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You have an analogy you came up with that involves beer and a glass. >> Beer, right? So, I'm pouring it right
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down the middle so we get a nice thick head. Right now, we have a glass and we can see exactly how much foam there is
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and how much actual beer there is. Right? But imagine this was that I poured it into this vessel instead where
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we couldn't see that. The analogy is the stock market. So when most people think of the stock market,
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it's all this churning and trading. You know, what stocks are hot now, what stocks are rising, what stocks are
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falling, what's, you know, it's all this trading. That's not the simple path to
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wealth. That's the foam, right? What makes up the price of that stock is a combination of two things. It is the
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beer and it is the foam. And the problem is unlike that glass, it's in a vessel like this. So it's hard
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to see exactly how much beer there is as opposed to how much foam there is. >> And the beer is the value. The foam is
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the speculation. >> Exactly. The beer is the fundamental operating value of the company, right?
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The sales and the expenses and the money that's left over that you call profits,
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right? >> Yeah. >> So that's the beer. The foam is what the market
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determines that's worth at any given moment based on emotion and hype and speculation and fear and
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greed. >> And so up here is the total value of the stock. >> Right. Exactly. The total value of the
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stock. But this is all foam that can come and go very quickly. I guess Warren Buffett's greatness was he was able to
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pay for stocks where it was mainly beer and he paid at the price of the beer, not for the foam.
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>> Or he he looked for times where the sentiment was so negative that he was
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actually paying a little less than the price of the beer. It's going to be very
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very hard in this day and age to find companies where you can actually buy it for less than the actual beer value. So
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don't try to do that. Just try to find companies that you can pay a fair price
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for that have a lot of beer in the mix that are mostly beer. Because if you buy those companies, they are by definition
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very well-run companies, strong brands, big moes around them, which makes them hard to compete compete with.