SHDL

I'm about 80/20 preferred to common. I'm expecting the recap to take some time and the dilution issue to put downward pressure on the common. If we know for sure commons are ok then I'll go all in common if the price is weak enough for a multi bagger return on a sure thing. Anyone adding to their position with the recent news? Or waiting for something more "sure" - a court decision, an endorsed plan, etc.? (Count me in the second group - still a speculative position for me.) I'm torn between adding because outcome appears to be getting more positive than what it was a year ago and Reducing exposure because the price reflects those developments, we've been burned by rallies before, and it's what prudent risk/portfolio management would advise. I think I'm gonna settle in the middle and just hold what I already have recognizing that the 2-3x appreciation we've seen increased the position for me. I bought a few more preferred shares this year. Not too much though. For position sizing I’m currently using a model where, within a year or so, the investment “works out” with probability p, in which case I get back a fraction f of par, or it doesn’t (with probability 1-p), in which case I get x. My (subjective) belief at the moment is that p >= 80% and that the distribution of f should be no worse than a uniform distribution between 50% and 100%. I have no idea what x is but I know it’s >= 0. So I ran some simulations using my most conservative/pessimistic assumptions (p=.8, f~U[.5, 1.], x=0), and from that I got an optimal portfolio allocation (in the Kelly sense, assuming there are no competing investment opportunities) of about 25%. That number is of course very sensitive to the inputs, but having played around with them, I decided that I feel fine with, say, a 10-20% position, so that is where I’m at. My general view of this bet is that the expected return may no longer be spectacular but it is still pretty high among those opportunities where one can reasonably expect a very low (in fact close to zero) beta. I happen to be somewhat macro bearish at the moment so for me that is a big plus.

Good question. I’m not sure if I have a goal at this point really, it’s more like a hobby that happens to make good money when I do it well.

A look into how well the early investors have done (or should I say, will have done assuming the current valuation holds up): https://www.wsj.com/articles/uber-jackpot-inside-one-of-the-greatest-startup-investments-of-all-time-11557496421?mod=hp_major_pos16

Very good point.

Yeah, to me the key strategic consideration here is that the people who set the IPO price seem highly motivated to get the stock price “pop” when it starts trading - even if that means accepting a lower IPO price. And, as we all know, buying from a motivated seller tends to work well.

To me, value investing is about making sure you pay less than what you expect to get back. Now “what you get back” can mean different things based on your strategy. If your plan is to get a few shares in the IPO and sell them as soon as the stock starts trading, then what you get back is the price at which the stock trades at the open. On the other hand if you are going to hold the stock forever, then what you get back is the income stream you can extract from the business over time. To me it looks like UBER could be “good value” from the former perspective but probably not from the latter. I personally try to avoid getting involved in situations like that, but that doesn’t mean it’s a bad idea if you know what you’re doing.

Whenever I see this I just assume the author is a member of a royal family.

I think there are two ways to approach this: The first and more obvious approach is to short cyclical and highly levered companies. Even better if they’re already burning cash in this economy. TSLA is probably the most talked about stock in this category, but I’m sure you can find others. These are probably better as straight shorts because the puts tend to be expensive (for obvious reasons). The second approach is to buy put options on securities where you think the downside risk is under appreciated (and therefore volatility is underpriced). I’ve been thinking about doing this with a corporate bond ETF but I haven’t pulled the trigger. Gundlach’s recent pitch of buying a straddle on something like TLT falls into this category too, although I’m not a huge fan of that idea per se.

Suddenly the issues discussed in this topic becomes interesting - SHDL: Why do you think this is hard to understand from outside the US? It’s just my guess based on what I’ve seen, namely the stark contrast in terms of how teachers/educators are regarded outside vs inside the US. I’ve never lived in Denmark though, so I may be missing something crucial! ;)

It's an unfortunate view, but it's somewhat supported by data in America. While most of the world pulls teachers/professors from the upper quintiles of students, teachers in America tend to be more representative of the lower quintiles. That doesn't mean there aren't good teachers, or smart teachers, but that they are vastly outnumbered. Yes, based on what I see, I agree.

