Cigarbutt

RichardGibbons, I must say that my opinion here is different. That's OK. I submit that you are making a very big assumption when you say:"Thus, there's a decent chance that the economy will actually be bigger if you redistribute the wealth to people who will actually spend it." I agree on basic redistribution. But, perhaps a significant factor that should not be forgotten is that wealth has to be created before it is re-distributed. Perhaps from personal experience, did you ever feel how easy it is to spend funds that does not come from your pockets. Noble intentions make this endeavor even more gratifying (on the surface). G. Gekko said greed is good. The Great Allocator says redistribution is good. Funny but I feel uneasy about both characters. The balance must be somewhere in the middle. And the second one (my opinion) may even be more insidious.

The topic is potential increase in the inclusion rate of capital gains. Hope it doesn't occur. Of course, this is a subjective topic. An interesting angle is that it is a comparative game. Here's a link that is representative of many. (see p.17-18, fig. 4) http://www.theasi.org/assets/EY-ASI-2014-International-Comparison-of-Top-Dividend-and-Capital-Gains-Tax-Rates.pdf The top integrated rates relate to the double taxation impact of capital gains. The US stands out but many (controversial) suggest that the true effective rates are lower than statutory corporate rates. For reference a Forbes article. (relatively objective article but some may want to look elsewhere perhaps for a more balanced discussion) https://www.forbes.com/sites/taxanalysts/2015/03/25/the-truth-about-corporate-tax-rates/#76b94034742c My opinion (personal opinions not worth very much) is that -comparatively, there is little room to go up. -at some point, a small or any increase may have a disproportionate net negative impact. (I think we're there) As the famous economist (who won the Nobel prize for technical work) summarized: "There is no free lunch". I say: "You can't have your cake and eat it too". At some point, you can have too much of a good thing. Let's at least hope that rates are kept where they are.

--Interesting comment about turnover: "In other words, average "passive" investors hold their ETFs only about 47 days! It’s even worse with the SPY index fund (linked to the S&P 500), with an average holding period of around 12 days, or an annual turnover rate of around 3,000%. This compares with an average turnover rate of 120% for stocks in general. Just to give you an order of magnitude for the purpose of comparison, the turnover rate of our model portfolio is around 14%, which means that we keep our stocks on average for about 2,500 days at Giverny Capital!" So now long term investing is when you hold your investment for more than 3 months? How will this crowd behave if/when somebody shouts fire? -Mr. Rochon talks about his podium of errors. Impressive. --On Valeant: "Our confidence in the CEO was, in retrospect, a serious misjudgment of the person and his leadership qualities. Clearly, under pressure to maintain a high rate of growth, deleterious decisions were made. This was coupled with a significant increase in indebtedness." Valeant has a separate thread. Mr. Rochon considers the investment a mistake even if they made money on it. I prefer this kind of mistake but like, the Giverny guys, it may be important to learn from those as well. Leverage is beautiful when there are no headwinds. --On Alimentation Couche-Tard: "In 23 years, the stock has multiplied by more than 200 times." "This omission mistake has been haunting me for more than 20 years." Me too (in a big way). For those who are not familiar, this company is not about technology or revolutionary products. It has become a global consolidator in the convenience store industry! The history is fascinating. I am reading (in the huge pile on my desk) the founder's biography. This may be an idea for another thread. The conclusion here is that, if you can spot, a true long term wonderful compounder, be ready for pay for a good price. When I was in university, I bought myself a car (VW). If, instead, I would have put the money in ATD.B, today the investment would be worth around 3 millions (that's a lot of Ferraris). Food for thought. I know, we should not think like that. Shakespeare had something to say about this line of thinking: "We know what we are but not what we may be." (Hamlet, Act 4, Scene 3) I say that, maybe, it is better not to know. This story is particularly frustrating because I was able to witness (scuttlebutt) first hand the transformation that the acquired stores went through after the serial acquisitions and this was within pretty much anybody’s circle of potential competence. In the years 2000's, I was always behind the ball on this one. In 2008, I finally put my finger on the trigger. Chose other targets. The founder CEO Alain Bouchard pulled the trigger himself in 2008 and purchased 16.9 million shares. Since then the share price went up at least 12x and they introduced a dividend since. Do I need to say more? One of my long term goals on this Board (my take of long term is not 3 months, it's more like 10 years) is to help uncover and dissect such a long term compounder going forward. --On Mohawk industries (carpet manufacturer): The Giverny group did not double down in the 2008-9 downturn. I have held MHK too and my mistake is different. I picked it up in the 2008-9 period as a investment that was blasted by the real estate downward spiral of the subprime unraveling and that would recover to intrinsic value relatively rapidly. I got that right but failed to see the long term compounder characteristics of the firm after. It became a bagger. Could have been a multi-bagger. Food for thought. --On politics, Mr. Rochon says: "It would be a mistake to let our political ideas, as valid as they may seem in our point of view, to blurry our investment decisions". I would tend to agree but then again who I am to say?

