Uccmal

This webcast posted by Ni-co is quite good. I have listened to the first 2/3 or so. He covers the topics of alleged efficiency gains, rig counts (and their relevance - less than before). The webcast is long but the guys are slow talkers and the site allows you to speed up their conversation - nice feature. He basically summarizes that while rig counts are important, they are not the be all and end all anymore, with much more pad drilling being done. The reason, he surmises, that the rig counts still drive market behaviour, is that they are the only regular data point for investors to hang their hats on. All other stats are infrequent and unreliable. He also challenges the notion of efficiency improvements being as high as they are. I guess, drillers have been going after the low hanging fruit, so far. As the decline rates catch up new drilling will cost more. Part of the cost curve has to do with relationships. This has been discussed by various companies I follow: Arx, Wcp, Mullen. One of the oil drillers, either Wcp or arx, I cant recall, stated that service prices couldn't go any lower without jeopardizing the solvency of the service providers. In Western Canada it is important for Arc and Whitecap to support Mullen and vice-versa. There is a high level of interconnectedness going back decades. Obviously, the Russians and Saudi complex are subject to different dynamics. The state pays for the oil and allocates profits according to its needs, or whims. They are producing full bore but cracks are starting to show everywhere, and cuts seem to be on the horizon, even if unintentional. I dont have any stats to back this up, but I personally think the Rus. and SA et al, have been producing more in the short term than they can do in the longer term.

Makes sense. I think this is the politics behind oil FWIW. Everyone is pumping their max. Who knows if the majors can even keep it up? The democratic countries have cut via the normal route and will come back more competitive. That is the risk SA et al are taking.

Who knows, but all new or continuing projects require investment. Any outside capital would be pretty skittish for exactly the possibility you mention. On the other hand, they could convince themselves that everyone else has cut back and now is a good time. Also, I have read about a few huge long tail projects that have been put on ice or cancelled; deep water, and arctic, in particular. In a somewhat related issue, Major energy companies are shifting capital toward renewables. Enbridge, has explicitly stated that they are putting more investment in non O&G projects. Might this sort of thinking lead to a bottle neck in Oil - again who knows.

There is a huge similarity between Canada, Australia, and New Zealand. They offer the most mature and systematic schemes for foreigners to move into their country. They are English speaking, so attract people from every country (Unlike Spain is attractive only to South Americans). All three countries offer both good job/business opportunities and social welfare. And luckily for the immigrants all three countries have cities that are highly livable by global standards. On this issue the US is very different. The US mostly takes in people with family ties. So while you can pretty much fill out a few forms (after meeting certain standards) and then wait for your turn to get into Canada, you can't do that to get into the US. Now as I said repeatedly, many demand/supply factors influence housing prices. The US is a particularly curious case. Despite having one of the highest incomes in the world, the US homes to my knowledge are probably the cheapest on an absolutely basis when adjusted for quality and certainly the cheapest relative to income globally. There is not enough space and time to get into why that is the case. But this means if Canada is merely more expensive than the US, Canada is not expensive at all. Every country is more expensive than the US. The Yanks are quite lucky. I think concentration plays a role as well. For higher end employment in Canada you need to be in one of the big cities... Toronto, Van. Calgary, and Montreal perhaps. The advent of telecommuting was supposed to work opposite and allow people to work from anywhere. In reality work has become more concentrated in the biggest cities. New Zealand has the one city, and Australia has Sydney, Melbourne, and perhaps Perth. The Us has dozens of big cities, which may be dispersing the population a little better. Or Toronto is in a horrible bubble of epic proportions.

You are right of course. Carry on.

At least 3 bullsh*t macro threads going on at the same time on this board. If some of these characters put as much time into actually studying companies, and learning the practical side of trading, they might actually find something to invest in that didn't have S&P in its title. When I posted earlier in this thread last week, the TSX was in bear territory. It is up several percent since then, while people moaned about S&P market valuations, and fretted about whether a rally is real or not. I bought stocks up to last week, and was selling into the rally yesterday.

