Saluki

Picked up some shares of NTDOY.

I haven't looked at the numbers in a while, but I would bet that based on miles driven a self-driving car is safer than most passenger driven cars. For highway driving, or roads without a lot of cars (rural, but not dirt) it's a much easier lift than trying to get it to work in San Franscisco (pedestrians, hills, obstacles, buses, more cars). It's interesting how different companies approached the problem. Waymo started in Phoenix (sunny all the time, few pedestrians, flat terrain, long distances), and another intentionally chose Pittsburgh because the amount of iron bridges made it harder to communicate with the vehicle. And snow, potholes and people added to the difficulty. The theory was that if we can get it to work here, it will work anywhere. Self-driving cars could reduce the cost of ownership. If your car is in the driveway, why not let it pick up fares and pay for itself? I don't see why paying for a driverless car, which surely would cost less than a car with a driver, for the occasional trip wouldn't work for rural people. Especially if the car comes to your door. Most construction companies don't have their own cranes or other specialty equipment because it's cheaper to rent it you don't use it a lot. It's not going to happen overnight because no one is working on retrofitting existing cars to be driverless. For a time riderless cars will share the roads with drunk drivers, distracted teens and Maryland drivers, just like cars shared the road with horses for a while. Eventually the lower cost of maintaining a car vs a horse made it hard to justify the joy of riding in the saddle. I'm sure your grandkids will chuckle one day when you tell them about how you had to learn to work a clutch.

@CGJB Actually, I think you might be right. I found this https://acquirersmultiple.com/2017/06/walter-schloss-cagr/ which mentions some of his railroad bonds. Maybe he didn't want any more investors in his fund, so went by "Herbert"?

That was my first thought too. But it appears Schloss took the Graham course through the NYSE, and he was know for holding dozens of cheap stocks, not distressed bonds that would take years to pay off. And Schloss started his own firm in the 1950s, so why wouldn't he use his real name if he was still trading for outside investors?

I mentioned in another post about someone mentioned in Supermoney. Does any know who this person's last name? Warren introduced me to another Graham disciple. “He has no connections or access to useful information,” Warren wrote. “Practically no one in Wall Street knows him and he is not fed any ideas. He looks up the numbers in the manuals and sends for the annual reports,and that’s about it. He is a very family-oriented fellow: he probably spends more time thinking about children than about stocks.” There followed a list of stocks, about half of which I had scarcely heard of. The Rutland Railroad? The New York Trap Rock Company? The Union Street Railway of New Bedford? Jeddo Highland Coal? Clearly the fellow had never been to lunch at Scarsdale Fats, and was probably not around after the close at Oscar’s. The record was not spectacular; it plodded away, beating the Dow Jones average by a few percentage points, not as wide a margin as the Buffett Partners, but up 17 percent compounded over fifteen years. I made a lunch date with Herbert. We stopped at the checkroom with his raincoat and briefcase. He waited until the briefcase was stashed away. You couldn’t, he said, be too careful. “I didn’t get to go to college,” Herbert said. “I went to work in the Depression because my folks didn’t have any money, and I worked as a runner on Wall Street and then in the cage, tallying stocks.” Herbert took a Graham course at night at the Institute of Finance. “Ben really loved to teach,” he said. “He could have made a lot more money if he hadn’t been so interested in teaching.” Herbert operated just as Warren said he had. He never looked at rising stocks. He looked at the list of new lows in the paper every day. “Look at the steels,” he said. “No one wants them. Will they go bankrupt? How can an industrial country not have a steel industry? Look at American Can under thirty. Can they keep that dividend?” “I’m not very bright,” Herbert said. “I can’t compete with all the bright people, and especially the ones who have college educations, who have been to business school, who have lots of corporate contacts. I don’t know anybody. I have to buy what I’m comfortable with. These fellows that buy, even Procter and Gamble and General Electric, why, those stocks go up and down all the time. I just wouldn’t be able to sleep at night if I owned stocks like that.” What was Herbert buying? “Well, there’s one issue of Penn Central bonds,” Herbert said. That was a bit breathtaking. The Penn Central is very busted. “The Pennsylvania Railroad is bankrupt,” I said. “The value of the stock is negligible. The value of the bonds is questionable. It will take twenty years to straighten out. What you should buy is Shearman and Sterling, the lawyers, who will get all the money for the next twenty years.” “I know,” Herbert said. “But there is one issue of Penn Central bonds that is collateralized by the Pittsburgh and Lake Erie Railroad. I wrote Irving Trust and asked them, did they have the collateral behind the bonds, and they said yes. They don’t pay interest on the bonds, but when they settle the case, I think they will, and meanwhile the interest is in a special account at Girard Trust, twelve, thirteen, fourteen percent. It may take a long time, but I can sleep at night. I’m not in a hurry. Things always take longer than you want them to.” Had he really owned the Union Street Railway of New Bedford? “Oh, yes. They had a lot of cash. It took quite a while to liquidate, but it worked out very, very well.” A couple of things about this passage are very interesting. In the Snowball, if I recall, he mentioned an investor that he would trust to invest on his behalf (the investor had died years before). In this passage, he directs Adam Smith to someone who is only managing his own money and doesn't want to give a last name. Does he not like competitors for the spotlight? Or does he not like anointing people, besides Munger, who works with him? Herbert had a really long time horizon, but he wasn't betting on things like vacant land. He was sticking to railroad bonds backed by good collateral. Ted Weschler also made a killing on distressed assets (W.R. Grace) which took over a decade to sort out. Even back in the 1970s, there didn't seem to be a lot of patience for ideas that would take a long time to play out, no matter how big the payoff. In the 1940s, the average holding period for a stock was 7 years. In 2020 it was 5.5 months. It seems like the short term end of the investing curve is getting more crowded, what happens to the long-term end of the curve? I'm sure the decline of full service brokers and the outrageous fees helped to speed up trading by reducing the transaction costs, but it's still interesting to look at your portfolio and think about which ones will have a big payoff, but not for a very long time. I won't mention my favorite real estate stock, because I want it to go down, not up, but if you take a look at something like Howard Hughes, maybe the payoff down the road is so big that the mismanagement is not going to matter? Or maybe, like Trinity Place Holdings or Seritage, someone may eventually get rich on it, but it probably won't be you? Just a thought. But if anyone knows Herbert's last name and how he turned out, I'd be very curious to hear.

