LR1400

He's not going to set off nukes. That's ridiculous. If he did that there would be a viable reason. He's over the top, but not stupid. Trumps biggest problem is he doesn't do much to hide his self centered nature unlike a typical politician.

What to me makes sense is real estate investment based on making money holding the real estate in the long run, not [trying to] flip it in the short run. EBVAT/S compared to price/S are the crucial paramenters for me, combined with an overall assesment of what you are buying into [quality]. The financing is part of that equation. Agree 100%. Buying real estate with a somewhat long term view (at least 5-7 years) is what Zell and others have done. Look at the rent like a coupon on a bond and the price appreciation as the same as increase in a stock price. Finance it for as long as possible at the lowest rate possible.

Good stuff. Lots of wisdom there. Regarding leverage: I understand the dislike of debt; however, sometimes there just is no other way to get going or keep going. Real estate is especially tailor made for leverage. I can't understand why anyone would not use leverage for real estate. Buffett had outside investor capital to help him get going. If you don't have outside investors, what do you use? Buffett still had an obligation to these outside investors as well, not the same as debt holders, but an obligation nonetheless.

I was thinking the same thing as Parsad. I like to read, only wish I had time to read more. I no longer really try to read super fast either. With newspapers I just skip sections of if I'm not interested.

I agree that healthier food is in general most likely better for us all. I eat lean meats, protein, and some complex carbs. I throw in some unhealthy meals here and there. That's just what I like to do. I hope it pays off. There are some solid examples of people not eating "healthy" and still having great body composition and appearing to be reasonably healthy. I prefer moderation.

There's a lot to calories in calories out. Another example is Chad Johnson (Ochocinco). The guy eats MxDonalds everyday and is still in great shape. A Coke a day or one McDonalds meal a days isn't going to kill you.

Listened to an interview with Sam Zell, he says a lot of his success has been due to being a voracious reader. Same with others. Maybe there are individual tendencies where some learn better through voice/video, however you can't listen to everything via podcast. Personally, the benefit I find with reading for business purposes is repeated observation of information and the ability to discern tendencies from that information.

Thanks for that link! I listened to another Zell interview where he discussed how much he reads. Common trait in many billionaire investors it seems.

I set up one for real estate in 30 minutes plus another 15-30 minutes to establish the operating agreement with my attorney.

Man, I don't know about that. There are lots and lots of people that have tremendous wealth from real estate investing alone. The use of leverage, positive cash flow, and typically an appreciating asset makes it a solid asset class. I'm not sure what kind of net worth you guys are thinking but I know a professor, a small restaurant owner, and multiple other small business owners each have a net worth over $10 mil. In a town of 30,000 people. The money they made in their small business or job was invested into real estate and that's where the majority of their net worth is. In a larger city the number is probably $50 mil. I think it is a temperament based decision primarily.

Yes. It's always slightly different. But the dynamics are the same. And you could make the argument that when even most broadly diversified conglomerates collapsed after their acquisition boom in the 1960s this must be even more true for roll-ups. In highly fragmented industries, I see roll ups as a great thing for shareholders.

What's wrong with going to college, learning a little about humanities, history, etc. and being a well rounded person? There's more to college than preparing for a career. It's fun, you learn social skills and interact with multiple types of people.

Smart people paid to tell you the obvious. They have to string management along in order to extend the "engagement". I learned a lot of basic business analysis by studying their materials and books. Learned more studying Buffett, Munger, and the outsider ceos. Learn more reading BRK shareholder letters because there is no bullshit jargon and the advice is tangible and easy to put your hands on. For example: studying Buffett would keep you out of businesses with poor economic models. Not many consultants would advise you that your industry sucks and the economic model of it is doomed to fail, some may, but not many. If they did that there would be little to no follow up engagements and fees.

I am in 100% agreement with Vinod.

I prefer the books from practitioners myself. Green wald's book is good though. I personally think the academics and those like them over complicate subjects. The Hooke book helped me a lot because it helped me understand how to value and look at various industries.

This one? http://www.amazon.com/Security-Analysis-Business-Valuation-Companion/dp/0470277343/ What would you say makes it better? Thanks in advance. Yes. I think that book, the book Investment Banking by Rosembaum & Pearl and the Wall Street Prep materials are better. They are written by practitioners. The book referenced above does a good job of giving an overview of valuing different industries as well. For example, they point out the difference in valuing a natural resource company, a finance company, etc. Hooke walks through examples and describes the thinking behind the valuations.

