LongHaul

Quick 2 minute video of Carl Icahn on CNBC. Note the CNBC didn't seem to think his point was important. http://video.cnbc.com/gallery/?video=3000391298&play=1 He mentions briefly how there is GAAP and then mgmt often says ignore GAAP here is what I think are real earnings. I completely agree with Icahn and I think many, many mgmt teams basically promote fraudulent earnings. It is fraud in plain sight. I read a lot of annuals and the ones where mgmt uses unadjusted GAAP earnings analysis are the exception. These charges are often ANNUAL Non recurring charges. Every business on the planet is trying to become more efficient and effective so when a business spends money on restructuring that is normal operations. It is money out of the pockets of shareholders. It has really become a disgusting practice in my view so that is why I bring it up here. Also - if you are basing your Value on these mgmt earnings you may want to recheck your numbers. Note: There are exceptions. Non-economic amortization from M&A is a great one. Depreciation of real estate that is above maintenance capex, but they are rare. FASB is comprised of a highly intelligent group of accountants who have to come up with accrual based accounting for tons of scenarios and if you have ever read any of their proposals/rules you would be very careful to challenge them. They are independent and have deep accounting knowledge (unlike mgmt) so don't write off the GAAP rules quickly.

I thought this was a great read of Essential Virtues especially because we are all human and tend to get caught up in our daily life. https://www2.cortland.edu/dotAsset/299043.pdf

Isaac Newton was clearly a smart man. He invested in the South Sea Company. Got out at a profit. Then apparently, saw his friends getting richer, invested again at a much higher price, and then lost his shirt. And this was in 1719/1720 during the South Sea Bubble. How do people get sucked into these bubbles even when they know it is craziness? Stories welcome. Isaac Newton investing in South Sea Company http://www.telegraph.co.uk/finance/personalfinance/investing/10848995/How-not-to-invest-like-Sir-Isaac-Newton.html

A+ presentation. I thoroughly enjoyed it. Thanks for posting Liberty. The long peace and lack of conflict is why I think the US should cut its spending on OFFENSE and just focus on defense and nuclear to save a ton of money.

Throughout history humans have been impatient in the stock market. Everyone wants to make money fast. And this was prior to smartphones. Smartphones may make them less patient with recessions and market downturns and less able to think long term. This will be to the advantage of those who can act long term and have the discipline of patience. That's my current hypothesis anyway. Perhaps it will be marginal though. It is the electronic herd.

How is new technology (ie smartphones,etc) changing us with regards to patience and the stock market? This is a 2 minute video of students at MIT. Some have to multitask or they fall asleep in class. http://www.pbs.org/wgbh/pages/frontline/digitalnation/living-faster/split-focus/multitasking-at-mit.html How do you think smartphones and new technology is changing humans (if at all) and how do you think that might affect the stock market?

I don't have cable. Netflix is the main service I use. I think it will be a slow shift to internet TV or OTT.

Romance: The Other Man - Contemporary Romance (Chasing Love Series Book 1 - by Nancy Adams Totally kidding about the romance novel. Here are a few recommendations: Conspiracy of Fools by Kurt Eichewald (Munger's recommendation and I could not put it down) Boomerang by Michael Lewis The First Tycoon, Cornelius Vanderbuilt by TJ Stiles

Name one product/service that you love and one that you hate for Peter Lynch style field research. Everyone on this board is a consumer and often what one loves is often taking market share. Love: Google HP Chromebook (quick, simple, cheap) Hate: United Continental (for gauging on prices)

Free clothes! Make that free anything! I honestly can't find anything that is truly cheap on an absolute basis. The ideas tossed to me tend to be reaches and often high risk which I will pass on. Patience, although difficult, will pay. When China busts, a lot will unravel. It is the linchpin.

Jamie Dimon - Looks like he was paid $27.7 million in 2014. JPM Net Income for 2014 to common ~$20 billion. So it is about 14bps and it is pretax. $27.7m is a lot of money in an absolute sense but it is a pittance for the value he provides overall. If I owned JPM privately I would probably pay him that much if I thought he was truly earning it. It is actually pretty amazing that Buffett and Munger have taken such low salaries for so long. They are a true rarity. I think this speaks volumes about their character. They can take a lot more but they don't. As I recall in the 1800's, Commodore Vanderbilt also took nothing, as he didn't want to make money off his shareholders.

Ben Graham wrote in 1949 that “stockholders are lazy, indifferent, accustomed to obey the management, and suspicious of outside suggestions.” My personal experience of watching CEO's engage in legal theft and then trying to convince large shareholders that they should vote against approving new stock options of the CEO's extravagant pay, completely agrees with Graham's point. I have found the vast majority of institutional shareholders to be lazy, corrupt and cowardly. It is completely pathetic. In my opinion it is 100% shareholders fault for allowing crazy CEO compensation as they almost always vote for it and the board. If I own shares in a company and think they CEO is overpaid (depends on the situation) I generally vote against the entire board and vote against the company's executive compensation. I also vote against all excessive stock/option issuance. “Be the change that you wish to see in the world.” ― Mahatma Gandhi

Let's look out a few years. Canadian real estate tanks 30% in real terms, unemployment way up, construction and consumer down, CAD down, etc. Headlines are terribly pessimistic, the world is doing to end, Everyone is scared, bla, bla, bla. Typical bust but it will recover. What are some high quality businesses to own in Canada that are likely to get cheap? I can only think of the 2 railroads that are cyclical but seem great.

