SharperDingaan

No .... BK is entirely appropriate. If I make an investment, & lose, I do not get bailed out for being stupid. Education is an investment. If the market were corrupted; trades would either be cancelled (ie: flash crash), or recompensed via class action (ie: LIBOR, product miss-selling). Where the required correction is large enough to be an immediate & sustained threat to all society; government intervenes to mitigate the impact (ie: housing crisis). Not every student over-borrowed, & those that did over-borrow are a threat only to themselves - not society in general. No bail-out. Government loans, & outstanding taxes, don't discharge for very good reason; and those loans are offered by society because it is highly advantageous overall to have an educated workforce, & re-payment is guaranteed. Some abuse is expected, but it is not permitted to stop loans to those who would not otherwise be able to go to school. School or no-school is the students decision - because they have to pay the loan back. Most students are borrowing on the implied intent of never paying the loan back, the same way you never intend to repay your mortgage. Debt service in both cases is paid from ongoing income - except the mortgage gets paid back when you sell the house. If in your lifetime you have pay off your school, put your kids through school, & then save for retirement; just how exactly were you planning to pay off school- ie: you were either relying on an inheritance, or never really intending to repay the school loan. Millions of people successfully pay off their loans everyday. You do not get a break because you were stupid, or repaying will be life altering. We make it life altering - if you do not repay; the mob would break your legs & make you a cripple for life. You get to keep your mobility, & those loans stay until they are repaid. Life is a bitch :( SD

Sound familiar ... http://www.cbc.ca/news/world/affluenza-defense-earns-ethan-couch-probation-in-fatal-dui-1.2462273

We see nothing wrong with this at all; folks just don't like the consequences of their decisions. You do not have to go to university.. you could have gone to college & got a technical diploma/designation; You do not have to go full-time ... you could have done a co-op, or gone part-time, while continuing to work; You did not even have to physically attend ... on-line is commonplace, & at both undergrad & grad level; The expectation is that you will work part-time in your field .. & actually apply what you know while going to school; And on graduation, you move to where the work is ... wherever it is. Status is not an excuse, there is nothing wrong with the trades or apprenticing in them; millions do. Stupid is not an excuse, these students knew exactly what they were doing; & are hoping that squeeking will get them the grease. Youth is not an excuse, most youth in the world gets on a plane & travels to the work; wherever in the world it is. Debt is not an excuse, nothing stops you from doing a BK & starting again. These over-privileged thought they were above everybody, chose vanity over reality, & relied on an implicit family bail-out if they got into trouble. And now that the bail-out is not forth-coming, the belles cannot handle the fall from grace. Gimme all your money or I'll put you in a home, is a well worn threat that has been practiced by many generations, & in many cultures. And usually uttered right up till mom/dad kick them out onto the street, change the locks, cut off the trust fund, & go on vacation for a few months These students are not special, they are not owed a job, & there is nothing to prevent them from turning their lives around; millions around the world die every day simply because they cant access clean water. SD

EFN If you want to play in the derivative vehicle space, this is probably one of your better candidates. One of our 2 main picks from early in the year; we are not adding - but continue to hold on to a sizeable position that is up 140% on the year ;) Not for everyone, so look before you leap. SD

Multiple of EBITDA, as we're typically buying into a cyclical. Usually up to 5% over the odds for quality, & in the bottom end of the multiple range; sell at around 90% of the upper end of the multiple range. If we think that this time it may be different; we may keep some upside exposure via call options. Multiples, & their trends (usually technology driven), are pretty consistent across multiple cycles; even though they might not apply exactly to the current cycle. So ..... circle of competence, & industry/company familiarity (Gladwell 10,000 hour rule), has significant value here. We're also happy to capture < 50% of the investment thesis, especially if the typical cycle is fairly short (2-4 years). If we like the firm; over a 10 year period we can expect around 3 complete cycles, & we will be coining on both the up & down legs of each cycle ... as well as compounding all along the way. We don't need to be greedy. Different approach, but it seems to work fairly well. SD

