scorpioncapital

If interest rates are zero (or negative after inflation), 15x earnings for S&P500 is very cheap. I would expect it to climb much higher. Maybe 30x earnings is more reasonable actually.

How can we short japanese bonds like he says? He thinks japan is a disaster waiting to happen in 2-3 years. Is shorting bonds or other derivatives possible? What's an easy solution via a us discount broker who does options/derivatives?

Goodwill is an attempt to represent equity valuation on the balance sheet as opposed to the share market. It's the difference between cost and market value. It represents the essence of investing really - you can see all the smart or bone-headed deals a company has ever made in the goodwill. Conversely, you can see how they mark up or down their organic business based on what they think the cash-flows are. It's a great way to see the insider's opinion about business value as opposed to the market or your own.

An article in the globe and mail investing section today about how financial repression and inflation both swindle the saver and creditor. But I don't really see the difference between the two concepts are they not in fact the same thing?

I don't think calleability of leverage is particularly that important. The central issue is the success or failure of the investment. Whether my loan can be called and I lose part of my shares or investment seems to mean very little even if that loan can't be called and it has dropped to such an extent to make my return very low. If my house is worth half of what I paid for it and I have to wait 10 years to get to break-even, the penalty is in the rate of return, not that I didn't lose my house. I could very well lose my house, and use whatever cash is left over and make another investment. As a sidenote, a major study was done showing that even with margin calls, young people would still have a higher overall return if using leverage than just cash. The conventional wisdom is that recklessness doesn't pay off, perhaps this is only a half-truth. The truth is that recklessness in investment selection is far more damaging than recklessness in financing that investment.

Unless you trade in foreign currencies, I don't see much need to keep any records as the broker has all the data and calculations. For example, my broker even provides an annual statement with cost based, realized gains, etc.. Therefore, I've concluded foreign currency is the only enemy

Nobody says it but Germany is equally to blame in this crisis. For a decade, they have been overstating their exports. The greeks cooked their books, but in my mind, the Germans did too. 40% of their exports went to their Euro friends. But since the money to pay for that was partly a fiction/vendor financing, then German exports was partly a fiction. The difference is they got the money in Euros up front and now don't want to give part of it back - that's money that should never have been made because the buyers of the goods didn't actually have the money to buy them.

Phenomenal interview! At the 24 minute mark, he names two (French?) philosophers about the truth being in the details. Did anyone catch the two names and if so could you post it here?? Thanks!

Interesting, so perhaps the massive inflation came during WWII?

Google says that $1 is 80 yen. That's an 80:1 ratio. Many major currencies don't have such a huge conversion of nominal figures. Does this mean that even after 20 years of deflation, Japan must have had a massive inflation before that?

there must be an asymmetry of information between buyer and seller. If there isn't, don't expect a good deal. Without a good deal, don't expect an outstanding return. Usually, the seller has better information, but not always. If you see something they don't see, you can negotiate the types of deals that are worth making.

Your tax reporting currency is what matters. If the stocks you trade are in another country, you will most likely have to convert it back to home currency, so I don't really see a way around it.

The cost basis is in the base currency. Unless they changed it, all they do is use the forex on the date of the report, not the date of the purchase of the stock to calculate cost basis. For what it's worth, what I do is use Excel. I use a VLOOKUP and download forex data, then I download the statement data and use the function to convert every open lot basis to the desired currency and the sale price as well since IB statements have the date code for the transaction it can be matched up with the forex for that day, the difference is the actual gain in the desired currency. Takes about 30 minutes to do per year.

") if you hold foreign securities, once they are sold take the IB sales price minus the IB realized gain equals your cost basis (i.e. IB does the FX calculation for you" Are you sure this is true? Purchase Price : $40/share * forex = adjusted cost basis (ACB) Sale Price: $50/share * forex = adjusted sale price Realized Gain = adjusted sale price - adjusted cost basis If you use F/X mark to market data can you associate that with individual lots, unless you sell your entire stake?

http://www.bloomberg.com/video/91747701/

He's right... and a very smart man from the books I've read by and about him :)

Asian culture has been eating lots of carbs in their diet for centuries, diabetes has been low and you don't see much obesity. I think it's something else...maybe glycemic index?

Ian was the older one, perhaps we'll get another 10 years from the current president who is his close partner!

"I kind of like the Kelley bet, which is 2*conviction - 1 for how much to bet/invest. e.g., an assigned 60% chance of success gets a 20% position (120%-1), though I might set the bar a little higher in general" I'm not sure how correct this formula is in the real world. Conviction = 100%* 2 -100 = 100%. But this is crazy, the amount to bet in this situation in a margin account should always be > 100%.

can't delete msgs here?

Derivatives can be excellent financing vehicles, but other than that, the analysis is exactly like buying the company's stock.

moore_capital, I understand your frustration. They have bought and sold dozens of investments over the years. Their target return is 20% per year, sometimes more sometimes less. I think there are many ways to reach that goal.

"However, the latter two documents are filled with charts proclaiming the company's bright past and bright future, and the former two are more about the company than the individuals that run it" You've answered your own question :) If your mental model says that an annual report should be written in a certain way and that glitzy charts are a bad sign, then you might decide to pass. I think Buffett once said that you want an annual that speaks to you as opposed to be a marketing piece created by the PR department. Conversely if you see nothing wrong with this, you may consider meeting them in person at a meeting. Watch words, body language, dress, everything, you want signs of things that translate in your mind into integrity, skill, genius, and drive. I tend to look for interesting eccentricities, especially if they suggest a correct, but minority point of view.

This is a good strategy. I posted it here somewhere else but Ian Ayres and Barry Nalebuff from Yale have done a study that shows young people should absolutely use margin to invest and that even accounting for all the margin calls and having to sell out, the net gain was still higher than a cash only account. I've always wondered why people are so afraid of margin calls. You get a call, you sell stock, and when the stock recovers, you buy it back. *All of this assumes you choose the right, relatively solid companies, and not basket cases headed for bankruptcy*

Omission bias. If you make a mistake by your actions it is perceived as worse than if you make a mistake by not acting. Thus, being average, while just as bad, is considered less of a failure than swinging for the fences and being wrong.