Uccmal

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. In theory, yeah... The sawblade effect your talking about rkbabang is one outcome but not likely in a relatively tight supply situation. This seemed to be the case in the 1990s when there was a huge oversupply. If you break down the supply side a little you start to see the possible outcome as being a huge spike: 1) Arabs and persians keep pumping as normal 2) Russians keep pumping as normal - 1&2 are going full bore right now - no excess available 3) Offshore - drilling has essentially stopped - existing wells will run off. 4) Other countries - smaller suppliers run off due to high costs and low capital available. 5) US shale comes off - in theory it coukd ramp back up quickly but the workforce has scattered, the companies and their bankers are poor and skittish. Does it bounce back quick enough to offset demand. 5) Canadian Oil sands comes off some. The IEA has said that something like 400 Billion in investment has been put off or cancelled so far, worldwide. The IEA is projecting a long term supply squeeze. Ultimately know one knows how or when this all happens.

Pennwest - not for the faint hearted

Actually, that's just something he imagined. Here's the full sentence: His wife seems pretty on board. She has written posts on the blog, actually, and did the same thing he did to retire early from the start. Yeah, she is on board. She has said on the blog that he is hilarious and fun to live with. I have read much of his blog. Its a worthwhile read. What he is esposing is sensible living, like my older parents and Grandparents have/had. Its not a new message. Why work so hard to buy things for people who dont need them and dont really want them? We go through this every birthday with my kids. They dont need or really want anything, and aunts, and gps want to know what to get them. Taking them for the day or overnight is the greatest thing you can do for them (and us). edit: and I like him because he grew up very near me.

Peter Hodson is a good writer (very pragmatic): http://business.financialpost.com/investing/investing-pro/five-reasons-the-stock-market-is-just-plain-weird I love the part where he compares investors/analysts to the weather forecasting a few years ahead, or hockey prospects 5 years away. If you had told me 5 years ago that we would have even lower interest rates now I would have laughed. In fact, I have locked in my mortgage rates for five years twice in that time period, due to worries about rates rising. Similarly, of you had told me in 2008 that oil prices would drop this low, I would have said its possible, but not likely - all the rage was Peak Oil. Since I have been investing: (20 years) we have: - had the tech crash - had a housing bubble - had a financial crisis - had a worldwide bailout - The US has gone from budget surpluses to the largest Debt to GDP since WW2 - bbry was the consumer tech company, followed by Apple - Facebook and Google were invented and went public etc. etc. etc. My conclusion is that anyone who thinks they can predict the future is grossly deluded, including me. And, isn't this what its all about. Graham and Buffett, with their different incarnations, have always invested according to what is, rather than what might be.

I'm 110% invested and I'm a person who doesn't like leverage. I can't really buy more. Makes no sense to me, either. I have been greater than 100% invested continuously since 1997, including going into fall 2008. I just took advantage of the extreme low prices at the time to move up the quality curve. I have been doing the same in our bear market here in Canada. Moving into stocks that have increased their dividends year after year. Markets aren't displaced enough to be trying for home runs. AL, when you said trying to move up quality curve. I remember you were exchanging sbux and other quality in 2008 when things were going down. Do you see in terms of overall portfolio earning power and with every move you try to increase it over time? I'd like to say yes, but no. I had bought Leaps on Sbux, Ge, hd, axp, ffh, and a couple of others I cant recall right now, in spring 2009. Unfortunately, I didn't stick with anything I had bought. Sbux is up 6x, ge 3x plus dividends, hd 6x, axp 5x. I sold them all, probably because of the uncertainty at the time, to invest in much more certain things such as bbry, fbk, pwt, and so on :-). It hasn't all been bad - BAC and jpm and wells fargo were good off their bottoms, but the blowups have put quite a dent in my returns. I think I am just drinking the koolaid of compound interest, now. I have geen picking up dividend growers for the last year, such as Brookfield renewable, First National, Bell Canada, Enbridge, and so on - see my signature. I try to get them at 52 week lows. Part of the reason is that I had a good look at my kid's RESP where I hold several blue chip type companies. Most of them have doubled in 7-8 years while spinning off 4.5% growing dividends along the way. I have always been more conservative with this account, virtually never selling anything. Its instructive that it has grown with none of the blowups, and gyrations I have had in other accounts.

