Jurgis

Petec, I think that the answer lies somewhere between two extremes. I think you are closer to one end and I am closer to another end, but neither of us are at extreme. How close we are is unclear. :) I disagree that all consumption is borrowing from the future. Clearly at extreme if a person dies from hunger, they will not consume (or produce) anything in the future, so you'll have a better future (with more production and consumption) if they are fed now. Similar argument can be made about healthcare consumption, possibly shelter, etc. (I'll skip the argument that one person's consumption is also another person's production - it's there, but it might get hairy ;) ). Now, you are right that at personal level if person has no money and has to eat, they can only borrow from the future, since that's how obtaining-money-when-you-have-none is structured. But I disagree that this is true at society level. Like you said, society can focus at productive vs. non-productive spending and it's likely that feeding the person is one of the most productive things society can do. Now, we are back to "moral hazard" issues and yeah, these are hard, but IMO these belong to another discussion. Going to society level, IMO you guys are making a mistake looking at country (society) as individual investor. For individual investor it is almost always true that saving is the way to go, but that's because of the way our society is structured. If person does not save, they won't have anything to live on when they are not productive anymore. It is also likely that individual investor does not have many productive uses of their money assuming they are fed, have shelter, healthcare, education and any professional needs. Although they can invest in businesses and I wonder if you count that as saving or as spending. I'd think it is not saving, but possibly this is OT. This is quite different at country level: country will never go old and unproductive. Also the goal of a country is not to amass enormous fortune while its people are left at worse productivity level than they could be. So assuming country has productive uses of money, it should allocate it to those uses now. And when I say productive, I mean something that is either consumption or infrastructure but what enables better future production and consumption. Now, I think your example of "building a five lane highway between two villages in rural China" is intentionally exaggerated to be wasteful (you say it's unproductive, I say it's productive but wasteful). However, building a road between these two villages, or paving an existing road is likely to be quite productive. Now, we get to the question: what if country has a lot of productive uses of money, but it has no money? My argument is that it should borrow and spend and that this would still bring a better future than not borrowing. But, yeah, I see how this probably would be a point of contention between us. I think you'll have no issue if country borrows, spends money productively, then later when internal production/consumption rises, the debt is repaid. But what if the debt continues to grow. I say that assuming productive uses, this is still a "good thing". But I am aware that our society does not have a great way to delever that debt in the future. Money printing or default are two options. You don't like them, I don't particularly like them too although I find them somewhat acceptable. There likely should be a way to get rid of debt without the pain of two methods above, since debt is a financial construct (and not a real world construct), but I'll leave finding the solution to some Nobel winning economist. ;) Anyway, everything above is for ideal world where unproductive-use-of-money does not exist. In real world, unproductive use of money exists in spades and moral hazard exists in spades. I am sure there are examples where even productive and useful money spent ends up not as productive as expected. So it's possible that something closer to your position is a good heuristic to ensure that countries and people don't overspend on unproductive uses and don't get rewarded for it. I still think that pretty large portion of spending is productive and therefore I still remain somewhere farther from your position on the line of how much to borrow and spend. Hope this explains my position. Not sure if this is Keynesianism or some other -ism.

TwoCitiesCapital and petec, I disagree that "discipline" the way you mean it is a good thing. I talked about austerity because IMO this is the closest to "discipline" we have in fiat currency society. I agree that there is a large amount of waste, especially trillions spent on wars. "Discipline" would be good if it cut the waste. But I doubt that the waste would somehow disappear under "discipline" of gold standard. IMO the productive parts would suffer, likely more than wasteful parts. And that's why I am against "discipline" as you define it. If the goal is to reduce waste - and I think this is a real and good goal - then we should be talking about that. But solutions for that would likely be political and policy solutions rather than monetary ones. And I still disagree with the whole "borrowing from the future" mental model even though I have a pretty good picture where you are coming from. Anyway, we'll probably continue to disagree. Good luck.

