hyten1
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Posts posted by hyten1
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in regards to impeachment, one question i have, how would mike pence behave? does he have similar views as the trump on the gse? would he change the players if he becomes president?
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jmp8822,
i hear ya you are probably right.
but i secretly believe a fews year back web would like to buy MSFT, but he can't due to his relationship with gates, that is my belief
"I think Microsoft is attractive but that—but we will never buy Microsoft. " from the cnbc interview in above post link
i am not so sure...
i have heard web saying he won't buy msft due to his relationship with gates, but i have never heard him said he would not invest in msft due to the fact its not a good investment. if you guys have read this or seen this please let me know.
i mean he did invest in IBM and a big position at that, MSFT and IBM are similar in many ways as for valuation that is another discussion, also msft few years ago was reasonable valued vs today (you can argue otherwise etc.)
Given CM's comments on GM last year, I think this is likely just a joke.
I would agree this is a joke - I've heard him tell the same joke using Microsoft instead of GM about 7 years ago.
I am about 99-percent sure this is a joke - again, I've heard him say the exact same thing in a similar setting using MSFT as the company instead of GM. Could he be actually interested in GM? Maybe - but in this case he was joking regarding his age/hearing.
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i am not so sure...
i have heard web saying he won't buy msft due to his relationship with gates, but i have never heard him said he would not invest in msft due to the fact its not a good investment. if you guys have read this or seen this please let me know.
i mean he did invest in IBM and a big position at that, MSFT and IBM are similar in many ways as for valuation that is another discussion, also msft few years ago was reasonable valued vs today (you can argue otherwise etc.)
EDIT: http://www.geekwire.com/2011/warren-buffett-vows-buy-microsoft-stock/
http://www.cnbc.com/id/45290263 search for microsoft "I think Microsoft is attractive but that—but we will never buy Microsoft. "
Given CM's comments on GM last year, I think this is likely just a joke.
I would agree this is a joke - I've heard him tell the same joke using Microsoft instead of GM about 7 years ago.
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its not my quote, i read it, its from peter theil i think
"fyi, i thought this observation was salient:
the media takes trump literally but not seriously and his supporters take him seriously but not literally"
+1 Hyten1
By the way, Nelson Peltz mentioned that exact same quote at lunch time on CNBC... Any connection?
Cardboard
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fyi, i thought this observation was salient:
the media takes trump literally but not seriously and his supporters take him seriously but not literally
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i think we should stop calling names ... even though donald does it.
instead, think of why someone would vote for donald, its not simply because they are stupid/racist/sexist, i am sure some of them are stupid/racist/sexist just like i am sure some hillary voters are stupid/racist/sexist.
...down there.
Really! You're taking this all the way?! Wake up stupid...wake up!
Finally America has become one big reality show! Even PT Barnum as President would make some sense!
Cheers!
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i didn't vote for donald... lets get that out of the way
however, if people think supporters of donald are simply crazy, racist or stupid, i think you have to think hard to why someone would vote for donald, given what he has said and done etc.
i would also argue donald (if he wins) is a continuation of obama, along the lines of "change". people were tired of the status quo and wanted change, so they voted for someone (obama) who was different and promise the "change", however he still had part of his foot in the establishment. for a lot of people the "change" wasn't enough, or simply didn't work for them personally. now the change has been amp up 10 fold. the change is now someone who is completely outside of the status quo. despite of all the crazy/sexist things that donald has said and done.
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oddballstocks, all good points but :
1. why does the auto maker need to bet the farm on EV to succeed? I actually think that would not be a good idea. Sure the autos can't stick their heads in the sand and simple dismiss EV/autonomy. But i don't see legacy auto doing that, unless they are just fooling us.
2. EV i actually don't think is the golden goose. GM just announce Bolt with a 238mil range available end of 2016. I think the golden goose is autonomy and i don't see a clear winner yet, even if there is a clear winner right at this moment, base on what i know the tech is still far from ready for prime time etc. So that means there is still time for players to catch-up or fall behind etc.
3. I hear ya about "The Innovator's Dilemma" and I have read it. But from what I can see I don't see all auto makers falling into that trap, then again I don't really know what is going on. The bad thing for tesla is, auto industry is such a capital intensive, regulation heavy, long lead time biz, expensive product. It allows time for the legacy players to wake up and catchup, which is not a good thing for tesla/innovators.
