nafregnum

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.