@ValueArb yes I agree, you shouldn't be reckless, you should be informed. Ackman made a big pile in Wachovia during the great financial crisis when it was announced that Citi was buying the banking subsidiaries. He realized that the holding corp parent had a lot of valuable stuff and it was worth 10 or 11, and it was trading for $1. I was recently re-reading Supermoney and the author spoke to a friend of Buffett named Herbert (no last name given) who was a Graham disciple who had never been to college, but took the course at the NYIF when it was offered. He had invested a bunch of money in the bonds of the bankrupt Penn Central Railroad. He explained that MOST of the bonds were garbage, but that the bonds he bought were guaranteed by another railroad, which had been depositing funds into an account to be paid when the court ordered it. Because the bankruptcy case was so complicated, he didn't think he would get paid for several years, but knew that in the meantime that account was racking up interest at 12-14% per year. The people who bought energy companies when oil went negative (not me) did the work, had a variant perception and nerves of steel, and they deserve whatever riches came their way. I'm just trying to keep learning and getting better every day.

I tend to agree with Peter Lynch that the most important organ for an investor is the stomach, not the brain. Here's an interesting interview I came across from a Psychologist about Behavioral Finance. Most people know the things to look out for, but don't do them. Because it's not a lack of knowledge. If it were, there would be no smokers.

I'm reading a classic, John Neff on investing. If we return to 1970s stagflation or 1980s double digit interest rates, it would be interesting to follow the play book of someone who crushed it then. This passage caught my eye and reminded me of the tanking stock prices of several cable companies. Several billion dollars in market cap wiped out overnight based on a wall street journal article that had a lot of scary words, but not a lot of facts. If you're wondering how it worked out, the SP500 went up 29% while his Cigna pick went up 54% in the same period. Reminds me of an investor who said "if you smell smoke, run towards it, that's where the money is." Just as there is hype in things like crypto and AI there is fear in things like China (they can just steal your BABA VIE shares) or North Korea (CPNG is in Seoul, which is within artillery range of North Korea), or ESG (oil companies are shrinking ice cubes, EVs will replace cars and no one will need auto mechanics so dealers will go bust). I'm working on figuring out better guard rails for myself as an investor. A behavioral psychologist I was watching on YouTube said "if you're excited about a stock, don't buy it" and "and if you're worried about it, don't sell it". It's not bad advice. Decisions should be made rationally.

I remember that right before it went bankrupt there was a day where it went something like 120%, then it opened the next morning down about 30%. Stay away from the mosh pit. It's not for people who have a mortgage and a day job.

Added a little FRFHF, and picked up a few shares of NTDOY to start a position. Bargain hunters, get ready for the 20% drop that happens after I buy.