4. in regards to tone of the thread. we should keep it enjoyable/lighthearted. i'll blame this whole internet/online thing for the misunderstanding.
just my humble opinion
One other thought, Picasso mentioned this. The killer for an EV is the range. In SF or in NYC a 100 mile range probably isn't a big deal. But it's a big deal for most of the country where suburbs are spread out.
Consider Atlanta, Chicago, or some of the larger cities where people living 40-50 miles away are still in the suburbs. Commuting into town and home again is impossible unless there's a charger at your office. This is cutting it too close for most, and it doesn't give them the extra distance they'd need for errands on the way home or picking kids up from daycare.
If they could get an EV with a daily range of 250 miles I think it'd sell like crazy.
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picasso, for me even if tsla becomes a force i don't see why GM or Toyota can't retain their current status or become stronger (some weaker players can go bye bye or get absorbed, i guess i consider GM and Toyota some of the better position autos), you are saying once tsla becomes a force most of existing auto goes bye bye, how/why?
i have been thinking about the winner take all/most scenario. Unless winner take all/most happens i don't see how tsla will wipe out most players. Its possible, but it would take a while before that happens. I guess once auto becomes a commodity or near commodity (you will always have exception or exotic that people buy for fun/leisure) or someone becomes that dominant (i don't see it).
- car sharing/autonomy don't necessarily mean less cars being build.
- will car sharing/autonomy create a winner take all scenario, where customer don't really care what brand it is.
- will the expensive/need/cost for technology create additional consolidation which result in a handful of auto company left
- others....
but i do feel all above will take a long time if it happens (who knows)
hy
Maybe that's what makes the Tesla so different. You don't feel like you're in a golf cart. My wife drives a high-end ICE and I loathe having to drive it. I don't think any high-end ICE is better than a comparable Model S.
But you also have Woz who decided to endorse the Bolt over the Model S. Not sure what's up with that.
I mean we'll see. Even if I'm right about the probability of Tesla completing their mission (around 30% or greater) it doesn't necessarily mean go long TSLA. I think it more implies that these other automakers are going to have a really, really hard time. Anyone that looks like the marginal player will almost surely be out of business. It's sort of a dangerous game because in 30% of various outcomes you'll get absolutely crushed in GM or FCAU. In the other 70% you'll probably do well. Yet I get the sense that various investors (short TSLA or long GM) think it's more a 1% chance. Even at 10%, would you play Russian Roulette with ten chambers? Not for a double. So my point is that the odds of Tesla destroying others (and possibly even themselves in the process) is too high to go long GM or FCAU. Your view may obviously vary...
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i hear ya, see that is the good and bad of this industry for tesla and legacy auto
this is a very capital intensive industry, but also an industry that has a long life cycle, tons of regulation and very deep pocket players with very good talent. does it matter if GM spend $2 or $3bil? maybe it matters to Tesla.
Even if GM (toyot, Daimler pick your auto) spend $10bil to get to par to tesla, whos going to end up standing at the end
i don't disagree elon is awesome dude and tesla a cool/nice cars, like i said before what people disagree on is the probability of tesla becoming this dominant force. Then again that can be too simplistic a view, what if tesla merge with someone and becomes something else, etc etc.
and also remember its not the outcome that matters its your investment process that counts :)
EDIT: isn't tesla a golf car that can go 0 to 60 in under 3 second?
How has resale value been on the Volt ? It's awful. Ones that sold for $40k in 2013 are now selling for $10k. It has the worst of both ICE and EV. What do you think the resale value on a Bolt versus Model 3 will be?
I personally think the Bolt is a nice golf cart with better range. My dad always had this idea to ride golf carts to work so maybe he's their target market.
A billion dollars for the worst of both ride sharing and autonomous is a lot of capital to spend. I bet Tesla could get a lot more results by paying that $1.1 billion for software engineers.
Anyway, yes, we can agree to disagree :)
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at the end of the day i am confused what everyone is talking about (that is a long writeup below about tesla), lets get some facts straight.
1. volt can use gasoline, getting stranded is not a concern.
