LongHaul

Probably the biggest protection is being vigilant where you have your money. If the broker is highly levered with risky assets or losing money I would pull my money out. It is rare (although possible) to have a sudden failure. More typical is a somewhat slow progression of bad results and then failure. I like to check IB's results quarterly. Also, I like the culture at IB - risk averse and they seem straight with customers. I would not put my money in a sleezy broker - higher risk of fraud. That is a qualitative judgment though. The insurance that I have looked at can be expensive.

Wasting emotional energy on unproductive states. We all only have a finite amount of time on this earth. Getting mad or upset or stewing over someone that wronged us is a waste of our time left. As I have gotten older I have gotten much better at this - it is not worth it to give someone else your mind. With regards to investing - not studying history enough and not studying the qualitative factors including risks of business enough. Understanding key drivers can be complex and I have had to grind it out for better understanding. Not reading annual reports enough. Not being patient. Over the history of financial markets - it has always been the case that if you waited, low risk bargains would surface. The other aspect of life is from Munger regarding the difficulty in transfering certain wisdom from one human brain to another. Some stuff you just have to experience yourself and cannot fully understand from reading a book.

I am researching some of the big Integrated Oil Companies (XOM, CVX) and have never invested in oil and gas. What are the biggest long term business risks for these companies? Thank You.

I think Sprint's cell network is inferior to Verizon and ATT. Maybe 99% of the time with ATT was great reception - with Republic/Sprint more like 97-98% so it is not that big of a deal for me. Coverage is very local though so depends on you area.

Republic Wireless: Super Cheap Cell Phone/Data Service This is a private company and not super well known, but I think members could save a boatload of money. Plus the business model is interesting. I have zero affiliation with the company. I just switched to Republic Wireless ~2 months ago and so far love it. Cost for my unlimited talk and text plus wifi only data is $12.30 per month including all taxes and fees. 3G plans are $25 plus taxes. I had to buy a Moto G phone for ~$150. I can cancel anytime. Main downside is limited phones and they use the Sprint network. I am saving ~$500 per year by going with them for 3 phones. I find it fascinating how they charge so much less. From what I gather here is their business model. 1. No stores, 2. Minimal customer service, it is mostly self service thru the web. 3. Minimal advertising. 4. Simplicity. 5. Wifi calling/data when available. 6. They rent Sprint's network. 7. Basically they are a low cost operator and pass the savings on. This probably sounds like an ad but I can't recommend it enough. Worst case you try it you get 30 days to send your phone back. I ordered the phone, tried it with an random phone number then switched my main # a few weeks later. https://republicwireless.com/info/plans/

I think the best ones are by Howard Schilit, Abraham Briloff, Quality of Earnings by Thornton L. O'glove and similar forensic accounting books. If you learn them well you can spot aggressive accounting by mgmt trying to inflate earnings.

But this does, and should, apply to the IPCC as well. The only tools scientists have are the data and their models. The debate is about which interpretation is correct. Ridley, along the Freeman Dyson, Tol, and others, perform an important service in publicizing a rational alternative interpretation that is drowned out by the mainstream media. Listening to the hectoring tone of scientists like Al Gore, attempting to bully policymakers and the public into specific policy prescriptions by claiming the consensus is settled science, is almost enough for me to take the opposite side. All in all, though, I'm inclined to believe the IPCC scientific consensus on the trajectory and effects of temperature change, with the caveat that science does not settle or advance by consensus. However, even if the IPCC consensus is correct, I think Bjorn Lomberg's policy prescriptions are more practical and sensible, that it is better to spend trillions on severe problems that are more immediate with solutions more certain (like poverty, hunger, and disease in Africa), than on something as uncertain as long-term climate change. I completely agree with your well written reply cobafdek. I have tremendous respect for Dyson, Ridley and others who have the courage to tell the benefits of Global warming. I think the reality is that in an extremely complex system with change it is very hard to predict and noone fully knows what will happen. If the last 300 million years are any guide life will adapt. Perhaps it has gotten better, but it seems like it is heretical to say global warming is good for xyz logical reasons. And Europe sounds seems more certain that CO2 is a pollutant. One funny aside - I sometimes order paper annuals from companies in Europe and they send these real thick annuals with 50 page sections of corporate sustainability which I find ironic.

Why climate change is good for the world. by Matt Ridley http://www.spectator.co.uk/features/9057151/carry-on-warming/ I agree with Ridley that there are benefits of climate change that the mainstream media and consensus ignores. Environmentalism can be like a religion with its own ideology.

Great info. APH does talk about their harsh environment leadership in the annual which corroborates your point. What is odd though is that the Gross Margins for APH were 31.4% in 2013, TEL had 30.5% and Molex 29.4%. I would have thought the GM's for APH would be substantially higher then TEL and MOLEX if they were able to achieve premium prices. I am not fully sure why that is.

