beerbaron
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Posts posted by beerbaron
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Anybody visited this city?
Last time I went in Northern China I was amazed by the low amount of vehicles but it did not mean the city was empty. It just meat that there is no cars.
China has huge infrastructure, like that bridge that's about 30km long that links Shangai to Ningbo, you go on that thing and your the only car around. In my opinion they are planning ahead but so far, they are not getting any return on their investment.
One thing that worries me tough is... everything China does seems to work perfectly all the time. In my experience no country can do everything right all the time. Especially in a country with such limited experience in ecenomics.
BeerBaaron
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I always found that destroying anything to stimulate the economy is pretty stupid. If there is an over-supply of ressources (in this case houses) then under a theorical economic model the workforce will move toward another market where their time is most needed. Therefore, increasing the country's efficiency.
If we destroy old houses just to stimulate the construction then we do not let the free market do it's magic and we will still have an over supply of work force in that area.
BeerBaron
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Here is what you are looking for I think.
http://www.bengrahaminvesting.ca/About_Us/about_us.htm
I posted a link a while ago with videos from Seth Klarman and Francis Chou too from this university.
http://www.bengrahaminvesting.ca/Resources/videos.htm
BeerBaron
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Yeah, I just read their AHL's annual report, looks good it should go back to BV soon enough. I would buy this as a short term investment up to hurricane season. I just have too much insurance exposure.
BeerBaron
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What's a VIC?
BeerBaron
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Unemployment always peaks after a recession is over .... same case with foreclosures in a housing wreck. The matter of having the economy stand on it's own two feet takes us back to the root cause. The head wind to recovery will be rising energy demand alongside a supply side that has now been knocked back a couple years. The dominos in the financial/housing crisis had been lining up for a while. The jolt that made them start to topple was oil soaring to $140/barrel.
One way or another -- the economy was headed for recession due to soaring energy costs alone. Yes, the financial/housing crisis made things a lot worse. However, there has been a lot of money thrown at this problem. Energy equilibrium is still outstanding and the balance the economy needs to reach.
UCP/DD
I believe you are dead on about oil prices contributing to a recession. It happened that the financial system melted down before the 140$ barrel could finish what it started. I have not heard a lot of people talk about that aspect of the financial crisis but to me it makes perfect sense. When you get a highly leveraged society with a discretionary income of about 1% end you take away this 1% in a year with a sharp price increase what do you think can happen? It's simple arithmetic.
It's going to be fun to see the economy trying to pick up speed with the oil prices choking it.
BeerBaron
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I'm not expert but I think it would be a lot easier to swallow the pill in financial markets if the legislation would not be seen as tax.
I would suggest that they create a separate account a the FED that would collect a % of all the bonuses. The proceeds of this account would be used in case a bailout is needed. The retention rate on the bonus would vary depending on the funding requirements.
I see the following advantages:
-It would not be perceived as taxpayer's money anymore. Unless the accounts gets depleted.
-It would act as an insurance at stabilizing the financial market.
-The government would intervene a lot less often.
-On the long term, the beneficiary of this system would clearly be the financial market.
-The incentives to avoid financial fiasco would be greater. Exactly like any insurance, if I make a car accident I'm insured, but I won't want to create on with risky behavior because I will cost me extra $$$ in premiums for the rest of my life.
-This would give greater control to the FED to pop-out potential bubbles.
Beerbaron
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BeerBaron, you are spot on regarding Peter Drucker. I've heard him called the "Warren Buffett of management" and that's not a bad description. The only issue which I have with him is that his books are not a "light read". He's brilliant to be sure but his writing style is more easily digested by folks waaaaay smarter than me. I remember on several occasions needing to read the same sentence 3 or more times to understand what he was saying. To be clear, that is more a criticizm of me than of him, but there is a higher level of challenge in reading his stuff than the vast majority of what else is out there.
-Crip
Yes indeed he is one of those writer that writes in a hard to understand way. Nothing close to Buffett's annual letters.
