Uccmal

I was getting to that: SHLD, BH, AIG, BAC warrants, AAPL, VRX, FNMA ; A mixed bag to be sure.

I know someone who wrote a script to evaluate this. The correlation between number of posts and returns is almost 1 to 1. The more posts the worse the return. Your best bet is to just look at ideas with zero or a handful of responses. If there is a lot of discussion move on. Lol, I guess you and I should have terrible results..... Al: 3430 posts Nate: 1900 posts

Big 5 Canadian banks are a cozy, protected oligopoly. They are able to extract outsized rents from the Canadian economy, and their oligopoly isn't going away any time soon. On the con side, they are quite expensive at present. But that is only a relatively minor consideration; the elephant in the room is the state of the Canadian real estate market. Read this thread for some insight: http://www.cornerofberkshireandfairfax.ca/forum/general-discussion/garth-turner-greaterfool/ This is the case. They are also extremely well run in general, and conservatively run. Right now they are expensive but they move in a trading range. Around Christmas 2015 they could be bought at multiyear lows. And this proves what exactly? Have you ever tried to get a loan or a mortgage from the big 5,6, 7 Cdn. banks? They are pretty rigourous.

+1, emphasis mine. One could make it a tighter filter than this to net even a smaller universe of companies to pick from, like some of these, - Has the named CEO shown trustworthiness for a long time. If long time>25 years, you get down to a number you can count with fingers on one hand. Even if you use 10 years or even 5 years, you will net just a few. - Does the CEO have all their personal money in the business? - Is cost consciousness a pervasive behavior in the business as seen from the outside? Pattern recognition, - Are earnings smooth? Like really really smooth? QoQ, YoY; Lots of analyst meetings and favorable recommendations to go with "beating projections"? - Does the CEO own up to mistakes at all? Even the obvious one? - Ratio of CEO / management compensation to payroll is like XXillion-to-one - Liberal stock options? Repricing of options common? It has worked for me to be lazy / unmotivated after applying these filters. Virtually all of the money I have made and expect to make has come from the two names listed on the top left side of this board. Not saying there are not a few others, but making it stringent has worked for me. Will a somewhat looser filter net a few more? Perhaps not much more. Any more pattern recognition themes? Whitecap doesn't produce a paper annual report, and never pre-announces when they are going to do an earnings release. They save money on all these little things. From that I can hope that the bigger things are being looked after.

Just curious, cheap by what metric? And by markets do you mean a TSX ETF or the big caps like you mentioned like banks, O&G, etc? I like stories like those of your friend. He buys during a bear market rout. He bought Canadian Banks in early 2016 because I told him they were cheaper than usual. He bought US Banks in 2011 and has never sold. Google, Apple, FB, etc. He buys and forgets about it. Being a business person he has a knack of recognizing cheap assets. He asked me about options and I told him to forget about it, because he doesn't invest the time to follow them. He is naturally diversified and naturally contrarian. Nothing fancy, just household names. His words "I guess I should sell my Apple stock but I cant be bothered".

After 20 plus years of doing this I am finally learning the value of simplicity. 95-98 % of companies can be tossed right away. I dont do net-nets or graham style investing. It just never worked for me. I had a knack of picking the ones that never did anything. A basic checklist is all that is needed. I dont even write it down. 1) Is it easy to understand how the company makes its money? If I need to write this down there is already a problem. 2) Do they actually make money or do they hide behind an assortment of non-Gaap metrics. GAAP or IFRS exist to protect investors. My latest learning is to focus on EPS earnings. (Seaspan is a mistake I have made with my eyes wide open in this regard) 3) Will they stay solvent through any downturn or cyclical component. (PWT is an example of a mistake - two years ago - not now). Whitecap Resources (my largest oil holding) not only managed to stay solvent but grew during the oil crash, and is back to reporting IFRS eps profits. Its amazing how often the market will toss up deals on really good companies. I was buying Enbridge, Brookfield Renewable Power, Royal Bank, and Russel Metals around during the recent Cdn. bear market. I can read Russel Metals quarterlies and annuals in a short period of time, same with Mullen Group. Enbridge, BEP.un, and Royal Banks are not so easy, but I dont need to know as much. They are in regulated (protected) businesses. They raise their dividends annually, predictably, and the EPS rises over time. If I can snap up companies like these when they are cheap (like during the oil crash) I keep them. I know working people who have never read a balance sheet retire early by buying BCE, the big Cdn. banks, and Enbridge. A good friend of mine operates a business in NY State. He invests his excess cash in the markets when stocks are cheap. He never reads a single balance sheet. He spends so little time on it that he never even sells his losers. They just languish in his accounts forever. And he beats the market, easily. When you get right down to it there are 30 to 40 companies over 500 m. in market cap worth looking at in Canada, and maybe a couple of hundred mid/large caps worth looking at in the US. It is likely the same worldwide.

