APG12

That's only half of the whole picture though. If buybacks are correctly understood as a return of capital, then you have to take into account what happens to the capital returned in option 1.

Yes it is. Frugality is very compatible with a good and rewarding life. Its only in this, the Age of Stupidity, that this even comes up as a question. To the extent that anyone has studied this question and many, many, many have, no one has concluded that the best way to make yourself happy or live a good life is to spend more money. If anything its quite the opposite in every spiritual and philosophical tradition I can think of. Its such a settled point that even philosophical opponents agree e.g. Stoics vs Epicureans The Hedonists (Epicurus) argued that friends, simple pleasures, knowledge would bring you happiness. But they also argued that you shouldn't eat expensive foods or enjoy luxuries because it would make it harder for you to be satisfied. The Stoics argued happiness could be obtained not by changing your external situation but instead by changing your thinking, hence the Epictetus quote: "Man is disturbed not by things, but by the views he takes of them". The one common denominator is that nobody advocates for material possessions or spending money. At best they advocate for not being too extreme in asceticism (Buddhist middle path). You can read the happiness research studies and I don't think any of them has argued for spending more money. If you have the means of enjoying material values, why should you not do so just as you do with spiritual values like friendship, productive endeavor, art, etc.? I don't see why there's any difference. You would not say that it's wrong to have a great friend because it will make all of your other friends less enjoyable. By this logic I should starve myself each week so I can appreciate brussels sprouts by Friday. I agree with you that if you're unhappy, spending more money is probably not going to make you happier, but then concluding that the converse is true is wrong too. It's a false dichotomy to claim that either spending more money makes you happier or spending less makes you happier, even if 'everyone' agrees on it. Money isn't the fundamental driver of happiness. Happiness is an emotion that arises from the achievement of values. For some people, producing great music or writing great literature is higher in their hierarchy of values than realizing the full potential of their people management skills. For those that are climbing the corporate ladder, they may value the realization of their management skills more highly. All three are equally valid goals, the achievement of which will lead to happiness for each person, but only one is likely to make much money. Since money represents material values, or consumption, frozen in time, if you have earned your money through honest, productive effort and mutually beneficial trade, it is completely consistent with happiness as an enduring state of consciousness to enjoy the material values that you have earned.

Very interesting. Epstein actually mentions that there are other theories on hydrocarbon creation in the book. I'd made a mental note to check them out because all I'd heard of was the plant material theory, but by the end I'd completely forgotten. One of the many valuable things I got from this book is a wider perspective on the issue of energy itself. What constitutes 'easy energy' is contextual. The process of making fossil fuels into a resource is a complex, technological phenomenon. Unfortunately, there are billions of people for whom it is not easy (compared to the west), and their lives are shorter, dirtier, and less enjoyable because of it.

[amazonsearch]The Moral Case For Fossil Fuels[/amazonsearch] I saw the review in today's WSJ and it reminded me to make a thread. I thought this book was fantastic. It very clearly explains a lot of ideas that I've personally been thinking about for a while. The most interesting points were the explicit identification of human life as the standard of value and the idea that resources are created. It's a quick read and worth picking up if you're looking for a different viewpoint on the fossil fuels debate.

I could not disagree with this paper more. The return by era chart is just downright silly. Even if one could say there was some sort of dramatic shift in perspective around 1990, there are just a few other variables at play ::) The J&J vs IBM comparison is equally misleading. He just cherry picked two companies to make his point. Why doesn't the pro-shareholder value side get Berkshire Hathaway? Montier's side should get a non-profit. The right way to look at business, in my opinion, is that it exists to make money for the owner. Long term value creation is the fundamental goal that every employee in the business acts to achieve. It's the standard by which every action is evaluated, both of employees and the company. It's because of this standard that an owner of a business can judge as good the attempt to treat customers well. At the end of the day, every interaction with a business is voluntary. Customers have to voluntarily choose to purchase the product or service and so by the standard of maximizing shareholder wealth, treating customers, suppliers, and everyone in the value chain well is good. It's the path to making money. Every interaction between individuals in a free society has to be win-win, otherwise one side will not be party to the interaction for long (that true for personal relationships as well as economic relationships). If J&J had really held, in principle, that customer satisfaction is the standard, why would they make any money at all? Those products could have been sold to the doctors, nurses, patients, and mothers much cheaper. So apparently in practice, that constituency DID NOT come first. The fact is that no business could survive if it acted this way. There's such a thing as giving away too much to your customers. Double Your Profits (a 3G Capital favorite) makes this point from a practical perspective. From a theoretical perspective, profit ought to be viewed as a measure of value creation. Anything less than the maximum achievable represents potential value that was destroyed. If you want to give away value, that's what charity is for.

