KinAlberta

^ Yeah our intent has been to buy at about 4 yrs and sell at 8 years. Thus paying about half price of new at 4 years and selling at 8 before major repairs undo the savings advantage. I've had a couple cars I've kept a long time but when I thought about it, one- I've taken the maximum or highest depreciation hit by buying new and realized that while buying new gets you the latest safety technology compared to buying a 3 -4 yr old vehicle, then keeping the vehicle for 10 - 12 years to justify the new purchase is in the end worse than being just 4 - 8 years behind on safety and driving technology. Basically the leapfrogging works but the lagging could be a killer (like a value trap).

We had a Honda Pilot and I was getting rid of my old Saab and so needed a second vehicle that we didn't plan to put many miles on, on an annual basis. We found a 2+ year old Honda CRV that was being sold by an individual outside the city. It looked like new and was loaded with all the options. However the CRV had a record of hail damage and a minor front end accident - both repaired nicely - and quite high highway km on it since it was an "acreage car". So, we got it for a quite a good price. Going forward, driving fewer than average or typical km, we expect it will become an 'average mileage' vehicle for its age - the relative price should thus adjust upward over time. The hail damage is a permanent mark against it but we saved more on the up front purchase price due to that damage than we likely will loose on the eventual sale price (plus we have a car with an extra coat of paint over most of it). The crv is an ok vehicle, great interior room, amazing head room, good and reliable, nice to drive in town but like our previous Hondas: incredibly boring to drive. (I miss my even more reliable - and very fun to drive Saab.) So we've decided we won't be getting any more Hondas. We're not getting any younger and buying vehicles that are good value for the dollar has a downside impact on quality of life if you do anything more than city commuting.

I was looking at valx. It is "offered only to United States residents". So I assume such "active ETFs" are, or are treated, more like mutual funds than standard tradable ETFs. Does anyone know much about how these work?

I'm curious what shares people own that they are able to follow on this board but more interestingly, I'm curious what stocks board members own but no one started a thread on yet. Also, while most posters on this board likely fall into the "value investor" camp, I don't see any great harm in such investors holding the odd growth and even highly speculative (lottery ticket) stocks if the investor knows the risks. So it would sure be interesting to see how some of the "unknown" positions are viewed by the holders. For instance, here's one I just searched for and no mention of it turned up: Not of Corner of Berkshire and Fairfax: IMRIS (IM). Purely speculative (A buy and sell position of mine. Recently bought back into the stock)

What was first, deflation or lower oil prices? Well in Japan they had deflation even with rising commodity prices. We're not seeing deflation here yet, but we are seeing lower commodities. Real purchasing power is rising as is employment. So far anyway :-X I have been thinking about it a lot lately and I'm still not sure about it. Why did we have high(er) oil prices in the face of the whole shale gas revolution only a few months ago? To me, it seems more probable that the prices are reacting to deflationary pressures from all around the world (but the US). I'm really curious whether we will see this working out as economic stimulus for the US economy or more as importing deflation. Gundlach talked about this lately: http://video.cnbc.com/gallery/?video=3000333313 He is using oil as a leading indicator for the CPI. I recall going to a dinner arranged on this board before the 2009 annual dinner and someone asked Sam Mitchell: inflation or deflation? He said: both, and what really matters is when one turns into the other. I'm inclined to think he's right, and I think commodity prices coming down are deflationary at first, and that is so good for the economy that Eric's thesis plays out and we get wage growth and a little inflation. But the third order effect is that, with those elements of the economy normalised, CBanks can and might have to raise rates, and it is quite possible that that will cause havoc. Now, by the time you get to third order events your chance of making a correct prediction is so small as to make the exercise pointless! But I can see how Prem's 2011 forecast of a possible decade of flattish nominal GDP with bouts of deflation might come true. But then I suppose any forecast *might* come true ;) I know back in 2010 or so, everyone was expecting a lot of inflation to appear by right about now. So, since those expectations have changed quite dramatically or at a minimum those expectations have been pushed back by a few years, I would think that their hedges should be doing alright. Am I way off base here?

He was 46 years old here - one of the most interesting Buffett articles ever... Buffett: How inflation swindles the equity investor (Fortune Classics, 1977) by Warren E. Buffett http://fortune.com/2011/06/12/buffett-how-inflation-swindles-the-equity-investor-fortune-classics-1977/

