Jurgis

I think Bruce's investments are a bit YOLO, but if Fannie/Freddie work out, he'd get about 4x (or more?) on 20% position, so ~80% return. That would be enough to recompense for underperformance in 1, 3, 5, 10 year windows. Not that I advice to invest in his funds, do your own DD and all that.

+1 good post Parsad.

Adesigar, I understand somewhat why average voters may vote for a populist, nationalist, racist candidate with simple "solutions" that are not implementable and don't solve anything. I've seen this firsthand in other places. I think the results for average voters if Trump wins will be just as disappointing as they've been in other places that elect such populist candidates. In (best?) neutral case, this leads to disenchantment with the populist hero and possible jump to another one next election. In the worst case, it leads to breakdown of democracy and installation of totalitarian regimes. Let's hope we don't get there. Unfortunately, I don't know a good solution how to persuade such voters that their choice is wrong. Yes, usually they are disenchanted by mainstream politics and politicians and they think that changing to populist outsider is a simple solution. Persuading them otherwise requires both extensive education and positive results from mainstream political machine. Some kind of economic upturn also usually works - people usually attribute that to government somewhat and tend to less likely vote for extreme candidates. I don't change my opinion about CoBF Trump proponents though. They are knowledgeable and educated. They should know better. If they decide to support a candidate whose only competence is relentless self promotion and who bases his campaign on nationalist and racist demagoguery, it's shame on them. Edit: Aside: I wonder if Koch brothers will propose any workable plans for dealing with income inequality and if they can make their Republican candidates accept these plans and platforms. I don't hold my breath, but if they did, this might be a good direction for congress/senate, government and country.

There. Fixed that for you.

ROFLMAO. ;D ;D ;D ;D Oh wait. This is actually sad. There are people out there who think that Trump is competent. And these people are on CoBF. And they are managing someone's money. :-\ :'(

Not all of us hate Hillary. And we can still hope that Trump resoundingly loses.

http://www.cornerofberkshireandfairfax.ca/forum/investment-ideas/effn-effnetplattformen/ Let us know if you visit them and any info.

I don't know if this helps your thinking at all but i think it's related. Basically I have mostly given up trying to reason with people that support Trump. If they still support him after all he's done and said and promised I don't think there's anything that he can do or anything I or anyone can say that'll change their minds. Let alone facts and figures. Sadly, Trump is right. He really can go and shoot people on 5th avenue. +1. My ignore list is getting longer by hour. The contortions of some "respected" CoBF posters on this thread are completely disgusting. At least Koch brothers are showing some rationality.

If I understand correctly, to buy Canadian prefs you have to open brokerage account in Canada. It doesn't matter that Fido/IBKR allow you to buy Canadian stocks trading on TSX and Canadian prefs also trade like stocks on TSX. You still can't buy these prefs from USA Fido/IBKR accounts. You have to have Canada-based account.

There's "Income taxes, principally deferred" liability of 63B that is not attached to any segment. Assigning 20B of that to Railroad, Utilities and Energy segment would reduce its equity to ~72B and raise your ROE to 8.8%. Assigning more, would increase ROE even more. I don't know what is the right amount of this liability for Railroad, Utilities and Energy segment.

Hah, AMZN is almost 10 bagger since the peak before the Great Recession. That 50% drop during? Just icing on the cakez. 8) Nope, did not buy. The only justification: I got other ~10 baggers then. More risky ones though. And learned bad habits. ;)

He should merge with Wohl Capital asap. Think of the opportunities.

Well, I mostly like Amazon's "Subscribe and Save", though it has some annoyances. :)

Amazon's "Subscribe and Save" feature may be the least annoying of the monthly clubs, since you can shift the orders forward/back without penalty and you can easily cancel. A lot of monthly clubs rely on difficult cancellation to keep subscribers (even in this Internetz age). OTOH Amazon gets back at you with floating prices - your subscription is not fixed price and prices may vary +/-20% in practice. I use Amazon's "Subscribe and Save" for some items.