You say that when we are still feeling the effects from financial under-regulation that almost brought down our entire financial system that would have thrown the civilized world back into the stone age? Under-regulation? :o Can you think of 1 or 2 industries that are more regulated/controlled/screwed with than housing and banking? Office of the Comptroller of the Currency, SEC, the Fed, the CFPB, the FDIC, Fannie/Freddie securitizing (and guaranteeing) huge swaths of mortgages, FHFA, arbitrary bailouts, etc. Those are just off the top of my head. But then you have all of the distortions caused by the tax code which allows for mortgage deductions/no capital gains/etc. And those are just federal- then you have entities within each state like the NYDFS, 'ambitious' attorney generals, etc. There are regulators that literally have offices IN the banks. How can anyone say with a straight face that there was or is too little regulation? After researching the industry, I'm honestly astounded that it can function at all. To put the blame on the small bit of freedom left is a real perversion IMO.

Ah, I did read it but the fact itself is not subjective- although which era you would choose to live in is subjective. So I thought I'd clarify. But I'm glad we're all in agreement. :)

There's always someone ;) But me, I'll take modern technology. That is really subjective when you make a statement like that. For example, I am not saying you... suppose someone failed in college, is bitter about not graduating, is white, and think well his life 50 yrs ago he has much higher relative socio-economic standing. However, as a typical person he has a lower life expectancy, has no access to computers, cell phone, etc. Heck he can probably beat up his wife and get away with it and his wife will put up with it... nowadays she'll dump him cos she can very well support herself on her own. But for the masses, for example a black person, or a chinese person, America today is better hands down, for the chinese person, 50yrs ago he couldn't have gotten in because they were just a few years past the chinese exclusion laws. I am going off in a tangent probably, but one last thing. Something really interesting I saw on TV, it was a doc on a escapee from a N Korea prison who is now in S Korea, and he said in some sense his life was easier back in the prison, out in S Korea everything is about money. So in some sense, he was happier in prison..... You guys might be over thinking my point, which was simply that material quality of life has improved dramatically over the last 50 years.

There's always someone ;) But me, I'll take modern technology.

It really is a testament to the productive power of capitalism. Would you rather be wealthy 50 years ago or middle class today?

Why is limited liability inconsistent with freedom?

Why is that a joke? The existence of the Ferrari offers the person washing it an opportunity that they didn't have before. Well, it's fine but if this master/servant model is what drives society than it creates a huge wealth disparity. IMHO a strong middle class with more 40k cars and a few car washes is preferable. Master/servant model ??? I was merely stating the fact that the purchase of the Ferrari has created an opportunity for the poor person that didn't exist before. That's Mr. Hansell's point as far as I can tell.

Why is that a joke? The existence of the Ferrari offers the person washing it an opportunity that they didn't have before.

To understand VPRT's valuation you really have to ask how much of the marketing spend should be classified as growth investment (ie. what are the real owner earnings). And what return is the company getting from this investment? If the company had spent the money on acquisitions instead of higher marketing expenses the EV/EBITDA ratio would be a lot lower so it's deceptive in this respect. If the company has a moat, it's in their ability to be a low cost producer. At one point they were the low cost producer for business cards and other low quantity print jobs but a quick search for business cards indicates there are many similarly priced alternatives now. The J curve idea is interesting, but if this is your thesis you better have a good idea of where the company is getting the data that justifies this strategy. And also how reliable is this data? And what are the other implications for VPRTs customer base as you implement this strategy? One final observation: the greatest low cost producers (Borsheims, Nebraska Furniture Mart, Wal-Mart, GEICO, etc) had one strategy- provide the lowest possible price to customers. Imagine Sam Walton hiring a firm to analyze his customers, looking at the data, and concluding that what he should really do is shift his primary focus away from price in order to attract a specific subset of customers that the data says will be likely to spend more money in his stores. Walton would have tossed out any such strategy immediately. Is this strategy really one that makes sense for VPRT?

