nafregnum

You might like www.dividendgeek.com -- it's a free signup, and when logged in you can see a page called "Check for undervalued stocks" -- he has a lot of useful information about each company's dividend, and sorts a list of companies in each sector based on how under/over valued the current stock price is (I think he is just using a DCF to establish a 'fair value', which is simplistic sure, but it's nice to just be able to look at a list and see who the 'cheap' ones are...) As for defeating anchoring though... I wish I knew how. :) I like to tell myself that just knowing about anchoring bias is a partial defense, but perhaps that's just its own kind of fallacy (Call it "Motel 6 fallacy" maybe -- I read some books about anchoring bias, so I feel smart now, but in all likelihood I'll probably keep on anchoring)

On the moral duty to investigate things before believing them, and to expose even the beliefs we want to hold onto to the same scrutiny: http://people.brandeis.edu/~teuber/Clifford_ethics.pdf An impressive essay from back in the 1870s by a mathematician. First two paragraphs are great: A shipowner was about to send to sea an emigrant-ship. He knew that she was old, and not overwell built at the first; that she had seen many seas and climes, and often had needed repairs. Doubts had been suggested to him that possibly she was not seaworthy. These doubts preyed upon his mind, and made him unhappy; he thought that perhaps he ought to have her thoroughly overhauled and refitted, even though this should put him to great expense. Before the ship sailed, however, he succeeded in overcoming these melancholy reflections. He said to himself that she had gone safely through so many voyages and weathered so many storms that it was idle to suppose she would not come safely home from this trip also. He would put his trust in Providence, which could hardly fail to protect all these unhappy families that were leaving their fatherland to seek for better times elsewhere. He would dismiss from his mind all ungenerous suspicions about the honesty of builders and contractors. In such ways he acquired a sincere and comfortable conviction that his vessel was thoroughly safe and seaworthy; he watched her departure with a light heart, and benevolent wishes for the success of the exiles in their strange new home that was to be; and he got his insurance-money when she went down in mid-ocean and told no tales. What shall we say of him? Surely this, that he was verily guilty of the death of those men. It is admitted that he did sincerely believe in the soundness of his ship; but the sincerity of his conviction can in no wise help him, because he had no right to believe on such evidence as was before him. He had acquired his belief not by honestly earning it in patient investigation, but by stifling his doubts. And although in the end he may have felt so sure about it that he could not think otherwise, yet inasmuch as he had knowingly and willingly worked himself into that frame of mind, he must be held responsible for it

Wow, this really was click-worthy! I didn't know about Rocket Financial. What other online tools do you guys like to use? (I like dataroma.com, and gurufocus.com)

