Rabbitisrich

I didn't think that Lewis' arguments made a ton of sense. In the 60 minutes interview, one of his descriptions of front-running included a scenario where you place an order, an HFT sweeps the bid, then you buy at a higher price from the HFT. What? Isn't that another way of describing your actual bid being exposed? From an investor's point of view, the danger of front-running is that someone diminishes the value of your more-efficient-than-market thesis. If Michael Burry explains his need for bespoke CDS, and the institutions step ahead of him to purchase their own CDS, then the institutions just occupied his place in line. But if an HFT bids a fraction ahead of you, then flips the share to another market participant who bids a fraction ahead of them, then that is nothing more than matching the share to the highest bidder. There may be a front-running aspect to HFT, but so far Lewis seems to be conflating liquidity services with front-running (I haven't read the book.)

Yeah, there a quite a few anecdotes that depict Buffett as being extremely sensitive and prone to anxiety. Even fairly recently, he pulled out of a championship partners bridge tourney, right before the match, because of self-doubt.

http://www.newrepublic.com/article/117088/silicons-valleys-brutal-ageism My least favorite quote of the entire article, After making computer chips for 15yrs in silicon valley, and just generally getting older, I have found there is no substitute for experience. If you look closely at the world trend, I think you'll find the opposite phenomenon more accurate than what the article says. The world is harder and harder for young people to get ahead. They lack knowledge and experience and blue collar jobs are harder and harder to get and lower and lower paying. The established and experienced can get richer and more successful. The world favours the incumbent. Not necessarily for businesses that emphasize innovation. Young people are "smarter" than older people in specific ways. Think back to when you were 16 and you read something that kept your brain buzzing until you internalized the new thought process. That sensitivity and cognitive agility lessens over time. Of course you pick up other attributes, but those young attributes are especially useful for mold breaking.

The Dual N Back test improves your working capital memory, which is useful for tasks like long multiplication/division, and arranging your thoughts. Improving your cardiovascular efficiency helps memory and concentration.

He has made some economic arguments of questionable merit. Liberty mentioned one. More significantly, Gross sold treasuries apparently using a model that treated demand for treasuries as something distinct from trade and dollar demand. Then, he recently tweeted that China could weaken its currency by selling treasuries. And yet his record is exceptional over a multi-decade span.

isn't the advise for the know nothing person ? someone like buffett may not need any advise :) Arguably, Buffett's cautionary is more suited for the experienced investor, who may be lost in models and big picture narratives that impress at dinner parties and client meetings. But the new investor might literally try to ignore macro issues, without understanding that every company specific expectation exists in permissive macroeconomic conditions.

If the government wants to tax big banks, then they should just do it without this foo foo systematic risk nonsense. People focus too much upon idiosyncratic risks, and use metrics like banking asset concentration as if the legal container is important. What's funny is that we saw TARP announced in late 2008, only to be followed by drops in industrial production, inflation expectations, and GDP. Yet, "bank bailout" is still a term. It should be called the nominal expectations bailout!

+1 The way he phrases it can lead new investors into believing that macro views are distinct from company fundamentals. But if you listen to Buffett talk about his companies, and how he acted during the demand fall off post-Lehman, he clearly understands that every company-specific expectation implies macro environments that permit those expectations.

5. sounds good, but what would it look like? The Federal Reserve is going to push Lehman Brothers into conservatorship in March 2008, zeroing out the influential figures and institutions who own the stock? And then subsequently use monetary actions to forestall an expectations collapse as a result of a major financial institution collapsing? If the Fed is going to "manage" institutions prior to systematic instability, then the Fed is going to have to push against the market. Otherwise, the market would take care of such institutions by doing things that look a lot like systematic instability. You have to sympathize with the Fed. Stabilize the system and then face the music when you impair a powerful institution, or impair the institution and then face the music when you try to stabilize the system?

Not disagree with your major points, but you also have to consider the implicit rent that the householder is paying to the landlorder. Plus there are significant non-pecuniary benefits to owning your home, and customizing it just so, and finding a niche in a community.

I can't speak to Banco Santander, but it might be analogous to U.S. banks reclassifying loans as performing/accrual to non-performing/nonaccrual, and then back. The gist of a non-performing asset is that your economic interest is permanently, "other than temporarily", impaired. 90+ and 120+ days are tests of impairment. But you could also look at undercollateralization, falling behind on payments, and being a secondary interest to a loan in default. In all of those situations, the borrower may be paying in excess of their principal, to the full amount of the scheduled interest owed, but you still have cause to lower your expected return on the loan. Yet, you wouldn't recognize interest on a non-performing loan until you actually receive the cash, vs. a 60+ late mortgage where you would record accrued interest, or a 250% overcollateralized 1st home mortgage. For example, if you go back to 2010, there were lazy claims that big banks were throwing huge amounts of impaired loans into the troubled debt restructuring (TDR) in order to avoid charge-offs. But a TDR can be performing or non-performing! Many of these borrowers turned out to be good credits under temporary stress, and they kept paying, or worked out a reasonable loan adjustment, and maintaing, or returned to, accrual status. If you rework the lending conditions so that your new loan is of lesser economic value than your original loan, you charge off the uncollectible amounts to get to your collectible value, and the new loan may be performing. Also,

If anyone goes to the AGM, please ask how the Fairfax team has updated their macro views given performances in Australia, Canada, and now Japan. As much as Watsa and co. deserve respect, it's important to distinguish between being right on portfolio positioning vs. being right on the economics. Too tempting to confuse useful rules of thumb with sound logic. Was a "Lehman Moment" inevitable? Did it really have to be a great recession vs. a less volatile period of reset? The world has not provided us with enough information to come to a definite conclusion.