I really wonder if there will be success for monthly wipe club. Isn't toilet paper already efficiently priced at shops with all qualities and price points covered unlike the razors? Sure, maybe it's still cheaper to order online, Amazon b-ass-ics ;D brand via Amazon Dash button in your bathroom, but do you really need to join a wipe club? :o ::) :-X I'll go on a limb here and say that the similarity with shaving is misleading and that this area might be much more shitty ;D business than Dollar Shave Club was. But then it's now Unilever's problem, isn't it. :-X Edit: BTW, "Monthly X club" is not a modern Internetz-age invention at all. There have been monthly CD, video, panty, pantyhose, coffee, tea, cosmetics, etc. clubs for ages. With various levels of success. Mostly success is in persuading consumers that they will spend less money (they usually won't) for better quality (or same quality) merchandise (sometimes true, sometimes not) while making less effort (mostly true). Been there, seen that, and all I got is a pile of lousy VHS tapes. ::) ;D

You don't trust me, take a look at BUFF ( http://finance.yahoo.com/quote/BUFF ). They did it. Perhaps now it's too late, though I know at least couple more companies that are on success track with this recipe. Not saying it's trivial, but it has been somewhat easy way to riches. (I don't advise buying their stocks once they go public - IMO most money is made before going public or by going public). :) LOL. I wonder what they are comparing. For cat food Amazon is cheaper for most same-brand comparison vs PetCo or grocery store or so. Though Amazon is still crappily stocked for some human food brands and sometimes 3rd party prices for such are indeed 3x the price in the shop... so perhaps the author of the comment chanced on one of such brands.

On one hand I don't watch TV, so for me TV-Industrial Complex is gone long time ago. For some things I buy noname cheapest stuff without even thinking. On another hand, quality matters and that's where brands still live. Maybe less so than in the past, but they still do. My wife would never buy cheapo shampoo or toothpaste. It's not that she watched Colgate ads on the screen, it's that she doesn't like the quality of cheapo toothpaste. I can use pretty much any toothpaste, but I agree with her on shampoos: there's a lot of crap and some of it branded too. Cat food? No way store brand. Yeah, the quality differs. BTW, fastest way to make $millions? Create pet food brand. Advertise that it's all natural spring water, wild river salmon, home grown potatoes, molecular vitamins, etc. Outsource the manufacturing. Sell like crazy. $$$ profit $$$. Well, maybe parts of the story should be true... ;) Whoever said Trader Joe's sells no name brands - LOL. Trader Joe's is a brand. Unlike some (most?) cheapo stores where shop brand is the ugly cousin, TJ's products are mostly geared to push TJ's brand message. It's a brand that has good quality and is not available elsewhere. Double ka ching. I don't go to TJ's for price - well maybe a little - I go there for good quality products I can't get elsewhere. Sure they also have some fungibles, but I wouldn't go there if they only had fungibles. In general, it's not a single night revolution. Things are changing, but they've been changing for the last 15+ years. Brands will still be there but possibly in a way different than "TV-Industrial Complex". Moats may not be insurmountable as people thought, but they are likely deeper than people think. And BTW, Amazon rules a lot of this. It's not clear how much they understand and use their power (yet). On previous Dollar Shave Club thread someone mentioned "The Art of Shaving". I went to their website, got interested in pre-shave oil, went to Amazon, picked oil (not "The Art of Shaving" brand - heh lost sale for these guys) that seemed to have OK reviews and OK price, bought it. IMO, Amazon could make huge $$$s if they managed to earn extra money through brand placing, low impedance advertising, etc. I think they are doing it a bit, but IMO there's way more that they can do, they just have to be careful not to annoy and push away their customers.

A lot of people make this claim and use it as a shortcut to find investments with "moats", but I believe this is false. Companies can have high margins for sustained period of time without having sustainable competitive advantage or moat. Capitalism and free markets are not perfect and hyper efficient and niches can be high-margin for long time without being moaty.

