cobafdek

Early Season's Greetings everyone! http://www.mrmoneymustache.com/2014/04/22/brew-your-own-cider/ Start today and it'll be ready for Thanksgiving. P.S. Parsad, if this will hurt Russell Breweries, feel free to take this down.

This adjustment makes good sense. Do you have a reference for it (Damodaran?). Even if the "bad data" stocks were included in the cohort, maybe there aren't enough of these bad apples to spoil the whole bag, and the final results might not be too different? The key might be wide diversification, and the bag has to be big enough. So if you have any spare time (!), you could run the screen on Compustat unadjusted data to see how sensitive the results would be if one "erroneously" included the false positives.

west, this work of yours (and your posting of the results), is much appreciated. I have a general question about these databases upon which quant research is performed. I'm assuming, in the case of studies examining EV/EBITDA, that EV is defined as MV + Preferred + Debt - Cash. Have any of the well-known reputable researchers actually gone to the 10Ks to check the actual numbers? I'm sure you've had the experience of finding a stock on, say, Yahoo Finance or Morningstar, with an EV/EBITDA < 2, but when you simply look at the actual 10K, you find that you need to make obvious adjustments so that the adjusted multiple is higher, such as > 6. Such a large adjustment is possible, for instance, in the case of accounting for minority interest. In other words, running an EV/EBITDA screen on any database will have some percentage of "errors," or false positives, and it could be a very large percentage (possibly > 25%). This concern of mine does not detract from these research results, but, on the contrary, I think it might actually strengthen them. That is, an EV/EBITDA screen, that identified a group of outperformers, but contains a sizable number of such false positives, could be called a "Really Dumb" quant screen THAT STILL OUTPERFORMS, whereas the screen that could be culled into containing only the correctly adjusted numbers (the true positives) is merely a "Dumb" screen. I haven't looked at the famous quant papers yet, with the purpose of answering my question, and I haven't yet read Carlisle and Gray's Quantitative Value. Do you, or does anyone, know whether any researchers have performed the laborious task of checking the database numbers with the simple 10k numbers? Or are these databases already adjusted? Does anyone have a handle on the effect of false positives?

The Complete Basement Tapes (Bootleg Series, Vol 11) - 6 discs for $119.88. One share of BH - $348.38. Proof that BH is insanely overvalued. Q.E.D.

I heard about it here this past week: http://www.pbs.org/newshour/bb/bob-dylans-complete-basement-tapes-surface-first-time/

Reading this gave me the sudden urge to re-read Slaughterhouse Five, but I'm on the first edition of The Intelligent Investor, so in the immortal words of Billy Pilgrim, "But I'm not ready yet!"

I wonder whether Kirkland Signature could be considered a brand . . . . Our household shopping habits say it is.

Le più sentite congratulazioni! Do these returns include your real estate holdings? How is the total return on real estate? (Pardon my fixation on your potential Liguria idea . . .)

Taking the thread question literally, one would have to swill a lot of Pepsi while taking a breaks from Moody's Manual, then play a lot a bridge. Sometime in mid-career, after closing the partnership, you switch from Moody's cigar-butts at cheap prices, to long-term compounding great businesses at fair prices, and switch to Cherry Coke and Dilly Bars. Continue playing bridge. For me, the soft drinks are unhealthy and would detract from my performance. Playing bridge seems to flex the same cerebral gyri as value investing, so it might be of minimal marginal benefit to improving my thinking process. I'm with oddballstocks: physical activity is doing something completely different, and is healthy. Exercise should be interspersed in one's schedule. The guys on the Meditation thread a few months back are on to something useful, too. (A corollary, speculative question: would a soft-drink-abstaining, exercising, meditating Oracle of Omaha be a better investor?)

I'm confused as to what your position is here (and the general position of that Facebook group)... Does my position matter? :) Apparently, to many former classmates, it did. I received PMs asking when I became a Republican. (For the record, before moving to DC, I owned a Prius & tried to get my dad to buy a Nissan Leaf because he doesn't drive much anyway. My parents now drive my Prius. My position is in accordance with the stereotype of Prius drivers.) Yale's Business School (the group was set up for the 2014 & 2015 classes to communicate) has a lot of students who are joint degrees with their Forestry School and the entire school leans fairly eco-friendly. Amazingly, or perhaps predictably, once I revealed my personal position, the rhetoric toned down a notch. And yet, should it have? Nothing had changed in what I had said -- only the perceptions of who was saying it. Highly disappointing since we literally had a required class on avoiding these biases. I'm chuckling because your clarification is as clear as Alan Greenspan! Parsing all of the above, I guess you're on my side. Not that it matters, as you say!