I connected with that book a few years back because I was working with a CEO who was a terrible business manager, yet because the business was growing it made him look wonderful to the PE firms who were falling over themselves to buy the company. That's the "Halo Effect" basically: Even a terrible manager looks great to outsiders while a business is outperforming. Journalists can't do anything other than tell stories that would seem to explain the performance of the business, whether good or bad, and they typically look to build a story about management, ignoring many other factors. Investing is such an interesting challenge because it's so much like the poison wine guessing game in The Princess Bride. I could sit and play devil's advocate against myself back and forth all day, and ultimately I could choose wrong. I'd modify that slightly: "There's no such thing as "the story" -- there are only "stories" ... So it's dangerous to look at just one 'story' when investing. You might read a few glowing stories from Bloomberg writers, or Fortune magazine, but what story would the employees at the bottom rungs tell about management? For that, I try to go to glassdoor.com or linkedin.com to do some digging. Scuttlebutt information like Phil Fisher would try to collect still has plenty of value (in my opinion) The numbers themselves tell "a story" and I think it's dangerous to only trust that story. For example, if you're not concerned whether the management has integrity or not, then you might certainly fall for a good looking "story" from the numbers (as will the computers.) Buffett: If management is corrupt you better hope they're also stupid and lazy! This guy does a better job of reviewing the Good to Great kind of storytelling ... I agree with him that they're still worth reading, but if you read them and know about our weakness for good stories, you can approach those books of stories with a better chance of sifting the valuable insights: http://www.tomorrowtodayglobal.com/2011/12/09/good-to-great-to-gone-2/ Artificial Intelligence can beat the best humans at games like Chess, Jeopardy, and Go. They're going to surpass human ability in many other cognitive tasks. They're a lot faster to act on data than humans, and they don't make errors in judgement because they skipped breakfast or stayed up too late watching Westworld the night before... But on the day of the flash crash a couple years back, as I remember it, humans were buying the dips and the algos were doing the selling. Granted, those were just dumb "follow the herd" algos, or sell stops being blown out. The algos will improve and evolve as long as they provide an edge for their masters. But whether with computers or human brains it'll still be an "arms race" just like it is now. Find something that works extremely well, and it'll get copied before long and that 'magic trick' will stop working. What worked in Ben Graham's day doesn't work so well now... I think at its best, knowing about Narrative Fallacy is just one piece of armor: the codpiece maybe. Wouldn't want to go into battle wearing only a codpiece, but wouldn't want to go without it either. :o I really loved the first few pages (haven't finished it) of the Chinese-to-English translation that CoBF member Graham Rhodes made: "Moreover, since one of the ultimate goals of this class is to train the future leaders of China’s asset management industry, I would like before you enter the industry to keep in mind two unbreakable, bottom line moral requirements: "First, make the pursuit of knowledge and wisdom your moral responsibility. You must consciously reject any ass-backwards theories. Once you enter the profession, you will quickly realise that almost all theories are of this kind. If you don’t think about this closely, you will soon confuse your interests with the client’s. This is just human nature; no one can avoid it. Because this profession is complicated, it is full of specious points of view. Even though there are many judgements, it is not an exact science. So I really hope that any young people who are wholeheartedly trying to enter the profession can let this kind of moral bottom line take root; you must make the continuous pursuit of knowledge, truth and wisdom your moral responsibility. As an informed practitioner, don’t knowingly trot out those theories which are good for you but not your client. Don’t let yourself be confused by specious theories. This is very, very important." I really like that bit of his presentation -- it sounds a lot like how Charlie Mungers says it: It is our job to become as rational as we can in our lifetimes. To grind as much ignorance out of our systems as we can. Or as he paraphrases Samuel Johnson: "The ethical rule is from Samuel Johnson who believed that maintenance of easily removable ignorance by a responsible office holder was treacherous malfeasance in meeting moral obligation." Along those kinds of lines, I can't recommend highly enough the YouTube lectures by Robert Sapolsky on Human Behavioral Biology -- the introductory lecture has an amazing set of examples on just how wrong geniuses have gotten things in the past by looking at the world through just one lens: (cued up mostly to within 5 minutes of the powerful argument against categorical thinking)

Love it! Reminds me of the "Story of the Mexican Fisherman" https://bemorewithless.com/the-story-of-the-mexican-fisherman/ Nutshell version: While on vacation, an investment banker living a workaholic life chats with a fisherman, recommending to the fisherman a life of hard work and entrepreneurship to build a fishing business empire. At each step, fisherman asks "And then what?" ... answer to last "Then what?" question is: Then you can retire, and live the life you're essentially living right now (taking it easy, a little fishing, a daily siesta, hanging out with friends at night)

