bargainman
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Posts posted by bargainman
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If you need a different analogy, this one might help:
Newly rich behave like Richard Sherman
Old money behaves like Peyton Manning
The Koch brothers have given more money to charity than any of the execs you mentioned; most rich people are active in the charity scene, but that's not the point. Tech entrepreneurs scream back and forth at each other and generally behave without respect for their competitors, while more refined businessmen act with more restraint. Donating to political causes is not arrogant, though it may be controversial.
Quite the generalization .. how about some names of these execs who are shouting and screaming at each other?
Newly rich behave like the tech execs I mentioned, and others like say Buffet and Bill Gates who earned most of their money.
Old money behaves like Paris Hilton, The Marriott sisters, and a host of other spoiled rich kids. (Kids in the Johnson & Johnson inheritance feud)
Speaking of shouting at one another and behaving without refinement:
http://www.dailyfinance.com/2011/06/06/the-10-most-infamous-family-inheritance-feuds/
9. Fred KochValue of estate: $5.6 billion
Amount contested: $2.3 billion
Feuding parties: four brothers
The four sons of Fred Koch, co-founder of energy conglomerate Koch Industries, spent nearly twenty years feuding with one another over whether two brothers, Charles and David, cheated the other two, William and Frederick, out of $2.3 billion when they sold their shares of Koch Industries in 1983 for around $1 billion. For years, the billionaires reportedly communicated only through lawyers, occasionally making efforts to publicly humiliate and discredit one another. After years of fighting and millions of dollars spent on legal fees, the brothers reconciled in 2001.
In any case this is kind of a useless argument because there is a large enough sample set that one could find an example of just about anything to support one's point of view. There are going to be spoiled Rich kids, refined responsible inheritance kids, newly rich people who think they are the gift of God, and really rich people who want to change the world, and to do good. If you have any actual studies, That would be more interesting and perhaps more convincing.
I think that ultimately it comes down to the individual's character and in particular also whether they acknowledge the role of luck and Fortune in their situation. For particular individuals I think it's worth asking whether their hard work and success has brought arrogance, but I don't think it's fair to make a blanket statement that tech execs and particular ones in Silicon Valley, Of which you have still not named any, or any other new money somehow always acts arrogantly by default.
Now if you're talking about sports, you will also find arrogant idiots who just got rich, as well as more refined individuals. Although I would agree that there tend to be more of the former than the latter, although that might be biased as well since you will clearly hear more about the former than the latter...
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It's not too difficult to be outwardly humble when your success is obvious. But Silicon Valley a-holes could certainly learn a thing or two from Charlie and Warren.
I think one's reaction to success comes down to one's upbringing. Look at all the newly rich tech entrepreneurs and wildcatters and you'll find a bunch of Lamborghini-driving I-can-do-anything misfits. Look at guys like Gianni Agnelli, the Koch Brothers, Buffett, George H.W. Bush, and others who built on top of a privileged upbringing and you'll find men who handle success with more restraint.
Wow I must say that I am quite surprised that you point the finger at Silicon Valley a-holes and on other hand talk up people like the Koch brothers in the same sentence as Buffett.
I do not have a deep understanding of the Koch brothers, but I know they are highly reviled in multiple circles. (as is the younger Bush, although you could say that of most any politician)
What Silicon Valley a-holes are you referring to exactly? Mark Zuckerberg who has taken the giving pledge? Larry and Sergey from Google? Reid Hoffman? Perhaps Elon Musk? Or the arrogant Larry Ellison who has also taken the giving pledge? I guess that it makes sense to point at Silicon Valley given the disruptive nature of the industries here, and the necessity to be at least a little bit arrogant to think one can reinvent an industry. That said the majority of Silicon Valley people I know of are highly intelligent and want to give back to a cause.
I am also surprised that this thread has not yet mentioned the high-frequency trading hedge funds and wall street folks like a fabulous Fabrice.
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everytime i see someone with these beats, I think they are suckers. It is basicly a big rip off . You can get headphones for less money with noticable better sound quality that are more durable. Same with that bose crap. Shows again that people are not rational agents like economists seem to think.
And funny thing is that if they would have priced them lower, those beats would have been a flop :D .
in that case isn't it a perfect fit with Apple products ? at least in terms of margins versus quality versus perceived value? pretty much every luxury brand charges a non- rational premium right?
