vinod1

Come on. A prominent investor has a few positive things to say about your point of view and suddenly you find him admirable and attribute to him qualities that successful people have. Ross Sorkin, a left leaning ideologue. Ann Coulter & Sean Hannity are fair and balanced :) I voted for Hillary holding my nose, just because I find Trump behavior unacceptable. If you are the kind of person who looks at an 8 year old girl and think in 10 years I am going to be dating her, you would be perfectly fine with Trump. If you have assaulted women in the past, you would be saying "What is the big deal". Many find that offensive and that by itself rule him out as POTUS. If you find all his past behavior closer to how you yourself have behaved, you would just be fine with him. No, not all of his supporters are like that of course. A decent proportion of his supporters are like that. Now you can find equally offensive people on the democratic side. But when your leader is exactly like that, these are the kind of people you are going to attract. So that is why you see many people (remember less people voted for him than Hillary) who find him and many of his supporters so offensive. As Liberty put it so eloquently "Human Garbage". Now, I see a lot of positives also with Trump. 1. He put an end to two dynasties (Bush and Clinton). So he gave democracy a push and a blow to crony capitalism. This by itself is a big achievement. 2. He is talking about the issues that are directly impacting the low income workers but which are completely being ignored by both the parties - not being smart about what Chinese are doing trade wise (not just about currency) and acknowledging that immigration is a big problem. These are not going to magically solve all the problems with wage stagnation among low income workers but it is a step in the right direction. 3. He is likely to reduce regulation on businesses which I think went to the other extreme. 4. He seemed less driven by ideology and a bit more practical stuff. He might be a mediocre businessman but that is better than policy wonks who lost touch with the common man and women. I would guess that I am a lot closer to many of his likely policy positions than Hillary's - because it is not clear what his policy positions are going to be. I knew all this but still voted for Hillary just because of his behavior. I can understand people who held their nose and voted for him for various reasons. There are also people who admire him and are his very enthusiastic supporters. I do not have much respect for them. Nothing changed just because he won. Vinod

I don't think it was well-written or well-organized BUT there is a tremendous amount of insight hidden in the jargon in this report. I certainly don't think the takeaway should be simply buying cheap. His definition of cheap would not be a low-multiple stock. My definition for cheap is also not low multiple stock, it is just as Buffett defines it - cheap as compared to IV, which incorporates growth, quality, etc. The concept of outside view - just having base rates in mind is something I imagine every value investor incorporates when making an investment decision, it certainly is something that is very central to my own approach. Mean reversion which is what data indicates is the very essence of Graham's 1934 book. What I did not see in this report is anything new that adds to what Graham and Buffett had already covered. I have a written investment approach - nothing fancy, pretty much what Buffett, Graham, Munger, Greenwald, Fisher, etc. have repeated over and over again and a checklist - my own mistakes and few pointers from the same gang. So when I read an investment book or article, I am primarily looking for something new to add or modify in either the investment approach or checklist. After reading this report, I did not find one thing that I can add to either of these. What I find mildly useful are the two pages of base rate data on earnings growth. Nothing new, pretty much in line with my understanding but I did not have this data before. See after all that is written, he gives examples, where quality is high and stock is cheap and returns are good. But the main thing is stock is cheap. Is that really a surprise? This is before even going into such things as expected returns over 90 day period. Vinod

After reading all of the 158 pages here is what I ended up learning: Buying cheap and quality leads to good returns. He talks about inside view, outside view, HOLT.... and on and on. When it comes finally to examples it is really simply buying cheap. I think someone has written about it all the way back n 1934. Netnet - Please do continue to share interesting research. Nothing against you. I am disappointed with Mauboussin. That he had to write so much to convey so little. Vinod

Sorry for the OT. But to support what Liberty is saying here is a short story. I read this a long while back but I keep thinking about this often. Vinod Mexican Fisherman Meets Harvard MBA An American investment banker was at the pier of a small coastal Mexican village when a small boat with just one fisherman docked. Inside the small boat were several large yellowfin tuna. The American complimented the Mexican on the quality of his fish and asked how long it took to catch them. The Mexican replied, “only a little while. The American then asked why didn’t he stay out longer and catch more fish? The Mexican said he had enough to support his family’s immediate needs. The American then asked, “but what do you do with the rest of your time?” The Mexican fisherman said, “I sleep late, fish a little, play with my children, take siestas with my wife, Maria, stroll into the village each evening where I sip wine, and play guitar with my amigos. I have a full and busy life.” The American scoffed, “I am a Harvard MBA and could help you. You should spend more time fishing and with the proceeds, buy a bigger boat. With the proceeds from the bigger boat, you could buy several boats, eventually you would have a fleet of fishing boats. Instead of selling your catch to a middleman you would sell directly to the processor, eventually opening your own cannery. You would control the product, processing, and distribution. You would need to leave this small coastal fishing village and move to Mexico City, then LA and eventually New York City, where you will run your expanding enterprise.” The Mexican fisherman asked, “But, how long will this all take?” To which the American replied, “15 – 20 years.” “But what then?” Asked the Mexican. The American laughed and said, “That’s the best part. When the time is right you would announce an IPO and sell your company stock to the public and become very rich, you would make millions!” “Millions – then what?” The American said, “Then you would retire. Move to a small coastal fishing village where you would sleep late, fish a little, play with your kids, take siestas with your wife, stroll to the village in the evenings where you could sip wine and play your guitar with your amigos.”