Petec, I disagree with most of what you write. The "borrowing from the future" is incorrect mental model and IMO dangerous model to have. Economic activity and growth as early as possible is positive and should be encouraged. It compounds into the future. The fact that you build university, factory, bridge, etc. today rather than tomorrow means that it will have multiplicative effect for the future: its use and its products will allow you to build other needed things sooner than otherwise. Growth into productive fields such as infrastructure, tech, etc is especially beneficial. You are not borrowing from the future, you are actually enabling the future to be here sooner than later. Sure, there is waste and mismanagement due to too much money available, but IMO austerity is never a solution, especially not global austerity. Now, I will say that unfortunately we do not have a good mechanism to produce growth without waste. Austerity isn't that mechanism though. Pretty much every country that may have had issues would be better of if their debts were forgiven and productive growth resumed instead of wallowing in recessions. Now, the issue is "moral hazard" and that is a real risk. But even with that I believe that growth is more important than the risk in a lot of cases. I'll also say that we possibly don't have a great mechanism for global delevering without consequences. Debt cancellation has consequences and hasn't been tried on large scale. So you may be right that our societies may not figure out a painless way to delever and then we may have tough time in the future. IMO we don't have to have tough time, but we may have it because we don't have a mechanism to get rid of debt that is financial construct (and not something reflected in reality). My guess is that printing money is the best known mechanism for solving this, though I am open to others. Anyway, I doubt we'll agree. :) Good luck

It's not really worth responding, but just in case: 2016 - 50 = 1966. Just FYI WW2 ended in 1945 and most of post WW2 rebuilding was done by the time US went off gold standard. I guess it doesn't trouble you at all that a great economic activity can happen with fiat currency. And then you accuse me of religion. ::) I am fully aware what Bitcoin computations are. Yes, they are there for reason. They are still fruitless in terms of results: their only reason is to solve hard problem for security, but the problem solution itself is worthless. Once someone creates computations that are both useful and provide the security we could talk about Nobel prizes. The rest is just a bunch of venting and personal attacks which is par for the author. Unfortunately, moderators do nothing about it in this forum.

Any proof for this? Let's see: People are happy and yet somehow everyone is worse off for it? And BTW before you go on your gold bug bandwagon, maybe you should explain why the last 50 years of fiat money was one of the best times of the history of our civilization. For businesses and entrepreneurism too. Or will you claim that it made everyone worse off and it would have been so much better on gold standard? Edit: it's also rather funny seeing people railing for gold standard at the time when there is no inflation, no inflation on horizon and there might be deflation because of a number of reasons. So you want to go back to gold standard why? BTW both gold standard and bitcoin are bad because they encourage spending resources on unproductive endeavors: gold mining and fruitless computations. There's already way more gold in the world than there's need for it. If you're so smart, at least tie your bitcoin computations to finding cure for cancer. I'd vote for "cancer-cure-coin" maybe. ::)

https://www.washingtonpost.com/business/economy/us-household-incomes-soared-in-2015-recording-biggest-gain-in-decades/2016/09/13/a832da44-79e0-11e6-ac8e-cf8e0dd91dc7_story.html

I am not predicting a major correction. (I'd still like a definition: 20-30%? 30-50%? 50-??%?) I think 20-30% is likely in next couple years. Higher percentages less likely. My guesses would be: Likely: - No big reason - Meh generic recession after long business cycle (Much?) Less likely, but possibly bigger crash: - EU falls apart - US presidential election (I have some scenarios, but won't post so this doesn't turn into another ... thread).

http://www.huffingtonpost.com/entry/stephen-king-donald-trump-cthulhu_us_57d77e19e4b0fbd4b7bb4540?

I have to read through his letters - I only scanned through. I think he's in difficult position. He started well and has some nice gains in less than year. He's smart and intelligent and maybe has talent. But he's starting during expensive phase of bull market. There are no secrets. Every fricking stock is turned over by dozens of bright managers. Even if he went for microcaps, he'd have trouble to find something that is great business and cheap. I read a bunch of "great manager" letters posted and referenced here. And IMO at this time anyone who claims that they found Buffett's KO/AXP/WPO "great business at a good price" is mostly deceiving themselves either to the quality of the business or to the price or to both. (There are few exceptions but usually with bad future prospects - according to market - and you'd have to have a great business forecasting ability to predict successfully against the grain.) So... we'll see how he does in next five years. Maybe he'll do great - congratz then. ;) But in general: don't start a fund at later stages of bull market. Unless you gonna short it successfully. ;)