I guess he would say we are in a bubble and prices will go down soon. Turner is generally a decent guy but he makes most of his living as a financial shill, hence the sensationalism.

I will pull some very anecdotal evidence from my personal experience. There is a vibrant Tamil (Sri Lankan) community in Toronto. I was at a wedding of two under 30s three years ago, via my Wife's work. They bought a house at market prices then - both are young professionals from pretty poor families. There were dozens of similar kids at the wedding. I envision this going on in our sizable, Chinese, Indian, Persian, Serbian, Polish, Romanian, African etc. communities. I have friends, and have worked with people from some of these communities. The city is growing and there is pressure on housing as a result. I cant answer whether that justifies Paris and Rome pricing but I am damn sure there is vastly more opportunity for intelligent and educated immigrants in Canada than nearly anywhere else in the world. Just ask the moderator of our message board, his business partner, or Prem Watsa, or Frank Stronach.. we get the idea. The flipping of real estate is a sidebar to the real effect, whatever the sensationalist headlines are. I would never argue that the price increases, year on year, are sustainable, either. The increases may slow down, stop, or even reverse somewhat as time goes, since that is what markets do. But the overall trend is in place. Prices will not revert significantly. Add to this that Canada and Ontario have been floating at the edge of recession for 7 years now during the most dramatic price rise.

Your statement is a bit weak on evidence.

Of course its anecdotal or subjective - So is this entire discussion. One would have to start by describing what a global city is, and how prices are affected. Even the damn government cant figure it out and they theoretically have access to all the statistics. I know that in Toronto prices are higher closer to downtown, or near subway lines. The price rise has not been porportionate across the entre region.

The last line I have quoted here summarizes the situation nicely. Toronto and Vancouver play by the rules of global, international cities. See the chart in this article from just over a year ago. http://business.financialpost.com/personal-finance/mortgages-real-estate/toronto-and-vancouver-home-prices-pass-rome-and-close-in-on-paris Land availability does not seem to be a factor. Proximity is the issue. This applies very neatly to Toronto. The greatest price increases have been downtown, and near the subway lines. I live very near Mississauga (~1 km), 15 minutes by bus from the subway, and the prices have not risen nearly as rapidly, as homes slightly east and walking distance from the subway. There has also been huge developments of high rise condos along old, and new subway lines that may be skewing the prices upwards as well. Finally, Canada's immigration is somewhere over 200,000 people every year, of which over 40% wind up in the greater Toronto Area. That is an addition of 1 million people, with their children every 10 years since 1991. Of course, prices will go up. No one really knows if they are in a bubble. I honestly thought they were in a bubble 12 years ago, when we bought our house. I am happy my wife pushed to buy a house then, in retospect.

There is literally no way to answer this. I mean, other than just making things up. Oh, this rally is very real and is going to last for awhile... until it is over. The catalyst is obviously you guys choosing a buffoon to lead the GOP into an election.

The corporate governance at CHK was the absolute worst. No doubt some bad stuff was going to come out. All one has to do is read the proxy materials. The best example was in December 2008 when the company purchased an extensive collection of historical maps of the southwest from McClendon for $12.1 million. Why the company would purchase these from him is an interesting question and an even bigger question is how was the purchase price determined. Ironically the sale of the "maps" was applied as a credit against costs incurred by McClendon for participating in the "Founders Well Participation Program", a program that allowed the founders (Ward and McClendon) to participate in a 2-1/2% working interest in every well drilled by CHK. Behavior like this gives capitalism a bad name. I was especially surprised when Lou Simpson joined the BOD in 2011. I was not, however, surprised to hear of his resignation less than two years later. He likely didn't agree with the business ethics of the extremely well paid BOD's. This was covered on the Chesapeake thread years ago - stuff about the map room, and the sleazy drilling deals. I guess Tom Ward will be the next greaseball to be indicted.

