The Pre-Buy Checklist.
Most investing failures don’t happen in the analysis. They happen in the moment between “I should buy this” and clicking buy. This page exists for that moment. Today’s macro context, plus seven gates the purchase has to walk through before it deserves your capital.
Macro context · May 11, 2026
Shiller Excess CAPE Yield
1.39%
15th percentile since 1970 · thin premium
Patience-curve forward 10y
+2.8%
Real, annualized, model estimate
S&P 500 drawdown
+0.0%
Real total return vs prior peak · at the high
Marks Pendulum
69/100
tilted greed · 0 = max fear, 100 = max greed
Macro headwind. Equity premium is thin and the pendulum has tilted toward greed. The bar for a new purchase is higher than usual; demand a fatter discount, smaller starting size, and a sharper thesis.
Circle of competence
Could you explain the business model to a smart non-investor in two minutes, and would you bet your job on the explanation being right?
Pass looks like
You can name the customer, the product, the moat, and the failure modes from memory.
Fail looks like
You're relying on a thesis someone else wrote, or on a story (AI, tariffs, GLP-1) that does not require you to understand the company.
The thesis in one sentence
Can you state, in one sentence with a number in it, why this stock will compound at ≥15% annually over the next five years?
Pass looks like
A specific operating claim plus a specific valuation claim. "Earnings grow 12%, multiple holds at 18x, dividend 2%."
Fail looks like
A vibe ("this is a great company"), a story ("AI tailwind"), or a momentum reference ("up 40% this year").
What the price already requires
Run a reverse DCF: what growth and margin must this business deliver to justify today's price? Is that growth already on the conservative side of the consensus, or is it heroic?
Pass looks like
The implied growth is at or below your own base case, which itself is at or below management guidance.
Fail looks like
The implied growth requires the next ten years to look like the best five of the last twenty.
Inversion: three ways this loses money
Name three specific, plausible scenarios in which this purchase loses 50%. Each must be a path the world could actually take, not a generic "recession".
Pass looks like
Three concrete failure modes, each with a leading indicator you would actually see.
Fail looks like
You can only think of one risk, or your risks are vague ("execution risk", "macro risk", "valuation risk").
Margin of safety
What is your estimate of intrinsic value per share, and how big is the gap between that and today's price? Would a 30% drop tomorrow change the thesis or just the price?
Pass looks like
Price is meaningfully below your estimate of value, and a 30% drop would make you want to buy more, not panic.
Fail looks like
The gap is small or negative, or you have no estimate of value, or a 30% drop would force you to sell.
Position size and portfolio fit
What percent of the portfolio will this be at full size? Does the buy push any single business, sector, or factor (AI, energy, dollar) above your tolerance?
Pass looks like
You have a written maximum position size; this purchase respects it; the portfolio still passes the "could survive a 50% drawdown without forced selling" test.
Fail looks like
No size limit set, or sizing chosen to "feel meaningful" without reference to the rest of the book.
The rethink trigger
At what price, or on what news, will you reread this checklist? Write it down before you buy, not after.
Pass looks like
A specific price (down 25% triggers a rethink, not a sale) plus 1 to 3 specific business events that would invalidate the thesis.
Fail looks like
No trigger, or the only trigger is "if it goes down a lot" without a number.
The decision rule. If the purchase clears all seven gates, you have done the work and earned the right to act. If any one gate is borderline, reduce size or wait for a better entry. If two or more are unclear, walk away — the answer is "not yet," not "no." The Charter’s rule is “avoid later regrets.” The cheapest way to avoid them is here, before the trade.