Jurgis

That's actually not quite true. There was IRS proposal in 2015 to deal exactly with hedge-funds-masquarading-as-insurance-companies. I did not find info if it went through or not.

I don't have a bear in this fight. Not even a polar one. As I said before in this thread, when I buy a house for consumption, I refuse to spend 1.X M because I might just as well use that money to retire. But I'm fine if people want to waste that money on houses in Silly Valley, NYC, Vancouver or North Pole. The views are great I hear. And the prices can never go south.

Since there was renewed interest, I'm gonna post the list of CoBF favorite possibly PFICs: Exor EXOSF - possibly Premier Diversified Holdings PRDGF - pretty definitely Clarke CLKFF - pretty definitely depending on year PSHZF - Pershing Square - definitely TPRE - possibly GLRE - possibly I'd like to hear any definite stories about clawbacks based on ERISA that Ham Hockers mentioned on page 1 of this thread. Any data? I did not find anything useful online regarding ERISA/PFICs.

Hear, hear. He should do Mike Lewis ( https://en.wikipedia.org/wiki/Michael_Lewis_%28author%29 ) 8) Sorry Buffett_Groupie, this thread has taken a movie life of its own

A couple of days ago I was flipping through the FT property section when sitting in a plane. Yup, French and Spanish properties are dirt cheap. If you can think of a way to arbitrage, we can get rich. 1. Flip that 1.8M mobile home 2. Buy French/Spanish properties with the money 3. ... 4. Profit!!! Repeat as needed. 8)

This thread is shaping to be fun. Perhaps someone should make a movie about it. Hint, hint. ;D

I charge famous people to have picture with me. ;D 8)

Since there are so many extolling the virtues of non-office jobs, I'll take the other side on this. I had to (was forced to ;) ) do physical jobs in high school and a bit in college. Was a total waste of time and hated them totally. Would have been much more useful to study more, do more programming, etc. It very much depends on the person. You and your son know best what would work for you guys.

It's not a bridge. It's an airport. ::) jk

Not counting startups, most people who leave go to Alphabet and Amazon. But that's partially because of the field (tech) and location. I am pretty sure if you asked people in Silly Valley they would have different answer by now. My friends from Alphabet say that people from there leave for ... some time ago it was Facebook, not sure right now. If you invert, the place where great tech people leave from is IBM. But that's all still limited and anecdotal. :) Also "most capable" is a bit fuzzy. If you are talking about superstars, there's not that many of them and they do live their own lives, some staying in one place like Jeff Dean, some going through multiple places like Andrew Ng. In the past there were also great people and great teams attached to dysfunctional companies/subs. Like Xerox PARC or Bell Labs in later years. There's possibly less of that nowadays, but I wonder if some of Alphabet's moonshot subs not gonna end up like that. From articles Tesla and SpaceX seem also to be magnets for great people. I don't know people there though. Edit: just to emphasize that "great people" does not necessarily mean great organizations, a lot of the great tech people worked at DEC and Sun through the nineties. It would have been a big mistake to invest in either... Maybe things have changed. ;)

5 year return poll similar to 10 year return poll: http://www.cornerofberkshireandfairfax.ca/forum/general-discussion/performance-vs-index/ Yeah, I know, this raises a lot of questions: which index, why index, etc. Just answer to the best of your knowledge and integrity. :) Poll is for fun. Vote and enjoy. One source for SP500 5 year average return: https://quicktake.morningstar.com/index/IndexCharts.aspx?Symbol=SPX

Let me disagree with some of these: - There's a number of professions where people are taught how to react to a crisis. Police, firefighters, military, astronauts, etc. Yeah, results vary. - Yes, you can teach patience. The remaining ones are IMO also teachable somewhat, but I don't have good examples. I agree that it's way harder to teach these things to someone not predisposed for them. Also they are not easy to teach and would usually take great teachers (or great teaching institution) and a bunch of time.

And you assume that someone that indexes is able to hold even if the index sucks and everybody else is outperforming like 2000-2002. Indexing sounds easy on paper, but in real life with emotions and all the macro news involved its not that easy anymore. Maybe. I can say from experience that holding index funds in accounts where I cannot buy stocks is trivial for me. YMMV and all that.

