netnet

Here is an interesting article whose thesis is that Apple's iCloud is a dagger, actually more like a howitzer, pointed at MSFT. http://www.cringely.com/2011/06/iclouds-real-purpose-is-to-kill-windows/

Sigh, When will economists realize what the laws of thermodynamics are? And when will people realize the absolute difficulty of predictions that you really have to have a probability space associated with the outcome. Furthermore attaching a definite time makes predictions that much harder, i.e. suppose Paul Ehrlich was right he was just off by twenty years. Or even Malthus was right! First, the idea that oil or any other resource is infinite is ludicrous. Second, the reality is that today, we humans have the ability to affect the virtually the entire planet. In previous eras our affect was only in localized areas. In Roman times, North Africa was a granary unencroached by the Sahara! Third, we were not bumping up against hard constraints. (Although the people who died as a result of depletions in Easter Island or Greenland might disagree. Nevertheless, when 1 million people wanted more whale oil, the switch to kerosene was possible.) Would that everything is okay and there is no such thing as peak conventional oil (most agree that we have reached it by the way). We could have the well fed turkey problem, i.e. every day is good until Thanksgiving comes around and whoops, life ain't so good. The essence of the argument in the Vancouver Sun is that there are no hard constraints and Thanksgiving is never going to come. Which means that there will always be a good substitute for whatever becomes scarce. I hope for my children's children's children this is true. I sure don't want me or them to be the turkey!

Great thoughtful comments all. I have a question--I have been thinking about taking the non-copyrighted version the 1937 Think and grow rich and updating it. What do people think about a more relevant update? Parts really do seem totally outmoded. (Now obviously The Secret is a different take on the genre, but yet I like the Hill book so much, but my own kids would not take it seriously, given how stilted it is!

Well Greenwald was probably right...about monetizing the rights of way, at least that is essentially what Buffett said himself. The interesting thing to do is to go through Greenwald's analysis and see what he did wrong--since he lays it out for you (see the gurufocus article)--and try and see what Buffett saw. To tease out part of the deal, was it an oil play? Well at least partially. But I would maintain that Buffett deployed huge amount of capital safely on a cheap utility type play. And most important, he bought at the bottom of the cycle--oil, equity and economy were all bumping along at lows, which Greenwald could not see. I have not gone through the Annuals to see what the margin issues he was talking about, but I'm not interested enough in railroads to try.

Look, I'm myopic, that guy is deaf, dumb, blind and stupid.

The inoculated investor's notes from the value investors congress (Tilson's semi-annual shindig) Here is an intro: http://inoculatedinvestor.blogspot.com/2011/05/detailed-notes-from-2011-value.html Here are the full notes in google docs https://docs.google.com/document/d/1aLX6nVhU0gFPQlUWII9QbBDu7cmZzml-oYN14DUvxss/edit?hl=en&authkey=CLPEyvUB Best, Netnet

Unlike previous years, I have not seen any good early summaries of the meeting this year. Is it the wedding and the Osama take out that has everybody's attention?

Look at the Wikipedia article on them. I haven't looked recently, but it had a pretty good discussion at a very detailed level. Also Nomura put out a white paper on them a while ago. Way back, at the time of the crises, the Wall Street Journal ran a longish article for the general reader, (that is the general reader of the WSJ!) Finding that article might be more trouble than it is worth however. good luck

It would appear that the examination is already proceeding!! :D

Buzan's speed reading book is fine. It's relatively quick read ;). Breakthrough Rapid Reading is more thorough.

the link is back up.

A few things occur to me: From your explanation they have the rights to the water already but they need to get access to it. If the above is true, they may actually be able to put a pump on your land regardless of what you want them to do. Depending on the state even private parties have this right Even if the above is not true, they may be able to use eminent domain to get to the water Check to see exactly what are their water rights In essence you are leasing the land and not the water rights, but that does not mean you can not charge accordingly. From all of the issues above, you may want to talk to a lawyer who specializes in this area.

I misread the dates and amounts, when I said is was not a wash. :'(

Here is the transcript of Buffett's interview with the Financial Crisis Commission. http://www.santangelsreview.com/2011/03/14/transcript-of-warren-buffetts-interview-with-the-fcic/ (click on the download to get it in pdf format.) I highly recommend it. It is classic Buffett--folksy and informative.

It should be in Pasadena, per the press release below....

Thanks everybody. And Harry, I will have him call you next week. (If you don't mind, I'll listen in!)

While in my late teens I did this sort of thing with my mom. As in all investments diligence is key. the issues: Make sure the value of the property covers the note, i.e. margin of safety. The bidding will ruin the returns--stay disciplined no auction fever. Bidders tend to flock to the least costly liens and leave the more expensive ones even if these are better deals (documented auction behavior!.) Due diligence is key both on the property and the laws governing the liens.