Proforma: $260mm net cash, 7% dividend secure, 4X EV/EBIT...

I'm about half way through Dream Big and I would say that this is an unjust characterization of a great man and his success. There is plenty to be learned from that speech.

Dream Big is now available in English on the Kindle for those interested: http://www.amazon.com/gp/product/B00JUWYGDQ/ref=as_li_qf_sp_asin_il_tl?ie=UTF8&camp=1789&creative=9325&creativeASIN=B00JUWYGDQ

Kind of ironic given that the fundamental cause of the issues in the industry is the government's unconcern with profit.

I think this is a great idea for a thread but am I looking at the right stock? http://finance.yahoo.com/echarts?s=AXX.TO+Interactive#symbol=AXX.TO;range=5y Looks like it's up 100% over the 2+1/4 years since the write up.

I'll just leave this here... http://www.forbes.com/sites/alexepstein/2014/02/27/the-unscientific-consensus/ :-X

Wonderful! Now I can set these next to my WB fathead.

Hmmm. Well I would argue that this is just not true. If the government forces me to sell my car to you for $20k no more no less, that would not be a market. Markets are not just one person selling to another. It's two people coming to an agreement to transact. Yes, I would agree that the American healthcare system is not a fully voluntary system in a lot of ways. I don't think it was before the individual mandate either (pre-OCare 50% of spending was from the government, insurance regulation, etc). But my point about markets as voluntary was not that certain markets can't function with some elements of freedom and some of coercion. Pretty much every market these days has some coercive element to it. What I was trying to say is that there must be some element of freedom or you wouldn't even call it a market because it wouldn't be a market in any sense of the term. With that being said it doesn't make sense to point at a mixed economy and say, look this functions with some freedom and some coercion. It's only thanks to the element of freedom that it functions at all. Yes I agree with you here too and consequently it makes sense why you're arguing above that the mixed healthcare system we had was inefficient. Yes, I'm using the word fraud in a legal sense. No, I would say my opinion is not dependent upon the law because I think fraud has an objective definition. Even if what Bernie Madoff was doing was considered legal it was still fraud because he was lying to his investors. I think this is really where the breakdown is. I've always been interested in why people disagree about things, in general. We're two honest people looking at the same issue and discussing it with each other yet come to completely different conclusions. And worse, we're pretty much unable to convince each other of our positions. When this happens it seems to me that it's almost always because there is a disagreement about a more fundamental issue. In this case I think it's a moral issue. When two people agree to a voluntary transaction, I have a moral problem with forcing them to act against their will. Who is to decide how a person lives their life? Who should be making these choices? Essentially, who does your life belong to? I would argue, as the declaration of independence states, that your life belongs to you. I think you can see that coming at this from my perspective any arguments about efficiency are really not going to be very impactful. Or to you, concerned with efficiency as you are, are not going to have a much harder time buying this argument: "regulation = force = distortion = market break down" I have a certain moral view that confirms that theory and you don't. I do believe it's true apart from the moral aspect but nonetheless it's a lot easier to convince me of its truth than it is to convince you. Mehhhhhhh. I don't know. The whole 'the market is rigged' and David Einhorn as a 'dumb tourist' in a casino were a bit much. I think FB probably presents are one-sided view (although I've yet to read it). I'd argue that there is no such thing as a level playing field in the sense that you're using the term but I think that's another debate. I'm afraid that unless our moral assumptions are in agreement we stand a fat chance of ever agreeing on whether HFT should be allowed. With that being said, thanks for an engaging discussion! :) ;D I'd say you're right. Although the wisest folks are probably the ones that never bothered to post in this thread. I need to remind myself more often: "Better to remain silent and be thought a fool than to speak and to remove all doubt."

