Read the Footnotes

Thank you Norm for maintaining both of these webpages. The Fairfax 2023 page is already up to 19 pages after three months. I am sure this is a year there will lots of happy shareholders who are looking forward to attending who will appreciate your efforts, including your involvement with these two out of the many events: April 18 (Tuesday) The Early Bird Time: 5 PM start. We'll probably order dinner around 6 PM and be there until 10:30 PM or so. Restaurant: C'est What Location: 67 Front St E, Toronto, ON M5E 1B5 (a 10 minute walk east from the Royal York Hotel) Google Map: Walking along Front Street is the easiest Reservations are not needed. So, drop by, ask for Norm, and say hi. April 19 (Wednesday) The Ben Graham Dinner Time: 7:45 PM to late Location: The Keg, with details via the RSVP Info: RSVP Required

From everyone I spoke to it was much more about low quality and rudeness. Again it was the same two names over and over again. It's like an extreme version of the Pareto principle. Instead of the 80/20 rule, it seemed like the 2998/2 rule. I suppose if you remove the 2, then you might have new problems pop up, but I appreciate and support your management of the situation, Parsad. Thank you for preserving an alternative to Wall Street Bets.

I know who it was that prompted Schwab to leave and it was one of the same two that people have been telling me drove them to leave for some time. For the most part the emphasis was on the rudeness and the lack of thought, not the actual politics. We should also remember that CoB&F does not operate in a vacuum. There are other options, and if people get sick of rudeness, they have the ability to leave and go elsewhere to other forums and media. Longhaul, I know you like behavioral economics, so you might enjoy looking in to the research on library fines, swear jars and the like. Some research has shown that swearing or late returns actually increase after a fine is put in place. The reason is that people no longer feel guilty; They feel they are merely paying for the privilege to swear or keep the book longer. So the policy might work, but designing the policy is more difficult than it might appear on the surface. Also, thinking like an economist, there is a chance that a policy like that would select for only the richest jerks who don't mind paying fees (see: adverse selection and unintended consequences).

Second of all, where were you all guys when great contributors like Schwab711 were forced to leave CoBF because of behavior of people like Gregmal who has justified rape multiple times on this site without any consequences. ... Gregmal should have been banned long time ago. He's probably still not. Just because you disagree with his ethics does not mean Greg is not a good contributor. He is one of the most valuable contributors of this forum. Please explain though: How was Schwab forced to leave? A couple of years ago just about every investment professional I knew and respected told me that they no longer read CoB&F. Each of them had one explanation, and it came down to members who: 1) Were abusive in their posts 2) Were frequently posting about politics 3) Posted low quality posts with great frequency. Interestingly about 95% of the time it was the same two people that came up in the discussion. So it seems to me that for each jerk you keep, you might be losing dozens or even hundreds of respectful, thoughtful participants. Here is "the lesson" from Henry Hazlitt's Economics in One Lesson: Applying Hazlitt's thoughts to this situation, we know what the world looks like with one or two members frequently posting low quality and abusive drivel that drives other people away, but we don't fully weight the alternative because it is less immediate and present. In other words it's not so much what it is, but what it could be. Personally, I would like it if Schwab711 and others chose to come back and if the quality of the discussion prompted them to do so.

Like Buffett says, you are never forced to swing and can keep the bat on your shoulder all day. Sure, HF's and Banks suck in many ways, but you have the option to at try to not play their games. Ok, I'm not using options or margin but yet I can't buy some stocks with cash? That's what what bothers me personally. THAT is a way better complaint in my opinion. The attention that this is calling to the fact that there has been so little effort to assure suitability is potentially a problem for Robinhood and any other broker that is allowing 18 years with no source of income who don't can't define an option to engage in option trading. I'm guessing they are not excited about the potential this has to stir regulatory attention.

Again as I said, his comments were limited to exchange traded derivatives, and he has engaged in over the counter transactions. No one is being prohibited from over the counter transactions if they can find a counter party.