Good stuff Wisdom. I agree. During the 1920's Bernard Baruch reminded himself that 2+2 still equals 4 when many got sucked into the stock bubble at the time. I think these times are relatively easy to identify. The hard part is having the independence, courage, patience and confidence to not get sucked up into buying the bubble even though you may feel alone.

Expensive stuff Eric! Will that stuff kill you? Snake Venom is organic but deadly. Some of these organic pesticides may be just as bad as traditional ones. The older I get I have realized things are often more nuanced and complex than just "good and bad". Organic vs non-organic is a great example of this.

Great article on organic foods. One point they make that shocked me was that organic farmers also use pesticides. http://blogs.scientificamerican.com/science-sushi/2011/07/18/mythbusting-101-organic-farming-conventional-agriculture/

All of this was true 10-15 years ago except the industry is more consolidated now. AZO, ORLY and AAP being the biggest players. There are really 2 sides - commercial (DIFM) and DIY. If I am an independent auto repair shop working on someone's car I ultimately pay the price from the commercial seller so I care a great deal about getting the best price especially because I am buying tens of thousands of dollars a year and my business is tough already. On the retail side AZO is a huge player. Keep in mind a lot of people fixing their cars are price sensitive. They don't make much money. Not sure how much is convenience vs price. Same was true 10 yrs ago yet margins are much higher. The margins on low moving inventory is insane. Well over 50% Gross Margin. Amazon and the internet offer huge discounts to those willing to wait a little and this channel is growing quickly. A lot of stuff is half off depending on the part. See this site for parts comparison shopping: http://frugalmechanic.com/ With the A/P being pushed out by AZO, ORLY. It is effectively a price decrease to their suppliers that does not show up in AZO's GM's. So I would argue that their true GM over the last 10 -15 yrs has actually gone up if one adjusted for this. I think it is really some type of tacit collusion where they are consolidated and pushing up prices to what they can get away with. I think eventually supply will come on to bring returns on capital down but not sure of the catalyst besides the internet.

Why do AutoZone and O'Reilly have such high margins for a retailer? If someone said in 2009 that AutoZone would have ~19% EBIT margins, I would have doubted it as I would have though they would come down to a more normalized level. O'Reilly also has ~17.6% now as ORLY GM have increased almost 8% since 2005. Seems like it is a consolidated industry where AZO and ORLY have increased prices substantially and kept them high without consequences so far. Any insight appreciated. Thanks in advance.

Any on the ground insight into what is currently going on with China Real Estate? I have read the general reports how real estate is down a little in China but wondering if buyers/owners are doubling down or getting nervous and if the situation is really worse than reported in the press.

So what? Is this just investing gossip and ego envy? I am not personal friends with Tilson but I like the guy. I think he one of the better people on wall street as I heard stories of him personally helping people in a variety of ways. He is the opposite of the arrogant hedge fund manager. See the 60 min story of him with Lumber Liquidators. That was a great service to society. I would rather hear Tilson's views than most others.

Couple of issues. 1. Has anyone read Boomerang's chapter on Greece? It portrays the Greeks as lazy, corrupt socialists milking foreign investors. Is this accurate? As an aside I once asked a Venezuelan about why people there elect Chavez, etc. And she said the majority agrees with him. Pretty nuts. 2. Been looking at some Greek companies and noticed that Minority Interest Income tends to suck out a high proportion of Net Income. 10% of Total Shareholders Equity might be MI on the balance sheeet but MI might take a much bigger percentage. Kleeman and Intralot have this. Is this normal because I can't help but wonder if someone is just looting shareholders?

The health area is filled with utter nonsense and baloney and it is hard to cut thru the BS. The "Ben Graham" of healthy eating is Walter Willett who is the chair of the department of nutrition at Harvard School of Public Health. He has nothing to sell anyone and is independent of mind and is fact and data oriented as to what works, etc. His book - which really changed my life is: Eat, Drink, and be Healthy: The Harvard Medical School Guide To Healthy Eating 2005 http://www.amazon.com/Eat-Drink-Be-Healthy-Harvard/dp/0743266420 I cannot recommend it enough. If you want to live longer, lose weight and be healthier it is really a must read. The other key point that has come out since the book, is how bad sugar is. Here is the key video on this. Also highly recommended. Sugar the Bitter truth: Sugar is horrible for you. It is like poison in your body. It is associated with diabetes, heart disease, being overweight and other diseases. If you think about it fruits have sugar in them but they are embedded in fiber, which slows down the digestion and ends up being fine for you in that form. But just raw sugar goes without the benefit of fiber end up being horrible for you.

Fascinating data Liberty and Cardboard. Thanks for sharing. What a bust this will be, especially for oil rig owners. I was reading something interesting on that the other day:

Who owns all these 30 year mortgages at low rates? I was reading Liar's Poker and Michael Lewis was discussing banks selling mortgages at well less than par (65 - 80 cents) because mortgage rates had gone up the early 1980's. One can easily imagine a scenario where mortgage rates go up to 7.5% or much higher and the market price of mortgages declines drastically. Seems like a very risky and dangerous bet to be holding these long term mortgages. Historical Mortgage rate chart http://research.stlouisfed.org/fred2/graph/?g=NUh

http://www.dmagazine.com/publications/d-magazine/1982/october/jim-ling