Congratulations ;)

Keep in mind that the apartheid experience is very generational, & todays commentators would have to be 20-30 younger to have actually grown up under apartheid. Apartheid was also less rabid in bordering countries. A lot of very brave men & women died in the atrocities getting to peaceful transition. A young & white male face, whole-heartedly participating at a native beer drink - was a very dangerous thing for both sides; so you blacked out your face/arms/legs (with charcoal that kept running off), before dancing around the fire with your equivalent Zulu age cohorts. But mixing was occurring, you invariably tipped each other as to passing dangers; & that saved countless lives, & maiming. But it also laid the foundation for future reconciliation, & all because the village headman (Induna) was an exceptionally brave man ... willing to risk the lives of both him & his family every time one of these mixings occurred. At a time when 1 in 2 Induna's were being necklaced .. for allowing just such mixing to take place. SD

Look at this months CFA magazine; read the articles on demographics/deflation, & time management. The underlying theme is disconnects: markets & people. The more old folks you have (spending), the more migration (productivity), & the more women leaving the workforce (too small a net take-home pay), the more structural deflation you have to overcome. Demand, not supply, is the dominant velocity of money driver; therefore you can print what you want .... without inflating ... as you still have to overcome structural deflation drag (the dominating money demand). So ... if you are in ageing Europe & importing workers - deflation risk is high, & you can run QE flat-out with little risk. But do it where the workforce is mostly <35 (EM countries), & you will get inflation/hyper-inflation (Zimbabwe) Do you know what your top 3 objectives are? ... so why are you not spending at least 50% of your time on them? SD

This is why you hedge a position ... http://www.calgaryherald.com/business/Precision+Drilling+shares+plummet+Alberta+fund+manager+sells/9251848/story.html We bought in our stake at around the same time as AIM Co, & hedged it at well above the $10 mark. Entirely house funded today, positive carry, & it looks like we might well get our grubstake back a 2nd time over the next few months. Not the easiest thing to manage, but quite the technique if you can master it ;) SD

Bruce Trail Conservancy. Our family are volunteer trail captains to a 4km section of the trail, do 2-3 trail building days a year, & lend some of our time & expertise to the board. Anything that comes out of talking to people while hiking the trail is bonus. Our preference is also to NOT do more of what we already do. http://brucetrail.org/ SD

If you ever get the chance to talk to a lottery organizer... ask them privately what proportion of the big prizes ultimately get quietly put back into the pool - at the winners request (ie: won $100M, but gave back $90M); & the reasons why. It is not immaterial ..... Most newly rich simply blow up either themselves &/or their family; with surviving generations often ending up as in-breeds because the eligible social circle becomes too small (Various Royal Families). The solution has long been to escape the gilded cage, or procreate all over the place, but you have to be your own person (ie: Henry VIII). Most are not up to it though; hence the drugs, booze, break-ups, hookers, etc. trying to escape. The next time you see/suspect a secret Santa; laugh loud, quietly congratulate them, & ask to talk to him/her over a coffee. The conversations are usually very illuminating, & burgers over a bottle of very lux Chateau Laffite - not particularly unusual. SD

Ah, but they keep getting re-incarnated; you could be talking to the nth version of Adam ..... & he could also have been a few versions of Eve along the way! I am not going to argue with a levitating amped up Lola .... though I would like to know how its done :D SD

We live in a world measured on multiple metrics; family, happiness, wealth, health, etc. We know they are interrelated, yet insist on measuring against just one metric - compound growth through to end-of-life. Here lies the richest man on earth .... so what. Some Himalayan nations use Gross National Happiness as their measure of wealth. Laughable to western eyes, but perhaps just maybe ... those monks, who have been around for a very long time, are a little wiser & more worldly than most of us. Wealth is a servant, not the master. Most would argue that if you just make your small part of the world a better place, while you are still living; you have done enough. Different cultures have different approaches, but some money/time/effort out today versus tomorrow is pretty universal; individuals execute according to what make sense to them. SD

