Financial Accounting
There are 3 types of Financial Statements which give you financial insight. They are:
– Income Statement
– Balance Sheet
– Cash Flow
Warren Buffett says: nobody (or almost nobody) beats the market over the long run:
The Bet: 2008 Buffett bets $1M that nobody in the world will beat the S&P500 over the next 10 years
Buffett was right: true or false?
TRUE (only one person accepted the challenge and they failed to beat the S&P 500)
"Performance comes, performance goes. Fees never falter. ”- Warren Buffett
All nations with a low GDP per capita have a lower quality of life for their citizens.
True or False?
FALSE. Cost of living is a factor too! May have low GDP per capita with low cost of living.
Ray Dalio Says: there are 4 levers for Government Policy Makers. What are they?
1.Fiscal policy
2.Taxation
3.Debt defaults and restructuring of debt
4.Monetary policy
E.g., setting the rate (r) and changing money supply
Isaac Newton famous did well when investing in the South Sea Stock.
True or False?
FALSE
"I can calculate the motions of heavenly bodies, but not the madness of people!" -Newton
List 3 things that will improve your FICO score.
Paying credit card each month; paying off student loans/mortgage; having a long credit history, etc.
Warren Buffett says that, when investing, the general public should/recommends that one:
"Consistently buy an S&P 500 low-cost index fund.”
The Fed controls the money supply mainly through _______.
open market operations (OMO).
Ray Dalio says: there are 4 ways to reduce debt. What are they?
Four levers governments use to reduce debt
1. Austerity (spending less)
2. Debt defaults and restructurings
3. Transfers of money and credit from those who have more than they need to those who have less than they need
4. Printing money and devaluing it
Mark’s two goals! Howard Marks points out that if you go down the path of the active investor, you must realize that to be successful you must do two things....
1. You must make choices that are different than the market… otherwise you will simply match the market
2. Your choices must be right!
What is in a Net Income Statement?
Revenue minus costs
Warren Buffett says:
Diversification is a protection against _______.
Ignorance!
SURPISE DATA SCIENCE QUESTION (worth double):
What are the (6) characteristics of a data scientist?
1. Develop Tools & Techniques, 2. Visualization, 3. Decision making, 4. Communicating, 5. Curiosity, 6. Scientist
Ray Dalio says:
There have been 3 nations which acted as the reserve currencies in the history of the world. Which nations were they?
1. Dutch Republic
2. Great Britain/UK
3. United States of America
Harold Pollack has 9 investing tip. What does he say about them and how can a good investor learn these tips?
The best personal finance advice "can fit on a 3-by-5 index card, and is available for free in the library."
SURPISE DATA SCIENCE QUESTION (worth double):
What is the (technology and innovation) cycle? What are the 5 steps. What happens to workers?
There is a constant, creative destruction between human employment (labor) and automation (capital) as production evolves from art to automation.
1. Technological innovation causes labor to adapt new skills – demand rises for labor with these skills
2. Best practices are identified and codified for efficient production
3. Production is broken down in to routine components
4. Routine components are automated by new technology created by innovators, increasing productivity (example: Moore’s Law)
5. Capital flows to those who innovate, motivating further innovation
This leads to unemployment for those in affect sectors!
Warren Buffett says there is 3 types of risk! What are they?
1.Capital structure (–Ex. businesses with lot’s of debt)
2.Capital requirements (– Ex. businesses which require lots of $ to create its products)
3.Commodity products (Brands better than non-brands)
EXPLAIN THIS GRAPH TO ME
It's the graph showing trends for world cycles. (Teacher evaluates explanation)
Ray Dalio Says:
A nation in decline has what characteristics?
1. Prints lot of money
2. Has really high national debt
Ray Dalio thinks what nation may become the next superpower due to its rapid growth recently.
CHINA
SURPRISE DATA SCIENCE QUESTION:
Explain this to Graph to me
Graph of Moore's Law
Buffett Says:
EXPLAIN THIS PHOTO: (SHOW THE PHOTO)
This is Buffet’s Metric = (Total stock market capitalization / GDP)
– It’s a way of estimating when Value < Price
– The idea is, total market cap should not grow faster than GDP, and when it does, stocks are overpriced. When it grows slower, things become underpriced.
What is going on in this graph?
And what will determine growth?
Drift
Ray Dalio Says: nations will too much debt will....
(2 parts)
1. Transfer their (the richest) wealth to the poorest by borrowing.
2. Which will contribute to other nations not wanting to hold their debt, which will cause the economy and reserve currency to crash and be eventually replaced. NEW SUPERPOWER
Warren Buffett Returns!
What is his CAGR over time?
20%
(Alpha ~ 10%)