Saluki
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Posts posted by Saluki
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If you think about how easy it is to communicate changes in your life to your friends through Facebook, it adds a lot of value. What is the alternative? Sending pics and messages in a group text to all 200+ of your closest friends and acquaintances?
Friends of mine are traveling in Europe and now they can easily share with all of their friends the things they are seeing and doing, and as someone who hasn't seen them in probably 6 months, it helps keep me connected and it reduces my "cost" of staying connected via phone calls, texts, in-person get togethers. That coin has two sides though. Now we see what everyone else is doing, and how cool the most photograph-worthy moments of their lives are, and it makes some (most?) people sad.
I don't think Facebook is any different than the way humans have always communicated and experienced the envy by seeing/hearing about what others are doing. It amplifies that FOMO experience, but unfortunately I believe that is part of the human experience.
While I don't that Facebook specifically will always be around, it is hard to imagine a world where everyone has internet access that does not include some kind of utility that humans use to communicate their thoughts and experiences to others.
It's also a historical index of your life events. It has symbolically replaced scrapbooks and baby albums (to an extent) The longer it has been established the harder it will be for people to leave all that behind. I think there is a sense of effort from the user perspective. The idea that you're building something to be able to look back on has value in and of itself. But let's not forget 2.5B active users....that number alone is insane.
They also have not yet monetized WhatsApp. I didn't get the big deal about it until I went to visit relatives in Patagonia where cell service is spotty (and expensive) and everyone uses WhatsApp. I think it's the same in many other parts of the world. I don't see why they couldn't throw ads on there like they do with FB and instagram.
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PBF, I only bought a little when it came down last time and regretted it, now I am sizing up as I sell other things off. And I just started a position in IPI (I liked the water rights part of this business but now that Potash prices have gone from the low $200s a ton to the low $300s a ton, the mining side should be profitable too and the shotgun will be firing with both barrels).
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I came a across an interesting podcast called Household Name recently. I listened to the Sears episode out of morbid curiousity (I own SRG) and went down the rabbit hole from there. The first episode about how the TGIFridays chain restaurant started out as a singles bar in manhattan is very entertaining:
https://www.stitcher.com/podcast/stitcher/household-name/e/55480565
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I started a small position in ADT (it IPO'd at $14 and is at ~$6 now and I love a bargain). I also took another bite of TPHS at $3.71 (it's only slightly above the price for the giant blocktrade that Michael Price brought from Mercato).
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I recommend the book too. If you're already familiar with the Kelly criterion for bet sizing, this is very basic but still entertaining. Howard Marks and Nassim Taleb have talked about decision making and probabilities--how you can't determine if it was a good decision by looking at the outcome, only by looking at the process--but this is a book solely on that decision making process. I think people will get a lot out of it because besides just announcing the theory she gives you some practical advice on how to apply it to your own decision making process.
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In Montreal or Toronto, I recommend doing a bike tour of the city. I just got back from Montreal a few days ago and I highly recommend the "Aura" light show at Notre Dame Basilica. It's like those synched light/music displays you see at Christmas, but it's inside the church, with laser lights and music. It's at night after the basilica has closed for visitors. About $25 Canadian if I recall correctly.
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Well, think of a classic example, LTV (Ling Temco Voight). They had a high P/E and they would buy low P/E companies and it would immediately make a positive impact on stock price because their earnings kept going up. So if they had a P/E of 30, and bought a company with a P/E of 10, that portion of the P/E 10 company's earnings becomes P/E 30 when valuing the acquiring company. The problem is that LTV had to keep borrowing to buy more and more companies and they had a low P/E because they were terrible companies and the end you have a company that's made up of other terrible companies and loaded down with debt.
That's sort of what Valeant did (although they raised prices, which helped them boost earnings) and it's what a several dot com companies did in the 90s. Bricks and Mortar + clicks = a Low P/E company being bought by a high P/E company and having the earnings being revalued by the higher P/E by a gullible public. AOL Time warner, anyone?