Good article. I'm too lazy to create a WP account to ask the author the following question, but I'll throw it out here: So in winner-takes-all economy competitors cannot destroy the margins of AAPL/FB/MSFT/GOOGL. But that does not prevent competitors from trying. And when AAPL/FB/MSFT/GOOGL invest into trying to capture the market of FB/MSFT/GOOGL/AAPL, doesn't that drop their margins, since they can't win and they are just throwing money into the wind? I guess the answer could be that they spend only a small percentage of money trying to break into another winner's market. But is that really true? Didn't Google spend a lot on G+? Another answer could be that their winner margins pre-attacks-on-other-winners are so high that even the money wasted does not lower margins to past averages. I'd also add that what these companies are dominant in is not what drives revenue. Facebook is dominant in social networking - but it's not social networking that drives revenues. It's advertising. Google dominates search. But search doesn't drive revenues. It's advertising. So while both Google and Facebook dominate their respective fields, they're still both in competition with each other for online ad dollars and I imagine that the price they charge for those ads is very much determinant on what others are charging for a similar quality product (similarly targeted, effective, etc.). They may dominant in their freely available products, but they are NOT dominant in the product they charge for. I also struggle with the winner take all argument...naturally, it is supported that we are in a winner take all environment with his chart of the top 20% and bottom 20%. But shouldn't the losses of the bottom 20% offset a large portion of the additional gains by the top 20% thereby neutralizing the impact on margins in aggregate? We'd have to see a revenue weighted chart to be sure, but I don't immediately buy that firms in the top 20% are carrying the whole index while ignoring the drag from the bottom 20%. My expectation that the main factor has been those mentioned in the article - lower interest rates allowing greater financing by debt which is tax efficient, increases leverage, and came at no additional carrying cost as rates fell and more debt could be rolled at lower and lower rates. Pair this with the limited ability for workers to demand higher wages in a stagnating economy and you get corporations that were able to maximize leverage to increase revenues while keeping a fairly flat cost structure while globalization allowed them to grow revenues elsewhere even as the U.S. stagnated. Revenues go up and cost structure remains flat = higher margins. So, what happens in a rising rate environment. Corporations are forced to roll record debt levels at higher and higher rates increasing the carrying impacting the bottom line. They'll also be issuing less debt and likely cutting CapEx as they are forced to pair down leverage to service the higher debt cost instead of borrowing to invest in growth. Negative impact to the bottom line is medium term as maturities roll to higher cost and the negative impact to the top line is a bit longer term as corporate investment is cut in favor of pairing down leverage to maintain the bottom line. Further, in a rising rate environment (a symptom of inflation), you'd expect the labor market to be tighter and for employees to have more job mobility and negotiating leverage to push pay up. So the corporate cost structure would rise for overhead as well also negatively impacting the bottom line and providing a higher bar for additional investment/growth. I really think the elevated margins of today are simply a symptom of the 30 year bull market in rates and the stagnation of the U.S. economy since 2000. I don't expect the economy to remain stagnated forever nor do I expect interest rates to remain in a perpetual decline so I would argue that margins will meaningfully revert when one or both of the reverse trends takes place. Really well articulated Twocities. I can only add that in a major prolonged recession ad revenues will crash. There is also the honey pot effect. a) With a stroke of the pen major governments around the world could eliminate tax deductibility on interest payments. As we know, most world governments are a little cash strapped right now. they could target, or regulate the honey pot at any time to get more money out of it. b) The cheapening of computing power across the board can damage all of these companies. Why google if you can download and store the entirety of the internet in your closet. Alot safer and more secure. You could update it every few weeks, and never have to watch another you tube ad again. Then there is cybersecurity, privacy, and a whole host of associated issues. If governments start harassing people due to their online life then we can kiss FB, Google, and every other linked network company goodbye. Apple was very cognizant of this during that fight with the US government a couple of years ago over unlocking the alleged terrorists phone. If they unlocked that phone for the Feds every single company in that space would have had its stock and profit margins crushed. Then there is the amazon effect causing a race to the bottom in the pricing of everything. Why would data, search, communication services, social media, or anything else be immune to this effect? I think what you are seeing right now is a confluence of events that have temporarily driven profit margins very high in some industries. This too shall pass. So many things could happen.