BeerBaron
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Air Canada??? I should short them on principle. They are probably the worst airline I have ever flown on.
Lol, I think any airline, lumber mill, steel mill can be shorted. Peter Drucker explains the reasons pretty well for it in Innovation and Entrepreneurship: Practice and Principles.
The problem lies that any increase in demand over capacity, asks for huge capital expenditures to supply the demand. But the return on the added asset are very small at the beginning, with a slow growth. If a company does not expand to accommodate the demand then it loses irrecoverable market shares.
BTW. I recommend Peter Drucker to any person that wants to understand management. This guy must have written the 5 out of the 10 best articles on management ever.
BeerBaron
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I've had a checklist for a while and I tough it might be good if we could make it a collective work. I'd be happy to have you insight on what's missing. There is still a lot to add!
For me, the most important part of the checklist that I think is not present in Pabrai's checklist is the mental state. It is so easy to go out of range and lie to yourself. The checklist might not avoid it but makes you wonder if you are being irrational.
Another part I think is important is to review your checklist at each quarter. Again, your mental state probably influenced your decision back then... are you still reaching the same conclusion 3 months later?
BeerBaron
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you could try to short a China ETF.
That's great way to lose money, I don't see why it could be even remotely considered value investing. A bubble can last much longer then your wallet.
Also, I don't see how you can have any informational advantage with this macro thing. Do you go regularely to china, do you have deep knowledge of their financial system, their government, their currency strategy, their inflation strategy, their infrastructure spending, etc... If you do then you might want to try. But might I remind you that there is thousands of analysts checking china and "trying" to profit from it. All of those analyst probably have much better knowledge then you about the subject, remember HK is a financial center so they have a huge advantage over you being close, speaking the language and with political contacts. I doubt that you have any knowledge advantage over any of those guys, so why bother even trying.
As charlie munger would say "You don't want to be like a one legged man in an ass-kicking contest"
BeerBaron
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I personally don't think the railroad business is a great business, but this will work out OK for Berkshire. Just another toll booth for them to play with.
It may be cheaper to ship via rail (as opposed to truck) when looking at fuel costs, but it would seem to me that the cap-ex for railcars and for train tracks is higher than trucking. No science or analsyis here, just random thoughts.
Well utilities and railroads are totally different animals, they won't get you 20% returns but they will generate cash until then end of time if it is well managed. I see it as a long term hedge against inflation with cash generating capabilities, contrary to gold.
BeerBaron
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Was it Fisher that stated that dividends or no dividends did no difference on the total return of a stock?
Either way, they can keep their dividends and invest it for me, with the investing opportunities drying up I realize that I love the managers that can manage a portfolio for me!
BeerBaron
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How about shorting paper distribution companies?
BeerBaron
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May I recommend reading The Omega 3 Connection by Dr Andrew Stoll. He did groundbreaking work at Harvard, showing that long chain N-3 fatty acids from fish oil help modulate the synaptic transmission through the brain's neuronal membrane. This helps to prevent attacks of mania with confusing flights of ideas and to clarify thinking in general. Omega 3"s are generally deficient in the diet, and We can all benefit from taking it, as I know that my own thinking is at times not entirely clear.
LOL
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I don't know where the market will go and quite frankly nobody knows. I have kept about 25% of my portfolio in cash since september and I'm quite happy I did, the outlook is getting somewhat clearer now so even tough the reward have not gone up the risks have gone a bit down. I'll probably be down to 10% cash soon.
Buy things at an attractive price and you will probably be better off then others. Not a lot of opportunities available tough, I just spent my Christmas vacations looking for stocks to put in the pipeline and all I came up with was BRK and another canadian small cap. NOTHING compared like march! God, please bring me another march :).
I don't believe in hedging with derivatives unless you have vast amount of stocks and the trading fees of selling/buying a lot of them would be higher then buying puts. For me, cash is the perfect hedge, it's free, perfectly liquid, as simple as it gets and it can provide meager returns if placed in TIPS.