I was looking at the electronic connector industry - TE Connectivity and Amphenol are the main public companies that I know of. They seem to be small, engineered parts. Are they generally commodities to the buyers? Any idea why Amphenol does ~19% EBIT margins while TEL does far lower? Thanks

I believe Munger said that corporate acquisitions on average would be lousy. Very often I am stunned when CEO's pay 25x earnings rather than buy back stock at 15x. It is irrational. They don't care about increasing per share value. Tyco was a highly acquisitive company paying top dollar for deals. The list of rollups that failed is very long. On the other hand distributor acquisitions often work quite well. Not as people dependent and benefits to scale. Other aspects are more intangible. Deal CEO's do not focus on organic growth. Typically the more deals the worse the relative organic growth. Also imagine a company that is built through acquisition vs built organically. Which is probably safer and why all else equal?

DRI seems like its margins can be improved. Any idea why they are low? Thanks.

Which companies are badly run where management has low margins? Often times these have long run potential. The one that comes to mind is Tootsie Roll. Really old, overpaid management where the business probably should be doing far higher margins. All responses appreciated.

Perhaps this is one of those things you need to experience for yourself. Hopefully you don't go bankrupt in the process. Shorting Equities sounds great in theory right and is very tempting sometimes - just bet against companies that are overvalued, going bust, etc. I have a bunch of experience shorting companies and I basically gave it up. My sum total profits from shorting was positive. Prior to ~2003 there were frauds that you could short and less hedge funds. It was still hard making money. Now there are many more hedge funds and the borrow is tighter plus less acct game frauds. The game has gotten much tougher basically. Julian Robertson recently said the same in an interview. Go look at what happened with VW in 2008 to get an interesting lesson. You will be wrong a certain percentage of time and it can really kill you. Lots of time and emotional energy too. Basically shorting is a losers game. Long term markets go up so if you are a really, really smart short seller and lose -3% a year you still lose. Plus you have taken on unlimited risk. Basically I think it is irrational to short equities. The highly educated, big fund managers are basically stupid for shorting. The have different reasons for shorting but unless you are making money over the long run, it is a waste of time.

Google and Bing Cable and DSL broadband provider Duracell and Energizer (mostly) I would not put ATT and Verizon in that bucket as TMobile and Sprint are a real threat.

Thanks for the info Writser. I may check that out. I am always struck by how human nature has not changed over history and in financial markets emotions rule. 6 years ago everyone was scared to death of another great depression now it seems like it is all forgotten and optimism rules. They say the stock market has no memory.

[amazonsearch]Confusion De Confusiones[/amazonsearch] CONFUSION DE CONFUSIONES - Book from 1688 Describes the Netherlands stock market in the 1600’s Here are some memorable quotes and notes. A good read for anyone interested in stock market history. Striking similarities with the stock market today and this was in the 1600's! Author: Joseph de la Vega ”He who knows how to endure blows without being terrified by the misfortune resembles the lion who answers the thunder with a roar, and is unlike the hind (deer?) who, stunned by the thunder, tries to flee” “experience has shown that usually the bulls are victorious and the bears lose out.” “As there are so many people who cannot wait to follow the prevailing trend of opinion, I am not surprised that a small group becomes many. Most people think only of doing what the others do and of following their examples. .. “ "Such a panic we call to be in tortures.” In the 1600’s there were calls, puts, shorting, and buying on margin. I think the main company traded was the East India company. Complex manipulation in market. http://www.amazon.com/Confusion-Confusiones-Portions-Descriptive-Amsterdam/dp/1614274517

The Centurion card is pretty nuts. Fees for Centurion Card "It does not offer a signup bonus, but requires a one-time initiation fee of $5,000 and a $2,500 annual fee – the highest fees of any credit card on the market." Read more: http://thepointsguy.com/2014/05/is-the-amex-centurion-card-worth-the-2500-annual-fee/#ixzz3DgGtEYeT Follow us: @thepointsguy on Twitter | thepointsguy on Facebook http://thepointsguy.com/2014/05/is-the-amex-centurion-card-worth-the-2500-annual-fee/

This site claims average spending is $15,000 per AMEX card. Also has some other interesting data. http://www.trefis.com/stock/axp/articles/176460/analyzing-american-express-spend-centric-model-and-future-growth-potential/2013-03-29 Helpful comments everyone! Great data Liberty.

I totally agree with Liberty on this. The U.S. rate might be the highest in the world and at the end of the day it is a cost of doing business for companies. Relative to the rest of the world the U.S. is uncompetitive. Funny how the US prides itself on capitalistic traditions but taxes the hell out of corporations - much more than the socialist countries. If the tax rate is reduced it is likely that almost all will just be passed on to the consumer anyway. To be clear, that's not what I was saying. I didn't mean that it's literally impossible to find a country anywhere that has a lower tax rate than you do. Just to be competitive with most of the countries that are comparable. Territorial rather than worldwide taxes, fewer loopholes/exemptions (more of a flat tax rate, in other words), and a rate that is closer to Canada, the UK, the Netherlands, etc, would be a good start. I bet that if you do that, any money you lose from the companies that are currently paying the full rate would be more than offset from all those who won't redomicile elsewhere, from trillions in cash that would come back to the US and be invested there (which are now kept away to avoid double-taxation), and from corps paying very low rates being brought up to the new statutory rate. Right now the system has incentives for companies to create jobs and invest elsewhere, domicile elsewhere, and lobby for exemptions/loopholes. Not exactly a fair or effective system. This has nothing to do with paying for infrastructure or whatever. A better system could probably gross money tax revenue and boost overall economic health.

