Saluki

I'm about half way through this book and it's a really interesting read. It's a look at business development through the lens of biology /evolution instead of the standard mathematical/physics model. A lot has been written in the past 20 years about "behavioral economics" and how it doesn't fit with the classical "rational man" narrative in most economic models. This book was written in 1990, but he cites a study done in the 1980s where they analyzed the articles written for The American Economic Review and found that 1/2 of them contained no data at all, just mathematical models. Another 25% contained data that someone else gathered. Only 1% analyzed data that was gathered by the writer. While no biologist would publish books and articles without ever going into the woods to see what he was writing about, I don't know of any economists who have made field trips to a factory, an oil field, or a shipping port. Economics was born in the time of Newton, not Darwin, but the current mania with math and physics may be an attempt to give the field legitimacy. Taleb says that majors like "social science" and "culinary science" are BS, because you don't need to call a real major "Physics Science". It's a marketing thing. So maybe the emphasis on physics and math instead of biology isn't just marketing, but it's also wrong. The advancement of technology and the competition in business have more in common with biology and evolution than they do with physics. Concepts in biology like genetic drift (why Australia has so much strange wildlife) and Silicon Valley and it's culture are easier to form an explanation for than anything we can come up with in math. Niches in an environment that give one species an edge feel a lot like moats. Looking forward to the rest of the book, but if you are looking for a book that is not usually talked about but has some interesting ideas, this is a good one.

We are really enjoying a show called "The Diplomat". It's from the creator of Homeland. If you like shows like that or Occupied, you will probably like this one.

thanks @LC and @Paarslaars

I was looking at two public companies, amprius and enovix, which are both trying to make batteries with silicon anodes. They both using different fabrication techniques, but does one have an advantage over the other? Is the process something that can be protected with patents, or is it like current lithium batteries where efficiency is what matters bc everyone is working off the same formula and just trying to be better at it? Thanks @Paarslaars

Anyone know of a good book or other resource for learning about batteries? I'm looking at a company (pre-revenue) that is publicly traded that has some Lithium Ion battery tech that is supposed to be better than the current generation because it uses silicon instead of carbon. I also see another company that is working on a solid state battery for energy storage and is also being hyped but isn't making any money either. I'm wondering if there is a way to get up to speed on this. Something that explains the stuff, but is not directed at people in the industry.

You can still find some gems, but it's more a scavenger hunt now. Some clues that I have found to be useful are 1) how much do insiders own in the spinoff entity, and 2) if a company is splitting, where is the CEO going?. An example of number 1, In Vitesse, besides the stock based compensation, the insiders bought a lot of stock with their own money. http://openinsider.com/search?q=vts An example of number 2 is Vista Outdoor. It's splitting into 2 companies of roughly the same size. I thought the RemainCo looked more interesting, but the CEO has announced that he is going to the Spinco, and he's leaving the RemainCo with a lot of the debt, which means I will have to take a closer look. Another example of number 2 is Bausch Health, formerly Valeant. If I recall the CEO left when the crown jewel (Bausch and Lomb) was spun off and left the debt laden RemainCo to fend for itself. The debt holders were threatening to sue the last time I checked.

New Ackman interview. Didn't realize that he invested in Elon's Twitter fiasco.

Since this is where tidbits go: Spurious Correlations (tylervigen.com) My favorite is the number of letters in the winning word in the National Spelling Bee vs the number of people killed by venomous spiders.

I don't know whether that last strategy would fall under "spurious correlation" or the "sharpshooter fallacy". The Bangladesh Butter Indicator Says Buy! (forbes.com) In a world where datapoints are infinite and now available at your fingertips, you can find correlations that have no predictive value. With infinity, you can eventually find things that match up by chance, like butter production in Bangladesh and SP500 prices. And the reason that backtesting works flawlessly in theory is because if you shoot at a barn and draw circles around it, it looks like you hit bullseyes every time. My favorite line from the article: "Oh, and one more thing about Bangladeshi butter. Leinweber wrote in Forbes a few years ago that he still gets phone calls—20 years later—asking for current butter production figures."