2. bolt is not a golf car on wheels, people who think it is are committing the same sins as people who just hand wave at tesla and say they are doomed.
3. GM pay $600mil for cruise automation and $500mil for part of lyft, both critical ingredients for the future of auto for many reason.
not sure who say auto is a crappy business, there are some "legacy" auto company that is doing quite well, Toyota, Ferrari, Porsche comes to mind.
i think we can all agree tesla/elon has done great things, but what i disagree is extrapolating that to complete EV/auto domination that all legacy auto are stupid/slow and doomed base on what i see.
That is pretty arrogant considering what is happening in the industry.
I find it strange and funny whenever people talk about tesla they seem to compare apples to oranges. tesla awesome EV, volt what a crap (conveniently forget one car is $100k the other is $40k, conveniently forget existing volts owners love the car etc.). why is that importantly, because it shows you that existing auto makers are not taking this lightly.
people who use apple as an example conveniently omit things like the $500 vs $40k, network effect/eco system vs none (at least not yet). so they extrapolate "look at apple, elon is like job etc etc. => complete domination like apple"
why don't we look at other example where innovators in tech didn't "dominate", some examples are Tivo, commodore, apple (PC), blackberry, palm, yahoo, xerox, Polaroid, altavista, friendster, ibm, sure none of these are exact comparisons, neither is apple/iphone/ipod.
I find it interesting that people can be so sure of what tesla will become and one thing we know from tech, especially tech, dominance is an illusive thing (except for the select few).
There are so many landmines for Tesla, beholden to the capital markets etc (sure maybe this will end soon, maybe not), tons of competition, at the end of the day we can just agree to disagree.
Tesla/Elon good car and awesome entrepreneur, but that is not enough yet for me to declare them victory considering what is happening to this industry, the players, the size etc etc. Do they have a shot, sure they do. I guess what people disagree on is the probability of this shot. You say 50%, I say 20, someone else may say 70.
I am ok if i lose out on tesla's potential double or whatever.
EDIT: as for how do you copy the autopilot, you don't copy you come up with your own system base on your own experience/data/software. there will be many black boxes, all trying to have the same end result. But i doubt the black box all look the same, at the end of the day the customers don't care what the blackbox looks like as long as it works. Similar to search engines.
The best part of all this Tesla hand waiving from not just Pabrai but others as well, is that they all seem to highlight how crappy the car business is. Tesla will just be copied because that's how the car business is. They can't turn a profit because that's how the car business is. It's too capital intensive and Elon's wasting money because that's how the car business is. Then they're massively long various auto stocks. It's a weird and arrogant contradiction of this is crappy and this is less crappy. But I don't see enough understanding of what is supposedly crap (Tesla's business model) to know whether the less crappy (GM) should be trading at 10x earnings instead of 5x.
And it's also a static way of looking at the auto industry. I don't think the auto business has to be a bad business. Apple is a hardware company but it's not a bad business. The software and brand that turned the hardware into a great business can't be easily replicated . Apple ends up with the vast majority of the profit share without having anything close to that in market share. But we're all so used to these crappy auto stocks that we assume the business will always be crap. And that's a big part of the appeal with Tesla. They're doing things right the first time. Every single car is already networked up together. By the time the Model 3 rolls out, they'll have billions of miles of data sourced across all their semi-autonomous vehicles. For this reason alone their version of the autonomous bridge will likely be much better than the competition. Each day that goes by their autonomous system will get better and better. Anyone not moving as fast as Tesla will be moving behind. That doesn't sound like it will have the makings of a bad business model.
I do think Pabrai will be right on the capitalism aspect here. When people are lining up down the street buying hundreds of thousands of Tesla's each year, outside capital will start coming in and taking over where Tesla is forced to invest today. There will be less capital coming out of Tesla to build a supercharger network, others will take their capital and do it for them. Tesla will not have to take billions of its own money to build battery factories, there will be more partners willing to take that on. A lot of the areas where they need to spend capital will require much less capital over time. If the value starts to lie more in the software, maybe someone else will take over a lot of the manufacturing. Tesla needed to make those investments because no one else has approached this problem correctly. Let me explain...