Yes, please let me clarify. I'm not referring to a specific document but rather to what a market is by its very nature. A fundamental characteristic of a market is that participants interact voluntarily. What makes a characteristic 'fundamental' is that it is a necessary condition and gives rise to the other characteristics of a market (for example, volatility, price discovery, etc). That is, without voluntary interaction a "market" would be nothing like what we call a market. It wouldn't be a market at all. This is what I mean by fundamental. It's intrinsic to the concept. Try imagining a market where interactions are not voluntary. Would it have any of the characteristics which are common to all markets? I would say definitely not. In a market place people enter into agreements because they are expecting to gain from the transaction. This is a very important characteristic of a market because it implies that the interactions are win-win. If the transaction is not, you don't engage in it. A forced transaction, on the other hand, may very well be lose-win or lose-lose. All of these reasons are why voluntary interaction is fundamental to the concept of a market place. I could go on if you think it'd make it clearer but I think I've made my point. There are market places where some actions are voluntary and some are forced (ie regulated). These are not market places in the fullest sense of the word but because they retain some voluntary aspects they largely function like a market. The extent to which interactions are not voluntary is the extent to which you remove the fundamental factor that makes a market place a market and the extent to which your interaction should not truly be considered a market. Does that statement make more sense in light of my explanation about what it means for something to be fundamental? What you see is the more distortion the government brings to the market by injecting force the more the market breaks down and ceases acting like a market. Banking, housing, education, student loans, health care... Now, look at perfect competition. Perfect competition is a construct used to explain certain interactions in a market place. It is not fundamental in the sense that it is not intrinsic to the concept of a market nor the source of what it means to be a market. Well, I think it's silly because it does not accurately describe reality and is therefore a bizarre choice for an ideal. But now do you see why your question about antiquated principles is an invalid question? Voluntary interaction as the fundamental component of a market can never be antiquated. It is what it means to be a market. It is a fact and not at risk of becoming antiquated. Haha, no worries! Yes, fraud in a strictly legal sense. If you have a case for how you were defrauded you go to the government and say, hey, I had an agreement with this guy to do such and such and he did something else which I had not agreed to. I gave him money and he tricked me. Take front running. It's clear why front running is fraud. You pay your broker to do a certain job- he does something else to which you had not agreed costing you money. Now who is being defrauded w/ HFT? If you had agreed to purchase a security at a price and someone else came and raised that price without your knowledge thereby stealing from you- that would be fraud. However, when the price goes up from HFT, you know the new price before you pay. There is simply no fraud going on that I know of. The interactions are voluntary. When you see that HFT has raised your price, you still have the choice not to buy. You might not like the new price- but so what? It's not your stock and whoever owns it can offer it for whatever price they want. Don't like it? Don't buy it. Would I describe the practices as deceptive? I presume that you think the deception arises from seeing a bid in the market for a certain price but only being able to buy it at a higher price. I don't think it's deception because the price you see is really the price that it's being offered for. It might cost you personally a few pennies more to buy it but that really is the price it's offered at. It's too bad you don't have the technology to take advantage of the displayed price but calling it deceptive is a little silly. People should just be aware that they don't have the fastest trading platforms on earth and therefore should expect to pay a bit more. I hope that clarified my position and I'm sure you'll disagree about... well probably everything. :P

Heh? I'm talking about founding principles. The extent to which a market is controlled is the extent to which it's not a market. A market is a place where buyers and sellers can choose to exchange good/services. Sure there are mixtures of freedom and coercion that are still called markets. But again, I was talking about the founding principle of what it means for an exchange to be considered a market. I really don't think that's a mis-characterization. Forcing two people to take part in an economic transaction is not a market. No! I don't think it is at all. Perfect competition is a (silly?) notion that developed as our understanding of markets developed. It's certainly not a founding principle and I don't think you'll find it discussed anywhere in early economic literature. Yikes, I didn't mean to offend anyone. Anyways, maybe that's the defense for some HFT defenders but it's certainly not mine. My defense is: these interactions are voluntary and not fraudulent therefore you have no right to tell people what they can and can't do with their own time and their own money. Just as we do not outlaw overdraft fees even though I don't like them. In the end, you will never pay more for a security than you agree to pay. I'm sorry you don't like that someone has figured out how to make a tiny amount per transaction on your purchase. But that doesn't change anything.

HAH! "High-frequency trading isn’t providing more efficient, liquid markets; it is a technological arms race designed to pick the pockets of legitimate market participants. That flies in the face of our markets’ founding principles." OK, equating HFT with theft is downright dishonest. No one is having money stolen from them. The founding principles of our market (of ANY market) is that people are able to interact voluntarily and that we have objective laws. Not a system where if enough people yell loud enough the government outlaws certain practices.