Rainforesthiker

How can anyone look at the current tax code and the enormous number of man-hours american citizens and corporations waste complying with it and not think that something drastic needs to be done? Rand Paul isn't even half the Libertarian his father is, but in many areas I agree with him, he's far and away better than the Clinton's, Bush's, and other candidates who spend hundred's of thousands of taxpayer's dollars gouging their fat faces on food. +1

EZPW

http://www.project-syndicate.org/commentary/greece-debt-agreement-risks-by-barry-eichengreen-2015-07 I would argue that spending cuts, cuts in pension payments, and other reductions in the size of Greek government / bureaucracy are what Greece needs and does provide some basis for recovery / growth if the people are willing to seize the opportunities presented to them and become more productive. This article seems to approach things from the academic Keynesian perspective that governments should spend their way out of a recession. I disagree with this notion. Sure this is a tough pill for Greece to swallow, but the alternative seems to continue to allow other hardworking people to subsidize a lifestyle that they cannot afford.

I think Angela Merkel should call a referendum in Germany for a week from now to let the German people decide if they should lend more money to Greece. Give the Greek PM a taste of his own medicine.

The one constant in an ever-changing world - human nature. People's desire to get rich quick trumps rationality. So the Chinese stock market lost over $3 trillion in value over the past few weeks or so. But yet the academics will still argue that the market was "efficient" . . .

You forgot Sandridge . . .

"The First Tycoon" is an excellent book on many levels. It is a fantastic history book. I did not truly appreciate how new and novel corporations were in the early 1800's. Up to that time, the vast majority of people were sole proprietorships (think printers, butchers, shoe makers, smiths, etc.) or worked directly for an employer. Wit the advent of railroads, a new business form was needed to adapt to the scale of such enterprises. Many were suspicious of the corporate form. Vanderbilt mastered it quickly and used it to his advantage. One of my favorite quotes from the book related to people who habitually take the cynical view as a substitute for intellect: "Cynicism would color later assessments of his efforts, growing out of the deep suspicion of nineteenth-century Americans - particularly newspaper editors - toward wealthy and powerful men. Cynicism, of course, always seems to be the most sophisticated position to take; yet it is also the laziest (along with hero-worship, its direct opposite).

It is helpful to start with a definition of value investing, so everyone is on the same page. I would define it broadly - attempting to assess the value of a business or asset and only purchasing the business/asset when there is a sufficient difference between price and value (MOS). Different flavors of value investing can work in different scenarios. The biggest stumbling block that I see in value investing is failure of some to appreciate that markets are mostly efficient, and in general certain conditions must be present for value opportunities to exist. Efficient markets are largely based on a wisdom of the crowd concept. Certain criteria are necessary however for this crowd wisdom to manifest in the stock market. Knowing what these criteria are, and how to reliably identify when they are missing, are IMHO extremely important to being a successful value investor. In other words, value investors should be able to articulate WHY a stock is mispriced - why the crowd is getting it wrong. If you can't, you are essentially saying you are smarter than the crowd (smarter than a likely efficient market). I see too many purported investors do their back of the envelope value calculation, determine this calculated value is greater than the stock price, and then stop their thinking. It would be much better to give an equal amount of thought as to what is causing the mispricing - why is the crowd getting it wrong. http://www.amazon.com/Inefficient-Market-Theory-Investment-Foolishness/dp/0692273948/ref=sr_1_1_twi_1?s=books&ie=UTF8&qid=1414171231&sr=1-1&keywords=inefficient+market+theory

I would be very careful here of a particularly pernicious form of bias (which I have just made up) called academic consistency bias. When you spend a lot of time researching a topic or technology, esp. in an academic setting, you are inherently biased to think that it is a bigger deal than it is, perhaps going as far as thinking it is revolutionary. This is because otherwise you would have to admit you spent a lot of time researching and writing a thesis on something that had little value, and thus you wasted a lot of your time (and in my experience much of academic research is a waste of time). I am not really saying here that blockchains are not important - they might be. I am just pointing out the inherent bias that comes from spending so much time being forced to research something for academic reasons. I do think though when someone says what they are researching is as important as the introduction of computers and the Internet, that is a potential sign of academic consistency bias. And SD I am not saying this to be mean in any way. I truly think that one of the biggest hurdles to clear thinking is the various biases and cognitive defects that we are subject to. The best way to prevent such things from corrupting our thinking is simply to be aware of their existence.