Murder, perhaps. I guess we will have to wait for the toxicology report, coroners report, and the car inspection. If he was indicted there may be a number of people who didn't want him talking. BTW: I am not normally a conspiracy theorist.

It seems I really read this one badly.

You are speaking from a US centric approach. Many sectors in Canada are in a bear market. I sold all of my US holdings except Seaspan and have invested in CDN. companies. In the past year and a half I have sold very little at a profit. Pennwest as an example. I was out of it after taking significant losses into early 2015. I re-entered in late 2015 and have since sold out at roughly BE. I took the proceeds and went up the quality curve. I did the same in the past year with all of my US financials, although some had significant gains, when I sold. I redeployed the money at home in stocks that were trading at 52 week or multi year lows. Over the years I have trained myself to eat losses and move on to something better when the opportunity arises. One has to get past the sunk cost fallacy on individual stocks, and look at the whole. This still meets Buffett rules 1 & 2. We dont need to hold the shit stocks in the paper, tech, or oil industry, to make our money (back) when better opportunities abound. As to most people. Most people are not 'successful' professional investors, and should stay out of individual stocks.

Except in China, where red is the lucky color and, therefore, it's the other way around. ;) Or if you are somewhat colour blind in the red -green spectrum.

Your general point is valid but I think some statements are not quite. I would characterize reading the wrong material, or doing anything inconsequential, as doing bad research. Doing good research means you are able to come to the crux and form the right insight. Ackman did plenty wrong in Valeant which he now concedes. It's not a case of good research leading to bad outcomes (though of course it can happen). You say "if you need to work so hard to decide if something is the right decision, it probably isn't." I find that hard to accept. It's possible you can still come across what you believe to be no-brainers, I think it's rare in today's market and getting rarer. When I see a "no-brainer", I first tell myself that it's probably because I know so little of the situation that I couldn't even understand the opposite view. WEB has done great things for investing. But one thing he didn't do as well was to warn people not to try to become him. His statements such as "two-foot poles" have led many to think investing is easy. It may be easy for him. Munger made up for Buffett's inadequacy on this by stating more forcefully "Investing is hard; if you don't think so you are stupid." I happen to appreciate WEB's approach. It is an approach of 50 years of working non-stop reading annual reports and numerous other things and hard thinking. It's approach of reading 500 pages a day. He does than even though he could simply call his CEO friends and the foremost experts in the world in any field. How can anyone come up with insights without much effort and mental struggle? I agree that The WEB/Munger approach is cumulative. They have developed mental models over time that prevent them, more of the time, from making bad decisions. Reading 500 pages a day, which is unlikely, is a molecule in an Ocean of information. Buffett and Munger, and others like them, have learned to filter out bad ideas. Many times they filter out what might be good ideas as well. The two foot hurdle, or seven foot BB player concept is something they learned to spot. It is a process of elimination rather than inclusion. I dont think Buffett has ever implied it was easy. I think that if you have to work too hard to convince yourself that something is good, or has some underlying attributes, then you are probably working too hard (on that idea). I also think that the idea of research as defined here is narrow. Perhaps it needs to be redefined as '"learnings". For example: Some of the things I have learned from years of learnings are that retailers, unless they are HD, SBux, Costco, or wmt, are usually bad stocks. Mining companies are a wildcard. Shipping companies have one good year a decade (except Seaspan). Turnarounds seldom turn, except Fairfax, and Apple. Banks make money for a couple of generations and then they dont. Consumer tech is a fickle mistress. Any new technology is inherently hard to predict. Utilities make money but you pay up. Telecom is like utilities. Thats only some of my learnings, and they are the result of 20+ years of reading, and thinking. Most of it has nothing to do with the narrow world of financial statements. My best hits have had little to do with the actual financial statements beyond the issue of solvency, and EPS/cash flow. If solvency is an issue I prefer to stay far away. I have never had a hit because I spotted something on a balance sheet the market had missed. edit: for bad spelling because I dont wear my reading glasses when I should.

