Rod

yep. One is Brookfield (actually Partners Value Fund), the others are Dream Unlimited (DRM.TO) and Brookfield Office Properties Preferred (BPO.PR.N). I could be accused of being Real Estate heavy.

Concentrated bets are not for beginners because you need to ensure your bets are all low risk and learning to do that takes experience. I like to own 3 to 5 stocks which puts me at the extreme concentration end of the spectrum. But I’ve been at this a long time and experience has shown me that I have good enough judgement of risk to do it. You have to be able to judge the durability of the business. Factors that increase risk are leverage, financial and operational and a short history. Factors that reduce risk are being in a business that is more at the core of the economy and serve basic unchanging needs. Some companies are low risk because they are more like holding companies and are highly diversified (think Berkshire). I currently own three stocks, two are highly diversified and involved in real estate and infrastructure. The third is a preferred stock in a similarly stable business.

I like the Brookfield Office Properties prefs, BPO.PR.N and BPO.PR.P specifically. They are priced about $14 up from $10 but still very cheap.

This is key. You want clients who act like passengers in an airplane. They don't go running to question the pilot if they encounter turbulence. They operate on complete trust. I have two immediate family members who's money I've managed for 20 years. And it's going extremely well for everyone involved because they are hands-off and trust me implicitly.

Ok. In your example the optimal annual return is 20%. This is 100% divided by 5 years. No other distribution of returns will exceed what you will get with 20% per year.

Maybe you are saying if you have 400 percentage points of return to allocate over a given number of years, what allocation would provide the highest total return. If you are asking that then the answer is to earn equal returns each year. Anytime you have a given amount of something and want to divide it into a fixed number of pieces and multiply those pieces together to get the highest total product, you should divide into equal sized pieces. Example: a 5x5 square has a larger area than a 6x4 rectangle or any other rectangle with adjacent sides totaling 10 units. The mathematical principle is called the “arithmetic mean/geometric mean inequality”.

I don’t understand what you mean by “the best output”. You provided number of years and total return as givens. So, what are you trying to optimize?

How does this relate to compound interest? I don’t see it.

I think it's worth noting that as electric cars and buses displace internal combustion engines the experience of living and working downtown will go up significantly due to much reduced air and noise pollution.

It may be less of an issue for small investors since we tend to have many more good opportunities than people working at the scale of Buffett. We can afford to miss things.

May I ask which? I would suggest Brookfield Office Properties. I own BPO.PR.N I like them because they are receiving dividends from the core office property segment of Brookfield Property Partners (BPY). This is the safest part of BPY (not retail). And there is no way that dividends will be suspended because BPY can’t access the cash flow from it’s office properties without first paying the BPO divs. BPY needs that cash to pay its own distribution and support it’s retail segment through these hard times.

I doubt there will be much buyback activity for some time. The common is cheap but not necessarily cheaper than other investment opportunities they have. And the prefs are actually expensive relative to other safer prefs IMO, many of which trade around $10. The prefs have run up to $15 seemingly on speculation of a large imminent tender offer. I don’t think management is going to feel obligated to reward this “front running”. I expect they will wait for them to drop back. I sold all my B and D prefs.

It seems to have taken Chou an extremely long time to learn that you can't just buy cheap stocks without understanding the quality of what you are buying.

I will bet you $1 million this is not your last post.

Turtle Creek's strategy is reminiscent of Allan Mecham's--both of them carve out a group of superior companies from the market. In the case of Mecham, I believe it's about 100, and with Turtle Creek it's 25. Going by memory, Mecham tries to own the cheapest 10 or 15 from his universe at any given time and rotates them as valuations change, while Turtle Creek owns their whole universe, but adjusts the weightings. The Turtle Creek approach is essentially the same as Mecham's, but less bold. I think the concept of identifying a universe of superior companies, following them long term, and getting to know them intimately is a great strategy. For individual investors it would be enough to find 10 or less and then just own the cheapest 4 or 5. And as a small investor, you could dredge up your own Top 10 from amongst the smaller and illiquid companies so you are not dealing with the well-followed, large cap compounders like Costco, for example.

1) Understanding probability and how to apply it in daily life 2) Compound interest 3) Understanding sources of bias and misjudgement 4) Doing what you enjoy

I suspect he may be leaning too heavily on book value as a measure of intrinsic value, something that I think worked pretty well 20 years ago, but seems to have fallen apart in more recent times. Nowadays relying heavily on Price/Book gets you involved in a lot of value traps. Chou may have been a one trick pony in this regard. I say this without any real insight into his process, except for looking at what he owns. I've read some of his reports and I don't feel that he's telling me much about what he's doing and why.

Chou gets a lot of credit for being a "nice guy", etc. But it's possible he's also a really bad investor.

Yes, but they are too cash constrained to continue buying right now, hence the idea of getting a loan against the value of their DPM shares and using that to make a more substantial bid

I like the Dundee prefs (DC.PR.B/D--$15). I suspect Dundee will soon announce a substantial issuer bid for them. They are in the process of obtaining a loan, and their stated #1 capital allocation priority is buying back prefs. The logic of doing so is rock solid. An SIB announcement would likely see them bounce by $1 or so. I also think they are a good long term bet.

+66% due to an insane degree of concentration and a great year by my biggest holding Dream Unlimited (DRM-T)

Are you sure that you've captured all the damages the world would suffer if temperatures rose, say 3 degrees Celsius? Or are even in the ballpark? Admittedly, I'm relying on the UN scientist report, so I'm not trying to calculate all damage -- that's in my too hard box. Per the 2018 IPCC report, released every few years by the UN, the total damage was estimated between .2% and 2% I believe. and that was like 60 or 100 years out. So, 2% of global GDP was the worst-case scenario. Do you have a link to this UN report? Have you read it?

Are you sure that you've captured all the damages the world would suffer if temperatures rose, say 3 degrees Celsius? Or are even in the ballpark?

Were most of your no brainer ideas in real estate? No, just Dream Unlimited and Morguard. Though there have been some really good microcap real estate bargains over the years. Those weren't long term holds, however.

The wrong thread to ask, but what do you think of the the Dream Global transaction and the seeming move away from third-party asset management (Dream Office restructuring, Dream Global deal, and increasing DRM ownership of Alternatives), which I thought I was the best part of the business? That transaction surprised me. I didn't realize that DRM had such a large embedded incentive fee in Dream Global. They also have the same deal with Dream Industrial, 15% of gains on properties sold. Industrial trades at $14 now with a book value of $9.40. If you assume the market value of their buildings is reflected by the $14 price, then DRM has about $100 million of embedded incentive fees in Industrial, or about $1 per DRM share. I don't know if Industrial will get bought out, but that $100 million is a real asset for DRM and it's growing. I think they are having some trouble growing the asset management business through the publicly traded REITS at the rate they would like, so they are going to pivot to private equity funds like Brookfield does. I think they have a good shot at this, given their performance track record is good. If they can build up private equity funds then I expect their asset management earnings can grow for a very long time.