Cigarbutt

I know many now consider Mr. Benjamin Graham as yesterday's man and (from Mr. Munger, recently) "Graham had a lot to learn as an investor" but I still hold great respect for the man and his writings and try to remember that he went through a period of tremendous adversity (from the investment point of view) and remained level headed and graceful. His investment record can be debated but he had this to say about luck, when looking back and referring to his overall record as well as the effect of the Geico acquisition decision: "Ironically enough, the aggregate of profits accruing from this single investment decision far exceeded the sum of all the others realized through 20 years of wide-ranging operations in the partners’ specialized fields, involving much investigation, endless pondering, and countless individual decisions. Are there morals to this story of value to the intelligent investor? [One] is that one lucky break, or one supremely shrewd decision—can we tell them apart?—may count for more than a lifetime of journeyman efforts." But we've all become more sophisticated now. Right? @DooDiligence Scientific American produced this short video a while ago about the 4-leaf clover and there is an interesting parallel with 'filters' we use when trying to identify a value opportunity. https://www.scientificamerican.com/video/how-science-can-help-you-find-four-leaf-clover-video/

If history is your thing, most of the 'action' lies within the old section which is still pseudo-fortified. For restaurants and bistros, a lot of places feel like tourist attractions and I won't offer any specific recommendations but I usually find good spots (reasonable cuisine and European feel) either on St-Jean street inside the fortifications or in the Petit Champlain district. If that's what you're looking for, the Château Frontenac serves brunches that are expensive but worth the price. Here are some generic references: https://www.quebec-cite.com/media/16115/old-quebec2015.pdf https://www.quebec-cite.com/en/what-to-do/activities-attractions/history-heritage/ https://www.lonelyplanet.com/canada/quebec-city/travel-tips-and-articles/a-walking-tour-of-quebec-city/40625c8c-8a11-5710-a052-1479d276214a https://www.avacture.com/rallye-pedestre-vieux-quebec?gclid=Cj0KCQjwvdXpBRCoARIsAMJSKqIwhM3xWTCkHy6QawAk-jsH6_fZTh614b8loRvWEPNVb24dnEcvyMgaAqSJEALw_wcB The last reference is something I did (2 families with children aged within reasonable distance from 12) 2 or 3 years ago. I just checked and they offer the tour in English. What you do is, after registration (there are several options), you walk the old part of the City with a hand-held device and follow the itinerary, looking for cues and answering questions. The interest of this tour for you may be that it is a way to get oriented, to learn some historic trivia and to spot places where you may want to hang around, visit, eat etc. Walking requires energy because flat sections are rare!

For those who use a tool that Mr. Thiel applies for many problems, here's an interesting thought exercise. skill skill luck yes/yes yes/no luck no/yes no/no A lot of people suggest (I agree with that) that there is more than correlation between skill and luck (both ways) because they are not completely independent variables. But relatively independent, they are. Most people hope (think they) to belong in the yes/yes category but, some days, I seem to fit in the no/no section. :) If given to choose another option than the yes/yes section, I would settle for no skill and yes luck. At least that's what somebody says: “Remember that not getting what you want is sometimes a wonderful stroke of luck.” ― Dalai Lama I guess we could call this an inverse error of commission.

While I don't disagree with the statement overall, I'd like to see flows information confirm it. It was my understanding that this was, in part, what drove the 10-year to 1.60% back in 2016, but since then I thought it had been a net negative return for most foreign buyers to buy treasuries and hedge the currency risk which has eliminated a lot of the foreign demand over the past 2 years. Is there any flow data supporting foreign buyers? If the references I looked at are correct, US government debt held by foreign entities has increased ++ after the last recession but has relatively plateaued. https://fred.stlouisfed.org/series/FDHBFIN However, the US government has issued debt at a rate much higher than GDP growth and somebody/somewhere has been piling up. In percentage terms, US government debt held by foreign entities over total US government debt (as per the Treasury Department) has risen from about 25% entering the Great Recession peaked at around 34% in 2013-6 and is now on its way down to 29% even if absolute numbers keep going up. Remember also that the Fed has recently been a net seller of government debt. Against all odds, rates have gone down despite the increased supply and demand from US individuals and institutions (including banks) seems to be the driving force. Here is official data showing what happened recently (over a year-period when public debt increased by 960B). https://ticdata.treasury.gov/Publish/mfh.txt From a bird's eye view it seems that the fear and greed spectrum looks more and more like the bimodal distribution that is becoming obvious in other segments which cannot be discussed in investment threads. The US continues to have the cleanest dirty shirt but it's getting dirtier in our beg-thy-neighbor world.