I can't decide whether this article belongs here or in the serious SHLD thread: http://online.wsj.com/articles/malls-fill-vacant-stores-with-server-rooms-1415042980

Of course I had the same thought! ;) Alternatively, maybe the line as printed is correct: it could refer to momentum-trading and short-selling, and those were what Carnegie was condemning. Damn! I was looking forward to the pictures.

Gio Did the publisher employ a proofreader? Shouldn't that last line read "buy and selling shares in companies whose assets he knew were worth far more than the value of their stock"? P.S. Since Carnegie toured Europe, let us know if he saw Liguria and what he thought of it.

But this does, and should, apply to the IPCC as well. The only tools scientists have are the data and their models. The debate is about which interpretation is correct. Ridley, along the Freeman Dyson, Tol, and others, perform an important service in publicizing a rational alternative interpretation that is drowned out by the mainstream media. Listening to the hectoring tone of scientists like Al Gore, attempting to bully policymakers and the public into specific policy prescriptions by claiming the consensus is settled science, is almost enough for me to take the opposite side. All in all, though, I'm inclined to believe the IPCC scientific consensus on the trajectory and effects of temperature change, with the caveat that science does not settle or advance by consensus. However, even if the IPCC consensus is correct, I think Bjorn Lomberg's policy prescriptions are more practical and sensible, that it is better to spend trillions on severe problems that are more immediate with solutions more certain (like poverty, hunger, and disease in Africa), than on something as uncertain as long-term climate change.

[amazonsearch]The Intelligent Investor[/amazonsearch] This book obviously needs no introduction, at least the 4th and Zweig editions, so I'll just brag about my exploit. Just picked it up this afternoon for $3. Hardback reprint of the original 1949 edition ($35 retail, $21 amazon). From one of the county branches of the Friends of the Library Bookstore. It first showed up three weeks ago for $6. I gambled by waiting a few weeks, because this branch marks prices down from their already deep-deep discounts if the books don't move. I'm in 7th heaven, but feel free to shoot me down for risking letting this slip away. I'd be more interested in hearing previews of how this edition is superior or inferior to later editions.

Those of us geeks familiar with Bayesian probability terminology would acknowledge that value screens probably have poor sensitivity and specificity. That is, given a large sample of value stocks, an ordinary value screen may come up with only 30-60% of those that are truly value stocks, and miss the rest. And given the remaining larger sample of non-value stocks, the same screen will mis-classify many of those as value stocks, meaning poor specificity. That's why a great stock-picker, in an interview, can easily cite a home-run value stock missed by a screen, or a value-trap falsely identified by the same or different screen. In the medical field, a laboratory test with such poor screening characteristics would be rejected as useless, possibly dangerous. But for investing, a value screening approach will find enough great stocks to beat the market.

The "Timeliness" rankings in Value Line are interesting in this regard. Some people consider it a screen, but others don't because there are proprietary "quality" and momentum factors added. In public interviews, the professional money manager HAS to say this, even if he unconsciously doesn't believe it. He has to justify the existence of his business, that his process adds value to simple indexing or a mechanical quant approach. I recall an old Money magazine story about a retiree who went to the public library every week. He held all the stocks listed on the 2 pages in Value Line that were ranked 1 or 2 by Timeliness. Any stock that dropped off the list he sold, and bought any new listing. He beat the S&P by 5+% annually long-term. He also beat Value Line's own funds, which cherry-pick individual stocks based on their Timeliness rankings, and have expense ratios > 1%. This is more than good-enough investing for most people, and very humbling to many of us board members. So I doff my hat to the guys with the guts to manage outside money publicly. Hope springs eternal, and Buffett-like returns will occur, but extremely rarely.