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So I watched a few more of the episodes available on CNBC.com. I am left with a couple of impressions. I am still amazed at the level of incompetence and the lack of self reflection among a lot of these people. The two episodes that stick in my mind are the skulduggery and worldwide trailers. In both those episodes Marcus actually decides to walk away from the deal, which was actually very warranted. The only question in my mind was why he didn't walk away earlier. That actually had me wondering how much of the show is a show, that is how much of it is scripted, and how much of it is reality. I am sure that there is a little bit of both. Especially given that you can actually find these companies and they are Live companies. I also wonder about his level of due diligence, since there is usually the scene where he puts his offer on the table, and then later he has to go back and check out the corporate papers etc.
Another thing that had me confused was just how he calculates his offers out. In particular for the world wide trailers he offered I think it was 700,000 for 50% of the business, where the business I think was almost a $2 million revenue and supposedly 400,000 in income business. But then for the skulduggery business which seemed like a horrible business, again with almost 2,000,000 in sales, but multiple tens of thousands in losses over the last two years, and 1.1 million in debt, he offered to pay off the debt and invest in another million dollars for only 50% of the business. The idiotic brothers who run that place Were insulted with the offer believe it or not. And after that Marcus came back with a deal for just paying off the debt and getting 30% of the business. That made me wonder how much he does for the purposes of the show. Since obviously there's some pressure for him to keep the drama going until later in the process so they have a show. If he walked away at the very beginning, there would be no show.
Anyway so far my favorite episodes were wine place, the key lime place, and Sweet Pete's. Although I agree with one of the earlier comments that with Sweet Pete's he really didn't have enough time to give solid results as to whether the turnaround really worked. Anyway I still find the show pretty fascinating.
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How does Marcus exit these companies?
Who says he exits these companies? Does Buffett exit the companies he buys? If he has his money tied up in high return on investment companies gushing cash, why would he try to exit them?
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I'm curious, has anybody watched this show on CNBC? I was at the gym this afternoon and this episode was on:
http://www.cnbc.com/live-tv/the-profit/full-episode/amazing-grapes-wine-store/220369987529
I actually found it quite fascinating. I'm not sure what the guy's background is, it was very interesting how he went in and basically fixed up A dying or almost dead business. I think what was most fascinating was how terrible of a businessman original partner and owner was.
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V interesting idea that doesnt seem noticed in the corner of the market. With 100% upside and a catalyst of 1 year.
can you please expand on this?
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after thinking about it for quite some time, I really have no idea why anybody especially anybody in United States, would ever want to fully pay off their mortgage, especially at the current rates that we have today. If you have a mortgage rate at 4 percent or less for 30 years, (remember that that is tax deductible as well) so you are in an insanely low borrowed rate! You have money that is liquid, generally a non-recourse load.. You can invest in other things like the stock market. Even if you don't find anything that is insanely cheap in the stock market, time and again it's been shown that over a 20 to 30 year periods, the stock market returns will be 6-7 percent after inflation is taken into account. Real estate will not. Plus over time the real value of the loan goes down with inflation.. Why would anyone ever want to pay off their mortgage? It makes no logical/rational sense as far as I can tell.. As long as you're not over leveraged...
I agree with your logic but not where it is taking you. There are several assumptions in your statement:
1) That the investment someone chooses will equal the stock returns. They often dont.
2) That the person doesn't get spooked out of their investment at the wrong time. They often do.
3) That they have a mortgage that cheap for 30 years. Most don't and will face a readjustment at an inopportune time when interest rates are double digit.
4) That the person buys stocks throughout the cycle, not just at the top of the market.
5) That the person buys a properly run ETF via dollar cost averaging and never gets spooked.
The majority of people cannot adequately describe what a stock is, or what a stock market is, but they do understand their mortgage payments.
I am with Peter Lynch and others on this one. Pay the mortgage first. Unless you have the kind of investing ability of some of the board members here. We just went through a period of huge numbers of people using their homes as cash machines and look where it ended up.
I don't know where DCg stands in terms of tax rates, age, mortgage ability, or investing ability; the above likely does not apply to him.
Ok. What I said was "why anybody", what I meant was "why anybody on this board, or "anybody with half a decent understanding of investing". You points apply to the general population, but probably only to 10% of people on this board... Especially with a 30 year fixed US non recourse mortgage still at almost record lows with the tax deduction kicker...
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after thinking about it for quite some time, I really have no idea why anybody especially anybody in United States, would ever want to fully pay off their mortgage, especially at the current rates that we have today. If you have a mortgage rate at 4 percent or less for 30 years, (remember that that is tax deductible as well) so you are in an insanely low borrowed rate! You have money that is liquid, generally a non-recourse load.. You can invest in other things like the stock market. Even if you don't find anything that is insanely cheap in the stock market, time and again it's been shown that over a 20 to 30 year periods, the stock market returns will be 6-7 percent after inflation is taken into account. Real estate will not. Plus over time the real value of the loan goes down with inflation.. Why would anyone ever want to pay off their mortgage? It makes no logical/rational sense as far as I can tell.. As long as you're not over leveraged...
