randomep

+1, I think his one gets a lot of publicity because the manager was so frank despite this fund blowing up. Amaranth Advisors

I am surprised no one mentioned www.footnotechanges.com

.... institutional investors may need to accept that investing in small cap public equities is better for long-term investment returns than investing in second- or third-tier VC funds..... Yet more confirmation of WEB ideas.....

My god he looks like a zombie in all the photos. While this does good to restore public confidence in markets, it would be nothing compared to seeing SAC looking like that :)

But I think most on this board don't think this is a stale environment. There are lots of dirt cheap stocks in russia, japan, and certain parts of europe. But it the entire world is out of bargains, ya, I would hold cash.

+1 That's what I see, for us small investors the universe is so large that if in doubt move on......

The first article's basic conclusion is very very misleading. I am surprised nobody called them out on it. The conclusion states that the difference between 100% turnover and 0% turnover is 2.1% or 6% vs. 3.9%, assuming a 35% tax rate. The 100% turnover case $100 gains $114.94 CASH which is the 3.9% compounded. The 0% turnover case $100 gains $220.17 in stock, but you have to sell the stock sometime! If you sold at 35% interest rate you would gain $143 which is 4.5%. That is a 4.5%-3.9% = 0.6% difference! Our purpose to invest is to gain money in our lifetimes to spend, and even if you will it to your kids it will get taxed if you give it to them in kind. Maybe these numbers make sense if you will it to a charity but then again, we most of us aren't rich enough or altruistic enough to do that..... :)

I don't get what you are saying and I cannot read that article (I dont want to sign up or anything). Is it hot? or cool? BTW I am in california.....

This is a great topic. I printed out the article but I am at work and I must read this on my commute home. But I want to jump in for now. The article seems fantastic, just the stuff I have been looking for. Now please forgive me if you feel I am hijacking your thread. But everyone says the 3 killers of returns are: inflation, fees, and taxes. I think it is arguable which is worse in all circumstances. We are lucky to be in a time of low inflation, so we don't think about it too much (in terms of returns!). I also have discussion on all three topics: taxes: http://bovinebear.blogspot.com/2013/07/taxes-and-investment-returns.html fees: http://bovinebear.blogspot.com/2012/09/my-investing-costs.html inflation: http://www.cornerofberkshireandfairfax.ca/forum/general-discussion/inflation-fallacy/ I'll definitely comment on the article tomorrow. Now back to you jtvalue!

http://www.sequoiafund.com/fund-reports.htm Thanks now this is a gem!

I don't understand what you don't understand. Like I said I read the first few paragraphs. Paragraph 3: ----------------------------------------------- Sometime in February, I will ask my ECON1000 students: "So, why is inflation a bad thing?" I can anticipate the look on their faces. Some will give me that look of sympathy, normally reserved for those who aren't too bright. Others will look like they know this must be a trick question, since I wouldn't ask anything that were really quite so obvious. Finally one will answer. "Because if all prices rise 10% we will only be able to afford to buy 10% less stuff. Duh!" Except the "Duh!" is silent. ---------------------------------------------------- Everything I wrote in my last post (not the one about stalin) addresses the 3rd paragraph of the article! If I talk about the 3rd paragraph only I am not addressing the point of the article??? Boy I'd love to be in his ECON1000 class when he asks that question! And about Stalin, I was just saying in any "unfair" distribution of wealth, someone will benefit. ERICPOLOY's father is a perfect case in point.....

But I am saying inflation (too high) is universally bad. In what sense is inflation good? If I understand what you are saying then by his argument Stalin can be considered a great man because there are still russians today who celebrate his reign. Of course they were the people who didn't wind up in the gulags, they benefited from the slave labour. Capitalism breaks down when you have runaway inflation. I mean bribery can be considered good for the civil servants. But really, except for a select few like a tinpot dictator, everyone suffers under bribery and corruption in the long run. Same for inflation. I have no idea what you're talking about. Did you even read the linked article? It's just saying that inflation can be bad, neutral, or good. It depends on what economic actor you are and what it is that becomes more expensive. If your wages inflate faster than the prices of the things you buy, inflation is good for you. And anyone's higher price is someone else's higher revenue. Over the past year, how much less can you buy for a dollar? Yet are people living better or worse? What matters in the end is the value that you produce and get, not how many nominal dollars you get and spend. I admit I didn't read every word, it didn't make sense after about 3 paragraphs. But still why don't you understand what I said? Sure price raises will benefit somebody. But think in practical terms. Like his example. It is good to sell something for $2 instead of $1, then he sells the goods at the inflated price. But he didn't really add value he is able to raise the price because everyone else is raising prices. Say he paid $1 for it. His profit is $1. But he isn't really ahead because if he buys another apple to sell he will have to pay $2. So is he back where he started? No! because he made a profit of $1 and had to pay $0.33 cent tax! He has 1 apple. before sells 1 apple for $2. has $1 profit and pays 33% tax. So now he has $1.66 buys another apple for $2. he has 1 apple and -$.33 debt. The reason is that our tax laws were invented with the notion of stable prices. So it is wrong to say the price raiser is a winner, because he will benefit and suffer from inflation. Pretty soon he will go out of business. And you mentioned labour does great if they get to raise wages, ya but what if he loses his job? That's what happened in the 70's. High inflation is universally bad. We think in terms of stable prices. I don't know what ideal world the author is thinking of that will make inflation benefit anyone in the long run or be neutral in the long run. Certainly we have to change the way humans think and how the banks and tax laws are made.