Buffett has spoken out about it many times. He has said that no one should be allowed to buy options unless they are legitimately hedging something. Though he has used options, I believe they have primarily been warrants in the early days, or over the counter options in later days with Berkshire. His negative comments have been restricted to exchange traded derivatives (primarily options), which is of course what we are discussing here. From his 2002 letter: “In my view, derivatives are financial weapons of mass destruction, carrying dangers that, while now latent, are potentially lethal.” Wall Street Bets: "Hold my beer, I'm going to try to take down this market maker. What could possibly go wrong?" It's interesting to note that the loses to date are reported to be larger than the loses that LTCM suffered in 1998. At that time, many people feared that if LTCM had to liquidate that it would bring down the entire system. They did liquidate orderly and didn't bring down the system, but it is interesting, none the less. Also interesting that the WSB attitude is to try to kick the crap out of their counter parties by rigging the game and then they are surprised that the counter party might not want to make a market any more. Both sides have the option not to play, but neither side can be forced to play. Like Buffett says, you are never forced to swing and can keep the bat on your shoulder all day. Sure, HF's and Banks suck in many ways, but you have the option to at try to not play their games.

What legal theories are you referencing? I am only familiar with Rule 10b-5, which is here: https://www.law.cornell.edu/cfr/text/17/240.10b-5 A 10b-5 violation requires a material misstatement or omission of fact. Speculative statements of opinion ("This stock is going to the moon" or "Buy GME, can't go tits up") don't count. And there are more hurdles than this in the law. Importantly, the Supreme Court held in Ernst & Ernst v. Hochfelder (https://supreme.justia.com/cases/federal/us/425/185/) that there must be intent to deceive. On top of that, you actually have to show that the misstatements or omissions caused someone to buy or sell the stock in question, AND that they lost money. Are regulators really going to trawl through millions of posts from 20-year-old kids looking for deliberate factual misstatements to trace to individual buy/sell decisions? I doubt it. I would've thought it would've been more around the intentional manipulation, but looking back at Porsche/VW, the courts ruled in favor of Porsche. Yes, I was referring to intentional manipulation primarily. If there was coordination among a group or enough deception by a single individual then they might face criminal issues. I have seen articles from reasonably reputable sources that make me believe it is possible that there was more going on behind the scenes than meets the eye. Though it is possible, usually someone doesn't have a good idea and suddenly it goes viral and becomes worth billions in market moves. Frequently making something go this viral involves a bit more effort on the part of someone. I'm not saying it happened in a way that might be prosecutable, but it might have. I think the question is basically was the effort distributed in such a way that no one individual bears enough responsibility. On a side note, Melvin Capital seems to be the fund that may be suffering the most. Melvin Capital was founded by Gabriel Plotkin a former trader at SAC Capital. Plotkin was also known as "Portfolio Manager B" in one of the SEC's complaints regarding insider trading. After the insider trading scandal and the shutdown of SAC, Plotkin launched Melvin Capital. Cohen reportedly invested $1 billion in Melvin. Cohen is also reportedly down 15% on his entire portfolio due to the Melvin investment. Cohen also contributed to the $2.75 backstop of Melvin. Given the involvement of SAC Capital in the Fairfax shorting debacle of 2002, I would guess there are a lot of people here who will not feel too bad about Plotkin and Melvin or Cohen and Point72's difficulty in this matter. On the homepage, Parsad describes Cohen's involvement in the 2002 FFH short selling incident: An interesting distinction is that those of the CoB&F community who in 2002 made lots of money on their long call FFH LEAPS had to wait for the business and the market to prove them right, whereas in 2021 the WSB crowd forced a quick market manipulation through mobbing the market.

What legal theories are you referencing? I am only familiar with Rule 10b-5, which is here: https://www.law.cornell.edu/cfr/text/17/240.10b-5 A 10b-5 violation requires a material misstatement or omission of fact. Speculative statements of opinion ("This stock is going to the moon" or "Buy GME, can't go tits up") don't count. And there are more hurdles than this in the law. Importantly, the Supreme Court held in Ernst & Ernst v. Hochfelder (https://supreme.justia.com/cases/federal/us/425/185/) that there must be intent to deceive. On top of that, you actually have to show that the misstatements or omissions caused someone to buy or sell the stock in question, AND that they lost money. Are regulators really going to trawl through millions of posts from 20-year-old kids looking for deliberate factual misstatements to trace to individual buy/sell decisions? I doubt it. There are other legal theories and you are completely ignoring civil litigation risk. Going around bragging on social media about how much money you made is also like putting a target on your back if someone wants to know who they could file a suit against and potentially recover something. For a lawsuit to be viable, there would need to be a tort claim, there would need to be damages, and it's a whole lot more worthwhile if you know a few people who might have assets to go after.

