ItsAValueTrap

I know it's an example but using the example of a lemonade stand is kind of dopey. In the real world: A- You would get financing from the bank of mom and dad, unless you had your own savings. B- You, uh, probably wouldn't pay taxes. Because it's a cash business. C- It is very difficult to have very high returns on capital due to competitors imitating what you do. The only way to enjoy high returns over a long period of time is to do something that is difficult to imitate. etc. etc. I wish I was still shorting JCP, one of Bill Ackman's stocks.

http://www.stockspinoffs.com/ value investor's club ...this site

This reminds me of ICQ and Myspace... it looked like they had really strong network effects until they didn't. I believe the New York Stock exchange is seeing its volumes shrink as regulators open up the field to competition. A retail order might get routed to any of 20+ different places (the official exchanges, companies like Knight, etc.). CME has much more of a moat since their contracts can't be traded elsewhere. If you look at quarter contracts versus full contracts, the full contracts have much more volume and many quarter contracts never reached the critical mass to be liquid.

Fannie Mae and Freddie Mac might be examples of stocks with a durable moat. The implicit government guarantee on their debt means that they have a cost advantage that nobody else can duplicate. This moat will last as long as market participants believe in that implicit guarantee. Unfortunately, management at these companies ran it into the ground. Fortunately for Buffett he got out before that happened. Moody's is another example of a stock that I would think that Buffett thought had a moat. He has said that Berkshire would still hire Moody's for bond ratings if they doubled their prices. This may be less true today now that Moody's credibility was damaged in the subprime crisis.

I think some of their moat may have to do with fraud (as in, they know how not to get killed by fraud). That's what I learned from Paypal... almost all of Paypal's competitors have been killed by fraud. Paypal figured out how to keep fraud at a minimal level while maintaining convenience for Paypal users. It has algorithms that spot patterns of likely fraud and automatically shut it down. And if you look at Amazon dropping Paypal as a payment option, that might also suggest some things about the moat that Visa and Mastercard enjoy. Personally I don't think that advertising affects people's decisions to choose Visa over Mastercard or cash or debit. There are huge amounts of marketing aiming to sign people up for credit cards (each signup is worth $15-40+... check affiliate marketing networks for better information). But I don't think that their brands are valuable.

I agree... it's so hard for human beings to fight this. Obesity has steadily been rising. Scientific studies on weight loss show that people lose weight initially but gain it all back in the long run because it's so hard for them to stick to their diets. A few people do lose weight and keep it off but they are in the minority. I think that Coke has a strong moat as it has been around for a very long time and is practically a dinosaur. Tobacco companies apparently have good moats since smokers usually don't switch brands. Buffett passed on Lorillard for ethical reasons.

I believe that Apple has put a lot of effort into attracting developers to its platform. If you see articles in the newspaper about app creators making a lot of money... it is probably because of Apple's PR efforts. Paul Graham explains the world of PR here: http://www.paulgraham.com/submarine.html (Basically... PR firms write articles and hope that newspaper journalists reprint them.) 2- There is a HUGE demand for app developers right now. If you work for somebody else, you can make a decent living as a programmer. A lot of corporations are getting onto the mobile app (and social networking) bandwagon. A lot of software firms making good money from the bandwagon making custom apps. Eventually I think that most companies will realize that apps don't generate a positive return on investment for them. There is a shortage of Mac and iOS developers because of the app craze. Nobody teaches Objective-C or iOS or Mac development in universities so there are very few developers with that skillset out there. Some developers with Mac desktop development skills are being siphoned away to make apps.

I'm not really sure that this is going on. From reading Jim Roger's books, it seems that many countries around the world use US dollars when the local currency collapses. This practice seems to continue today. They just don't use gold or silver coins. That's the reality I see so far, though I have never visited Argentina or Zimbabwe. 2- At the end of the day, macro speculation/investing is not my strong point at all. I'd rather stick to things I am less ignorant about (and am interested in and think I understand). Good luck to you. Sometimes crazy things happen with individual commodities. Beaver pelts, spices... nobody cares about these commodities anymore. Maybe not that crazy. The Hunt brothers cornering the silver market... crazy. The gold market have a massive correction before a massive bull market... crazy. North America about to become an exporter of natural gas... crazy. Several years ago Cheniere was trying to import LNG. Ken Peak of Contango Oil & Gas, a really smart guy, made money with Cheniere (LNG) and got really lucky even though he was wrong about natural gas. A smart guy like Jim Rogers thought that the production of lead wouldn't increase due to environmental concerns and NIMBY effects... he was wrong. I think that there is a lot more uncertainty in commodities than I prefer. Though my portfolio is really long commodities (via commodity stocks... even though I'd rather index futures over commodity stocks).