You said "No" to your wife? How did that go? Do you do that often? Brave man. (Or foolish one) :)

Whoaaa, take it down a notch little fella, why all the anger? I suggest you re-read my post, very slowly...a couple times, until you truly understand it and not cherry pick and take things out of context. Did you miss the part about asking for feedback from those hurt by leverage? So just take a deep breath and read it again. No need to be so critical just because someone happens to have a different opinion, is there? Now, what do you think Warren had in mind when he said sensible investing? Not angry at all, just trying to get you to question your own assumptions. And frankly I think it's a tad worrying to see a new thread on the benefits of leverage or people that have had success with leverage basically every week. I'm not going to re-read it, I understood it very well thank you. I don't know what kind of feedback you expect to get from people that have used leverage. It's great if you made a good bet and didn't get margin called? It's great if you are lucky? The fact that you think my post was critical because you have a differing opinion (as opposed to anything factual) is not a great sign that this discussion will be very fruitful. There are ways to disagree with someone or get them to question their assumptions without the sarcastic, condescending tone. I read the initial post in this thread as an honest inquiry into the pros and cons of leverage.

In the 1973-4 time frame Buffett had Berkshire sell bonds ( if memory serves at around 8% interest) so that he would have money to take advantage of all of the bargains in that bear market. So Buffett has used leverage effectively. But it was fixed rate leverage, not a variable rate margin loan. My source for this is the Lowenstein biography. I have quite successfully used leverage the past 6 years, partly with a new mortgage on my previously paid off house (3.5% fixed rate) and partly with margin. The margin was generally no greater than 2x my annual gross pretax income, and I have other assets I could tap to pay it off if need be. I think the time to use leverage is when there is a fairly clear point of maximum pessimism in the market, i.e., some clear inefficiency or irrationality you can point to to explain why bargains are present. Also, most of my margin went to buying BRK stock when it was close to book value, something I thought was a no-brainer. For me though now is the time to dramatically reduce my margin, which I have begun to do. I have halved it in the last few months and intend to reduce it to 0 fairly soon. IMO, now is not the time to use leverage. There just aren't the bargains out there, or the irrationality, to justify it.

I think it is critically important on a forum such as this for people to focus on the ideas being discussed, and not attempt to attack the people behind the ideas. If someone disagrees with an idea put forth in a post, by all means present (politely) your disagreement with the idea, however strongly you wish. However, attacking the person who put forth the idea is virtually certain to squelch freedom of expression on this forum, something I think nobody wants. It is also not a good way to "Win Friends and Influence People."

The good thing about Carmax is the no haggle price. I hate haggling with a new or used car salesman at a dealership. You always come way from the experience thinking that you got screwed somehow.

Just go to Carmax and pick one, or Carmax website to find one.

Summer is actually the dry season in the Pacific Northwest, with relatively little rainfall compared to the remaining months of the year.

We homeschooled my son for several years and it was a fantastic experience. A kid can learn a tremendous amount when he is able to learn at his own pace, i.e., without being constrained to learn at the pace of the slowest kid in the class. Also, you are not restricted to some set curriculum, but can stop and explore things that interest him at the time they come up. You can also cover subjects that are not taught in school, e.g., we spent 3 weeks learning about the Federal Reserve, time on insurance, investing, etc. He was middle school age, so for science he read "A Short History of Nearly Everything" by Bill Bryson. He taught himself algebra. He started writing a book. Etc. Socialization-wise I thought it was good too; I took him around with me and he got to interact with lots of different people, young and old, professionals, young adults, etc. I tend to think you become much better socially adapted if you can interact with a wide range of people, as opposed to just a classroom peer group.