Say someone walks on a dealership lot because they want to buy a car. The second they walk on that lot, 99% of the time you will not convince them to buy electric. That product is simply not good enough for most people. Why spend $30k on a car you can't really enjoy? You're stuck in a 100 mile radius unless you want to sit somewhere for hours charging. It's stupid. Fears start running through your head. "What if it's 100 degrees out and the battery dies in as bad part of town with your toddler in the back?" "What if you forget to charge it before going into work?" "What if the power goes out?" How hard is it for GM to understand that you can't properly sell this product unless it's compelling enough for the consumer to know that charging will almost never be an issue? They just don't approach this problem correctly. I see lines of Volts and Leaf's at various public chargers today. And sometimes the owner hogging up the spot leaves it there all day. You can be completely stranded. To work past these issues you need to address multiple issues at once. You can't just build a 200 mile golf cart and assume someone else will solve the other problems.
And it does sound like automobiles are heading towards a winner take all business. How much is the typical Chevy you see on a dealer lot going to be worth when it lacks the ability to generate income by being part of a fleet of autonomous taxis? What if highways are restructured where lanes start getting dedicated to "autopilot" instead of just carpool for more than a couple occupants? The carpool system is already flawed, that will need to change at some point. How much more is your car worth if your daily commute times are cut down by 75%?
I think there's a reason Apple or others are putting capital behind this idea. The current auto business is asking to be turned on its head. It's ripe for incredible innovation. But guys like GM can't do it. They have activists down their necks telling them to repurchase stock and pay dividends. And the company culture doesn't allow it, they have to go blow a billion dollars on some autonomous startup. And I'm not convinced GM could recreate Tesla with the same capital Tesla used to create their business. There is a tremendous amount of blood and tears that cannot be easily purchased.
Now throw in Elon Musk. He's not someone easy to write off. I hear the bears say he's promotional or as Chanos put it "Elon who?" Tell you what. If I ever have 1/10th the LinkedIn profile of Elon Musk, I'd deserve the right to be half as "promotional." Ignoring PayPal for a minute, this guy has been levered up to his eyeballs his entire adult life chasing down his vision. 2008 would have broken anyone else. I can't see anyone else surviving in 2008 in the middle of running a rocket and electric car startup. He sunk every bit of money into them, spoke for money he didn't have to get VC's to put up what he couldn't, and was trying to make a product everyone was crapping over. Rockets were still blowing up, his cars were negative gross margin,and he went through every last dollar he made off PayPal. Bloggers were attacking his company, putting out death clocks, and ridiculing his personal life. And they still are. Yet the companies we see today versus 2008 are simply staggering in difference. You don't just build that off of being promotional. Go and tour the Tesla factory up in Fremont if you think he's being over promotional. Theranos wouldn't let anyone see their labs. Drive a Tesla for a couple months and go back to an ICE to see if he's being overly promotional.
And since this is a value investing board that cares about guys like Buffett and Munger. At one point in 2008 Elon had dinner with Munger. Munger spent almost the whole dinner telling Elon about why he was going to fail. Since Elon had always thought highly of Buffett/Munger, he left dinner feeling super depressed. Despite someone he thought very highly of telling him of all the different ways he was going to destroy his life, he went on to do the impossible.
And since we all know Mr. Doobert doesn't change his mind easily (thank you Congress for those VRX emails), here is his comment a few years later:
I think Elon Musk is a genius and I don’t use that word lightly. I think he’s also one of the boldest men that ever came down the pike. Put me down as saying I’ve always been afraid of the guy whose IQ is 190 and he thinks it’s 250. I like to think there’s a little of that risk with Elon. He is a certified genius.But yeah, let's just say Elon is promotional because "Elon who?"
Or how about this latest upgrade to a 2-year old autopilot system for every Tesla produced past Oct 2014?
https://www.tesla.com/blog/upgrading-autopilot-seeing-world-radar
Additional Autopilot Release NotesTACC braking max ramp rate increased and latency reduced by a factor of five
Now controls for two cars ahead using radar echo, improving cut-out response and reaction time to otherwise-invisible heavy braking events
Will take highway exit if indicator on (8.0) or if nav system active (8.1). Available in the United States initially
Car offsets in lane when overtaking a slower vehicle driving close to its lane edge
Interface alerts are much more prominent, including flashing white border on instrument panel
Improved cut-in detection using blinker on vehicle ahead
Reduced likelihood of overtaking in right lane in Europe
Improved auto lane change availability
Car will not allow reengagement of Autosteer until parked if user ignores repeated warnings
Automatic braking will now amplify user braking in emergencies
In manual mode, alerts driver if about to leave the road and no torque on steering wheel has been detected since Autosteer was deactivated
With further data gathering, car will activate Autosteer to avoid collision when probability ~100%
Curve speed adaptation now uses fleet-learned roadway curvature
Approximately 200 small enhancements that aren't worth a bullet point
How the hell do you copy this? Seriously?