To me, this is not 100% set in stone. One of my largest positions is in Queenston Mining, a gold explorer, so I am long gold. But I am not sure that the long gold trade is an easy lay-up. Historically, all sorts of fiat currencies has had problems and have ended badly. Yet the adoption of fiat currencies has steadily been increasing. There aren't a lot of people using seashell, cattle, gold coins, silver coins, etc. for trade. 2- Historically, gold and silver have had 50%+ corrections. 3- I'm not sure if silver is scarce. Production has increased more than gold even though the price of gold has gone up more than silver. It's not as hard to find as gold. 4- Some macro trades are incredibly hard to make. Suppose you foresaw the collapse of investment banks, homebuilders, etc. Timing is so crucial!!! These stocks took a very long time to collapse. George Soros would crying wolf over the overleveraged financial system for decades. There is a lot of uncertainty in macro trading. This is why guys like Jim Rogers and George Soros are somewhat diversified.

1- Warren Buffett used to horde physical silver. I don't think he made much money off it. Apparently he also did swing trading on copper futures... I'm not sure about that one. 2- Personally I find that predicting commodity prices is too hard. There are a lot of variables at work that makes prediction hard. Even Soros, who is famous for his macro trades, has a hard time predicting commodity prices. Or look at Jim Rogers (who advocates futures as there is some yield on them). His book predicted that the supply of lead would be constrained due to environmental and NIMBY issues (which is true in many but not all parts of Australia)... but it turns out that lead production went up a lot because of China. I think that some diversification may be sensible. 3- Check out companies like Altius Minerals and Contango Oil & Gas. Well-managed companies with productive assets would be another way to play commodities. 4- Oddly enough, people in Argentina and Zimbabwe are hoarding physical US dollars. They are not hoarding gold or silver.

Originally I was going to copy Eisman and short these stocks, but I didn't feel like these stocks were really in my circle of competence as it involved the US government cutting back on subsidies to these companies. Having read Einhorn's book on business development loan fraud, I did not want to bet on the US gov't doing the right and obvious thing. (Another example would be the payments to the Taliban and warlords via Host Nation Trucking contracts in Afghanistan.) Suppose for a second that the US gov't did remove all the private education subsidies. There may be a few companies with decent businesses that could be worth buying if you really understood the sector??? Here in Canada the subsidy situation does not exist but there is still a private education sector (presumably it's profitable). Unfortunately there are people who enroll in private colleges hoping that it will help them land a job (usually it doesn't).

Smazz, check your personal messages on this forum. Cheers!

1- The root of all your problems is that the partners don't get along. I have no idea how to solve that (I would lean towards having a single party being the controlling interest). 2- You could setup your email so that only you can read it. The easiest way is to get a gmail.com account (or other similar email service). Change the email address on your website to that email account. If you do this, then your partners are likely to figure out that they are not trusted. So... this just goes back to the root of your problem. If you migrate all your email accounts to Google's paid email services, then you can have emails point to [email protected] instead of [email protected] (if you are worried that the latter may look unprofessional). 2b- If you want your emails to be pretty secure then: - Make sure you control your domain registration - Make sure you control your email service (it may be bundled with your web hosting) - Scan your computer for viruses and keyloggers - Don't send email to other people. This sounds stupid but some people are dumb enough to forward emails that they shouldn't. - Make sure that physical access to your computer is secure. 3- One way to check if somebody else is reading your email is to have an IT friend send you an email with a hidden/invisible image in it. Some email clients will load that image (some email clients like gmail don't automatically do it). The web server that serves the image will have logs that track all the IP addresses that have requested the image. Based on the different IP addresses that request the image, you can figure out if there is more than one person looking at the email. But it is not foolproof. There is software (or a service) out there that does this but I don't know what it is called. Um... no.