What is it, that you're really suggesting here, Cardboard? I guess part of the answer is expectations related to mean reversion. https://www.marketwatch.com/story/this-chart-from-gundlachs-doubleline-capital-says-commodities-are-due-to-rally-2018-01-31 Mr. Gundlach who is now financially related to both Mr. Marks and Mr. Flatt has expressed, for some time, that the interest rate 'environment' has contributed to the relative valuation profile and the generational occurrence of the present situation. What is Mr. Gundlach's opinion about negative interest rates: negative, very negative. :) Disclosure: I've held (indirectly) physical gold from 2003 to 2008 and, despite the outcome, decided that the process was wrong and promised never to do it again. I guess, renewed interest in gold (Dalio et al) may have something to do with potential currency debasement.

^Whether one is expecting a greater fool or forced by a central authority, it seems that this is fertile ground for an imbalance. https://gallery.mailchimp.com/7372687636bfa669f0a51ec26/files/3ee5faf6-38fe-412b-9305-83fcbc417eb2/2019_07_04_Betting_Against_The_Gods_Is_Now_Impossible_Charles_Gave.pdf With the recent ECB nomination and the expected push for more easing and further dive into negative territory, it looks like Europe is following Japan in its path. https://www.inflation.eu/inflation-rates/japan/historic-inflation/cpi-inflation-japan.aspx A few days ago, the BIS released their half-year report: https://www.bis.org/publ/arpdf/ar2019e1.htm It's long and boring but I think the take-away message is the following: "The room for policy manoeuvre to address these risks has narrowed since the Great Financial Crisis (GFC) of 2007-09, and regaining it has proved harder than originally thought. One example is monetary policy. After shoring up the economy during the GFC, with other policies taking a back seat, central banks were instrumental in supporting the subsequent recovery. While central banks succeeded, an inflation rate stubbornly below objectives even with economies seemingly operating close to potential has made it harder to proceed along the normalisation path. In addition, after the prolonged period of plentiful accommodation, financial markets have proved very sensitive to signs of policy tightening while some financial vulnerabilities have emerged. As a result, intertemporal trade-offs have come to the fore. The continuation of easy monetary conditions can support the economy, but make normalisation more difficult, in particular through the impact on debt and the financial system. The narrow normalisation path has become narrower." Isn't value investing about intertemporal trade-offs?

Much if the US power grid is 2nd world standard at best. Wooden poles leaning over until they fall down, transformers that look they are from the 60’s and high voltage lines strung and cobbled together are the norm. I list power last winter in an apartment I rented for a week. However on the plus side, electricity is fairly cheap compared to Europe when you get it. Most larger industrial facilities have multiple power connections for redundancy. Which just goes to show how massive infrastructure projects could easily increase productivity. Would be such an amazing positive economic investment. What is the US currently missing? The one thing I can think of is mobile network and wifi capability. But this is already really good. Especially when you think about how big the US is geographically. And in the high population areas access to these services is already good. Practically everything needs upgrading. A few examples in this thread. Another one: http://t4america.org/maps-tools/bridges/overview/ "68,842 bridges – representing more than 11 percent of total highway bridges in the U.S. – are classified as “structurally deficient,” according to the Federal Highway Administration (FHWA). Structurally deficient bridges require significant maintenance, rehabilitation or replacement. A number of bridges also exceed their expected lifespan of 50 years. The average age of an American bridge is 42 years." A lot of data shows the need for significant infrastructure spend in many places but how this is decided and allocated is anything but simple and easy. Going back to the reliability issue of the electric grid around large urban centers, the return on investment principle should include the basic input that reliability is already at 99.99% and, before approving a major budget, one would need to assess the return on the incremental improvement in reliability. International comparisons are often flawed from the start because of incomplete data, variable definitions and other basic reasons such as geography and population density. An interesting feature in the US is that access is widespread and reliability tends to be proportional to population density. It will be interesting to see how different 'systems' will deal with the change of investment focus (from generation and transmission to points of distribution) that is likely to come with distributed energy and the 'smart' grid.

