In one sentence: A rerun ("vault") of 243: Eddie asks whether long stretches in cash wreck a Rule #1 return, and Phil and Danielle answer with compounding arithmetic and Buffett's cash pile as a signal.
Key ideas
- Rerun. This is the same conversation as 243 (originally aired December 2019), with a new 1-minute intro from Danielle, so read that note for the full detail. [00:00–02:00]
- What's new here: only the framing. Danielle's intro links this season's interviews, saying Jeremy Deal's way of investing (next episode, 298) connects to the innovation interview in 296. [00:00–01:30]
- Reminder of the core arithmetic. $100 to $200 in four years then four idle years is about 9% a year over eight years. Two doubles ($400) then idle gives about 19%. A high return on a short hold leaves a lot of room to wait. [06:00–10:00]
- Dated figures. The S&P 500 level (about 3,110) and Berkshire's cash (about $140 billion) are as of late 2019, not December 2020. Check current figures before using them. [14:00–27:00]
- The Schwab/TD Ameritrade valuation contest at the end belongs to 2019 and is now over, so it needs no action. [34:00–36:30]
How it maps to RuleOne
- Same as 243: the screen showing little to buy is an expected output, and a watchlist built in quiet times is the ready list.
Buffett, Munger and Graham links
- See 243: Mr. Market (Graham, The Intelligent Investor, ch. 8) and Munger's "make money by waiting" idea.
Words to know
- CAGR: the steady yearly rate that turns the start value into the end value, counting the idle years too.
Try this
Open / and note how many names are at a real discount today. Then do the 243 exercise: what yearly rate turns $100 into $250 over five held years plus five idle years?
Check yourself
- Does this episode add new teaching to 243?
Answer
No. It is a rerun with a new intro only. - Why should you not reuse the S&P and Berkshire cash figures from this episode?
Answer
They are from late 2019 and out of date.
Short quotes
"We make money because we are very patient, both as an owner of the business and as someone sitting in cash." (Phil, ~33:30, auto-transcribed)