netnet

You digress. Stick to finance lest we get into a spitting match on geopolitics.

1. How'd you get started? So I got started when a friend came to me in desperation in a liquidity crisis. The business was sound and I invested it what was a debt like and secured. I would say the terms were tough but fair. I made my money and we are still friends, Although I'm not the first person he turns to for investments, I may be the second. 2. Do you invest on your own or through a fund? I do both. It takes a lot of diversification 3. Average investment in dollars? Range as well? 25 to 50K 4. How involved are you with the start-ups? Pure money investments or also director/mentor type roles? Honestly, it is a bit of an ego thing. I think that I can add value and I like to see where my money is going up close.

It's Timothy Vick. -Netnet

Whether or not we would have heard of him is irrelevant, a) Munger's ideas would be the same and worthy of study. b) He would be a billionaire c) Buffett would not be as rich, his presumed purchase of excellent companies at fair prices would have happened much later, if you believe what he says. d) Almost certainly they would have met anyway: super astute investors from the same neighborhood in Omaha, the world isn't that big.

Only a Quasi-genius, really, are you on the special parking list at UC Berkeley, i.e. for Nobel Prize winners? (no kidding there is such a thing) He is a genius period. Good points but I have to partially disagree. While it is true that experience is important--insert joke about teaching how to make love to a virgin. Yet you do not have to burn your hand to learn not to touch a hot stove. (Further, I don't know about you but I was an avid consumer of all manner of Playboy and the Kama Sutra, before I knew, ahem, which end was up!) I think that you may be generalizing from your experiences and everybody is not quite the same--you do have to do it the first time, which helps learning, but you don't have to be f%#ked. Interesting except that he explicitly proclaims the usefulness of written checklist!

So assuming that you have a reasonable repertoire of mental models, how do use them. Do you review them periodically say the whole list monthly or do you go down your list before big decisions or when confronted with a deep thinking task? Personally, I (try to) review one per day and go through the whole list. Now that would mean I would be through the list in three months and would start again. I confess have not as yet gone through my list of ~100 in under a year. And I have not explicitly reviewed the list before a big decision. For the life of me I am not really sure what Munger does. He seems to imply that you should go through the list explicitly, but it does not seem that he does.

I was wondering if there were any angel investors on the board. I am and I research extensively, but I would be interested in others experiences and methodologies.

I have a bunch of college age nephews and nieces (plus my own kids) to whom I always give books for Xmas. So given the previous post asking for rec's for a 12 year old, I thought that I would ask this savvy board! This year I'm thinking of Griffin's book for the younger end of the kids, (17--19) who have not expressed an interest in investing. I know there are those who dislike the book, but I think for a first exposure to Munger it is a good choice. Shall we leave that discussion to thread on the book? ;) Damn Right for the older group Persuasion, I would love other (better) ideas. Thanks

The answer to your question is not really the answer that you need. Sundry publications/blogs/fora/websites include: Forbes, Fortune, WSJ, Economist This site, Value Walk, Value investor Club, Old School Value, 25iq, Basehit Investing, Columbia Grad of Business Newsletter for$ Value Line, Acquirers Multiple, $$$ Manual of Ideas This is hardly an exhaustive list. BUT, even this is an ocean of info. You need a boat to navigate all this. Or to mix the metaphor you need a scaffold to hang this info on. So I would you suggest that do two things: start reading the essential books of investing, Intelligent Investor, BH annuals, Poor Charlies', The Most Important Thing, Common Stocks and Uncommon Profits, The Little Book that Beats the Market (maybe), there are many more, but this is a start. increase your circle of competence, starting with the industry you know best: read the trades, compare the ratios over 5 to 10 years(Valueline), read the annual reports of competitors, suppliers and if applicable customers.

As Yogi said, it hard to make predictions especially about the future (and extra especially about future commodity prices but... Iron ore Bear predicts sub 40 per ton pricing: http://www.bloomberg.com/news/articles/2015-11-22/iron-ore-bear-andy-xie-says-price-to-drop-below-40-by-year-end

Shane's list is great (FarnamStreetBlog.com). If you do not follow it you should. For a list of mental models you also can check out thinkmentalmodels.com, which has sort of a cheat sheet, around US$4.00 Or for the grandaddy, Bevelin's book, some find it way too dense. Note: Munger say you should collect them yourself to "bang it into your head".

+1 You need to figure out your circle of competence, define its edges and expand it. From your questions it is clear that you need to work on both general accounting, at least as it relates to investing, and industry specific knowledge. For example what is (are) the key financial ratio(s) and best operators in the business, either in pipelines or where you work? But don't think of this as a burden you have many things to learn--make that rewarding! And keep reading and asking questions. You are in the right place.

In a word, don't didn't work for Buffett, isn't working for Lampert. Here is a great article on the problem on retailers rebounding: http://deadcompanieswalking.tumblr.com/post/132936795348/dead-sector-walking-traditional-retail-is-still

Three things Generally, this question should be asked in the Constellation thread. This has been partially answered in the thread (and is answered in Constellations' AR) Some curmudgeons, on this board have chastised me for answering questions like this, i.e. they think posters should look it up first Now that said, if you invert the question would you add organic net revenue growth to a capital heavy business, no you would not. The question is answered right there for you! Every incremental dollar of revenue is going to require a lot of capital, with CSU this is not the case. The capital in ROIC is invested in acquisitions. (ALERT editorial opinion on a divisive subject) In this case without the Valeant funny business accounting. For other companies without CSU's characteristics, this would be a bad number to use, if you acquisitions were not material and/or most of your growth came from organic growth, you may even be double counting. I was first put off by this and it seems like apples and oranges (or apples and hand grenades), but for this company it works. Apparently they manage to this number. They seem to have strict capital allocation and most importantly revenue growth is extremely high margin. If the company did not have both strict capital allocation and high margins then you would not use that number. But since this is not the case, % increase in organic revenues tells you the % of organic growth. etc. Ultimately, the CEO has given you his targets and tells you how to judge him. Very honorable indeed.