I put the odds of someone ripping out the profits from the legacy automakers as very high. Probably around a 75% chance over the next ten years. But I put the odds of it being Tesla as 50/50. So in my mind I think there's something like a 30% chance that Tesla does incredibly well. But based on the work I see from people either short the stock or long GM while talking down Tesla, I think it might be higher than 30%. I don't find the short sellers work particularly impressive.
Things are looking pretty tough for Elon right now, but that's usually the best time to bet alongside him. He didn't think it was probable that Tesla would succeed in its mission, but I think he now sees it as very probable (I mean Apple is a trying to steal his employees for a reason). His willpower to see this through shouldn't be overly discounted. If you keep doubling down eventually you go bust, but I don't think he's too far away from the point where doubling down will no longer be necessary.
*walks off mumbling* someone will clone Tesla, indeed.... *mumble mumble*
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a little insulting, "Not much second level thinking on here eh?" i don't see any 2nd level thinking below much.
people understand your point, yes emotional, tesla/musk, yes same tech put together differently etc etc.
yes playing music digitally from a portable device wasn't specif for the ipod, but the entier experience was (easily download music from a large libray, easily usable interface etc.)
"Have a superior product coupled with a very savvy marketer is the perfect combination. That's what captures mindshare." i think that is pretty much common knowledge, don't need to make it sound like its some unique revelation.
the biggest different is apple dominated in a way that makes competitor's same tech irrelevant, almost like winner takes all (then android came along that did something iphone didn't, its free along with multiple hardware options). which is not the case with automobile that cost 45k.
if $500 item isn't much different from a $40k item then you live in a different world than i do.
Not much second level thinking on here eh? My point wasn't to say the iPod is the same as a car. They are different, but it's how the leaders of both of these companies have framed the product and the purchase. It's emotional, not based on specs or rational. The circuits and buttons on an iPod were commodity items. Same with a Tesla. Obviously things are formed and molded to their own specs, but what I'm saying is what sets Tesla apart isn't some brand new flux capacitor drive that powers the car. GM makes an electric car, Tesla makes an electric car, someone made that EV electric car in California in the 90s that was turned into a movie. My point is electric cars and electric motors aren't what makes this special. Just like playing music digitally from a portable device wasn't special for the iPod.
I agree that the iPod had the ecosystem and a superior experience. From what I've read the Tesla car has the same thing. It's a superior experience compared to other electric cars. Have a superior product coupled with a very savvy marketer is the perfect combination. That's what captures mindshare.
If I were going to get an electric car I'd probably get a Tesla. When I think about electric cars Tesla is the name that comes up. Does Toyota make one? Who knows, BMW? No idea. Tesla has dominated the namespace for this category. Much the same as Apple did with the iPod.
I don't know if Tesla will achieve breakthrough traction because they're selling cars. It's different than a $500 purchase. Yet at the same time it isn't. Most Americans don't have $500 in cash laying around, everything is financed. If Tesla can make their cars fit into payments of $199/mo or less this will have serious traction.
Most people I know only care about the monthly car payment. If a Tesla is the same cost as their Acura then it's a shoe-in replacement. Tesla needs to work on building out a financing arm. Maybe they can finance these things for 8 years with an add-on servicing warranty and get it to $199/mo. That price isn't crazy. Keep in mind for most Americans an iPhone ($35/mo plus service $100 for $135/mo just for an iPhone) and cable (average $200/mo) are in the similar ballpark to a car.