+ 2

It looks like the Canadian Federal Government is going to go ahead with some major infrastructure investment. I would think any business would do well. Infrastructure spending should put some pressure on borrowing and defaltion as well. I dont see any indication the US government is going to go this direction, at least for a year. It looks like the have abdicated any resposibility to the Central Bank. Maybe if you guys elect Trump.....

Pretty good answers. There is diminishing returns to research. One certainly needs to know things such as the primary risk factors for a business, from a macro perspective - I have more than proven that with oil last year. One also needs to know the debt levels, cash flows, etc. in order to gauge the solvency of an investment or ability to meet its demands, since we often engage in buying less than savory morsels. But does it really pay to know BACs in depth to the 1000 page of its filings. Obviously the CEOs of these companies dont even know this. You could have known everything you wanted to know about BAC and still been killed this year by the spector of negative interest rates. Similarly, with Pennwest - they were on the right track and profitable even down into the 60s to 70s per barrel and then whoomph, the oil price tanks to levels way below production cost. What can you do? Knowing Shld in depth didn't help anyone. Knowing Horsehead in depth didn't save anyone. I guess one has to determine where their skill lies. Mine does not lie in doing deep research into companies... it has never paid off. A wide view has always worked best for me.

Yes. They are masters at financial engineering. Not saying it will happen this time but they raised 1 billion at 500/share in 1998 or 1999, just ahead of the unforeseen asbestos debacle at TIG and C&F. I expect its a little bit of alot. There is institutional demand for Fairfax shares given it trades so little. How else could you get a couple of hundred million dollars worth. Speaks volumes as to how the company is respected in Canada, regardless of the stock investment results.

Pennwest - not for the faint hearted Pennwest is not worthless today... or is it? ;) IMO, there's a lot of small caps some even without debt loads that will go 2x+ if oil goes to 50+. So pick your poison. Actually Whitecap issued 95 million in equity today to develop production. Worth a look. Why does it make sense to develop production today versus defer it until prices rise? I can see raising money to buy cheap assets but developing production today appears to be a negative NPV project or at least a less profitable project than it will be 18 to 24 months from now. Packer Jeez, Keith.. Your nitpicking.. just read the press release. I am agnostic - guy above asked which companies may be good investments in this environment - WCP may just fit the bill. WCP just raised equity in this environment - not debt, not asset sales.

There is a lot of talk here of supply being reduced and oil rebounding, but wouldn't that just bring a bunch of supply back on line? Just because it is currently off the market doesn't mean that the excess supply doesn't exist. Wouldn't demand have to pick up drastically to raise the prices significantly for more than a short amount of time? Or is this a simplistic view? I'm not sure I understand the oil market all that well. Theoretically, the price should rise to the marginal cost of producing the last barrel of oil that the market demands. The price of producing that 93rd millionth barrel for that highest cost producer in my opinion is closer to $80 per barrel than $30 per barrel. The current price seems to be a medium-term side effect of oil that was $100+ per barrel. Drilling and investment from earlier price assumptions drove the oversupply, while today's prices might be pushing the market toward a deficit. The 'correct' price though should be the cost of that last barrel of oil. It looks like the marginal cost of producing the last barrel also seems to decline along with the oil price. Something I did not realize before - at least not as much as they seem to be dropping. So I would not put much confidence in $80 per barrel marginal cost. FWIW - This is way outside my circle of competence and just parroting what I read. Vinod Apparently, Its outside everyones "circle of comoetence". The best one can do is stake their claim in a lower cost operator with a decent balance sheet, trading at a cheap price.... Come to think of it, its the same thing we do with any investments. I agree, the marginal cost has likely come down some... cheaper labour and parts.

Pennwest - not for the faint hearted Pennwest is not worthless today... or is it? ;) IMO, there's a lot of small caps some even without debt loads that will go 2x+ if oil goes to 50+. So pick your poison. Actually Whitecap issued 95 million in equity today to develop production. Worth a look.