LongHaul

Great point lessthaniv and this is probably the case. Great job!

GAAP income is booked on an accrual basis. Accrual essentially means income/expense is recognized when earned as opposed to the cash basis which is recognized when cash goes in or out. My guess is that the company "earned" the income but didn't collect the cash. Perhaps deferred interest or a PIK note. I have seen this on at least a couple of frauds though where interest was accrued but nothing was actually collected. Imagine a borrower who cannot repay a loan but a fraud keeps booking the interest income.

That's crazy! Would Munger every put a guy like that in any position? Trump did though. What does that say about Trump? Rick Scott became governor of Florida after running HCA and massively ripping off the US govt. These things are mind boggling. "Columbia/HCA On March 19, 1997, investigators from the FBI, the Internal Revenue Service and the Department of Health and Human Services served search warrants at Columbia/HCA facilities in El Paso and on dozens of doctors with suspected ties to the company.[31] Eight days after the initial raid, Scott signed his last SEC report as a hospital executive before resigning. He was succeeded by Thomas F. Frist Jr.[32] Four months later the board of directors pressured Scott to resign as Chairman and CEO.[33] He was paid $9.88 million in a settlement, and left owning 10 million shares of stock worth over $350 million.[34][35][36] The directors had been warned in the company's annual public reports to stockholders that incentives Columbia/HCA offered doctors could run afoul of a federal anti-kickback law passed in order to limit or eliminate instances of conflicts of interest in Medicare and Medicaid.[32] In settlements reached in 2000 and 2002, Columbia/HCA pleaded guilty to 14 felonies and agreed to a $600+ million fine in the largest fraud settlement in U.S. history. Columbia/HCA admitted systematically overcharging the government by claiming marketing costs as reimbursable, by striking illegal deals with home care agencies, and by filing false data about use of hospital space. They also admitted fraudulently billing Medicare and other health programs by inflating the seriousness of diagnoses and to giving doctors partnerships in company hospitals as a kickback for the doctors referring patients to HCA. They filed false cost reports, fraudulently billing Medicare for home health care workers, and paid kickbacks in the sale of home health agencies and to doctors to refer patients. In addition, they gave doctors "loans" never intending to be repaid, free rent, free office furniture, and free drugs from hospital pharmacies.[4][5][6][7][8] In late 2002, HCA agreed to pay the U.S. government $631 million, plus interest, and pay $17.5 million to state Medicaid agencies, in addition to $250 million paid up to that point to resolve outstanding Medicare expense claims.[37] In all, civil lawsuits cost HCA more than $2 billion to settle; at the time this was the largest fraud settlement in U.S. history.[38][39]"

Wise words KC. Sounds like a good book. Cyclicals are hard, no doubt. But the basic rule is pretty simple: Strong returns attract capital. More capital lowers returns. Lower returns cause capital to exit. And it takes a long time for capital to enter and exit. So the cycles last longer than you expect. The Air Canada chart probably looks pretty familiar to someone who owns Penn West. -- The other dynamic is low-cost versus high cost producers. WJA, LUV, RyanAir had a relatively stable decade. But the marginal guys had a wild ride. Every investor should understand cyclicals. At least so you know what to avoid. I highly recommend "Capital Returns".

unions are a great point. Not ideal. Plus there are Airplane fanatics out there who find it fun to build and run Airlines. I think it ends up hurting the ROIC of the industry long term.

Not sure who bought the airlines but I thought it was very stupid. One thing is pretty clear - airlines are some of the riskiest companies out there. The industry history is filled with bankruptcies. And you can't look at the recent 5- 10 yrs, you have to go back 40 or so. Bottom line is that ULCC are Much lower cost carriers on a CASM basis and are growing like weeds. Low cost producers win in a commodity industry. The history of almost all the high cost producer airlines is bankruptcy. We'll see... IBM was a mistake so Buffett is human and can make mistakes.

Great post Oddball! Some of this is dependent on the person. I also like to walk and get ideas. I think it gets the blood moving to help the brain think. NYC would be too many noises and distractions for me. One thing I really love to do is take an annual or some reading and go outside to read. No phone, no computer just the annual.

Great Question! Nestle

Life will knock you down, but you can get back up and learn from it. "Life will have terrible blows in it, horrible blows, unfair blows. It doesn't matter. And some people recover and others don't. And there I think the attitude of Epictetus is the best. He thought that every missed chance in life was an opportunity to behave well, every missed chance in life was an opportunity to learn something, and that your duty was not to be submerged in self-pity, but to utilize the terrible blow in constructive fashion. That is a very good idea." Source: Charlie Munger's USC Law Commencement Speech, May 2007

+1 Great post liberty.