Are you talking about QC? No need to answer of course, but NYS has been purchasing from HydroQuebec for decades. http://www.hydroquebec.com/international/en/exports/markets/new-york.html Last April, there was an announcement by the NY mayor to reactivate discussions (the project is essentially ready to go, what was lacking was the impetus by leaders) for a significant project involving a new distribution line (eight terawatt hours of electricity). The post was mostly based on a superficial impression but, if in a position of power, outside of the mumbo jumbo dedicated for the citizen, a reasonable response would have been to consult the city department responsible for the grid supervision and regulation and order an investigation if appropriate. Wasn't this the gist of the thread? I understand that the Jennifer Lopez show was cancelled at the Madison Square Garden but the outage seemed to raise other relevant security and safety issues.

I share your long-term enthusiasm given the evolutionary (and cooperative) nature of humanity, despite the negativity and divisiveness that often oozes from online exchanges. The other day, I was discussing with my daughter (studies software engineering) and she was explaining how it was becoming possible to detect when an exchange was about to become abusive (previous behaviors, nature of the exchange, words used). This is quite similar to discussions around the dinner table but online exchanges lack non-verbal and other cues. Some people have tried to use bots during Twitter exchanges that would introduce empathic comments at opportune times and it seems to work quite well :) Also, in-group discipline and posts leading by example seem to be helpful. Back on topic, what is perhaps surprising is the relative low frequency of power outages given that the City That Never Sleeps sits on the oldest and largest underground network of electrical wiring and connections in the world with some of equipment (5 to 10%) dating from the 1880's, at a time when Edison himself was 'playing' with electricity and contributing to the debate about the direct and alternate current. Maybe the timing is good with ultra-low interest rates for major infrastructure upgrades but progress is being made as, a few years ago, Con Edison moved from reactive maintenance to preemptive or preventative maintenance using modern statistical tools and even machine learning in order to, for instance, predict where and when the next manhole fire or explosion will occur. But more work needs to be done. An interesting feature about the redundancy principle is the fact that the City of New York is presently negotiating a long-term electricity supply contract coming from hydro power in my jurisdiction. Of course, the political message is centered on the 'clean' energy aspect but diversification of inputs may also be helpful for secondary prevention of power outages and help the grid be great again.

Some people are simply larger than life. On top a being successful in business, he was able to launch several initiatives. The Iran episode (On Wings of Eagles, book and TV mini-series) has been romanticized to some degree but… https://www.texastribune.org/2019/07/10/ross-perot-business-success-tehran-raid-and-presidential-run/

Thanks for the recommendation! I didn't find a place but I have reservations for Toqué and Damas. Are those ok? I also have reservations for Cafe Boloud and Bar Isabel in Toronto and Riviera in Ottawa. I wanted to try Joe Beef in Montreal but there was no availability online. Where do you recommend to have breakfast? Toqué is fancy and sometimes it's hard to eat what appears on the plate because it 'looks' so good. I have heard good things about Damas which is situated in a nice and quiet neighborhood. Joe Beef needs advance reservations especially as it has been identified with the place your ex-president and my present prime minister hang out together. My favorite restaurant in the Montreal area is Europea. Are you traveling with children? I don't have time to show you around as we are preparing a large family reunion but you can send me a private message describing what you are looking for. The big challenge these days is physical displacement as we are in the middle of a large upgrade to road infrastructures. I'll go with your recommendation! I just cancelled my reservation at Toqué and made a new one for the same date at Europea. I'm traveling with the wife no kids. I'll be in Montreal for 3 days and already have tickets for Cirque du Soleil - Les Cowboys Fringants and a 1 hour water tour at Le Bateu Mouche. I also have dinner reservations at Europea and Damas. I'm planning to lunch at Schwartz Deli and have a hot chocolate at Juliette et Chocolat. I think we'll visit Notre Dame, the Financial District and see the underground city (not sure where to get in and what to see!). What do you think? By the way, I have a similar busy schedule for Toronto. Sounds like you have a good plan. If you go underground, part of what you may want to do is to combine visiting and shopping and it's probably best to prepare an itinerary. The following is in French but that's part of the charm: https://voyage-montreal.com/montreal-souterrain If the weather is nice you may want to take a walk at the top of the mountain (Mont-Royal), which is centrally located. Enjoy!

Thanks for the recommendation! I didn't find a place but I have reservations for Toqué and Damas. Are those ok? I also have reservations for Cafe Boloud and Bar Isabel in Toronto and Riviera in Ottawa. I wanted to try Joe Beef in Montreal but there was no availability online. Where do you recommend to have breakfast? Toqué is fancy and sometimes it's hard to eat what appears on the plate because it 'looks' so good. I have heard good things about Damas which is situated in a nice and quiet neighborhood. Joe Beef needs advance reservations especially as it has been identified with the place your ex-president and my present prime minister hang out together. My favorite restaurant in the Montreal area is Europea. Are you traveling with children? I don't have time to show you around as we are preparing a large family reunion but you can send me a private message describing what you are looking for. The big challenge these days is physical displacement as we are in the middle of a large upgrade to road infrastructures.