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also note the income limits. You may not be able to get deductions for the Traditional IRA above some income. In that case you can't get a Roth directly, but you can do the ->Traditional->Roth transfer to get around it..
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Under community property laws here in the US, when either you or your spouse dies all of the capital gains held in the marriage community are forgiven via a full step-up in basis upon the death of the first spouse. You might find yourself a billionaire, with a ton of unrealized capital gains, separated from your wife and living with another woman. It would be better not to formalize the divorce under community property law.
wow interesting... checked it out...
http://www.paytaxeslater.com/stepup.htm
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Anyhow, in my personal life I don't hold any cash at all. I just have a large chunk hedged with puts for liquidity guarantee. I would rather lose it to the options market than the tax man anyhow. The puts don't cost as much as they appear in a taxable account -- the IRS shares my losses on them.
This is the equivalent of just buying calls (synthetic calls). Interesting that you consider the tax angle. I suppose that doing the synthetic call is in fact more tax efficeint? you keep taking the tax losses and can hold the shares and not pay those taxes indefinitely? Is that the strategy?
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I'll add my 2 cents:
1. We don't have an education problem in the United States if you are upper middle class or wealthy. We only have an education problem with the middle class and the poor. Therefore, "market solutions" have little offer this problem. You can't squeeze blood from a stone and you can't get $15k/year tuition per student from the middle class and the poor. So, at some point, the government is forced to subsidize the education of the vast majority of Americans. Saying the market alone will find a solution for this is asinine.
2. I like to take the easy route to problem solving - find people who were able to consistently solve this problem and copy them. And the best school systems in the world are almost all big-government, very draconian styles of education.
3. There will always be an education gap in the United States. The government can't stop me from educating my children with my own money. And I think education is extremely important. But many, many Americans don't think education is important. They just want a place to drop off their kids while they go to work. I don't know if you can solve a problem where so many parents really don't give a crap. My best friend is Korean and he said even the poor kids feel academic pressure from their parents. You don't see that as much in the poor communities in the United States.
This is actually quite interesting. I don't know if you read the book outsiders, but he addresses some of this in that book. Apparently there is a study about the schools, and they measured kids at the beginning of the year and the end of the year. What they found is very interesting. Apparently all the kids learned between the beginning and end of the year. But what ended up happening was that the middle class and upper class kids either continued progressing or stayed the same over the summer months, whereas the poor kids ended up regressing during the summer months. That basically suggests that the schools are not really the problem since they are actually teaching all kids equally. Apparently it's the parents that are the problem.
Another interesting thing about the United States is that property taxes go to fund the schools. That said there is also a Federal funding and state funding, but my understanding is that property taxes are the bulk. This again leads to the issue that the kids in the better neighborhoods will have better funded schools which will once again propagate their advantages.
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I think the American Dream is misstated - who ever stated if you worked hard and persevered you get into the middle class? If you work hard and persevered in a field demanded by employers then the statement is true. If you go to school and take STEM subjects in demand then you will be fine. Just ask aspiring actors and journalists and other star professions how many hard working and persevering folks do not make it? I think the mobility is there if you want it but it may not be on your terms.
Packer
Sure, but the point of the article is that overall it's easier to do this in countries outside of the United States even though it is the so called American dream.
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Can somebody give me a quick paragraph or two on what
Coverdell ESA
Are? I have 529 plans for the kids, but have not looked into Coverdell ESA yet. Should I?
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http://money.cnn.com/2013/12/09/news/economy/america-economic-mobility/index.html?source=cnn_bin
The American Dream is supposed to mean that through hard work and perseverance, even the poorest people can make it to middle class or above. But it's actually harder to move up in America than it is in most other advanced nations.... Among the major developed countries, only in Italy and the United Kingdom is there less economic mobility, according to Corak. -
I am Not sure if I can trust Bruce Berkowitz with my money any further. I just came back from the movies to see the new Thor, and every time I saw Loki, I kept expecting him to bust out Bruce's distinctive drawl and say something like "price is what you pay ... value is what you get!" and then he did something conniving to Thor...
you be the judge... ;)
http://www.google.com/search?q=bruce+berkowitz&rls=en&tbm=isch
http://www.google.com/search?q=loki+thor+images&rls=en&tbm=isch
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Anyone else notice this?
http://www.formulainvestingfunds.com/
We are pleased to announce the upcoming merger of Formula Investing’s operations into Gotham Asset Management, the advisor to the Formula Investing Mutual Funds. We believe that utilizing our valuation principles to invest on both the long and the short-side will provide additional benefits over long-only investing. As a result, the following measures have been approved:The Board of Trustees has approved the merger of the long-only Formula Investing U.S. Funds into the long/short Gotham Enhanced Return Fund, subject to shareholder approval - Click here to View Supplement.
