constructive

Why do you like Zynga? It seems like they're a one hit wonder and don't have a competitive advantage or a clear strategy. R&D costs are enormous, and seem very ineffective so far.

I'm not an expert but Google tells me it's probably MEI Pharma (MEIP).

Does this statement mean P knows that Q doesn't know based on what Q has just said, or independently? If he knows because Q said it 2 seconds ago that is kind of a useless comment.

Here is my armchair analysis of some famous investors. INTJ: Buffett, Einhorn ISTJ: Munger, Klarman ISTP: Graham, Marks INTP: Soros ENTJ: Loeb, Icahn ENFJ: Ackman ENTP: Tepper

I'm ISTJ but right on the edge of INTJ. I wonder if there is any correlation between INTJ/growth and ISTJ/value. To me "intuitive" implies more growth orientation. Of course since this forum is generally value oriented it may not provide a broad enough data set.

Well... a margin loan is callable. So if your investments decline significantly and you can't meet the margin call then you'll be force to sell your securities. This loan is too. But there's a duration on when it's callable. So it's more predictable, and the interest rate is tied to Libor. I think my brokerage is asking like 8-10% interest on a margin account. I'm not expert on this. That's what I got from the short 10 minute speech. I wouldn't compare it to the margin rate at a typical retail broker. Using margin at any retail brokerage except for Interactive Brokers is clearly a terrible idea. For low balances, IB margin is about 1.62% while Schwab PAL is about 3.67% (varying based on the benchmark and the amount). Margin is cheaper because they have easier access to your collateral to protect the value of their loan.

I think fundooprofessor is missing the point. He shows evidence of companies that Buffett bought because they had great management despite not being in a great industry. But he has also bought many other companies in great industries that could survive lower quality management. Compare US Air, USG, McLane (bad industry, so the investment depended on good management) to AXP, ABC/Capital Cities/DIS, Gillette/PG (good industry, could have survived bad management). The returns on the latter group have probably been higher.

I am more comfortable on the investment side than the operating business / large acquisition side. Ted and Todd have exhibited very good decision making so far, and that is reflected in their performance being stronger than Buffett's since they joined. One of their advantages is that they don't have the $200B CEO mentality. So far they are targeting much smaller midcap companies than Buffett. I think in his 80s he has constrained himself to ultra large companies a little more than necessary. Not knowing who will be the CEO, what their investment background is, and what the decision making split will be on large wholly owned acquisitions in terms of the CEO vs the CIOs, that is where I see more risk.

Sure. But assuming your investment analysis is accurate, the optimal investments at an 11% discount rate are the same as the optimal investments at an 8% discount rate. You have more options to choose from at an 8% discount rate, but they are suboptimal.

I find this statement pretty funny. I don't think anyone is enough of a genius at stock selection that choosing a discount rate is at all difficult compared to that. Pick a random number between 8 and 15%. It is not going to have that big an effect on your returns, as long as you are willing to put in a lot of work to find investments that exceed your hurdle rate.

Actually, if you read the story of Mike Burry, you make hugely outsized returns for your investors and they still fire you. IIRC, most of his clients complained hugely when they got locked out during 2007-09 crash and left immediately when he removed the lock even though the results were extraordinary. In their defense, they hired him thinking he was going to run a long-short value fund and he style drifted into global macro credit. Just because CDS and sidecars were in the fund prospectus doesn't mean partners actually expected them to be used.

And talking about Berkshire, or any specific large cap equity, if an advisor suggested someone invest 100% in it, it is questionable that would meet either the suitability standard or the fiduciary standard, but if they invested 10% there would be no problem with either standard.

Well it's currently vague because the laws and regulations are not written yet, but I disagree that the end result will be vague and unenforceable. 401K sponsors already have to adhere to a fiduciary standard. Most fee-based advisors voluntarily adhere to a fiduciary standard. The fiduciary standard actually gives them a lot clearer legal line, specifically on conflicts of interest, than non-fiduciary advisors have.

About 500 in an Excel spreadsheet. They are organized by industry, and within that ranked by value. I would like to find a better web based tool. Looking forward to other people's comments.

If the budget estimate is accurate, by my math the government will make about 17% annualized on the senior preferred. (Although, maybe $0 on the 80% of common warrants they own.) That is higher than I had assumed. It may or may not be a valid legal argument, but you can make a financial argument against the 2012 Amendment for increasing the senior preferred return from 10% to ~17% without a valid reason. At the same time, the estimate is probably less than what a lot of bulls would hope for (since they assume 15% reduction in assets per year).

No, the liquidation preference does not decline as a result of the net worth sweep dividend. You can confirm that by reading FNMA and FMCC financial statements, or by reading FHFA's reports.

This is just cherrypicking. There are a lot more than 6 stocks in the social media / cloud / SaaS space, the average decline last year was minimal, and the average valuation continues to be extremely high.

IPO valuations may or may not have fallen 60%. Public market valuations definitely did not fall 60% and are at the highest levels ever, second only to the tech bubble. Most likely the VC just saw a patch of weaker quality IPOs that didn't deserve ultrahigh valuations.

If Watsa's thesis depends on hard-left Greek politicians being extremely adept at financial negotiations like Marchionne, I am afraid that seems hopeless.

Why do you say that? You like his confidence, or you think what he's saying makes sense? Because I don't think it does. Greece is refusing to negotiate with the troika. http://www.reuters.com/article/2015/01/31/us-greece-politics-idUSKBN0L31TB20150131 There is not much time. If they don't find a lender by this summer, they will default.

I think it would be silly not to. Would you calculate bond returns without including the yield?

Historically emerging economies have had lower ROE than developed economies. That is why there has been a slight negative correlation between GDP growth and stock market returns. Also you suggest that they have a tax advantage but tax rate is included in ROE.

Yep, and looking at countries over time, those per share effects overwhelm GDP, and make GDP growth uncorrelated with stock market returns.

Inker's paper clearly explains why these comments are wrong.

Ben Inker's paper covers the (non)relationship between GDP and market returns very clearly. http://www.thereformedbroker.com/wp-content/uploads/2012/08/Explaining_Equity_Returns_GMO.pdf I would also recommend Philosophical Economics.