I sold most of my small tobacco basket at a small loss to free up some cash because I see a lot of bargains. Added some SWBI, NTDOY and FFXDF. SWBI is down about 20% in the past couple of weeks and if the earnings release today is bad, it's already baked into the price. If there is any surprise on the upside, it will have been a bargain. NTDOY I have been adding in dribs and drabs when I get some cash, to get it up to a full position. FFXDF is trading at $13 and change, with a book value of $20 and growing. Even with the performance fee that they have to pay FFH this year, it will still be a good year for them.

There are always new companies popping up. The tech companies are super large but that doesn't mean that they aren't subject to disruption. When Facebook bought Instagram, Insta had like 10 employees. And ChatGpt erased hundreds of billions from Google's value when it was released, but it wasn't something that required a lot of time and tens of billions of dollars to develop. The number of publicly traded companies is fewer than it was in the 1980s, there are more investors with better access to information, and the Nasdaq 2000 has about 40% of it's companies with no profit. So fewer places to fish, more fishermen, and less good fish is a tough row to hoe. Still, if you think of old companies, there can still be some bargains. Coke has been around for 150+ years, so it's not likely to go away soon, but you can find others that are likely to be around for a long time because they have already been around for a long time (an idea that Nassim Taleb likes to promote). I own Smith and Wesson, and it's also 150 years old, and it's less $500mm (and an industry that people hate) so it's a good place to find a bargain. I had a big win with Vitesse. The company is new but oil isn't and it isn't going to be disrupted by an app anytime. Also, part of the reason that there are fewer companies is a lot of them have merged. So think about consolidating industries. Asbury and Lithia are auto dealers and are the biggest players, but combined they are less than 10% of the industry. Energy companies and certain sectors of shipping are consolidating too. Railroads did too, and now they are more profitable than ever.

If offshore wind is to become viable in the long term, it has to overcome some challenges that are political, like this NIMBYism: https://www.offshorewind.biz/2023/09/05/south-australia-rejects-offshore-wind-project-application-asks-federal-government-to-move-declared-development-zone-out-of-state-waters/ Another problem is that the same inflation and supply chain disruption that affected other industries also affect offshore wind, and when it does, who should pay for it? https://www.offshorewind.biz/2023/09/01/new-york-offshore-wind-developers-ask-for-inflation-related-price-relief-nyserda-argues-some-requests-not-tied-to-inflationary-pressures/ It's pretty easy to say that a contract is a contract, but several new projects have not gotten multiple bids and the willingness to take on these type of projects will be greatly diminished if they can't make money on it. It could be that rising energy prices will fix this problem because renewables become more attractive relative to fossil fuels as the price of fossil fuels goes up. "The cure for higher prices is higher prices." But I don't think that the industry has been around long enough that some of the new entrants are willing to endure a long winter of unprofitability. Also, if you have an interest in this industry, the website linked above will send you daily articles to your inbox so you can keep track of what's going on.

Small adds to JOE and TV on the dip yesterday. If I was sitting on cash it would've been a good day to go buying yesterday since almost everything in my brokerage account was flashing red. But alas, I had no war chest

Well, it's not just a Florida problem. The National Flood Insurance program charges way less to insure those Outer Bank mansions in North and South Carolina than they should. I saw an interview with the director of that program a few years ago on TV and he said something so stupid that it could only come from a bureaucrat. He said that they were raising the premiums a little bit each year and hoped to eventually get to market rates one day. In the meantime, people whose mansions were destroyed in hurricanes, just rebuilt them in the exact same spot using the cheap insurance they bought. When asked why they didn't raise the rates to market rate if they knew what they should be charging to make up for the losses, he said that if they raised it too high all at once then people might not buy the insurance and they wouldn't have any coverage. OR they might use common sense and not rebuild in the same area. Or they might build a small summer cottage instead of a McMansion. Or they might take remediation measures (hurricane tie downs on the rafters, sump pumps in the basement, hurricane shutters, build with cinder block instead of sticks). Or they could pay what it costs and not have low and middle income tax payers subsidizing your beach mansion.

