racemize

I think they just write these articles to generate tons of traffic. I think it works.

No problem. I personally just rolled my BAC 2015 10s to BAC 2016 12s. Hi Racemaze, Looking at the data, can you explain the switch over point? is it a share price at which point that the warrant/option would yield the same return as the common? Also, why not BAC 2016 10s? isn't it better (i.e., have a better return with your velocity term)? Sorry for the newbie questions if it's been asked before (or you can point me to the right reading material). thanks. Yes, the switch-over point is the common price where the option would have the same return as the common. The switch-over point, with dividends, includes the lost dividends assuming the current dividend amount (not including possible raises in dividend, which is almost certainly the case for BAC next year, so you have to do your own guesstimate/adjustment for that). Wrt 10s vs 12s, I decided the increase in cost of leverage from ~3%->5% was worth the increase in velocity of leverage (30->43). In addition, I could buy more of the 12s than the 10s, so I also increased exposure. Moreover, if you look at the 10vs12 comparison, the common needs to reach 17.77 by Jan 2016 for the 12s to be better than the 10s (currently), which I thought was a reasonable assumption. That's most of my thought process on them. It is also similar to what I did before, buying the 10s when common was around 12, so buying 12s when the common was around 14.

I'd also like to get ahold of that one. As I mentioned in the other thread, I'm curious as to why it seems to contradict this one from Tweedy: http://www.legend-financial.com/files/Great%2010-Year%20Record%20Great%20Future,%20Right.pdf

No problem. I personally just rolled my BAC 2015 10s to BAC 2016 12s.

Great, thanks. Thanks. According to this spreadsheet, JPM is actually cheaper that BAC? The cost of leverage is lower, but you have to consider what the growth of the common will be. BACs common growth should be much greater than JPMs (assuming the board is right here).

So that credit suise study he cited seems to be somewhat contradicted by this tweedy browne essay: http://www.legend-financial.com/files/Great%2010-Year%20Record%20Great%20Future,%20Right.pdf perhaps it is based on the return on invested capital rather than ROE?

I've added the BAC 2016s to my spreadsheet, for anyone interested: https://docs.google.com/spreadsheet/ccc?key=0AhTPR9eP5nWedEF1SGVLdllJTnBMSDMzM3lYZ2d0SlE&usp=sharing

absolutely agree, although I think I voted yes.

The more I read this thread, the more I think I just shouldn't use DCFs at all, which would alleviate this question entirely. I much prefer projecting owner earnings and then putting an appropriate multiple on it at the end.

The funds annual performance can be found at http://aquamarinefund.com/fund/ looks like you need a login to get it, unless I'm missing something.

Phenomenal interview. Anyone know what his record looks like?

Seems like we should just use Buffett's "owner earnings" which is the amount of cash left over after taking care of operational costs. Everything after that is an allocation decision. Now you might be tempted to keep repurchases used to keep the share count steady as part of the cash required to keep the business going, as a possibility.

I recently had an idea for forums in general, but I doubt it would be easily implemented. Basically, I was wondering how to deal with forums that get larger and larger with increasing posts per day. An interesting feature would be the ability to get the highlights from a thread. e.g., if someone wanted to read the BAC thread fresh, be able to condense it down to a smaller, and more useful, number of posts. Here was my thought: 1) implement a thumbs up on a per post basis--that way people could upvote posts as being particularly useful. (Downvotes optional) 2) then when you view a thread, there could be a feature to condense the thread, which would filter based on upvoted comments. For example, you could ask for the top 50%, 60, 70, 80, etc. of the comments. Then, people could choose whether to view threads in condensed formats or full content, depending on their preference. You also still get to keep everything in date order and in the thread format, which is better than the reddit/digg style threads, whose content moves down based on age or isn't date sorted. Kind of a hybrid format, that is optional to implement from the user side.

One thing to bear in mind is that they probably do pretty well before fees--if we buy at or below their prices, then we should get pre-fee performance (or better if below).

This may be one of the best Dalio videos I've watched in terms of questions (but perhaps not as much in terms of the initial presentation). He really answered a lot of specifics he usually skips over. Towards the end, commented on domestic equities as 4-5% over the next decade, and repeated that asset classes were "expensive". Thanks for posting.

I wanted to hear the end of what he was saying! Who edits these clips?

Soon the WiFi at Starbucks is going to see a Level(3) boost. Enjoy! What this means to Level(3)'s revenue, who knows but we shareholders of (3) like to feel good about something. Had to get it out. :'( Needs more ALL CAPS!