I'm not sure that Ericopoly is presenting a bias. You could say that you have a position in BAC hedged by puts, and that you have written SHLD puts for income. Or you could say that you have secured BAC upside and SHLD risk. They are different ways of phrasing the same thing from a portfolio perspective. It doesn't seem like a bias because it describes the actual economic position of your portfolio. Compare that to someone who owns BAC after it drops from $20 to $10, but says, "It's ok. I bought it at $5." There you have a person who is misinterpreting economic reality due to some emotion driven impulse.

Maybe the lesson is that calling a manager smart or stupid isn't helpful. Instead of searching for some romantic notion of skill, like a residual that keeps popping up, just allow for people to demonstrate outperformance in some tasks, and lesser performance in others. What one person views as complaining from the sidelines, another person might see as part of the process of differentiating personal investment styles from respected figures.

In addition to StubbleJumper's comments, it would be great to hear how the Fairfax team have updated their views on monetary policy given outcomes in Canada, Australia, and, particularly, Japan.

Great, thanks you two for sharing.

Perhaps the comment above is missing the point of the recent thread. It seems like debate is over how to measure dividend yield? You could measure it by the yield from future dividends to the common purchaser at the moment of purchase. But you could also judge yields by the moment of investment, AND every subsequent dividend issuance. With respect to the BAC warrants, the latter yields make more sense because the comparison is between levered common reinvestor and warrant holder. Regardless of the magnitude of future dividends relative to the initial purchase price, you end up with initial stock quantity + future stock quantities purchased with dividends. That gets you somewhere close to the A Warrant.

Are you guys talking about the BAC A warrants with the adjustment feature? In that case, the cost should be pretty close to (cost of carry + div yield - div adjustment). If you calculate the div yield in the same manner as the div adjustment, then they should cancel out, so you just have the negative carry. Think about a warrant trading exactly at fair value (stock price - strike). There is no charge for leverage, so if the company issues a dividend, your warrant return should be neutral for that time frame. This is assuming that the stock price moves only to adjust for the dividend issuance. Hmm, that looks more confusing than it sounded in my head. Appreciate any different viewpoints.

Perhaps, but the problem is stereotypes is less about their usefulness in a given situation, and more about the way they embed in the mind as a bias. Maybe you have seen such a situation again and again. Or maybe you saw it a couple of times, formed a quick and rough heuristic, and manufactured the other half dozen times that you think you saw. I think that I would be annoyed as an older man, or a younger women of non-threatening attractiveness, if people took a glance, and then made up their minds before the glance was done.

Discounted cash flows are generally a measure of business values. When you start looking at per share DCF, you are mixing up business results with your actions as an investor. A shareholder may choose to hold during a buyback, or choose to sell. Similarly, a dividend recipient may decide to reinvest, or not. That is not right or wrong, but such choices result from expectations that should already be included in your discount rates. You stumble across a company that yields FCFE, pre-buyback, equal to your discount rate. But they announce that 100% of FCFE will go towards repurchasing shares. Management has not suddenly caused DCF to plummet to 0. Every moment your percentage ownership increases is another moment that you have reinvested in the firm. The growth rate of FCFE is unchanged. Your FCFE per share increases because of your reinvestment choices, just as if the firm changed course and announced a 100% dividend option. The same logic that compelled you to maintain shares in a buyback program, would cause you to purchase shares in a dividend program.

Do you know which organization under the Hyundai banner he was referring to?

It's not a dumb article, although the writer uses hyperbole. If you measure "ownership" by distribution of wealth as an indicator of effective control then you can see where he is coming from. The principal-agent problem shows the limits of law-based ownership. Agents can divert wealth if, for example, equipped with an information advantage and facing a diffusely incentivised shareholder base. Or there might be situations, like in some buyouts, where shareholders can't trust each other, so you have the potential for intermediaries to control assets. Or there could be a union with major political clout, or a shareholder with special voting rights. Martin Whitman controlled for this absence of control by valuing companies from the perspective of an outside passive minority investor. It's a good way of cutting through the semantics, and focusing on what you get for what you pay.

Valueline one-pagers are great, but they are cumbersome to download. Is there anyway to update one-pagers automatically, or to create a list and download them in groups?

Thanks for the link. Man, he looks younger than me despite being older in that clip. I am going to be a horrific looking senior.

If anyone gets to ask a question, it would be interesting to hear how Buffett would incorporate Brown-Vitter into his banking valuations. Even though the market doesn't seem to be pricing Brown-Vitter's passage, it could reveal a lot about how Buffett looks at banks.