JRM

The Snowball discusses the reason for the 6% hurdle rate for the early Buffett partnerships. At the time the long term average risk free rate was 6%, so he didn't want to charge people a fee for what they could get without taking any risk. At the time he invested in a lot of special situations and workouts, so I'm not sure using an index (Dow Jones?) for the hurdle makes as much sense. I haven't been investing long enough to have ever seen a 6% risk free rate, so this is a foreign concept to me. For this reason, I think Pabrai using 6% is very generous to his investors.

Put it all on red SPY same month calls. YOLO! 8) Seriously, IRL I'd probably do nothing. Even with special situations, there is no guarantee they'd work out in a month and they likely won't be big enough to put in $1B. The best trade would be one where you are likely make a little, but have a tail risk of losing a lot. I think this can be structured by selling out of the money calls and puts simultaneously (forgot how this is called). The thinking is that even make a little percentagewise with a high likelihood is worth quite a bit with this huge sum and blowing up with $1B is somebody else’s problem. The problem is most trading strategies don't work with that much money. I know of a $100M AUM fund that only does theta decay trades similar to the short strangle trade you mention. Even at that size they have difficulty getting into and out of positions. Other trading strategies don't work well at scale because instead of coat-tailing the market movers you become the market mover. I know an engineer who day trades and has been successful for over a year. I don't know if the strategy will work for all markets, but he has traded it long enough that if it was scalable he should be worth quite a lot of money. He is not worth a lot of money because: 1. his strategy is not scalable, and 2. he spends a lot of money. I decided a few years ago it wasn't worth my time to "get good" at trading even though I dabbled with a short theta trade for about a year. If you look at the wealthiest people none of them got there (and stayed there) by trading options. Rant over.

There were copycats as early as 2013. It may surprise you, but nuclear power plants in the US are not state of the art. Most of the critical control systems are analog based 1960's vintage technology. A few critical safety systems are digital. Mostly ancillary, less critical systems rely on digital controls or computers. My point is, the computers used to run control some of the systems in these plants are extremely dated. We're talking Windows 95. At a nuclear power plant its not always as easy as simply upgrading the software/hardware, unfortunately.

Stuxnet is a big reason why my job became a living hell at the nuclear power plant I used to work at. We actually had Siemens PCS7 controls systems that this virus was made to attack. The article is a little bit dramatic, but is mostly correct. The US government most likely designed the virus, and deployed the targeted attack at the Iranian uranium centrifuges. The scary part is that once the virus was discovered, the "bad buys" could reverse engineer it to perform similar attacks.

As has been stated before, what is the carbon footprint to manufacture solar panels compared to the alternative (over the life of the panel)? The same argument can obviously be made for batteries. California is getting out of the carbon-free business of nuclear power for electricity generation with the closure of San Onofre and the imminent closure of Diablo Canyon. Are subsidies not enough to coerce people to switch to solar in California?

You just can't make this stuff up: https://www.cnbc.com/2018/05/09/california-approves-plan-to-mandate-solar-panels-on-new-homes.html

I've found that selling is far more difficult than buying. I don't trade short term (because I'm terrible at it), but I've adopted a trading technique to my buying process. I will establish my sell criteria before I make any purchase. For traders the sell criteria could be a stop loss, price, or other technical indicator(s). For me, I will sell if my core investment thesis is busted. I will write down one to three (or so) bullet points that encapsulate my core investment thesis for a position. If at any time if I realize my thesis is wrong, than I will re-evalute the position. Its much easier said than done with something qualitative, but this approach also helps when the going gets tough. This process has helped me hold onto eventual winners when the market wasn't cooperating early on. Most novice investors tend to sell winners and hold onto losers until the portfolio is full of losers. I would love to hear Buffett's thought process on IBM. He will admit when he's wrong and move on. He also made a little money on the "loser" IBM position.

There was an episode of Black Mirror on Netflix that had an interesting take on this. Not sure if it is true or not. Basically they stated that in older wars more people died from disease, mal-nutrition, and infection rather than actual combat. In the revolutionary war times people many times fired over the heads of their enemies, not actually trying to kill their opponent. From the Vietnam onward the mortality rate on a per soldier basis has increased (they state). A single drone operator or sniper may be responsible for killing dozens of people without "facing combat". That said, I have relatives who have fought in the Battle of the Bulge (WW2) and later in the Korean War. They have very gruesome stories to tell, but I think they tended to suppress their bad memories. If they had PTSD they didn't talk about it.

I noticed that if I commented on an article I could still access it through the comments link after it had gone behind the paywall. I still had full access through this backdoor. Not sure if they "fixed the glitch", because I don't comment often.

Exactly. Half of the articles are just copy and paste from the most recent conference call slide show or investor day presentation. They literally copy and paste the graphics from the company presentation, and that is the majority of the article.

Actually understanding the problems and possibilities here is critical for anyone considering investing in Canadian O&G producers. I hate the politics threads on here but I'm glad to have read this. I agree. I have been following the BC antics due to my investment in Kinder Morgan. It has provided for a lot of entertainment value.