I have hike some small sections of it during hikes in North Cascades National Park in WA. I can make some gear recommendations if you are interested. How many days or weeks will you be hiking? What section are you planning to tackle? There are a lot of great hikes in the Western US. Some of them coincide with the PCT, many do not.

Yes I do understand what you say and agree to a large extent. One can never be 100% certain about anything, especially where human behavior is involved. However, just because someone has high conviction about something does not make it a good investment, or that person right. Investors have varying skill levels, and varying degrees of awareness of human's innate cognitive and behavioral biases. Also they may use more or less rigorous investing frameworks in their analysis. I actually need to see a number of factors (or criteria) clearly in place to have high conviction about an investment. IMHO, when these factors are all present, then I believe the investment is clearly one of high conviction; if any one of these factors is missing, then I don't have high conviction. Other investors may get high conviction when only one of these factors is present, and in that case I think they are assuming a much larger risk of being wrong as you say. With BAC and AIG (and BRK) all of the factors that I look for were clearly there. I really thought my risk in those was negligible to non-existent. These factors are: 1) variant perception - My fundamental (qualitative and quantitative analysis) indicates the business value is much higher than the stock price; a large margin of safety; this also includes the notion that underlying business franchise is sound and the current problems are both short term and solvable. With BAC and AIG i thought that in a (extremely unlikely) worst case scenario of bankruptcy / liquidation my investment would turn out just fine. 2) inefficient rationale - I can point to clear irrationality in the market, e.g., some combination of fear, uncertainty, hatred of the business, loss aversion, short term thinking, that explains WHY the market is not pricing the business correctly. I view this as the most important criteria of all. There is a lot of power in crowd wisdom when the crowd is thinking rationally (which is the basis of EMT), and I really believe that in most situations there needs to be some clear identifiable irrationality on the part of the crowd to produce a reliable offset from a normally wise crowd result. This offset from crowd wisdom produced by crowd irrationality creates the mispricing. Thus I need to see clearly irrational crowd behavior to understand WHY the crowd is getting this wrong. 3) "wisdom of the crowd" from a select group of value investors. When other value investors that I respect have taken positions in a stock at a certain price (and even better if the stock price has fallen further from that price), this provides added confirmation to me. I have spent a good bit of time thinking about the "wisdom of the crowd" phenomena as it relates to stock market pricing. The reason why stock mispricings occur is largely because of crowd irrationality which corrupts what should be a wise crowd result. However, if I can select a smaller group of "truly wise" crowd participants, where this group is not susceptible to irrationality, then there is a degree of power/truth in that smaller wiser crowd. This is very similar to a cloning strategy. This would also be what efficient market theory (EMT) would actually look like (on a smaller scale), where every member of the crowd behaves rationally and bases his decisions on fundamental value. As an example, it would be rare to never that I would have high conviction about an investment where I merely thought my fundamental analysis was producing a different price than the market (having only a "variant perception" above), absent some clear irrationality in the market that I could point to (an "inefficient rationale"). Or to put it another way, if someone analyzed a company and came up with the conclusion that "Hey, this is cheap!", they might have a high conviction about the idea. I never would unless I could identify clear crowd irrationality to explain the mispricing. I would also want to see other value investors that I respect reaching similar conclusions. Thus I guess my point is that someone could reach the level of "high conviction" in an investment idea with a less reliable framework or thought process, and that will certainly lead to trouble over time as you point out. If an investor uses a more thorough and rigorous framework to identify high conviction investments, IMO there is a much smaller chance of error.

