LongHaul

It is a great question Jurgis. About 8 years ago there were 2 particular big funds that I did not understand. 1. SAC - we now know more about this one. 2. Medallion - I still don' t understand this. The returns should just be competed away with competition. Maybe it is luck and leverage at this point.

It will be interesting when Berkshire gets to ~1.2x book if he buys it back aggressively as he says. I think it would be the most rational to buy back Berkshire at say .8x Intrinsic Value rather than do a deal for 1x Intrinsic Value. I would also add that misallocation of capital is a risk. IBM I think was a big mistake. PCP may also turn out to be one.

What do you think are the biggest items of disconfirming information on the value of Berkshire Hathaway? How can someone be wrong investing in Berkshire?

I switched to TaxAct a few years ago and have generally been very pleased vs Turbotax and would highly recommend it. I think you can try it for free. It can handle some complexity for me. Turbotax seemed like they were price gouging. Jurgis had a great point about the stock data downloading which is not important to me.

Might be from the 17.5m rate of vehicle sales from ~2000-2007. As those cars age each year they add to the average age. Then there was a steep drop off in 09 and 10 which is more recent. It depends on the mix of volume and age by year. That is my guess anyhow.

I'm not sure if they will, but they should. Government policy allowed banks to lend absurd amounts to anyone, because borrowers can't default on it. So the banks lent. And schools raised their prices in turn. Allowing more of a free market would have created a totally different landscape than what we have now. Everyone wanting to study 19th century poetry could still do it, just without 150K of debt. The government failed. I might have agreed with you until a few weeks ago... The "youngsters" (very late 20's & early 30's) I work with are almost ALL on IBR (income based repayment) plans for their student loans. They pay between $0 & $200 a month on their loans. This isn't even covering interest payments. Another eye opening thing was that I was playing poker in Greektown Casino with a rough crew of characters. Surprisingly, the subject of student loans came up & started grousing about them. Several players openly laughed at me for paying them back. They said that student loans are "paper" bills. They are ACTIVELY gaming the system, and paying back nothing or nominal amounts. Several people at the table said this! One even had a son at the next table...his son was doing the same thing. Like father, like son! There were six people who had similar stories. One guy was paying his in full. These guys LOUDLY & EXPLICITLY expressed their contempt for their educations and the chances that the government will get paid back. I was shocked at how many people in that group of people had student loans...and their attitudes. I suspect this is fairly common... Thus, the government is going to take a huge bath. You've got a (large?) group of people with open contempt & a large group of people (co-workers) who want to pay back the loans, but simply don't have the capability and likely never will. If one fails to pay back their govt student loan on purpose and the govt eats the loss then it is like stealing from your fellow citizens. I despise that kind of behavior. When one is 17 or 18 and picking whether to go to college one generally knows little about the world and themselves. It is a great time to con a person into going to and an expensive school by promising good stuff at the end. One may get out with a useless degree and find he has essentially been conned. The school has the money and you have a piece of paper that may have value or may not. The for profit schools seemed pretty bad. I suppose in the end you did get an education of sorts that is not in the books. I am skeptical of college for many people (stem is probably fine). Much of the soft sciences can be learned on your own by reading, etc. I like practical philosophy but that would be a costly learning experience in college. I think it is a total shame that the trades are not looked up to more as in Germany. The skill level required and experience can be enormous for working on all types of things that require your hands. Think of airplanes or big pump mechanics. I sometimes wonder what my experiences in life would have been if I pursued an alternative track of skipping college. Perhaps I would be wiser today. Schooling is just one part of an education. Also - here is some food for thought. Take someone who went to a top Ivy League School at 22 vs someone who never went. If the Ivy guy stopped reading and learning while the no college guy kept reading a lot and learning over 20+ yrs who probably knows more a decade in and who would your most likely rather hire assuming similar intelligence?

I think more people are in your boat than you realize. I'm going to stick with my deflationary thesis - every year we've inched closer and closer to deflation despite the supposed recovery, trillions in stimulus, etc. and yet people still seem to think it's a possibility that is very var removed from reality. I think it's much more likely than most seem to and that the last five years have only served as confirmation of the thesis. To be more localized, I'd suggest that NYC real estate is due for a nasty correction. I understand it could become the next London, but prices have outpaced wages by a significant amount for a significant time. My friends look at me like I'm crazy when I say it - they can't imagine a better investment than buying their own apartment in NYC because the prices "have never gone down" or that "everyone wants to live here." It just seems like prices seem generally unsustainable for the local population but the local population justifies it with the flawed reasoning that doesn't necessarily support the current prices. Seems like the tinder is there - just waiting for a spark. Totally agree with you on NYC real estate. Cap rates are way too low. Similar bubble dynamics at work. The great interest rate reset (when interest rates rise) should be interesting.

In the business realm, what do you think is true, which most everyone believes the opposite? My answer is that the majority seem to believe that China's housing situation is sustainable. I think it is a massive bubble that will pop, with severe emerging market knock on effects. In China ~20% of apartments vacant Very high price to net rents Impossible to time but the longer the boom the bigger the bust will be.

Even if you bike for 6 months out of the year. It is still a good partial option. It lowers your overall car cost and miles put on the car. I still have a car but drive ~4k miles per year.

A few recommendations. The Honda Fit is a nice car - worth exploring it anyhow as the hatchback can fit a lot. I would also recommend BIKING. Here are the benefits. 1. Out in the fresh air. 2. Exercise - get the blood flowing so you can find the next 10 bagger! 3. Super cheap. 4. Consider the incremental time to work. 10 min by car 20 min by bike is only 10 incremental minutes. 5. It is fun. Cons 1. None at all - just kidding. 2. Night biking is dangerous. If you do it, wear a ton of reflective gear and lights because it may be 10x as dangerous as during the day. 3. It is extra time. 4. Cold, raining, etc. This will toughen up any remnants of an inner wuss you have.