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FRFHF will be converted into BRK.B eventually.
I own both and have not bought or sold either in a while. I like both as counter-cyclical bets because they tend to get great deals in a downturn. Why do you prefer BRK? (I think it's a great company, but so big that I wonder if there are more doubles or triples in there)
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I'm nibbling on Fairfax India. It's now at book value so you are getting the airport and some other nice assets at the prices that Prem paid for them. The 1.5% management fee should be more than offset by the growth of these assets and we are well below the high water mark, so it will have to go up sharply before you pay the performance fee which has a 5% hurdle rate.
I'm also adding small amounts to JOE when it dips below $16, TPHS when it dips below $4 and Seaspan when it dips below $9.50.
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Very helpful review. Regarding your thesis that there are a few super talented operators, how do you balance that against WEB's goal to find businesses so good that a ham sandwich can run it? I am not challenging your perspective that there are some business people who leap out as much better than the competition no matter the field. But I am cognizant of the WEB maxim that when management with a reputation for brilliance tackles a business with a reputation for bad economics, it is the reputation of the business that remains intact.
Buffett used to feel great about the newspaper business and even when it was a good business, there where people who made a lot more than others at it even though they were operating in different markets. The same came be said with TV stations which, before cable, were a license to print money. Even the mediocre people got rich, but some people made fortunes. So I think in good businesses, a great operator can make it a great business. And even in a great business like Microsoft that is almost indestructable, a bad operator like Steve Ballmer can work his incompetence to turn it into a mediocre one.
I think that's why a lot of cable operators ended up selling out to bigger competitors like John Malone. They were in a great business but weren't getting all the horsepower out of the engine so they were better off merging into a worldclass operator and let them take over the ship.
Buffett has said that he doesn't like turnarounds, he wants great businesses with great management already in place. Maybe that's a recognition that some things where you don't have both are trades and other are lifetime purchases (100% owned operating companies).
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Thanks all, for the various potential trades, ideas, and commentary, so far. Lots of food for thought. One thing it brings home is how Wild West-like commodities are, and how superficial my knowledge of them is.
Just from doing some initial digging around, I think it's going to take me months (or more likely years) to get some kind of handle on the dynamics and where the real risks lie. I mean I think that's to be expected, but the last few days have made it even clearer.
I remember reading The Frackers by Gregory Zuckerman a few years back, which was an enjoyable book.
Trying to understand the space so far though, makes his narrative seem orderly and organized in comparison. It gives me a new respect for folks who consistently make money in this sector, and through each cycle.
Anyway, my appreciation to those who took the time to share their experience and insights.
An indirect (and possibly safer) way to play the fracking trend is Intrepid Potash (IPI). It's a small low-cost producer of potash (an oligopoly industry) but has been making a lot of money selling water to frackers. They have water rights in some desert areas where a lot of fracking is going on, and each well that is fracked needs thousands of gallons of water. I used to own it but sold out. It's come down since then but still not cheap enough for me to buy back in yet.
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I think the gold analogy is off base because you can't say "gold is way overpriced, let's switch to brass or bronze." Bitcoin is open source and although the blockchain/cryptocurrency model may be useful, if you can make another coin with the same software as bitcoin in a few minutes, I don't know why people would build applications upon it if the price is too high.
The reason for using gold is that everyone has always used gold.
This is something that Mises espoused in The Theory of Money and Credit, but not to get too nerdy but the alternate theory is that money is a system of clearing and settlement of societal obligations because reciprocity only works in very small bands and there is no other way (pre-writing) of deciding who owns what to whom so we use money and we owe it back to society. Other people use other kinds of money. If I tried to buy a house from a Yap tribesman with gold, they wouldn't take it, preferring instead their far superior giant rocks with a hole in the middle.