I thought until recently that tech is going to make living in cities less desirable. If I can Zoom into meetings, why not have a bigger house further out, than live in a cramped apartment? Why pay for a lot of office space, when you can pay for a smaller space and have "hotelling" when people need to come in for a meeting? My thinking has gotten more nuanced on it. I was reading "The Logic of Life" by Tim Harford (it's a book like Freakonomics) and he was pulling up data about how tech makes living in cities more attractive. Clusters of specialized people (chip design in California, pharmaceuticals in New Jersey, Finance in NYC, biotech in Boston) lead to quicker advancements in industries. And tech like railroads, internet, food preservation, let's larger numbers of people in cities be viable with finished goods and food shipped from further away. Although we have email and facetime, you don't suddenly start engaging with people around the world. You use those tools to engage with people near you. You call your friends and email them, to arrange to do social things in your city, not have random interactions with people in a different city (COBF is the exception). I no longer think big cities are dying (despite the efforts of places like San Francisco to kill them), and there will probably be a need for office space that is somewhere between pre-pandemic levels and where it is now, which is the low point. But I don't know where that point is. It's going to take rational discussions about why we need people in the office and when rather than saying "we need them in here because we are paying for rent on this builiding". You are paying the rent whether people are there or not. I'm more productive at home because I don't have the distractions of people knocking on my door and saying "do you have a minute". But for people in a creative field or people who work better in groups, they may get a benefit from being in the office that I don't.

The funny thing is that Madoff had a legitimate business that would have made him wealthy enough, even for NY. And he got into the ponzi stuff. The ego is never satisfied. Similar story with super lawyer Marc Dreier. He had a 250 person law firm, where he was the only equity partner. The only reason this story isn't well known is that he was arrested about a week before Madoff. https://en.wikipedia.org/wiki/Marc_Dreier But this is a wild story too. At one point he made fake business cards and pretended to be someone from the Ontario Teacher's Pension Plan and tried to scam some investors into giving him money. And another time he claimed to be selling promissory notes for a real estate billionaire, and had a meeting in the client's office with someone he hired who pretended to be an executive from the billionaire's firm, to answer questions for the investor. It's fascinating because if you are a partner at a top law firm and have 8 associates under you, you will be very rich. I worked at a firm where their was only one equity partner and 60 attorneys. He's one of the world's largest art collectors. I can't even imagine how having 250 lawyers under you and keeping all the money could go horribly wrong and you end up behind bars.

In my copy of Security Analysis (6th edition), there are a lot of chapters by people who are well-known in the value investment community, like Seth Klarman, Howard Marks, Bruce Berkowitz and Tom Russo. However, I noticed a name that didn't ring a bell, Ezra Merkin. He made 1-1.5% fee by channeling his investors to Madoff. He agreed to payback over $450mm to investors. https://www.artnews.com/art-news/news/merkin-sells-310m-art-collection-amid-fallout-from-madoff-fraud-1162/ He was definitely a better salesperson than an investor because when he was running his fund, he had trouble generating alpha so he had a person trading for him who was convicted of insider trading (this is a story line in the Billions TV show). Victor Teicher wasn't trading for Merkin while he was on parole or subject to home confinement. He was literally trading for Merkin from behind bars. And when he saw the results for Madoff's fund, Teicher warned Merkin to not invest with Madoff because it was a fraud. But Merkin sent billions of his client money there anyway. He seems to still be around has money to invest: https://www.citybiz.co/article/297146/ezra-merkin-hedge-fund-manager-scarred-by-madoff-scandal-buys-into-orgenesis/ I don't know what the lesson is from this, other than this industry is full of shady people who live in nice houses and buy expensive things. I'm surprised that his reputation was good enough that he got to write a chapter in the previous edition of the bible of value investing. Didn't the other smart people figure out there was "no there there"? I think this would make a better TV show than the Madoff Netflix movie.

I don't know what this kid was thinking. But if the account is in your name, then so is the indictment. He's lucky that they closed him out the next day for a small profit. If he had lost money, then it wouldn't just be the SEC involved, they would probably have had him arrested. https://finance.yahoo.com/news/pretzel-shop-worker-committed-1-201647808.html https://www.sec.gov/litigation/litreleases/lr-25816

I noticed that the airport in Athens may be privatized soon. https://www.reuters.com/markets/deals/athens-airport-shareholders-clear-way-30-stake-sale-source-2023-06-01/ Don't know where else to put it since there aren't a lot of details, but this post seems as good a place as any.