I have sold IBM earlier this year - a wash with no gains. That said, I agree with KCLarkin. I disagree with the whole premise: "So, the companies that don't understand IT and therefore hire IBM will frequently lose to companies that do IT in-house. It's hard to win long-term when your business model self-selects the customers who are more likely to lose long term." Visa for example is heavily into IBM products and it is not because it does not understand IT. It is not an isolated example, you look at many examples in the financial sector. Vinod

My understanding and belief is that Buffett did not mean this literally. It is a general approach that 1. Promotes long term thinking. This way you are forced to look at the earnings power 10 years or more down the lane. Those are good businesses with moats. Businesses you can understand, etc. 2. Restricts investments to things that are less likely to blow up. If you can have confidence in something to hold long term, it must be in businesses that are not likely to undergo rapid change. 3. Forces you to really research the idea in detail. 4. Reduces tax drag. And many other such good investing qualities. As long as you are really doing that, it does not matter if it is 20 punchcard or 100 punchcard. Are we not reading too literally his comments? Just like the 500 page a day reading habit. :) If you are literally trying to implement this 20 punch card type portfolio, you need to know the like rate at which opportunities arise, how long your investment career is likely to last, etc. It really does not make a lot of sense. Sometimes the opportunities may be in a group operation like Buffett did in Korean stocks or arbitrage opportunities. Contrast this with the alternative approach, where you research an idea a little bit, price looks ok and you take a 0.5% or 1% position. Soon you have a portfolio of stocks that all look interesting and you have no conviction. Any stock that goes down, maybe you average down once or twice, it goes further down you sell out. Vinod

My thoughts are in line with Al, Jurgis and Stevie. I think best way to address is is via some sort of change that make it truly market driven. Paid in stock, for performance over long term (say 10 year) and only for outperformance over sector/industry. Having a long vesting period with large holding requirements relative to net worth. Just as the 1990s change in tax code to make CEO pay above $1 million taxable and performance based pay (stock options) tax deductible likely contributed to the pay rise, I think something that acts in the opposite way would be right approach. I really wish Buffett had come up with a compensation plan for his own that reflects shareholder alignment and value created instead of taking just $100k annually. Of all he has the business acumen, knowledge of human behavior and the intellectual firepower to come up with something elegant. Not every CEO can afford to take only $100K given the effort involved. Vinod

Buffett is just playing by the rules. All he was saying is that the rules need to be changed (tax increases for the rich). He would be happy to pay the higher taxes when they get raised for everyone. Say you believe that oil price should be $100 and that it is low only because it is being manipulated by some players. As a result you get retail gasoline prices in in $2 a gallon range. Because you believe it should be closer to $4 a gallon, when you put gas in your car do you pay $4 per gallon even when the gas station is selling it at $2 per gallon? If not, your actions are no different then Buffett. Vinod

Do you (a) genuinely admire Trump and see him as the right sort of leader who would be a good POTUS or (b) are you supporting him holding your nose, because you dislike Mrs. Clinton? If (a), what do you admire about him? If (b), what are some things that he can do that would turn you off from voting for him? Not trying to make a point or anything of that sort, I am trying to understand your point of view. Vinod Vinod1: Before I respond, lets agree that there is zero chance either of us will change the others minds. OK? But since you asked: Generally (b), I draw the line at candidates who exhibit a strong inference of serious criminal behavior. Regarding Trump. He has negatives, but I find the positives things he can do on important matters to far outweigh them. He is far more likely to: respect the rule of law, deal with the threats to this country directly, understand the importance of the free enterprise system and the capitalists who simply want to operate without regulatory overburden, nominate supreme court justices that lean constitutionalist, secure the border, unhinge the corrosive PC culture, make other unpopular decisions as he is not corrupted by the donor class. Will he be the "right sort of leader"? Probably not in the traditional sense, but I'm more interested in getting things done than following a playbook. Thanks for your response. If you believe that way, I can see why you would prefer Trump. Vinod

http://www.wsj.com/articles/new-rough-patch-for-trump-campaign-roils-republicans-as-defections-grow-1470184353 Mr. Trump, speaking at a rally here Tuesday, said voters would stick with him over Mrs. Clinton because of his vow to appoint conservative justices to the Supreme Court. “They have no choice,” Mr. Trump said. “Even if you can’t stand Donald Trump, you think Donald Trump is the worst, you’re going to vote for me. You know why? Justices of the Supreme Court.” Unbelievable. Vinod