Are you so sure that was a bad move? Buying back in now may be the bad move. We are into one of the longest bull cycles of all time. How much more upside, or how much longer can it go? No one knows of course, but probability says there is a 100% chance of a bear market. In the position you have created which is presumably got lots of cash, I would be inclined to sit and wait, and cherry pick. I am essentially buying nothing right now. I am short term trading around core positions but thats it. Core positions I dont mind getting stuck with.

Those are just facts. Please limit the discussion to bone headed opinions only. Best laugh Ive had all week...

I respect Trump for this change today. He's not a thoughtful guy, so everyone should expect many mistakes from him in one of the most complicated jobs in the world. But in this case, he could have remained rigid and let the courts fight about it for months. Instead, he recognized the mistake and wasn't to proud to correct it. That's much more than I expected from him. Well done, Trump. Just a few hours earlier, Spicer was not apologetic about this at all on "Meet the Press". Whether it's a Liberal leader like Obama or a right-wing conservative like Trump...such ineptitude in how they planned and executed this whole thing simply was stupid! When you are blind because of your ideology (Liberal or Conservative) you are going to make stupid decisions. This was simply just an idiotic, xenophobic idea, supported by very poor execution. Not some grand observance that they mistakenly included "green card holders". The original intent was obviously to include them. Early on, I viewed this administration as something akin to the "Abbott & Costello" of politics and governance. Funny, very disrespectful, but harmless to the U.S. and world at large. Might even create some positive changes in business. I was wrong! When you get this type of blind faith in a world view, combined with executive choices with unintended consequences, you have a very dangerous man. The leash gets shorter and shorter every day! Cheers! Well said. Its going to get realy hard for US, and non resident multinationals, to do business in this environment. The tech. companies have been calling back vulnerable workers. That kind of thing costs money, and impedes productivity. If anyone was looking for a catalyst to cause a recession and market crash, this leadership would be it. Hardly a black swan as we all knew this was a possible outcome. Companies that cant plan due to the erratic reactionary politics will stop investing, or invest elsewhere. The saving grace is that so far they havent attacked the bureaucracy, which provides some continuity and stability. But its only a matter of time, I suspect.

I doubt the US is going to be having job losses here. At least not the result of in-sourcing. Incrementallly higher prices I can see but with robotics I am not even sure that prices go up. They rebuild these plants in the US with new technologies maybe the price goes down. It really depends on the industry. Economically, things are great in America, you don't have to like it but I think it's bad to mix ethics with business predictions. Bad mood. No more poltical discussions for me.

So what!

No, it gets much worse for the US before it gets better. This is near certain to cause a massive recession in the US. Trump has already overplayed his hand. Mexico wil do fine. US citizens will be the ones who cant cope with the Job losses, higher prices, and higher taxes this will cause. Mexicans know how to deal with hardship. Study the supply chains of your stock holdings. There is nothing good in a standoff with Mexico for the US.