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i think this is too simplistic, if this was the case then everything that apple/steve job touch should turn into gold, but it didn't (apple tv is great example)
sure awesome leader like musk/job helps, but i don't think that is enough (not for the long term). at the end of the day your product/service needs to provide considerable utility and value ... relative to the competition.
i would argue ipod did and iphone did when it came out. and i would argue tesla less so.
ipod was one of the very first that had a complete experience (ipod, nice design, easy of use and ... don't forget itunes). everything else at the time wasn't the case (especially ease of use in terms of downloading music etc etc.). also don't forget ipod is a $200 item. it can capture the market fairly quickly, even when competition catched up in terms of the actual product, it was too late. tsla doesn't have this characteristic.
now does tsla provide enough of value to get to ipod/iphone status. i would argue no.
but then again that is my opinion.
Had a thought while reading this. Is the Tesla more like the iPod than the first IBM computer?
Tesla has taken existing tech and created a product. It's hard to answer the question "what's the most important part of a Tesla car?" If you were to break it down almost everything is a part any other car company can create. Maybe the software's unique. This was the same as the iPod. The iPod had no special glue making it better. What sets both apart is the experience. It's the marketing, branding, and the experience of owning one of these products.
Why did consumers buy iPods over Zunes? They both did the same thing. I think that's what people are asking about the Volt. If you look at specs the Volt is the same, so why aren't people lining up to buy the Volt? It's the disruption field thing. Jobs had it and Musk has it. They make you feel special for purchasing their product. People feel a certain way buying a Tesla. They might even pay more for that feeling. People did the same for iPods.
This is a really hard thing to capture from an investment perspective, but it's vital to marketing. If you have a charismatic leader who can create an emotional response to the product you will generate a lot of demand. Leaders like Musk are in short supply. Was Steve Jobs a huckster and hype machine? Yup, probably one of the best. I've read articles describing how carefully planned his demos needed to be so he didn't accidentally hit a feature that wasn't complete or didn't work right. When he unveiled the first iPhone he was mostly selling a dream, not a working product.
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i don't have a home page, i have a list of pages/tab that my browser opens up when it launchs and yahoo finance is one of them
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adesigar, was wonder where exactly can you buy property for 500k and rent for 3k/mo in souther ca. i would like to know, and probably invest there
That's a nice screed, but people have been trying to explain that what you call "high" effective tax rates are caused by a very high purchase price relative to revenue, which is causing property taxes (which are a function of market values) to be a very high percentage of income.
I already know what they "have been trying to explain".
Do you really?
Firstly property taxes vary by state from like 0.5% to 2.3%.
Secondly in my neighborhood (in south California) homes are selling for 500,000 and they rent for 3000/mo. If someone choses to be dumb and buy a Million dollar property with 40k in rent per year that's the problem.
Finally please don't turn future threads into whines about taxes like you have a tendency to do.
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wouldn't the richest man ever lived be genghis khan or some emperor in china at the height of china's power? i am equating the riches with controlling/owning the highest percentage of the world's wealth.
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aig shares will tank :(
Gaspo: Court decision in legality of AIG bailout likely by end of June
"If Greenberg wins looks for shares of Fannie Mae and Freddie Mac to soar..."
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cevian,
in regards to Cat 1. I think you are making assumptions here, typically sellers sell because they want to be done with the biz. But i believe in this case that is probably not the case. I imagine it is more like 1) liquidity 2) under a large umbrella were you can concentrate on doing what you love, running the biz vs deally with all the outside crap. selling to brk gives you both 1 and 2.
as for cat 2 I'll let other answer
hy
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HHC - not pure retail housing, but a good portion of it
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Common sense has its place
Then there is the rule of law
I think, legally, it would be really hard to honor the rights of the preferred holders but not the common.
I don't agree (but I am not a lawyer :)). One way is to partially nationalize which would dilute the common to the hilt. It's impossible to dilute preferreds. To make prefs worth less than par, you have to go through formal recap in which case they come before common, but might be worth little and common might be worth nothing.
In general though, I think most arguments in this case are emotional or mind-screwing variety from people with ownership agenda (i.e. people holding securities that are possibly worthless will argue anything to prove they are right and other side is wrong). Personally, I am on the government (and Munger/Buffett) side on this: if government would not have backstopped Fannie/Freddie, they'd be BK and worthless now. So IMHO from common sense, government should have nearly 100% ownership in remaining entity. Legal case might have completely different result though - common sense is not what the law is about. ;)
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in regards to #4, what are some of your tax strategies?
