Uccmal

I agree. But the next question then becomes: what exactly is natural talent? The answer I tried to provide above could be read this way: 99.5% a true passion for doing something and for getting better and better at it, the remaining 0.5% something else that could hardly be defined and which characterizes the genius or the champion. Don’t think that genes don’t matter in the first 99.5%! It clearly is not so! I don’t know why someone gets the burning desire to do something, while the majority of other people never feel the same level of passion for anything… But genes evidently matter! Gio Persistence and Stubbornness definitely are part of the equation, as is an ability to overcome setback. But these are traits, not the result of practice. Early success probably doesn't hurt, hence the Tall NBA players. To loosely quote Slash "Often I didn't want to practice but I forced myself to". He is/was noted for often practicing guitar 12 hours a day.

Well, As mentioned Buffett has actual business experience and likes running businesses. I think the 10000 hours rule is BS. Its a good example of choosing statistics to support your thesis. i.e. Not one of the world's best runners in any distance have spent 10000 hours running. Its simply not possible. Jimi Hendrix comes to mind in music. He had a perfect ear and natural talent. Same with Paul McCartney - perfect pitch. What about Cher or Lady Gaga? Did Harrison Ford spend 10000 hours acting before Star Wars? A friend of mine in law school was lamenting to me that he worked incredibly hard in law school. He had fellow students who hardly worked at all and were better than everyone else in the class. Mot fair, eh? They had a natural ability to memorize the law and understand legalese. I expect that natural talent plays a bigger role becoming the best in every endeavour rather than infinite practice. I think the logic tree starts with realizing a talent and then following it. As to anders: Is all that reading making you a better investor than the index, or are you just spinning your wheels?

Well Said. Aside from PWE. The rest I have got on my list are not getting to new 52'week lows yet. Did buy 500 shares of MTL the other day, though. I think people are confusing your comment with cheap financials. In 2009 I bought SB, GE, WFC, AMEX, FFH options to my recollection. I did not buy BAC (2010) AIG (2011) or JPM until much later. One of the best was JPM after the whale.

In my 20s: I wish I had more hot sex with attractive women who came my way, but was too clueless to notice because I was a nerd. Otherwise, I had a throughly misspent youth, as it should be. Really got started at 31 with 20 Grand in student debt. No real regrets. I am a product of my experience, strength, and hope.

f__king engineers ;)

There is a story about Buffett in Snowball, and Lowensteins Book: Warren met a crusty old school guy at an annual meeting who was a client of Ben Graham. Crusty asked Buffett why he had bought some stock and Buffett answered that he bought it because someone else (might have been Graham) had bought it. The guy made fun of Buffett and thoroughly embarrassed him into never having that as his answer again. I nearly blindly followed "gurus" into stocks way back. There is no chance I would do that now. I have been around long enough to realize that the majority of people have no idea what they are doing. Ask Bill Miller why he was top heavy financials in 2008. Ask Einhorn why he was chairman of New Century just prior to going into bankruptcy - he got sued and settled out of court. Ask Prem Watsa about Canwest Global, sfk/fbk pulp, Lindsey morden cunningham whatever. Ask Buffett about his shoe companies. Not saying that the above have no clue, its just that we all do the best we can with imperfect information.

One reason I do the work beyond the very basic is to help me stay in my conviction. In 4 years I have likely read what would amount to thousands of pages on Bac, and Aig, including each and every financial release. Right now I have shifted my focus to understanding the oil industry from all different perspectives. This adds to work I did in 2006/07 on the same.

My edge sure isn't quantitative. After eliminating for basic solvency, all of my big successes have been qualitative. I dont even pretend to be be able to comprehend BAC, JPM, or FFH 8 years ago. All I ever needed to really know was pretty binary in nature. Will they stay in business at near their present size, Y or N? If the answer is yes then good things will probably happen. This is not to say that I dont analyze companies - I certainly do, but beyond the binary analysis the rest is just comfort food. I am able to buy when others are selling, or more succinctly when others HAVE to sell.

Jawn, Lots of excellent advice. Unfortunately, its about experience, and internalizing that experience. And we still make mistakes. It also depends on your style, which evolves. If your doing The Ben Graham/Walter Schloss style of buying dozens of beaten down stocks like Kraven, Oddball, or Cobafdek, you have to be well diversified. If your a concentrator like myself, or Ericopoly, you need to be really prepared to accept the occasional hit and trade around positions often. Often my conviction grows as my losses mount. Sometimes it disappears. No matter what you do, you need a really good understanding of your respective tax code. I.e take a loss on the common stock, and reinvest in leaps, within the wash period (so you dont miss the turnaround). More on taxes: I expect that this is going to be a down year from a "real" loss perspective, but I have huge up years behind me. In Canada, I can push my losses back to past years, and get a tax refund. Know your local tax code! Following Gurus, Choose wisely. They have developed time frames, and strategies that work for themselves: I have been stung more than once being in something FFh holds alot of. A few on this board drank Eddie's cool aid, along with him. A bunch followed Buffett into IBM forgetting that Buffett plays a long game, and that IBM makes up a tiny percentage of Brks market cap.

Mainly by vomiting in a trash can. Where is that can?

This is a great chart ;D Quite something isn't it.

I guess you missed the resurgence in railroads? I hope your kidding.... Warren waited 70 years for the industry to consolidate.

The problem with cyclicals in general is when to buy, and later, when to sell. Do you buy XOM at $88 or wait for a real rout for it to get to 30,40, or 50, or less. i.e. when is the bottom of the cycle? Then there is the obsolescence issue. In the last 100 years we have seen railways undergo permanent secular decline, and more recently pulp and paper. While I dont think oil is in a serious permanent decline I am inclined to put in the word: Yet. At a price the lowest cost, best capitalized producers will survive, there may be alot of pain along the way.

