Cigarbutt

Richard Thaler won the Economics Nobel Prize. His topics of predilection are relevant to recent posts discussed on this Board: price gouging, personal disposition etc He contributed to the relatively new field of behavioral economics. His papers have the typical fancy equations and model orientation but, for a theorist, he showed an unusual capacity for practical applications of ideas. The essential ingredient for his works is that people sometimes depart from rationality(!). Interesting to remember that the main part of mainstream modern economics is based on the assumption that people are rational(!). His challenge was trying to show that people behaved in a non-rational manner but in a consistent way(!!). He is behind many useful concepts: the endowment effect, inadequate mental accounting but I especially liked the "nudge" concept. For those interested, he produced a paper on overconfidence (topic is the drafting of NFL players, side note to rukawa, this is not intended to be a political discussion). http://www.nber.org/papers/w11270.pdf In a way, this paper may have something to do with how much you are ready to pay, rationally or not, for growth. Then, you may want to compare with Moneyball: The Art of Winning an Unfair Game. Growth or Value?

I hear you. It just seems that there may be too much sensitivity and an excessive tendency to turn everything in politics. No? The idea behind the post was to potentially discuss issues about different types of biases: sponsor bias, authority bias, expertise bias, halo effect etc. I recently attended a presentation about a study evaluating the effect of knowing the authors' names before accepting or not a specific study for publication. Unsurprisingly perhaps, the names listed on the top of the study had a significant impact on the decision. Food for thought? Obviously, if this thread continues to be alive and reverts to the primitive parts of triune brains, this thread may need to be moved.

Thought this would be relevant because of comments made on this Board about science and its relevance. I believe in Science but that should not prevent questions. This guy is quite atypical but maybe he is asking relevant questions. https://qz.com/1095294/2017-nobel-laureate-jeffrey-hall-left-science-because-he-ran-out-of-funding/

Inspired from Whistling in the Dark (They might be giants) Apologies: no financial literature reference. A central banker came to me, and said, Let's extend and pretend, We'll do whatever it takes, he said, Balance sheets need to mend, We thought it made sense, Mark to market, can suspend, Supress the price of money, good pretense, Build up debt, with no end, Bail-outs and risk shifting, many connotations, Downside can be transferred but does not evaporate, Out of the QE trap, trying to extricate, Who pays the tab may be the center of all our attentions, Maybe the magical models are too complex for my simple mind, But with too much debt must come a bad loan hangover, Even in a world where Japan is one of a kind, The poster child and when zombies are taking over. No worries, be all in and kick the can, Just watch out when the shit hits the fan.

Maybe we don't hear enough from Italy these days. Apart from investment forays by BH, it seems that Italians are becoming more sophisticated in terms on monetary experiments. Perhaps another irrelevant macro phenomenon, but interesting nonetheless. https://www.nakedcapitalism.com/2017/10/great-italian-money-experiment.html

"No, the vehicle." So, self-driving car or you care about the driver?

longinvestor, Impressive. You may be interested in what Benjamin Graham used to say: "Quod licet lovi, non licet bovi". I think this referred to his unusual large and concentrated position in Geico. I would guess it's all about conviction. No?

Long term, things will tend to equilibrate. It is fair to agree though that the Market and individual firms market caps diverge from their intrinsic trend. Isn't this why we play this game? Stock picking, way to go. Market wise, this is another question, even if opportunities for stock picking or the absence thereof may help answer the question. Fully invested or market timing (or somewhere in between)? Who cares what I think? But, where does the Master stand on this question? What he says ("stocks are cheap") versus what he does may not be the same thing. The end points from 2003 to 2017 seem to indicate that he is relatively agnostic. If you look at the 2009-2017 period, there seems to be a particularly strong logarithmic taste for cash. http://www.investmentu.com/article/detail/54917/cotw-warren-buffett-cash-reserves-midcap-stocks#.WdZG5oWcHug If you look at the 1994-5-6 starting point, (time period chosen because then some were already alluding to an irrational exuberance era(!), a time period when wise heads should have considered fearfulness?) you find that the cash/eq to be much lower than the numbers mentioned for the most recent periods and you find that the CAGR of cash (1994-5-6) to now to be somewhat high. But then again, we may be in new era. The burning question remains: Why is he holding so much cash?

Interesting. The CAGR of the cash position at BH since 2009 has been higher than the CAGR of the S/P index. This brings up the concept of yardstick. If the yardstick is BH, then one will likely do well over time even if market price undershoots intrinsic value of BH at some point. If the yardstick is WB, then the reward is potentially larger. To enjoy a larger reward though, one has to do better than BH. Simple but not easy.

«Anyone who is not confused doesn’t really understand the situation.» Count me in the confused and unable to explain camp. As value investors, we are paid to take on uncertainty. What is the long term price/premium for uncertainty these days? Cumulative real growth, 2009-present US GDP: 16,70% S&P 500: 130,51% Fed balance sheet: 332,20% What, me worry?