Yes, and people keep talking about China/Yuan being a reserve currency. That won't happen without a huge change in China going from a net exporter to a net importer. The reason people use the dollar is that, besides being the largest economy, we are a net importer. Since we have a trade deficit, we've bought more than we sold so there are lots of excess dollars floating around that people can use for international trade. If it was the Yuan, and they are selling more then they are buying, there would be a shortage of Yuan and what would people use? China could transition to a consumer economy, but they are still trying to grow enough to bring the last one or two hundred million people out of poverty. So it will be a while before that shift is possible. What other viable alternative exists now? The Euro? Dollars and Yuan are gift certificates at Walmart and Costco. They are valuable because you can cash them in for something at the store. Europe doesn't make enough things like Oil, Agricultural crops, software, or electronics, for people to want to have their gift certificates. When people steal your credit card, they buy gift cards at Walmart to resell it. I'm sure they could use it to buy gift cards at Whole Foods, but you have fewer people that you could sell it to.

That's my take on it. The reason that Treasuries were always viewed as the "risk free" rate is that dollar denominated debts by the US government won't default because you can always pay it back by printing more money. It may not be a great idea to keep printing money, but if you are owed $1mm, you will get $1mm in nominal dollars. What the political brinksmanship has introduced is a scenario where the possibility exists that they won't pay it back as agreed. "It's not that I can't pay you, it's just that I don't want to." So if that scenario is now possible, then is it risk free? I think the downgrade is a nothing burger because that game of chicken ended, so to downgrade months later when an agreement has already been reached is kind of silly. Not to mention damaging to people seeking a mortgage.

I don't have much choice in my employer provided retirement plan, so I'm exposed to the Magnificient 7 at any valuation. I try to think of it like a ballast (or a barbell approach), where the bigger stocks are in my 401k account via the index, and (other than BRK and GOOG) the majority of my discretionary portfolio is in small-mid caps (JOE, FRFHF, VTS, FFXDF, STNG, TV, SWBI etc.) If we get a "correction" in the magnificent 7 the smaller stuff might do okay because a lot of it is already cheap. If you can buy British Tobacco today at less than 9x earnings, how much lower could it correct to?

I sold the STNG in my retirement account that I bought a couple of months ago, for quick a 10% pop and bought some FRFHF and FFXDF. I hate selling something that I think is underpriced, and I hate buying something at $800 that I didn't want to pay for at $700, but the price to book on both of these looks good and the pie is growing.

Yes, you're right. My mistake.

I own a small basket of Tobacco stocks (Mostly BTI and a little JAPAY, PM an IMBBY). My broker doesn't allow me to directly buy Indian shares (only ADRs), so when IMBBY spins it out, I assume it will just get sold and there will be a small amount cash distributed. Might be interesting to someone with an Indian brokerage account.

@hasilp89 https://www.reuters.com/world/india/indias-itc-demerge-hotel-business-2023-07-24/ Here you go. Probably didn't come up in search because they call it a "demerger" instead of a spinoff.

Rather than wait for an SEC Filing, maybe it's a good idea to have a post where people can list upcoming spinoffs so we can start our research early and have an easy place to find upcoming spinoffs. Here's a few that I heard about: Danaher (DHR) is spinning off a company called Veralto: "Veralto is DHR’s Environmental & Applied Solutions unit and post-spinoff, it will be the global leader in Water Quality (59% of 2022 revenue) and Product Identification (41% of 2022 revenue)" https://finance.yahoo.com/news/dhr-target-industrial-healthcare-firm-095800056.html?.tsrc=fin-srch I've also mentioned on another post that Vista Outdoor (VSTO) is splitting itself into two companies this year. One focused on outdoor (hiking, biking, fishing, camping) and another focused on ammunition. A days ago Imperial Tobacco (IMBBY) announced it was spinning off 60% of their hotel business to shareholders. If you know of any other upcoming spinoffs that look promising, post them here.

Great new interview with Gio. In addition to the Warren & Charlie little rubber duckies on my computer, I have a post it with a quote from him "Deploy capital proportionate to the the opportunity that presents itself in the moment" on my screen. He makes some interesting points. If you're not smarter and can't outwork the pros who do this all day every day, then you're best bet is to have a different perception (Buffett seeing Apple as a consumer brand, or Washington Post as a SOTP, not a company whose broadcast licenses were going to revoked by Nixon, or Geico as a company with a better business model and long runway, not a bankrupt insurer), hire someone to do what you can't (hedge fund?), or have a better process. I think the process part is where people go wrong. Tyson said everyone has a plan until they get punched in the mouth. People can value things quantitively when the markets are calm, but they succumb to FOMO when a stock is ripping upwards, or sell in a panic when they see losses. They improvise instead of following a process, because most of them don't even have a process.

