watsa_is_a_randian_hero

I've been a CNRD investor for the past few years (not quite as well, but a multi-bagger). I remember reading about AKER but can't remember why I didn't invest now (this is why I try to keep notes on all of my reviews and rationale for decision made). You say this was a case study for you. How dd you find Aker? What was the rationale for buying at the time - valuation alone?

I spent more money on taxes last year than I spent on my living expenses for my own family. So if they all died, my costs would go down. And with that I'm ending this convo

Ok, but he has still added value by choosing the best cow to milk. Just the capital allocator is dependent upon entreprenuers to generate ideas to choose from doesn't invalidate the fact capital allocators provide a valuable service.

I'm sure it is the same with cows as it is with companies; not all cows produce to the same extent. Some are healthier. Some are more predisposed to falling sick. Capital allocators choose which cows to milk.

To the extent you are retired, your life is being sustained by the the current work of others, paid for by your deferment of spending of earnings from your past work. IE, you are still living off of the current work of others. Think about it this way, if every other member of society aside from your family were for some reason to die overnight tonight, does it matter how many ounces of gold you have, real estate you own, or factories you own?

If your contribution to society is efficiently allocating a few million dollars in a multi-trillion dollar market, you haven't contributed much. Lol. Agreed the benefit is tiny at that level. So small it would in most cases probably be the equivalent of less then minimum wage if it were measureable. Simply put, it is unlikely the highest and best use of that person's time. However, you have contributed something. I (think) what is being discussed here is whether it is a net positive, neutral, or net negative effect on society.

Your welfare system comment unnecessarily complicates the example. In any case: 1. If you "retire," you still have to live off of someone doing work. Think about it; if every member of society started saving half his/her income each year in the hopes of retiring early, you couldn't satisfy them all, or else there would be nobody to produce the goods/services demanded by retirees. In both cases you have 20 people living off of the current productivity of 19. In the first case, you have 20 people living off of the productivity of the 19 most productive members of the village, in the second case, you don't. 2. I already mentioned my statement that profit is indicative of value add to society presupposes a free market. 3. Your comment and erics assume that there are a limited number of jobs and that just because eric retires someone else will be hired. perhaps nobody else is hired. Perhaps the company he worked for goes bankrupt and jobs are destroyed because he was such an integral part to its success. Think about what you think would happen if the top 5% most productive smartest people all decided to retire. Do you think their productivity could just be "replaced" by unemployed people?

Say you have a town, with 20 people, and 19 are employed. The first 19 are employed because of the 20, those 19 are the best suited for the jobs available. If one of the 19 chooses to withdrawal from the labor market, is the village better off because now the least qualified of the 20 can be employed?

This would be better stated as "we choose the cow to milk." I think the juxtaposition of these two statements makes clear and epitomizes my argument.

I'll stop you right there... I am a passive investor. (I buy shares in companies and also allocate dividends) Buffett is a passive investor. (Berkshire buys companies with management intact and just allocates the dividends) So if I work "like Buffett"... then... what will happen? this is false. neither of you are passive investors. a passive investor owns an index fund. youve made buy/sell decisions on individual stocks, and so has buffett.

I think the fruits of labor of the capital allocator may be more visible in the debt markets than the public equity markets. -If a company wants to expand and needs additional financing in order to do so, they are dependent upon this market. -If it is a project that is likely to be popular with that company's customers, it will be profitable. If it is a project that will enhance productivity saving the company money, then it will be profitable (and customers will benefit in the long run through reduced real cost). If it is a profitable project, then the company is more likely to get its financing. This capital allocator distinguishes between a proven farming technology that will reduce long term costs or enhance crop yields and funding for a man who wishes to become an auto dealer in Alberton, Montana (population <500). -The capital allocator in this case chooses which projects get funded and which do not. There are likely an excess of profitable projects choices and a shortage of capital; in this case the most profitable projects will receive favorable treatment and lower interest rates. The converse is true for the least profitable. All of the above is true of the debt markets (and more visible). The results are most visible in the debt markets, and maybe next in the private equity markets. The results are also most visible on the large investor, institutional scale. However, that doesn't invalidate that at the margin the small capital allocator in the public markets is beneficial to society.

to the last 2 posts quoting me "+1"... 1. I had previously addressed 2 examples that touches on some of these (Scroll up). 2. I guess I should clarify my position that a profit made in a free market (devoid of crony capitalism) is due to the result of doing something good. This also presumes that laws regarding property rights, theft, fraud, and externalities of behaviors are enforced. 3. Regarding munger...??? I don't know what you want me to say to that. You are clearly quoting someone who said an exaggeration and generalization as though it is gospel. I'm going to turn your quote "Are you kidding me?" back on you with this one. I dont want to hi-jack this thread and turn this into a totally separate discussion (the thread is about whether investing results in a societal benefit, which I believe it does). If you want to discuss the topic of whether any profit is good for society more, feel free to PM me.