So it boils down to bullshit avoidance, Seek out things that make a difference, Stay away from the toxic, Be unconventional and authentic. "Cultivate a habit of impatience about the things you most want to do" Sometimes, one wonders if writing on these boards makes a difference. Sometimes it does. Thank you dcollon

« Would like to know what caused the problems in US if it is not unfettered one way trade. Essentially the lot of an average person has improved in almost every country on the planet in the last two decades. » Out of respect shalab, here is a short response. Early this morning, I read something which summarizes this well. https://fee.org/articles/the-core-of-liberty-is-economic-liberty/?utm_source=FEE+Email+Subscriber+List&utm_campaign=aa901e1dfc-MC_FEE_DAILY_2017_09_07&utm_medium=email&utm_term=0_84cc8d089b-aa901e1dfc-107170297 Invariably, for these tough topics, there is a political component and maybe this is not the right forum for these discussions. I am really a fan of economic liberty and, possibly, you are right that some of it was taken away (by strangers through trade, large corporations and others) but I humbly submit that the « ordinary people » somehow have let it be taken away. I also hope that the « we » continues to be extended beyond the heartland. Obstacles, compromises and maybe some abnegation along the way but J curves up for grabs. Good luck to you.

I put a link that may be helpful for those who follow Irma and worry about Florida. Out of the 9 most powerful hurricanes that have hit continental US, 6 have hit Florida. Including Andrew in 1992. http://www.nhc.noaa.gov/1992andrew.html Good luck.

Shalab, Unnecessary clarification: i don't enjoy people losing their job or dignity. I read your opinion article. The author has ties with the Economic Policy Institute, which is related to unions and a "left" label. That's OK. We can still talk. The EPI seems to promote publicly financed infrastructure spending and increased taxation to the rich. Hey! This sounds like the political program in Canada! If you have in mind a balanced budget and sustainability, I may be in. SharperDingaan seems to evoke some kind of economic repression and perhaps even class clash. The rising income inequality, whichever its origin, is not healthy. Maybe I should spend more time reading financial statements these days but I suggest that the issue should not be overlooked. Fortunately, the Forefathers of your country put in place founding principles that, likely, will survive the next transition. We just need to come together around those principles and yes, like SD mentions, the majority may hold the balance of power. One or a few guiding lights may help. Where is your Mandela? I include a link which constitutes a form of rebuttal to yours. https://www.nytimes.com/2016/04/27/business/economy/the-mirage-of-a-return-to-manufacturing-greatness.html?mcubz=3 My opinion continues to be that free trade, globalization and the trade deficit with China are not responsible for your country's woes.

HJ, Fair enough. I respect your position. There are a lot of people in your camp. I too think/hope that the US will regain its foothold. The trajectory will lie between exceptionalism and cynicism. There is a lot of talk about disconnect these days and I don't like it. Participation to this Board is only one of the ways to "fight" this. And frankly, I don't know if the "elite" has disconnected from the common man or is it the other way around? Whatever the cause, I submit that we have to re-connect. Disclosure: Naturally born idealist.

Appreciate the link and response. Will eventually re-visit the issue. I am fairly new to this Board and have found that the search tool to be valuable. When you read something, think that it's dumb and realize it's you, well, may help in getting better going forward. For instance, profit margins and mean reversion have been discussed in the past. I would bet that the topic is bound for resurrection at some point.

By 'poker', you mean the game of playing with a metal rod to stir fire? Disclosure: no need to answer. writser, I am learning to respect you. I am not wired for poker. To get a high return on equity, prefer large margin and low turnover. I admire though players who succeed on the edge.

“Management” of the P+C underwriting cycle is fascinating. This topic is what introduced me to investing in the late 90’s and to a certain company based in Toronto that was in the difficult process of absorbing excesses of yesteryears. It is not of question of if. Hard markets do come and opportunistic players can dominate over the complete cycle. Raises the issue of timing and the value of dry powder. For those interested: https://www.casact.org/pubs/forum/90spforum/90sp063.pdf https://www.casact.org/pubs/forum/93sforum/93sf377.pdf http://media.genre.com/documents/chairmanuwcycles1503-en.pdf The first two references are dated but perhaps their substance resides in the fact that they are still relevant. Those who can’t stand fancy mathematical models will be rekindled by the cycle description coming from Paul Ingrey, an underwriting cycle master who was instrumental with Arch and who lent a hand to Canadian cousins during the “transition” period. Another interesting thing is that even rating agencies are pro-cyclical in a way. Then, who can you turn to, but yourself? The crowd thing. Tough. Science and Art. Enjoy the ride.

Thomas More, who was also into slogans as a Renaissance Man when he wrote Utopia, defined a semi-ideal society in a critical pamphlet disguised into a book. Henry VIII did not like it. He kind of liked the status quo. More was beheaded. My take: Henry should have looked into this utopia thing more carefully. Disclosure and relevance: I am trying to see how the US will regain global industrial and manufacturing predominance and trying to define prisms that will allow me to pick the winners before they reap the medals. "Sometimes there's no solution other than to slow down the leap into the utopia and take a step back." What is the game plan?

