in simple terms what a stock is, why the stock market is the greatest wealth creation machine of all time, and how ordinary folks like us can use the stock market to build the kind of wealth that can transform our lives. In this episode, Brian tells us about his journey as an investor, and walks us through some of the key concepts covered in his book. Download the Callin app for iOS and Android to listen to this podcast live, call in, and more! Also available at callin.com

All active investors should have the ability to do basic financial calculations. And many kinds of financial calculations take the form of solving Recurrence Equations. In this episode, we'll cover the basic theory behind this: what a Recurrence Equation is, how to formulate one to reflect a particular financial situation, how to solve the equation after formulating it, etc. Download the Callin app for iOS and Android to listen to this podcast live, call in, and more! Also available at callin.com

Many people divide investors, stocks, etc., into 2 groups: “value” and “growth”. But Warren Buffett believes this is lazy thinking. He says value and growth are “joined at the hip”, and that growth is always a component in the calculation of value. In this episode, we'll go over why Buffett thinks like this. We'll discuss the basic math and fundamental concepts underlying the interplay between value and growth, and why investors should learn all this well. Download the Callin app for iOS and Android to listen to this podcast live, call in, and more! Also available at callin.com

Every year since ~1965, Warren Buffett has written a letter to Berkshire shareholders. And before that, he wrote letters to partners whose money he was managing. These letters are an absolute treasure trove of investing wisdom. They cover a range of concepts — the key characteristics of wonderful businesses, how to think about inflation, the power of retained earnings, etc. Plus, they're a joy to read — because Buffett thinks so clearly and articulates these concepts so well. In this episode, we'll discuss some of the key insights contained in these letters. Download the Callin app for iOS and Android to listen to this podcast live, call in, and more! Also available at callin.com

As investors, we should learn to judge a business's quality from its financial statements. The Balance Sheet is 1 of 3 key financial statements (along with the Income and Cash Flow statements). In this episode, we'll discuss the typical structure of a Balance Sheet, Assets vs Liabilities, the various line items under each, what insights we can glean from them about a business, etc. Download the Callin app for iOS and Android to listen to this podcast live, call in, and more! Also available at callin.com

Steven Crist is a skilled bettor on horse races. He's written a 13-page book chapter titled “Crist On Value”. The wisdom in these pages applies equally well to financial markets. For example, Prof. Michael Mauboussin has called Crist's chapter “the best 13 pages on value investing”. In this episode, we'll unpack the many investing lessons to be found in this chapter. Download the Callin app for iOS and Android to listen to this podcast live, call in, and more! Also available at callin.com

Why do the stocks of wonderful businesses grow exponentially over the long run? Their compounding of retained earnings plays a BIG role. Download the Callin app for iOS and Android to listen to this podcast live, call in, and more! Also available at callin.com

To become a successful Jedi Knight, one needs a deep understanding of the Force. To become a successful investor, one needs a deep understanding of the “force” of compounding. In this episode, we discuss the fundamental principles, concepts, and properties of compounding and exponential curves — and their implications for investors. Download the Callin app for iOS and Android to listen to this podcast live, call in, and more! Also available at callin.com

To what extent does volatility impact fundamentals-driven, “buy and hold” investors? To what extent does volatility reflect risk? Kris Abdelmessih (@KrisAbdelmessih) has been pondering such questions for many years. With Kris's help, let's try to understand and explore some key concepts related to volatility. Download the Callin app for iOS and Android to listen to this podcast live, call in, and more! Also available at callin.com

Let's usher in 2022 by refreshing our memories with some timeless concepts about Financial Independence. Download the Callin app for iOS and Android to listen to this podcast live, call in, and more! Also available at callin.com

Warren Buffett has called inflation a “giant corporate tapeworm”. How should investors think about, prepare for, and try to protect against inflation? Download the Callin app for iOS and Android to listen to this podcast live, call in, and more! Also available at callin.com

How much cash can owners TAKE OUT of a business each year, relative to how much they PUT IN? Join Sahil Khetpal (@skhetpal) and 10-K Diver (@10kdiver) to explore these questions. Download the Callin app for iOS and Android to listen to this podcast live, call in, and more! Also available at callin.com

Companies return money to owners in 2 main ways: dividends and share buybacks. Which is better? Download the Callin app for iOS and Android to listen to this podcast live, call in, and more! Also available at callin.com