That's great. Thanks!

Anyone doing the tax liens (sales) in Nor Cal. (I would prefer not to bidding against a fellow board member!)

Ok, speaking as an interloper from south of the border (49th parallel), I must say that I heard M. Trudeau for the first time today. My, my at least our princelings down south here, don't sound so posh. Of course our most recent, shrubby, dynastic pretender came from a long line of syntax manglers, this has been the third generation worth. (The Bushes, Prescott (grandpere, Senator), George, (pere), George,(fils, president) and the current shrub Jeb, the most well spoken of the lot.) My wife and I looked at each other hearing Justin Trudeau for the first time and said, he would not have made it down here with that upper class affect, but you northerners are so forgiving and fair minded!

Excellent discussion of using Bayesian thinking in your life and business. Pair it with Julia Galef's YouTube video on Bayes.

I may be misunderstanding your meaning, but book value is "averaged up" in that the purchase price of the acquisition is added to the book value of BRK. Your point may be that you view the purchase as an inflated value on the balance sheet. That may or may not be true, see Buffett's discussion of Scott Fetzer. Furthermore, assuming that Buffett is rational (if he isn't who is?) that the purchase price is not only below intrinsic value but ( a reasonable probability) that it is a better deal than BRK's shares are today. Plus the economic goodwill is compounding while the accounting goodwill is being amortized. So logically then we would have the book value of the acquisition equal to something on the order of 1.2 x the purchase price. I would have a 95% confidence of that, given Buffett.

Are you sure about that? I can not believe that that was the case. He did say that that the policies were not properly written and that ti would really have hurt, but bring down BRK!???!(The confusion may be that he did say that such an attack could wipe out the insurance industry, but he did not say that it would have wiped out BRK. Unless you can supply the quote indicating otherwise? The point about concentration still remains; honestly, I could not put 100% in BRK, (without perfect foresight). 20 to 30% maybe. A 35 year old Buffett, was young, brilliant and had long runway, but was neither bullet nor truck proof!

Add to that deferred taxes as per 1H2015 approx. USD 62.7 B. [Nature of the deferred taxes is different from the nature of insurance float, but also basicly low/zero cost leverage]. Insurance float as per 1H2015 USD 85.1 B. Sum of deferred taxes and insurance float as per 1H2015 approx. USD 147.8 B, relative to shareholders' equity as per 1H2015 USD 246.0 B, [ie. sum of insurance float and deferred taxes relative to shareholders' equity approx. 60%]. John and Vinod make an important point here that is often overlooked in the PB discussion: Low cost float is really a huge value. Specifically, Buffett has said that it is (can be) better than equity. (Low cost "permanent" or increasing float that BRK has.) Now I would not add the entirety of it and the deferred taxes back to count as book, but certainly one should be able to add back a fraction to the book value. Also remember that the buyback point means that Buffett himself thinks that 1.2 is undervalued, what might that mean? Well it certainly means that at 1.2 it is significantly below IV, another words he is certain that he will make 12-15% per year at that valuation.

Premium or discount is related to the value add that is generated at the conglomerate level. How many conglomerates suck out all the cash flow from the subs and allocate them to the highest risk adjusted returns? Berkshire additionally gets low cost leverage from float - a value add due to its structure. Compare it to other conglomerates. It is not great salesmanship or popularity that gets Berkshire its premium to book value. Vinod +1 to Vinod's comments Additionally, you need to look at both the value you are using with BRK and the comparison class that you are using. Some conglomerates trade at a premium and some at a discount. If I remember the literature, about 2/3 trade at a discount 1/3 at a premium. So BRK is not unique one way or the other. Furthermore, you are valuing BRK on book, that is not really the best metric at all, obviously that is the easiest to use and calculate, but really the number (although variable estimate) would be IV. The metric should be how does a conglomerate trade in relation to its IV. (Also the discount to publicly owned shares is not limited to conglomerates, numerous examples from Palm to Yahoo.)

Berkshire Specialty Insurance enters the cyber-security market: http://www.ibamag.com/news/warren-buffett-enters-the-cybersecurity-insurance-market-25540.aspx And BRK reduces stake in Munich Re: http://www.forbes.com/sites/gurufocus/2015/10/07/why-warren-buffett-sold-munich-re/ Forbes article cites Jain as saying:“What was a very lucrative business [reinsurance] is no longer a very lucrative business going forward,” all the best netnet

Superforcasting literally just came out, (Sept. 29) my copy from Amazon just arrived!

He was a great investor, deal maker and business builder. RIP I'm sure you can find it somewhere. Basically, when he started out with the Bass family, he lost a bunch of money (I think it may have been more than half) and then went on to be a more methodical investor (talked to Buffett, read Graham, etc. funny how an MBA from Stanford is not enough!). I pretty sure that John Train featured him in one of his books, so you could look there or comb through the NY Times or the WSJ.