I have read the book. It is very interesting from a historical perspective but it can be very dull at times. Worth reading some parts and skimming others.

You can buy HY bonds on the IB platform and can bid where you like. Very low commissions. Much fairer than old system of human brokers.

It you think about how Buffett and Munger have set up Berkshire it is extremely important for them to have individuals they can trust running their businesses and even as an investment managers. They are careful who they select and have policies to repel those who don't fit the Berkshire culture. Someone unethical is generally someone who will rationalize all types of things away. They are delusional and have trouble seeing reality and because of this often make idiotic decisions. Witness Trump basically almost getting wiped out in the early 90's because of a series of horrible decisions.

I know I am not an expert in the energy industry. I find it complex. The technology of energy can really change things. Fracking is making nat gas super cheap - probably for the long term and will help keep a lid on oil. I think productivity, new technology in fracking and excess supply of labor and equipment will bring costs down even more. I have no idea of the bottom. I also find a lot of the "investors' and CEO's to be optimistic gamblers. There is a lot of risk in the space so make sure you understand what you have invested in. Also - generally the bigger the boom, the bigger the bust.

I personally believe that character is one of the most important traits a leader can have. No lying, no cheating, no stealing. The odd thing is that Trump and Fiorina are running for president. I think Trump cannot be trusted and Fiorina was at Lucent when it was cooking the books. Rick Scott is governor of Florida and he was CEO during the massive fraud at HCA. There are other CEO's of public companies that are sleazy and liars and yet shareholder tolerate them and their legal theft. I typically vote against them in the proxy if I own shares in a company where I think the CEO is overreaching. Why do humans tolerate leaders who don't have character?

I buy LaCroix sparkling water and like it. Fizz does seem like a ripoff though at a P/E of ~40x

Has anyone come across any businesses where you can't understand how they make so much money? I am curious because some of them may be cooking the books. Here are a few historical examples: 1. Worldcom - reporting good profits while comps profitability declined drastically. 2. Gowex - comps losing money while Gowex nicely profitable. 3. Chinese reverse takeover companies with high margins that later turned out to be frauds.

I just finished this. Great book about the history of AIG, Hank Greenberg, and the mistakes that created the downfall. It was a fascinating read. One story jumps out. Martin Sullivan, the CEO after Hank, had a 2 hr meeting with a top level executive about AIG Financial Products (FP) when he took over as CEO. His notebook didn't have any notes on it after the meeting. And FP was complex. edit: clarified FP

I absolutely agree. Knowing of it takes many years. I first read this 4-5 years ago and I re-read it the other day and it takes on a whole new meaning, because my experiences have changed since I last read it. But I think the framework still holds true. I'm a Star Trek guy but I like Star Wars also and I have to think that there's some value from trying to learn from those that have come before me. I have to think that I can learn from yoda on the caveat that I must move forward to situations even yoda has never had to deal with before. Sorry all....I'm not very fun at parties. I agree with these. Easy to spit something back for a test but to really understand it and change your behavior is more difficult. If you really know something you do it.

These are great posts. I have 2 smart friends who are straight shooters who have worked at large companies for many years. They both independently told me the same thing at two different points. The mgmt consultants come in, interview a lot of employees, package what they learn and regurgitate all dressed up to mgmt. They use a lot of BS terms and they both now say as soon as they hear consultant - they think bullshit. But they are really smooth talkers - that is essentially their job. I have to wonder if these consultants spewing all this BS eventually start to believe it themselves. It sure seems like it. I have also noticed that many capable CEO's don't use them or minimize them - Buffett and Munger and others. I have become more wary of CEO's from consulting backgrounds because some seem so full of BS it makes me want to throw up. I think it is good to be skeptical of them. The other thing that may be going on at Mckinsey is a culture of extreme arrogance. Culture is a very powerful "force" that can and will subtley affect us all.

I went to an over rated university that had Mckinsey come out and recruit from. At the school I went to there were plenty of snobs and arrogant behavior. One thing I remember clearly was going to a Mckinsey recruiting event and being amazed and the level of arrogance that they exhibited towards people. Morgan Stanley and Goldman also came but I distinctly came away thinking - wow these Mckinsey guys are really arrogant. Of course they also had the Mckinsey name which is/was the creme of the consulting world. What is also interesting is that Jeff Skilling, Rajat Gupta and now Pearson are also Mckinsey alum. I can't help but wonder if this is more than a coincidence and am now wondering if Mckinsey culture is partly to blame. Any thoughts or stories appreciated.

I enjoyed this article on Koch Industries http://www.popularmechanics.com/technology/infrastructure/a17558/koch-industries-inside-story/ Koch seems like a long term oriented business that is engineering and improvement focused. The CEO seems very thoughtful. Let's not discuss politics on this thread, just the business. Any thoughts how Koch has been so successful over the last 40-50yrs?

Great Kurt Eichenwald Video https://www.youtube.com/watch?v=HGpBhvhoA08 Great article by Howard Schilit on Frauds. I think he is a master at detecting these frauds. http://www.cfapubs.org/doi/pdf/10.2469/cp.v27.n4.1

Very interesting stuff Beerbaron and Hswoon. I am a super bear on China. I call it the Great Delusion because the Chinese real estate bubble is just so insane. I think it blows big time. And I am not a permabear at all. I can't think of one time in financial history where these things ended well. People have just gone nuts in China and many other places as well. The problem is most short bets with limited risk are expensive. Puts tend to very pricey and you have to nail the timing.

Interesting on the FXI. Are the banks there as vulnerable as the US? The last time I looked there wasn't all that much exposure to apartment loans and I have heard that China has big down payments which protects the banks if real estate falls.