2 separate interpretations of this come to mind. First is related to profits from items on the black market (ie, drug dealer), and the second is related to fraud/theft. 1st - to the extent a black market profit is achieved, most of the time I think its still a sign of doing good. You are providing a customer with something desired. The exception is for items used to assist in future crimes (if you are aware of this), such as a dealer of weapons to a terrorist group. 2nd - to the extent your wealth is derived from fraud or theft, this is not "profit." Bernie Madoff did not "profit" from his ponzi scheme...he defrauded investors and committed theft.

+1

From a societal point of view, I would have to disagree Eric. The economy is not a zero sum game. Your leaving the labor pool did not "open" up a spot for someone else. Your act of leaving the labor pool reduced the percentage of people working. Your statement is very anti-supplyside economics. To the extent you are rich and continue to work, (like buffett) you provide to help society become more efficient and produce productivity gains. Even if your work is limited to investment decisions, you are helping society allocate capital efficiently. To the extent you retire and do not work and put your money in an index fund and just spend down your retirement, you cease to provide society any benefit. However, this is not necessarily a bad thing; it is your reward for providing a large benefit to society in prior years.

I am leaning towards not doing this. Reason is it would result in me either (a) needing to delay my job exit to start my own business or (b) not delay my own business but risk needing to annuitize or withdrawal from my IRA in 5-10 years from now.

I've looked at this fed data before. What I'd like to know, is how does my net worth compare against my cohort? Ie, of 25-30 year olds with a college education, what percentile is my net worth?

Thanks. I know that in doing an after-tax ira conversion to roth, you are supposed to treat all IRA's as one in determining a pro-rata basis. I also saw a similar rule for after-tax 401k conversions. However, does anyone know whether the basis for the after-tax 401k conversion must include any other ira accounts I have in the pro-rata basis calc. I guess for example, Say I have the following: Roth 401k: 2k 401k: 60k IRA: 200k: Roth IRA: 100k Say I want to contribute 20k after-tax to a 401k, and them immediately rollover to a Roth IRA with no earnings or losses. Is the basis: A. 20k B. 1.81k (20*(20/(200+20))) C. 1.42k (20*(20/(200+60+20))) I am hoping the answer is A ...

can someone help me with the mechanics here? I am technically rolling it to roth in a similar way a ira-to-roth conversion would be done, correct? It looks like I will owe tax on the earnings? So if I roll to a roth, I will end up with +/- earnings/loss for the time period between when the contribution occurred and when the rollover form can be processed? Also, there is a high likelihood I will need to tap my IRA assets before 59.5 in order to fund my lifestyle if/when I quit my job to focus on asset management. Roth IRA principal can be tapped penalty free up to your contribution basis. For roth conversions and after-tax 401k roll overs to roth's, is this counted towards the principal contribution basis? any other issues/pitfalls I should be aware of?

WOW - thank you James22. I never realized that was possible with after-taxed non-roth contributions. My company does allow for after-tax non-roth, and i called me provider and they claimed they allowed in-unit distributions of these at any time. I have an email in to our HR for more info. thanks!

I struggle with this same decision. I want an income of about $250k pre-tax for our family. We have no kids now, but will. Variables I consider: -A withdrawal rate must be considered in the context of taxes and inflation. I think 5 percent is something I would consider conservative. If I cant return an average of at least 5% after inflation, the highest and best use of my time is going back to work full-time, and not portfolio management. -2/3 of my money is in IRA's/HSAs/401ks. While this could be tapped without penalty via annuitizing my IRA's, this would not be the most beneficial thing from a tax perspective. -I could go back to work if I needed to, so there is no catastrophic risk to our family if I fail to generate high enough returns. -My wife may work once we have kids (not sure). -I have an income from managing assets right now; this income will grow over time, and hopefully accelerate once I focus on asset management full time (reducing need for reliance on portfolio for income). -I could potentially have part-time consulting gigs bringing in extra money (reducing need for reliance on portfolio for income) Considering all of these factors, I am hoping to have around 2-3mm before I break off, with 1mm in taxable accounts. I am also hoping my income from asset management would grow to 25-30k before breaking off, and my wife would continue to work once we have kids.

I'm not familiar with that; I think you may have me confused on that situation

I have used leverage in the past and don't think there is anything wrong with it as long as its prudently managed. Keep in mind that insurance companies are levered, but typically the majority of assets are fixed income/lower risk. I think its rare to find an insurer with its book value leveraged to equities.

are you self employed? do the SEP or individual 401. You don't have the same income limits then. If not, I wouldn't bother contributing until you know what your income is. It wouldnt be worth the hassle of trying to reverse. If your income is very low or negative in a year, thats when you should convert your IRA's to roth!

I agree with the complaints as well; bought it up before as well, not many others wanted change at that point. for me, the following features would be valuable: -ability to follow specific posters -peer ratings on posts (1-5 stars) -peer ratings on posters (1-5 stars resulting from the average rating on their post) -ability to filter for posts meeting star threshold -ability to create sub-topic folders under investments such as AAPL, so that the discussion can be organized into specific sub-topics.