I think retail investors are underestimating the number of different legal theories that could be an issue for them. Just because there has not been much appetite for pursuing bad behavior for the past 4+ years, does not mean there won't be in the future. The SEC tends to be reactive, not proactive, and I am sure they know they have a problem now. I am guessing that reddit realizes it has a problem too. From what I have read, several early instigators probably have multiple risks that they should be worried about. Some people involved will face little to no risk even if what they did technically broke the law, but my guess is that some people will be made an example of. Even more participants just amplified the message or joined the mob and in no way broke the law in the way they did it. What is interesting is that in the past it was more organized crime, rogue professionals, conflicts of interest, corrupted journalist and corrupted analysts that the SEC needed to worry about. Social media has just democratized the ability for the average Joe to commit a crime and amplify that message in a way that can move markets. That really would not have been possible to this extent 20 years ago, but we shouldn't forget that the TMT bubble had it's own version of market manipulations scandals that resulted in firings, prosecutions and reforms.

Nice joke, but more similar to Anaconda Copper in my opinion due to the prevalence of bucket shops. https://en.wikipedia.org/wiki/Anaconda_Copper

This has basically been my mental model for what is going on for some time. If you compare this to bucket shops from 100 years ago, the speculative environment was very similar with one very important exception. To the best of my knowledge, the bucket shop trades were never executed on any exchange and had no mechanism to feedback in to the value of the underlying exchange traded security. Today the speculative environment is very similar, but today's option trades are executed and visible on exchanges, and there are multiple pathways for the options trades to feedback in to and effect the market price of the underlying security.

Relative valuation sucks. What you want is to see where you are vs your potential. Right now, "49% of the shots distributed to states have been administered", and more shots could probably have been available if the Feds had taken up Pfizer's offer last summer. The opportunity cost to the economy of not purchasing those extra shots is very, very high. Placing most of your bets on one tool was also not a good strategy. If anything goes wrong, even a delay will cost lives and billions of dollars unnecessarily, and delays should have been expected.

Yes, this is the right approach. The problem is that it is more difficult to do and potentially less mathematically precise so some people will default to doing what is easy. It's basically the same rant as when Buffett and Munger have complained that academic finance is drawn to elegant math even when it is not sensible. The real standard should be what it should have been or was expected to be. The fact is that many countries who were trained by the US CDC have been outperformed the US response. So the master is outperformed by the "students", and those students are completely mystified and horrified by the outcomes in the USA. Many of those trained by the US CDC in other parts of the world have given interviews to say exactly that. To me when you have a country that should have been the absolute gold standard for the whole world that comes in average at best, we should be asking why did the country fail to meet expectations, and why did it under-perform previous experience. Here's a sport analogy. Let's assume that you have a football team, something like the University of Alabama. This football team has the biggest budget by a significant margin of all football teams, many times larger than it's nearest competitors. It has a long track record of winning national championships, which given the long history of investments and the high current investment top performance should basically be expected. In fact the biggest risk to continued championships is that so many other teams try to copy their playbook and learn from the gold standard team. Now assume a new head coach comes in to this best in class football team, he fires half of the coordinators or coaching staff and refuses to allow those positions to be filled because he doesn't think they are needed. Then when game day comes, the new coach tells the team they can continue to use the defensive playbook, but not the offensive playbook. In addition, he tells them that some of the defensive playbook he really doesn't like and it will be trouble if they call any of those plays, but since he hasn't read the playbook, he can't tell them which ones yet. So in this case, if this team with a long history of championships comes in mid-pack, shouldn't we be questioning why? In football, it seems like when you spend a lot on a program and suddenly don't get good results when there's a history and culture of winning, there's usually a price to be paid.