So, if you think about Bitcoin as as using the underlying blockchain technology to build secure applications on (like for transfering title to property or managing digitial permissions), instead of as money, I wonder why I would pick the most expensive version of something to underly applications if the others are exactly as secure. If you think about it as money (in the alternate clearing and settlement theory) why would a society switch from one system to another? Do you know of any country that has done so besides in an economic collapse where they knock a few zeroes off the bills and rename the currency?
I don't own bitcoin but I wouldn't short it either. To me it's genuinely something where it's too early to tell.
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I think the gold analogy is off base because you can't say "gold is way overpriced, let's switch to brass or bronze." Bitcoin is open source and although the blockchain/cryptocurrency model may be useful, if you can make another coin with the same software as bitcoin in a few minutes, I don't know why people would build applications upon it if the price is too high.
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I really enjoyed this autobiography by Jim Clayton. I'm convinced that most businesses are terrible and the profitability of most businesses depends on the operator. That's why there are lot's of people with one struggling restaurant and a few people with a dozen thriving restaurants.
Jim was in radio ad sales, used car sales, refurbished mobile home sales, mobile home manufacturing, real estate and eventually banking. And he did well in everything. In my opinion it's always a good idea to get some insight into the mind of a successful operator because they are few and far between. The Clayton sale to Berkshire was very controversial at the time and the subject of a few law suits. In this book you will see Jim's side of the story and why it was a great match for BRK and Clayton homes (BRK solved Clayton's problem of financing sales for their customers in a downturn so, unlike their competitors, they no longer had to rely on the kindness of strangers).
My only critique of the book is that the typeface is so large that if the used a normal size font it would a 1/3 smaller and lighter.
I tend to avoid any company that relies on debt as part of their business model, but from looking at this and my previous efforts to understand auto manufacturers, and John Deere, a pattern is emerging for me that sometimes financing is best part of a business. If McDonalds' tells you that the money isn't in the hamburgers, it's in the real estate, well maybe for some businesses, the money isn't in the business, the money is in the money.
Not a book, like Poor Charlies Alamanack, that will change your worldview, but a good fun read with some business lessons thrown in as well as cameos by a lot of famous musicians like Elvis and Dolly Parton.
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I love the tour of Buffett's office that you can find on YouTube. As you can see from my avatar, I had an "Invest like a champion today" sign made, like the one in his office.
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Right keep grinding those hours away for that +5% annual alpha while missing out on the largest paradigm shift in global finance ;)
I bet Berkshire will acquire a position in Bitcoin and everyone here will lose their minds as to why.
I will sell my shares the moment they do that.
Happy to do so - at least until someone changes my mind. ;)
I'm open btw to the idea that this technology could lead to something useful, but I don't see why that makes Bitcoin a good investment. Maybe you can enlighten me and the other skeptics around here.
I agree, the fact that people use blockchain and Bitcoin interchangably makes me doubt that it will work out well for most people speculating in this. It's like saying "what do you mean "Toys.com" won't make me rich? The internet will change everything." I'm sure blockchain will be used in a lot of new and interesting ways , but that doesn't mean that Bitcoin or any other particular crypto asset will be a big winner. And just because some of them will be big, doesn't mean that I'll be able to pick the right one when lots of computer and math whizzes are trying to pick the winners too and they understand it better than me.
If you can make money this way, mazel tov! You deserve it.
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Sold some junk and reinvested it in a little BRK-B, JOE, SSW and Fairfax India. My weighting on these is about 20% 10%, 10% and 1%
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Sold off more than half of my Alliance Data (ADS) shares. When they sold off a big chunk of their business at an okay price and it still didn't move the needle for them I started getting tired of waiting.
As I get more concerned about the economy, a company that has credit card receivables starts to look less attractive when you can pick up some BRK at under $200 (Buffett was buying back shares at a little more than this price last quarter) and FRFHF and Fairfax India at decent prices too, and they tend to scoop up bargains when it gets ugly on the street.