I'm not a big fan of the American obsession with this notion either. In fact I think it's unfortunate. But, although I'm American, I'm also what people call a third culture kid, so I don't think my views are representative of the general population here.

There’s a famous quote from George Bernard Shaw that goes “those who can do, those who can't teach.” It’s a fairly commonly held notion among Americans, and explains well the general lack of respect for teachers in this part of the world. Anyway, I think that is one of the deep reasons why people around here like to make fun of people like Tilson, whom many regard as a stereotypical “teacher” of the investment world. There's a cultural idiosyncrasy involved that may be hard to understand from outside the US. :)

Everyone likes to call my city a swamp. So when a random, overly friendly guy on the street asks me where I’m from I tell him I’m from Dagobah. Almost always the guy tells me his aunt lives there and absolutely loves it. LOL, poor aunt.

I’ve been playing around with some numbers/simulations on this lately and the type of “barbell” strategy discussed here is growing on me. Not 75/25 obviously but it may be worth considering.

He did also say something like among those things that one could expect to slightly outperform the S&P, BRK should be among the safest. So I think on a risk adjusted basis he personally much prefers BRK.

A dude on the phone with his father, a grumpy old retired econ professor: Dude: “Hey dad, guess what, I just became a millionaire.” Dad: “No you didn’t.” Dude: “How do you mean?” Dad: “You just converted your human capital into financial capital. In other words, you just sold your life for money. You were always a millionaire, you just didn’t know it.” Dude: “Ok, but no dad, I didn’t just save my salary, I made a killing in the stock market!” Dad: “That just means you used the wrong discount rate.”

Congrats, that’s quite an accomplishment assuming you started from zero. I remember first passing the $1m mark because it happened rather quickly thanks to a concentrated position in a stock that went up 5x or something in less than a year. Of course I did a round trip on that one, and it took me a while to get back to $1m again. Hopefully you will only need to become a millionaire once, not twice like me. :)

The guy nails it. These articles should be required reading for anyone interested in the Japanese stock market.

It sounds like the Fed is making a move that could eventually allow Berkshire to own more than 10% of a bank holding company without triggering Fed oversight: https://www.wsj.com/articles/fed-eases-restrictions-for-bank-investors-11556045487

Apparently Didi, which dominates the Chinese ride sharing market with something like a 90% market share, is still losing money: https://www.wsj.com/articles/didi-dominates-ride-hailing-in-china-but-still-loses-money-on-each-trip-11556021083?mod=hp_lista_pos4 Some quotes from the article: So a near monopolist is struggling. That says a lot about the industry.

This discussion reminds me of a nice quote from a VC who lost a fortune in the aftermath of the dot com bubble that went something like “no great thing has ever been accomplished without irrational exuberance.” His point was that financial bubbles can actually have a social purpose, which is to encourage people to take chances on certain high-risk-high-return endeavors that otherwise would have trouble getting adequately funded. That is a great observation, and my guess is that the human brain evolved in a way that makes them susceptible to occasional manias for exactly this reason.

I did mean several decades. For example if an anomaly exists just because there is some idiot involved in a certain name, it may be reasonable to expect that to continue for a few weeks but probably not for decades. I guess my point was that if AI is going to detect patterns it would be useful if those patterns persist; and in equity markets I am not sure the there are long term persistent patterns I guess we share the same skepticism then. I do think some patterns will survive forever though - like if you buy cheap you should do better all else equal. That’s one of the big reasons I believe in value investing.

I did mean several decades. For example if an anomaly exists just because there is some idiot involved in a certain name, it may be reasonable to expect that to continue for a few weeks but probably not for decades.

The story is that this is what Renaissance Technologies has been doing since inception. From what I know they seem to focus mainly on relatively small short term trades where they can exploit whatever patterns or anomalies they find in the data. They then milk each trading strategy until it stops working, at which point they move on to something else. I think it’s much harder to do this sort of thing as, say, a long term buy-and-hold equity investor because of data limitations and the fact that statistical relationships between financial/economic variables may well change over the course of several decades.

Best story of the day: https://www.cnbc.com/2019/04/18/investors-appear-to-trade-wrong-zoom-company-shares-before-ipo.html