IHME is basically projecting for infections to fall off a cliff given rapid vaccine roll out changes, and universal masking. https://covid19.healthdata.org/united-states-of-america?view=infections-testing&tab=trend&test=infections It will be an interesting test of policy to see if it comes true, but it is far from a laboratory test with many ways in which the real world could disrupt any experimental value.

Regardless of what the perfect solution is, two things are true: 1) Distribution has failed relative to the goals and promises of the Trump administration. Last I calculated it was roughly 10% of what had been promised. The shots were manufactured and left the manufacturing facility on time, but it seriously goes off the rails after that. 2) The USA has seriously under-performed its ability. The USA should have been the gold standard, and it has not been. Many experts are repeating that vaccine distribution is going to be the most complicated logistical challenge since WWII and some are going so far as to say that it is the most complicated logistical challenge in the history of the USA. It doesn't make sense to me to have a hands off approach at the federal level. It would make more sense that you would want to take advantage of economies of scale, and efficiencies of scale. It also make sense that you would want to tap in to those with expertise, even if that requires a greater federal response. What is unclear is what the future holds as a result of the proposed changes. Fauci and others certainly seem very happy about the ability to follow the science in the future, but the results may not produce a clear referendum on any one decision or policy because of a long list of confounding variables, such as: 1) Misinformation and conspiracy theories 2) New more transmissible variants 3) Multiple variables changing simultaneously Judging by the response of certain sectors (oil and gas, small banks, and others) in the past couple of weeks, I believe the market is also indicating that it believes that small businesses and economic activity will fare better in the future as a result of better management of the virus. I am sure there will be people who try to find evidence to prove that masks don't work for example. There will undoubtedly be people who pick and choose data to try to prove a point using models that are too simplistic to be useful. I personally am hopeful regarding the direction of the response. As an anecdote, I saw today someone I see basically on a daily basis who has been a staunch anti-masker. He was wearing a mask for the first time I've ever seen. It was early in the morning and no one was around. Maybe he was hoping no one would see him looking so weak with a mask on? ;) Maybe he was feeling self-conscious and wanted to try it out when no one was looking? Whatever the reason, I take it as a good sign. A year late, but a good sign.

There are some parallels to 1999. But this is also sounds eerily similar to the Go Go Years of the 60s. A new generation of gunslingers... Really good point. This story in some ways is more similar to the 60s although maybe social media has has replaced cocktail parties as the influence to concentrate in a new version of the Nifty Fifty. The regular Joe's and Jane's that I've spoken to who want to quit their jobs and become day traders, that rhymes more with the 1990's. At least it's an easy call to take. I can pretty quickly say that I can't help them with learning how to day trade. The fact that they don't even understand why I would be ill equipped to help them underlines the fact that they have no business being active in the markets.

It's getting to the point that if I get a phone call from someone I haven't heard from in a while and they are not a professional investor, I am just going to have assume they are calling me to ask one of two things: 1. How much of their investments should they liquidate so that they can buy ARK funds instead? 2. How much should they borrow so that they can buy options on Tesla on margin? As a follow up question, is it a problem that they don't understand what an option is? After I have done my best chicken little/Debbie downer impression regarding their proposals they frequently follow up with some feelers regarding whether they could give me money to manage. Of course questions number 1 and 2 would play heavily in to my feelings regarding the third question. This is NOT normal.

