LC

Or the updated version, Letterkenny

Also just my 2 cents - these read like pseudo-marketing materials where you throw a bunch of fancy words out there and hope it convinces someone to invest with you. Not saying that's the case here as I don't know these guys at all, they may have it right on the money for all I know. But when I hear phrases like "time dilation", "velocity of information"...my eyes roll backwards a bit :)

More from these guys https://static1.squarespace.com/static/5ca38f3216b6405d11e3d4b4/t/5cd77067c830251ea8301574/1557622902586/ComplexityInvesting_9.1.8_Aug19-1.pdf

Bought some ABS as a symbolic gesture, sold TAP a few weeks ago around 58. Breakeven sale price, made a few % from the dividends...and very happy to get it out of the portfolio.

Even more so I think the benefit of AI comes in medical diagnostics. Huge structured training sets, if people were allowed to anonymize their health records and sell them, en masse to developers, that is decades of medical history over millions of people. Perfect conditions to train models.

Exactly. Then the question becomes: what enables high interest rates. And the answer there is, scarcity of capital. Now, I would argue that human capital is cheap. Financial capital is cheap. Material capital is cheap. So, what will cause a contraction in capital availability? That is the question.

When looking at an overall economy, profit margins are important exactly for the reasons you mention: a signification change in profit margins indicate a structural change in the overall economy. Again if we are looking at an overall economy, is ROE a flawed metric because is ignores the cost of debt? There must be a cost paid by economies which deflate the value of debt capital. Therefore, I would think ROC would be more informative of the nature of an economy.

Most fundamental investors (myself included) have zero industry specific knowledge in healthcare r&d. The ones that do hire specialists (baupost), and their portfolio looks much different than bill ackman and valeant.

Interesting ft article https://www.ft.com/content/97be3f2c-00b1-11ea-b7bc-f3fa4e77dd47

What do you mean by pure capitalism? This is like the one true scotsman. If you mean a complete laissez-faire approach, as you saw with the Standard Oil example, sometimes pure capitalism leads to monopolies. But, sometimes it leads to an optimal case: low pricing that is great for the consumer, and great profits for the business. Think Walmart for example. A handful of large players competing is a decent outcome, in the generic case: (1) They have large enough size to take advantage of economies of scale, and therefore drive costs down for the consumer. (2) But, there are still enough independent competitors to prevent price fixing. E.g. if Walmart jacks up their prices, others competition still exists. How large is optimal? I'd argue it depends on nature of the demand (market factors) and supply (characteristics of the product/service being offered): -Economies of scale are global in nature for Walmart - this allows incredible benefits and justifies a global company. -In contrast, these same economies of scale are regional for concrete/rock aggregates - this is why you see regional companies rather than global.

I may have been unclear - I was talking about price, not costs. Prices of commodities are identical (by definition, else it is not a commodity). Prices should follow the curve - the only way to improve returns is as you mention to lower costs of production. Monopolies circumvent this by improving returns by raising costs above this curve.

Buyer Beware: In Chile, you are investing into this environment Goes to show you that the relative peace and lawful society of western countries is paramount to long-term investing stability.

Yes, there are industries where the same handful (or less) of companies have essentially the same market share year after year. I've never looked at it myself, but I understand Lubrizol is/was a good example of this. But not all such industries produce outsize profits to the handful (or less) of participants. The strategies and tactics of oligopolies are complex and cartels are hard to hold together because cheating is so profitable. For another more fun example, take a look at how the hemp industry was killed by Dupont and others (https://www.hemphelps.org/why-hemp-is-illegal/). Actually, the 2018 farm bill re-legalized hemp federally, so I hope (although it probably won't happen due to local building codes) that hemp is used in more industrial settings where it does provide both cost and performance improvement in certain areas (https://www.engineering.com/BIM/ArticleID/19056/Not-Just-a-Pipe-Dream-Hemp-as-a-Building-Material.aspx) In fact, funny story is that the old generations of my family were hemp importers to the US in the late 1800s and early 1900s. After the 30s and then the 2nd great war, they moved to growing tobacco (the original "marihuana").

Another thing: commodity producers should have low ROIs. Someone who sat in a Macro-econ classroom more recently than I may be better to explain it, but their returns should match the marginal utility curve. Why? Because it's a commodity. By definition, the product is standardized and anyone can product it - there is no differentiating factor to justify increased ROIs above the marginal curve. In other words, if we can both as easily dig rocks, why should your gravel cost more than mine?

