LongHaul

Here is a field trip recommendation for the kids . Go visit a Sears before they are all gone.

This sounds harsh - but for some people they will never get it. I have a son who intuitively gets value investing, not sure about my daughter yet, 9 and 7. Here is what we do as my son is very interested in business: My son has a snack business. He buys chips, etc from Sam's club and sells them for a $1. This is massive and it is concrete example he and I can refer to it constantly for him to better understand business concepts. I had this with my Dad and his apartment building. This puts way ahead of their peers. (This would help tons of investors understand business if they ran their own businesses BTW). I like the Lego business a lot that 1 poster started! There is so much to learn it is beyond massive but I try to tell my kids stories about business, frauds, failures, irrationality, history, mistakes etc. Sometimes when visiting stores we will talk about the business models or other aspects. Talking about product quality or lack thereof. There are different philosophies about raising kids but mine is to talk business at the dinner table, etc. I think shielding kids from it and real life is a big mistake. The best learning is always through experience. That is how our brains work. So sometimes I will bet with my kids. My son was about 3 or so, and he said he slept with his eyes open. So I bet him $20 that he slept with them closed. I go in at night when he is sleeping, take a picture of his obviously closed eyes and show it to him and collect $20. The shitstorm I got from him and others was massive, but he doesn't bet anymore unless he knows he has good odds. He even beat me out of $5 when I didn't believe that Bluejays bury acorns and eat them. Damn - the teacher becomes the student!

But I think they would pay substantially less to a floor plan lender like Nextgear. https://www.nextgearcapital.com/news/top-5-floor-planning-mistakes-by-dealers/

I saw the same thing. Pg 52 of the 2017 10-K I have to correct something I wrote earlier regarding 10 year writeoffs. As far as recording provisions in the 10-K (pg 52) they do say: "If such difference is unfavorable, a provision for credit losses is recorded immediately as a current period expense." I must admit I was really confused by how they account for the loans with the NAV, discounting at yields at the time of assignment, accretion, etc. I didn't understand it. Maybe I am dumb or maybe one just cannot fully understand it and one just has to trust mgmt. The other interesting thing is in 2017 Finance charges divided by average gross loans receivable was ~22%. So to me these dealers were willing to borrow money for 22% from CACC. That is a steep interest rate. You can quibble with the 22% rate as CACC has some collections expense and write offs but it still seems like the dealers are borrowing at a very high rate. Doesn't make any sense to me why they would do that.

Morningstar - I didn't understand your comment on why writing off the loan was not important. Can you please elaborate. 2 data points for people to consider on CACC. I will lay out the dots. 1. ~35% ROE since 2009 in a brutally competitive business. 2. Apparently only fully write off loans after 10 years. (do say that if forecasted difference is unfavorable a provision for credit losses is established).

Very interesting LC. Feel free to write more about this. How to psychopaths come into play?

Nice Catch - Nell. So let me understand this - they write off loans generally after 10 YEARS. This is totally nuts. So basically if writeoffs only occur after 10 years (perhaps 5 years after the borrow defaults then who knows what the earnings are. Wow. Who knows how long this one can go on. writeup on the writeoffs https://www.hvst.com/attachments/13770/Credit-Acceptance-Corporation_Thesis_11-Feb-18.pdf

Other than CACC dealing with a possibly dubious warranty company that got bought out, what is the smoking gun or fraud? I didn't see or detect it from reading the 1st 2 reports.

I am interested in how this plays out. It smells (and I have heard) auto lenders are going into deep subprime territory and pushing out the Buy Here Pay Here operators. So if the easy lending reverses then a huge chunk of consumers can't buy cars. Rough guess ~90% of Carmax buyers finance (includes Non KMX finance guess). So if financing suddenly becomes tight for subprime and near subprime that eliminates a big chunk of demand and buyers. Then used vehicle prices fall and lenders lose more. Typical credit cycle. See used vehicle price chart https://publish.manheim.com/en/services/consulting/used-vehicle-value-index.html Could mean that prices tank and stay lower than normal. I think this cycle has happened a bunch of times as the new subprime autolenders learn about credit risk and get wiped out. Not an easy industry dealing with a lot of yoyos who you are loaning cars to. Thoughts on how this plays out?

Hi, I am interested on the types of forensic work both of you have done. I have a deep interest in frauds and how to spot them both in public markets and in everyday life.

Worth a watch to learn. https://vimeo.com/129662453

A guy in a basement will create a new one a couple days later. If you think about it, mining for gold isn’t very productive either, that’s one reason why the gold standard isn’t really feasible. It makes no sense to couple wealth with the amount of gold that can be mined, or just as much sense than mining for a artificial limited number of crypto keys. It’s quite easy to create a new crypto currency, much easier than finding and building a new gold mine though. Very true about creating newer coins (and possibly better ones) Funny kitty comment Jurgis!