Anyone vying for the PC leadership at this point in the election cycle is kissing his political ass goodbye. They are just serving as the Tory parties sacrificial lamb for the next election, and maybe the one after that. Look at your history. Canada votes leaders out, not in. And we keep our elected leaders and their parties for two terms mimimum. Pierre T. : 16 years total - short interuption by Clark Mulrooney: two terms: His unelected successor got turfed. Chretien: 10 yrs.: His unelected successor got turfed. Harper: 9'yrs.: He got beat. No one has every served though more than 3. consecutive elections. Trudeau jr.: 2015 to 2024: Minimum. Like it or not, Canada is pretty stable politically and we stay European right, US far left. Our closest comparators are Britain, Australia, and NZ. O'Leary, himself, ironically has developed this blowhard TV personality but its not real. He has done nature documentaries, and is a very avid nature photographer. He is also far more worldly, aware, and intelligent, than DT.

Cardboard, have you been to China in the last few years? It's nothing like you are saying or imagining. They've embraced capitalism in such a way, that it would make Adam Smith blush. I saw as many people suffering there, as I do in Canada or the United States...and the prosperity was equal as well. In terms of the deception, control, restriction of freedoms and rights, etc, it's probably no better or worse than any Western democracy. I would say that such behavior will become part of this new U.S. administration rather quickly as well...both driving the capitalist engine and censoring the press, freedoms, rights and deception is already part of their manifesto. Cheers! Thankyou Sunrider.

I was in Iceland in July. It was booming. Extremely cheap reliable power helps a great deal.

I can only answer the one question. Could a bond rout tip over into equities? Absolutely. Think about all the connections. Especially if inflation starts. The bond market is 10 times the size of the equity market. Bonds are held by certain companies, pension funds, money market funds, banks, and insurers. When actual losses start to show up on the balance sheet, I think we see a slow motion crash as asset values adjust to a new lower growth reality. I will have more to add as I think about this. One thing is for sure. I wouldn't want to be getting inauguarated this week. Forces beyond the control of any government are at work.

Awesome story. Tx. Care to explain the mechanics and reasoning behind doing that ? This was the first oil boom and Calgary had little experience with the boom and bust cycle. Jobs were plentiful, adventure was everywhere, pay was good, and as in booms everywhere; people bought ‘toys’ and expensive houses – sure it would never end. Dome Petroleum was the ‘darling’; and I was a 2nd year petroleum engineer flying up and down the McKenzie Valley pipeline, teaching Cariboo to walk under elevated pipeline, & doing engineering tests on cold weather metal fatigue and heavy drop parachutes (D9 cats yanked out of a Hercules in flight, & dropped softly onto a 50m target, when the plane is going at 200km+ an hour). Then the bust struck. Petroleum Engineers with 30yrs experience couldn’t get a job, & went from king to bum in under 6 months. It lasted a long time, folks couldn’t pay their bills, and mortgage foreclosures went through the roof (often every 2nd or 3rd house on a street). Alberta’s depression era laws were still on the books, & they had the effect of making recourse loans ‘non-recourse’ under certain conditions. If you had title, you could essentially ‘quit stake’, sell your property in a public auction, and just give the banker the proceeds; if it wasn’t enough to pay off the mortgage – the banker had to take the loss. Block party auctions were common, underwater homeowners would put their property on the block, and ‘enforcers’ would ensure that nobody offered more than $1 - or competed against the selected ‘winning’ family (cant bid if you’ve been rabbit punched, & are on the ground with a boot across your throat). It was community action, and it saved a great many people from poverty. I went to university with many of the sons & daughters of these people, and many of their dads owed their companies to a successful win at poker – when it was common for roughnecks to ante up their partial well interests, so that the winner would have a better chance at building something. They were being wiped out, and there were more than a few suicides. I found it utterly amazing, & extremely odious, that Canada’s banks didn’t know their sh1t; and that this level of misery had been allowed to happen. I changed majors to finance, researched what had made it so bad, left Calgary, & swore it would never happen to me. I learnt these things are recurring, what you can do to avoid getting burnt, and how to exploit them. It turned me into a counterculture value investor, & I have been forever grateful for it. Not much different to the experiences of many of the ‘greats’. SD It is an awesome story

I tried to read one of his books. Agony would be the appropriate word.

