KCLarkin

He cherry-picked the 6.5 year stretch for this letter but his out-performance record goes back to 1999. That is two full cycles. Hope isn't really required because the share price reflected the hopelessness of the situation plus the new management was already making moves to unlock value. The stock is up over 60% since he started buying so I don't share your concern.

This would be noted in 13F as confidential disclosure (there were none in Q4).

They amended Q3 13F to show sizeable increase in Deere. They didn't ever sell Deere, just switched it to confidential disclosure, best as I can tell.

Deere, they have filed an amended 13F for Q3.

Canada has a duopoly. Air Canada still managed to lose money four years in a row just barely avoiding its second bankruptcy in less than 10 years. Even if the airlines remain rational (doubtful), fend off Low Cost airlines, and remain profitable, the unions will reassert their power. This remains a terrible industry with very strong cyclical tailwinds. Westjet is 5% of my portfolio but I put no faith in the "this time is different" mantra.

If you want to start a new airline, you basically just need to lease a plane (read Virgin story in Dhando Investor). It is essentially impossible to build a new railroad.

No asset has an absolute value. All values are relative.

Yes, real estate prices are elevated and are sensitive to rising rates or economic shock. But almost all asset prices are elevated and sensitive to rising rates. This doesn't mean there is a bubble -- it just means that low interest rates are creating dangerous distortions in the financial system.

Mortgage affordability index from CMHC.

The median income in my neighborhood is more than 2x East Harlem.

Why do you think their houses are cheaper? https://financialpostbusiness.files.wordpress.com/2014/11/fp1106_world_property_markets_940_ab.jpeg?w=620&h=666

If I wanted to sell my detached house in Toronto (great neighborhood) and move to Manhattan, could I buy a similar house for the same price? Nope, I just looked on Trulia. If I want a townhouse in a nice neighborhood in Manhattan, I will need to sell 10 of my houses. There is a small vacant lot in East Harlem that is only 50% more than my house in Toronto, though.

I don't know what stats you are using but remember that averages are misleading. Average U.S. housing prices might appear cheaper but most of the cheap cities are not desirable. Anyone want to move from Toronto to Detroit, Buffalo, or Cleveland? The really desirable cities (San Francisco, LA, San Diego, NY, Miami) are expensive even after the housing meltdown. The other factor that people are ignoring is land use policies. Land is scarce in Vancouver and Toronto. In 2005, the Ontario government introduced the Places to Grow Act designed to promote intensification. This has limited the supply of single family homes (and resulted in a condo boom). Housing prices are certainly elevated but when you can control for supply constraints and interest rates, I don't know that we can be certain there is a bubble. We will only know in retrospect.

http://b-i.forbesimg.com/jessecolombo/files/2014/01/united-states-interest-rate.png

Before the housing crashes in Netherlands, Spain, US, Japan interest rates were rising. Also, did the housing market crash because of the recession? Or was the recession caused by the housing crash?

There is absolutely no evidence to backup any of your assumptions.

Mutual funds suffer from the constraints you list above but individual investors do not.

Rob Arnott has a couple good articles on this: http://www.riabiz.com/a/5814459/is-your-alpha-big-enough-to-cover-its-taxes-a-classic-journal-article-revisited

I'm not sure how seriously we should accept these researchers's interpretations. Negative correlations in the 0.03 to 0.32 ranges would be laughed at by physicists, chemists, and engineers. These are extremely small and weak correlations. You've all seen random scatterplot diagrams in which some statistician draws a line through the mist and says there's a correlation. Generally speaking, correlations of at least 0.70 - 0.80 are considered strong in the social sciences. Moreover, the P-value in Ritter's paper was 0.16, i.e., not statistically significant. If I remember my probability/statistics classes correctly, the statisticians square the correlation coefficients ® to come up with an R-square number, which represents how much of the variance in one variable explains the variance in the other. So GDP growth "explains" only 0.09% - 10% of the subsequent stock returns. Another illustration of the gulf between the physical science and economic/social science. I think the most that can be made of this is that economic growth is not meaningfully associated with equity returns. In the quote, he is pretty clear that it seems unrelated for all the reasons you mentioned. The potential country level dataset is too small to have any definitive conclusions,

You have two companies with the following stable profiles: China Inc Growth = 10% ROE = 5% P/B = 1 America Inc Growth = 5% ROE = 10% P/B = 1 Which one will have higher total stock returns? "All else equal" means holding margins fixed. Okay, which of these will produce better returns? China Inc Growth = 10% ROE = 5% P/B = 1 Canada Inc Growth = 5% ROE = 5% P/B = 1

You have two companies with the following stable profiles: China Inc Growth = 10% ROE = 5% P/B = 1 America Inc Growth = 5% ROE = 10% P/B = 1 Which one will have higher total stock returns?

I thought there was an inverse correlation? "When measured over long periods of time, the correlation of countries' inflation‐adjusted per capita GDP growth and stock returns is negative." http://www.alphaarchitect.com/blog/2014/01/31/finance-mythbuster-economic-growth-doesnt-help-investors/#.VNEbxWjF_h4

Will a 0.25% drop in rates have any impact on borrowing or the economy in a ZIRP world? The only benefit I can see is to devalue the currency even further.

Sorry, I don't see any style drift. If anything, I'd be worried that he hasn't changed enough.

He has WEB as his personal analyst.