Aberhound

High Vancouver RE prices creates a problem for those holding. I realize concentration of assets in High priced RE is unsafe. But I can see the massive influx of wealthy immigrants from everywhere. I wonder why they come because engineers and doctors etc. have a difficult time getting qualified here and business people have a difficult time adapting to our oligopolistic markets. But then I meet their young sons and daughters in their early 20s and I see the reason for the sacrifice. Who wouldn't want to move their children to a tolerant society with massive stores of societal trust, the type of trust that takes decades of safety and stability to develop? Further, I see technology making it easier to run international businesses from Vancouver. Then I wonder why prices aren't double or triple in a globalized world. What is the price of feeling safe? And what if winters in Toronto keep getting colder?The proportion of immigrants choosing Vancouver might increase. So I pay down debt to make it safe for me to hold RE through any conceivable correction. Hence the imbalance of assets. Suppose one of you seeking to build an asset management business could help people like me. Could you find a pension fund that seeks to diversify their risk like a bank or pension fund in Japan and show them that they would benefit from writing no recourse first mortgages in Vancouver at say 60% LTV if the monies are used to fund portfolios of diversified assets upon which the bank can hold a charge as well ie the recourse is on both the RE and the portfolio. Problem solved especially for me if there is a clause allowing mortgage payments to come from portfolio appreciation during downturns when my income drops. Pension gets extra yield on no recourse loan, risk is reduced for both sides by diversification, you can rapidly get millions in portfolios and I can hold a lot more BAC and US long term treasuries. Buffett suggests no leverage which is what I have mostly followed. But is leverage better in some circumstances if it allows you to diversify? I think the answer is yes if the cost of borrowing is below the 6% expected returns + a margin of safety. This may be possible with the current low mortgage interest rates.

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+1 I enjoyed the mental challenge of reading Walter Russell's books and then thinking of real life examples to prove why he was right or wrong. Russell does not agree with many of of the so called laws and says we are often wrong in describing laws. He has his own list of about 200 laws, many of which are quite different from conventional understanding of physics. For instance his laws explain why 90% of category 3 to 5 hurricanes or cyclones in the northern hemisphere. I like this quote from Leedskalnin. Education You know we receive an education in the schools from books. All those books that people became educated from twenty-five years ago, are wrong now, and those that are good now, will be wrong again twenty-five years from now. So if they are wrong then, they are also wrong now, and the one who is educated from the wrong books is not educated, he is misled. All books that are written are wrong, the one who is not educated cannot write a book and the one who is educated, is really not educated but he is misled and the one who is misled cannot write a book which is correct. The misleading began when our distant ancestors began to teach their descendants. You know they knew nothing but they passed their knowledge of nothing to the coming generations and it went so innocently that nobody noticed it. That is why we are not educated. Now I will tell you what education is according to my reasoning. An educated person is one whose senses are refined. We are born as brutes, we remain and die as the same if we do not become polished. But all senses do not take polish. Some are to coarse to take it. The main base of education is one's "self-respect". Any one lacking self-respect cannot be educated. The main bases of self-respect is the willingness to learn, to do only the things that are good and right, to believe only in the things that can be proved, to possess appreciation and self control. Now, if you lack willingness to learn, you will remain as a brute and if you do things that are not good and right, you will be a low person, and if you believe in things that cannot be proved, any feeble minded person can lead you, and if you lack appreciation, it takes away the incentive for good doing and if you lack self control you will never know the limit. So all those lacking these characteristics in their makeup are not educated. Ed Leedskalnin, 1936.

Both are excellent. I just ordered Marcus Aurelias Meditations translated by Hay after I read a review complementing Hay's clean and clear writing style. I look forward to the simple pleasure of reading an excellent book during summer break. Thanks rk for the mention of the podcast. I enjoyed the Norman Centuries podcasts by Lars Brownworth also on ITunes which you might try.