Came across this. http://www.cbc.ca/news/business/lego-job-cuts-1.4275744 Had done well with Mega Brands. At least to a moderate degree because shares and warrants had been bought with a margin of safety. Sold concurrent to the cashless exercise of warrants. Thought for a while that it was mistake to have sold when Mattel bought the company after. The link above shows evidence of a weakening competitor and a potential opportunity for the Mega Brands sub of Mattel. I realize though that the likely sub-par performance of Lego is related to poorer industry dynamics in the building block segment which I had failed to appreciate fully even if the long term challenges were well described at the time. Bias because I enjoyed Legos when I was young? Anyways, the toy business is and will continue to be challenging with the growing number of substitutes. I had looked at Mattel after the acquisition with interest. Notice now that they too seem to have a hard time.

The quote is about a time when the Market dominated the culture. https://www.bloomberg.com/news/articles/2017-09-05/med-school-grads-go-to-work-for-hedge-funds Either health care sucks or this is a new era in financialization. Perhaps detachment required.

Some US citizens are clearly struggling. Perhaps more so than usual. At the same time, I read this: http://www.realclearmarkets.com/articles/2017/09/05/the_underreported_story_of_middle-class_revival_102854.html Is this the eye of the storm? This concept of unfairness (inequality, inadequate governance (government and large firms), disconnect with the elite), I think, is not related to how the top (call them top 1% or top 10%) moved ahead, it is related to the fact that the poor or poorer segments have seen living conditions stagnate and their prospects deteriorate. A lot of finger pointing and resentment but perhaps not a lot of constructive action. :-\ There are many reasons for this new normal status and the main point of this post (my opinion anyways) is that the US-China trade dynamics have not contributed in a predominant way, even if the perception may be different by a segment of the US population. Whatever the true causes and even if the trade debt with China would explain this new era of stagnation, I would submit that people should look forward and find effective ways to win. http://www.pewinternet.org/files/2014/08/Future-of-AI-Robotics-and-Jobs.pdf The article likely overstates the issue. Still, I think SharperDingaan on a previous post of a different thread talked about the growing need for individuals to be able to bring a value proposition to the market and I would say that, as a country, policies and actions should focus on increasing productivity. That would go along way to balance trade. Do not underestimate the capacity of the forgotten man to react correctly to the right incentives? And this is not an ivory tower concept. Time to roll up our sleeves? Let's get to work.

shalab, The fact that I hold different or even opposing views does not mean that we are enemies. Thank you for the inputs as it incites to dig deeper. To get closer towards the light, maybe helpful to look at the other person's facts or line of reasoning. I read your posts and links and suggest that you do the same. In terms of trade balance, here are two links, chosen on basis of quality and objectivity. https://sites.hks.harvard.edu/fs/rlawrence/ShatteringMyths.pdf https://www.usitc.gov/publications/332/pub4614.pdf You focus a lot on the trade balance issue, attribute the trade deficits to trade agreements and allocate a lot of unilateral harm to this aspect. That opinion likely played a decisive role in the last election. The second link has a lot of pages and the authors used "models" that can be reasonably questioned. However, I submit that the report shows convincingly that the trade agreements have not contributed significantly and independently to trade deficits. The persisting trade deficits, especially with China, are significant. You can look at this from an "economist" point of view using the Kalecki equation (à la Montier/Hussman) or simply using common sense. Sharper Dingaan talks about the addictive buying behavior of America and high relative costs of production but it could very well be the savings glut behavior of export driven nations (you seem to favor the latter, with currency manipulation). But the deficits could also be due to Americans not saving enough themselves or the unusually low interest rates prevailing. There are many variables and the situation is dynamic. What do you think of the Triffin dilemma? Are you not worried that somehow unilaterally changing course on trade balance may precipitate a sharp fall of US firms profitability. http://www.oftwominds.com/blogaug13/trade8-13.html The Great Recession worked great in improving the USA trade deficit. Does it mean that we have to induce another Great Depression to normalize trade? Like said before, in business, you need trading partners. Accords are better negotiated, not imposed. No?

SharperDingaan, In some cases bilateral is better than no agreement or even disagreement. Don't you agree? ;) http://globalnews.ca/news/3711536/canada-mexico-will-stay-in-nafta/ Unilateral decisions can be good, if right. Partners can be useful. "After I'm gone, after we break up After I'm gone, you're gonna wake up You will find you were blind To let somebody come and change your mind" Ella Fitzgerald I don't spend much time on the horizon of the USD dollar relative strength, but I take in consideration that the US may have the cleanest dirty shirt. I also think that the US continues to have amazing attributes that may be masked now, and maybe for some time, by unusual expediency. I agree though that "adjustments" will come along the way (opportunities?). Downsizing can be difficult.

The present context related to the described need to at least re-work the trade agreements with China is based, at least in part, on the perceived notion that trade imbalances explain the anxiety and frustration of some voters who feel left behind. Wages are stagnant. Potentially useful link for constructive thought concerning this multi-variable equation. http://www.nationalreview.com/article/451059/growth-stagnant-economists-disagree-reasons-automation-offshoring-demographic-change I would submit that potential solutions mentioned (either market or government based) could give rise to investment opportunities.