Do you (a) genuinely admire Trump and see him as the right sort of leader who would be a good POTUS or (b) are you supporting him holding your nose, because you dislike Mrs. Clinton? If (a), what do you admire about him? If (b), what are some things that he can do that would turn you off from voting for him? Not trying to make a point or anything of that sort, I am trying to understand your point of view. Vinod

Putin is trying to influence the election in favor of Trump. If I were Putin, I would do the same. The link below is not related to the election at all, it is a very interesting piece by itself. It shows how Russia uses Internet/Social Media and the vast network it employs. If you read it you can see how Putin could be playing this game. http://www.nytimes.com/2015/06/07/magazine/the-agency.html If Russia is not strongly in favor of Trump, why do you think they released the emails when they did? If you think this is all some elaborate manipulation by Mrs. Clinton into fooling us to think of Russian connection, I am dumbfounded. Vinod

I can understand if one has to hold the nose and vote for either of these candidates - Trump or Mrs. Clinton. Trump at least brought out into the open issues that others would not talk about - that immigration is a problem that is directly impacting a lot of people with lower incomes, trade terms are more favorable for other countries, etc. So if you feel strongly about these issues and have to hold your nose to vote for Trump, I sympathize with you. I can understand. What I dont get is the ardent supporters of Trump. I have a very low opinion of these people, enough to give them a wide berth. Vinod

I agree on an absolute basis both of the candidates would be disqualified. What in your mind makes Clinton more fit be POTUS than Trump? I see her as bad as Trump but worse as she has rigged the Democratic primary (Trump at least did not do that) and then spread false statements (which the press ran with) that somehow Putin supported Trump. I got the distinct feeling she is deflecting the examining of her record by making stuff up and stooping to Trumps level when it comes to inuendo. I am more concerned about her actions than her words which have real consequences versus Trump whose words appear strange but his actions are more reasoned. Packer Trump repeatedly ignore facts - his net wealth, soliciting campaign contributions, etc. when he makes statements. I mean he lies repeatedly on things that are obviously not true. I dislike Mrs. Clinton and many of her actions. But Trump, lying seems to be ingrained. His actions - with his lawsuits, etc all point to a person who is closer to say Putin style of governance. That seems far more dangerous. It is really who can do the least damage as POTUS. Viewed this way, I ruled out Trump. He can really mess up big time in so many ways. Vinod

I spent 45 minutes taking Trump's side in a debate with my wife. After that I tried to find out a little bit more that would support him. What I found repulsed me away from him. So I can honestly say I was pretty open minded going in, but even the most basic research suggests that Trump is not a person fit for any public office, must less POTUS. Vinod

This is why I am skeptical of the press reporting anything. If you read the article is says it appears that the group did not provide an invitation but later said the group would not respond to the direct question of whether an invitation was given. No direct facts but speculation. Call me from Missouri but I see there is as much possibility of Trump being right versus what the article appears to imply. Packer I don't know. There might be a lot of cases where it is speculation. But, if you spend an hour critically looking at Trump, it seems obvious that he lies pretty often. I can only assume that his supporters ignore that part as they care more about some of the stands he has taken. So how can you trust a person who lies so easily and so often? I would rather not vote for Mrs. Clinton, but Trump seems to be worse than her in nearly every respect - including trustworthiness. Vinod

What I find difficult to understand is it looks like Trump seems to have utterly low opinion of his own supporters. He must be assuming they are some of the dumbest idiots in the world. I tried to honestly see if I can vote for him, given my preference for someone other than Mrs. Clinton as I do not like the dynastic aspect of it. Even if he has extreme views that conflict my own, if he behaved/talked in a manner that makes sense I would have supported him. Take for example his comments on meeting with Koch Brothers: http://blogs.wsj.com/washwire/2016/07/30/koch-brothers-network-of-donors-meets-without-donald-trump/ Mr. Trump tweeted on Saturday “I turned down a meeting with Charles and David Koch. Much better for them to meet with the puppets of politics, they will do much better!” It seems more likely that they have not invited him but he outright lies about it. Now I am not sure about this particular one, but if you have looked at his comments over the last few months, there are so many instances where they are unbelievable and objectionable. So why does he do that? Why does those who support him dont seem to care? If a person can lie so easily and repeatedly, how can one believe that he is even remotely telling the truth on the positions that are popular with his supporters (trade, immigration, etc)? Vinod

