LR1400

I don't think that you're necessarily a bad capital allocator. May somewhat inefficient. But so what? Strip malls and parking lots exist because they are efficient (read cheap) but they're ugly as balls and make your life worse so in the end not such a good thing despite efficiency. Yes maybe you can leverage your house and use the extra funds to make some smart investments and in the end you'll end up a bit richer. Bu then you'll have to monitor and balance your leverage, etc, basically more headaches. Alternatively one can be less capital efficient, have peace of mind, enjoy life and have no worries regarding having to put one's home back to the bank or not. What if you get rich enough and don't need the extra funds? Wasn't that a waste of time? A lot of this boils down to temperament and most likely age/stage in life, it appears. One is neither right nor wrong. When I was really young I wish I had levered myself to the hilt. There was little to lose and I had time to make it back. Now it my 30's there's more to lose, with a little less time to make it back and with more responsibilities to family. Fundamentally, I would prefer no debt, however, I view it as a tool to be used when circumstances benefit or when your other options are limited. If you are an entrepreneur and you are young your options are really limited. You get equity help form a partner or you use debt. Debt will be cheaper and you usually have more control in most instances. Debt or equity funding in this circumstance isn't really too different. If you intend to invest in real estate, my opinion is it's really dumb to not use debt capital. Debt is typically perfectly tailored to real estate investment. If you aren't an entrepreneur and you don't intend to start businesses or own real estate then you may want to roll along with low debt. I still can't see buying a house or even a car with cash with anything close to these interest rates.

Almost all good advice anyway. But Blood alliances? The U.S. has the best system in the world making it the greatest country ever and it will continue to be this way regardless of who wins. So, I'm definitely hoping Trump wins if it means market crash considering my massive cash position. Two thumbs up!

If he's a long term guy, why is he going in and out of Nestle every 3-6 months? What am I missing?

I admire your ability to blaze your own trail. It's certainly crossed my mind. I like the idea of frugality, but I don't think I would enjoy extreme frugality. The wiser, older people I know don't really espouse the idea of extreme frugality, not Buffett or Munger either. Do you think your depression at a younger age was related to your more solitary existence?

I need to read Fischer. I have one on my shelf but I've only skimmed it.

That's it! Thanks.

I recently read a quote, supposedly from Buffett, where he states he would buy smaller, young, newly public companies were he a young man. This was due to their potential for long term earnings growth. I thought I had saved it but I didn't. The topic he was discussing was related to young investors and investors with smaller sums as well as qualitative versus quantitative investing. Thanks for the help.

Kick ass letter. I learned a ton! Thanks.

Did Buffett shift consciously or did it just happen over time? He may have noticed this, but I believe it was a gradual thing. He also, has always said to look at stock investing like you are buying a portion of the company's assets and earnings from those assets. He gained control of operating businesses while still using the partnership, though not many. I have wondered how his performance would have been had he simply maintained the partnership and never used Berkshire as the vehicle. I believe Munger stated that Buffett would've been even more wealthy in his opinion. From what I can find, Buffett wound down the partnership because: 1. the overvalued markets, 2. he was tired of the pressure and scrutiny associated with managing other people's money.

Couldn't agree more. I've started buying real estate in a stable area. When interest rates rise it will hurt me some in the short term but not bad in the long term. It's a catch 22 there, low interest rates give cheap ability to borrow, but will of course hurt me for a bit if I had to sell some of them in the short term. I try to buy on the fundamentals and not worry too much about all the shit swirling around the world, same thought process as Buffett. Averaging into and index fund may not hurt you too bad.

That's good. That's not what the PE who have discussed buying business or friends businesses used. When discussing an offer. I understand the apples and oranges comparison and need for EV/EBITDA in that scenario, but when making an offer of $X to buy our company, they have used a multiple derived from P/EBITDA.

I don't think I would want to own equity in a bunch of small caps with tons of debt. Jay Pritzker, Sam Zell, and I am sure others have done similar things by buying the debt of small to mid caps, especially in down trodden industries or ones needing consolidation.