Thank you Charlie. I tend to read the report every year. He may not be well known as he comes from the other solitude. He is one of the fund managers I respect a lot. Has a very satisfactory long term record, a consistent approach and recognizes and even discusses mistakes. I like the quote from Mr. Munger: "I like people admitting they were complete stupid horses’ asses. I know I’ll perform better if I rub my nose in my mistakes. This is a wonderful trick to learn". And I'll add this one too: "There’s no way that you can live an adequate life without many mistakes. In fact, one trick in life is to get so you can handle mistakes. Failure to handle psychological denial is a common way for people to go broke". Time to read and think.

Wow! What a post. In all due respect, Mr. Buffett may not be able to go back in time but I would not rule him out as he may be able to opportunistically wind the clock a few more times. (reference to the movie trailer) I came to investing mostly as an accident. Mental models and multi-disciplinary thinking are cool. (and useful) What you describe makes me think of hysteresis. A concept applied mostly in science (often electro-magnetism). It has to do with the fact that exposure to a temporary phenomenon can leave a permanent impact (latent). This concept ties well with your path dependency description. Hysteresis is applied also to social sciences. I think it is used for instance to explain less than rational decisions related to the concept of sunk costs. We tend to think that we are free from biases. Not true. Unrecognized biases are the worst. Your post helps with that. Thanks.

Mr Maida, in his letter, comes to the conclusion that the recent election does not essentially change the global investment picture. I would tend to agree. LC, feedback appreciated. You clearly spell out a position and openly recognize what you consider to be a mistake. I really respect that. I will try to do the same if and when needed. At the end of the day, I agree that your "exposure" to "risky" assets is a personal decision especially if you don't manage funds for others. Here, I will keep looking for opportunities and, whatever the context, remain ready to deploy funds in a big way. I tend to hesitate about the "trade-offs" that Mr. Maida describes especially now. I would tend to side with Uccmal but "delevering" has gone down much further for me. Delever in order to deliver. I think Mr. Munger has mentioned that Benjamin Graham's results would have been better during his later investment career if he had not been shaken by the 1930's period. Despite the bumps that we went through in the last few decades, can we not say that times have been good? I wonder if some famous investor in the future will reflect on today's time as unusually complacent? Carpe diem?

Let's not mix politics and regress here but for context, I usually lean right. Flexible though. Medical user fees have been used in many countries and the impact has been studied. (My understanding is that many Scandinavian countries use them) I include a simple link but "academic" studies also point, in general, to the same conclusions. http://www.cfhi-fcass.ca/sf-docs/default-source/mythbusters/Myth_User_Fees_EN.pdf?sfvrsn=0 Interesting to note that sometimes theses fees are referred to as deterrent fees. My first reflex is to agree with user fees. At first glance, it seems to make sense. However, when you think about it and look at the studies, the net result is a negative. -People of the hypochondriac variety will consult even if there are fees -A significant number of people (especially the poor or those close to their money) will not consult or stop follow-up -Fee revenues will be negated by higher administrative costs Health care system waste and inefficiency are big problems. Unfortunately, I submit that user fees are not the answer.

Some way want to look at some graphs esp. p.14-25. https://www.fraserinstitute.org/sites/default/files/sustainability-of-health-care-spending-in-canada.pdf CDN data but, in fact, similar trends appear elsewhere too. Add demographics and it will be interesting to see the political capital allocation game going forward. With change come opportunities?

For somebody who has no idea, I find your insights pretty convincing. If interested in comparative benchmarking: https://secure.cihi.ca/free_products/Benchmarking_Canadas_Health_System-International_Comparisons_EN.pdf If interested in aggregate measures: https://en.wikipedia.org/wiki/List_of_countries_by_total_health_expenditure_per_capita I would tend to say that the CDN system compares to European counterparts. The US is a clear outlier in the aggregate: much higher expenditures/capita and failing marks on basic health measures. I also would like to bring another level of comparison ie inter-generational level of health care. I would submit that, despite significant improvements needed, the level of care that you may receive has nothing to do what perhaps your parents or grand-parents had access to. Food for thought.

