rmitz
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Posts posted by rmitz
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Parsad,
The media definitely seem to think Sokol is the heir apparent. But, don't forget that everyone assumed Li Lu would be joining Berkshire very soon, only to be proven wrong. I for one would not be so sure who the next CEO of Berkshire will be.
Please share your thoughts on why you think Sokol would be the best choice for CEO given that the fountain from which all the funds flow for Berkshire is insurance.
My argument is basically the inversion--Ajit Jain is simply *too valuable where he is* to make him the overall CEO of Berkshire, which would take him farther away from the insurance decisions. I also suspect he wouldn't be interested, but that's purely conjecture.
Sokol seems reasonable, but I have nothing specifically wedded to him.
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There are a lot more gold naysayers than there are cab drivers and common folk piling into gold. As I've said more than once, when people flip from calling the highs "tops" to calling the pullbacks "opportunities", then we're in bubble territory. Right now everybody is falling over themselves to explain why gold has nowhere to go but down.
This thing still has a long way to go IMHO. Canadian Real Estate is far more in bubble territory than gold is right now. It's almost a perfect mirror image, because you get shouted down in most circles for even suggesting Canadian RE can go down. Cab drivers and newlyweds with no money are "investing" in second and third properties, trying their hand at "flipping". You tell me that's not screaming a top.
As far as the USD goes, just plot out the purchasing power of the USD from 1913 to now, it's down 97% and falling. There has been no paper currency that has not gone into terminal decay like this, ever. So if you want to talk about the fallacy of "this time it's different", please explain to me how come a piece of gold dug out of the ground 2000 years ago can still buy you a suit and you can't rent a video with a 1913 $100 bill.
People who hold gold are saying the exact opposite than "this time it's different". They're holding gold because they know that this time it most definitely is not. People who deny that the USD is going into terminal decline and that the world monetary system isn't headed for a massive reboot are the one's saying "this time it's different".
So, there are two keys to this situation to me. 1) These kinds of currency destruction scenarios are extremely unpredictable in the endgame, which can be drawn out for many years. I have no idea when that could happen. People have been saying that it was imminent for over 50 years. So therefore.. 2) The people who are claiming that it's going to end "this time" are the ones who are claiming that "it's different this time". I totally understand the overall argument, but I can't say that THIS is the time when we hit hyperinflation or some other major event.
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I agree that Florida vacation property is a very difficult place to invest and make it work. All kinds of issues.
Still, today I have a pretty crafty friend, a self-made scrapper with a few million of net worth, who has a bid in on a 4 bedroom waterfront home. It has its own pier, boat ramp, pool, patios (covered ones too), etc. Appraised for $775,000 in 2007 (rediculous) and he thinks the 90 day process is about up on this short sale propery and that his bid of $125,000 is going to be successful.
It has an in-law suite where he plans to stay and he says he'll rent out the 3 bedroom part.
With deals like this around St. Joe and its new property out back just looks a long way out.
I'm not in a position to do the research, but that kind of money would be tempting just to have a vacation place on the water. Plenty of trouble in upkeep though. That might just get a crappy lake house around here. I wouldn't view it as an investment though.
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Not sure how accurate it is but these surveys make me wonder : http://www.aaii.com/sentimentsurvey
That the recent surveys have bullishness going down does give me some comfort.
And to Myth--the natural tendency of all those stock programs is to bullishness. It sells, it's entertaining. No one wants to watch a bunch of bears. :) I think you'll only see a moderate tone on those programs when the market is just getting completely killed.
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myth, how much do you feel you need to get out of the rat race?
I know this wasn't addressed to me, but I think that the amount probably fluctuates based on the current market environment. I think I'd be OK with 2M in open, taxable accounts. I would be expecting to take out 100k/yr, so that should account for pretty significant downturns. My comfort level goes up rapidly after that point, and I'm sure it could be done with less, but that's about where my comfort level is. Realistically, I would have other sources of income (perhaps startups, or part-time work) so it's a conservative number.
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Scorpion,
Why do you think it is irrational to use both approaches? To take your statement to the ultimate, I should only hold one stock - the one I think will give me the highest return. However, I hold more than one stock because I might be wrong. I don't think of that as irrational, rather I think that is prudent. Not being confrontational but interested in your reasoning.....