Is this EV/EBITDA or P/EBITDA? P/EBITDA

When we've talked to PE they always discuss multiples related to us and others as a multiple of just EBITDA, 5-7x is what they seem to get. 10x is high for most mature industries from what I've been told. I know they use multiples of other things as well, but usually they discuss multiples of just EBITDA when getting down to it.

Thanks! Can't wait to read Zell. Brilliant businessman.

It's good cross fit for you into the more sports oriented preparation. Consider that explosive movements, especially loaded explosive movements under fatigue are very dangerous for the body. They are significantly dangerous for the lumbar region. You're commended for doing something much more manly than a few machines in the gym. Is alcohol really a toxin when consumed in moderate amounts? What about caffeine? We know simple sugar is potentially very harmful. If you can't sleep after cross fit it is almost guaranteed to be a nervous system issue. Explosive movements and heavy movements significantly strain the neuromuscular system. A symptom of this strain is often an inability to sleep after a high neuromuscular training session. You are essentially wired. The next day you will feel a bit lethargic and foggy if you have a strenuous neuromuscular session the day before.

Whether real property is a cigar butt or high quality depends on the location and class of property. I look at them like a blend of a bond and a stock. Personally, I prefer to lean toward looking at them as a bond. There are shitholes that provide solid cash flow and little price appreciation - similar to a cigar butt in some ways. There are ones that provide massive price appreciation potential but little to no positive cash flow - an AMZN tyow scenario. Then there are those that are in between, which are probably the best investments, but harder to find. The latter scenario is similar to a workout. Find a class C property in a solid market and fix it up to class B type standard. Or get a deal on a class B poverty in distress, etc.

I think being involved in running a cyclical business has been harder on my health than any moderate alcohol. It certainly feels harder.

I was joking with you as well. Lighten up. You are born with the propensity and susceptibility to be an alcoholic. If you make it through your college years without being hooked, you'll be ok. I know multiple athletes, some pros in fighting sports, that have a few drinks daily as part of recovery. Like 2-3 beers EVERYDAY. They have fantastic health. I think people who drink 2-3 Coca Colas a day are morons, yet we all know of at least one example of someone living well into their 80's who does just that.

You must be a broker. If he's not, he's gonna be soon. ::) You nerds need to live a little. It's ok to have some drinks, even if Warren doesn't. :) Not a broker. Business owner.

A couple drinks most days.

Here's a quick list of value investors, many still alive. Buffett Graham Munger Pritzker Zell Icahn Ackman Schloss Shelby Davis Tom Evans Einhorn That's just the billionaire ones I can remember. None of them do anything that Graham didn't do or didn't write about. They use the same valuation methods and strategies he wrote about. He wrote about or practiced activism, growth, net net, distressed bonds, arbitrage, etc. I don't recall Graham writing about real estate but it wouldn't surprise me if he did. The principles are the same.

It's tempting to speculate for a bit, get the massive gains, then switch really quickly back to value investing for the long term. Kidding. I have thought about using margin. I probably will never do it.

I think most people who quote Graham don't actually read him. In the Intelligent Inevstor he specifically talks about growth companies as an option for "enterprising" investors. He doesn't advocate momentum investing, rather he bases it on earnings. The same stuff Buffett advocates. It's all there. People just seem to brush by it or want to invent something new. Graham doesn't just advocate net nets, he advocates anything where a bargain be reasonably calculated: bonds, arbitrage, net nets, growth in earnings. Again, it's all there.

I still don't understand who are the "ordinary Americans" in the "0% tax bracket actually paying a 60% tax rate." Median family wealth in the US is about $80,000, including all forms of wealth such as retirement plans and equity in your primary residence. (http://money.cnn.com/2015/07/27/news/economy/wealth-diverse/). The "ordinary American" does not own an investment property or anything close to it. Which is seriously sad considering how rich the US is "on average". This is by far one of the most urgent economic matters for the US. But I guess propagating "the American dream" as something achievable for everyone is more important. The American dream is achievable. People are slanted too far toward materialism and consumerism. It's not the rest of our fault that people would rather buy boats and cars instead of investing their money, nor is it our job to mae it "equal" so the people who decide not to invest can consume more. People in the US have the ability to take responsibility for their own lives.