KJP

What exactly do you mean by "store of value"? I understand the phrase to refer to something that does not depreciate in value over time. But you say a horse could be a store of value. The average lifespan of a horse is 25-30 years, and a 20 year old horse isn't as valuable as a 3 year old horse. So, a horse clearly depreciates over time. So, you must mean something else by the phrase "store of value." Also, is it correct to say that "What should be clear from this is that gold specifically has no special intrinsic properties that warrant it to be a store of value. The dependency is only one way. The only reason why gold is a bearer of a store of value is because of our history of social acts that led up to gold being accepted as a store of value, nothing more"? Doesn't, for example, gold's relative resistance to corrosion and many other chemical reactions (i.e., it's "special intrinsic properties") make it uniquely suited to be a store of value? EDIT: The point I'm pushing back on is idea that the fact that a tangible object has become a "store of value" in a human society has nothing to do with its physical properties. But that does not mean that an intangible object couldn't also become a store of value -- i.e., valuable across generations -- if there were sufficient social acts to make it so. But I suspect those social acts would only occur if the intangible had certain useful characteristics.

Company: Impact on my 2017 performance (not including opportunity cost) Rentech: -850 bps [permanent loss] -- too many analytical mistakes to list here; I've given them their own post in one of the Rentech threads Fortress Paper: -380 bps [remains to be seen]

~10% USD, pre-tax 2016: ~22% USD, pre-tax Biggest difference between 2016 and 2017 was a series of blunders (both analytical and portfolio management) regarding Rentech that ultimately cost me ~850 bps of performance this year. Fortress Paper also cost me ~380 bps this year. The positive returns came from several investments that appreciated 20-60%, most of which have been discussed elsewhere on this board: Command Center, PAR Technology, Parkit, QVC, EZCorp, Keck Seng, Gaia, Clarus (formerly Black Diamond).

Cambium Learning Group (ABCD)

Funny. A lot of people say it's a great book. I did not even finish it. I found it a bunch of outdated self-serving boring blah blah. Me too.

What is organic growth (or decline) after you account for all of the acquisitions? Is this really a proxy for e-commerce or, instead, a proxy for direct mail and the types of mailings that need letter-sized envelopes with little plastic windows? There is a two-year old short thesis on VIC that may interest you.

In theory, the 30th Street District would be a very good fit: https://static1.squarespace.com/static/539b050fe4b077b40b221f4f/t/5762b1a2e3df2899e111bcc7/1466085819062/District+Plan+Marketing+Book_June2016_7x9_web.pdf It has a huge footprint for new office space right next to a major rail hub (30th Street Station) that connects to downtown (subway, trolley), the suburbs (SEPTA regional rail) and the other cities on the eastern seaboard (AMTRAK), along with easy highway access to a large international airport. It's also a few blocks from from one Ivy League school (Penn) and easy driving distance or an hour train ride to two more (Princeton and Columbia). Also relatively close to two large public research universities (Penn State and Rutgers) along with loads of well-regarded liberal arts schools (e.g., Swarthmore, Haverford, Bryn Mawr). Also, right next to one of the country's leading medical research areas (e.g., UPenn Hospital, CHOP). The suburban public schools are also almost all very good. They also wouldn't have to worry about the city government enacting stuff like bathroom bills. On the other hand, there is (i) massive, de facto segregation; (ii) with a few exceptions, the city public schools are a mess; and (iii) in nearly every direction between a thriving urban core and very nice suburbs is a ring of severe and seemingly intractable poverty (e.g., large swathes of West Philly, North Philly, Chester, Camden).