But I am saying inflation (too high) is universally bad. In what sense is inflation good? If I understand what you are saying then by his argument Stalin can be considered a great man because there are still russians today who celebrate his reign. Of course they were the people who didn't wind up in the gulags, they benefited from the slave labour. Capitalism breaks down when you have runaway inflation. I mean bribery can be considered good for the civil servants. But really, except for a select few like a tinpot dictator, everyone suffers under bribery and corruption in the long run. Same for inflation.

Inflation IS a bad thing like the Fed says. The 70's proved that pretty conclusively didn't it? Our hero Warren Buffett wrote a good piece on it in the 70s: http://fortune.com/2011/06/12/buffett-how-inflation-swindles-the-equity-investor-fortune-classics-1977/ to me its a no brainer. As someone with a lot of skin in the market, one of the biggest macro factors I look at is the inflation rate. I am riding this bull market as hard as I am because inflation is muted. Ok as a current example of bad inflation, I invested in Oi of Brazil, my biggest mistake since the financial crisis. It is a capital intensive company in a country with high inflation. And the company sucks! I vow to never invest in a high inflationary environment again.

Well said. At the risk of being repetitive, let me summarize: Picketty is wrong on so many levels. But Bill Gross made a similar point in his letter on "the death of equities" http://www.reuters.com/article/2012/07/31/us-investing-gross-pimco-idUSBRE86U15720120731 And your article points out the faults with both. We humans waste A LOT capital for discretionary things: - helping the poor (ok ok maybe this isn't exactly a waste) - helping preserve nature - partying - fighting wars - taking drugs And relatively few people actually save and grow capital. And growing capital isn't easy, lots of people try and lose their shirts. So the world must reward those who can take the risk and are good at allocating capital. Without the reward of 10% investment growth the GDP cannot grow at 3% or whatever number Picketty uses. We already gave marx his chance to implement his theories, that's enough!

Generally, generalizations don't work.

" technological change has been destroying jobs faster than it is creating them" that is very plausible however, to be more precise, I believe the small number of new jobs filled is because of a lack of people of available new skills, not a lack of openings......

It is amazing how many people think that getting more output for less human effort is a bad thing. If you want jobs, you could pay people to dig holes and then pay them to fill them back in. I think this horrible future will see unemployment skyrocket and these "poor" people will be living lives that even the rich today couldn't imagine. But of course, there will be much blathering about the wealth disparity between the masses and the insanely rich. Humans get wealthier and our lives get easier, but we never really change. I believe a lot of the longinvestor argument comes from thinking along the path of least resistance (sorry don't really mean to offend). It comes from some observation which then extrapolates easily infinitely into the future. But the minute you dig deeper, you see the argument has lots of problems. For example regarding global prosperity, while it is true that we are marching towards higher and higher standards of living, parts of the world are also marching back to medieval times. I am talking about the middle east. The Bushes tried twice to democratize Iraq, and now it is back to basic feudal tribal warfare. For selfish reasons lots of leaders in the world aren't interested in progress. So it isn't a given that the world is marching lockstep towards greater prosperity for all. It is plausible that the world will destroy a big chunk of progress through war and conflict every decade or so. People will suffer, and the more sane societies will make money reconstructing those places. So, there is more reason for the owners of capital to get richer. We have had many false starts towards utopia, after the first world war and second world war, and cold war leaders touted a new world order... boy were they wrong. I think value investing has a similar problem. Value investing is hard because it requires lots of original contrarian thinking. Even people who are sold on Graham and Buffett find it hard to think for themselves and following through against the grain. I see it in work also, people love parroting whoever they think is the thought leader, even when facts don't support what they say. .... a bit of a tangent.....

Shouldn't the answer to this thread be: OWN INCOME PRODUCING CAPITAL??? Doesn't all this mean money is moving from the workers to the company owners (shareholders?).

I am not an economist and I don't assume anything. How do we know that Yen is going to 110 to the dollar? As I understand, to get there requires lots of inflation, and that is very very hard to come by in Japan. I don't think they are meeting the 2% target.

thanks!

It's ok it's tax deductable.

It is a coincidence as he is a international investor. Funny how he compares himself to S&P500 when it makes more sense and probably looks better if he chose a MCSI EAFE index.

here Munger has quantified (even though it is just an estimate) the value of the $127 of deferred tax liability to be $30. For our personal finances the same logic should apply. I don't know his logic but one can use his methods to estimate the value of one's holdings when one does not sell a stock in a non-tax sheltered brokerage account. I have always been looking for a way to weight the cost of keeping a stock and the benefit of the tax-deferred liability.

Hey, you know I really learned something from this thread. I have a lot more in common with a lot of you besides an interest in investing. So I haven't heard anyone talk about the meds they are taking. Maybe we should compare notes on what works and what doesn't. We are DIY investors, so next step is we self medicate? lol