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I sold this just under $4.00 because I thought the good stuff was already baked into the price. The price is now $3.26 a share and things have gotten better for them, so if it drops another 10% I may start buying again. Their earnings call transcript is here:
With the acquisition of the Dinwiddie ranch and the associated water rights, they have "a new 5.8 million barrels per year of permitted water rights perfectly located in the Northern Delaware Basin and ready for sale." They think they can repermit it and get 13mm barrels a year. Even at the lower number, however, they can get premium pricing since its closer to the wells that need it and can get $1.25 per barrel and $1.50 per barrel. At the 85% margins they have been getting, that's $6.1- $7.4 million a year in additional income. (double that if they can get it re-permitted).
Potash and Trio prices looking okay but still not great, but they are finding new sources of income along the way, like salt prodcution
"And to just to add a little color on that, our salt sales increased year over year almost by 90% with $3.3 million in Q1 of '19 versus $1.8 million in Q1 of '18."
The CEO owns a lot of stock so he eats his own cooking.
It's a $400mm market cap company but it's basically a growing water company (fully priced) with a free potash mine thrown in for good measure.
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CLF
I will see you at the Goldman Sachs conference soon." Goncalves instructed Korn to "bring the guy from the commodities desk" with him. "It's going to be bad, but its going to be worse if you're by yourself," Goncalves concluded.
This makes me want to go the conference and hang out with a chair and some popcorn. It makes Jeff Skilling calling someone an asshole on a conference call sound quaint.
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I'll be the first to admit that most conference calls are terrible. A few are enjoyable though.
SAFM: Sanderson Farms. Joe Sanderson is a good ole boy running a multi billion dollar chicken company and he knows chicken like the back of his hand. Occassionally an analyst will ask a stupid question and he doesn't suffer fools gladly. Wind him up and watch him go when someone has the wrong idea about something like bird flu or antiobiotic free chicken. Even though it's been a few years since I owned the stock, I still dial in occasionally .
WPG: I'm not brave enough to buy this mall operator in 2nd and 3rd tier markets, but Lou Conforti talks like a truck driver from philly (cussing and inappropriate metaphors are very entertaining).
Are there any you like listening to, whether you own the stock or not is irrelavent.
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Congrats on your first brick! You should do something meaningful to you to celebrate.
When I hit my first one (not counting real estate) and I realized I was officially an accredited investor, I decided to reward myself by going to an investor conference (NERD ALERT!) and meeting some of my heroes. I looked at Sohn and a few others but because I am a value guy decided on the Ivey Ben Graham one. Spending $500 vs $2000+ to meet the same people is a no brainer for me.
In my 30s I was paying off law school debt and starting to build the foundations and now I'm working on FIRE and playing to retire (hopefully) when I'm 51.
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I have one of those two books (I forget which one) sitting in my queue on my bookshelf. My GF works at Mckinsey and asked if I wanted a copy. I will move it up the queue based on the reviews here. thanks guys and gals.
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I think it's well written because it can be easily understood by a lay person. A lot of books on investing are full of jargon or written by people who are terrible at writing, so it stands out because it's not terrible--which is the norm. It's a good book, but definitely not worth $1000+
I think I'm the only one on here who is not a fan of The Intelligent Investor. Maybe I need an earlier version of the book but something about the writing style in that book (and Security Analysis) I find quite grating.
Books I have liked and re-read from time to time
Peter Lynch: One up on Wall Street
Greenblatt: You Can be a Stock Market Genius (only the title is terrible, the rest is wonderful)
Phil FisherL Common Stocks, Uncommon Profits
Marks: The Most Important Things
Pabrai: Mosaic (hard to find, and mostly reprints of articles, but I think better than his other book, which is also good)
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Berkshire Letters to Shareholders 1965-2014, in hardcover, is not recommended enough.
Michael Mauboussin Interview
in General Discussion
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I have his other book, More than You Know. It's similar to the ideas in Hagstrom's Latticework or what Charlie Munger preaches about grasping ideas from different disciplines. Highly recommend.