Yes. I would recommend it too. I first read the book when it first came out sixteen years ago, and I believe it has probably subconsciously helped me many times since then. Funny story, I was either in the process of reading the book or had just finished reading the book when a psychopath came in to my office. Thanks in part to the book I immediately identified him as a dangerous psychopath and I had a language to codify the signs. He claimed that we had a better waiting space than the office next door which was true, but my assumption was that he was there to case the place and I started documenting the interaction so I could provide information in preparation for a break in or assault or something. I also interacted with him in a way to try to get as much information about him as possible. I found out he was waiting for a meeting in the next office down the hall and I believed it wasn't a cover story. My goal was to track him to the specific office and note the time of appointment. My plan was that after his meeting was over I would pressure them to provide his identity for our records and provide feedback regarding the quality of their clientele. I was never able to execute my plan because I watched him get up a leave to go to his appointment, two gentlemen in suits followed him down the hall maybe less than a minute later and then the three passed back by with our psychopath in handcuffs hidden under a coat draped over his hands. This guy had been a long time client of the neighboring office and this was the sort of office building where this type stuff didn't happen. I'm not sure how the cops found out about the guys appointment, but my neighbor was surprised by what happened and we didn't have to have a discussion about firing him as a client. The book basically paid for itself with one interaction in the first year.

Is it just me or has this thread completely declined to the point that 95% of the posts are posts by conspiracy theorists and those who try to rebut them? Not that discrediting biased or ignorant posts is not valuable, it absolutely is, but seriously what the heck? At times this thread has been very valuable to all but the conspiracy theorist COVID deniers and anti-maskers and anti-vaxxers, and now it primarily seems like a mouthpiece for some pretty wacky ideas that are far out of the mainstream. You can dismiss my concern by saying that some people are simply pushing a story of doubt, or that other people are merely repeating narratives that sow doubt but that would overlook the fact that sowing doubt is the primary tool of disinformation.

Why would this be more palatable without the riots? If Trump does this he enriches hedge funds, paulson et al. He is already going down as the worst president in history and has pardoned all of his cronies manafort, kushners dad, flynn, etc. The riot made this too much? Interesting. I think Cameronfen has a good point. The Joint Chiefs just reiterated that they serve the constitution, that they only take lawful orders and that Joe Biden "will" become the next President (they made a similar statement just after the election, for the first time ever). The emphasis on the use of "will" is interesting, because in US military speak it might have an additional emphasis of inevitability. It's a VERY unusual statement. The kind of thing that you would only write if you believe one branch of the government was engaging in a cold war with the other. https://www.cnn.com/2021/01/12/politics/joint-chiefs-memo-capitol-insurrection/index.html Mnuchin and other cabinet members have made similar gestures that indicate they side with the Constitution (and that might indicate they have ambitions for the future under the current US Constitution). That combined with the fact that many cabinet members and staff are reportedly trying to avoid Trump for legal reasons, plus the added complexity of COVID-19, and it starts to be understandable that timelines could slip. Plus his staff are probably dealing with all kinds of crazy problems that they weren't last week. Staff are also resigning across the administration at even faster rates after last Wednesday. Mnuchin is fifth in line of succession and we see a military presence in DC unlike anything we have every seen before. The top five are going to be treated differently from other members of government, and with the level of dysfunction he might be taking on additional responsibilities as one of the top four most important Cabinet officials. We also need to add in the Russian hack discovered quite recently that involved government and financial institutions. With that longs list there is a lot that the Treasury has on it's plate that on and ensuring financial stability during these troubling times would of course be a top priority. The number of previously unexpected curve balls is quite high. If he was planning on something last minute and the work wasn't all done well in advance, it make sense to me that there could be major issues meeting a planned schedule.

United 93 is at the top of my list.

This might belong here. Or in the 1999 thread. Hopefully its a sign that the fun is just getting started. https://www.wsj.com/articles/warren-buffetts-latest-challenger-will-fizzle-like-the-rest-11610204581?mod=hp_featst_pos4

I'm not going to put too much effort in to this so, here's a high level overview. It seems that you understand that retirement assets are different from a legal perspective, you need to add in that they are different from a practical perspective in terms of the differing regulatory burden likely means additional costs with the end effect being that client money of different types can have a different value to you in terms of being a viable pursuit after costs. The other important consideration is that on a practical level what you can get away with in terms of avoiding regulatory burden as you grow can vary dramatically by local (state) regulation. Sounds like you already know a lot, but hopefully that helps confirm some of what you are learning.

I would prefer to phrase it as . . . hopes and prayers about the tangible addressable market in the far distant future become less valuable as rates increase. Therefore with increasing rates, growth stock are expect to decrease in value more than value stocks.