https://finance.yahoo.com/news/ammo-inc-issues-letter-shareholders-123000873.html We are also developing and testing a new suite of AI (Artificial Intelligence) tools to enhance the user experience. AI applications include FAQs, real-time instructional/ factual outdoor related inquiries, digital buyer assistance, reviews of inventoried products, and internally by employees for ad hoc data requests to help improve customer service. This company said it will take them about 9 months to add a shopping cart to their website so you can purchase multiple items at once, instead of one at a time. Now they are talking about integrating AI. Did they suddenly get so good at tech, that they are leapfrogging in skills? Or are they trying to ride the AI wave? During the height of the dot-com boom, I remember companies would change their name to "Name.com" and their stock would shoot through the roof the next day. That was shortly before the crash. Once I see companies start to try this AI schtick and the market overreacts, I will think we are close to a top. But the market doesn't seem to be responding to everyone trying to cash in on the hype, so I don't know where we are.

I've been thinking a lot about longterm holdings. Besides the advantage of not paying taxes, if you are still in your working life, there is no reason that you have to sell to invest in something else. You just keep investing paycheck to paycheck in whatever is available at the time. Three examples recently got me thinking about this. Buffett talks about Citi Services preferred, which he sold shortly after he bought it, for a small profit and it went on to be a multibagger. He did fine, but if he held onto it, it would've worked out fine too. Munger's mention last year of the oil royalty that he bought for himself for $1,000 in the 1960s and it still pays him $70k a year even decades later. Joel Tillinghast still has the first stock he bought when he was a child (!), which went through several mergers, but currently pays a dividend that is much higher than his original purchase price. And one of his 1000 baggers was Hansen's Natural, which later became Monster Beverage. At times it got pricey, but he just had the patience to sit on it because the company was getting better. If the company isn't in decline, and you have capital available to buy the other things you see, why sell when the compounders are so few and far between? Some of Peter Lynch's best returns came from things like Dunkin Donuts which he held for years, not ones that he sold after a quick pop. Even Phil Fisher's record wouldn't be worthy of talking about if he didn't hold Motorola until the day he died. I can understand dancing in and out if you're going to invest in a cyclical business like energy or shipping, but I definitely think that there is something to deciding which stocks are Tinder dates and which ones are marriage material. If you are getting a deal in a cheap stock, in an industry with bad economics, then it's a trading sardine. But if you managed to get into something with a long runway and in a business with a higher than average return on invested capital, then as Munger said, over time your return should match the returns on the business. If those businesses are rare, then why sell and pay taxes to look for quick hits when these businesses come up so rarely?

Maybe because I was a M&A lawyer, I'm programmed to look for things that can go wrong, but lately I've had a feeling that we're due for a correction. "The market" which mostly index funds buying the magnificient 7 is doing well, but when I look at my portfolio of individual stocks, which is doing well, I can't think of anything cheap enough to buy more of. I see a lot of okays, but nothing really says "cheap," except for Televisa, but I don't see a catalyst there yet to make it not cheap. Of course, because I didn't buy it, it went up 10% in the last couple of days. But, if I had bought it, it would be down because the ancient curse is relentless and unforgiving. This morning I decided to buy some BTI if it was still under $34 today, so the curse made it $34.08. Damn you, curse! If the index funds are all cap weighted and fund flows are driving the momentum, then a few layoffs (or fear of them), or some inflation could make people contribute less and then the big run up will be a big run down. Last year I saw so many people asking on Facebook (in forums like ChooseFI) whether they should go to cash because "higher interest rates will make the market go down" and buy back cheaper later. These are people who are no where near retirement age. How much did they miss out on? It doesn't take much to cause a stampede. My thought is that if I happen to have cash when a crash hits, great. If not, just stick to the process and the guard rails I set in place for myself : sell only after earnings release (data point vs noise) or price target is reached. If I have a certain % in mind for a stock, but something else I own is better buy, buy the better deal. If I buy, don't sell for 3 years, unless something in your thesis is proven wrong. Do your due diligence for every purchase (10k, investor presentation, CEO interviews, COBF Forum) before buying.

She said she was working on a book on investing, the last time I heard. Snowball took several years to write, so it may be a while before the other book comes out.

NFTs! I had my doubts about crypto, but NFTsseemed like a grift from day one. I just read that the NFT of the first tweet which sold for several million dollars, is now worth less than a cab ride. I don't think you need to find new ways to lose all your money, the old ways to lose all your money still work fine.

Not very familiar with them, but I heard speculation that it might be a bet on commodities, in addition to a bet on Japan. Apparently those "trading houses" in Japan operate like Cargill or Glencore, not like Merril Lynch, and have a lot of exposure to other economies in Asia.