I read that Amex has over 3x the spending per card member as Visa/Mastercard. In addition Amex has higher fees to merchants. I don't understand how Amex attracts the highest charge card spenders. Anyone have any insight into why Amex attracts such high spenders? Any help appreciated.

Here are my notes on Google Fiber with my rough ROIC calculations. • Cost for Google Fiber to pass a home might be $700 plus $300 incremental sign up costs (CPE, etc). Total ~$1000 • Verizon’s was ~$1,400 for Fios per home passed all in. • Google Fiber Might make ~$500 EBITDA per home per year on the $70 per month package and get 50% market share. $100 depreciation. $240 after tax Net Income per sub for $2000 capital (initial capital – only half the homes). • Depreciation might be $100 per year. • 12% ROIC after depreciation. • Fiber optic lines appear to last for 30+ years while tax depreciation is 15 yrs. I think Verizon Fios got far less market share as their price point was much higher. No questions it is a local scale business but if you're prices and profits are too high competition can come in and bring down the ROIC. Especially when you have built up a lot of badwill with customers. Another interesting twist - apparently both cable and DSL are supposed to launch Gigabit services of their own in the coming years as they roll out new tech. The virtual cable is really the big threat at this point with pretty high profit contribution margins for the cable guys. I think a lot of the cable and satalite guys will get run over by this just as the newspaper owners were in denial about the new tech. Cable was a great business. It is much more threatened going forward.

I have DSL at my house and it works great for Netflix at a slower bandwidth speed option. Google has said they expect to make a profit on their Google Fiber venture. From the numbers I saw I would guess 10-12% ROIC. Verizon Fios apparently did not earn a decent ROIC. I think the main difference was significantly lower customer premise equipment at Google fiber and lower Fiber cost per home passed. The other major difference is that Google's pricing was low so they may have taken ~50% market share in Kansas city. The will limit the long term pricing power of cable and DSL internet. Great article on the subject. http://www.cnet.com/news/google-fiber-on-track-to-become-major-broadband-competitor/ Verizon Coming out with a Virtual Cable service for wireless http://variety.com/2014/digital/news/verizon-to-join-virtual-mso-fray-in-mid-2015-with-wireless-tv-service-1201303707/ At the end of the day the cable co's and Satellite providers lose a big chunk of their profitability to a virtual cable service so too risky for me.

I am not sure about the net neutrality argument. NFLX actually started paying Cable companies and perhaps others for better distribution this year. You can actually completely bypass the broadband of the cable companies with DSL, so the cable providers power is checked on the broadband side. In addition Google Fiber, Verizon Fios and perhaps others may be larger competitors to broadband in the future. An interesting sidenote: Google Fiber actually looks profitable because they have gained such huge scale in the markets they entered.

I view TV content distribution as a commodity so the lowest cost distributor should win over the long run. One key metric to consider is content cost as a percent of revenue for 2013. Cable NETFLIX US STREAMING Content 45% 67% What this means is that Netflix US Streaming is delivering far more content per dollar of sales than Cable because it is a more efficient model. However, Netflix at ~$8 per month is at a far lower price point than Cable. Netflix’s total costs and profit is ~$2.70 per month per user for delivering its content. Below I look at the economics of a Virtual Cable Co – which I think would be similar to a Netflix streaming for a Cable channel content offering. The estimated cost of a Virtual Cable company to provide a similar cable bundle. Existing Cable Co Virtual Cable Difference Revenue per sub per month $70 $36 -49% Content Cost 32 32 Other Costs and profit 38 4 That means that a Virtual Cable company could offer consumers a price point of about half off the existing cable company. Essentially, I think the existing distribution of TV content over cable/Satellite is massively disadvantaged vs a Virtual Cable offering. There are other issues that I didn’t discuss like scale advantages in content – these are real but I think even a smaller player could provide a much cheaper Virtual cable price point than the largest player. Content availability. I think this is partly an issue. Some agreements may prohibit some content from being delivered to a Virtual Cable company. But the Satellite providers had this issue and ultimately overcame it. I have also read that content players are ready to do over the top (virtual cable). Recent article about Dish’s plans to offer a virtual cable plan for ~$30 per month per news reports. http://money.cnn.com/2014/08/06/media/dish-network/ Unbundling could also happen but I just looked at providing the current bundled cable channels using virtual cable.