There's tons of uncertainty in any stock--doesn't matter what the situation is. You don't even have to be wrong, given the current knowledge and situation. At the very least you have timing uncertainty--which is why you'd want some number of deeply undervalued stocks. You don't know when the catalyst may come. Otherwise, you have the vagaries of life throwing wrenches in the way.
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What I'm suggesting is that it is irrational to hold owner-managers and personally selected deep value plays. The question is what is rational. Either you know what you are doing 100% or you don't. If you don't you hold the owner-managers or an index, if you do, you hold 0%. There is no hedging your bets with knowledge. It's not a gambling proposition, a weighted portfolio of well selected value plays ensures against 1 negative outcome, I just don't see how the two "styles" are compatible, it almost seems like people are hedging if they know nothing and gambling that they know something, just learn it well, know your limitations and there's no gamble. Problem solved :)
I mostly agree, but there are two factors I think left out of this. One is tax concerns. Sometimes tax churn could tip the scales in favor of holding the lower-appreciating security. The other is risk. Having some portion of your portfolio in the lower risk categories makes sense to me, especially if, as discussed in this thread, you are willing to sell once the securities are overvalued.
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Dude, myth, aren't you pretty young? If so, 15% a year will make you pretty rich. Your money will double in less than 5 years. So, let's say you're 40 with a million. At 45 you'll have more than $2 million. At 50, $4 million. At 55, $8 million...60, $16 million, 65 $32 million. Maybe I'm crazy, have low expectations (or both!), but $32 million is rich to me.
Now, if you're an old man, then I'm wrong ,and 15% a year won't make you rich. :P
I think a lot of us here aren't looking at this not in terms of retirement, but in terms of having the option to drop out of the rat race. The sooner one has the option to do that, the better.
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I also find myself grappling with these same sorts of questions, though my portfolio has a different sort of long term/short term bent. The main stock I purchased as an "owner manager" stock is Berkshire, which is mostly via options. Ironically, that's the one where I actually have a firm target range where I want to sell most of the holdings. Everything else has started as a deep value or special situation. However, many of them evolved into interesting growth possibilities, such as ATSG.
I am leaning towards the "sit on my ass" approach with these situations, as the tax benefit involved in holding and letting it continue to compound is significant, especially given the continuation of the 15% long term gains rate. There's also value in keeping some of these highly appreciated shares around to use as charitable contributions. Beyond all that, I find determining full or overvaluation for my stocks to be difficult at this point.
I'm not seeing that many huge opportunities right now which would make me want to liquidate my holdings; though that is partially because I'm not looking that hard.
I have been playing around with small arbitrage situations and what not, and I suspect I will continue that.
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Everyone keeps talking about stagnation in the United States since 1948. I don't see evidence of this at all. Could someone please back this statement up. In fact all the data i've seen suggests that exact opposite. The US and a few other industrialized nations have grown 2% real on a yearly basis for the past 200 years, and since 1948, the US growth rate has also been 2%. I think there is a lot of theory here without much basis in reality.
People were talking about that only in terms of the health/economics per capita situation, as in the video. Not overall stagnation--clearly that is not true. It's actually not that true in an absolute sense either--it has been going up slowly, it's just that much of the rest of the world has been playing catch up in both dimensions.
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With all due respect, this is the kind of nonsense that could only be learned in the humanities at one of the leading universities. It is just hogwash and someone needs to say as much. It is not entirely dissimilar to the nonsense spewed by some who, on the one hand talk about how quickly they want to get enough money to stop working but on the other hand go on and on about how people need to pay "their fair share in taxes." Only someone not making much money would not realize that the two are effectively mutually exclusive.
What, exactly, were you disagreeing with? I can't understand your point here, since it seems like you're actually agreeing somewhat with your quote.
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Credit scores are not a measure of ones ability to repay the loan, but of the chance that the loan will be profitable to the lender. That's why people who are likely to pay the loan off in advance have lower scores instead of higher ones. There are real up front costs to the lender (like sales commissions) which must be charged against the total profit of the loan.
I have a very low credit score because I rarely take loans and when I do I have a history of stiffing lenders by paying off the loan before its full term.