Although I think there is a good chance most if not all of these coins are wipeouts, I would advise against any type of position that would be unlimited downside for you personally. From Shorting Bitcoin: Upside: Fixed amount Downside: Unlimited Amount or possibly your entire networth

So if I buy up all the cryptocurrency in the world for say $500b then what do get out of them? Nothing.

Brainstorm on Long Run Net Effect of Lower Corporate Tax rates This is a really complicated topic and I don't think anyone will always have all the answers so I thought we could put our brains together. Key question: How much will the bottom lines be effected by the lower corporate tax rates? Here are my thoughts - for many commodity businesses almost all will be passed on to consumers - banking, insurance, oil and gas, etc. This may take some time. Shipping has very low tax rates but low ROE's also. For higher quality businesses how much will they end up keeping. That's a tough one. I don't have a great answer. For businesses with a mix of intl and domestic - often much of the pretax earnings is already overseas but the US portion will still benefit. I would be curious if anyone has any insights from low tax countries, history, etc.

That happened to me once. They left a note saying they needed some ethanol.

With all due respect, if one has not read the book then one cannot judge. There are patterns of human behaviour that are powerful models. Sociopaths, narcissists, etc. Trump is an outlier and worth studying, politics aside.

Has anyone read this? Curious what people thought for a deeper understanding of humans?

Awesome post Dynamic! 100 billion galaxies is incredible. If there are then 100 billion planets in each galaxy it is just an awesome number of potential life planets. Not easy for me to get my mind around. Seems like a super high probability event that there is life out there.

I wanted to press you on this since you started this topic... First of all, this is a fact (not a consensus!): Indexing will generate market-average returns. Given this fact and that overall market valuation is high (which implies that the expected market-average returns would be low), what should an investor do? I see two conclusions: 1) Since the overall market valuation is high, you should pick stocks that are undervalued instead of indexing. 2) Since the overall market valuation is high and because stock picking is hard, you should invest in other assets (or just sit on cash). Are you advocating any of these two, or something else? I would personally prefer cash to the market at this price. Safer and you have the option of buying some really cheap, safe companies at some point. Human memories are such that the fear and super cheap prices have become a fading memory. People can get scared very quickly. It is not an easy choice at this point. But why should passive investing be easy. PS I think Berkshire will outperform the S&P 500 by a nice margin in the next 7 yrs or so.

Interest rates are the monkey in the room. I really am unsure of how they affect market valuations. This sounds stupid at first and super low interest rates likely push up earnings and P/E's but how much I am not sure. There is crowd psychology and then the interest rate effect and I can't untangle them. Interest rates may be going up now though. Let me repeat that - interest may be going up now. And that is off of a ~100+ low for the 10 year. I think we have all become numb to low interest rates that are probably the lowest in centuries. Quite amazing actually. I am in the camp that crowd psychology is the overriding driver. In the early 50's (and early 09) interest rates were low and P/E's were low. Pessimism was the driver. Japan has had low interest rates for a long time and a wild stock market. Bears are always early unless they time the top perfectly which is impossible. Many bubbles I been in and heard about have had bears accurately call the bubble very early. That is because they see the symptoms, stupidity and risk but the bubble just goes on and on. I would not take any kind of consensus on this topic. Just like many other things in life you need to do your own research, thinking and analysis and come to you best conclusion and go with it. Especially on this topic though because if the mass majority anywhere are in agreement it is probably better to take the contrary bet.

Interesting observation. Why do you think he would be difficult to deal with?

I have the opposite opinion of the current masses on Indexing (right now). More than any other time in history that I can think of, almost everyone seems on one side of the boat in recommending and liking indexing. In practice if you buy the S&P 500 it is like you are buying one massive US Company. And if that Company is way overvalued your returns will stink until value catches up with the price. And currently the S&P is a ripoff - especially with low GDP growth. At something like 26x P/E you might have 7-9 years of 1% return per year while the downside could be 30-50% in the near term. Previous market bubbles saw individual and institutional investors excited over individual stocks. Today indexes are all the rage. I guess the koolaid tastes too great - until one's liver stops working. I generally agree with indexing but at fair or undervalued levels. Not today.

This is a really great idea Alex and I wish you the best with it. If you can figure out how to save customers time and give them relevant news in a clear way I think it will do really well. There is a lot of room for a comprehensive finance site that doesn't overload users with annoying, slow loading advertising. Take a little less money and you can own the world. Yahoo has gone to the toilet and has gotten worse over the years. Google finance is mediocre and has not improved. Morningstar has done a decent job with a lot of the fundamental data. I don't like their new site though. I use finviz for news. 2 suggestions: 1. Make the background white. David Ogilvy did some advertising studies and found that black letters on a white background was much clearer to his readers. I have consistently found this too. 2. Be careful about putting junk sources of news in there. Too many sources is a waste of users time. Perhaps a way to turn on/off certain sources would be good.