Interesting post Cardboard. We have been doing this for about the same time so it is good to compare notes.
I mean this with the utmost respect but I completely disagree with most of your points!
1. My finest investments have been holding positions with predictably rising intrinsic values even when discounts have narrowed. Some of my biggest regrets have been selling companies because the discount has narrowed.
2. I have been doing this for a couple decades now and enjoy the confidence gained from lessons learnt. It saves me a lot of time and heartache.
3. I have bought many good dividend paying stocks and have enjoyed rising dividends, sometimes for many years.
4. Taxes are massive costs. Having a good strategy to manage taxes has been invaluable.
5. AGREED
That all said, if you are prefacing your list of lessons learnt with "IF one is investing in cyclical businesses then lessons learnt are 1, 2, ...5" then I agree with you. Cyclical industries are tricky. I have made money and lost a lot of money: tanker market of the '90s, the iron ore market end 90s beginning 00s, asbestos/building materials, financials 07,08,09...I've become exceptionally careful when I step into these areas, and as my capital and experience has increased over the years I venture in less and less because it's always a hell of a lot of work and very stressful and unless one is really buying in the gutter (think net-net with assets valued at trough) one's margin of safety is invariably a lot less than one thinks. I think that last point merits saying again: MOS in cyclical businesses is smaller than one thinks. Why? because of the often very reasonable probability that there is a bust and that in a bust nearly all cyclical businesses lose money. So, take a company with reserves - say iron ore. Pretend you know exactly whats in them, and what they are worth. Well, say you can buy at 50% of the value. Is that really a 50% MOS? When a decline in iron ore prices would make the mining company not economically viable? I have a pet peeve about cyclicals, on this board and generally, they should be approached (if at all) with humility, skepticism and a lot of care. No one should venture in who doesn't know history because there be dragons.
(Didn't stop me putting a couple percent into Sandridge though!! But generally I only allow myself one or two of those kinds of things in the portfolio and only in very small size)
If you focused more on businesses with various types of intellectual property then I think your "lessons learnt" would be very different.
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cardboard,
awesome posts.
#4 and #6 has bit me in the ass many times
just recently with BAC around end of Dec 14 BAC was around $18. I was thinking I need unload some of this, but then i thought its almost 2015 will delay the cap gain until 2015. Then 2015 comes around the stock started to drop, I thought/hope it should pop back up a little then I'll sell some etc. :(.
#4 and #6 working hand in hand.
hy
As I enter 2015, I do feel horrible. After a wonderful start to 2014 or being up just over 40% in June, I am now down 50% from that lofty level. My portfolio now needs to double to just get back to that important psychological level. Trust me it is hard to accept. You look at the value of your portfolio and you realize that you are now back to where you were 2 or 3 years ago. You feel like dumb shit.
The main reason for the disaster is being heavy into oil & gas name since 2013, not selling enough of them between May and July and using my cash reserve to buy more of them too early or in September and October.
Despite the dangers of investing in commodities related names, here are the lessons that I believe should be useful to all value investors:
1- Whenever your price to value ratio of your portfolio goes above 50% you have to get worried. Or a portfolio of at least doubles based on a reasonable fair value assessment.
Back in 2013 and 2014, I could not find very many sources of value. Some oil & gas names however seemed to meet the test, so I bought. Where I got wrong is to not sell all of them when the remaining upside based on my reasonably calculated fair value appeared to be only 30 to 40%. They were barely doubles when I got into them anyway, so the test would have also kept me clear of that entire area.
Food for thoughts: There are many people invested in BAC on this board currently. I exited the name at around $15 in 2013 after buying in late 2011 around $5 because I could not see more than a 30 to 40% necessary jump to fair value over the next 18 months. So I will simply say just be careful if you are holding something for little upside left. It means that your margin of safety has declined significantly.
2- Whenever you feel knowledgeable and are making great gains each week or month you have to get worried.
Every time I started to feel great in my 18+ years of investing, there was a humbling moment right around the corner. And being a value investor and having relatively long holding periods (2 to 3 years), it takes a while to shake out the facts that you assumed were right and to react adequately. So if you start feeling intelligent, please look carefully at your portfolio, weightings, cash balance and hedges.