It seems to me the logical outcome of his argument is that the government should not intervene. Most agree that the intervention was absolutely necessary. And furthermore today, most mainstream economists believe that cutting off the spigots immediately, i.e. ending QE 2 and run the government with a breakeven or a surplus would be folly. Does that mean the QE 2 should not end and that the fiscal situation needs to be corrected. No of course not, but if you look at the how these sorts of crises play out, (Rogoff, et.al.) these near depressions and panics take years to work out. Many countries just repudiate their debts and move on. That won't happen here, except possibly by some inflation (either a little or a lot). A more nuanced argument would be that a) the stimulus although not perfect but was necessary and b) given political realities we should address the fiscal imbalances now because it will be a long hard slog to address. (I would say that we will need to get the country's fiscal house together in the medium term, BUT in the short term we a still in a pickle and probabilistically we need the stimulus .) Macro predictions are notoriously difficult to make. But he does not say this. Uncharacteristically, Klarman is not thinking clearly, but his position in life let's him parrot Marie Antoinette--Let them eat cake. Unlike her, he does tend to keep his head about him :)

My nephew has taken to Buffett/Munger's dictum about building a circle of competence. For whatever reason, he wants to learn about the insurance industry. Well I don't know very much about insurance to tell the truth. So, I directed him to a reinsurance broker I know. I also suggested that he re-read BH's annual letters. But I know that there are insurance gurus on this board. So the question is--What would you suggest that an enterprising sort do to get to level so that he knows what he doesn't know? thanks netnet

Not to quibble, but this is an important distinction. Greenblatt absolutely does not use P/E. He uses EBIT/Enterprise Value instead of P/E. This allows for apples to apples comparisons of various companies given varying debt levels, interest payments and taxes. Thanks King for the info on the Thai market. I'm not sure that alot of commodities businesses in a stock market mean that value investing will do substantially better. (By that reasoning value investors should do better in Canada than the US.) I would think that the Thai market is just less efficient.

King, Thanks for the reference. I wonder how badly survivorship skews the result. Just by approximation, if 20% of the stocks in the sample had gone bust per year, you still get a compounded growth of 48%. The professor does make an error in saying that Greenblatt uses P/E (he doesn't) but nevertheless what is important to me is the outperformance of value investing generally and in particular the out performance of a Greenblatt "style" screen. The modified magic formula really crushes the market in general and even the low p/b, low pe, 3% dividend screen. 66% returns per year wow!! Makes me want to move to Thailand. Out of curiosity, what is the level of financial disclosure in Thai stock markets?

Greenblatt's data (according to him) does not have a survivorship bias. The 100,000% return in the Thai market does strain credulity, but if factoring in illiquid companies, etc. and survivorship bias knocks of 2 orders of magnitude of gain(100X), it still would be pretty impressive. As a general rule, these mechanical value screens have done very well in most markets. If you look at the Tweedy Browne study, these sorts of value screens tend to do better in markets like Thailand rather than say the US or the UK.

Who put the screening site together? best, Netnet

The commentary on the changes/unrest in the Middle East has largely been not talked about the really big issue from an investor's perspective. What about Saudi Arabia? Regardless of whether or not unrest in Saudi Arabia is a low probability event (I don't think it's really that low) or whether the unrest leads to either an overthrow of the monarchy or cutting off oil,(probably low probability events) ANY unrest may send oil up by 25 to 75%. The protesting Shiites in Bahrain may spur their co-religious in the Eastern provinces of Saudi Arabia. So the question is: how to play it in one's portfolio as a whole and what specific securities will benefit from the tumult? I honestly do not know. (I really do not like ETF's and I am not that fond of shorting. Although given the technical issues with ETF's shorting the double short oil might be the way to go.)

Here is some amusing (but instructive psychological) "comedy" for your weekend reading: Brought to you by no other than Countrywide's Mozilo. As reported in the NY Times, Mozilo, founder of Countrywide and also payer of the largest assessed SEC sanction by a public company executive, said that he compared Countrywide to BH. He told the examiners of the Federal Inquiry Commission that Countrywide’s stock grew “25,000 percent over 25 years — a much better performance than Warren Buffett at Berkshire Hathaway. This is documented.” This is so ludicrous that is beyond belief. Needless to say, when it sold it wasn't beating BH. But what is instructive is what psychological factors are at work here? At a minimum, I have a lolapalooza of psychological tendencies: Dissonance: he thought he built a great company, but it went poof. Commitment: he has been the public face of the company most of his adult life. Defensive reaction to perceived threat All of which cause an inattentional blindness, i.e. when the company sold its return was alot less. The quote from the NY Times follows below: he compared Countrywide to Berkshire Hathaway, the conglomerate run by Warren E. Buffett. He told the examiners that Countrywide’s stock grew “25,000 percent over 25 years — a much better performance than Warren Buffett at Berkshire Hathaway. This is documented.” He is right, to a point. From 1982 to August 2007, Countrywide’s stock price gained nearly 25,000 percent, according to the research firm Thomson Reuters. Berkshire’s investors experienced similarly strong gains over the same period. But Mr. Mozilo failed to acknowledge what came next for shareholders. Countrywide plummeted more than 90 percent, to around $4, in February 2008. At the nudging of government officials, Bank of America bought the lender for $4 billion, or roughly $4.25 a share, in July 2008. Mr. Mozilo lauded the deal, telling the commission that the sale “did not cost the taxpayers a dime” and saved more than 50,000 jobs. (NY Times 2/17/11 Dealbook by Protess) Note that Bank of America is still paying for the deal!