RichardGibbons and stahleyp, thanks for posting. I doubt that you will change the minds of people you're replying to. I mostly gave up, so I can only post a /support to you guys. It is very surprising to remember that USA had top marginal tax rates of 90% and somehow it wasn't called socialist heaven then and its economy, entrepreneurship and innovation did not collapse as some would suggest. But now some people will call you communist and predict doomsday for suggesting even 40% marginal tax rate or any other mechanism to provide more equal renumeration, social services, and opportunities to people. Right, even Koch brothers are now socialists. They dare to talk about income inequality and issues that come because of it. They dare to say that USA should keep social security programs until and unless other ways are provided for people to live a normal life.

Very well said.

I don't think it's no brainer. Yes, his compensation would have been higher with investment format. But he would have faced at least couple of issues: - flighty capital, especially when his AUM would have become large - complications in acquiring full businesses. I guess hedge funds can do this, but there are likely issues. I think with just stock investing Buffett would have performed worse than he did with buying whole businesses. - possible regulations if his AUM got to BRK size? - no float? Though some hedge funds now have insurance companies for float, but then how is this different from BRK?

Parsad, no need to get emotional. Investor judgements come with territory. You can hate your investors as much as you want, but if you manage OPM, you're gonna get judged - fairly or unfairly. If you manage a company, you'll be judged too. And, sorry, but IMO Pabrai is not a great investor. In general though, I think it is going to be very very very hard for people to outperform indexes long term going forward. Sure, maybe next month market crashes, index goes nowhere for next 5 years, all the value investors make out like pigs and then you can judge me. :D Buffett BTW is very smart in that he shifted into operating businesses rather than just investments. This is potential area where people can outperform by running and growing great businesses. But then running operating businesses is not easy either - right, Parsad? Take care.

Chou seems to be a nice guy and clearly Toronto/Canadian crowd likes him, but the performance and portfolio seems to be bad. I guess just shows that being nice and talking good talk is not enough.

That's pretty much the situation. Fund argument is pretty much that they will outperform eventually - when market crashes??? - but I am not aware of any funds that are clearly worth investing into with expectation of outperformance. I thought a bit of getting into Sequoia this year as they opened to investors. But did not act and not sure it's worth doing it. If you're bearish, it's likely better to just adjust your allocation yourself rather than invest in value fund and expect that it will do better in market downturn... Edit: OTOH with 20-40% non-stock allocation, you're likely to underperform index as well, so... you might do as well with some value fund maybe... or not... :) Just my thoughts though. I may be wrong. :)

Valeant killed the radio star...

Hmm, I'm somewhat in the camp that the number of cars produced won't likely go down much. Very very optimistically (or pessimistically?) to 1/2 of current. I see proportionally more smaller cars - almost nobody needs four-seater taxi - but I don't see why you think the production will drop so much. Can you walk through your thinking and numbers? My thinking follows the discussion on FCAU thread (I think): The number of miles driven is unlikely to go down (I still have to do all my driving legs even if I call self-driving-Uber). It might even go up if cars have to drive empty to pick next person and if people switch from busses to self-driving-Uber. Assuming number-of-miles-driven doesn't go down, it doesn't matter that person does not buy a car. The car wears out from being driven. So replacement cycle based on miles driven won't change (much). There is some replacement from cars being old but not driven much, but that's likely what 10-20% of replacement? So OK, let's go all the way and say 50% of replacement gone. That's where we get to 1/2 of current. Maybe you can argue that electric/automatic cars don't wear out at 200K miles driven, but I'm not sure that's true... Anyway, I don't see cars going to 1/10 even in wildly optimistic (pessimistic?) scenarios. :) I'm not talking about possibility that something else replaces the car concept way long term.

