scorpioncapital

Only those who are long-term financial investors pay the low 15% rate. Therefore, Buffet's argument is to raise taxes on LONG-TERM investors, not short-term investors or millionaire entrepeneurs who pay the standard, higher rate. I find it interesting - does he believe that long-term investment in America is taxed too little and short-term investment in America is taxed just right? In all his other interviews, he claims that short-term investors should be TAXED MORE than long-term investors. Or maybe he's just talking about billionaire long-term investors only which is a limited pool but somewhere to start.

"Therefore, if CRA wants to say your trading is business income, just put your assets into some sort of trading entity, such as a trust or corp....of course there are costs involved but the concept seems sounds, which makes CRA's position a bit...dumb. " The same issue, profits on account of income or capital gains classification occurs in a Canadian controlled private corporation.

I've read dozens of cases on the tax canada website a year ago regarding this issue and the US judgement seems almost identical to the Canadian cases in terms of criteria. The biggest red flags are trading the same stock on the same day, or trading in and out of it within 30 days on a relatively large scale. The whole issue is also complicated by superficial loss rules, if you sell a stock within 30 days and buy it back, you are deemed not to have a loss and add the loss to the cost basis of the stock - for capital gains treatment in the future! Regarding T-123, view: http://www.cra-arc.gc.ca/E/pub/tp/it479r/it479r-e.txt , it explicitly states that if you elect this method, you will get capital gains treatment even if you are a trader. This is a benefit Canada gives to Canadian security investors vs. foreign. Another reason to own Canadian stocks if you trade in and out frequently.

I spend time around investing subjects for entertainment purposes, it does not necessarily involve actions on my portfolio. I find it very hard to believe that gaining "knowledge" alone, for fun or potential profit can be used against you in this way. And that's the point, it's a conjunction of factors, not just one. Just buying a stock for long-term holding on margin is unlikely to trigger this distinction either. Just buy insurance...obviously transaction volume is most likely the largest input, so trade less and when you want to sell part of a stock, don't sell it in little lots over several days, just sell all that you want to sell in one transaction. Go to financialwebring.org, they discuss this topic extensively in the message boards, you can do a search. You can fill out form T-123 and PRE-CLAIM all your security transactions on account of Capital instead of Income IF the securities are Canadian! No such benefit for trading in US stocks. This analysis of a tax case may be instructive of the thought process, there are many cases on tax court of canada website: http://www.deloitte.com/view/en_US/us/Industries/Private-Equity-Hedge-Funds-Mutual-Funds-Financial-Services/c1d38d52c7171310VgnVCM1000001a56f00aRCRD.htm . Notice in this case, the person was classified as capital gains instead of a trader. You can see that the criteria for trader status is quite high. I mean, in my book this guy was definitely a trader, but not for CRA! I think for all intents and purposes, only a day trader would fall under the business income rule. I mean all you have to do is not buy and sell the same stock on the same day and hold if for 30 days or longer. Not hard to meet this criteria at all.

The difference between investing and other games is that in other games you actually have to work just to get average - since everyone else is trying to do the same, you have to think just to tread water and not do anything stupid like jump in and out of stocks cause you're panicking. What makes investing an easier game is that to be average you just have to buy an index and do nothing. I know of no other game that is quite that easy - to get average that is. As for talking fund managers I find many do have open houses and you can just go up to their office and talk to the manager, don't be shy.

For managers less than 10 years, I would track -incremental improvement. Say 2% above average in first 3 years, then 3% in next 3 years, then 4% in next 3 years. Actually it doesn't matter as long as the number is going up. -I would track number of decisions made because one can be lucky and just "play once" and outperform big. So set a minimum number of investment decisions made that you would like to see that you think would cut out the noise. - I would track a third variable, not related to investment selection but impacting on it significantly which is (mental) concentration ability and this can best be seen if you can somehow meet the person or read their literature to see how they interact with partners and how they think about the investment process.

It's for you not to be extremely skilled in investment selection (nothing wrong with that, being average works) and choosing a partner in the form of an investee that is equally unskilled. That's a sure way to lose money. Having a skilled partner or you being the skilled investor both work, but it doesn't work well when both players are average or worse, then the result is naturally average or worse.