Mr Money Mustache saiz: Why shave? You don't shave, you save! About 12 years ago, Gillette had a great idea to sell the razor with 2 blades with free movie ticket. The cost was less than the cost of the movie ticket by itself. I bought as many as I could. Emptied the shelf. Still have some (I don't shave often). Gillette caught on at some point. True story. Movie rights available on request. Contact my agent.

I'll answer to everyone and not post-by-post. Sorry if I miss your point and don't answer it. Feel free to remind me. Volatility and low probability of 100% loss - yeah, sure you are right. But that's an argument against any leverage. Also please read up on Thorp. He used Kelly's, modified Kelly's and way-modified Kelly's for investing with great results - mostly arbitrage, which is more calculable, but still. He used large leverage (over 1.5x) in some cases. And arbitrage can blow up too, so he's a great example of someone who successfully used levered results from Kelly's even with possibility of loss. So there's at least one example that this can be used successfully. I'm not saying you should use it, but I'm trying to understand if/when I should use it and how. ;) In terms of volatility, correlations, portfolio sizing, etc. that people brought up, please read Wiki and Thorp. I'm feeling this conversation is a bit just skimming the surface if we are not even acknowledging and understanding readily available material. There are formulas that account for volatility and correlations (see the "Application to the stock market" section on Wiki and corresponding parts of Thorp's paper). I mentioned this already in my first post. BTW, this also addresses somewhat the questions about time and about the fact that in betting you make repeated bets (and in stock investing you might not). Now, arguments can be made that these formulas are artificial and that Brownian drift plus volatility coefficients are hard to estimate, and that correlations are hard to estimate, etc. I don't necessarily disagree with these arguments. What I am looking at is not mindlessly applying the Brownian motion Kelly's, but rather if using these formulas and putting in actual numbers in them would provide some insight into stock selection or allocation that I did not have before. Also I am looking if they can be modified further for the exercises I am interested in, i.e. where I don't use historic drift and volatility, but rather use my future estimates based on some kind of fundamental insights about a business. BTW, there is an actual example in Thorp's paper of allocating money into BRK (page 29, example 7.3). There's even a real case study (section 8, page 31) of allocating money into BRK, SP500, Tbills and BioTime (something that client owned and wanted to keep). Thorp's paper is a pain to slug through and I've only done cursory read so far, but for me this might be interesting to go through in detail. I'll see if I can allocate time to do it sometime in the near future. :) So far for me I feel that thinking about Kelly, its variations and applications is a time well spent. For other people it might not be. :) Peace, Brownian motion and partial derivatives

Yes, I am sure about that. This is exactly the error everyone makes when applying Kelly's in situations where the loss is not 100%. Please read my post, please read Wiki page and read Thorp's paper. Don't rely on people who just parroted wrong formula for the situation where it doesn't apply (or applies incorrectly) based on the way they thought they understood Kelly. (BTW, the leverage is assumed to be free, so you are welcome to change any levered result to unlevered 100%). You get no levered results for original Kelly's because with a 100% loss risk, levered bets always lead to 100% loss eventually. Even if your loss chance is just 0.0001%.

Answer: You'd invest 2.25 of your bankroll. I.e. you'd have to lever 2.25 on 1 if leverage is free. Jurgis- I think your math is incorrect with regard to the above example; isn't the correct answer around 67.50% of your bankroll (based on Kelly Criterion)? The answer 67.5% is based on the bad formula (see fbad in my post). 67.5% is actually incorrect answer.