I'm 110% invested and I'm a person who doesn't like leverage. I can't really buy more. Makes no sense to me, either. I have been greater than 100% invested continuously since 1997, including going into fall 2008. I just took advantage of the extreme low prices at the time to move up the quality curve. I have been doing the same in our bear market here in Canada. Moving into stocks that have increased their dividends year after year. Markets aren't displaced enough to be trying for home runs.

Jeez Crip, Give yourself some credit. FFH seems to have couple of blind spots. They are caught somewhere between Graham and Buffett. Graham's style is to diversify widely among stuggling companies, while Buffett leans toward concentration in really good companies. Fairfax concentrates on struggling companies: BBRY, RFP, Greek Banks, etc. - sometimes it works, sometimes it doesn't. Most of Buffett's investments work. Its that simple - but perhaps not easy. Buffett is a very good judge of character as well, which keeps him out of some ugly situations - Salomon Bros. not withstanding. Fairfax commits alot of unforced errors, and has along history of it. This behaviour creates a significant hurdle to overcome. Personally, I am tending toward the Buffett model, after my share of unforced errors. We will see how it goes. Al

I hate these articles. I saw this exact same thing in Motley fool Canada that suggested Fairfax could make 109B too - the only way that happens is if the world ends and money means nothing.... Realistically, even in a very, very favorable scenario for Fairfax, they'd only make 15-20B over the course of several years. That's assuming we get the same amount of deflation that was seen over the decade following the Great Depression. No way he makes anywhere near $109B... I think what we'll see is that he makes WAY more money from the TRS hedges than he does from the deflation swaps, but the deflation swaps could still turn out to be great investments even if they only return 1-2B given the cost basis being $650M and a current carrying value half of that. It just blows my mind how clear and open he's been with the details of these swaps and yet the media still misunderstands them years and years later. The financial post article is the same article as Motley Fool. The Financial Post is a shadow of its former self, years ago. Mostly regurgitated hooey from Bloomberg these days.

http://www.motherjones.com/politics/2014/04/oil-subsidies-energy-timeline Very long history of tax breaks for oil companies. If we took away the direct and indirect subsidies oil gets the fuel would be much more expensive. Proper accounting of all the externalities for O&G, would make wind, solar, and EVs look alot more competitive.

That "my stupid ass" is just my personal results over the past five years in my personal account. I knew that...

Awesome. What fund is 'my stupid ass?' I clearly remember the copper tear out days - quite instructive.

Good god. That's exhausting. No offense but people have been saying the same stuff since time immemorial - Graham himself warned of the death of value investing in the 1970s. And Buffett, Walter Schloss and a bunch of others went right on outperforming. Computers and progressively faster data crunching has been around for 40 years, and we have had several vicious bear markets in that time. Right now, oil is in a severe bear market. That is where the value is today. Every day there is a new announcement by mega oil co.s about cutting their drilling budgets. In a coupke of years it will be something else. Its about temperment. Until you can duplicate that with a machine somehow, your doomsday scenario will never arrive.

My original statement: Beaten the S&P 500 by 4% per year pre tax BUT after fees, for 15 years. Pre tax, after fees.. comes out to ~ 2 % for the holder of the fund.

The quote about simple but not easy, is from Buffett, who advises most to just index. And as Faber points out just buying Buffett's picks would have worked out quite well. sooo... No more from me. So, how did you know, or Faber know that Buffett's common stock picks were going to outperform? I first read Lowensteins book on Buffett in 1996 - I think it was published a year or two earlier. At the time there wouldn't have been the data available to clone Buffett. We are assumming you could just google his 13f - this wasn't the case. In 1998 you would still need to go to an SEC office, or somewhere to track down his common stock picks. Good data on 13f holdings did not come about until after 2000. Thats a 15 year runway. Buffett was not commonly mentioned until Lowenstein's book.

Vinod, Tx. I recall reading your notes in conjunction with Security Analysis when I reread it a few years ago. FWIW, Canada's markets are in a bear, with energy, banks, and services all being hit, energy the worst obviously. I have no holdings of US companies right now, and moved all of my margin cash over to Cdn. dollars. I hold SSW but it is not really a US company with its offices in Hong Kong and Vancouver. So, I am still a value investor. I didn't even do this on purpose. The deals in Canada were just better from a Canadian currency perspective. For example the price for RY, and FN present a more compelling value than BAC, and I will get paid to wait. Keeping in mind this is from the perspective of a person operating in Canada. Our dollar will rebound at some point. From a rebounding Cdn dollar perspective a Us stock has an extra 30% hurdle rate. I have definitely shifted to a "being paid to wait approach". With that I am accepting lower likelihood of homeruns, but also lower risk.