Mr. Singer IMO sometimes goes too far in his aggressive activism but he is a sharp thinker. The title of the following short video does not directly correspond to what is said. I would not be comfortable aligning actions with the man and certainly would not bet against him head-on.

That was an interesting read and it seems to fit with consensus thinking among central bankers with, for example, Mr. Bernanke suggesting over the years that real yields are getting lower in developed countries because of maturing age cohorts and search for yield coming from the savings glut. Just like deflation I guess, there could be 'good' and 'bad' reasons behind low interest rates. When people try to get to the top of Mount Everest, gradually declining oxygen levels tend to send a signal to the hiker that the safe limit has been reached, necessitating to abandon the cherished goal. Interestingly, at some point, there is a phase when low levels of oxygen causes cerebral edema and confusion and the safety signal is lost and, without proper sherpa people restraint, people become filled with overconfidence and think they can reach the top at a time when they should retreat. Maybe the sky is the limit. If interested, Hoisington Investment Management, which used to be a significant source of inputs for Fairfax, released yesterday their Q2 report. They continue to think that yields are heading, eventually, lower. www.hoisingtonmgt.com/pdf/HIM2019Q2NP.pdf

Surreal may become an insufficient qualitative word at some point: https://www.ft.com/content/6cee154a-a307-11e9-974c-ad1c6ab5efd1

Opinion: The Fed should be as independent as democratically possible and should lean to be counter-cyclical. As far as Mr. Laffer's credibility and his ability to spot bubbles (1999 dot-com or otherwise), a retrospective look may be helpful. Included here is a video that is kept in my post-mortem file of the 2007-9 episode. A penny was gained on that unsustainable housing price bet. Mr. Laffer has contributed to the supply side and trickle-down debate and some have suggested that his most important contribution could be summarized on a napkin: https://americanhistory.si.edu/collections/search/object/nmah_1439217 Given the opinion that I have about the present Federal Reserve policy, I would say that the dot-plot scheme that they use to make decisions could be reproduced on a piece of toilet paper and bubbles, by definition, are an after-the-fact phenomenon.

As with all Dr. Gawande writes, the text is full of insights and offers the raw material with which you can make your own opinion. We all live unique stories and the ending is terribly important. The author candidly explains how technology paradoxically has resulted in a major failure on how to deal with inevitable death for many individuals. Interesting book for those interested in end-of-life care and a simple take-away may be to formalize your advance directives. The book also contains data, historical facts and goes through interesting concepts such as the "rectangularization" of life expectancy.

Let's call this the cocktail party sentiment index and admit the limited usefulness for choice and timing of individual stock pickings. In 1999, I created a malaise at a cocktail party when saying that I had just sold Nortel (low 40's before it tripled shortly thereafter), by far the largest capitalization in the Canadian market and darling among others in the tech group. In 2019, I just shut up and listen (except occasionally on incognito boards) and the same people tell me that WeWork is the way to go. Maybe this time is different.

The history behind the design and development of the interstate highway is fascinating. The issue is still debated but part of the impetus for the infrastructure spend was national defense and fear of falling into a recession after the Korean War. For President Eisenhower, the inspiration seems to have been a real-life experience crossing the US after WWI. https://www.atlasobscura.com/articles/in-1919-dwight-d-eisenhower-suffered-through-historys-worst-cross-country-road-trip However, I would submit that the architect behind the grand plan was Francis V. Du Pont. https://www.fhwa.dot.gov/publications/publicroads/96summer/p96su10b.cfm Eminent domain transactions were numerous but the real challenge was (federal) funding. It looks like President Eisenhower insisted on a plan that involved a clear and sustainable path to reimburse issued bonds through a gas tax in order to avoid kicking the can down the highway. Effective governance is also cyclical. -----)Back to the US grid

Dean Foods is an interesting company and would appreciate that you eventually share the outcome and underlying rationale in the DF thread. FWIW, earlier this month, the CEO of Saputo commented that he looked at the company: "There is more capacity than people drinking milk in the U.S., which would make an acquisition of Dean Foods a volume play rather than a value play". Right now, I'm drinking a glass of milk but I agree with Mr. Saputo.