Alabama law isn't as draconian as has been suggested. The Alabama corporation law says that the corporation is subject to a "penalty of an amount not to exceed 10%" of the value of the shareholder's shares. Ala. Code § 10A-2-16.02©. [Full text quoted below.] This language has been interpreted to give courts discretion on the amount of penalty to award. See Sewell v. Bank of Wedowee, 918 F.2d 152, 154 (11th Cir. 1990) ("[T]he legislature intended that a penalty be mandated, but intended that the amount awarded be discretionary."). Alabama Code § 10A-2-16.02© © Any officer or agent who, or a corporation which, without reasonable cause, shall refuse to allow any shareholder, or his or her agent or attorney so to examine and make copies of and extracts from its books, papers, records of account, minutes and record of shareholders, for any proper purpose, shall be liable to the shareholder for a penalty of an amount not to exceed 10 percent of the value of the shares owned by the shareholder, in addition to any other damages or remedy afforded him or her by law. It shall be a defense to an action brought to collect the penalty specified in this section that the person suing therefor within the two years next preceding the demand has sold or offered for sale any list of shareholders of the corporation, or any other corporation or knowingly has aided or abetted any person in procuring any list of shareholders, or improperly has used any information secured through any prior examination of the books, papers, records of account, minutes or record of shareholders, or was not acting in good faith or for a proper purpose in making this demand.

A fund that doesn't charge a management fee, but only a performance fee is IMO not ideal. Without regular income there is a strong incentive to try to get performance fees, whatever the cost. Better to blow-up trying to get to high-water mark, than getting stuck with zero income. A good reason to ask how much of the manager's personal wealth is currently invested in the fund.

Interesting ideas. What are the sales taxes where you live? It would be very difficult to keep your cost of ownership (I assume you're excluding insurance from your $100-$200/month number) so low if you're turning over your car every two years in a state with high sales taxes.

Are you in the US?

You seem to be asking whether, so long as the multiple the stock market applies to a given metric stays the same, changes in the stock price will be proportional to changes in that metric. The answer, of course, is "yes," because, by assuming a static multiple, you have assumed that the stock price can always be calculated by the following equation: y=Z(x), where y is the stock price, x is whatever metric you're using, and Z is a constant, i.e., your hypothetical static multiple.

The ABA is a guild. Low bar passage rates are not a concern. I assume most of the third- and four-tier law schools are surviving on student loans that at largely guaranteed by the federal government and essentially non-dischargeable in bankruptcy. If you got rid of those financial subsidies, those schools likely could not survive in their current form, which probably would be a good thing. There is a tremendous need for lawyers to help low income people in criminal law, immigration, family law, etc. But it is extremely difficult to have that kind of practice when you have $150,000 in school debt. Ideally, there would be alternative types of legal education, such as a shortened, two-year program that provided extensive practical training and was taught by practicing lawyers who had no research/publishing obligations. But as a guild, the ABA has no interest in pursuing that path, and state legislatures are dominated by lawyers, so I wouldn't expect any legislative initiatives along those lines anytime soon.

At its dot.com bubble peak, Microsoft traded around 65x EBIT ($620 billion market cap - $40 billion net cash and investments)/($9 billion operating income after accounting for SBC). [Numbers are from 6/30/00 annual report] Today, Google trades around 21x EBIT ($580 billion market cap - $80 billion net cash and investments)/($24 billion operating income, includes SBC). I understand the belief that 21x EBIT is too much to pay, but is it really comparable to 65x EBIT?

I suspect very high, but it's also very hard to track down the failures and interview them.

Thanks for sharing what you learned. When you say "leverage was not used," I assume you mean at the personal portfolio level. But was leverage "used" in the sense that they invested in levered equities? Putting aside the financials for a moment, were the companies these people invested in significantly levered? And were the financial investments through warrants or common stock?

It's not just concentration, but concentration + leverage. In this case, levered equities.

You are correct that some active decision must be made. But if you believe your decision-making with respect to equity investments is poor and destroys value, one reasonable approach would be to attempt to minimize your decision-making as much possible by selecting a very broad, vanilla index fund to capture as much of the benefits of diversification as possible and a purely mechanical method of adding and selling, e.g., 10% of paycheck each month goes into XYZ Global Index Fund. No further decision-making; no attempt to assess valuation or anything else.

I don't really view spending time on evaluating investments to be a burden or lost cost. I enjoy reading, consider investing a partial hobby as well as a job; it's something I like. Because you derive independent enjoyment from investing, it makes sense that forming a belief about whether you can beat the market is less relevant to you. For people who do not believe they can be the market, this would be either irrelevant or a good thing. By hypothesis, their security selection and portfolio weighting decisions (i.e., deviations from the index) destroy value rather than create it, so gaining knowledge likely won't help them. But if your point is that you cannot avoid some active decision-making because you must pick an index, I would suggest the broadest, most vanilla equity or bond index fund you can find, rather than any exotic index.

