JBird

I check it as well. Since I've been frequenting the site it seemed user traffic jumps on bigger days for brk or ffh; so it seems an odd day for a two-fold increase.

If you wanted to answer this question Munger-style I think you would turn it back onto yourself. Would you employ an investment manager who planned on using a clone philosophy because he lacked confidence in his own ideas? The idea of course is: don't sell something you wouldn't buy yourself.

How is this thread not brimming with advice?

Can you explain this? The wording makes it seem like your saying if Berkshire's Salomon stake went to zero it would've been life or death.

I know you're kidding but I'd be happy to wager that it isn't a tech company :D

Elon Musk, "Boil things down to first principles. Use reason from there; as opposed to reasoning by analogy." Paraphrasing: "I looked at the cost of the raw material to build the rocket. It was certainly less than 5% of the finished product; maybe less than 2%. So I was able to see there’s a great deal of room for improvement, even if the rocket is expendable. If on the other hand I had analyzed it by analogy; I’d have said, “Well what are all the other rocket company’s rockets cost? What historically have rockets cost?" And that would be an analogy but it doesn’t illustrate what the true potential is. So a first principles approach is a good way to understand what new things are possible." A nice insight, and probably not hard to see the application to the investment process.

+1 The latest wow moment: http://www.spacex.com/news/2013/08/14/grasshopper-100m-lateral-divert-test

Any glaring reasons for selling 40% of LUK stake, a position that was just opened last quarter?

Eric is the best

Elon makes SolarCity sound fairly compelling in this TED talk: Are any board members SolarCity costumers? I'm curious about the customer experience.

What broker is allowing you to use proceeds from short positions to initiate long positions?

I don't know if you are right or wrong about this statement. But is there evidence to back this up? Quotes?

When I read about EBITDA I can't help but think of Charlie Munger calling it bullshit earnings, yet so many people seem to use it. Most of Geoff Gannon's articles cite EBITDA. But I like his thought process in researching the actual company. If I understood the article, this guy uses an industry comp as a basis for EBITDA and cash flow. Different strokes for different folks I guess. It's times like this that I see why people use Buffett's owner earnings number. That Munger quote is one of my favorites. Here's one from Buffett, ""We’ll (Berkshire Hathaway) never buy a company when the managers talk about EBITDA. There are more frauds talking about EBITDA. That term has never appeared in the annual reports of companies like Wal-Mart, General Electric, or Microsoft. The fraudsters are trying to con you or they’re trying to con themselves. Interest and taxes are real expenses. Depreciation is the worst kind of expense: You buy an asset first and then pay a deduction, and you don’t get the tax benefit until you start making money. We have found that many of the crooks look like crooks. They are usually people that tell you things that are too good to be true. They have a smell about them." Augustabound, your username got me thinking. For the golf-minded reader, EBITDA is akin to what may be called SYB-WELR; Shot Yardage Before Wind, Elevation, Lie, and Rough. A player may happily boast his distance before WELR on the range, but ignoring WELR on the actual golf course makes him look like a total horse's ass.

You can be totally correct about a short thesis and be forced to endure a lot of agony before you make any money out of it.

Fidelity is able to do broker assisted trades on the Korean market. For the trade I inquired about, there was an $82 commission plus the Korean broker takes 10 bps on the buy side, and ~20bps on the sell side.

Great post beerbaron

It's a great question to ask. The discount rate is your required return rate. Since you always have the option of investing at the risk-free rate, you're required return rate must at least match the risk-free rate. Above that rate, it's your call. If the risk-free rate is extremely low, you may find it appropriate to use a much higher rate.

The '86 letter will answer your question about owner earnings. The '00 letter will tell you that future owner earnings discounted to the present value is the definition of intrinsic value.

On valuation: http://www.berkshirehathaway.com/letters/2000.html On owner earnings: http://www.berkshirehathaway.com/letters/1986.html

Anyone familiar with the formula that insurance regulators use to calculate statutory capital requirements? (NAIC calls it Risk Based Capital) http://www.naic.org/cipr_topics/topic_risk_based_capital.htm On the 5th paragraph down they attach an additional document that mentions a formula that applies covariance. I can't find anything else. Thanks

Phoenix, but currently in Bay area

Thanks, I appreciate you finding that!

"They were a remarkably homogenous group of men, mostly headed to General Motors, IBM or U.S. Steel after they got their degrees. U.S. Steel was a good business… it was a big business, but they weren’t thinking about what kind of train they were getting on." Snowball, by Alice Schroeder

Buffett has said over and over that the attractiveness of an investment is based on its after-tax return as measured by mathematical expectation (1966 Partnership Letter, 1988 Berkshire Letter), or said another way, by its probability-weighted range of values (2011 Berkshire Letter). If the risk of an investment is based on the reasoned probability of a loss in purchasing power over the holding period, measuring the amount of risk taken in a single investment is straightforward. Measuring the amount of risk taken in the entire portfolio is also simple. Take the probability of loss for each individual holding and multiply those probabilities together. To use the coin tossing example where the value of Heads is -1 and Tails 1, the probability of loss in one trial is 50%. Two trials is 25%. Ten trials is 0.09%. An expected value (EV) calculation forces the investor to assign probability weightings to his range of estimates of intrinsic value. Over time the investor can use actual outcomes to judge his effectiveness at weighing probabilities. In my view, the benefit of a EV estimate is clear; it's a tool the investor uses to not only help him looking forward, but to judge himself looking backward. We're all terrible with precision when it comes to the future so we'll never get a probability-weighted range of values totally correct. I think it that in certain cases these EV numbers will prove useful though. A brief example to illustrate: An investor allocates 100% of his portfolio in 15 stocks (with same value outcomes as the coin flip example). He estimates the probability of loss on any 1 of the 15 stocks is 50%. Now say the portfolio does lose purchasing power- the probability of him being correct about the odds and simply being a victim of bad luck is 1 in 33,333. (50% ^ 15) Feedback appreciated

Hahaha