LC

Can I amend my post?? I agree with HJ :D He is right: in certain spaces, debt is necessary. Here in NYC you can't hope to make an adequate return on RE without leverage. I've used leverage in my portfolio before but for me it puts me on edge too much, psychologically, and in retrospect I don't think it was worth the stress.

leverage: if you know what you're doing, you don't need it. if you don't know what you're doing, you definitely don't need it.

Scared me, I thought you were buying Lumber Liquidators. I would be scared to be short. one of the smartest stock pickers in the world just bought a big position. I saw that, and everyone's favorite whipping boy Tilson has made a very loud short case. I don't have a position, but if I had to initiate one here it'd be short. Gross margins at all time highs, bulk of the remodeling done by the Blackstone's of the world to build the world's largest rental pool, and the business still only generates $40 MM in FCF (less than 2% FCF yield). I just don't see how you get significantly much more upside in the stock. Sorry for digging this comment chain up from the grave, but 60 Minutes apparently did a piece on Lumber Liquidators confirming they have been selling flooring with levels of formaldehyde above legal limits: http://www.cbsnews.com/news/lumber-liquidators-linked-to-health-and-safety-violations/ I actually looked into the company but passed for this reason (although it was only a rumor at the time - but my carpenter neighbor confirmed LL sold the cheapest "wood" he had ever seen).

At the firm I used to work for, (NYC architecture/permit firm) we took deposits for permitting fees for large projects up front. We did a large Nomura project where permit fees were 75%+ of the total job. But large deals usually have special pricing. For us, deposits were usually ~15-25% of the total cost of the project. Also in general cash earned by us was not remitted until milestones were completed, although once the deposit cash was in our acct we could theoretically do anything with it (pay salaries, owner withdrawals, etc.). In terms of sniffing it out, I would look for large imbalances in the cash account over time. This is probably indicative of deposits. Also maybe how revenues are earned vs. the cash account, to see if they hit a certain milestone and then can recognize revenue, assuming they play fair. By Play fair I mean, we had huge receivable problems. Small firms like this are usually on the short end of the stick vs. large guys, and other small firms usually just don't have the cash flow. But we kept things on the books to avoid write-downs for years. Cash flow is definitely king in figuring out these things, I think.

Spinoff that division and let it go bankrupt?

For me, if I make adjustments for various accountings, then I would find growth in BV useful. But otherwise it can be influenced by all kinds of non-cash charges. For example under-depreciating assets, or under-reserving for insurance policies or loan defaults. These non-cash charges may not correct themselves for years, in the meantime you get inflated growth in BV. My philosophy is that assets value = capitalized earnings stream. So book value and earnings power are really one in the same, and growth in BV equals growth in earnings power (or reduction in capitalization rate)

Oh man...he seemed like a really, really nice man from what I read of him. RIP.

Congrats Sanjeev. Best of luck with your new enterprise!

I'm really getting pulled into this one. Next I'll be believing in alien abductions. But boy, these guys are really weaving a tale if it's purely fiction. Are they that bored in Nebraska (probably). But it reads like a summer novel. Lance Munger is even involved! Judges being paid off! CPA licenses revoked! Someone needs to turn this story into a film.

Honestly...I was (and still am) curious purely for the entertainment value. It's good drama! Everyone else in society has Kim Kardashian and Kanye West, or sports drama (come on pitchers & catchers already!), and I want some investing drama. And I love a good conspiracy theory on top of it!

but at least the accounting is exciting, right? They're really canning that underfunded pension liability! I'll show myself out.

Problem with Seneca is it might be too boring. My experience with these competitions is everyone likes a catalyst...

Whoops that was my fault. Ben is right, there should be no favorable tax treatment. Harney is where Buffett places his confidential trades. But insurance companies do gain favorable tax treatment of dividends, and Buffett does do a variety of things to reduce his capital gains (the Graham Holdings swap for instance)

Randomep, if you google "harney investment trust" there are some articles written about it. Nate, Mephistopheles, if either of you are able to dig up details on the lawsuit Nate is referencing I would love to see it. I haven't been able to discover anything on Google and I don't have access to Pacer.

Haha, if you like cigar bars, my recommendations in NYC are Soho cigar bar (low key) or the Carnegie club.

I believe Americans can now import $100 of Cuban cigars into the US. The story I immediately thought of is a famous city (I forget the name) where people can buy 500g worth of caviar. The Russian mob employed people every day to purchase their share and cross into Russia for the mob to distribute.

How structured is his investment process? He has given talks about how only invests in potential doubles/triples/ etc. I am referring to his columbia presentation about 26%/year target. But it seems he has deviated from this. Does he look at this as a philosophical guideline or a practical guideline? How well does he get to know management? What do his conversations with management look like?

In that case, maybe don't watch Hannibal with him.

CLCT

I outperformed over the last 3 years because I leveraged into a bull market. Pretty sure that goes more into the "lucky" vs "skillful" side of the coin.

Shake shack started in a literal shack (maybe 15sqft) in Madison park in NYC. To this day there are lines which span the south end of the park during lunchtime. The burgers are as BG2008 mentioned succulent and juicy. No idea about the investment qualities as I haven't read the S1 but just in case people wanted some color.

Add "+1" after every post to make the world aware of my tacit approval. Even if it is my own post. +1

He definitely lived a full life, which is why it was a pleasure to know him and celebrate his life...another fun story is him working out of Curacao at one point as an accountant, doing inventory checks on oil tankers for George Soros' funds by dipping a rope in a drum of oil, calculating the volume and applying it to the ship's inventory!

I can vouch for Kraven's kindness and willingness to help out newbies. Today is an unfortunate day for my family. My father in law died from a massive heart attack last night, he was a man who knew both riches (net worth of tens of millions in the 80s and 90s), culture (owned the largest Rolling Stones private collection at one point), heartbreak (divorce, abandoned by his family), and abject poverty. Had it all and lost it all. He was a great friend and will be missed and I was glad to know him and have him think of me as a son, even if just for a short time. This drink is for you Tom!

SD always gives great advice! Merry Xmas!