Are we talking about oil or natural gas here? They are not the same thing.

I had many friends and coworkers asking my opinion on crypto-currencies when is was above $15k. My answer was I didn't have an opinion and don't invest in things I don't understand. Now that the price has dropped all I hear is crickets. If my favorite stocks dropped 50% (from fairly valued or undervalued basis) I would be backing up the truck and telling everyone who will listen what good deals there are to be had. This has been an interesting behavioral experiment.

If you shorted Amazon in 1999 and held through from peak to trough you would have done well. That is essentially what Buffett is recommending now with the 5-year expiration on the put options.

Largest realized loss was PG&E (-18%). I broke a lot of rules buying this one thinking I could make up for it with it being in my circle of competence. I sold as soon as they cut the dividend and I realized I had no idea what was going on.

+32% against the S&P of about +20%. After a couple of underperforming years it was nice to finally outpace the S&P. Looking for energy to outperform the next 2-3 years.

You hold it and wait for the greater fool to come along.

There are (at least) four types of edges you can have as an investor: 1. Informational 2. Analytical 3. Psychological 4. Time frame (patience, long term vs short term) WEB is one of the few investors to ever have an analytical edge in so many areas. That is why he preaches to 'stay within your circle'. It may be that his analytical edge is actually in evaluating people and finding good managers to run his various businesses. He doesn't actually need to know the nuances of every business. When I study various industries I only realize how much more there is to know and how big my blind spots are. I'm not going to pretend that I'm any more competent than the next guy. I'm not saying don't try to learn as much as you can about the businesses and industries where you're investing. Just know that there's probably already somebody out there capable of better analysis with likely better information.

ok, that's what I thought. thanks.

My question is more about the timing rather than the value. Let's say a t-shirt company offers $1000 worth of t-shirts to the radio station in exchange for $1000 worth of advertising. Let's say the radio receives the $1000 worth of t-shirts in month one, and the radio station airs $1000 worth of advertising in month 3. I would think the $1000 in t-shirts would be considered deferred income until end of the month 3 (air the advertisements). Also, the radio station should expense the $1000 advertising cost at the end of month 3. Assuming the cost of $1000 worth of advertising is less than $1000. In the situation I'm describing, the radio station is counting the revenue income at month 3, but delaying the expensing of the cost of performing the advertising. This seems wrong to me if this is actually how they are operating.

That is certainly what I would expect. I guess my questions is this: is it normal for cash payments to be treated any differently than fair trade payments in accrual accounting? My thought is that it is easy to track the money trail for cash payments. It can difficult or nearly impossible to prove when goods or services were received under a fair trade agreement.

My interpretation is that they are accruing expenses (inappropriately?) in order to inflate their earnings. They are booking revenues "on time", but delaying the expenses past when I thought they should have been transferred from the balance sheet to the income statement.

I was talking to a friend who is a low level manager at a local radio station. His company is a large publicly traded nationwide broadcast company. He was explaining some questionable accounting to me, and my initial reaction was that this was at best very shady and at worst illegal. It is common for the radio station for trade services for advertisements (fair trade agreements). Like most large corporations they use accrual based accounting. He said whenever they have receive cash compensation they expense it as I would expect; when the goods or services are received. However, when it is a non-cash trade his boss delays expensing the income well past when the goods or services are actually received. He said they usually catch up at the end of the year, but not necessarily. The problem is that his boss is compensated with a bonus if he meets his "numbers", and this little gimmick is used to help make his quarterly numbers. He said this was common practice at other radio stations within the company, at least with all the ones he has spoken to. For those with an accounting background or more familiarity with this type of industry: is this legal? This is a publicly traded company that files quarterly with the SEC.

The point that Howard Marks and others have made is that there is no price discovery when you index. Indexing assumes that the market is mostly efficient, and the low cost structure results in outperformance because most active managers either track or underperform the market. Indexes are essentially taking advantage of the efficient market provided by active managers, but they don't contribute to efficient pricing. People are beating around the bush at the largest component by market of the S&P 500. It's Apple. Is Apple overvalued? Not to the extreme that some other stocks are. Has indexing caused the largest component to be overvalued? I don't think so. Perhaps and index selloff will create some buying opportunities.

A lot of times a dealer will offer some type of limited warranty on a used car. They can also throw in little things that may be missing like spare keys, spare tire, etc. If you're not tuned in what to look for in a car, you should probably take somebody with you. You can spot little things that indicate that the car may have been in an accident, for example, like doors rubbing or lines not being even. You can stack the odds in your favor of not getting a bad deal: 1. Research the model(s) you're interested in and make sure they tend to be reliable, in general. Consumer Reports is pretty decent. 2. Buy a car that has been mostly adult driven (as opposed to a teenage kid). 3. Ask about the nature of the miles on the car. Typically highway miles put less stress on a car than start-stop driving around town. My best advice is to take someone else with you to kick the tires even if you think you know what you're looking for.