Long before Buffett's widespread fame, I learned of Carnegie. In my elementary school years, I saw the name on a plaque in front of this library in the little town where I grew up. Lots of fond memories of hours spent inside: http://www.galionlibrary.org/about/

For some research, see p. 27 from Damodaran: http://papers.ssrn.com/sol3/papers.cfm?abstract_id=2042657 For experience, you probably already know about Schloss and his average holding period of 4 years. And I recall from an old Whitman/Third Avenue Value shareholder letter, his preferred holding period is forever, and usually sell mainly when they replace with better values, if any. Good luck to you (and me)!

A masterpiece! The Onion (financial edition) may be hiring. I'm tempted to link this over to the main SHLD thread, where it might pass for real.

Such would be the rare valuable woman! And more than justify the cost of the property! Especially if she possesses that fabled mysterious quality attributed to their gender: the woman's intuition for sizing up people. This intangible would add to your over-developed left-brain rational investment process, and assist you in evaluating those entrepreneur-owner-manager's you seek. Upside: she might have steered you away from a Richard Brindle before he jumps your ship prematurely. Downside: she might sense grave forebodings in the bling and ritzy excess of Mr. BiglariSardar, and you would be nagged for eternity until you sell BH. This female optionality with the Liguria investment resembles a DCF calculation: change the assumptions, and the valuation is in a completely different universe.

If having such a prize property gets (or helps you to keep) the woman of your dreams, it is not an unproductive asset. In this regard, for most (?) women, your stocks are unproductive assets.

Gives me a chance to review my random meeting notes. From BRK 2004: -Not thinking about the consequences of the consequences. -Not remembering the trite stuff: Don't try to outrun a train; don't use cocaine; don't engage in behavior that will get you HIV. -Not staying away from evil and irrational people, particularly if they're an attractive member of the opposite sex. From Wesco 2004: -We don't think about beta. From Wesco 2005: -To say "I want more, and therefore I have to get more" is how you get into trouble. -Not figuring out how best to deal with the hand that life has dealt you, and trying to get a higher return than the next fellow - it's an insane way to live. Better to lower your expenses and your expectations. From Wesco 2007: -Not avoiding certain streaks of nuttiness, especially envy, jealousy, self-pity (e.g., Mozart). -Nothing more nutty than to feel entitled, that life is unfair. Well, if your child dies of cancer, that is NOT unfair. -The excessive self-regard tendency: a lot of it is self-conscious, and all humans have it (e.g., Wolfowitz making stupid mistakes). -Not having the right wife (Ben Franklin's worst regret/failure). From "A Morning with Charlie" 2011: -Envy is the worst of all the sins. There's always someone better at something than you are. Envy is not only a sin: it's stupid because there's no fun in it. A reminder from the recent WisdomTree Investments thread: -Comparing apples to elephants in projecting long-term trends. Jeremy Siegel going all the way back to 1802 to project future stock returns - he's demented, a nut case.

Probably correct, but the wild card is viral mutation. There is a "dumb virus" theory held by some virologists. A virus with a case-fatality rate of 90-100%, while extremely virulent, is also dumb in the sense that if it kills off all its early hosts, it diminishes its chance of spreading. The Ebola virus was discovered in the 1970s and was observed to have those case-fatality rates. Around 2006, a new strain was found in Uganda in the Bundibugyo district, hence called the Ebola-Bundibugyo variant. It had a case-fatality rate of 30-40%. Another different strain was identified in the Sudan, with an 50% rate. Both of these rates are extremely high, but what's important to note is that it is also much lower than previous strains. One hypothesis is that the viral RNA underwent a successful mutation that allowed easier transmission and/or better host survivability. This is one consideration that has the experts worried. On the other hand, a mutation enabling airborne transmission is still probably unlikely. Here's a good article by an MD (although it is from that well-known medical journal called Forbes): http://www.forbes.com/sites/scottgottlieb/2014/09/03/can-ebola-go-airborne/ Stay tuned.

From a purely public health/epidemiologic standpoint, this is correct. The two major spokesmen on the news (Fauci at NIH, Frieden at CDC) are top-notch, and I would bet if they were wearing only their medical scientists hat, they would have quarantined travelers at the source. Unfortunately, they also wear government hats, so the leper colony idea is politically incorrect. Higher-ups (Obama?) made the judgment call to allow travel overseas with "screening" at selected major airports. So a "politically incorrect" factor may turn out to have political implications in the upcoming elections. It fits into the narrative of Obama overruling the experts (witness Iraq).