A new tax information has been signed between Canada and Bermuda. http://www.pwc.com/bm/en/assets/document/pwc_bda_tiea.pdf Basically any active business income placed in a Bermuda subsidiary and certain passive income is now only subject to tax in Bermuda and if paid by dividend to the parent corporation is now usually subject to no further tax in Canada and is deemed to form part of the exempt surplus. Previously the rate of tax in Canada on such dividends was 26.5% according to this PwC write-up. Bermuda taxes consumption, not income or savings so has a near perfect tax system and has a better pool of insurance industry employees than Barbados plus excellent common law Courts. This should give Fairfax more tools to lower their effective tax rate. The agreement is clearly made to benefit insurance companies based in Canada. I wonder if other Canadian companies will form subsidiaries in Bermuda to conduct active business or to hold qualified passive investments?

http://www.businessinsider.com/rail-traffic-2014-7 Rail traffic strong in US. Buffet has always watched rail traffic closely.

http://www.acting-man.com/?p=31417 Note the chart showing how the change in the risk factor for sovereign debts and the actions of ECB accepting risky debts as good collateral caused the drop in EU sovereign debts while reducing loans to the private sector. Has the diversion improved allocation of capital? Has the incentives for EU governments to adopt sensible policies increased? Is the problem of too many and too big EU banks being solved?

SC on speculation that the lower earnings are due to the conservative reserving while the credit portfolio is improving due to the Chrysler deal. I think the new Chrysler/Fiat vehicles are great so they are likely to grow market share. This means at least 9 more years of good growth. I agree with SD that the company is in a position from its scale and expertise from Santander to bleed the competitors such as Ally white. We are mid cycle and I expect more jobs as manufacturing moves back to US primarily due to cheap energy and faster innovation adoption. Good interest margins like this are likely to become scarce. People love their cars keeping margins fat. Finally car sharing technologies will help the poor increase the utilization of cars so they are better able to afford the payments. Can't make your payment? Sign up with Uber as a driver and work during peak hours.

The Globe article said the fund would be publicly listed so I am watching for it. Fairfax to launch India fund after Modi victory IAIN MARLOW — The Globe and Mail Published Friday, May. 16, 2014 7:01PM EDT Last updated Friday, May. 16, 2014 7:18PM EDT Prem Watsa is bullish on India in the wake of a landslide electoral victory for Narendra Modi – so much so that the head of Fairfax Financial Holdings Ltd. plans to launch a publicly listed India fund.

I own Banco Santander so I was looking at its competitor BBVA for a comparison. Very interesting. BBVA adopted a new control system designed by Accenture that won the Best Bank award in 2013 for that category. The system allows real time financial information. Second, they purchased Simply based in Oregon which is a banking interface as revolutionary as the IPhone. There is a website with an explanatory video. BBVA Compass has 785 branches across Southern US and the financials were unusually easy to read with improving numbers. Is this a result of the Accenture system? BBVA is similar to SAN with a big expansion across Latin America. The financials are much worse than SAN but improving. Perhaps an innovative bank in a hated industry with geographical spread from a depressed valuation might hit 50 fold gains? Idea #2 is Prem's new India fund. India hits demographic peak in 2035 so investing now is like investing in US 20 years before their demographic peak in 1999. Idea #3 is to create a startup for listing on the CSE the Canadian Securities Exchange which is run by and for entrepreneurs with dramatically lower costs. Trading exploded with the marijuana boom. Perhaps we can convince Sanjeev to start a junior BRK allocating capital starting with a marijuana supplies company which is scalable. It is way easier to hit 50x starting from pennies in a hot new industry which will soon enjoy $200B revenues. It would be instructional to create a business plan thread for the idea called "IPOs for Sanjeev" to take advantage of the astute business minds on this board and to encourage him to take the leap. The exercise might help pick out the types of business models most likely to achieve the 50x goal. Most often the opportunities requires capturing a wave. So you need both a good model and an industry with rapid growth like Solar City but with a better moat. In the 1930s the richest man in UK made his fortune taking over failing companies then putting in place management and new business plans. Sanjeev would be good at that. The ability to disrupt and the speed of change is increasing so a junior BRK model is more likely to achieve the 50x goal. SoftBank enjoyed such gains by early investments in Alibaba etc. most of which were private at the time of investment. We need Sanjeev's public vehicle to be able to share such gains.