BeerBaron
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I don't see how there would be an intelligent manner to dispose of the shares. Any delays to dispose of them will require further selling in the future. This would create more volatility not more returns for the shareholders.
BeerBaron
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Well, it's the end of the year and I came to realize that my good old excel spreadsheet might not be the most efficient tool to track my portfolio and my results. I have looked at Google's portfolio manager but it only tracks the stocks themselves. Not the dividends paid, money inflow/outflows. Anybody has a suggestion on a good free website/software that would do the job for me?
BeerBaron
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I believe BRK is cheap because of the Santa Fe Railroad acquisition. A lot of people see it as a bad investment. From my point of view, judging by BRK's size, it's a good acquisition. I love when the market judges Warren's actions... if I were to argue against the most intelligent investor in the world I might think I'm right but its most likely not the reality.
BeerBaron
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I'm not interested for completely different reasons.
I LOVE the business model, if you cancel a universal life insurance the issuer will probably give you pennies for every dollar it's worth. Great way of making a profit from insurance companies who ripped old clients.
What I don't like is the INSANE margins it offers, this screams for competition. There is no moat on this one, anybody with capital and a calculator can start an equivalent business. Rest assured that with those kind of margins it won't take long before intense competition appears from all side. Heck it's so profitable that I might start doing it myself!
So people beware if you look at the company and go "Wow 45% revenue growth + PE of 11" , the margins might shrink faster then you can think about it on this one.
From might point of view I see it as a high risk for my money, especially with the current BV.
BeerBaron
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It seems to me that to invest in cheap cash flow generators like savings stamp co''s one needs either a good capital allocator at the helm or a controlling interest so that you can make the capital allocation decision to turn it into a decent investment.
It depends, if funds are redistributed to the stockholders then it can be considered as a high yield coupon with decreasing interest rate. Management must be aware of the situation and accept it. It's quite rare because the financial community considers a declining sales company a failure.
BeerBaron
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If you don't mind liquidity and canadian market you can take a look at Xentel DM. It's a telemarketing company with a market value of 2 to 3 times FCF or net earnings, no debts and is currently selling at around 0.6 times BV. Not as cheap as when I bough it a few months ago but still a fairly good price. Also, this one could have a nice lottery ticket on the background as they have a lawsuit pending where they could win up to 50M$ (for a 6M$ cap!). Also, management seems to realize their business is not a growing one so they started distributing the money.
I lately took a look at envelopes company Supremex seems like a fairly good buy with FCF of 40M and a market cap of 72M. I decided not to invest due to intense price pressures from their North-American competition but it is a good example of declining high yield coupon. Currently selling at 65% BV... but still some goodwill to go. I might buy if it goes down another 20% or if insiders buy.
BeerBaron
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Whatever the metrics the current quotations are a good price. Bough some today.
I hope this NYSE delisting will continue to depress the stock, I love buying great companies for a good price it's getting scarce by these days.
It sucks for the US board members tough.
BeerBaron
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What did you learn from the Crash and rebound?
I learned how much I love investing when price are deeply depressed.
I learned I can handle a portfolio value decrease pretty well.
I learned the power of cash.
BTW, I never knew what value investing was before the crash I was investing in Index Funds and that's all. The crash deeply sparked my interest for real value.
BeerBaron
Who can beat the magic formula?
in General Discussion
Posted
Pure quantitative selection does not make any sense. If more investors go to magic formula then the amount of companies falling into this category will be reduced, the diversification falling we can also expect the risk to increase as the remaining companies are probably lower quality. I think it would be wise to apply the magic formula only when it is out of favour.
If I were using the magic formula I would tweak the timing. I would only buy it when the amount of companies in the screening is 15% above it's historical average. That way you buy when value investing is out of favor.
Small investors without knowledge should just buy the lowest fees Equity Index ETF coupled with bonds ETF. The ratio of the two should be mixed depending on the investor's tolerance to volatility.
BeerBaron