cpan

Ottawa, Ontario. Is anyone interested in a meetup in Ottawa?

This thread had a nice start so let me jump back to the original topic. Here are my mistakes: Amex - Brought it because: 1. Valueact bought it. 2. Thought the third payment network should be valued higher than a regional bank but not realizing the market was richly priced over all. 3. Didn't appreciate how hard the banks were competing in this space. Maybe this is still not a mistake but definitely could have bought it cheaper. Italy/Spain index - I think I just heard Mab Faber talk about applying low P/E across different countries. Thought these countries should start to recover after 3/4 years. Yet, not realizing I know nothing about these countries. To ignorant to know about catalonia or NOL on Italian banks. This one was well deserved spanking. POSCO - Thought I understood that it was a commodity producer but couldn't get Charlie Munger's words out of my head about POSCO is so advanced that its not a commodity producer. Bought it early and it went up. Thought I was smart but I was just lucky. Then see it go down. I hear Charlie Munger changing his mind about the brutal reality of competition. Chulk it up as learning experience.

I am definitely not an informed opinion but the thesis feels quiet logical to me. There are a couple of other youtube videos with Bruce Greenwald going over the same idea if you search for his name. I think Bruce is pointing out that the minsky cycle is but one of the cycles in economics. There is also another cycle when the supply is increasing faster than the increase in demand. The productivity increase in farming or manufacturing driven by competition causes 2 problems. One is more and more excess labor becoming not productive enough to join the system of production. Two is that prices drop because the demand is fixed or is growing less than the supply productivity growth. This eventually results in a economy contraction that can not recover on its own. There is no way to get out of this unless the excess labor can be deployed elsewhere in the economy that can produce value. Or we have some way to grow demand for the existing system of production but not through debt financing which is unsustainable. I like how his thesis ties competition into the macro economic cycle. His example for Japan shows that the issue is not Japan suddenly produced less goods or goods with less utility in the 90s but its because the prices dropped or the goods produce by Japan couldn't compete because of China. The link between FED monetary policy and bank not having to pay interest on deposit is also interesting. I just wish he had mentioned that it was not because the law got repealed that bank started to pay interest. My reading seem to indicate that the money market (shadow banking of its day) pretty much was going to drive banks out of business if the law didn't get repealed.

I am a software engineer for over 15 years and just started learning about value investing 5 years. I think the piece that value investing really fits with engineer is the need to understand what going. As an engineer, I think you have an innate need to figure out how things work. Same thing with value investing in term of trying to figure out if there is value in a security and why the value is there. The big difference is that in engineering you can pretty much figure everything out if you put your head to it but in investing there is the too hard bucket, so you have to get use to the nondeterministic nature of the problem.

Just finished: The Origin of wealth - Eric D. Beinhocker Good summary of the issues with classical economics with some fascinating example of complexity in economics. The Billionaire's Apprentice - Anita Raghavan Some good insights on how some of the hedge fund gains a edge as well as how ambition can help and hurt us.

In my opinion your whole answer just proves how difficult it is to invest in technology and, I would add, in fashion too. You write: Sure! But the problem remains the same, if even the CEO or the board cannot predict the outcome accurately enough! And that is just the nature of the beast with technology and fashion. You also write: Those are good questions… in hindsight! What was BBRY to do instead? The only thing I can think of is to become a BRK: to buy new and completely different businesses, using the free cash generated by operations that were going to die… Come on! Let’s face it: BBRY is (or was…) in the business of selling mobile phones, either you succeed or you don’t. If you want to run the risk, you do whatever it takes to come up with the best product you can. Vice versa, if you don’t want to run the risk, you use all the cash you generate, until you can generate some, to change business. Could have Mr. Watsa taken the decisions required to follow the second course? I don’t think so. And despite the existence of a wonderful device like the i-phone, it seems that Samsung is doing pretty well, isn’t it? Therefore, to compete with Apple might not be easy, but neither it is utterly impossible. Or so it seems. giofranchi One thing BBY could have done was become an to other phones by offering a keyboard attachments that also have hardware encryption to provide secure messaging access to enterprise BB servers. This would have solidified their enterprise hold.

Another thing she said in the article is that Buffett won't get impacted if the company goes bankrupt, I am not sure that makes sense. I would think that the preferred and common equity would get wiped out in that case. Of course, Buffett could pay off the bond holders but thats additional capital which would hurt the return. Does anyone else know what Alice is talking about?

In my simple mind, I am counting on Fairfax to hedge me against apocalypse (since I am not a goldbugs so I only plan against apocalypse lite). But just out of curiosity for the experts in the forum, is there a better way (i.e. cheaper way) to hedge this. As far as I can tell, fairfax looks to be a pretty cheap hedge (given you still have one of the best investor working for you on the long side). So the way I think of it as a couple of percent goes to the hedge as a form of cheap insurance. Is there another way I should be thinking about this?

Thank you for the pointers to the interesting docs. I would say that risk appetite for low-grade bond and stock is related. From Howard Marks memo I gather that he is seeing that low-grade bonds are getting bid up to a level where its getting him worried. I don't have any data to shows how this translates into stocks but currently we do see S&P hitting 5 year highs, but with macro stuff its hard to know anything that is actionable. Certainly, there are always value stock around that you can find so it doesn't affect specific company analysis. However, I just think maybe its time to check how much dry powder is available if something pops up. What is your point of view? Do you see a lot of stock with good value? I don't really see much but maybe we got spoiled by the last few years. I'm not aware of any correlation. I'm curious by nature, so I Googled a bit and found this study: http://www.cbsnews.com/8301-505123_162-57464128/the-correlation-of-bond-and-stock-returns/ "bond-like" stocks sounds like another word for "high quality or "flight to quality". Anway, the word correlation makes me think of this: http://xkcd.com/552/ The "flight to quality" gave us some good opportunities in 2012. If the trend continues and there's causality between "good deals" and "flight to quality" then 2013 should be a good year. Isn't "flight to quality" the opposite of what a contrarian investor would do? If so, then I'm quite sure there's some causality there. But what do I know, I'm no statistician, just a guy trying to find undervalued stocks. Macro investing is certainly not my game. Here's a link to the study behind the CBS News article: http://www.people.hbs.edu/mbaker/cv/papers/Comovement_RAPS.pdf

My view is that this is a good time to double check the valuation on your holdings and pear down a little on the high-end ones. Even if stock is not high, we have seen that stock and bond can be very correlated so if stock will be effected if the bond market ever tumble. I guess this is where the fun is.

For some reason TE connectivity looks really interesting to me. It looks like its the leader in a fragmented industry with maybe 2 other big competitors (molex, Amphenol). The valuation looks pretty cheap with strong free cash flow. The CEO sounded very humble in the conference call when explaining their effort in expanding to mobile. I am still trying to understand the industry segment better. Does anyone have any pointers to what to read to get a better handle on the industry?

I don't think Bruce was talking about decline of manufacturing. Instead, I think he was saying that productivity gain in manufacturing has outran demand and as a result there is unemployment. Manufacturing is doing what farming did where instead of 1 person farming 1 family plot, you have a few person farming hundreds of acres. The equivalent would be 1 person installing a windshield of a car vs. a few person would assemble the whole line of cars. It will be interesting if Bruce's theory is correct. If it is correct, then we are in a world of hurt since I am not sure service economy can scale as well as manufacturing.