Starting to see the bigger picture here. I realize that the administrator is the soul of this forum. Apologies for the Fairfax punches. I accept the fact that my working hypothesis is taken as wrong. We all face our potential Waterloos. (Maybe polite dissenting voices should be heard) Yes, downside protection, patience and prudence are not fashionable these days. I like though the idea of chugging along ahead of the markets over long periods AND sleeping well at night. LC, thank you for your post. I aim to dissect specific ideas but this is a major question for me right now and I assume that it is also relevant for some. You see, when I read your post I agree completely. I reviewed the work done by racemize (thank you) and I nod yes reading the analysis and the conclusions. However, the difficulty I have (trying here) now is that I don't see opportunities. The obvious answer is to consider trade-offs like Mr. Maida suggests and to expand the opportunity set. Reference to Mr. Buffett in the early days is very relevant. His actions have been studied but he is not the kind of guy to show all his cards. My understanding though (early 70's period) is that he was pretty much fully invested and possibly sold positions that suffered less in order to buy deep bargains (eg Washington Post). That makes sense. Giverny Capital, an investment firm I follow from the outside and who I respect have shown long term decent returns using this approach. But, right now, even if I kept everything in cash, my inner circle has enough to last expected life remaining and more. The idea (fun) is to get closer to the returns that Mr. Buffett was having during his early periods by adapting the model. When you change something, the aim is to improve, but this is a Bell curve in the aggregate. Perhaps I need to get rid of biases and misconceptions but I just looked at my portfolios in 2008. Outside of cash and equivalents, the only holdings mostly left were FFH, ORH(OdysseyRe) and Gold. Looking back, I have difficulty believing that I held gold bars in some vault at some point. This was primarily the result of limited opportunities which I realize in my case tends to be correlated with overall poor returns going forward for the markets in general. A similar situation occurred during the dot-com bubble. I want to adapt, but for the better. I want to be convinced that I need to be more fully invested. The easy answer is to expand the opportunity set and accept trade-offs. Somehow though, I submit that this may not be the best time to switch hats. We'll see.

http://www.patientcapital.com/news The Winter 2017 edition is out. Mr. Maida shares his usual concerns and wonders about notable investors going all in. He also takes a shot at the "Cult of Buffett". Price is what you pay and value is what you get sort of analysis. Interesting take on trade-offs in investment decisions. He reports a 7.0% return since inception (early 2000), before fees and expenses. From the letter, we can infer that he has maintained a high cash and cash equivalent balance overall. His conservative approach is heavily weighted towards downside protection. Since inception, this has "cost" some return. But, you know what they say, past returns are not indicative of future results. I would submit (opinion) that, going forward, that cost may have more embedded value. I have respect for him and would advise my estate to consider him given his long term patient and prudent perspective. For now, going all in, be more selective than ever or somewhere in between, that is the question.

I’m new here. My goal is to reach 100 posts and then to contribute to specific ideas. The interesting part of this forum is to create investing goodwill by combining our higher thinking capacities. Isn’t it? Respectful collision of ideas. Invert, always invert, some say. When discussing politics, we tend perhaps to revert. Here, a concept and a picture are worth a thousand words. http://www.kheper.net/topics/intelligence/MacLean.htm Can we stay at least at the primate level?

I did not know what dud meant. I looked it up. Your judgement is quite severe. We'll see. Maybe, over time, the 90-90-90 rule will apply here as well. Looking back some threads and anticipating, I continue to think that compounding can be maximized in some instances. Good luck.

Interesting. There are many ways to skin a cat, some say. Like many, I find investing fascinating but it remains only one area of interest. Perhaps a gratifying aspect of investing is that results allow you to gain control of the schedule and have more time for other activities (whatever you may choose). Over the years, I find that I'm using a sort of an unconscious 90-90-90 rule. -90% of the investment universe is outside my pockets of wisdom. -Of the remaining 10% of potential opportunities, at least 90% get rejected very rapidly. -Of the remaining 1%, I devote at least 90% of my time to delve. When I hold something interesting, I delve deep and sometimes, the idea makes it to my investment punch card. I know I miss a lot of opportunities that way and I enjoy slowly enlarging my opportunity set but that seems to be an approach that maximizes the return on the time invested. I will call this the "ROTI". Involvement in this forum is likely to be beneficial in that regard. Hope this is useful to others.