We would suggest to you that Bitcoin has been in existence for a very long time; between nations we just call them SDR's, with individual nations we call it QE. Central bankers make them, not individuals; and those bankers issue bank notes for everyday transactional use - to minimize the fraud inherent with the use of money. No cash? no transaction - so you have to go to a bank; the distribution network for money. In the drug world each bank would be a drug family, & each bank branch would be the pusher on your street corner. Just as each drug family defends its turf, so do central bankers; & just as drug families live in a hierarchy, so do central bankers. It's a great system, works on both sides of the law, & your 'innovation' either gets assumed by the families - or you sleep with the fishes. So my Bitcoin? If it gets assumed, it might actually be worth something; but if not ....... Do you feel lucky :P SD

Poseidon Concepts. Jan-Feb 2013. They delivered/erected/managed/broke-down/removed the on-site tanks holding fracking fluid for use in horizontal drilling. Good & simple technology, real function/need (fluid freezes at -20), established customers, strong demand, & a sub that was a spin-off from a bigger company. We bought it because we rushed our fences, had cash to deploy, they had just had an earnings miss (collapsing their share price), & fracking is well within our circle of competence. Should have been like shooting ducks in a barrel ..... Problem was the coy was a fraud, & it went into receivership shortly after the fraud was discovered. The spin-off was at the expense of competent accounting staff & functioning controls, & the take-or-pay contracts were not quite as interpreted. Add to it that we favor concentrated positions ... & the loss hurt (both us, & our 25% tax-man partner!). Lessons learned: Even if your process is reasonable OK, shite can still happen. Don't rush your fences, & pay up for quality; making that extra $ is a lot easier, & a lot more reliable. SD

The split on this well informed thread is very healthy. Most industrial engineers would argue that when you see such a well-defined two choice (bull/bear) split like this in the real world, you are looking at an inflexion (tipping) point. Forecasts are what we have; they are best guess, horizon dependent, & we act on them every day. Took an umbrella with me this AM because I expected rain (short-term), to go to the shop to swap radials for snow tires (medium-term), that I will swap back in early spring (long-term). No idea as to exact time of day, or date of occurrence, but I am pretty sure the future event will probably occur. But it is not a guarantee; the sun could break through, the shop could be closed when I arrive, or there may be no snow this winter. There is uncertainty. Uncertainty is marketing poison. All firms are selling branded action & direction: & branding is nowhere near as effective when markets are directionless. Were it soap or beer we would say the brand is ‘tired’, & rebrand to promote sales through a new campaign or product line extension. Sunk investment falls risk to rapid obsolescence, media & fund jobs go on the line, & that business angst feeds back into the market. Industrial engineers would simply argue that the prevailing trend in the lesser split is about to dominate for a period. How long, etc. depends on the science of the physics/chemistry/biology driving the process. Sometimes …… all you need do is think like an engineer ;) SD

Congrats!

Remind yourself that flattery is a deliberate part of the pitch, & it is done for a reason; the most effective way to launch a new fund is to get the manager to put in the start-up hours for free. You will be just another brand manager, selling the nth brand of soap or beer. At a P&G, or an Interbrew, we would call you a brand manager; putting lipstick on a pig does not change what it is. Brands have limited lives, and are expected to either fail or be periodically refreshed. Always a good plan to have a hedge; find something that would go up in the conditions that would make your fund fail, & invest in it. Rain or shine you walk away whole, & most of the time - richer if it rains. Options 101. Look around you. Most folks do not have one career, they have many; & what they do depends on the opportunities at the time. How many old brand managers does your firm have, & what do you suppose happened to those that aren't there. Options 102. If you play in the crocodile pool, bring a knife; crocodile boots look very nice. SD

If you have any ideas to reduce volatility and not sacrafice upside, I would like to know. This is the main reason we hold onto our low cost bases; if the stock goes down tomorrow we can afford not to sweat it. Problem is that the lower the cost base, the poorer the price signal - so we're also prone to holding when we really shouldn't be. The cure is judgement. SD

Check your messages .

