bizaro86

IB allowed me to buy the hyundai prefs (off the london exchange, but traded in USD). There's a thread on it in the investment section.

Two lawyers getting married? How are they going to afford to have ANY children? Most attorneys do not make very much money at all... In Boston, the lowest paid person in the courthouse are the new PD's. http://www.bostonglobe.com/metro/2014/05/21/indefensible/23OMcEGsJe1151YT0Q43PJ/story.html This is not an isolated example or story. Most newly minted attorneys are unemployed OR underemployed. They also typically have $100k+ in student loan debt which makes things tricky. Perhaps a better example would be doctors OR portfolio managers of people being able to afford to have children. You are of course correct about lawyers, but the general point is still valid I think. For example, my supervisor at my day job is an engineer married to another engineer, and my family doctor is married to a doctor.

I've heard arguments that assortive mating leads to higher income inequality, as a lawyer who 3 generations ago married his secretary or hairdresser marries another lawyer. There could be an evolutionary argument there as well, that 2 high income people marrying might pass on a genetic predisposition to higher income.

Thanks for posting this!

That makes no sense. If I was running eBay I would charge those sellers more. The prototypical original American ebay seller can and will go back to the swap meet/used book store/craigslist etc if ebay raises fees high enough using it is no longer economic. Those selling goods from Hong Kong/China will have a very hard time accessing North American markets otherwise. EBay provides those sellers real value by reducing the inventory costs/middleman. Example: I bought my baby a tuxedo on Ebay from a chinese seller for a very low price. We needed it for a wedding, he'll wear it once, even if its cheaply made he looks cute. That seller can afford to pay ebay high fees, because ebay is the only other way for them to reach me as a consumer. I wouldn't have searched elsewhere on the web, and I probably wouldn't buy from an independent website selling imported baby tuxedos. The other choice would be importing it and selling it through a store in my local mall, which has costs dramatically in excess of using ebay, and the market for baby tuxedos in any one geography is very small. It makes sense for ebay to maximize its profits by charging those sellers more, because they could get away with the price discrimination.

There are huge problems with what you said. China is squeezing the population growth artificially. There isn't enough young growth to fill for the aging. China has to make do with their 20yr and 30yr olds for decades to come. And you know... once a person is 20's they have to make do with whatever education they got, nobody goes back to school at 25. So those hundreds of millions of 20-40 yr olds in china living on $2 a day have very little chance of improving themselves. So that will contradict what the original poster said, $20-25k salary in 20yrs, not when you got hundreds of millions living on $2 a day. The 2nd thing is education. Literacy is a world away from making $20-25k a year. Right now that kind of salary is reserved for the best in engineering classes or whatever other profession. I am in engineering so lets talk about that. How many engineers can a university produce? 100-200 a year? and how many of those type of first rate unversities can you have? 5? 10? in the country? You are talking a few thousand to notch grads capable of making 20-25k. And china cannot build unversities the way they build high rises. And this is not even mentioning the law and risk taking culture that is required for innovation which China is sorely lacking. The same goes for South America, like Brazil. When you imagine in your mind a world where those countries can become like the west, you'll see the numbers just don't add up. The last 10-20 yrs for the brics for example has shown that a bit of progress does not project into indefinite growth. Any reason why a competent engineer in China should always make 25k instead of the 100k+ someone with those credentials makes in the developed world?

Should also add there doesn't seem to be any restriction on them funding "equity" at the AltaLink level with debt from MidAmerican. So if they borrow cheap and invest at AltaLink for 8%, they could materially improve the long run ROE. Obviously this isn't material to BRK, but I thought it was interesting as a case study on how the utility acquisitions work.

is it preferred tho? they are super cheap. Not the regular one, they are a bit less cheap. Yes, it is the preferred. At least according to: http://worldwide.hyundai.com/WW/Corporate/InvestorRelations/IRActivities/IRFAQs/index.html which states:

I've bought Hyundai Motor preferred in London. http://www.bloomberg.com/quote/HYUD:LI

Suitable frac sand is not plentiful, most of it comes from a small area in the US midwest. However, expansions are underway there. Also, the transportation piece is overbaked into that seeking alpha article, and an important downside is missing. Although Firebag is much closer to Edmonton, there is significant trucking involved. Trucking in the Ft McMurray region costs more than trucking anywhere else in North America. Just like everything else. Operating a frac sand mine near Ft Mac is a huge disadvantage, in my opinion, due to the labour market in that area. Oil sands producers are growing like crazy, and equipment operators make ridiculous money. It's a bigger labour shortage there than North Dakota. I'd rather own the frac sand mine in wisconsin where there is cheap labour and my mine is right next to a rail line, but that's just me. I've owned this company in the past (don't currently) but not for the frac sand, for the gravel. Those same oil sands companies have a huge need for gravel, and transporting it any distance is prohibitively expensive. It's on my watchlist to repurchase, as those gravel pits are annuities of the best kind, but I'd like to buy it cheap.

