frommi

Profit margins erode through competition when there is no true moat or through inflation that can not be passed to the customer, roic erodes because it becomes harder to invest bigger chunks of capital. So in most businesses you see both mean reverting but at some only roic.

But that doesn`t mean its the optimal holding period for everyone. When you deploy capital in tenth of billions, its not really a matter of choice. There are not a lot of businesses that can compound capital at >20% forever (if they exist at all), so when you want to compound faster than that your only chance is to increase your inventory turnover or to use leverage.

Yes but they didn`t use leverage as far i know and when you compound at 27% for a decade and than have a 50% or 60% drawdown its not the end of the world. Especially when you look at the story, i mean he has only played with internet stocks in late 1999 because there was immense pressure from his investors, i doubt that he would have done it when he was a private investor at that time. Just shows how dangerous it can be to invest OPM.

Haha the typical anti market timing comment, what you can`t be right 100% of the time? Than its useless! There are a lot more ways to skin the cat, the really good guys know more than one way to make money. Value investing is just one tool.

FFH

Just wanted to thank you for opening the thread. I received my digital gold card from IB today after using the simple number card for a long time. Without this thread i wouldn`t have known that there is a better and more secure version.

Thanks, good idea.

Yes, shorted it again. Its like getting an ETF with 100 pump and dump stocks that have recently been pumped. Or i am just too stupid to understand these biotech valuations.

Pretty much this, covered XBI shorts and short Russel futures in the opening and after that bought a lot of stuff, like CMPR,IBKR,LILA,CSU.TO, etc. Really crazy what a difference one day/hour can make.

Historically when you hedged from august to october you didn`t gave up performance, regardless of where the market was. I would bet that only doing it when the market was expensive and with some kind of valuation bias would have improved overall performance. Now you can laugh about these statistics or dismiss them, but it is was has worked over the last 50 years. (and funny fact is, still nobody does it that way)

This is something I agree with somewhat... Not all drugs in pipeline are going to be wonder drugs...but how can we be sure and exclude the ones which are going to be? If the thesis is to short a basket... Also like in venture capital investments, does one blockbuster drug make up for the losses for the rest and still provide an adequate return on capital? It could be a bubble if that threshold is passed....how could I be reasonably certain about that without knowing how many blockbusters, how big of a blockbuster and how quickly it will be a blockbuster. My theory is that up to this point most of the biotech companies that really have something in store are already bought. And yes its a basket bet of just going short XBI.

I don`t think a tech crash is coming, but a biotech crash. You can pick a random company out of XBI and be sure to hit something like RCPT. 7 billion marketcap, 5-10 million in revenue, insider dilution, heavy losses. (but i am sure they have a wonderdrug in the pipeline ...) The problem is that in XBI are 100 companies that are similar to that. I don`t need to be a biotech specialist to see that the real bubble in us equities is there.

LILA

I can`t really see how the US is able to default without creating a huge problem for retirees at the same time. And since this is a growing and voting cohort, its nearly impossible for the US to go that way. Of course printing money is a slow and long process, but its the one that can work without a revolution. Assuming we get a long period of deflation has the implicit assumption that the FED has no power/control anymore (at least over the currency). I simply don`t believe this.

Japan has not really printed that much money until the start of Abenomics? When too much debt is the problem, QE is the only workable solution isn`t it? They have to print enough money to offset the negative money velocity. And ideally the government spends more money financed by the FED. That way you simply can`t have deflation. At the moment the FED is not printing money and the government is spending less, the outcome of that is what we see at the moment.

I really doubt that the US will go into a long phase of deflation, but in the short term its always a possibility. As soon as the market drops the FED will turn around and anounce the next round of QE. And that is necessary until the deleveraging is over. Since the FED will then own most of the government debt its just an accounting number that the government can easily erase if it chooses to. They can simply print a trillion dollar coin and give it to the FED and the debt magically disappears. Thats the beauty of having full control over the supply of money. EDIT: This was not possible in the 30`s, since the currency was gold backed, so it was a totally different situation.

AXP and PWE

No it is the strongest currency because it is one of the few countries that is currently not expanding the monetary base. And as long as that is the case, the trend will probably persist.

Is there a correlation between investment performance and having the highest quality data? I can`t see a reason to pay for data, but of course i understand that people that sell data have a different view on this aspect. :)

3) the first step, i see this as a prerequisite for everything else. If we aren`t able to do this, than forget about everything else. 1) maybe in 50 years. 2) running out of time ... 4) maybe in 500 years. :)

Bought GOOG,PCLN,CMPR,BRK.B,LUK,BAC,CHEF,HEI.A,LBRDA,VRX,CSU.TO,PDER,DNOW,LKQ .... Sold puts and covered shorts. I really have to think about this summer hedging stuff very hard going forward, perhaps i should just stay invested during downturns.

Looks like a possible deal will be a) greece transfers 50-70 billion € of assets into a trust fund and immediately starts realizing the proposed reforms. Money is only paid after each round of votes in the greek parliament. b) greece exits the € but is allowed to stay in europe and gets structural help out of the EU-honeypots. Ball back to Tsipras ... New referendum? :)

I would put OUTR and Cimpress into the quality pocket, only Sony was a true turnaround. But in general he seems to favor businesses with high RoIC and insider ownership/management qualities. But i may be wrong, perhaps he can answer that himself, i think he is a reader of this board. :) EDIT: And maybe even Sony was a quality investment given the value of pictures+music.

Mecham`s returns are probably a good proxy for this, ~38% CAGR over the last 6.5 years or 22% over the last 15 years.

Greece and the target 2 saldo should put us easily above 110% Debt/GDP and there will be a heavy contraction in GDP because all other european countries don`t pay in the same currency anymore. Its hard to see how this will all unfold and what the consequences are, but germany has a tendency to default instead of inflate. I hope that doesn`t happen.