1- This sounds like a partnership where there will be much infighting. :/ 2- Anyways... to address your email problem. There are ways to lookup who owns your domain name and who is providing your web hosting and email services. Use a WHOIS lookup website. e.g. whois.net It will tell you what name is registered for the domain. You can find out which domain registration company was used. You can see what nameservers are used- you can figure out what web hosting company is being used for the domain. There are ways to figure out the MX records for a domain... this will tell you information about what email service is being used. For example, the WHOIS for this forum shows the following information: This forum is being hosted by this company: http://www.watermelonwebworks.com/ 3a- In general, you should not talk trash about other people over email even if they supposedly don't have access to the email account. Because some idiot will be dumb enough to forward said incriminating emails. 3b- In general, you probably should not talk trash about your partners.

1- A simple way of looking at a company would be the PEG ratio. 2- Another way of looking at it is guestimating future cash flows across a range of scenarios. e.g. Company has a X% chance of becoming obsolete and going to 0. Company has a X% chance of continuing its growth as one might expect. etc. Of course the problem with models is garbage in->garbage out. The underlying assumptions may be way, way off.

You can see Einhorn's presentation on St. Joe here: http://www.businessinsider.com/david-einhorn-presentation-joe-2010-10?op=1 Einhorn is short. He argues that they didn't make that much money during the boom years and that St. Joe's market cap overvalues the land by a huge margin.

Technically yes. http://michaelbach.de/ot/lum_hyperacuity/index.html In practice, people may not notice??? There are a lot of things that we can spot but usually we don't notice. For example, people tried doing 4K resolution in movie theatres instead of 2K and apparently nobody cares.

Honestly I think that Intel's biggest threats would be: -End of Moore's Law / Moore's Law slowing down to a trickle -Contract fabs like TSMC developing technology on par with Intel's manufacturing capabilities. This would make AMD extremely dangerous as AMD can design chips just as well as Intel (and they have done so in the past). -Desktops/laptops being replaced by something else (e.g. smartphones/tablets); hugely unlikely in my opinion. ARM just isn't that dangerous in the server space. They are just another RISC instruction set, and the whole RISC versus CISC difference is irrelevant now. x86 chips from AMD and Intel are taking market share from the RISC-based CPUs in servers.

There is something called bitcoin mining where hardware is replacing software. There are many areas where the software is developed first. And then for performance reasons, people start looking at specialized hardware. Anything where GPGPUs are used would be an example. I think that the x86 instruction set is a very weak moat and it matters less nowadays than it used to be. If you look at Intel versus AMD, the moat doesn't exist since both companies can make x86 chips. Intel's real moat in my opinion is its lead in manufacturing technology. In process size it is usually around a year ahead (this varies). In process technology it is 3-4 years ahead (this varies)... it may only be 2 years ahead in finFET. Intel and Microsoft are probably the two companies out there with the best moats in the tech sector. If tech companies can have moats. Mainframe computer companies have sticky customers... it costs their customers a lot to leave them. I wouldn't call that a moat. 2- The best examples of moats to me would be: -Moody's. Their reputation is not something that can easily be duplicated. -Newspapers in single-newspaper cities. Or, the largest newspaper in a city about to become a single-newspaper city. Of course, we know how this story played out... Warren had trouble with the latter due to union disputes and now newspapers are getting hurt by the Internet. But I think he did make out well financially on it. -Fannie/Freddie. The implicit gov't guarantee on their debt gives them a low-cost financing advantage that nobody else can duplicate. To me, those companies have an "unfair" competitive advantage that is very hard or impossible to duplicate. It's just very difficult to compete against them... it's not a level playing field. Many moats do not last forever, e.g. newspapers versus the Internet. There are some fields where you cannot have a moat. Yet because management is so good, they build a $1B company based on their skill. Contango Oil&Gas is like this. A lot of Warren Buffett businesses don't really have a strong moat but have good managers. To me Wells Fargo seems to be a bet on management (along with M&T). I'm guessing a Warren Buffett with less money would do that. Originally he wasn't into buying quality businesses until See's Candies. The textiles business of Berkshire Hathaway was a little bit of a mistake... he was pissed that management lied to him about the tender offer.

This won't happen due to the shale gas revolution. Cheniere (LNG) is now looking to export natural gas instead of importing it.

Commercialization of space travel has been around before that if you look at the Wikipedia page on space tourism.