There were signs that oil production was in a bubble. I actually visited Fort McMurray in July and could not believe the level of activity. It was impossible to predict $48 oil, but to realize that optimism was too high back then, not hard at all. There was also a small supply glut in NA from the time I bought in 2013. When the price did not spike much after the Ukraine issue and ISIS, it was a big danger sign.
3- Whenever I bought a stock with an appealing dividend, it almost always got into trouble.
This must be a disease affecting many value investors. I would have to look long and hard in my trading history to find a stock with an above average yield that did not result in, at least temporarily, significant losses. These stocks are often decent value, held artificially high by the dividend and ripe to be taken down hard on any more bad news. Dividends should never be part of your thesis.
4- Whenever delaying taxes is on your mind, you are prone to make big errors.
I was sitting on big gains in June. Selling all oil stocks to meet my point #1 met an issue in my mind or a large tax bill this year. Not being my number one reason, still slightly thinking about it affected my judgement.
How often have you lost money because you held on to a stock in November and December only to sell it in January at a lower price to avoid paying taxes that year? And all you are doing is delaying the tax bill by one year. So basically, all you are saving is the capital cost on that tax bill for 12 months. In fairness, you also have decreased installments. However, at a maximum rate of 25% of your capital gain in Canada and at the rate that things can change in the stock market, it is not worthwhile at all playing with fire IMO.
5- Whenever a thesis is brought to you by an "expert" be skeptical.
I don't care if it is Watsa, Ackman, Buffett or whomever. These guys rarely make money with the idea that you have retained and it is often the one that will make you lose money.
You really have to make an idea for yourself about an investment and remove from your head target prices, buyout possibility or whatever rosy scenario someone may have mentioned. It includes things that are said on this board and that stick in your mind. It is something very hard to do, but you have to purge from your mind anything positive or that is not a cold hard fact.
For example, Sanjeev had mentioned that TPG-Axon would try to sell Sandridge. Sanjeev is successful and right much more often that he is wrong, but that thing stuck in my mind and seemed to make a lot of sense. This was reinforced by Cooperman's $10 target. Fairfax also held a very large position and Watsa mentioned publicly that SD was worth $20. The CEO mentioned not that long ago $15. Unfortunately, TPG-Axon was likely greedy and did not do the sale. Maybe they could not either. The reasonable target now if things don't change rapidly, is much less than $5.
It was not that hard for me to realize that this investment was much worse than all my Canadian oil & gas names: higher debt, tougher reservoir with lower oil content. What kept me in was hope of a take-out.
6- Oh yes. Hope is an investor worst enemy!
Cardboard
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i'll be swapping my fnma with fmcc
hy
How did Toyota and Honda used cars maintain their high values?
in General Discussion
Posted
reliability is a factor, fleet sales which affect supply and demand is also a factor
i think the fact 80's, 90's and early 2000 american cars are not so great is pretty well known (nothing new here), the question is how is it now and in the future.
at least from recent jd power some american cars are just as reliable if not more so than japaneses cars, obviously this depends on make and model. yes jd power is not testing for long term reliability, but i think we have to look at all the facts and if facts change we need to change our thinking as well.
here is a 2017-2013 version:
http://st.motortrend.com/uploads/sites/5/2017/02/2017-jd-power-vds-chart-1.jpg
http://d1arsn5g9mfrlq.cloudfront.net/sites/default/files/2016_vds_rank_1.jpg
http://d1arsn5g9mfrlq.cloudfront.net/sites/default/files/2015%20VDS%20Slide1_0.jpg
http://d1arsn5g9mfrlq.cloudfront.net/sites/default/files/resize/remote/0400f6f33bf4cb6c2a889772d4418934-720x960.jpg
http://autoguide.com.vsassets.com/blog/wp-content/uploads/2013/02/jd-power-graph.jpeg
EDIT: I believe honda does not sell to fleet, i think that is a important factor to their resale value
EDIT 2: I find it a little amusing, people here on this board are "value" investors, if we apply the same principles and way of thinking to cars, maybe there are cars that is undervalued (more reliable than perception) or overvalued (less reliable than perception) or do people think car values are pretty much right on the money? obviously there are other factor like brand, looks etc.