Yeah, I know, this raises a lot of questions: which index, why index, etc. Just answer to the best of your knowledge and integrity. :) Poll is for fun. Vote and enjoy. If there is enough interest, I'll create separate poll for 5 years for comparison and people who don't have 10 year records. :) Edit: One source for SP500 10 year average return: http://quicktake.morningstar.com/index/IndexCharts.aspx?Symbol=SPX

Not really. You are assuming that good investors outperform the baseline which is index. My guess is that they don't. A lot of the "best" did not outperform index for the last 5-10 years. (I guess we could do a poll here, though results would be skewed)

Fannie and Freddie? ;D 8) ::)

Yes. What's even worse, market behavior changes through that decade and things that worked 5 years ago may not work now, and may or may not work next 5 - 10 years. And if you attempt to shorten the feedback loop, you are more exposed to market short term swings and learning wrong lessons. Fun, isn't it?

Bingo. That's why I don't live in Silly Valley.

It's a mix. Even great investors were not great investors when they started. They all needed training. But, yeah, like no amount of training would make me into Richard Feynman, Lee Sedol or Mozart, no amount of training will make into Buffett. Investing is deceptive though. Everybody knows from experiments that intermittent positive feedback is what hooks you onto some behavior. Investing is like that. It's very easy to keep coming back and thinking you're great while you're not. Anyway, not sure what's the goal of this thread is. :) Can you clarify?

This is a bit OT and a bit dated, but. I recently finished "Country Driving" by Peter Hessler ( http://smile.amazon.com/Country-Driving-Journey-Through-Factory-ebook/dp/B0035D9UX2/ref=sr_1_1?s=books&ie=UTF8&qid=1458704522&sr=1-1&keywords=country+driving ). The third part about Chinese boomtowns and factories is pretty interesting read. Can't say an eye opener, but gives some picture of China business. In terms of China stocks, I'd probably suggest actively managed funds rather than index fund(s). I've held TDF in the past, but at some point it became such a small position that I sold it (never added). Not sure if that's the best pick, especially since Mobius is retiring. Matthews funds might be good, but I haven't looked at them for quite a while now.

Sorry, randomep, I can't really help here. I think oddball is the expert on these kind of situations. Get on a plane, buy him a beer, and go through your positions with him. I'm sure he'll have input. ;) No, seriously. If I had to choose an expert for your issue, it'd be him. ;) The remainder of this is my thoughts that are not directly helpful, so please skip. :) .... .... What randomep described is one reason why I don't do the niche egregiously undervalued stock investing that we discussed with oddball. With mediocre businesses it's very hard for me to know when to hold and when to fold (sorry for repeat of what I wrote to oddball ;) ). Yeah, stocks don't go up. Or they go up some, then go down some, then go up some. And since the business is crappy (ok, not crappy, "mediocre" ;) ) and management is mediocre, you really don't know what you are waiting for. Numbers look so so, maybe OKish, maybe not. Maybe it will get better, maybe it won't. So I lose patience, I lose interest, I sell. And then bam it's 3x+ in next couple years. ;) (See UVIC story). Or I sell and the business goes nowhere for another 10 years and I'm glad I sold. ;) For some reason or other I believe that it's easier for me to hold stocks in good/great businesses with good/great management. E.g. BRK - and I'll include BAC here for cheesiness ;) - and I'll include Malone constellation for "these-are-not-value-stocks-are-you-kidding". We'll see how this works out, since that's also experiment in progress and I don't know if I will manage to hold these forever. With great businesses, the issues are (usually) different. Stocks become overvalued and you have to decide whether to sell or hold. Or stocks are already overvalued and you have to decide whether to buy/add or not. Or stocks are overvalued and they drop a bit and you have to decide whether to add or not. Or business experiences slowdown and you're no longer sure if it's a good/great business (AXP, IBM now perhaps?) and you have to decide whether to buy/hold/sell. ------------------------------ And yeah, whether you do egregiously cheap or great-businesses, you still have to figure out position sizing, which is another 100 page topic by itself... ;)