Absolutely, as an under 30 year old person, life insurance for me is really cheap. Your deduction about my relative economic status is accurate enough that I'm extremely unlikely to have any need for life insurance after the expiry of my current policy, so I don't care what it costs then. Also, the compounded value of the difference in premiums (which was substantial) exceeds the death benefit by the end of the policy. So for me, buying term and investing the difference has only the potential downside of me not achieving a rate of return equal to the current medium bond rate if I don't die in the next few decades. It might be hubris, but I'll take that bet.

Although the acquisition is not really material to BRK, I though some of you might be interested in a bit of an analysis. Because AltaLink is a regulated transmission provider in Alberta, they publish financials. You can find them here http://www.altalink.ca/files/pdf/news/financial/quarterly/2013%20Q4%20ALP%20FS%20and%20Notes.pdf Equity at the end of the year was $1.8 billion, so BRK paid nearly 1.8X book value, and roughly 20X last year's earnings. Operating cash flow is higher due to depreciation, but depreciation is truly economic in this case, as it reduces the capital base they get to charge a return on. So the price paid was pretty high based on current economics. However, the company has huge growth potential. Last year they spent $1.7 billion in capital spending, which puts a significant amount of additional equity to work. The company is the exclusive transmission line provider for areas including much of the oilsands, the industrial heartland near edmonton, Alberta's largest cities of Calgary and Edmonton, and the southern part of the province where there are significant wind generation projects going in. All of these lead to large expansions of the transmission grid. The companies return is regulated as follows: WHEREAS, by Decision 2013‐459, the Commission approved, on an interim basis, a Generic Return on Equity for all utilities subject to Decision 2011‐474 of 8.75%, commencing December 19, 2013 and continuing thereafter until otherwise directed by the Commission; and So BRK will earn 8.75% on the equity it paid well over book for, and then 8.75% going forward on all new equity it puts into the business, which has the potential to be significant. Alberta regulators have a long history of adjusting this return based on current market cost of capital conditions, so they will be treated fairly if interest rates rise. As they have the potential to put huge amounts of capital to work relative to the purchase price, BRKs return on equity from this investment should approach 8.75% within a few years. Not a blockbuster investment, but a pretty good bond alternative in a low interest rate world. I was disappointed when BRK bought it, I was hoping for a spin-off.

He could buy a longer duration term life policy. We bought a 25 year term policy, just before my wife had a child. I figure that should last until he is done college, and since we'll have our home/rental properties paid off well before then, plus 25 years of compounding on investments, life insurance will no longer be necessary. So the cost of renewing at that time is irrelevant, as I wouldn't do it.

Never looked at spyglass, you aren't kidding about that being a random grab bag of stuff. The graph in the presentation on the Dixon water flood is great though. That GOR decline means its working very well, probably some upside to production there if they sped up the pumps. Could indicate the company is being managed for long term value.

I live in Calgary and work in oil and gas. I'm hearing rumours from friends/colleagues that PWE is doing layoffs again. Sorry, no written source or anything. However, a number of my co-workers are ex-Pennwest, and still know people there.

I'm hearing significant rumblings about a bunch more layoffs at PWE.

The Q2 report has the potential to be a catalyst for the stock, imo. Q1 doesn't look like they're making progress, becaust their capital spending is weighted towards the winter (as is typical in Canada). Q2 will have less spending due to breakup, plus the effects of the royalty sale on the financials, plus production from most of the Q1 drilling affecting the reported production numbers. Hopefully they keep up the asset sales, the market is pretty buoyant for those right now, and it would meaningfully surface value for them. I see potential for the reported debt number at the end of Q2 to be 2-300 MM less than at the end of Q1, which might be enough to re-rate the stock.

No, its not. I'm planning on doing a testamentary trust as part of the will. I live in a no probate cost/no estate tax jurisdiction, so some of those considerations are lessened. I'd be interested in hearing thoughts on structure, however, as I'm always open to doing things a better way.

I've had various long positions in ESI (some long stock, some short puts, some long calls at various times) basically on the dead cat bounce theory. It was really, really cheap. I still own some, but its less cheap than it was. It wouldn't be a good business with a long term future. What is, is something like PetroSkills. I've taken a few of their courses as part of my job, they're about 5k for a week of training in a hotel's meeting room. They're generally good, with curriculum and expert instructors (who would be expensive). But 5k in tuition times 30-40 students is real money, and they seem to have scaled it up. Multiple courses are offered in each city with oil and gas. The company is currently owned by a private equity firm who bought it from the founders, I'm watching for the IPO when they need to exit. I'm sure other industries have similar companies, that just happens to be one I'm familiar with that probably makes excellent ROIC. Their moat is the relationships they have with large O&G companies and the fact that everyone in industry has heard of them, which makes it easier to get the training expense approved.

