tede02

Bringing this topic back to life briefly. I spoke to a guy representing iShares today. According to him, ETFs have gained a lot of popularity in the US, but worldwide, there has been very little adoption. Perhaps indexing also has a looooong way to go. On another note, I've been thinking recently that indexing is much more likely to be popular when markets are moving up. And since 2009, all major asset classes have done just that (although precious metals and commodities have been weak in recent years). You can understand the mentality of "Why should I pay someone who can't beat the S&P?" However, I would be willing to bet that as soon as we get some significant market turbulence, particularly a year or more of significant negative market performance, people will be out searching for a "new mouse-trap," eager to hear a new story. After 2008, the "new mouse-trap" marketed by Wall Street was "tactical" investing. What a joke. "Tactical" was basically another word for market timing.

I can understand others' concerns about bias and saying no to the boss. However, a mutual fund manager that I know personally has an interesting way of using analysts. This isn't a huge firm. They manage around $5 billion and have 6-8 full time analysts. Nonetheless, when one of the analysts is bullish on a company, the firm assigns another analyst to be an ongoing devil's advocate. The devil's advocate is supposed to try and tear apart the investment thesis. Its all about trying to eliminate confirmation bias. Not sure how Bruce works with his analysts, but he has said many times in the past that he pays people to try and "kill" his investments.

I added to my FAIRX holdings today. Here is a quote from one of my favorite Howard Marks memos discussing how to create superior investment performance, Dare to Be Great I: "Underperforming managers - Retain, or fire...or add money? That's the real question. Good investors hold fast to their approach and discipline. But every approach goes out of favor from time to time, and the manager who adheres most firmly can do the worst. (Page 217 of the book "Hedgehogging" provides fascinating data on some great managers' terrible times.) A lagging year or two doesn't make a manager a bad one...maybe just one whose market niche has been in the process of getting cheap. But how often are managers given more money when they're in a slump (as opposed to being fired)?" Dare_to_Be_Great_I.pdf

The conference call was largely a repeat of everything Bruce discussed in his annual letter. I give him credit for sticking to his convictions. He's surely been under a lot of pressure. I would expect the fund to perform much better relative to the S&P500 now that valuations have moved up so much in the last couple of years (in large-cap US stocks). There certainly isn't as much room for them to go. The holdings in FAIRX appear to have much more upside.

Looking forward to reading both!

MAT

I just submitted a question about Sears basically asking what the long-game is on this holding. Even if the retail operation doesn't suck all the value up, and somehow there are profits to be realized at some point, what will the opportunity costs have been by the time it finally plays out? Looking forward to this conference call. I'm sure Bruce has been hearing it from clients. I've been hearing it from my clients!

Bought some IBM.

Graco (GGG). One of my favorite businesses. Very expensive today. I was able to buy in 2009. Sold most of my position at the end of 2012 (regrettably). Still own a little in my wife's Roth fortunately.

I think you should clarify whether you want folks to include debt payments (mortgage and student loans for example).

Attached is monthly and annual return data. Unfortunately the monthly data does not include the dividend component. You can dig around here for more data: http://us.spindices.com/indices/equity/sp-500 SP500_monthly_and_annual_returns.xlsx

Thank you both oddball and bookie. Oddball, that is really a great point. There are several companies locally that I could easily attend the shareholders meeting of.

I've attended the Berkshire annual meeting since 2007 which I've enjoyed. For those of you who had the pleasure to attend other great shareholders meetings and investment conferences (such as Fairfax, Markel, Pabrai, Wesco, Daily Journal, Value Investors Conference, etc.), which do you like the most and why?

http://www.wsj.com/articles/deep-debt-keeps-oil-firms-pumping-1420594436?mod=WSJ_hp_LEFTWhatsNewsCollection This phenomenon (discussed in the above article) is similar to what Gundlach discussed except he talked about it in the context of entire countries. The only way that a country who relies on oil revenues can increase them, when prices are falling, is to sell more oil. Of course pumping more oil when the market is already saturated can only lead to lower prices. Potentially a vicious cycle. The WSJ article seems to bode well for distressed debt investors like OAK.

Probably won't know until one is well underway. I was amazed to see that the Shanghai Composite Index rose over 50% in 2014.

Yes, I believe it is the Arkansas plan.

Check out Stephen Romick's FPA Crescent fund (FPACX). He's built a 20 year record of material out-performance. I think the strategy especially well for individuals who know little to nothing about investing. Reason being, Romick tends to hold a lot of cash which significantly reduces volatility. Another option to consider is a fundamentally weighted index. I've been looking at these more recently. The actual performance of these offerings (which haven't been around all that long) has been pretty good. They have out-performed a bit. Rob Arnott created the Wisdom Tree methodology.

The 529 is an excellent tool for college education funding. Starting a new one becomes less and less beneficial the older your kids get (there's simply less time for the tax-free compounding effect). One of the most flexible and low cost plans I've seen is the iShares product. The majority of other plans are all traditional A and C share offerings which will surely bite into your returns. I would personally be very cautious about dumping a big chunk of cash in the market at these valuations. Dollar cost averaging is a compromise from sitting in cash.

Great discussion. This article has some eye opening numbers around how big indexing has become. http://www.thinkadvisor.com/2014/09/29/the-perils-of-the-indexing-crowd The quote that really resonated with me was: "It is a law of investing that when something very successful starts to become too popular, past a certain point, risks will form where none existed before." One of the problems also seems to be defining indexing as one specific thing. Market-cap weighted indexes surely will have different effects on the market than will an equally weighted index. Also, these days there are ETFs that track very specific sectors and individual countries. This seems to complicate the issue further.

Have you ever thought about possible unintended consequences of indexing? Today the WSJ reports that Vanguard saw inflows of $214 billion in 2014 alone. I’ve been thinking about this issue more recently. Will market dynamics change somehow as more and more “mind-less” money gets sloshed around (or is most of the money already mind-less)? Will market-cap weighted indexes add to the bubble effect and boom and bust cycles? (For the record, I’m not against passive investing at all. It seems like a very sound strategy for many individuals with no interest or time to actively manage their investments).

I had the B of A card previously and didn't have a great experience. The system they are using to determine if you purchase gas or groceries is flawed. I found that only about half of the fuel stations I used would result in the 3% reward. The same held true for groceries. As I understand it, the company is using merchant codes which are not precise at all. The card program doesn't know what you're buying if you purchase groceries from say Wal-Mart, Target or Costco for example (and thus the reward defaults to 1%). I canceled the card in favor of Fidelity's which is 2% cash back on all purchases.

I would suggest looking at a thread from several weeks ago titled "Cash 'equivalent' investments." It was 4 pages in last time I looked.

I think Peter Lynch's books are a better place to start for the lay investor. A lot less investment jargon. It's been quite some time since I read any of them but I don't recall any specific discussion of margin of safety. As I recall, Lynch really emphasizes thinking about stocks as businesses. He also emphasizes keeping it simple by investing in companies you're familiar with (you use their products for example). For someone who doesn't know the difference between a balance sheet and an income statement, I think Ben Graham's books would be too much.

I searched the board before posting. I just realized today that Oaktree has entered the mutual fund business: http://www.bloomberg.com/news/2014-09-15/oaktree-to-start-first-mutual-funds-to-woo-individuals.html This is very interesting to me. Finally a chance for us mortals to get direct exposure to Oaktree's strategies. Wondering how close these strategies will resemble the firm's traditional private offerings.

I took a small position in Lukoil today. It appears I missed the bottom by several weeks. Nonetheless, it still seems very cheap. I'm only taking a small position due to the political uncertainly which is anyone's guess.