The Board of Trustees has approved the closing of the long-only Formula Investing International Funds. - Click here to View Supplement. For additional information and for alternative investment options, please call 877-974-6852. Special accommodations have been made for current Formula International Funds' shareholders who wish to invest in the Gotham long/short mutual funds.
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Nothing is my answer!!! Is there anything cheap out there? I guess I bought some IBM leaps a few weeks back. Been selling calls on stocks I own.. Slowly selling a bit here and there.. Anyone buying? Anything attractive?? Even selling puts kind of sucks since Volatility is so low...
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Consider Buffett's famous comments on IQ: "If you are in the investment business and have an IQ of 150, sell 30." "You don't need to be a rocket scientist. Investing is not a game where the guy with the 160 IQ beats the guy with 130 IQ." It's an appealing story, but is it accurate?
Translated into IQ scores, it looks like Finnish investors with an IQ above 120 outperformed those with an IQ of 100 by roughly 2.2% annually.
Somewhat perversely, I think quantitative aptitude might be underrated in investing. (Of course emotional control, social and qualitative thinking are also critically important.)
An IQ of 100 is just average (50th percentile), where 120 is well into the above average category (89 percentile). I'd believe that someone with an IQ of 120 would do measurably better in most tasks which require some amount of analytical analysis, such as investing. No one would find it surprising if a study found that on average investors with a 100 IQ beat investors with an 80 IQ. But when you are talking about the difference between an investor with a 130 IQ and one with a 160, both of which are above the 90th percentile already, I think the increased intelligence doesn't matter as much. I think once you are "smart enough" (being above some minimum threshold) having the knack for finding good investments isn't something that is measured by an IQ test. It can only really be measured by your returns over a long period of time.
Right, it's the common concept of marginal utility. I remember Outliers talked about this a reasonable amount. If you're about 6'3", more height doesn't necessarily make you a better basketball player (depending of the position you play). Apparently they did studies on all lawyers who graduated from a prestigious school (some percentage had entered under a special program for underprivileged people, so those people entering were significantly less 'smart' or 'educated'), and they found there was absolutely no difference in their career path's success rates by any measure. There is an obsession in our society to measure things, and sometimes those things don't matter. Another example was the combine and the wonderlic, apparently scouts use the information to grade football players, but it makes no real difference: http://www.cnbc.com/id/28813545
That said, there is a real difference and correlation up to a point. I do think someone with a 120+ IQ is going to do better in general and in investing than someone with an 100 IQ. That's why Buffet said 130 vs 160, not 100 vs 160...
Plus in STEM fields, I think IQ does correlate better to a higher level than an average field.
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So I've been reading the discussion about Sears,
http://www.cornerofberkshireandfairfax.ca/forum/investment-ideas/shld-sears/1775/?topicseen
and like a lot of discussions on message boards on the web, even the best boards like this one, there seems to be a reasonable amount of emotion, and also some amount of black and white thinking, or at least people arguing either just one perspective or the other. There is also a lot of great information.
I personally try to think of things in less of an "either or" way. I think of things, especially these sorts of scenarios, in both probabilities for the short term and the long term, and also decision trees to analyze actions that I might take on those probabilistic scenarios.
Well, that was certainly a bunch of mumbo jumbo and jargon, so let me get started on the actual meat:
Before I get started on the probable scenarios in the short term and long term, these are my potential actions on the stock:
- inaction
- purchase by proxy by participating in fairholmes fairx fund,
- purchase directly by buying shares and potentially participating somewhat in lending out my shares to shorts and making some money that way,
- buying longer term options primarily call leaps, and or
- selling short term options, primarily puts.
With that out of the way, let me list the short term scenarios and the long-term scenarios and attach probabilities to each.