Hmm what about looking at it the other way around. (As Munger says... "Invert, always invert") #1- China is a developing country. And as far as developing countries go, it may be one of the best and go on to become the world's next superpower (um... maybe half a century from now?). Their level of corruption might actually be going down. They are moving from a terrible Communist system to a capitalist system. (e.g. Communist countries tend to bad for human rights, terrible for the environment, inefficient economies, low standards of living, etc.) They are arguably more capitalist than the US in many ways (e.g. low taxes, don't have excessive regulations, etc.). #2- From what I understand of railroading a- All poorly-managed/underfunded railroads usually end up having lethal accidents. It happens in the US too... the Washington Metro is one example. Here in Canada, the TTC and GO systems have had accidents before. Though the TTC is probably one of the best managed systems out there and hasn't had a fatal subway accident in a long time. b- Having safe, fool-proof signalling and switching systems is a very tough problem. c- With faster rail, costs go up dramatically. So China's high-speed rail may be an example of excess spending as their highest-speed rail is way ahead of the US (Maglev at 431km/h vs US/Acela average speed of 135km/h). The US does overspend too... just not on ultra-high-speed rail. Las Vegas has a bankrupt monorail, New York has an excessive amount of subway (which should probably have instead gone to maintenance), Portland's streetcar is having economic problems, etc. d- There are tradeoffs between cost and safety. The US has little high-speed rail due to onerous safety regulations that push up cost. I guess in China the safety regulations are more lax than in the US... they may be pushing towards faster rail as symbols of nationalism and pride. (This might mirror China's behaviour during the Olympics, where they shut down polluting industries for the duration of the Olympics. This is uneconomic behaviour.)

I think JG explained it in some of the interviews he did to publicize his books. 1- His first book on special situations investing was too much work for most people. 2- His second book was on magic formula... it was STILL too much work for people because you had to trade 30 stocks/year. 3- So... he figured it would make sense to start a mutual fund to make it easier for people. 4- His firm started doing more research into quantitative investing, which Ben Graham would likely have been a fan of. I'm guessing that JG has figured out some minor improvements to magic formula investing and has also figured out how to apply it internationally. So as far as institutional investors go, he figured that magic formula on steroids would be appealing since it delivers almost as good returns as his special situations investing *but at much lower volatility*.

I guess I have a very very small short position in PRXI... basically I think that the auction failed to meet the reserve price and that the artifacts won't fetch a lot of money. --- The section in the 10-Q about the non-binding letter of intent seems incredibly vague. Is the buying party serious or are they just window shopping? Either is possible considering that the letter of intent is non-binding. The $189M price tag seems high. Premier probably would have sold the artifacts for that price in a heartbeat in the Guernseys auction. (Davino's contract and his transaction bonus suggests that the original plan was to sell the artifacts quickly... Premier was willing to pay him a big bonus if a sale went through.) My guess is that a buyer can buy the artifacts for far less than $190M/189M (the court appraisal value for the artifacts was $190M... 189 is just one short of that). --- The latest 10-K has a section that states that the old CEO will get a bonus if the artifacts are sold. The last two 10-Qs do not contain any mention of Davino's transaction bonus, unlike the last 10-Q. This may or may not suggest that his bonus is unlikely. The anticipated sale price may be very low, no sale is anticipated, or the anticipated sale date may be later than April 30, 2013. The 10-K: Davino's employment contract: http://www.sec.gov/Archives/edgar/data/796764/000095012311101204/c25374exv10w1.htm If an agreement to consummate the sale is within 12 months of his date of termination (April 30 2012 I believe), then he is entitled to a bonus. *Disclaimer: Obviously I am incredibly biased here!

Basically... if JPM was doing prop trading then they would have a reason to try to manipulate silver. If they are simply doing commercial hedging then it's possible for them to need to have a huge short position in the silver futures market (which is offset by a long position in their deals with their clients). With commercial hedging I don't think that they really have a motive to manipulate the market. If they bought silver options from their clients then they would have a motive to increase volatility. 2- If you were actually doing prop/speculative trading and were shorting silver, you would NOT want others to know what your true position is. So you'd rather not talk about it. Being involved in commercial hedging helps and others will have a hard time figuring out your true net position. And if you weren't doing prop trading, you might not talk about it either. 3- It may be unusual to see prop trading done on long timeframes (e.g. longer than a month). It would be too hard to manage risk / know that you are actually making money. Some prop traders never hold overnight positions. In a year they would have 365 different bets and it would likely be statistically significant. 4- You could look at publicly-traded silver companies and see how much hedging they are doing???