The credit score is an attempt to screen out both potential deadbeats and potential early payers. In the upside down world of contemporary credit risk assessment, people with solid balance sheets like Ericopoly are deemed a poor risk to pay the full pound of flesh.
Obviously I don't have details on exact FICO scoring, but I can say I have a very high score and I pay my credit cards in full every month, and have paid off various loans early in the past. This seems like a correlation argument to me; perhaps it was just that there were a bunch of "new" short loans on there. Even though they were paid off, they had a short payment history, so they don't increase the credit score much. The length a credit account is open *IS* taken into account...that's why old credit cards are more valuable than new ones.
But saying you're penalized for repayment...that's really twisting things a bit.
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I'm a happy user of all sorts of Microsoft products that don't crash. Have any of you used Media Center for TV and music? It's fabulous. Apple's TV product is a toy in comparison. We have Xbox's all over the house for extenders. When I hear all these people complain about crashes, I wonder what exactly they are referring to. My Vista office machine has been on for months, IE8 open with a god-awful number of tabs up, and not a glitch. The Windows 7 HTPC just works. The Windows Home Server has been going for over a year, quietly doing its backup job, and I have not even touched the machine once since putting it together(for $400).
Microsoft has gotten much, much better over the years; a lot of their reputation really comes down to crappy third party drivers, and historical problems with windows 95 and 98 (and previous). Though to be honest, my XBOX crashes an awful lot, probably due to heat issues.
That said, I use the mac because I need the unix underpinnings; for me, it's a commercially supported unix, and that is what I'm used to. (I also loved the old NextStep machines which OSX is based on.) The hardware in my experience also has tended to be better, but that doesn't mean there are no lemons; memory issues have been the one problem I've ever had (though that was with some additional memory I purchased for a later upgrade). I also ran into issues with an old machine after it had been upgraded a few times--a fresh install of the OS solved those issues.
For PC hardware I used to use various versions of Linux on Thinkpads, but the build quality is not as good now that they're run by Lenovo.
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I was listening to a portfolio manager the other day and he was using EBITDA as one of it's main valuation metric. I just can't understand why a person would take away the interest and the depreciation into a valuation. These are important components...
Depreciation, even if not a cash charge is still very real and, except in rare cases, will cost cash one day or another.
Interest is a cash charge and it's usually one of the most senior cash expense. After all the management could slash all their workforce, terminate their lease but the company would still have to pay the interests.
I can only see two cases where EBITDA could be somewhat used as a valuation metric:
-If a company is really short on cash. And it is a valuable metric only if the fact of being short on cash is temporary. Or else it seems to me like keeping a zombie alive.
-If the depreciations are actually lower then the maintenance CapEx
So why do people paid at evaluating companies take out the most optimists assumptions to make their calculations???
BeerBaron
Of the above factors, I think Depreciation is the hardest one to work out. All the others really can be quantified very easily as cash values, but depreciation can be difficult; it is usually better tax-wise to try to depreciate aggressively, but then you may have assets down the road carried at basically nothing which are still providing value. In addition, the replacement costs may be either higher or lower than the original investment, sometimes dramatically, due to changes in the underlying business and/or technology.
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Not sure what all the options are here, but I'm going to probably accelerate taking some long term gains unless we hear that the previous cuts are extended. I fall under the 250k cap but it's not clear they will extend the long term gains rates for that class either.
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70% expect a return between 10% and 20%, that leads me to believe returns will be below 10% or above 20%, unless of course everybody here has read Buffett and think 10-20% is what they should expect :)
Here's some food for thought, maybe the return you expect should be the return you need to get to achieve your goals - like inflation targeting. Maybe you need 4% to get your nest egg because you started early so why not aim for your 4%, maybe you need 50% and realize you are screwed (maybe the only way to get 50% is to start a new business).
Or people are just being as conservative in their expectations as they should be in their estimates of fair value. :)
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This is exactly what I'm talking about -- you're talking about what's "cool". If everyone gets an Apple, it won't be cool anymore. Some subset of people are willing to pay more money for something "cool" -- that ends the moment it isn't cool anymore. Then, they want something cheap.
I don't buy Apple products because they're cool. I buy them because they simply work better; I can get my stuff done quicker, more reliably, and more easily. The hardware is easier to deal with. Mac OS X being UNIX under the hood is also a bonus for me. Cool is just a small bonus after all that; if I could run OSX trivially and legally on non-apple hardware, I would.