Short term possible events
Bankruptcy - very low probability
Stock dropping to 30 -low to medium probability
Short squeeze -low to medium probability
Spin off of some sort which may cause annoying taxable or tax related event -medium probability
Eddie brilliantly turns around the business and makes it profitable - pretty low probability
Long-term possible events and outcomes
Bankruptcy -very low probability
Lost opportunity cost where assets follow or slightly trail inflation before Eddie is able to monetize properly -low to medium probability
Short squeeze that pops the stock up at least 50 to a hundred percent -high probably
Eddie becomes the next Jeff Bezos and turns this operation into an Amazon like machine -very low probability
Stock goes below 30 permanently reasonably low probability
Eddie winds down ESL and makes this his primary investment vehicle -medium probability
Now I have my reasons for assigning these probabilities but if I went into all of those this message would never end :-) so let me analyze my possible actions.
I already own a reasonable amount of the fair holme Fund so no action required there, I will participate in Sears depending upon the whim of Mr Bruce
Owning Sears directly might be OK, especially since my broker gives me some interest for lending out the shares, but the factors here are that I only get half of the total amount of interest for the shares lent, I also feel the pain when a split or spin-off happens and I have to figure out what to do with some spin off stock. Also in the scenario where the stock does nothing I have the lost opportunity cost, minus of course the interest I was paid. But generally here I am using a reasonable amount of capital and betting on Eddie monetizing quickly enough that the stock becomes worth something, or waiting for a short squeeze and selling out then.
Options, now here is where it gets interesting . First a word on pricing, for some reason at this stage, short term close to the money Puts are earning 40 to 50 percent annualized. Long-term calls are charging about 12 percent annualized at the money 2015 leaps. So if I believe that in the short term the stock won't drop too far below 30 and that in the long term it won't do so either, I can probably make a reasonable amount by selling short term close to the money puts and rolling them as necessary. How long those premiums will last, at those strike prices, I do not know, but they have been pretty high ATM consistently. Now if I believe that in a slightly longer term there is a reasonable chance of a short squeeze, it doesn't cost me a whole lot to buy some out-of-the-money call leaps so that I am exposed to any possible upside without a large investment of my own capital.
You can probably guess what my actions have been and will be going forward. I agree with many that this is not a slam dunk 1 foot hurdle. I also agree that Eddie didn't become stupid all in this recent period. I also agree that there is a reasonable difference between somebody running a hedge fund and that same person running as CEO of a retail business successfully . I see a significant difference between him and Jeff Bezos merely starting with the fact that Jeff Bezos is a trained computer scientist with significant interest in other sciences, while Eddie is a trained economist. Jeff Bezos also seems to be very inspiring and visionary whereas Eddie seems to be reclusive uninspiring but still rather data-driven. This is not to say that Jeff Bezos does not have his faults. But enough about that. I won't draw too much of a comparison with Warren Buffett other than to say that we all know he studied Warren deeply and we all know about Eddie's record. As far as the actual end game goes I really do not see a way out for Eddie, he either needs to fix the retail side of Sears, monetize the assets and invest in something else, do some combination of the two, or just keep sinking slowly.
So what am i doing then? I trust Mr Bruce enough that I am willing to keep holding My fairholme shares. I feel like the stock is paying significant short term options premiums with reasonable downside risk that will be offset by those premiums in reasonable order by rolling. It also feels like those short term premiums make up for the potential opportunity cost outlined above if Eddie is too slow to monetize and the business keeps deteriorating too fast . I feel like in the long term and even the shorter term there is enough impetus for a short squeeze that could spike the stock given the short interest and the small float. As such with the leaps costing a reasonable premium, I am exposed to this potential upside for little cost or at least reasonable cost.
Now both sets of options would be exposed to the spin-off issue, but I guess you can't have everything. Now if I could do that in my non taxable account that would be great, but I cannot.
I would be interested in hearing how others are trading this stock and dealing with the possible probabilities and different scenarios (also what probabilities people assign to the possible scenarios). I started a separate thread because I didn't want this particular thread to turn into something focused on what could happen, but rather something focused on what actions one could take to take advantage of the possible scenarios. Hopefully that makes sense but since it's late over here maybe it doesn't :-)
- inaction
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so what is the best way that people have found to read this site? I have both a smartphone at a little under 4 inches and a tablet close to 8 inches, and using the standard website view is far from ideal especially given all of the small links to click. any suggestions?
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looks like there are social based apps and sites looking to crowd source taxis too:
Lyft, sidecar.
Relayrides looks like another version of getaround..
It's getting interesting in terms of making currently unused assets useful..
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You didn't mention
which I think already has as many or more 'available cars' than zipcar. It's a pretty ingenious model.
Nygren's latest letter
in General Discussion
Posted
u mean Chase right?