TedKord, What is the timeline you are considering to get to 90m electric cars? Tesla AFAIK is the most aggressive and we are still talking only 500K cars in 2018 (?). That's only 50m pounds of extra copper or 22k tonnes. That's only 10% increase of Codelco production and only ~1% increase of worldwide production. When you say "Either Telsa and the rest of the electric car makers aren't going to hit their targets on production", can you point to what these targets are? How fast you expect them to go from 500K cars to 1M, 10M, 90m? Don't forget that optimization happens too. The fact that the car needs 100 more lbs of copper today doesn't mean it will need 100 more lbs of copper in 10 years. In particular if we gonna switch to Uber-taxi model, most cars could be much smaller since really nobody needs SUVs or even four seaters most of the time... (which BTW was not mentioned in the discussion of whether car production drops or rises when we have self driving cars). Lithium might be more attractive, but I haven't done the math since I probably won't invest in commodities companies anyway. Too many things can go unexpectedly sideways. In particular often costs rise as fast or faster than profits + crazy expansions, acquisitions, etc. :)

Great question and comment. I agree with the first part that a lot of people don't have a dream/passion/ideal job. I disagree that there is no way to solve this. The somewhat expensive way is to get good life coaching. It's not guaranteed to work, but I've seen really impressive people in that area and IMO impressive results. The somewhat cheap way is to do-yourself. There are ways to analyze what you like and dislike, to pay more attention to both your current situation and your future, to plan, to not get stuck, and progress. Not easy, but possible IMO. There are free resources and supportive people for at least some of these so you don't have to go alone. Finally, I somewhat agree that any job is not all sunshine and unicorns all the time even if you love it. And, yes, a lot of people who even have a dream don't realize how tough the job actually is. "Oh, I want to be a writer, a dancer, a pet zoo owner, a fireman, etc.". And then you have to write when you don't want to write, dance with broken leg, get crapped by an elephant and get third degree burns in the fire. Or like you say just boring routine. But again there are ways to deal with it and that's another part where ... see above ... there are expensive ways and cheap ways. :) If you have concrete questions, shoot me a PM or post here.

Best sellers don't make one non-hack. BTW, I don't dispute that some of his facts/stories are interesting. It's how he writes that I object. And I personally don't give a crap what you think about what I did or did not do in my life. Have a good one.

Hmm, that kinda sucks. Assuming this is somewhat fair comparison, you have to lug around 1.4x weight. Doesn't that shoot the energy efficiency to smithereens? Yeah, I know price-wise fuel-only you still probably come out ahead in gas vs. electricity cost. But I'm talking about pure joule to joule comparison with losses included. Was this ever asked to Musk? (Sorry my physics is rusty, I'm sure resident experts will chime in)

The fastcompany article above is a word vomit by some hack in love of himself and his supposed writing prowess.

Ok that's true, but shouldn't then P1 be discounted again to P0? According to an admittedly simplified Dividend Growth Model: P0 = D1/(r-g) ~ (D2/(r-g))/r ? The point is, could the market in the 1960s e.g. had predicted current earnings from 2016 and then discounted them correctly. It would be cool to have 40y rolling eps predictions to see the possibly permanent underrating of g or overrating of r. I think you are still confused. Even if market correctly predicts and discounts all the growth and earnings, the value at year zero (e.g. 1960) is different from value at year 1 (e.g. 1961). For some reason you keep thinking that if you make perfect predictions, then value doesn't change as time passes. However, it does. Play around with DCF calculator (this for example http://moneychimp.com/articles/valuation/dcf.htm ). Write your own. Maybe that will convince you that what I say is true. :) E.g. plug in into DCF calculator, FCF of 1, the growth of 5%, discount rate of whatever, 30 years of growth, then no growth. That gives you the value of security - in your case the whole market - at year zero. Then plug in into DCF calculator FCF of 1.05 (it grew 5% as you predicted), same discount rate, 29 years of growth, then no growth. That gives you the value of security at year one. Have fun

Every thread is a drinking thread, compadre. 8)

OT. Population growth: yeah, it's gonna slow and stop. And it might be an issue... if we don't get immortality and intelligent machines fast. We can get both. With current population growth predictions ( https://en.wikipedia.org/wiki/Population_growth ) we may get both before population stops growing. (And yeah we may blow ourselves up too).