Thank you to all of you who posted here. I chose to buy LTS steadily during the dip because I didn't know the other companies you mentioned. Now I get to decide when to take profits. When these companies move they move large percentages. Much more exciting than BAC. I try to copy Sanjeev's method of averaging in and average out which worked well here while buying. I have a hard time with these oil producers as it is much harder to determine a valuation. The estimate of double before this surge or roughly 12 after they get their debt from 3x to 2x is as good a guess as any. All I knew accuratutly was that the assets were cheap, that the valuations would rise to match the US and Wright was a good deal maker. Your comments have been very helpful. I like how the company left 19 wells to connect so the spring breakup won't diminish cash flow so much next quarter. Hopefully they will have more deals to announce. With high NG prices I hope they cooperate with their neighbours in Cardium and sell something bigger.

In regards to the charity remark you still want a charity provision in the will in case your children and issue predecease you and your wife. How about funding a scholarship for university students who read the top 20 value investor books suggested on this site starting with The Intelligent Investor? For the will my Grandad had this problem then set up a trust and hired the then best investment firm in New York. They preserved the capital but did not match the market. So a co- trustee with someone who can check performance and change to another firm might keep the investment manager more diligent. Perhaps the co-trustee can be in charge of liquidating non-public market investments except for real estate which is generally safe to leave in the trust. Two of my friends with more wealthy families both set up trusts with income to their children with a gift-over to their grandchildren. The structure worked well for all families over the decades. The trust gives lump sums to adults every 5 years until age 35 or so plus pays for university and funds an interest free mortgage with no payments to buy a house when you get married if the house is kept in your child's or grandchild's name. The income from the remaining capital goes to your children with a gift-over to your grandchildren of the remaining capital when all your children have died. The only possible improvement I have thought of is to add a provision to pay the income tax bills of your children and grandchildren to deter waiting for the money. Capital will concentrate to the more diligent over time and the incentive to work is restored. Equality seems to dissipate family wealth. Many families use plans and guides successfully to concentrate wealth in the hands of the most capable who then provide for all. Over the years I have noticed unusual investments do better for many families. Owners of sugar estates have kept their family wealth intact for hundreds of year. Timber worked very well for the Hindenburg family in Germany starting 1875 when many others were wiped out by the chaos. Salt mines will do well. I have seen a tea plantation run itself since it was set up in the late 1800s. Those Victorians were brilliant. They put certain Indian families with a different language in a remote part of Bangladesh. Olive oil and blueberry do well if you leave profits to managers if they plant certain acreage each year. Nut trees do well similarly. The hard part is to avoid corrupt locations like Southern Italy or Greece and now California with the water intentionally drained from reservoirs to protect fish etc.. If you read the Palm oil thread you might see how tropical agriculture will do well if agricultural shortages develop. Coconut plantations could be the value buy if you investigate the additive you can purchase to make biodiesel. You want a product which has many uses like sugar to better ride out gluts. Salt for instance can be used for roads or high value healthy salt depending on your deposit. For all farm and timber properties make sure you secure good water and the rights to it. Consider what cheap power will do to values if you have water. The strange thing now with agriculture and forests is that values are mostly based on cash flows while trees and blueberries add predictable intrinsic value which is not reflected in prices. Twenty years later many such properties increase more in intrinsic value each year than the original cost. The same will be true 20 years from now for well selected properties.

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WEB is not looking hard enough. A polymath like Rolf Witzsche might argue that BRK will become worthless unless they understand the insurance risks they face because the electric universe theory implications. One of his predictions is that earthquake severity and frequency will worsen in the upcoming solar minimums with severity worsening in the second minimum. He suggests it is foolish to build for past conditions and wants to see low rise construction instead. http://www.ice-age-ahead-iaa.ca/

You should have followed SD's example with buying fine wine at a discount and bought $250 Scotch for zero net cost! I look forward to the day you hold an event in Vancouver. Every year I get jealous of the great event I am missing.