(This went long, I hope you don't see it as any kind of attack, I am in agreement throughout but trying to make the case that the high skill / low skill operators are divided by whether they can graciously navigate the skill vs luck question.) Agree 100% "The harder I practice, the luckier I get" (a famous golfer from decades past) I think there's a secret key in that quote: Work as if it all depends on you. Then when you're success arrives in the mail, when you talk about it to others, you have to acknowledge role of luck in your achievement. It's an unspoken rule, and a trap that requires some EQ (emotional skill) to avoid. If you just saved a bunch of orphan babies from a burning building, and a news reporter asks if you think you're a hero, here are your choices: 1. Say "Yes" and you'll look small in the eyes of others. 2. Say "No, I just did what you would've done in the same situation" and you look like the real hero. That happened to me. And it did hurt. (Story below.) But... "To be wronged is nothing, unless you continue to remember it." Your kids are lucky to have a dad who encourages them to work hard and learn everything they can. It can safely be said that having good parents wasn't a product of their own skill. Later on when the major awards of life are handed out, and they're giving their acceptance speeches, you'll be honored if they graciously admit that they were lucky to have had you and your wife for parents to encourage and prod them toward their success. You'll feel quite differently if they stand at that podium with a narcissistic attitude that they achieved it all by themselves through their own hard work, or worse yet through their skills at manipulating others with shrewd negotiating skills <cough:Trump> I love how Charlie Munger says envy is the worst of the "deadly sins", because it doesn't even give you any fun or pleasure. True, some people exist who look on success and say "They got lucky" ... I helped build a startup on a philosophy of making our customer support a mind-blowing positive experience, trying to be like Zappos. The business grew by leaps and bounds. I felt sure our success was due to the word of mouth advertising generated by all the good karma. Through a mutual friend, I heard that one of my peers at a previous job had heard of our success and dismissed it as "luck" ... even though we weren't close friends, it really hurt to hear that someone thought my good fortune was just luck. (*Even if my success _was_ all luck, it makes that guy a little bit smaller to be dismissive instead of encouraging.*) Sometimes it's a lazy person's copout to blame bad luck. But sometimes the bad luck is real. You can eat lots of greens, beans, onions, mushrooms, and sprouts to reduce your cancer risks, but you still might get cancer. Looking at another person and trying to judge whether their success or failure is due to skill or luck is a waste of time that could be better spent thinking of an encouraging compliment instead. Far better (and more socially skillful) to say "Look at your awesome skills" when praising another person for a success, and to say "I had some great lucky breaks" when talking about your own successes. Good and bad things happen to us every day, and some of those things are random and unpredictable. One person or group or nation's good fortune can never be accurately explained as "all luck" or "all skill" It's just a feature of our psychology as humans to want clean little stories that explain good or bad outcomes ... it's the narrative fallacy working against us when we think that reality can be fit into nice little stories. Our brains are wired for hearing and telling stories, which helps explain why "Good to Great" has 2100+ reviews on Amazon, while "The Halo Effect: . . . and 8 other business delusions that deceive managers" has 120 reviews. (The Halo Effect is a book that debunks a lot of the other business books that purport to distill business success down to a bunch of inspiring stories. It's more scientific, but harder to read or listen to because it hurts all those cute stories we want to believe.) On Narrative Fallacy: https://www.farnamstreetblog.com/2016/04/narrative-fallacy/ Favorite quote about Narrative Fallacy comes from Yuval Noah Harari, in this interview: https://overcast.fm/+BSCDk9Xmk/57:10 "Homo Sapiens is a story telling animal. We think in stories. We expect reality to be a story. And we expect the meaning of life also to be a story. When people ask what is the meaning of life, they almost always expect the answer to come in a story. Some huge cosmic drama, with a beginning, middle, end, heroes, etc... also a role for me to play in the drama, in the big story... And I think the problem is: reality doesn't come in the shape of a story. I think as a kind of rule of thumb: If the meaning of life that you think you have found is in the shape of a story it is wrong: it's a human invention."