I think there are two different things (a) A decision to buy or rent (b) A decision to buy or pass on an investment property. For (b), you only want to buy property cheap at low rate or else pass up on it. But if you are looking to buy or rent, then if you are going to stay for a long time, the relevant calculation is versus the rent. Vinod

I have been tracking the performance - both operating and price - of the companies that I follow since mid 2011. Basically I do a write up of the company I am researching - I lay out the operating performance I am expecting in my conservative case, base case and optimistic case over next 3 years and 5 years (5 years part was added only later) and also the PE or BV multiple that I expect it to trade. Nearly always quality stocks (my "Exceptionals", "Compounders", "Blue Chip" categories) that I track tend to reach or beat my optimistic estimates of operating performance. PE or BV multiple most of the time exceeds my estimates by some margin. My "Deep Value" category of stocks however mostly tend to reach the base or conservative case and sometimes even undershoot on operating performance. Multiples are a mixed bag and also varies a lot more. So I have learned to be a bit more optimistic on the quality companies and be positively brooding on the deep value type companies. Vinod

Agree a lot with what oddballstocks is saying. One additional way to reduce reading time is to defer the reading material. Say you have a bunch of videos or audio that you want to listen to, just bookmark them, put them in a playlist if on youtube. If you wait a few months, it is amazing how much of that material seems less useful. Same way with newspapers or magazines, dont read when you get them. Read a couple of weeks WSJ in one shot. You end up reading only material that is useful long term. Vinod

I should probably try to tilt towards that as well since gains in my pension account are taxed 15 pct. whether I realize them or not, so holding short/long term doesn't matter. Still, why is it more import to limit downside risk in your taxable account? Can't you offset future gains with old losses? You can offset gains with losses in the current year, but I don't sell often enough. So that means losses would need to carry-forward, and you can only use $3k of carry-forwards per year. I used to be very conscious of taxes and had been very careful to minimize them. Not anymore. I replicate pretty much the same set of investments in both my taxable and non-taxable account. The only change is that in my non-taxable account I try to trade a bit more, buying more on dips and selling on significant run ups. The same set of stocks, produced roughly about 10% more in my non-taxable account compared to taxable over a five year period. So a couple of years back I figured, I might be better off just paying the taxes. Not a whole lot of data, and it might be that my specific set of investments (heavily concentrated in financials) have been volatile and in future might lead to opposite being true. But I think the markets are volatile enough that there is opportunity around trading around a core position that adds to investment returns. Being too focused on taxes might cause one to miss these returns. Vinod

I used to think that those supporting Trump were out of their mind. Although I still do not support Trump, I understand those who do. I found the following three articles very helpful in understanding the rise of Trump. First two have been referenced in this weekend's Mauldin letter. 1. Trump and the Rise of the Unprotected http://www.wsj.com/articles/trump-and-the-rise-of-the-unprotected-1456448550 2. The Secret Shame of Middle-Class Americans http://www.theatlantic.com/magazine/archive/2016/05/my-secret-shame/476415/ 3. The re-emergence of the Jacksonians http://blog.mpettis.com/2016/03/the-re-emergence-of-the-jacksonians/ Vinod

Here is the latest from Grantham. He acknowledges the mistakes made in his 2011 commodities call. I was shocked and disappointed when Grantham has written in 2011 about commodities entering a new paradigm. I thought he has lost it. Welcome back Grantham to reality! Also attached is the original 2011 letter. Vinod JGLetterALL_1Q11.pdf keeping-the-faith-and-part-1-always-cry-over-spilt-milk-and-part-2-updates.pdf

ETF business has pretty attractive economics and starting it now is like starting a .com in 1999 - lot of easy money to be made from selling overpriced companies to shareholders willing to buy any company with a .com in their name. So this is just take advantage of the current rush to ETF's. No need for any competitive advantage, even if by just luck the ETF performs well, it would attract assets that pay fees for a long time. Heads I win.... (from Dhandho Holdings perspective, not the ETF investors). I would think a strategy like this would depend on diversification to some extent, say top 5 holdings to be about 15% to 20% or so. But given the concentration it looks more like a straight up coin toss - performance would be either be good or bad and unlikely to be close to indexes, regardless of "patent pending algorithms". Vinod

Constellation software. Especially the income statement. Lots of companies stuff everything into SG&A. They guys neatly breakdown the main expenses. Vinod