The title of this thread is: How Are You Thinking Bout The Drop In Oil Prices? I have spent a good chunk of this weekend doing just that, and an assortment of reading on the topic. I have come to the decision to do nothing at all in terms of buying exposure to oil directly. By this I mean buying any stock in any oil producer, anywhere. It is simply not predictable in any meaningful sense as others on the board have mentioned. I am maintaining my position in PWT which I was into before the collapse, for what seems to still be good reason, but will not be adding to it at all. If things persist in this direction Pwt will likely revalue downwards ( the book value and dividend). I am looking at two companies on the edge of the oil sector which I have held before, both for years at a time. Russell Metals - Rus- T. Their business is about 50% levered to oil production, the rest is general metals brokering. The non-oil business will cover some of the shortfall of the loss of income from the oil sector. I actually have a couple of hundred shares in Rus in my wifes account I have held for ten years. Mullen Group - They provide all manner of oil field services, and trucking. They have a rock solid balance sheet. In addition they have moved much more into general trucking away from the oil patch. This is one I thought would fit very nicely into Fairfax, for years. The general trucking will be more profitable at the lower oil prices. Mullen carries very little debt, all of which they refinanced this year at 4%, down from over 6%. For comparison FFh loaned them money in early 2009 at north of 10%. As far as I know FFH is no longer involved, MTL having bought back the debt. I first held Mullen around 05,06 and have always liked the company.

I concur. Its all a waste of time. Things never unfold as they are supposed to.

My guess is that no one really cares about Putin or Russia in any important sense... excepting perhaps those living in Eastern Ukraine, who aren't Russian. My guess is that a lot of people care about Putin and Russia in a very important sense - i.e. Russia has the second most powerful military in the world and is expressing expansionist tendencies and engaging in hostile, provocative activities (e.g. Russian war ships performing exercises in the English Channel, Russian war ships near Australia during the G-20, threats to send Russian bombers to the Gulf of Mexico). The West wants to curtail these expansionist tendencies and hostile activities and if it has to sacrifice parts of the shale industry, so be it, it's cheaper and safer than an actual war. Its all political rhetoric. The Russian expansionist tendencies are not even comparable to the American interventions around the world. You watch too much CNN and Fox news.

My guess is that no one really cares about Putin or Russia in any important sense... excepting perhaps those living in Eastern Ukraine, who aren't Russian.

I think one can safely predict that what came down can go back up, or it may come down some more. One can also safely predict that there is a price below which oil cannot fall. Zero comes to mind but More likely in the 50-60 range now. Forward adjusting oil price for inflation on any number of infinite curves since the dawn of oil production should bring us to the 50-60 range.

Yup, I was reading predictions of where oil prices are going to go all week. The biggest bunch of horse manure I have seen in a while. No one knew oil was going this low. No one! And now there are predictions that we will soon see oil at $40, that it will steady at 50, 60, that it will go back up. Oh, and the primary reason young people weren't buying cars had nothing to do with a paradigm change. They haven't had jobs, and pay checks to buy vehicles since 2007. This will all revert as the US economy improves. I like the parachute analogy.

Why don`t you just buy calls or futures on oil when you want to speculate on that to pop? :) A couple of reasons. The index holds the best, and biggest oil companies. Holding it pays a dividend, literally. The price of oil my not recover quickly enough but the good companies will keep making profits even at lower pricing. I have no experience whatsoever with commodity futures. I am not keen on the inevitable loss of money that comes from gaining that experience.

Not Uccmal, but yes alot of ETFs have options available for them. Although according to my broker's site VDE only has out to June 2015 expiration. I saw that. I guess its not an option for VDE.

When the time is right in the next week or two I will be buying: VDE in the US - Vanguard Energy Index and XEG in Canada - Blackrock Cdn Energy Index I may use Leaps on these. Shall see.

Those charts above seem to say it all. Demand is about 90 M Barrels/day which equates to roughly 1.6 Trillion less spent on oil at $60 versus 110/bbl if oil stayed down for a year. That is a huge stimulus program for the world economy excepting Saudi et al, and Russia. So a few facts to counter the hysteria: 1) Oil demand is not decreasing, yet. 2) Oil supply is not materially increasing. What needs to be drilled to keep up is costing alot more than it used to. Choose a number - no one really knows. 3) Several mid stream oil producers in NA have already announced cuts to drilling and exploration programs. 4) Alternate energy cant grow fast enough in the next while to materially displace oil, yet. 5) An economic boom will use more oil. Even Teslas batteries will need oil to be built, and oil to charge them up for the time being. 6) Lower prices are going to bankrupt a significant number of over leveraged oil cos operating in the shale/deep water/tar sands arenas. No one is going to bail them out, and alot of operators will retrench for awhile. At some point fairly soon supply is going to come down quickly and prices will start to go back up. Oil has always operated on a tight cycle, and has always been prone to panics. It is not related to other commodities where the build cycle is in decades. Refineries can ramp up and down in days. Projects can be suspended instantly with marginal extra cost to the producer. New projects take a few months to build out. The guys who suffer permanent damage are the over leveraged, and the drill suppliers. Rukawa's comments about China make alot of sense to me.

He was being sarcastic. Todd Combs reads 500 a week but was mis-quoted for 500 a day and Ted Weschler spends 500 hours before he buys a stock typically. It was discussed in great length last year where multiple board members pondered how to read more to be like Todd and Buffett. I am changing my research process to only buying companies mentioned on COBF once the thread has 500 pages. :D Lets see... That would have netted you LVLT, SD, SHLD.... you'd be bankrupt by now.

Permit costs will kill you. Just buy a gas station and dont sell anything until the price goes back up. Were you kidding... :-).