That was what came to my mind. There is also a certain amount of breakage.

Go back and review posts in and around March 2009 and into the spring of 2009. You can see what we were doing. On March 8 or 9th I was down 75% from January 2009. I figured I was mostly wiped out so I sold stuff for huge losses and stocked up on Leaps of the very best companies. I borrowed money wherever I could get it. On one day in the 2008 portion I was on the phone to get my broker to advance me the money to buy back some puts I had sold, so I could get out of a margin call. I haven't sold a put since. It was nasty, scary, bad, and exhilarating all at once. I was really grateful to have a full time secure job at the time. There was no way to value companies. I would imagine that if Buffet or Munger were buying it was strictly on faith and not on valuation. I bought Leaps in Sbux, Hd, Axp, Wfc, Ge, and maybe one or two others at or near the very bottom. But there was no way to value anything. Basically, without an economic recovery everything was worthless. I went to Sbux and it was still busy. HD was okay and had recently undergone a management turnaround. GE I knew as an economic barometer. WFC, and Axp were the best of the worst. All of it was qualitative though. Numbers were useless. FWIW, I think we are going to get a repeat performance soon, although unlikely as bad, since 2009 was a banking collapse.

Eventually. Its easier to work bottom up. As my stocks hit new highs I take a little off the table, bit by bit. I was just looking at my accounts, trying to figure where I can trim.

Are you still short US markets? I reopened about half of them after the bulk of the rally following November's election. Still waiting on clarity for lasting corporate tax reform or for markets to begin to tank to get confident enough to go back to where it was at. Ultimately, the healthier the U.S. economy is, the higher interest rates go, the higher the dollar goes, and the higher wages will go. These will all act counter-cyclically to continue their contribution to negative earnings growth and I don't believe that there will be an incrementally large pick-up in U.S. consumer spending anytime soon to offset it given that we're hitting years where boomer retirements will be offsetting new job entrants (typically, spending drops in retirement and new workers won't be making enough to offset it). TL;DR - I'm expecting corporate profits to continue to fall in 2017. Was clearly wrong about 7 or so quarters of profit contractions being the end of the bull market, but I have a harder time believing markets will be ok with 11-12 straight quarters of corporate profit contraction without an eventual correction. I tend to agree. Impossible to time but it will happen.

Now that we have gotten philosophical... Would the answer "I dont know" suffice. I just read an article in Skeptic magazine about reversion to the mean. I think it sums up part of the strategy. Investing is after all just gambling. It differs from Las Vegas in that the odds can be shifted in our favour, minimizing the effect of bad luck as much as possible. I will be the first to admit that I am not a good financial analyst. When I look at balance sheets my main goal is to determine if a given company will stay solvent long enough to revert to the mean. I think this is how Buffett invested from the late partnership days until the late 90s. He knows from long experience that things operate in cycles. i.e. During the peace everlasting days of the late 80s, early 90s, he bought Gen. Dynamics. He has done this over and over. Walter Schloss took the idea to the extreme. He invested purely on statistics. Buffett was much more qualitative. I am more qualitative. Take the oil crash, and the correlated bear market in Canadian equities last year, as a perfect example. I took the opportunity to load up on blue chip Cdn. companies that were beaten down for no tangible reason. This is where the gambling component comes in. We are assuming that reversion to the mean will still happen. At this point we need to assess an industry qualitatively. Reversion to the mean only works if you can determine if a mean actually exists. In some industries such as pulp and paper, I dont think we can answer that. So stay away. On the opposite side, we can reasonably know that Apple will reach a sales pateau, or at least a reversion to normal growth.

Are you still short US markets?