This is very much true as well. Beating the index is a very popular topic on CoBF. In real life not so much. People don't really care if their investments beat the index. Mostly they just want their money to be safe and earn a decent/good return. You really find out how much people don't care about beating indexes the moment when you see a client and you tell him that he's down 15% but he should be happy because he's beat the index by 500 basis points. If people's overarching goal in investing is to beat the S&P500 or whatever then no one would buy any bonds. It's also true that investors obsessed with beating indexes will probably fail to do so. Just go out there, do your best, do good work and stop worrying about the index so much. Unless you have no opportunity cost to your time or derive independent enjoyment from the act of investment research, it makes sense to care about whether you are likely to beat an index. If you can't, why bother to do "good work" on investments? Wouldn't it be better to do no work, put your money in an index fund, and spend you're time on something else?

I would add that they have an investor base (or enough personal wealth) that allows them to act that way. You can be a fantastic investor, but if you have an investor base that demands, for example, very low volatility, you likely will struggle.

Your model doesn't take into account who it is that is trying to "beat the index" and the issues that they specifically face. 1) People who pay a fee to have their money managed by third parties: They face the missive headwind of management fees; they also may be indirectly exposed to the "professional money manager issues" 2) Professional money managers: Career risk counsels against deviating too far from the index; size and liquidity limit investable universe; investor base places limits on the amount of volatility that can be experienced; varying styles across time may not be permitted by investors seeking specific factor exposure; also usually look at performance after fees or costs; random variance in the timing (e.g., a strategy/investor who would be successful over 20 years never gets the chance because s/he underperforms over the first three years, whereas someone who gets lucky in the first three can hang around a long time because time-weighted returns can still look, even if their dollar-weighted returns are below average). 3) People who manage their own money and whose portfolio size does not create significant limits: Time and effort; sticking to a strategy, even one that has been shown to work over long periods, is psychologically difficult. So, both the OP's hypothesis and Hielko's hypothesis may be correct. The OP may be correct for most people in most situations. Hielko may be correct for small subsets of the groups above. For example, Hielko's hypothesis may be correct for the (likely very small subset) of (3) that is both willing to put in the time and effort and has the temperament to stick to a proven strategy. Hielko's blog suggests he may be in that small subset. Most people, however (me included), likely overestimate their chances of being in that subset. Put another way, the hypothesis depends on the population you're looking at, just as the validity of the hypothesis "It's easy to not smoke" depends on whether the population you're looking at currently smokes.

Threads like this always show how different people's perspectives can be. Everyone seems to agree about what happened: Buffett had an awkward business issue, and he dealt with it, in part, by trying to distract people with a joke whose punchline relies on the background societal belief that women who are open about their sexual desires are whores. I would think it's fairly obvious that telling jokes like that reinforces the background societal belief, and if you think that such a societal norm is wrong, then using the joke in the manner Buffett did would be wrong. Not a hanging offense, but simply a wrong that is worth commenting on. This seems pretty straightforward to me, yet from another perspective it's apparently "mental gymnastics" and "ageist."

I'm sure you recognize the difference between a descriptive and a normative statement. "How the worlds works," I take it, relates to descriptive statements about how humans currently interact with each other, as opposed to normative statements about how they should interact with each other. Elsewhere on this thread, people have suggested that the first two sentences of the joke are descriptively accurate statements. I'm not going to wade into that. I'm looking at the punchline, the part that gets the laugh and makes the joke work as a joke: "And if she says yes, she’s no lady." That's not really a descriptive statement at all, is it? It's a normative one about how women should behave, isn't it? At end of the day, this isn't really news. As others have said, Buffett is from another time, he's done alot of good, and he shouldn't be crucified over this. But just as over the top are statements like "SJWs are ruining the world" because some people have the temerity to point out that this joke is pushing a normative view with which they disagree.

I'm curious: What is he "right" about?