On the topic of skill and luck: It's a valuable social skill for a successful person to be able to acknowledge the role of luck in their life. I think it's one of the social graces any conspicuously successful person ought to have, and a person who can't do it freely is limiting his or herself in the eyes of others. Buffett does it when he says he was lucky to have come out of the right womb, or won the genetic lottery, or just happened to be born with an aptitude for a skill (capital allocation) into just the right time and place (US markets 1950s onward) where that skill was highly rewarded. Howard Marks does it too, he mentions the luck behind his transition into junk bond analysis at just the right time. When they acknowledge the role of luck, they're not saying "it was _all_ luck" and they're not saying "I have zero skill" ... I think by acknowledging the role of luck, they come off as more likable people... "A man all wrapped up in himself makes a small package." (I really liked that quote as a teen) I love a bit in "Fooled by Randomness" where Nassim Taleb says a Janitor might get lucky and win the lottery and end up with $1M dollars. And a dentist might do the same over the course of his or her career. But if you re-roll the dice of life 60 times for each of those two people, the Janitor will only become the lottery millionaire in 1 of those lifetimes, but the dentist will likely get there in maybe 30 of the re-rolls. This quote sums it up nicely, I think: “The more I practice, the luckier I get...” http://stelfox.ie/practice-luck/ Better to succeed and acknowledge luck (even if you think it was _more_ your doing) than to succeed and let others think it went to your head. Nobody is an independent success, and there's no such thing as a fully self-made man. I once heard someone demonstrate this by saying: "You probably took a shower this morning. Did you make the water come out of the pipes by the power of your own will?" "Victory has a thousand fathers and failure is an orphan." When you do succeed, I think in addition to acknowledging luck, you get bonus points for acknowledging the role of the other 999 fathers of the happy success.

Thanks - heaviest book I ever bought on Amazon!

This one? https://www.amazon.com/Permanent-Value-Warren-Buffett-Worldwide/dp/1681840723/ref=la_B001H6IVWU_1_1

I admit I hold Howard Marks up on a pedestal. Buffett has high praise for his memos. I think his book "The Most Important Thing" is fantastic (it's mostly a compilation of his memos) This quote is just restating the idea of value investing in different terms. I saw a YouTube video where I remember he said even a completely burned out and ruined car can be a good buy if the price is far lower than its value as scrap metal. He's restating the Graham/Buffett way of putting it: "Pick up $1 bills for $0.70." My favorite Marks quotes (not in the video) are: "Experience is what you get when you didn't get what you wanted." "What the wise man does in the beginning, the fool does in the end." (about the end of bull/bear markets)

For anyone on the fence about MOI, I believe they have a full refund policy if not happy. Might be good idea to buy in and evaluate... (I am a subscriber for the last two years and it's paid for itself in terms of idea generation.)

I admit this sounds crazy, but could he have done it by trading in and out of some of his stocks on a daily / weekly basis? What if what appears in the 13F report is just the net buys or sells? (since I never see 13F data showing both buys and sells of a stock in a quarter)

Last week I discovered a real gem among podcasts: Masters in Business with Barry Ritholtz. He has these awesome discussions with smart folks in investing -- here are some favorites below. If you listen to it, do you have any favorite discussions? Do any of you have other favorite podcasts on investing? Simon Lack https://overcast.fm/+F21xLUyPM Michael Lewis talks @ The Undoing Project and other books https://overcast.fm/+F21xVe6Xg Howard Marks https://overcast.fm/+F21yO_yZY Aswath Damodaran https://overcast.fm/+F21w8ksQE Daniel Kanneman https://overcast.fm/+F21xO4quY Roger Lowenstein https://overcast.fm/+F21wYXI88 Ken Fisher https://overcast.fm/+F21wzBElM Jason Zweig https://overcast.fm/+F21yMkhb4 Yuval Noah Harari https://overcast.fm/+F21xqUoGM

Bull markets are born in pessimism, grow on skepticism, mature on optimism and die on euphoria. --John Templeton The trouble is determining if we're in the maturing optimism phase or reaching the point of euphoria. I don't think it's euphoria yet, but I'm trying to be as skeptical as the market is optimistic.

This will help the market to be more inefficient but you'll have to know things about human nature that computers can't know.

The best learn from their mistakes. Charlie Munger says something about rubbing his nose in his mistakes. Studying them and figuring out what went wrong in himself. It's okay to be wrong. It's not okay to stay wrong. John Kenneth Galbraigh: Faced with the choice between changing one's mind and proving that there is no need to do so, almost everyone gets busy on the proof. (In essence, almost everyone fails to really learn.)

If I remember correctly he stated in one of his letters that he's never lost more than 5% of the total on one bad bet. He does a good job of obeying his rules #1 and #2.