With regard to concentration / diversification I believe there are times when one should (or can) be more concentrated and times when one should be less concentrated, this being largely dependent on the degree of irrationality in the market and hence the degree of mispricing presented in the market. In the 2011-2012 time frame I had 80% of my stock portfolio in 3 positions, these being BRK, AIG and BAC (I guess somewhat similar to what the jmp822 poster had that others are criticizing). I felt that at the prevailing prices the degree of risk in each of these was very low. With BAC and AIG trading at significant discounts to tangible book, I thought that further downside was limited. Also, I felt sure that their business franchise was intact and that reversion to the mean would occur (unlike SHLD for example where I have no such confidence). Also, although it is counterintuitive, I view a company as much safer after a major blowup, as new management is not likely to make the same mistakes, there is more regulatory oversight, incredibly cheap prices, etc. Also, I felt confident because I knew WHY the market was mispricing these stocks - there was a psychological rationale of fear and panic that I could point to to understand why the mispricing was there. At the current time I am more diversified, although the above 3 stocks are still about 55% of my portfolio. I intend to further diversify a bit because the above 3 are not the bargains they once were, and hence the risk of being concentrated in them has increased a good bit. In my investment philosophy, if I can understand from my knowledge of human behavior / psychology exactly WHY the market is mispricing something, I feel much more confident in larger position sizing and heavier concentration. A current example of this is what the GM recalls did to GM stock / warrants . The overreaction to oil prices could be another example (although I don't understand oil that well). I do feel that in general having 5 - 10 positions or more is quite a bit better than having just 3. However, sometimes the market presents opportunities where you can consider taking a big position in a stock or just a few stocks. Buffett at one point had 40% of his portfolio in American Express during the salad oil incident. If BRK ever got back to trading at book value like it did a few years ago, I would put 50% or more of my portfolio into it. Those opportunities don't come along very often, but when they do they should be seized. There is a great Munger quote on this that I am sure everyone knows. My advice to the jmp822 poster would be: You were very concentrated and did quite well in a certain time frame, but IMO that was because there was extreme market fear and irrationality that allowed heavy concentration to be successful with smallish risk. However, you should also recognize when those conditions are no longer present in the market, and when that is the case it is much wiser to diversify a bit more and spread your risk a bit.