I don't know how this will all play out. I don't think anyone does. The founding fathers of the United States constitution were well aware of the history of tyrants and how power deranges so they put in a lot of checks on balances on a possible tyrant as president. It is a strange bit of luck that the stars lined up and we had some high character, pragmatic founding fathers. The constitution may very well be tested and even come out stronger.

That's a dubious assumption from someone who just returned from Vegas & relies on Value Line. A quick read of Warren Buffets Ground Rules & then a long study of Graham & Dodd might change your opinion on some of the ideas here. H DooDiligence, Perhaps I should of phrased it as some are gambling. There are all types of investors and speculators. You can dig into what Buffett, Munger and Graham have said about gambling/speculating in the stock market.

Good questions CRHawk! I'll try to answer some of them as best I can. In the future you may want to have fewer questions at one time as you may get more responses. 1. I don't know about DAPEG but generally all these simplistic formulas are shortcuts. The long cut is doing the work and thinking it thru. Dividends are a headfake. FCF is ultimately what matters and that comes from earnings. 2. You can look for YOY growth and see if it is slowing numerically. The money is generally made or lost in figuring out the sustainability of growth and profits. That can be nearly impossible or easier for more predictable businesses. 3. Generally speaking buying companies for less than they are worth is a very sound approach. Figuring out what they are worth is the trick. As a starting place looking for cheap stocks below trend valuation on Value Line is great. I believe Peter Lynch and Henry Singleton did that. 4. I like to figure out why the mean has been the mean and value business using a long term DCF. I am thinking in absolute terms vs relative (what others might pay). There can be a ton of risk when you think something is "cheap" because someone else might pay 2x its real value. I think they call it the greater fool game and all types of smart people play it and lose as someone must lose as that is part of the greater fool game. I was in Vegas recently and it really struck me that tons of people (including on this board) are engaged in heavy gambling for thrills in the stock markets. Of course it can have the veneer of legitimacy which makes it all the more appealing.

The ripoff is my own personal opinion. There was a WSJ article about how a hospital was being ripped off by a PBM and they were seeing both sides of the transaction. There is a lot of nontransparency into PBM drug prices and rebates, etc from the customer side which give the PBM room to rip off their customers. I just remember seeing some small PBM with very transparent models and probably much cheaper pricing taking share quickly. I am no expert but that is my sense.

Brendan, I agree that more nimble players can poach market share. From my research big industry players have been ripping off clients in a major way and smaller more transparent guys have been taking it. Rite Aid bought Envision RX whom I thought was particularly well run. Any idea of any small PBMS that are gaining?

Great article on the cons of multitasking or task switching. The costs to multitasking are extreme if looked at over a period of decades. I think it is generally very harmful. I try to monotask as much as possible. http://coschedule.com/blog/multitasking-and-productivity/

I always learn something from Jim Chanos. He is the rare independent thinker who actually does his own work. http://video.vanityfair.com/watch/the-new-establishment-summit-disrupting-the-global-economy?c=series

https://www.ft.com/

Interesting read. Some good points about Trump and and patterns in history. https://medium.com/@theonlytoby/history-tells-us-what-will-happen-next-with-brexit-trump-a3fefd154714#.2m7ww4y57

AirBnb. LIttle more work but sometimes you can find a great deal.

I have not read IFRS 16 but if it causes companies to recognize assets and liabilities that are essentially there anyway I would look thru it. From a real life experience perspective a lessee is on the hook for paying the remaining lease payments - so that is a real liability in case the lessee wants out and is a potential real liability if one doesn't need the real estate anymore. Probably end up shortening lease terms for some public companies which may be a good thing. I sometimes pass on companies if their lease liability is very high relative to the value of the company, as that can be a lot of risk that hits at the worst time.

Sleuth Investor was a great book. I highly recommend.

That video was fantastic. Thx for posting. I am not a big bear type but China is a total mess. Classic real estate bubble and credit bubble that will likely have a very serious bust. Now if I only knew when....

Google news? Do you mean the one in Google finance? If so, I find that that is now cluttered with crazy garbage cutting its utility to me in half. I used Bloomberg Professional for years. Now that had great comprehensive business news. I wish the had a low cost public version. The news search in the main Google search. Google Finance for news is not good.

To find people you just have to put the time in and be creative. Linkedin, figuring out suppliers, customer, resume searches, articles written by industry people, industry forums, etc. If you put your energy into it you can figure out almost anything. John Rambo "I always believed that the mind is the best weapon"