I've had a standard subscription for a couple years. The monthly issue is more than I can get through, just like my Economist subscription if I try to read the whole thing... The youtube interviews are really fantastic. And the print interviews are really great too.

http://basehitinvesting.com/charlie-mungers-most-important-concept-takeaways-from-the-djco-meeting/ http://sabercapitalmgt.com/wp-content/uploads/2017/02/Saber-Capital-2017-02-08-Investor-Letter-2016-Review.pdf http://sabercapitalmgt.com/wp-content/uploads/2013/03/Berkshire-Hathaway-2016-03-23-1.pdf Yesterday I watched the recent DJCO Munger meeting on YouTube, and I read these by John Huber this morning. His biggest buys in 2016 were Berkshire, Apple, and a basket of bank stocks, primarily JPM and BAC. I did the same things in 2016, but I also lost some on OUTR. Maybe I like his writing because it's stoking my ego, but I really do like his thoughts on how everybody who gets big is saying the game has changed and it's harder to achieve excess returns, while at the same time a younger generation of great investors is starting small and compounding at 30%+ rates. Anyone else here who follows Huber and has favorite quotes / articles?

From a great old essay by Neil Postman, titled "Informing Ourselves to Death" https://w2.eff.org/Net_culture/Criticisms/informing_ourselves_to_death.paper ...by telling you of a small experiment I have been conducting, on and off, for the past several years. There are some people who describe the experiment as an exercise in deceit and exploitation but I will rely on your sense of humor to pull me through. Here's how it works: It is best done in the morning when I see a colleague who appears not to be in possession of a copy of {The New York Times}. "Did you read The Times this morning?," I ask. If the colleague says yes, there is no experiment that day. But if the answer is no, the experiment can proceed. "You ought to look at Page 23," I say. "There's a fascinating article about a study done at Harvard University." "Really? What's it about?" is the usual reply. My choices at this point are limited only by my imagination. But I might say something like this: "Well, they did this study to find out what foods are best to eat for losing weight, and it turns out that a normal diet supplemented by chocolate eclairs, eaten six times a day, is the best approach. It seems that there's some special nutrient in the eclairs - encomial dioxin - that actually uses up calories at an incredible rate." Another possibility, which I like to use with colleagues who are known to be health conscious is this one: "I think you'll want to know about this," I say. "The neuro-physiologists at the University of Stuttgart have uncovered a connection between jogging and reduced intelligence. They tested more than 1200 people over a period of five years, and found that as the number of hours people jogged increased, there was a corresponding decrease in their intelligence. They don't know exactly why but there it is." I'm sure, by now, you understand what my role is in the experiment: to report something that is quite ridiculous - one might say, beyond belief. Let me tell you, then, some of my results: Unless this is the second or third time I've tried this on the same person, most people will believe or at least not disbelieve what I have told them. Some-times they say: "Really? Is that possible?" Sometimes they do a double-take, and reply, "Where'd you say that study was done?" And sometimes they say, "You know, I've heard something like that." Now, there are several conclusions that might be drawn from these results, one of which was expressed by H. L. Mencken fifty years ago when he said, there is no idea so stupid that you can't find a professor who will believe it. This is more of an accusation than an explanation but in any case I have tried this experiment on non-professors and get roughly the same results. Another possible con-clusion is one expressed by George Orwell - also about 50 years ago - when he remarked that the average person today is about as naive as was the average person in the Middle Ages. In the Middle Ages people believed in the authority of their religion, no matter what. Today, we believe in the authority of our science, no matter what. But I think there is still another and more important conclusion to be drawn, related to Orwell's point but rather off at a right angle to it. I am referring to the fact that the world in which we live is very nearly incomprehensible to most of us. There is almost no fact - whether actual or imagined - that will surprise us for very long, since we have no comprehensive and consistent picture of the world which would make the fact appear as an unacceptable contradiction. We believe because there is no reason not to believe. No social, political, historical, metaphysical, logical or spiritual reason. We live in a world that, for the most part, makes no sense to us. Not even technical sense. I don't mean to try my experiment on this audience, especially after having told you about it, but if I informed you that the seats you are presently occupying were actually made by a special process which uses the skin of a Bismark herring, on what grounds would you dispute me?