I just looked at Subsea7 and it is still trading at lows. The question is will ROE return from around 10 since 2011 (and lower last year due to the Brazil cost overruns) nearer to the former 40%? The improvement in detecting below salt fields came suddenly due to the improvement in computers and viewing techniques. As a result many big finds were found like Brazil. These deep fields will be challenging due to the high temperatures and pressures. Bottom of the sea production vs. platforms seems safer as climate variability increases. I suspect the only way to safely produce at high pressures is high production rates to reduce stresses on the equipment. The two factors of many big finds and high production rates may cause lower oil prices due to temporary gluts every time a new big field comes online with monster production. You will need monster production to pay for the massive expense. This should mean high prices for the servicing companies due to the high risk and the time it takes to increase resources to meet the new demand. If I was an oil company I would race to get the big fields into production before there are shortages and a lower oil price. I conclude that servicing companies are a better bet than producers the same as we saw in NA natural gas. The main counter argument is that only the biggest oil companies will have the ability to take on these big risky projects. Exxon is likely a fierce negotiator.

Putin is the chess grandmaster revealing the powerlessness of the Deep State. Russians know from Stalin than money power is meaningless when it's machinations are revealed to all and a schism is created between the State and the people. Churchill boasted he had greater power than Stalin and Hitler because of democratic legitimacy. Obama has no legitimacy like Churchill nor would Bush due to the suspicions of the family's involvement in the Kennedy assassination and 9/11 and the cover ups. Putin knows the Deep State well and likely blames them, not Obama for events in Ukraine. Obama will likely say to the Deep State you caused it so you clean it up. Watch for financial punishments of Russia starting with currency weakness, a rise in their bond rates and a drop in their equity markets. Germany has extremely close ties with Russia so will stop any western government punishment. Germany is shutting their nukes to prevent blackmail from the 3/11 perpetrators so now depends on Russian gas. Germany is also upset with NSA theft of its technology and delivery to Israel in the alleged NSA base there. US will ramp up cheap gas exports to Europe just as it is now exporting refined oil. I am buying KMI as the US NG sector should benefit. Just wait for the surprise when US companies start to announce how much gas they have in the gulf. We would all be better off if the US reaffirmed the Treaty of Westphalia. What is the difference between Libya and Ukraine? Naked aggression over control of resources and destabilzation. Russia will protect its pipelines and can see the coming food shortages from the little ice age. They need access to the breadbasket. The Deep State wants western Ukraine tight gas and control over the wheat. The Ukrainian people will get little from either. Merkel opposed Libya for good reasons just like Chrétien opposed Iraq. Responsibility to protect has been revealed to be Desire to Destabilize to allow private control of resources instead of allowing citizens to profit from resources in their country. Every country which have been invaded under RTP have had kleptocrats placed into power. Libya in particular was to prevent the re establishment of the Roman breadbasket.

5. sounds good, but what would it look like? The Federal Reserve is going to push Lehman Brothers into conservatorship in March 2008, zeroing out the influential figures and institutions who own the stock? And then subsequently use monetary actions to forestall an expectations collapse as a result of a major financial institution collapsing? If the Fed is going to "manage" institutions prior to systematic instability, then the Fed is going to have to push against the market. Otherwise, the market would take care of such institutions by doing things that look a lot like systematic instability. You have to sympathize with the Fed. Stabilize the system and then face the music when you impair a powerful institution, or impair the institution and then face the music when you try to stabilize the system? Perhaps it will look like the Soviet system where a party member shared in decision making. Note the generals were the ones who were shot for failures, never the party member. The life of the bank CEOs just got more dangerous. Also remember that the party member was also responsible to set up the machine gun brigades which shot soldiers who retreat. Such a system may be intended to allow even more debt and leverage, but this time more targeted by central control. It might be possible for more growth to emerge by targeted lending to certain industries to overcome entrenched vested interests which sometimes stifle progress. Portland cement is one such example. Unfortunately what usually happens is the reverse, for example, central command has created the medical cartel. My own preference is like Jim Grant's who wants the Fed to return to its original mandate so that it only intervenes to lend in crises and only when good collateral is provided. This overcomes the borrow short lend long problem while avoiding the current moral hazard of rewarding recklessness. Fisher's solution overcomes the same problem in a different way. During war Fisher's solution is warranted but risking the good general bad general problem while Grant's solution is favoured upon the return to peacetime when any idiot can run banks with little harm except to their stock holders. We all should pray for a return to peacetime as there are a lot of central planners in charge of banks any of which might cause us to suffer grievous losses or even to lose the war.