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- Mac OSX is BSD under the hood, not linux, but both linux and *BSD are basically unix. Anybody running anything serious on the net uses unix/linux/bsd servers, this is unlikely to change - Microsoft never cracked the server platforms - you can't run web apps or SAAS on something that needs to be rebooted every other day. And now with BSD on the desktop (via Apple OSX) and *nix in the mobiles and tablets (iphiones, android) - the full spectrum of net connected devices is shifted more toward the same thing the servers run: *nix or *bsd.
(I know, I will draw hatred from the M$ systems types out there for saying this, there are a few)
I don't really care for MS products (and don't really use them anymore) but I have to say that a competent sysadmin running windows servers doesn't need to randomly reboot nearly as often as you say. While I personally don't feel it's as stable as various UNIX variants, I have routinely seen multi-year uptimes with modern windows servers, which is OK in a standalone, protected environment.
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Global finance - Real quick analysis
2003 - 2005 18b
2006 19b
2007 27b
2008 12b
2009 9b
2010 11b
Close to $100B. I wonder what MSFT's market cap would look like if they were buying Apple's stock with all that cash.
I know you're kidding, but if they used that 18B in 2003, that would have been more than AAPL's market cap at the time. :)
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advantage. The rest is history. Since they do the design, the software, the hardware etc, they had a huge advantage over everyone else. No other company did or does that. To claim that Apple succeeded because they focused on "why" vs 'what' or 'how' is a huge simplification and inaccurate. It was more about the fact that they focused on their key advantage and grew it even more, by entering into new markets and by creating an even stronger vertical (opening the Apple stores).
To be accurate, it's important to note there are things that Apple used to do which they don't do anymore, like the actual Manufacturing. It's not quite as simple as "do it all".
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From a business perspective I can see where you are coming from, though I think he was right about Apple and Tivo. There are better products then Apple but Apple sold the Ipod the best way inmo. That got them in the door.
I thought it was most interesting in relation to passion (Wright Bros) and more importantly politics / mass movements - Obama did the same thing as King, instead of staying I have a plan, he said yes we can. Its very interesting inmo and can be useful when it comes to getting buy in.
There were better mp3 players than the iPod in terms of features, sure. In terms of usability and design? Nope. Polish matters, and it's not easy. While I vastly preferred some of the other mp3 players available at the time (shout out to the empeg team), they were too complicated for most people to use. There's a place for geek oriented products, but sometimes the hard part of design is knowing what to leave out.
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Do you want to ask the next question by how much?
Packer
Not nearly as much as I would have if I hadn't needed to learn two lessons at the beginning of the downturn: 1) Don't just invest on coattails (do your own due diligence--always--and try to kill the idea) and 2) don't go crazy with leverage. My results were only +3.6% over that time period because of those mistakes...and very volatile. Though honestly (2) was the bigger lesson. My performance has continued to improve past that end date though. :)
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If the screen is problem, you might want to wait till Apple releases the next generation of the iPad in January. It may have the retina display which I find much easier on the eye. In fact, between reading on my iPhone 4 and my iPad, I almost reading on the iPhone 4.
The iPad is not so good in sunlight but then I never really read outdoors. If I need to, I can find some shade :-)
Unfortunately, there's no certainty that it will be coming out with the Retina display in January. But, if it does, I'll be running out and buying 3. :) (I have thus far held off mainly for that reason).
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Haha true but assuming he wants to maintain same standard of living in the same city, he will likely purchase another house for the same price. So unless this is his second house, he still needs to cover his basic needs of providing shelter for himself / his family. So if one were conservative, he would consider the first house to be an expense which can be either capitalized upfront or paid for over a lifetime as rent expense but in either case is an expense and not an asset.
However, it's an asset because you don't ever *need* to maintain exactly the same "quality of life" in exactly the same location. That is a choice as to how you allocate your assets.
Buffett article in February issue of Vanity Fair magazine
in Berkshire Hathaway
Posted
I think this is the best point. It's quite possible at this point that Buffett keeps going for another 10 years. It probably wouldn't be anyone we've heard of at that point.