Subject: Re: Grantham: In which stage are we?
My 2 cents. Investing is a little like trying to loose weight. The simple truism: eat less and exercise more. It works.

Buffett explained it in his forward to the Intelligent Investor as we all know well. 'Chapters 8 and 20 have been the bedrock of my investing activities for more than 60 years'.I suggest that all investors read those chapters and reread them every time the market has been especially strong or weak.'

Chapter 8 The Investor and Market Fluctuations

Chapter 20 "Margin of Safety" as the Central Concept of Investment

Great companies like Alphabet can trade at 5 times earnings and 100 times earnings. Pay zero attention to the value the market places on a business. The stock market is wild. Anything can happen in both directions. It is probably worth 20 to 25 times earnings.

1929/32, 1973/74, 2007/08.

Early 1970's can happen again. It probably won't, but it can. Therefore, avoid leverage and mentally prepare for long winters of tedious falling share prices where years go by, few are interested in stocks, doubt sets in. People exit at the worst time.

Great investors like Buffett and Munger can't possibly predict with 100% accuracy future cash flows. There are simply too many variables. To protect them against this fact they only pay when there is an obvious discount.

Buffett has said he is not interested in real estate, because it tends to be closer to reasonably priced most of the time. He loves the stock market, because prices can and do get dramatically detached from a reasonable intrinsic value estimate, from time to time. Buffett makes his decisions from the perspective, that the market could move 50% in either direction over the next one, two or three years. Grantham maybe thinks negative 50%.

Buffett knows, or at least believes it is a reasonable outlook, that 5 to 10 years, or 20 years from now, the economy will be bigger and the market will be higher.

If he pays 10x for Apple and his reasoning suggests it's worth 30x, he will live with the long term result and experience little anxiety in the interim decades. Neither celebrating market exuberance or despairing over irrational declines in prices.

Grantham was spot a year or so ago when he predicted the bubble would deflate. Starting with the junk and then the quality names.

Buffett probably considered Alphabet reasonably priced a year ago. Today he probably considers it a little undervalued. In both cases he doesn't buy. He doesn't know how it will be priced a year from now but if it's demonstrably cheap and he believes it's in his circle, he might buy some. If not he won't.

A year from now Grantham will still be making predictions about the market. Buffett will still be making decisions based on chapters 8 and 20 of the Intelligent Investor.

Eat less, exercise more. It's simple to understand but devilishly difficult to execute as per 'Buffett like' investing.

In times of market fear, I personally, find it useful to remember Munger's comment, that people generally get too pessimistic. Anticipate the potential 50% drawdowns, but remember the long term tailwind. If you own businesses with good long term prospects at reasonable valuations and it doesn't work out, well so be it. It was still a rational approach.

I don't anticipate great returns from here after inflation. Higher interest rates just make equities less attractive.

Some of Berkshire's 2022 purchases look interesting and I have copied a couple on a limited basis and am enjoying learning about them and will continue to buy as I generate cash. Paramount Global I like. It's just so cheap.

The consensus currently for the market appears to be: inflation falls, interest rates stop rising, markets go higher. But whatever happens, none of that matters much in 2030.