In this race to the bottom, the US has a lot of room to maneuver in comparison to other pushing-on-a-string benchmarks: --% of government debt with negative yields as of June 18, 2019 (total value 12T)-- Germany: 88% Japan: 74% Italy: 12% At the end of May 2019, 20% of European investment-grade corporate debt had negative yields. For those interested, here is a list of real-time tools to "Get Expert Insights to Manage FOMC-Related Event Risk". https://www.cmegroup.com/trading/interest-rates/countdown-to-fomc.html Interesting times.

Shalab, It seems that we disagree about where we're going although it will have to be, in the end, the same destination. "However all data is pointing to the other direction, i.e., prices going down." This yield inversion talk is getting confusing but one of the most significant and fundamental measures I've been following agrees that asset prices may have entered a deflationary phase: the Tooth Fairy payout. https://www.prnewswire.com/news-releases/tooth-fairy-payouts-plunge-for-second-consecutive-year-300798356.html I've been able to match the Tooth Fairy payout until 2012 and then it seems that the payout has been looking for a reversion to the mean. You will also notice that the US regions that have suffered from globalization have shown their resentment through lower payouts.

I had heard of Enron during the energy deregulation era and then it was surrounded by a halo of success. I looked into it when Fairfax (through ORH) reported Enron-related losses (?bond losses) and when, for a while, some suggested that FFH was the next Enron. When looking retrospectively and using accounting prisms elaborated after the fact, red flags are pretty obvious (revenue recognition, cashflow vs income, SPEs etc) but IMO only a few individuals could have spotted the extent of the fraud and have the courage to publicly voice concerns. There were some relevant and investigative-type questions asked by analysts but it's very hard to unsettle a stock market darling that reports audited results and obtains adequate credit ratings. It's probably best to walk away from these potential situations using basic sniff (accounting or management trust) tests. Financial Shenanigans by Mr. Schilit is a good book. Edit: I agree with Grafter. The whole story about Enron though is fascinating (human nature etc). For the opening poster, Nomad, I have a few pages from the CFA level I and II program that deal specifically with the Enron post-mortem accounting analysis and something can be done privately.

"To me it's incomprehensible that somebody will tie up capital for 20 & 40 years respectively on such conditions. I wonder who is buying this stuff?" The long and low interest game has introduced a relative idiocy paradigm. Another area to look for potential candidates are European life insurers who own huge chunks of the fixed income market and who have to deal with guaranteed return and duration mismatches. The 90's Japanese experience comes to mind for life insurers. Fairfax recently issued 10-year bonds with (from memory) the lowest coupon ever for that duration. Forgetting all global unintended consequences for a minute, what's not to like when risk is basically free? On the who's buying question and their state of mind in Europe, prolonged ultra-low interest rates can produce weird phenomena. In the last few years, it has been possible, in some instances and in a few European countries, to finance or refinance individual mortgages at a negative (!) yield for quite significant durations. In those specific cases, it looks like the financial institution would choose to incrementally lower the principal owed instead of paying interest to the customer. ??? https://www.bloomberg.com/news/articles/2019-05-23/bankers-stunned-as-negative-rates-sweep-across-danish-mortgages Mr. Buffett is a fundamental investor though he has been suspected of occasional bets on currencies. The recent UK currency issue seems just like a specific opportunity for cheap capital and perhaps will match in due course specific asset investments. Yesterday, I came across an interesting piece that shows how challenging it will be for him or his legacy to beat the crowd. I would bet that the ability to do so will be based on rationality. https://politicalcalculations.blogspot.com/2019/06/warren-buffett-versus-s-500.html#.XQPiZ9NKjOQ

^The above-described swap transactions would probably not be OK with tax authorities and their appraisal staff as they would not qualify as open market transactions but it is interesting to note that such non-arm's length transactions would simply tend to accelerate price discovery and the sticky adjustments of property taxes. So, the underlying question may be the expected trajectory of fundamental property values in the Detroit area. It seems that it will get worse before it gets better, and perhaps the timeline will be extended? Aren't many owners stopping paying taxes hoping to be ignored and hoping to buy back on the cheap in the auctions? For comparative purposes, here is a commercial property I've been looking at in my area: -built in 2000, good condition, well localized, 0.8 acre. -total 6.3K SF with 45% lent to a bank and 55% vacant for a while -appraised value land: 0.7M building: 0.97M total: 1.67M property tax: 37.5K -for sale, asking price: 2.495M The common denominator is the inadequate cap rate in both places, but for different reasons.