Financialization and financial engineering are the issues. And it disturbs me too. I know this too shall pass and that won't prevent me from eating my breakfast. Banks are critical but the underlying business is pretty simple. Isn't it? A lot of talking heads link this financial hypertrophy to income inequality and income stagnation. Makes sense. The solutions proposed by the same though often only circumvent the issues. More regulations does not sound good. I hope creative destruction infiltrates the network of financial intermediaries. Hopefully, the damage will be "contained". Make the real world great again?

Mr. Buffett is revered for his good decisions leading to good results. The Lubrizol loss is significant. However, despite the amazingly large size of BRK, these types of losses occur at a relatively very low frequency and, when they occur, are embedded in a sea of black ink. Another aspect of his accomplishments is the unbelievably low rate of bad decisions leading to bad results. But nobody's perfect. Thanks for the link.

Not intended to be a political post. Informational only. Interesting recent links for long term oriented investors perhaps. https://finance.yahoo.com/news/top-prosecutor-bharara-remains-office-being-asked-quit-191220559.html http://www.newyorker.com/magazine/2017/01/16/when-the-feds-went-after-the-hedge-fund-legend-steven-a-cohen “Animal spirits are back”. Interestingly, the second article was also run under the title: “Total return”. By the way, my favorite Star Wars movie is the Revenge of the Sith. I wonder about the ending though. Like the recent Nobel Prize winner pushing for deregulation used to say: “The times, they are a changin”. It’s all about adaptation to an evolving environment, isn’t it?

Interesting topic. Can bring some relevant info from micro and macro side. Premises before reading on: -Healthcare advances, organization and access have improved overall +++. -Prevention is key and large problems are entrenched. -The perfect system does not exist. The question is: where do you go from there? Opinions: -The CDN system performs better in the aggregate (mostly because it is socialized). -The US spends much much more per capita but it is less efficient. -For the well-to-do (most people on this board, I presume), The US has advantages that still currently outweighs the disadvantages (mostly costs). For those really interested, Ezekiel J. Emanuel from the medical policy division at Pennsylvania University, through Coursera, recurrently gives lectures on the US health care system organization and teaches a special course on the Affordable Care Act (Obamacare). If you go this route, one has to remember that he believes in government intervention and has been one of the architects behind the ACA legislation. Even if you can't stand the Left, I would say that he does a reasonable job giving the info and letting you decide for yourself. The US system developed in a very unusual and atypical way because of many reasons, including the bi-partisan nature of American politics. The resulting infrastructure is mostly the result of incomplete and often contradictory compromises. The fundamental problem is (my opinion) that the foundation is fundamentally weak in many ways. This created a situation where many layers of "improvements" (Obamacare/Trumpcare type programs) were applied over a poor foundation riddled with unintended consequences. After reviewing the projected new legislation, I would submit that Trumpcare offers some differences but I agree that it is basically an Obamacare-lite or a Obamacare-more Republican friendly type of legislation. If enacted, the number of uninsured will rise but the underlying flaws will not be addressed. I suggest the following link because 1-it shows somebody looking for a job and 2-perhaps it helps to understand the bi-partisan dynamics of the US political system. http://www.salon.com/2016/12/03/obamacare-architect-ezekiel-emanuel-donald-trump-has-an-opportunity-to-do-enormous-good-or-to-create-chaos/ Individual opportunities will happen for investors in this space but the fraction of healthcare expenditures/GDP cannot rise forever especially in the context of the aging demographics. There is also a huge (and largely unpredictable) regulatory risk. One way to spot occasions would be to look for survivors and to identify those that can build market share in a mature market. Long term, I hope I can be of some help here eventually.

I think I met the loyal shareholder label. I remember very well when I increased my position in 2003 (even in my kids’ portfolios) without even blinking. I had remained confident and optimistic despite the shorts, the restatements, the material weaknesses and the rest. In the last 15 years, investment in Fairfax varied but ran as high as 40% of my net worth. Over the years, some significant investments looked unusual and the Blackberry twist raised an eyebrow but I respected the long term track record and remained optimistic. The cautious approach made sense given the definition of risks that they saw. Yes the world is changing but the change did not occur on election day. I just cannot incorporate this presidential volte-face into an intellectually honest framework. Apologies. Maybe, I am not bright enough. The easy thing is just to sell, which I did and will say no more. Fairfax used to be my flagship holding and now it stands in my cigar-butt bin. Sad. I sincerely wish them good luck. The sun also rises.

LongHaul, I like your bottom line: "Best to do industry by industry when one invests". Going after the moat, aren't we?