.... I'm wondering if you mind sharing how well has this concentration approach worked for your portfolio in the past? We have extreme ROI volatility, worsened by few equities & the use of a max $ investment in equities. Rolling 10yr compound returns of 25-30%, but in any given year we can range from -35% to +140% (43% 2013 YTD). We pick well, but are not good at assessing how long an idea may take to come to maturity, hence our focus on risk. We buy cheap punch cards & hold forever, which can be costly. ie: we hold a big position in PD at an ultra-low cost base, entirely funded with house money; but year over year it has been a terrible investment (& per convention, should therefore be sold). Totally misses that we are already up 250%+, & when we do eventually sell ... it will be a 12 bagger, with a div yield in the 20-30%/yr range, with proceeds more than enough to buy a large apartment in Manhattan - if we so desire. But in the meantime ... put up with negative ROI. Over time our volatility (& extremes) have declined. In our early days of 100% equity we relied on small size, options, & cash inflow to cover our risk. Option use changed to hedging as we could afford the actual common, & dropped away entirely as positions got big enough to warrant hedging by other methods instead. We hold FI to park $ for distribution, & hedge our positions. If we have to average down, the incremental investment is usually no more than what we have already recovered of our original investment, & invested in that FI. With growing size we add distressed debs to offset the portfolio drag; but the higher FI weighting overall lowers compound ROI & reduces volatility. You could not do this as an institution, & most would not do this as their retirement strategy. But if you think that you might want to buy a business at some future point; the equity build, & the business/industry experience that comes with it, is very useful. Our Cdn partnership was originally created to fund a brewery ;) Hopefully the patrone also gets to be a Master Brewer! SD

US residents will suffer a 15% withholding tax on any cash dividends received from Canadian investments, if those investments are not in tax sheltered accounts. There is no withholding tax if the dividend is paid in stock. Little advertised is that some well known Canadian blue-chips offer DRIPs with the DRIP shares bought at 95% of MV. To avoid the withholding tax in a non tax sheltered account, simply take shares over cash, and sell the shares ;) SD

Just to stir the pot ;) There is zero reason why she cant do something else; ie: teach English in Asia, construction, truck driving, tv production, write magazine articles/books, join the army, war correspondent, etc. Thousands before her have done exactly that - she isn't special. She made her own bed, & knew the risks. Thousands of other women before her have been in the same position, & all of them have come to their own solutions. They may not have liked their choices, but they made them; including marrying below their station. Everybody grows up. SD

Seems show (prestige) is important .... only she cant pay for it ..... Not the brightest .... will not move to a better locale, because bank of dad will not fund it (closet brat?) ... Cant declare bankruptcy.... so marrying out is the next highest & best use of depreciating age & looks .... Optimal if hubby is a rain-making sugar daddy, with the good taste to croak out within 5-10 years ? Expensive to terminate early. High risk, low return. If you're really so inclined, just buy a good hooker .... or set her up as a madam!

Couple of add-ons: Re Slave to Kelly: Kelly is just a principle applied in a particular way. Nothing prevents you from applying that principle a little differently, according to situation; as many here do. Re Concentration: For practical purposes, most concentrated positions are actually independent of each other. You invest your whole financial services sector allocation in 1 bank, not 5; & it is in either Europe, Asia, or NA. Your next allocation is in some other sector, in some other geographic location. With only 3-4 stocks & only 3-4 locations, co-variance is pretty mild. Re Time Horizon: Strategies change as time & investment thesis advance; they do not stay constant. Todays dividend paying equity investment can easily become tomorrows synthetic FI, with all accumulated house money removed via margin. SD