Well, I'm not a coffee drinker, but my wife is, and I asked her the same question. Here's her response, which is somewhat represented by the thread already: Well, there was one comment that said the SBUX is not people's favorite coffee, which is true, BUT, the consistency argument is key: #1 They are everywhere. #2 I will get pretty much exactly what I want #3 I don't have to read a menu #4 I KNOW that they will make me my grande-three-shot-non-fat-two-pump-pumpkin-spice-latte-no-whip-extra-hot without looking at me twice #5 they are freaking fast The problem with more boutique coffee shops is that they SAVOUR the coffee --- the baristas aren't pumping it out generally for the working stiffs just trying to get their caffeine fix, they're pouring for the coffee lover, which I get, but it can be really annoying when you have a meeting in 10 mins. but yeah --- i guess it all boils down to convenience, comfort, and consistency. Their roasted coffee really is pretty good. It's their lattes that can't really measure up all the time, but at least they are consistent. So there you have it, I know she has spent a long time thinking about this, as she gave me that answer in less than a minute.

Although this article seems to be the opposite, I've wondered for a while about how good gamers would be at value investing. Take Diablo 3 for example, where there is an auction house. There are lots of "flippers" who go and buy items that are far too cheap for their worth, and then immediately put it up for sale at the "rational" price. In fact, most of them are far better at doing this than I am, which is pretty annoying. It is amazing how hard it is to deal with an opaque and relatively more inefficient market, found in games. Sometimes I feel like telling the gamers they could do the same thing with companies, but then, why introduce more competition? Can you give an example? How does one know an object in Diablo 3 is "far too cheap"? Very interesting. Well, it has a lot to do with knowledge of viable/popular builds of characters being played. For example, a seller might be aware that something is a nice item (e.g., because it has all the requisite stats to be nice, such as vit, all resist, dex or str, etc.), but not be aware that all of those + high critical chance takes it from being nice (let's say worth 1 million) to being incredible (let's say worth 100 million). Let's say they post it for 5 million in the AH. Then, someone with that knowledge purchases the item and reposts it at ~100 million. I always find it humorous because there are people who spend huge amounts of time doing this in the game, and have no idea how to do investing, or that they are basically doing value investing, but not making any real money.

Is it just because it is big enough already?

I'm not sure that guy knows how insurance works: Although this article seems to be the opposite, I've wondered for a while about how good gamers would be at value investing. Take Diablo 3 for example, where there is an auction house. There are lots of "flippers" who go and buy items that are far too cheap for their worth, and then immediately put it up for sale at the "rational" price. In fact, most of them are far better at doing this than I am, which is pretty annoying. It is amazing how hard it is to deal with an opaque and relatively more inefficient market, found in games. Sometimes I feel like telling the gamers they could do the same thing with companies, but then, why introduce more competition?

I think spreadsheet is the best way. There are some other tools out there (e.g., wikinvest) that try to do it for you, but they have bugs and don't always work. I've found it easiest to just track it on my own, that way you are sure that everything is working the way you think it does.

mine have all been mistakes that happened after I sold, so I've been extremely lucky in that respect: ARO, bought it thinking it was cheap (maybe it is now). Sold with an ok gain to switch into BRK, and then it went down by 50%. I'm not entirely sure what lesson I should learn from that. I think that retail is really hard, and that it is quite difficult to have any kind of moat with anything trendy. That was fairly early for my investing. Similar story with TEF, sold with a gain to get into BRK, then dropped a ton, exacerbated by the dividend dropping. Lesson--high leverage business and not to trust management with assertions that seem way too optimistic. Finally, CRUS/AAPL, and tech generally. Again, sold with fantastic gains, but found my thesis dying later. CRUS position with Apple was not nearly as good as I thought, as they removed margins with a stroke of a pen, essentially. I never actually bought Apple, but thought it was cheap, thought I was vindicated on the way to 700 or so, then watched it come all the way back down to <400. Lesson I've learned--if you can't predict 5 years out, then market sentiment can kill you. e.g., if you think you can get a year or so down the line, but not past that, then market sentiment can eliminate whatever "knowledge" you have, until you are outside of your investment window. Thus, you need to be able to outlast market sentiment, and can only do that if you can predict further than the sentiment's period.

please add ZINC! (for the Pabraians) Also: JPM What about warrants? you have two WFC

I've spent some time on it, and have a small position. I think you can call the current price somewhat justifiable with normal operations of the current plant. Then, you have the upside of 1) the plant working correctly in a year or so (maybe not immediately) or 2) zinc prices increasing. Either should give nice upside and both would be quite nice. Of course those are the two downsides, but I read the technology of the new plant is already being used in other metal processes of other companies, and the zinc mines dropping off in the next year or two should keep the zinc prices from dropping significantly (caveat, This is my opinion, and it may not be all that well founded, so I put more credence to the other one). Also, the higher quality zinc the new plant should produce should give access to a much larger and better market for the company.