Here's a fun new "App" you can install in your "Necktop" computer. It's called the "Surely alarm." Basically, when a scientific paper contains words like “surely” or “it goes without saying” in their writings, that is a tipoff that here lies the weak point in their argument (because they’re propping it up or decorating it with useless words that wouldn’t need to be there if the argument was strongest in that point) I probably jived with what he said here because it rhymes with my all time favorite quote from Benjamin Franklin's autobiography: "...never using, when I advanced anything that may possibly be disputed, the words certainly, undoubtedly, or any others that give the air of positiveness to an opinion; but rather say, I conceive or apprehend a thing to be so and so; it appears to me, or I should think it so or so, for such and such reasons; or I imagine it to be so; or it is so, if I am not mistaken. This habit, I believe, has been of great advantage to me when I have had occasion to inculcate my opinions and persuade men into measures that I have been from time to time engaged in promoting; and, as the chief ends of conversion are to inform or to be informed, to please or to persuade, I wish well-meaning, sensible men would not lessen their power of doing good by a positive, assuming manner, that seldom fails to disgust, tends to create opposition, and to defeat every one of those purpose for which speech was given to us, to wit, giving or receiving information or pleasure. For, if you would inform, a positive and dogmatical manner in advancing your sentiments may provoke contradiction and prevent a candid attention. If you wish information and improvement from the knowledge of others, and yet, at the same time, express yourself as firmly fixed in your present opinions, modest, sensible men, who do not love disputation, will probably leave you undisturbed in the possession of your error. And by such a manner you can seldom hope to recommend yourself in pleasing your hearers, or to persuade those whose concurrence you desire."

I think I agree, though I did think the movie "Arrival" was great. I recently read James Altucher praising TV too. http://www.jamesaltucher.com/2016/12/crucial-mistakes-stop-making/ Good examples (IMO) are Westworld, Stranger Things, and what Masterpiece Theater has been doing.

NYT had a big run since October because of yuge increases in subscribership. Whatever he is, Trump sure drives people to read about him. He is a weapon of mass distraction. Great article by Ryan Holiday: Want to Really Make America Great Again? Stop Reading the News. http://observer.com/2016/11/want-to-really-make-america-great-again-stop-reading-the-news/ All this distraction could be a gift to value investors who can keep calm: the more eyeballs glued to the news, the less efficient the market may become.

That leads me to ask: Which E&Ps have bargain prices and have the potential to sell off non-core assets while still holding on to their best lowest cost fields? PWE, right? But who else?

Thanks SD, I just learned something new: oil companies can "buy" from the market to fulfill their hedge obligations. That would be a very profitable activity for companies with high-dollar long term hedges right now, a lot less work than pumping it out of their own wells, right? So wouldn't that kind of activity resolve the oversupply problem twice as fast as if every operator were pumping? So, to attempt second level thinking: If such activity accelerates an oil price pop to say $45 then will all the "nearly dead and dying" firms just snatch up hedges at $45 where they're barely breaking even and then hope for oil to drop to $30 again as soon as everybody else pops the cap off their uncompleted wells and starts producing again, bringing on glut 2.0, 3.0, etc? If that played out, would the imperiled but intelligent firms just turn into hedge-feeding zombies instead of going bankrupt? Then: Would these zombies hasten end for the remaining unhedged players, or could it create a cycle of underproduction that leads back to $60 or $70 oil. Feels like a game of zombie musical chairs ... If many firms are shutting in, does that mean we're reaching the end of the oilpocalypse? I'm long PWE, AXAS, AR, LNG, CBI and DNOW (and a tiny bit of BXE and XCO) and I'm telling myself it'd be safer to hold or buy more than to sell at these levels. Maybe it's time to just go fishing and spend time in nature while the oilpocalypse plays out. Or maybe it's time for me to learn how to hedge against further downside using options. Thanks to Cardboard too, for your helpful posts.