I am up a little over 20% this year. My largest positions are in BRK, AIG and AIG warrants, and BAC. I also have a good size position in DIS as a holdover from 2009; DIS surprisingly was up around 25% ytd. I also have decent sized positions in GM B warrants, BP, EZPW, MKL, LUK, C, JPM warrants, ZINC, MA and V. Of these BP and LUK have been a drag on performance, but I was able to lower my average price a good bit on each of these later this year when the market went irrational. I am generally fully invested and use margin to enter positions when I see some clear irrationality going on in the market or a particular stock, and when I believe the company is dramatically mispriced as a result of this irrationality. Through the course of this year the amount of margin in my account has increased to close to 25% of my portfolio as I built large positions in GM B warrants, EZPW, and BP, as well as C, MA and V. For most of these I entered at very attractive prices. I entered BP with a smallish position and too soon, and I have averaged down to around $42 per share, down 8% ytd and my worst performer. My goal next year is to reduce margin . . . My investment philosophy is centered on what I call the "inefficient rationale", my reasoned understanding of exactly why the market is mispricing a stock. In other words, in addition to my fundamental analysis, I need to see some clear irrationality in the market, or other kinds of behavior that would cause forced or emotional selling, as evidence that a stock is mispriced. I see many people on this forum trying to identify bargain stocks where there is no clear irrationality that you could point to as the cause of the mispricing (e.g., Altius, Fortress Paper, SHLD, PWE, etc.) Although this can be done, I have found for me that trying to outsmart the market when it is behaving rationally is very difficult. My favorite approach, where possible, is to wait for clear, identifiable irrationality to occur (and convince myself the underlying business is sound) and then create a sizable position. The other aspect to my portfolio is to buy and hold compounders, mainly BRK, MKL, MA, V and LUK (although LUK has been treading water). I found the following quote from Goodhaven Capital as perhaps most similar to my own mindset: "There are two rules of thought on Wall Street about the future. The one most people follow is to try to decide what the world is going to look like going forward and on that basis make judgments on the industries and companies they buy. The other school of thought, which we follow, says you respond opportunistically to what actually happens. It’s not that we ignore the earnings power of a business or its competitive dynamics over time, but we’re more interested in reacting to turmoil in the market that can cause forced selling." VII Oct 31 I have given a bit of thought to the notion of "efficient markets" and what causes the occasional large mispricings in the market. Efficient Market Theory is based largely on the concept of crowd wisdom – that a large group of people casting their collective votes in the stock market produces correct stock prices and hence an “efficient market.” However, from experience it is clear that the stock market is not entirely efficient, and sometimes produces wildly incorrect prices. In thinking about it, various criteria are required for crowd wisdom to manifest in a financial marketplace, an important one of these being that the crowd is acting in a rational manner when it determines the price. Hence I look for an “inefficient rationale” – my articulated understanding, based on my knowledge of crowd wisdom and the criteria necessary for it to be present, to make sure I understand exactly WHY the market is mispricing a particular stock. I also use some cloning strategies to help inform my decisions, which I view as "true" wisdom from a select value investing crowd. This cloning strategy is used to both identify and help confirm good investment opportunities. There was a prior discussion on this thread about concentration /number of positions. In general, my highest conviction ideas occur when the following 3 factors exist: 1) my own fundamental analysis leads me to believe it is cheap (my variant perception) and I believe the underlying business franchise is sound; 2) I see demonstrable irrationality that indicates a bargain price (think BAC and AIG during the financial crisis, GM during the recalls, oil stocks today, etc.); and 3) I see some type of wise crowd behavior from respected value investors (cloning). My philosophy is best captured here: http://www.amazon.com/Inefficient-Market-Theory-Investment-Foolishness-ebook/dp/B00MMV5V3Q

Are you talking raw land? Raw land would not really have a rental rate, so I am presuming this is developed land? If it is developed land, then what is on it?

I predict that the Fed will actually raise (or signal the raising of) interest rates a little, and this will cause a huge selloff in the market, somewhere in the nature of a 10 - 15% temporary decline in the market.

[amazonsearch]The Go-Go Years[/amazonsearch] Quotes from The Go-Go Years by John Brooks “Reform is a frail flower that languishes in the hot glare of prosperity” John Brooks "Built into this situation was one of those moral absurdities that are so dismayingly common in American business life. . . . If a schoolmaster were to assign one of his pupils to write an essay (to be graded by the schoolmaster himself) on whether or not he was a good schoolmaster, it might be cause for merriment all around. Similar practices cause little mirth in business life because they are done all the time." “Usually after general disaster in Wall Street or elsewhere, one man takes charge of cleaning up and putting things back together, of dragging the bodies off stage and rearranging the set for the next performance - rearranging it neatly and primly, as if in hopes that subsequent action will turn toward drawing-room comedy rather than more bloody melodrama." “When a market panic is in progress, the SEC is as helpless as a meteorologist in a storm. No power vested in it enables it to turn markets around, or cause person and institutions that are selling stocks to change their minds and begin buying them instead." "Regulatory bodies, like the people who comprise them, have a marked life cycle. In youth they are vigorous, aggressive, evangelistic, and even intolerant. Later they mellow, and in old age-after a matter of ten or fifteen years-they become, with some exceptions, either an arm of the industry they are regulating or senile.” John Kenneth Galbraith To the above I would add that this life cycle is subject to revitalization and hence is cyclical; see http://scholarship.law.duke.edu/cgi/viewcontent.cgi?article=3018&context=lcp

A fool and his money . . . Or perhaps a crook and his money . . .