JayGatsby

This is an interesting summary: http://aswathdamodaran.blogspot.com/2015/11/runaway-stories-and-fairy-tale-endings.html

Hasn't demand continued to increase? Seems like cheap easy credit created excess supply (in all materials, not just oil), not that a lack of credit created a lack of demand?

I had some money in an account with no controls at a young age. Given the amount of money it wouldn't have made sense to start a trust, but a 529 would have been a good option if that was around. For me it was a good learning experience in saving / investing. I actively managed the funds starting at a young age with guidance as I suspect your beneficiary would.

Interesting. MCD seems to fall in that bucket. Declining earnings, increasing debt, steady dividend, increasing share price. Will look into that.

At what point does production start coming offline? I thought Venezuela and some of the Canadian producers have marginal costs in the $30 range.

HFTs

+1. If you ask most people why deflation is bad they give you the same look as if you asked them why they believe in dinosaurs. I do agree with Cardboard that low oil prices are beginning to be have deeper negative effects. While there's a fair argument that $65 oil is better for the economy than $100 dollar, $33 oil presents a lot of difficulties around the world. At the least, it seems like a good time to cap off the strategic petroleum reserves.

Thanks! Will check them out.

Let's say that oil will rise at some point in the future, where would be the opportunities be today? My problems finding opportunities have been: 1. USO and other ETFs have huge contango/execution costs. Investors in 2009 really didn't do very well. 2. Equity prices at E&Ps generally haven't come down nearly as much as oil prices and seem to generally reflect a rebound in price. 3. Service companies are suffering not only from a decrease in demand but also from oversupply in whatever niche they serve 4. Can't invest in term loans 5. Bonds are generally 144A or in a mezzanine part of the capital structure

I've had good luck with private sales, bad luck with certified preowned. Private sales you can talk to the person, understand why they're selling, review the records, etcs. Certified preowned is mostly off lease where the person has no incentive to treat the car well. CPO extended warranties can help. Depending on states and tax incentives an electric car can be a really good deal. In Georgia there was a $5,000 tax credit for leases of electric vehicles although I think that got cut.

Kyle Bass' commentary at ~19:45 on oil is pretty interesting: http://wallstreetweek.com/ (whole interview is good too but off this topic)

Looks like the carrying value on their books of the securities must be $1.4B. So when they redeem the pref at the $2B face amount they're doing so at $600M more than carrying cost causing them to be marked up. Not sure that's what caused the stock to move. Can't think of why it shoul have an impact.

Interesting interview with Michael Burry: http://nymag.com/daily/intelligencer/2015/12/big-short-genius-says-another-crisis-is-coming.html#

I didn't love it. His stories were mainly about pulling rabbits out of hats rather than creating long-term value.

Comparing Chipotle to Lumber Liquidators doesn't make a whole lot of sense. One sold a high dollar item, infrequent purchase using inventory that didn't comply with multiple (very different) laws, denied it for a long period of time and got caught. The other sold $7 burritos, had a supply chain issue and seemed to take the appropriate actions to fix it (or at least figure out where the problem started). I ate there today. No crowds! I'm not really concerned about the long-term direct financial impact of e coli, but I do worry that it weakens their "better ingredients, better burritos" marketing. If the same ingredients are used in Boston and Seattle they aren't very local

Short answer, I'm not sure. Long answer, one of the things I liked about the book was there was no one-size-fits-all strategy. Each CEO had to respond to a unique set of capital allocation decisions and be willing to make tough decisions to maximize value. After reading the book, when I'm looking at a specific situation I'm not looking for any specific strategy but looking at the way the CEO talks and thinks about situations. So not that he/she acts like one of the specific outsider CEOs, but that he/she thinks like the collective outsider CEOs. To use a specific turnaround example, one of the things I like about John Chen at Blackberry is he keeps a very open mind about the future. He's investing in handsets while also looking for other profitable applications of that technology while also being willing to scrap the flagship product if it doesn't make money soon. Another example I like is Klaus Kleinfeld at Alcoa; he's been sytematically evaluating the business lines, closing the ones that aren't competitive on the cost curve, selling the ones that are competitive but are higher valued by other (hydroelectricity), and aggressively investing in others. Of course, both of those situations will require time to see how effective they turn out to be. Their approaches are different in some ways, but their mindset is the same. I also found the book helpful in thinking about my own capital allocation decisions (both in personal investments and at work). It's easy to find an ok rate of return, but the challenge is to constantly be refocusing on the best rate of return. Guess I never really answered the question ;) Hope that helps. It helped me to think through it, so appreciate the question.

Of the companies/leaders in the book GD is the one that I remember the clearest of a less can be more strategy. I think the speed and aggressiveness with which he went about it was what left such a strong impression on me. It's an important point, so maybe that's part of why he chose that example.

+1. Pulled this off my shelf a few weeks ago to reread.

Are there any interesting secured bonds that aren't 144A (ie, available to non-institutions)? My challenge with the equity of many of these companies is the leverage. The only one I've come across is Forbes Energy Service, which has a weird Bermuda corporate structure.

I don't think Russia and SA are producing at a loss (nor are parts of the US). They're not producing at a level that makes the budget balance, but the wells themselves are profitable I believe. I thought the all-in cost in SA is ~$10 or less because they basically just stick a straw in the ground. My problem has been many of these companies are very levered at current prices, similar to what theAIGuy said. It's difficult to find an equity situation that doesn't entail balance sheet risk and I can't buy most of the debt as a non-institution. This is interesting: http://www.businessinsider.com/avenue-capital-ceo-marc-lasry-is-bullish-on-energy-debt-2015-11?r=UK&IR=T

Is there any difference that allows IB to charge ~6.5% lower margin interest than the retail brokers, or are they just not making an absolute killing on the spread trade?

My hold periods are pretty long so if I get slightly better execution on a limit order it's worth the $7 commission. Running any brokerage costs money so if they aren't making money on the commission they're making money on the spread. Plus I feel a bit more secure with a big FDIC bank than a startup company called RobinHood... Jim Rogers would always invest with the biggest bank in the country on the theory that the biggest bank never goes bust.

Not sure if anyone here is invested in any of the Sprott Physical Trusts (Gold, Silver, Palladium) or any of the Sprott vehicles but they seem like some of the worst fiduciaries around. I'm invested in another physical gold trust that has better safeguards with lower fees and Sprott has led a prolonged tender offer to take control and grab the fee. The trust I'm in which has $1B under management has spent ~$2M on legal fees defending against it. All people really want is safe gold and low fees so there's no rational reason why Sprott would be a better manager. It's basically just a fee grab by Sprott. Sprott has been rejected 4 or 5 times and keeps extending the deadline, presumably on their investors dime. More of a rant really, but thanks for listening ;). Definitely wouldn't recommend investing with these guys.

That's a lot of auto!

Really liked this book. Kind of in the category of Greenblatt's You Can be a Stock Market Genius; hyperbole title with the substance to back it up. Think it has areas that are applicable to pretty much everyone. Has anyone read a book specific to 3G? That's how I came across this. There's a few on Amazon but no clear leader.