Hadn't thought of that, thanks!

For sure. I've got a lawyer lined up for next week, who I expect will be able to advise on the mechanics of what type of structure is best, etc. I'm more looking for suggestions on what to ask for. As an example, if I ask for 40k per year to go to my kid's guardians, vs 100k per year, vs the income off the principle, I'm sure the lawyer would be able to execute any of those requests. My biggest concern is balancing how much control to give to any one person.

Hello, My wife and I recently had our first child, and are meeting with our lawyer to draw up new wills. Previously, if we both died all of our assets went to charity, but now obviously we'll want them to pay the costs of raising our son. When I added up the value of our (significant sized new term) life insurance and investments in equities and real estate, it would be enough to meet that goal, and likely have significant excess. What type of arrangements would you use for dispersing the money? The relatives we've selected as potential guardians are not wealthy, and would need the money or our child would be a burden. However, I'm a bit uncomfortable saying "here's a 7 figure check and a bunch of real estate and equity investments, have at 'er." I'm curious how other forum members hve dealt with this issue. I'm thinking of having our assets go into a trust with a fixed payout to the guardians, and the remainder to our son at 22/30. How much is reasonable for that? 50k per year, 100k per year? Would you select a trustee and give them discretion or fix an amount and have it adjust for inflation. Also, some of my investments are significantly illiquid and complicated to manage (real estate and microcaps/special situations). Would you have everything liquidated? I have a realtor I would trust to treat my estate fairly on the RE side, but nobody who could run my brokerage accounts with anything other than "rebalance these 3 index funds yearly" type instructions. Any thoughts on how much flexibility to give people and how much is too much? I don't want to tie hands from beyond the grave, but I also don't want my son to end up being fought over by relatives as some sort of sick lottery ticket. Anyway, this has been a long rambling post, but any thoughts, opinions, or anecdotes of how you've done your own estate planning would be appreciated.

Myth, What do you and others who know a good deal about what goes on in the oil patch think about the new developments at Petrobank? They appear to have all but thrown in the towel on their THAI process and injected steam down into their wells. Presto! They are now producing 650 Bbls of oil per day and 1700 Bbls of liquids plus they are merging with Touchstone 60% 40% with Petrobank getting the majority of stock after the merger. Touchstone is producing about 1600 Bbls of oil per day in Trinidad with the prospect of bringing in new wells at a cost of about $25,000/barrel per day of production. Plus, Petrobank still has about half the cash pile it started with a year and four months ago before wasting almost half it's cash on THAI, plus no debt. I'm currently long PBG, having bought when they announced they would stop spending on THAI if they couldn't get it to work by mid 2014. They're up ~20% since I bought, but they're still trading below NCAV (pre-deal), the touchstone assets appear to be worth at least what they paid for them, so at the current price you're essentially getting the Canadian heavy oil operations for free. With around 80MMbbl of contingent resource, that could double the value of the company, especially considering their existing Kerrobert wells/facility could be modified for SAGD. Definitely still has E&P risk, but its cheap so you don't need much to go right. I don't know much about Trinidad, but the quick metrics looked reasonable to me.

Disagree. The cost of building an upgrader in N. Alberta is astronomical. I've done the math, and you can rail dilbit to the US and rail diluent back to Canada, and pay for the transportation forever (even using a very low discount rate) with the capital savings from not building an upgrader here and building your coking capacity in the US instead. Also, if the pipelines don't get built (and my sources are cautiously confident on Northern Gateway getting cabinet approval) then the producers will build unit train rail capacity at site. This will eliminate the need for diluent, as the bitumen can be transported undiluted by rail (it doesn't need to flow). This eliminates the cost of securing diluent supply, but locks you into rail transport. Even at a low utility-like cost of capital, upgrading at site in Alberta is not economic, which is why the producers aren't building new ones. Of course, if the government subsidizes it enough, someone will build it. (eg Value Creation in Redwater)

I've discussed this with people whose job it is to evaluate oilsands technology, and the general consensus is that it's unlikely to be economic. Maybe they're one breakthrough away from hitting the big time, but I seriously doubt it. A lot of smart people are working on this, and they don't think Ivanhoe has it figured out. You didn't ask this, but I've looked into their land in Alberta, and my opinion is that it has no value whatsoever at any time in the forseeable future. It is too deep to mine, and too shallow with insufficient caprock for SAGD or other in-situ processes. The regulator is cracking down on these shallow projects, which will at least stop them from dumping more money down an unproductive hole. If the company just had the project I'd short them, but the technology adds a "lottery ticket" like aspect to the stock, which makes it too risky for me to short. Even if it doesn't work if they convince a major to pilot it somewhere the stock will pop.