^That was well said in buy backs and IV. I've argued many times that I do not want Berkshire Hathaway to pay a dividend because of it's track record of superior capital allocation. I'm wondering what my approach should be towards index funds that I eventually plan to buy and hold. (I believe Buffett has said that in his last will and testament he will recommend that the inheritance be put 90% towards equity indexes like the S&P 500, and 10% cash.) I don't agree with Buffett. Here's my thoughts: First let me say, I'll never have enough money that I could say I could hold it for 20+ years without ever having to dip into the account for some or the other expenditure - this raises the attraction of dividends. Choosing non-dividend payers may be more tax efficient and when looking at individual companies and aggregating them in the form of the S&P 500 gives one a mix of dividend payers, companies buying back shares, non-payers (reinvestors), etc. However, I don't know the general corporate record of share buy backs at below intrinsic value. I suspect a lot, if not most corporations' buy backs occur with less than optimum timing. So I don't know how much value they would add to intrinsic value growth (vs destruction) in an index fund or ETF. Now, if one considers published index returns, clearly an equity index can return zero over extended periods of time - 15 to 20 years - the buy backs aren't benefitting the index growth in the short run, though eventually you'd think would have to be reflected in long term pricing (potentially over the 20+ year horizon). Value may be building, intrinsic value growing, but the pricing doesn't reflect it. Published returns on "Total Return Indexes" are a different thing and sort of reflect reality. Generally investors seldom have lost money over some period, say 10 years, once dividends are factored into the equation. (Though published returns on Total Return indexes would be a bit misleading for lack downward adjustment on the return for payment of taxes in non-registered accounts but close reflect returns for index funds/ETFs held in RRSPs, TFSAs, 401Ks etc. I believe.) Another factor would be the growing strength and surviorship or survivorship bias of more mature companies in a recession or conditions where an index could return zero over 15 - 20 years. Over that time span some of the growth companies would mature and then pay dividends - some for quite a while during that period of time. So, wouldn't one want to bias their allocation of indexed funds towards dividend indexes, dividend orientated index funds vs. standard total return indexes? Wouldn't that assure you of more cash flow for either reinvesting or avoiding forced sales in down markets due to unexpected life events? Wouldn't this directly beneficial cashflow flexibility outweigh any weighted average tax advantages and growth company potential of holding a broadly indexed/market index fund where a portion of the indexed companies are non-dividend paying companies.? Thoughts on this would be greatly appreciated.

I've been reading Arnold's comments for years (maybe 20 yrs now). However never closely investigated his performance so that is interesting. The thing is, I recall reading that he's always had a large share in cash (something in the order of 20%) and still managed to do very well. Personally, my view (and this would include Hussman) is that if I were invested with them I wouldn't mind them not beating the S&P during fairly long periods if I felt they were being conservative and acting in a fiduciary manner. eg. Hussman had it right prior to the 2008 collapse but then adopted a highly protective stance afterwards. Exactly what you'd ask for of a manager looking after say your grandmother's money. So, I can always stick with index funds if I want to ride along with the market and I know how exceedingly rare it is for any mutual fund to beat the market (in this case the S&P 500). I can also buy into leverage closed end funds, etc. if I want goosed up returns (with commensurate risk). Otherwise, the odds of me beating an index like the S&P 500, or picking a fund manager that will constantly beat it, are extremely small so it's very hard to be hyper critical of any manager that fails to do so for a period of time.

Nothing wrong with buying something where the future is already priced in. It comes down to earnings quality. Fully priced securities can be a good thing to own in case the future of most other stocks have had their futures overly priced in (something low interest rates, growing export markets, never ending housing market growth, deflation like Prem Watsa predicts, etc. can do). There's little to stop an aging population from aging and spending where it has to spend, however there are a lot of things that can stop a growing economy from growing and people spending where they are currently forecast to spend. In this sense you'd want to own some of the surer bets.

What's the approximate value of DJCO today?

In past years I've made a few lists of companies that I thought were great or potential demographic plays. Can people suggest companies today that they feel are good candidates for such a list? My thinking has always been that aging baby boomers offer a near guaranteed sales increase for those companies with a great moat and a product that aging boomers will need such as funeral services. Kidney dialysis is another one. Robotics seems to have a demographic angle to it too. But it's not just serving the aging 1945-1965 baby boomers that could benefit a company. Today, here in Alberta we seem to have had a new baby boom the last few years. Then there's other countries. China softening it's one child standard may create benefits. In terms of population dynamics, in-migration might also be a neat aspect to consider. Again, Alberta's population has booms and some companies have benefitted immensely from that population growth (which may now quite suddenly cease). So what companies do you feel that there will be a near guaranteed growth opportunities available to them due to demographics?

MLP's can be problematic can't they? A while back I hoped to add one to my RRSP but found that if they are held in RRSP they are subject to a whopping big withholding tax - something in the order of 1/3 of the dividend.

Funny. I've owned this for years. Maybe it's reached a couple decades now for a few shares. Instead of selling, I've been thinking of buying more despite the new highs. The last time I recall buying was in anticipation of the 2008 market dip.

Any current thoughts on Hussman's work? He's far from alone among the smart money people. Grantham and many others are entering the same "the Market is Grossly Overvalued" camp ages ago but don't know when the reversion part of regression to the mean will take place. Seth Klarman has been here a while now. Rodriquez is just waiting. There's so many. Buffett says we're at a high range of normal - and so seems to be building cash more than anything else. Yet, falling oil prices should prime the growth pump in many parts of the world - much like driving down interest rates did. So could we be feeling a further equity spike and just heading towards a 1929 style blowoff? Or are markets now sensing that a slowing China, an anemic US market, debt market problems exacerbated by massive shale driller debt, continued EU issues, etc. all together put us closer to an equity correction right now despite any slow to materialize cheap oil benefits?