Somewhat shady? The guy pretty much invented corporate monopoly practices, or at least was one of the first to apply them industrially (pun notwithstanding). I'm not historian but from my brief reading of Wikipedia, the reporter who exposed Standard Oil's shady practices and contributed greatly to its dissolution was Ida Tarbell (https://en.wikipedia.org/wiki/Ida_Tarbell#Standard_Oil), who in the process of her research, practically invented the methods of investigative-journalism and the famous term "muckraker". Here is one such instance of Standard Oil's practices: This website has some more: https://www.crf-usa.org/bill-of-rights-in-action/bria-16-2-b-rockefeller-and-the-standard-oil-monopoly.html

The beauty of commodity businesses is that most have been around for a very long time. So you have a lot of historical data to fall back on. (For example the fracking industry to use something semi-recent) Alternatively, you can invert: Do we see large sources of untapped commodities in the US which people are unwilling to invest massive extraction capital due to no-to-low profitability? I would argue not really. To the banks - there isn't a lack of funding towards financial commodity products. More like there is an excess of funding as the returns are generally spectacular, not sub-par.

Very true. Rentech manages something like 100B so quite heavy but not all in Medallion. One of the other fascinating things is the human component. Berkshire is the product of two people. Simons/Rentech took a group of incredibly smart mathematicians, programmers, etc. (and all the neurosis that come with that) and got them to work and function together. That is one hell of a feat if you ask me.

Even longer term. It is publicly known that Rentech uses value/fundamental strategies. Simple 15 minute example: 1) Obtain credit ratings for all companies - proxy for "moat" 2) Determine trailing 1, 3, 5 year earnings/cash flows, growth rates 3) Make some exclusion/treatment rules to throw out highly volatile companies or correct for idiosyncratic events 4) Use 1)2) to build a fundamental model +/- 15% of normalized PEs and trade around that. You then combine this with other models in the firm which are estimating heatmaps of the market - i.e. expected cash inflows or outflows or some other metrics. So your +15% band expands during periods of expected inflows and your -15% band contracts during outflows. Now you've built a model to automate the fundamental investor.

Seriously. These guys are better than Buffett:

At about 5-10% but just temporary, I usually try to be fully invested. The point here is market timing : you think the market is going to drop (i.e. a recession is coming) and you want to move to cash. I would say, unless you have positions which you think are over-valued and want to trim, it may be more prudent to buy general market protection (SP puts).

About 10% right now. Am thinking of raising up to about 20-25%. Looks like a slowdown is coming.

It's also a plague to Amazon and Ebay. Those companies, Amazon in particular, are much better-suited to reimbursing for scams. However fraud is the definition of the cost-center. It is perennially under-allocated resources and it is most overlooked. Fraud models are somewhat helpful but it is much easier for individual scammers to one-up fraud models than it is for global companies to re-calibrate or re-develop these models and roll them out across their entire enterprise. (Reminds me of the "doping" scandal in sports in that way). It is interesting because in the case of fraud, many times the only thing maintaining an active fraud department at a global institution is regulators. I'll speak for the finance industry as that is what I know. Consumer fraud is taken as a BIG DEAL at banks not because of the cost of the transaction - that is usually a minor amount to reimburse. The problem is that when regulators see you have a series of fraud incidents, they will come down on you like an old testament plague. This incentives the banks to really get their act together. Most banks will have 5-10 fraud scores running concurrently, many are product-specific. And provide extensive training to customer-facing employees. Of course this encourages economies of scale because it is difficult to spread these costs over a small customer base. But, over millions the incremental cost per customer is almost non-existent, but it provides a great value. This is one case where regulation + industry concentration actually provides a positive cost-benefit to the customer.

Anyone interested audio gear, particularly vintage gear, should check out the audiokarma forums.

All banks forecast PD LGD EAD for their auto portfolio. PD and EAD are usually quite accurate but the problem is LGD (Severity). As you say banks must dispose of a quickly depreciating asset. These severity models are the least accurate particularly because many times there is lack of transparency into deal-level data. They are quite aware of this problem as is the FRB, usually accompanied by higher capital levels.

rk, thank you very much! Also, I see the "tell me a joke" thread is increasing it's presence :D :D