writser

Agreed, but you make an implicit assumption that you can identify which company will grow 10% p.a. for half a decade. However, suppose you identified Valeant as the next great compounder and bought it at 10x book (extreme example). If it turns out it is actually a fad you will lose a lot of money. Money that you can't compound anymore during the next 49 years. Compounding works both ways - hence the often heard Buffett quote about rule #1 and rule #2. Buying at a cheap multiple is not as much about trying to squeeze out an additional 1% p.a. if you are correct - it is insurance for when things don't go as planned. If you lose 60% your first year and compound at 10% for the next 49 years you are worse off than when you compound for 8% p.a. without the initial loss.

Couldn't agree more. A handful of people continually analyze the stool of Ray Dalio and stare at graphs but have never brought up a single actionable idea. There was plenty to do the last few weeks regardless of macro. Please go to the corner of Bridgewater and Soros instead if you don't like money.

You come up with a _very_ extreme scenario, say that it is the 'most probable', but refuse to give any odds / rough estimates. I was trying to get you to come up with a percentage because I was trying to sucker you into a bet that I could easily hedge with a few puts. Good for you that you didn't fall for it. But honestly, if you keep your predictions this vague and you refuse to put your money where your mouth is you should probably keep it for yourself because you are wasting your time (and mine, but I don't have anything better to do).

What % would you estimate for this scenario?

I never understood that line of reasoning anyway. I'd be happy if Berkshire shares triple tomorrow - I will sell and buy something else that is undervalued. I try not to get attached to any of my positions.

Weren't you familiar with the concept of float before reading this letter? Are all insurers Ponzi-schemes? What is your point?

Interesting question. First of all, how do you define 'average research'? Is that sell-side research promoting Enron right until it blew up? Or retail people buying TSLA because 'they have cool cars'? Or on the other end: David Einhorn studying Allied Capital? Assuming that you mean with average that you read a few 10K's, make a simple model for the business, have a target price and follow the news then I am inclined to think that yes, you can outperform. Or at least, that is what I hope. How? I think one way is to by exploiting retail and/or professional biases. In no way is this easy because you have to overcome your own biases as well. For example, I think a lot of mechanical strategies could could work quite well (NCAV portfolio, low p/b stocks, magic formula) but nobody does it (because it is boring?). Or people think they can 'improve' strategies manually while in fact they are doing the opposite. A couple of things that I think you could potentially exploit / use to improve your performance: - Large cap vs. micro cap: Buffett is not going to invest in the OTC-market. Prices there might be more inefficient. - Value tilt: low p/b & p/e stocks outperform in the long run. So buy cheap stuff - don't try to predict the successor of Facebook. - Liquidity premium: illiquid stocks outperform. Buy them. - Overconfidence bias: don't think your Valeant analysis is so impressive that you can put 200% of your portfolio in it. Always be skeptical of your own work. Always look for contrary evidence. Diversify. - Holding term arbitrage: don't try to time the market. Don't focus too much on quarterly earnings. Have a very long term perspective. - Ignore the crowd: Do your own work. Mostly ignore any idea that has a >10 page CoBF thread. So many people are looking at it, what's your edge? - Activity bias: the best performing brokerage accounts are from deceased people. So trade like them. - Mathemathics: try not to permanently lose capital. It sucks when you want to compound your savings. Look for a margin of safety. Basically, do all the boring stuff that other people don't want to do. Don't spend all your time in the oil macro-, european bank macro- and ZINC thread. Instead, research 100 boring stocks nobody has ever heard of and buy the cheapest 10. Or, buy a couple of global ETF's and don't open your account the next 10 years.

CoCo's receive way too much attention. Typical zerohedge meltdown-is-coming material. Just for reference, the worldwide outstanding market in CoCo's is probably way smaller than the market cap of Wells Fargo. Everybody knows that these things can convert in equity at inopportune moments and even if all of them convert into equity: nobody gives a **** - at that point there are bigger problems to solve.

I admire the certainty that you evaluate these dynamic businesses with. You are sure about what will happen with Facebook during the next 15 years. Consider me extremely skeptical. Company B generated more FCF last year than company F did in its lifetime. Company B has a gazillion year track-record, Company F has no track record. Company F trades at 7x book and 88x TTM earnings. Company B trades at 1.3x book and 14x TTM earnings. I'm a simple guy. My numbers might be 50% off, I don't even care. Company B any day.

Michel Faber - Under the skin. Weird ..

Just saying ..

And, what have you found so far?

DYAX. CVR hunting.

I think that's a good trait for a value investor.

1. Predicting something will happen at "the end of the market cycle" is not a falsifiable statement. It means whatever you want it to mean. Market goes up? Sure, the cycle hasn't ended yet. Market goes down? I'm right, this is the end of the cycle. 2. I would reframe your closing statement as follows: Always be skeptical of loud mouths. Especially if they're after your money. This guy is not properly incentivized to give you good market forecasts (this is apart from the fact that I think macro forecasting is **** anyway).

H) Essential for snorting coke. I) Essential to pay for coke.

Oh really? There is quite a long thread on deflation hedges that started back in December 2014. I encourage you to take a look at the first few posts. That thread pretty much proves my point. It was opened in december 2014 when oil prices where down ~40% year-on-year and the GSCI index was down ~30%.

Amen. Also most investors should spend less time on CoBF, articles, interviews, Google talks, etc. and more time doing fundamental analysis on real companies. Guilty as charged on both counts. ::) Couldn't agree more. Unfortunately digging through annual reports doesn't feel as satisfactory as posting a witty comment on a message board. I guess that is why value investing works. I'll add another one: macro predictions on this board are pretty much a reflection of what happened the past 12 months.

What point are you trying to make? Maybe oil doesn't have an 'intrinsic value' but you can sell your gallon of oil for cash, either in the spot or forward market, correct? If cash has intrinsic value and you can exchange X for Y cash then X should have the same value as Y, correct? Does cash even have an intrinsic value according to your theories? Why is Apple stock "equivalent" to a gallon of oil? You are absolutely not making any sense.

A broken clock is right twice a day.

Adding my 2 cents: 1) This is a 1 1/2 week correction without any shocking news. 2) If you listen to RBS or SocGen macro analysis you deserve to go broke. 3) Just a reminder: stocks got cheaper, not more expensive. Why the **** are we even talking about going net short?

He's just using the Giofranchi method. Who, by the way, hasn't chimed in on this thread despite being among the first to post results in previous years. Kind of illustrates the point that threads such as this one are dangerous because they are always biased towards outperformance.

HWDY

I didn't because I'm not sure about that yet. I think a lot of (value) investors tend to get overexcited about the narrative and don't pay enough attention to the numbers. The book exemplifies this bias. "Sure, this is a roll-up, is trading at 50x FCF, has a terrible balance sheet and generates no profit yet. But the CEO is an outsider!". Usually followed by the most dangerous words in investing: "this time it's different.".

That 80% of the people on this forum should close their account and start indexing. That "the outsiders" is overrated.