^^ Thanks for posting the article link. Ironically, it may be a simplistic article bashing the widespread adoption of an overly simplistic concept - the all-for-one "shareholder value" model. Both unions and non-unionized employees including management and even suppliers all seek to share the wealth. It seems that management has always been among the most successful group at accessing a larger share if not outright expropriating some, if not most, of the gains of the corporation by taking credit for upward stock price movement ('when the tide is raising all ships') or when the intrinsic merits of a product design sells itself and for numerous other non-management driven corporate gains. Some managements very successfully expropriate all future value of corporations though tactics to take companies private at substantial discounts to their then current intrinsic value. As for Market Basket representing something new, didn't the Coke Classic episode a few decades back also reflect that "stakeholder model"? Nothing new here I'd say. People need to protect the franchise (moat) to maintain market beating performance, if not profitability.

AAII has some other useful, fairly "proven" screens. Some of which are finding few securities meeting their criteria. Even their Shadow Stock Portfolio is having difficulty. That said, while we can't predict a market movement one way or the other, at some point any prior intrinsic value discounts of securities one may have purchased disappears and then your return going forward becomes mediocre under a buy and hold approach - unless you can find new positions to substitute in. If not one has to be ok with a market return and that's where Hussman's analysis comes into play. A fully priced or higher market just doesn't provide great rewards going forward unless some unexpected growth or new market appears from somewhere. Here's to waiting for another 1974 market to materialize: “Look At All Those Beautiful, Scantily Clad Girls Out There! excerpt: "Buffett is like the legendary guy who sold his stocks in 1928 and went fishing until 1933. That guy probably didn’t exist. The stock market is habit-forming: You can always persuade yourself that there are bargains around. Even in 1929. Or in 1970. But Buffett did kick the habit. He did “go fishing” from 1969 to 1974. If he had stuck around, he concedes, he would have had mediocre results."... “You’re dealing with a lot of silly people in the marketplace; it’s like a great big casino and everyone else is boozing. If you can stick with Pepsi, you should be OK.” First the crowd is boozy on optimism and buying every new issue in sight. The next moment it is boozy on pessimism, buying gold bars and predicting another Great Depression." http://www.forbes.com/2008/04/30/warren-buffett-profile-invest-oped-cx_hs_0430buffett.html

Of my meaningful positions, I'm sitting tight with BRK, FFH, GLRE, MKL, and a few others. Since I'm thinking that the market is very prone now to headed downward, I'm thinking of adding to FFH and GLRE if they tumble (their hedging might add offsetting unrecognized value in a downturn).

I sold a bit more of my Ceapro (CZO). I've owned it and accumulated it on and off over more than a decade and tt's finally doing fairly well but I'm paring back everything I own except BRK, FFH and a few "keepers" to raise my cash levels. (Market timing.) I have been selling off a number of index ETFs over the past few weeks too (some of which I just picked up a few months back).

Fairfax is making a bet, of sorts, on the future by hedging. They are using imperfect hedges buy holding individual securities while hedging indexes. Nonetheless, it's a reflection of an uncertain view of the future. I believe Markel on the other hand is mostly long everything and for an insurance company, is not walking its own talk by insuring its equity positions against loss unless they feel their fixed income positions serve that purpose. Correct me if I'm wrong - I haven't looked at either company in a long long time deciding that their managements are far more capable than me at managing my money invested in their shares. I own shares of both companies.

Mostly ETFs and funds (dividend funds and etfs, infrastructure ETFs, etc.), but also a wide range of speculative and investment grade positions. Keeping companies like BRK, FFH, MKL, GLRE, OCX, KSU, COS, FMNA, FRMO but have been selling a wide range of other positions. So basically, I've been raising cash across the board - AGAIN. Last year I apparently erred as, for well over a year now, I've felt the market was overvalued and at risk of a substantial decline, so by mid-May 2013 I had substantially raised my cash levels which was fortunate timing in the very short-term but the market decline was very minor and I then missed the fall rally. >:( Hating holding cash and knowing I can't really time the market, :) I couldn't stand it any longer and bought back into the market late in the year and into the first half of 2014. I still feel that the market is highly vulnerable and am basically trying to time a 5-7 year business cycle market top. That said, I've been returning to much more comfortable cash levels by taking modest profits across the board. Note: In the past held decade/two decade long positions and only went largely to cash in 2008. In 2009 I jumped back into the market big time. Then took profits until the crisis in the fall of 2011 and again jumped back in in the downgrade crisis. So I don't think I'm so much as a market timer as an opportunist in these volatile times. I think the 2008/2009 crash was pretty much a once in a lifetime opportunity and don't expect a reoccurrence. Right now with many somewhat reliable market ratios at record highs (Hussman goes on ad nauseam about them), many guru investors now raising cash, Buffett not buying much if anything, and screens like AAII's Shadow Market portfolio finding zero small caps passing its criteria (beyond its current holdings), indicate to me that market risk is higher than normal if not unusually high, and so I'm selling market/index investments and a few others to boot. Rule number one - don't lose money. ...And this market has been driven so much by intervention and subsidization and not free market fundamentals that I feel uncomfortable about prospective returns at these levels (in North America).