I'm trying to get my head wrapped up around Kelly and its (in)applicability for investing. One thing that annoys me a lot is that almost everyone uses Kelly incorrectly for non-100%-downside calculations. I'll pick on twacowfca above, but they are not alone. There are lots of others (e.g. https://dqydj.com/optimal-asset-allocation-with-the-kelly-criterion/ ) If you are trying to evaluate a situation where loss is 1-a and gain is 1+b with probability p (and q = 1-p), correct Kelly is given in Wikipedia ( https://en.wikipedia.org/wiki/Kelly_criterion ) and Ed Thorp's paper ( http://www.edwardothorp.com/sitebuildercontent/sitebuilderfiles/KellyCriterion2007.pdf - OK, the man might be a genius, but his paper writing style is pretty lousy ;)). The right formula is f* = p/a - q/b Rewriting it, it is f* = (pb - qa) / ab While most people make a mistake by using fbad = (pb - qa) / b I guess the mistake comes from assuming that Kelly's criterion informal specification: fKelly = expected net winnings / winnings if you win applies to situation where loss is not 100% (i.e. a != 1 ) Actually it doesn't. If you think about it, fbad makes no sense. Assuming a = 0, it becomes fbad = p, which makes no sense: if you can't lose, you should not be betting just p part of your portfolio. You should be betting infinity levered portfolio which is what the correct formula gives. ;) Correct formula also reduces to correct result if a = 1. So Kelly's for the scenario above is even more extreme: Answer: You'd invest 2.25 of your bankroll. I.e. you'd have to lever 2.25 on 1 if leverage is free. What does this show? - People are bad at math. ;D (Actually, I am too, I have trouble following a lot of things in Thorp's paper or even some things in Wiki article) - People are bad at estimating returns and probabilities. - Kelly's as base makes almost zero sense for stocks. For example, scenario above - Kelly's answer is extreme. Yeah, I know, possibly it was a fake example. But let's take a bit modified example from https://dqydj.com/optimal-asset-allocation-with-the-kelly-criterion/ p=85%, d=5%, a=2% and I am not comparing against bonds, but just saying that stocks may return 5% and lose 2% long term. Then Kelly is... drumroll ... 39.5. Wow. 39.5 leverage. Even 1/4 Kelly is almost 10x leverage. But then this assumes that stocks only drop 2%, which might be right on average for 10 year periods, but they could drop 50% in between... Of course, if you use d=5% and a=50%, the you'd get negative Kelly and would not invest in stocks period. (I know I know this is wrong way to use Kelly, don't beat me ;)). - It also makes no sense to apply Kelly that relies on a long series of bets to a single bet that is held 10+ years. You might be able to adjust Kelly or your process to assume you rebet every day, but that introduces other issues (e.g. what is expected win/loss for a one day bet on a stock?). - Applying Kelly to stocks is way more complicated than people expect. Unlike a bet which is resolved in single outcome (win/lose), stock price is continuous and possibly infinite sequence. What does it mean that stock will lose 30%? Tomorrow? In a year? Forever? Do you care if it loses 30% next year if your holding expectation is forever? OTOH, you cannot say that stock has zero chance to go down just because you plan to hold it long term? - There are Kelly's adjustments to Brownian random walk single stock situation and even more complex correlated multi stock portfolios (see Wiki/Thorp for some), but these become even more math intractable compared to original Kelly's. I'm not sure there are many people (if any) that apply these correctly on blogs and forums. There might be quant hedgies that have programmed them correctly (I am sure Thorp did ;)), but I'm pretty sure they don't publish their algos as open source programs. ;) On the lark: does anyone understand and has implemented a single stock Kelly's where you are trying to decide how much of the stock to buy compared to another asset with probabilistic return? Restrictions: the stock return should not be based on past returns and volatility (cause IMO this is worthless), but could be based on Brownian random walk model with directional drift that incorporates some volatility measure. The return of alternate asset could be based on Brownian random walk or just mean/stdev.

In this particular case this might a good advice assuming the universities like alwaysinvert said are not that different in quality. In general though, this cannot be applied indiscriminately. A much better - and much more expensive - university can open a lot of opportunities that cheaper and worse universities don't. The quality and depth of education might be much better. I've been in universities that were significantly different in quality, my wife was too and in these particular cases the better ones were worth way more than they charged extra. BTW, I disagree with ScottHall too. For a lot of people "no university" just means way worse quality of life for the rest of their life. Choose wisely. :)

I would argue that very likely it isn't. :)