If I ran a hedge fund I wouldn't ask any of these questions as they are largely irrelevant. I don't care if the guy or girl knows anything about money or finance, that can be easily taught. What I care about is the operating system in their head. For that, you have to ask questions about how the person thinks about problems, what is his/her ability to concentrate, partnership dynamics, what is their general approach and principles. Like Munger says, I want to know if the person has the right mental models to approach any problem in any field and that they don't suffer as much from the psychological and behavioural pitfalls that many people do.

Well, $18 million * 35% = $6.3 million tax savings. Let's say a 10-15% IRR, so $10 million capital will generate this amount in say 4-5 years, let's say 5. Interest rates likely to be 1-3% over this period so the value is pretty close to 5-6 million. Chop it in half if you're uncertain how or if it will be used and give it a value of say $2.5 million.

I'd do the same thing as the Greeks - take the money and run. If somebody gave you free money and it was a question of forgiving 50% vs 100%, why not go for taking off with all the money? You've already been painted as a "criminal" why not go all the way? You have to admit it was pretty stupid for the givers, regardless of how much fudging the takers were doing.

You go through problems, not around them...Does it matter when you own a business for years and years what the stock price may be here and there? You go through it - on the other side is a pretty nice pot of gold.

Summers is one of the most astute and intelligent people I've ever had the pleasure to hear speak. I always listen very carefully and weigh his opinions against my experience and understanding.

How come they don't translate their track record of predictions into a track record of investment results?

"All entities are fine, 77 trillion in networth - How would US Government transfer those assets to its own balance sheet without suspending the bill of rights?" Let's say $70 trillion in assets return just 2-3% (10 year treasuries?), that would cover the annual deficit of 1-2 trillion. The government has no wealth so obviously it comes from people through taxes, modifying contracts, the sale of public assets. Basically, all we need is a wealth tax of just 2% on all assets, which means people need to get maybe 4% to break even. But actually, the government is already doing this through inflation. Inflation at 2% is just that tax. So I think we'll be just fine over time.

You may want to look at this chart of US wealth: http://www.federalreserve.gov/releases/z1/current/z1r-5.pdf Something like over 100 trillion for all entities.

This article's conclusions I found extremely interesting why 2:1 leverage is actually a good thing for young investors: http://islandia.law.yale.edu/ayres/Life-Cycle%20Investing%20Working%20Paper.pdf I especially found the idea of LEAPS interesting. Consider the case where an investor receives a marginc all on stock. If they roll-over the remaining stake in 3 year LEAPS, they can now wait out a recovery, in 3 years they can buy back exactly the same amount they had leveraged 3 years before. If the depression continues or worsens, they can roll over the leaps. Given this logic, why not buy the deep in the money LEAPS initially, assuming the spread to market price is small AND the stock pays little to no dividends.

My tip for investing full time is to do it part time, and even better no-time. Inaction is brilliance (I know sounds kind of Zen). The way to do this is to practice what I call "constructive hypocrisy". It means that you do not actually do what you appear to do. Read, post, talk, but inside your head say this is all really for amusement and in no way will I act on these noises!

http://www.hks.harvard.edu/fs/rzeckhau/InvestinginUnknownandUnknowable.pdf

Sorry I meant 20% ROE with 30% debt vs 30% ROE with no debt.

After about 5 years, an unlevered company with a higher ROE will trump a levered company with a lower ROE, by a reasonable margin. A company with high ROE and some leverage will trump both. After 20 years, the difference between a 20% ROE and a 30% ROE is 3x as much money and even 30% debt won't come close to bridge the gap. You would need multiples of debt to equity and even then it's a close battle.

"The average price of an ounce of gold in 1980 was about $1,825 inflation adjusted dollars, while the single peak price was about $2,350 in 1980. At $1,900 per ounce, gold is now higher than the average 1980 inflation-adjusted price" A 30 year real return of zero, while the S&P500 went up something like 6x. No wonder many smart investors consider gold a foolish long term investment!

Only thing I'd add is it appears there are 16.5 million fully diluted shares for a total market cap of $55 million Israeli shekels which translates to 15 million US dollars, so it seems to trade around book value based on the bloomberg equity of $16 million USD.

I can't find Natural Resource Holdings filings on Magna (http://www.magna.isa.gov.il/Default.aspx?lang=en) anybody know why? Looks like an interesting investment and I want to buy in!

Are many juniors worth zero because they run out of cash before getting the minerals out of the ground or because they don't have the minerals they think they have?

Awesome find, Rick is one of my favorite value investors and think he is relatively unknown since his expertise is in resources but his track record, knowledge and wit put him right up there with Buffett in my mind.