Thank you all for the discussion. Yes this is a great board. I agree: -Mr. Hussman's record has been poor over quite a long period. -when one is wrong, it can become very hard to admit it without losing face. -I agree (not as easy as it sounds) that one has to change conclusions with changing facts. -investment is most fun bottom-up looking for opportunities. However, it may be still to early to cast the final vote on him as: -many respected value investors look awkward now. -some could argue quite strongly that markets now are at least frothy. If I would lose my mind (I have a feeling some here may politely and rapidly suggest that hypothesis), I would split my estate and probably a portion would be allocated to both Mr. Vaida and Mr. Chou. Just like a business, I submit that one has to look for: -competence (education and experience) -passion -integrity (and that includes intellectual integrity) Bottom line though, if I would have to choose the best of a limited set of options, based on the third criteria, I prefer somebody who is wrong but gives you his rational underlying the conclusions versus another group who change (radically, with basically the same numerous underlying assumptions in place, just adding an inconsequential ingredient) their mind without a reasonable and rational explanation. Sorry. We may have a chance to discuss this in another thread later on today.

Thank you notorious. I enjoyed the presentations. Painful reminder though. In 2008-9, I had my finger on the trigger for both Carmax and Stella-Jones. Chose two other targets. Did well. But would have done even better with KMX and SJ. Live and learn. Both are still on my watch list but our job is to buy low and sell high, isn't it?

I would say that Mr. Hussman never came across as a greedy or dishonest individual. You can affirm that he's been wrong but, at least, you can base your conclusion reviewing what he has repeatedly explained concerning his premises and reasoning. True, he may suffer from anchoring bias (most of us do, don't we?) but, at least, he's been consistent. For (?gullible) investors still with him, at least they know that his process will not change 180 degrees because of a relatively peripheral reason ie a presidential election. To outperform, you have to be different AND you have to be right. In 1969, Mr. Buffett felt that relevant opportunities had virtually disappeared, that he was no longer attuned to the market environment and that he did not want to play a game he did not understand anymore. Based on that, he liquidated his partnership. Wow! He was different, he was right and he had the timing right. That's why he's referred to an Oracle. I would submit though that Mr. Hussman's message here maybe was simply related to the fact that it may not be easy to liquidate BRK now (!), in the event that, deep inside, Mr. Buffett felt that markets are speculative now. And yes, let's focus on finding ideas. By the way, in a video presentation (around 3-4 years ago), Mr. Maida had shown a slide showing his returns with the effect of cash balance removed. He had explained that he usually kept a high cash balance and that caused his overall returns to come down. Perhaps the easy conclusion is to remain fully invested at all times? However, 1-this is retrospective analysis, 2-maybe the higher stock returns happened because of the high cash balance or the hedging and 3-a challenging aspect of investing is that it takes a VERY long time to define your performance. Secular forces sometimes have a way to change individual trajectories.

stahleyp, I like your balanced approach. There is a lot to learn here. It may be useful to "learn" from others' "mistakes". I have long term respect for both men and this gives rise to cognitive dissonance. Mr. Hussman may have a point when he suspects that Mr Buffett does not want to cause a ripple as he is writing his last chapter. Mr. Hussman uses a lot of technical/statistical verbiage that tends to over-simplify the complex nature of markets. However I find that a lot of his conclusions have a sound basis. Timing is a key issue though. If you are a vocal bear and a doom and gloom predictor, you better be lucky or right fast. Otherwise, you may look like you're stepping out of line. Then you look at the trend for AUM and realize that it must really feel lonely. Even if you're right, markets can remain irrational for very long periods. Mr Buffett is really a champion in terms of being ready if and when warranted. Like right now with a huge cash position and a long term outlook. I really admire that. One has to balance keeping rational principles intact with an evolving environment with new facts or newly integrated known facts. Challenging. This board has to do with facts but opinions also count (less). Right now, if I would manage funds for people outside of my inner circle, I would close my fund and advise to buy Berkshire stock. My last line would be from the Terminator: "I'll be back".

Hi Schwab, You're right. There are many variables, some are correlated and some go in opposing directions. We're trying perhaps to detect material trends within this maelstrom of variables. You touch on many of those variables. To help, cou you elaborate on the "hidden deflation for nearly all types of goods and services, other than necessities and labor"? Also, my understanding is that Mr. Yardeni is mostly a data provider. It is reported that he may feel that margins may stay elevated for some time before competitive forces eventually prevail. But, I don't have knowledge that he has made specific hypotheses with specific underlying premises/reasoning to support or reject an initial assertion. Can you clarify which main factor(s) will cause the presently high margins to stay high over time?