Why don't you ask Uccmal via private message? That was certainly a catalyst to my thinking about it. I wasn't picking on him. It just occurred to me it is really difficult. Bill Miller performed spectacularly until he didn't and much was lost. You can find dozens who have crashed badly enough their long term records reverted to the average. Lampert did great until he met Sears - then he ran into himself and the Peter Principle. Its awfully hard to recover from a really ugly pick(s). Walter Schloss kept up high returns for decades by sticking to a tight formula, and never doubling down on anything. John Neff did the same, with similar results as Walter. Partly I am tired of my own crappy results the last couple of years. My portfolio is Now 90% in dividend payers, except pdh, and pwt. I am trying to pick companies that will maintain, and raise their dividends regularly. I am willing to take lower total returns to have downside protection. And I am trying to get them on sale, at least somewhat.

Or an index fund with leverage over time... i.e. no buying and selling, forced or otherwise. I wasn't really after the philosophy... being extremely rich the day before I die has no appeal to me. I already have enough for my famiky to live well enough on. I was more questioning why people follow gurus when so very few outperform the major indexes after fees, and taxes, over time. I keep using the wording " so very few", because it is exceedingly rare. Since I started at this about 20 years ago, I have seen manager after manager revert to the mean or worse, by balancing their outperformance early on with serious underperformance later. Not saying its luck, just that its uncommon even among "gurus".

I bailed on Pot the next day, after doing something of a risk assessment that I should have done first. Kept the Reits though. There will be a time to buy Pot, but not likely for a couple of years. If I have learned anything from commodities its that they take longer to adjust than I think.

Too true. Especially looking at it from inception. Its pure survivor bias. Anyone who flamed out early we never hear about.

Not really fund companies are fine. There are many "normal" companies that have beat, but can only be identified with hindsight, or extreme luck. I would say Peter Lynch for example was lucky, especially with Chrysler. Had he used the same thesis in 2009 with a car company he would have had a terrible record.

Thats impressive.

Fairfax has increased BVPS at a CAGR of 6.5% since the end of 1999. That is after fees AND after taxes. As we can see in the picture in attachment, the S&P500 has returned 3.73% compounded annual since March 2000. This of course doesn't consider dividends (neither those distributed by Fairfax nor those distributed by the S&P500). Not quite the spread you are looking for... But not bad! Also the Malone's family of business should have performed pretty well... though I don't have the precise numbers. Cheers, Gio Well, you have to include dividends. Fairfax doesn't make it, once you add dividends in. They add >2% to S&P returns, much less to FFh returns over the whole period. I dont know anything about Malone's companies. Buffett is often lauded for his stock investing but he started with control positions in his late 20s, and wholly owned by his mid 30s. He wasn't a pure investor for very long.

For those of us who do not know, could you tell us what is the situation that you allude to with respect to Mohnish Pabrai? Thank you in advance for your insight. See Zinc thread.

I tend not to follow Guru's anymore. What bought this to my attention right now though is John Paulson having to back his firms lines of credit with more of his own cash. Also, the situation with Mohnish Pabrai. Over the long term it is exceedingly difficult to outperform the markets by enough of a margin to justify ones existence, after fees and taxes. By this I mean an outperformance of at least 2-4% over the SPY, over ten year periods, after fees and taxes. Off the top of my head, I can think of Buffett (size is now an anchor but he got 50 years), Seth Klarman, Bruce Berkowitz, and Walter Schloss (Is there anyone else whose flame hasn't eventually gone out?). Some companies have had great long term performance, but reverse engineering this to predict the future is mostly luck. Greenblatt's record is not public. I cannot think of any others. Can we collectively name those funds, investment type companies, or hedge funds who have: Beaten the S&P 500 by 4% per year pre tax BUT after fees, for 15 years.

Doesn't a huge short position in this type of circumstance usually indicate a rally is at hand. i.e. the point of maximum pessimism.