I'm fully invested but a dividend payment landed in my account so I picked up a few shares of SWBI. It's down about 8% in the past couple of days ahead of the earnings release. It still looks cheap, has no debt, is buying back shares and growing the dividend. I think it will stay cheap until 2024 when the new factory is up and and running and they will have no need for more big capex projects and more cash available to distribute to shareholders or do buybacks.

added a little NTDOY and TAYD

https://techcrunch.com/2023/08/24/better-coms-stock-tanks-after-spac-combination-brings-it-to-the-public-markets/ Since this is the CEO who fired 900 people on a Zoom call, it couldn't have happened to a nicer guy.

Almost finished with the book and giving it a bump. There are just enough examples of investments and the outcome throughout the book to make it interesting. A good balance between just theory and just war stories. The Year by year summary of his investments in the back half of the book are also very good because you know what will happen with the world and he doesn't. I didn't get any hidden arcane techniques of what to do in a high interest environment, but it seems his approach was mostly classic Ben Graham (maybe that's what works best in a high interest environment?). He writes in a very folksy, readable style. I was surprised to find out that although he is not mentioned in the Super Investors of Graham and Doddsville list, he could be considered one of them. Although he didn't study under Ben Graham, he took an investing class as a student in Ohio and his professor was a student in Ben Graham's class at Columbia. A great book on investing that is not often mentioned, I would recommend it.

I'm not a hunter or a gun guy, but I looked into it quite a bit before investing. My understanding is that when people go to the shooting range to practice, they generally buy what is cheapest. If the ammo is low quality and occasionally misfires it's not a big deal, it's only range practice. When they buy the "self defense" rounds (i.e. hollow point), or when it's purchased by police, or the hunting rounds, they pay up. And for those, they tend to have brands they prefer. The ammo is fairly easy to make (which is why several low-end, or specialty brands exist). You need the gunpowder, the brass casing and the primer. The first two are easy to get and with some machinery you can set up a factory and start making bullets. The primer is difficult to make, and currently only four companies in the US make it (3 are owned by Vista Outdoor and one is owned by Olin). Recently, due to a primer shortage and unhappiness about the price spikes, a low-end brand (Expansion) tried to open their own primer facility. It failed miserably. So their is a kind of toll bridge that independent (US) ammo makers have to pay to get the primers. A foreign company, Fiocchi, which makes primers in Europe, is building a US primer facility for lead free primer (more expensive), but I don't think that will alleviate the toll bridge problem for the little guys.

Yes, even though guns can last 100 years, people like to buy them and just keep buying more. That's what took me a long time to come around to for gun stocks. If someone already has a gun, why do they need another one? They don't NEED it, but they think they do. "This is my home defense gun, this is my everyday carry, this is my small gun that I use for jogging, this is the backup gun, this one is my bugout gun, this is my hunting rifle for small game, this one is for big game, this is for target shooting etc." But I'm very interested in the ammo as a kind of model where someone is selling the razors and you sell the razor blades. Maybe someone will prefer the Beretta over the Smith and Wesson, but no matter which he chooses, he still needs to buy ammo for it, and he needs to keep buying it. And with Olin and Vista owning all 4 domestic primer manufacturers, even if the customer buys a cheap brand for use at the range, the no-name brand is probably still paying Olin and Vista. I'm not sure to what extent they are able to use foreign primers (the small ammo makers are private and don't share details), but it's something that I'm looking into. And yes, with Coke people drink it over and over again. Since the ban on tobacco advertising, despite the decline in smoking, it seems like it is calcifying the existing moats. People keep smoking and if they don't see ads for other brands, there is no social pressure to switch. And ditto for R&D in tobacco. They bought into companies that make vaping products because tobacco is not very innovative. The last piece of "tech" introduced by a tobacco company was the flip top lid in a cigarette pack. So if the moat wasn't so powerful, the lack of R&D could have invited an innovative competitor to disrupt them. Eventually vaping happened, but for decades they just chugged along and made money without having to develop new products because no one was foolish enough to try start a new tobacco company. I heard performance psychologist Gio Valiante say that "beliefs blind your observation." Railroads were terrible for a hundred years, but then when they weren't most people didn't notice because they had a belief about them that prevented them from looking at it with fresh eyes. Ditto about the consolidation in the aircraft and chip industries. I have some energy, shipping, and other things that hopefully have a better near future than recent past, but maybe the reason I was able to get in cheap is because of people's beliefs about the industry. The other possibility is that they are still cheap because I'm wrong, which would not be a good alternative theory. John Neff's "measured participation" method seems to be a good way to split the difference.