Jurgis, what your saying is so wrong I don't know where to begin. There is risk and unknowns for all of us. We have to act with very incomplete information. As a result we can say much of what happens is luck. Suppose you get AA in texas holdem. You go in knowing your 80% fav against any hand preflop. Going in is the right thing to do and no matter what happens in the hand. Nobody says oh man I should've known better that my AA would get sucked out. Same as investing. My hero Walter Schloss typically had a hundred cigar butts in his portfolio. I am sure every year one or two goes bankrupt. Does he go I had a good 15% year but damn it I make a mistake with so and so bankrupt company. I am going to change my strategy? His success as well as his flops are the result of his strategy, if it works to get 15% he should keep it up! Now someone like Pabrai, he fundmentally takes too many risks trying to hit them out of the ball park. If he is wise I would think he would tone it down a bit and be less risky. If so, then there you have it! Someone can learn to invest with more MOS. It's a simple thing MOS is an actionable goal. There are couple issues with what you are saying: 1. I still believe that reducing everything to MOS is not helpful. It seems you are saying that buying overpriced stock is bad because of MOS, buying possibly fraudulent stock is bad because of MOS, buying commodity business is bad because of MOS. Sure, you can do it, but these are three different things that you should analyze and deal with separately instead of just pushing them all into a single MOS pile. 2. Investing is not poker. Sure, once again you are right that investors can try to figure out probabilities. But like I said in point 1, reducing everything to MOS only hinders your calculation of probabilities. You are much better of looking at company and saying "well, this has X% chance to be a fraud" than saying "well, this has Y% chance to have MOS". In fact, if you only look at business numbers and run some kind of formula to calculate MOS, then you're more likely to miss the other parts like fraud, cyclicality, commoditization, business changes, etc. So once again, in general I agree that investors should consider MOS, but I disagree at piling every single mistake into "there was no MOS" pile. And instead of addressing concrete issues like fraud/commodities/etc. just saying "MOS is an actionable goal". Anyway, I think part of the issue with this discussion is that it's too abstract. We might agree on concrete situations (e.g. ZINC or VRX or whatever), but we likely look at these things differently on the abstract level. Good luck.

And what do you propose they should do? If they don't make concentrated bets, they pretty much have no chance of outperforming SP500. (Well, maybe Klarman outperforms without concentrated bets, but he's likely an exception). It might be easier for smaller investors. They might be able to outperform while still maintaining MOS. I think that's what Oddball suggests with his "niche egregiously undervalued investing". I'm still not sure that works for a lot of people. Not that concentrated bets on large caps work for a lot of people either. Calling common theme to mistakes "excessive risk-taking" might be correct, but I am not sure if it's helpful. Yes, MOS, right. "It was excessive risk taking, there was no MOS". Sure I can say this about every situation that went wrong, but is that really helpful? Isn't this like trying to fit a hammer to every screw, nail, joint and rope there is?

oddball: yeah, what you are saying makes sense to me. :) Couple comments: - Re "dud companies" - yeah, some "dud companies" are easy to avoid for me too and I wonder why others get into these traps. But then I buy something that's a dud and probably someone else says "oh, that was obvious dud, why would anyone buy it". :) - Holding too long. Yeah, that's one of the issues why "niche egregiously undervalued investing" does not work for me. With so-so mediocre companies, I have no good feeling when to hold, when to fold, etc. Somehow this seems easier with "great" companies, though perhaps I'm just deluding myself. ;) Another example of mistake of omission from some time ago. Bought UVIC - pretty OK shareholder-friendly microcap. Got Baker Street hedge fund manager on board. They hit a rough patch after I bought. Cut divvie. They had patent royalty agreement with B&L that was expiring in couple years with possible loss of a bunch of free money. I held couple years. They renegotiated the agreement, started investing into new product lines, but numbers were not budging up. Baker Street got out through a "sweetheart" deal - company bought their shares. I looked at the numbers, decided to sell too. A year or so after I sold, price went up 3x-4x and it was finally sold to Valeant (B&L really, but Valeant owned B&L by that time). It's easy to say that this was not a mistake that the process was right, but OTOH I still wonder if it really was. And this was a large position for me comparatively speaking. Also not-that-mediocre company, so I can't write this down completely to "niche egregiously undervalued investing" not working for me.

Good post oddball. I guess the only place where I disagree with you is that you make it sound easy to do the niche egregiously undervalued investing. I've tried this and it did not work for me. So I just buy BRK. Furthermore, even when I look at some people who are supposed to be good at niche egregiously undervalued investing, I don't see them being very successful either ( not implying you here - I don't know your returns ;) ). Still a good post and it might work for you and some other people. ;)