I learned a lot from the book and its counterpart, Value. However, it's not my favorite for corporate valuation. I found it needlessly complicated at times. Security Analysis and Business Valuation on Wall Street is better for what most people on this site want.

I'm about to buy an Audi R8, used, so that qualifies as a value investor philosophy.

This is a great point and a great discussion. In his personal life, Buffett has taken personal loans before to buy stocks (for instance, in early 1972-3 I believe). And with Berkshire, he has previously employed leverage in certain ways that most non-obsessed investors would be surprised that Berkshire engages in. In 1988 or so, I believe, he took advantage of cheap financing to borrow a significant amount of money "just to have it" to strategically deploy - because capital was cheap. He has done this a number of times with Berkshire; borrow long-term when capital is very cheap and then deploy it during a period of turmoil or something similar. So, what gives? Is he a hypocrite, I can hear someone say? Well - how dare they say that - this man is my hero - of course, he is not a hypocrite. Its just that leverage and debt are not always ipso facto bad. There are exceedingly few things in business, and dare I say life, that are always bad or always good. Is a gun good or bad? Depends on whose hands it is in. (Maybe the world would be better without any guns, but that is a different discussion.) A police officer saving the life of someone by shooting a hostage-taker is of course substantially different than the hostage taker with the gun in his hands. So with that said, there are sensible and wise uses of debt and leverage. But, on balance, debt and leverage have caused every one of Western Civilization's significant financial calamities. Additionally, leverage is the singular largest way that smart people lose everything or have some other very adverse business outcome. Thus, from Buffett's vantage point, society and most of its members do not properly employ debt and would be better off without it. So in that context, dogmatic rules such as "don't employ debt" are the best general advice he can give to society. There is also a difference between being leveraged and employing leverage. Being leveraged, to my mind, is either actually or potentially being extended past the point where one could own everything they do without debt and/or does not have the capacity to pay back everything they owe or could owe in the short-run. Buffett has never put himself (at least this is my belief about him) nor Berkshire in the position where they couldn't pay back what they owe in the very short-run. They employ leverage when it is cheap so they do not have to sell a liquid asset or to build up their cash pile war chest - but he has never actually been extended past what he could have bought without the leverage. I'm not really articulating this point well, but I hope this point makes sense. All of this reminds a bit of this interesting thing a wise man once told me. I was having a beer one time with a very well-known political figure and he said "I've taken the two most likely, by a huge margin, personal scandals that cost politician's their careers completely off the table." I said, "How's that?" He responded: "I don't cheat on my wife and I don't drink alcohol. So there is no chance that there will be a mistress scandal or a drunken video of me out there or a DUI [though I actually think this man had one when he was a very young man, but I think he meant once his political career started he wouldn't have one]." I've thought about that conversation often when politicians inevitably have a scandal that either involves or is facilitated by infidelity and/or alcohol. If a really drive politician wants to simply remove the largest stumbling blocks from their career it is quite easy: Don't drink and don't cheat. It's that easy, yet human nature gets in the way. I think it is similar for investors, institutions, and certain businesses with debt - most of us can't help ourselves, especially when there is a huge industry made up of smart people who are always willing to (read: encouraging) the use of debt. Great points. People take Buffett's comments too literally almost all of the time. When he makes sweeping generalizations he is meaning this for the average person. He is also saying that 99% of the time doing "x" is a bad idea, but not always. He has lots of common sense and most people don't.

Great article. Lot's of insight in there. I love reading about these guys who started with nothing and became very successful managers.

I think you'd be better off with Greenwald's book. It goes through multiple logical ways of determining value. I like the McKinsey book as a business owner and for conceptual thinking, however, I would say it has done very little for me investing wise. It's written like you would expect McKinsey publications to be written. Also, Pabrai's Dhando Investor gives really good and simple examples. Basically take net income, add back depreciation, deduct capex. Or you can take cash flow from ops and deduct capex. From reading interviews with Pabrai and others, most don't worry about trying to determine a maintenance level of capex. Greenwald gives some solid advice on how to determine a logical level of maintenance capex. I personally don't bother much with that level of detail or spreadsheets, instead I do like Pabrai. You're looking for a reasonable range of potential cash flows and a HUGE discount on them, aka margin of safety.

He seems like a really good man. Thanks.