http://www.ledinside.com/outlook/2013/12/2013_review_china_led_policies_show_excessive_subsidizing_trend http://www.bloomberg.com/news/2014-02-27/china-s-subsidies-end-prompts-forecasts-for-slower-growth.html Instead of an end to subsidies slowing growth the LED article suggests the subsidies will be re-allocated from polluting industries to less polluting industries. The central planners in the west only dream while their minions publish misleading articles of how China will crash soon. Too bad they never see or admit their own stupid mistakes and correct them like their Chinese counterparts. The strength of the west was always an open society and tolerance of dissent. Only when the West remembers the reasons for its long success will they prevail again. NSA and targeted exercise of state power kills free speech as people who think they are being monitored do not express themselves freely. This transition of policies in China is likely a good time for targeted investment there and investments over here which will benefit. I have been investing in silver. I like Fresnillo. Unlike gold silver is not stable in the M-state so it is orders of magnitude more scarce. It is also more useful for energy technologies, solar being the first and superconductors being the likely second of the many such technologies in development. Asians long preferred silver more than gold. The ratio was originally 3 to 1 upon European contact. I have speculated that Asians remember better the practical reasons for their preference.

How do you steal bit coins and get away with it? Every coin has a record of every transaction it was involved in. Only morons would steal something like that. I bet the coders who run the other exchanges will soon have software ready to instantly identify anyone who tries to fence the stolen bitcoins. My guess of what happened is that mt. Gox developed short cuts due to too much volume and too little time and insufficient adaption with newer and better servers. It takes a lot of computer power to go through the transfer of the coin. The short cuts should be easy to identify. Probably the thief developed software to take advantage of the short cut. The main algorithm is constantly improved by the miners. Anyone with super computers good enough to break the algorithm does not need to lower themselves to theft. They would mine instead. It will be interesting to watch technology in action. My personal view is that Bitcoin was created to accelerate the advancement of computer technology. There is a strong incentive to develop the fastest computers possible. There are likely US hedge funds with links to Silicon Valley exploiting this opportunity already. These groups have a strong incentive and the contacts in NSA to expose the thieves.

Good luck with that: http://www.snopes.com/autos/business/carburetor.asp http://www.straightdope.com/columns/read/712/has-a-200-mpg-carburetor-been-suppressed-by-the-oil-industry Guys, being in the manufacturing business I can tell you all those stories about "invention X" that was killed by a big company do not fly with what I see. It also does not fit with the game theory aspect of it. A market disruptive idea can go two way: If it's invented by a dominant player in the industry that do not want to lose it's current business. This dominant player will go the path of least resistance: work on the idea a little bit, place a few patents and try to orchestrate a rollover over time. Think of Kodak that invented the digital camera. If it's invented by a wanna be player in the industry then the company will go full speed with the idea making it their strategic advantage. Think of... well any newcomer with a superior technology that moves all the other ones. Tesla being the most recent one I can think of. All in all, there are no magical solutions. All there is is a lot of brilliant minds competing to get the best ideas and make money from it. Capitalism works quite well for doing that. BeerBaron This attitude that it can't be done is what slows progress. Instead ones attitude should be that it probably is possible and there may be societal reasons why it not done yet. Anyone with an old truck without computer control can hire others to install a vapour carburetor. People just have to think. One of the purposes of the catalytic converter is to convert the unburnt hydrocarbons to carbon dioxide. Instead why don't you burn the hydrocarbons more thoroughly? That is what the vapour carburetor does. It is logic not magic. What I don't like is that inventors and tinkerers waste time re-inventing things invented decades ago. Now that many of these old suppressed inventions are appearing in Asia we might as well release them from the formal or informal "National Security" bans. The best example is the Meyer fuel cell. Since you can buy them in Asia and now here why not use it in industry? They are not economic for most vehicles here but other uses can be found. For instance, instead of up to 40% of electricity being dumped because of massive base load generators kept running at night when demand is low why not use it? You could split water. There are other uses for dumped electricity. You could heat water. You could heat salt. You could create a vortex and put water up into the clouds to drift east. You could pump water. Good scientists and technicians should be able to do far better than what Meyer and others achieved decades ago. We have wasted a lot of time and resources so now we are falling behind. Part of the problem is the lack of inquiring minds.

The passion people have on this debate is revealing. Somewhere behind the scenes is some behavioural psychologist who wants the use the debate to draw attention away from those who are looting the system through monetary policy and corruption regarding the use of public resources. If they eased up on the looting we would be in a situation like BAC where there is a massive cash flow available to fix any problem. I predict the next debate is going to be whether GMO makes you healthy and saves the planet. Meanwhile the looting will continue. I am still trying to buy a Pogue vapour carburator invented about 1925 to cut my fuel expense in half or more. Patton drove his Shermans a long way across France thanks to that carburator. There would be a lot less carbon dioxide now if it were removed from the Secrecy act after 1945. What else is being hidden?

Sequoia deserves every penny of that 300x because moving from 1 city to 150 takes many different skills, which needs to be put together. I have a good candidate of which I have a small piece which is now one of the top downloads locally and it would take $10m to roll out to the 150 top cities in North America. During roll out you get the same customers in multiple cities so it's get easier as you roll out. So far only vulture capitalists. Where are the fair and friendly investors to be found? Apps can be designed to create incredible leverage and zero marginal costs so once created you offer incredible value to the customer. The value then creates a first user network advantage so long as you build your moat and keep your price and terms easy and attractive. Hoot suite is an excellent example of this. At $10 per month and steady improvements few are going to switch. The apps look easy to duplicate but it takes a lot of skills to make them so they are user friendly, enjoy strong magnetic draw to get users to sign up and offer ease of use and good economics for the customer who should be in a niche so it is possible to roll out economically. I chose the app because in the dot com boom the guy created a a web app which caused a company to go up 100 fold when it was bought by one of the old guard who then killed the project to protect their business only to be destroyed by google instead. I also chose the guy because he was willing to listen to apply the building business moat lessons I learned from this great board and from reading Buffett and the like. It is very rewarding to see the lessons you learn reading work in the real world.

I wanted to compare the prospects of Washington vs BC so I arbitrarily compared some of the CFAR reports for vancouver WA vs. Vancouver BC. The interesting difference was that the in US the interest rate on borrowings was only 0.5% for most and about 3% for some while in BC the lowest rate was 1.7% to as high as 7%. We waste a lot of money on interest by comparison in BC. Both had significant investment income. In WA investment income had plummeted since 2007. In BC you wondered why they didn't pay off the high interest rate obligations. BC also had way more fat. Does anyone know how the cities in Washington State borrow at 0.5% for infrastructure like water?

The reason why the large bond losses and massive equity hedge losses are so unsettling is that the logic of the positions are so unlike Prem. In 2009 he spoke how undervalued the stocks he held the the banks and J&J were. He believes in Austrian economics. He quotes Menger "the bigger the boom the bigger the bust". He reads all the Fed papers. He knows Bernanke is going to print like crazy because that is what Bernanke said he would do in his 2002 speech. Yet he buys hedges which lose money and force you to pay cash if the market rises? He is the master at finding asymetric risks. Yet instead of buying hedges like an Austrian thinker during the boom he buys them in the bust when the asymetric risk is against you? Now is when you take the risk, not 2009, yet he now reduces the bet by about 1/4 locking in much of the losses? Prem is almost always right long term so he normally increases the bet as Mr. Market gets more irrational. The $400M reserve release when the average combined ratio averages about 100 during the one light year is also unsettling. We are at solar maximum at the start of a Maunder or dalton like minimum. The winter storms are going to get much worse. Earthquakes are getting worse. Releasing reserves now is like banks releasing reserves in 2008 after the mortgage crisis has already started. It is so unlike the Prem I have studied since 2002 that it is like someone has a gun to his head. I can't explain it. It is weird. He continues to display incredible talent in stock selection and most of his bond trades. Look how he sold hundreds of millions of Canadian bonds but kept the Us bonds seemingly in anticipation of the strong USD. It is like he has isolated brain fog only when it comes to total return swaps.