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alwaysinvert

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Posts posted by alwaysinvert

  1. I wrote a blog post speculating about this. I'll paste it here but if you want to read it in a better format here's the link: http://vardeinvesteraren.nu/vardeinvestering/buffett-buybacks-could-berkshire-tender-stock/

     

    Two weeks ago Berkshire Hathaway removed their set buyback level of 1.2x book value. The stock reacted by trading up 5% the following session. However, I think the momentousness of this action is heavily underappreciated by the market. In my view this is a far bigger step than when the original buyback policy of 1.1x book (later revised upwards) was instituted.

     

    The reason why I think this is a watershed moment lies in the answer to this question: why wasn’t the book multiple just once again raised? Let me try and answer that question in a roundabout way.

     

    If you have followed Berkshire for some time you’ll know that the former policies, perhaps unwittingly, established soft floors to the stock trading, such that Buffett hardly managed to do any buybacks at all. That was probably mostly OK for Buffett and worked out pretty well for the Gates foundation, in that they got a ”guaranteed” buying price in the market. Buffett didn’t really want to repurchase Berkshire shares if he had other alternatives; in the past he has looked at it as taking slight advantage of his less sophisticated partners (the selling shareholders) while also having superior information. This issue is of course also a big reason why he vowed not to make any repurchases prior to the release of the Q2 report on August 3.

     

    Another raise of the buyback level to say 1.3x book would likely also establish a floor. Keeping in mind the tax cut and the heightened importance of the operating businesses inside Berkshire, such a move would make perfect sense as a signal of what is now considered ”below intrinsic value, conservatively determined”. However, what’s slightly different this time is that Berkshire is sitting on an ever-growing pile of cash, now safely over $100 billion (Buffett still wants to keep around $20 billion cash as a cushion no matter what), while its investment universe is dwindling fast.

     

    The last ”elephant” Buffett shot was Precision Castparts three (!) years ago. He would need three more acquisitions (!!) of that size to move most of the cash that he already has. And another one in a year again, probably. Not very likely to happen in today’s market.

     

    In light of all that, this is basically Buffett admitting defeat. He just can’t allocate all that capital within the company anymore. Knowing how much he abhors taxes, the natural second choice then is of course share repurchases, rather than dividends. In short, I think the inherent ambiguity of the new policy is a deliberate feature – he really wants to buy back stocks this time.

     

    But how will the buybacks be executed? If done over the market he’ll have to move lots of volume and will risk the price moving away from him as soon as the market gets clued in to the magnitude of what is happening. Dribbling ”a mere” couple of billions in buybacks per year will not make much of a difference, so the purchases are going to have to be very aggressive and represent a sizable portion of the trading each day to even stand a chance at paring down the cash pile.

     

    Warren

     

    A tender offer?

     

    An alternative to this – that I have never seen mentioned anywhere else – could be if Berkshire made a tender offer for some amount of the shares. As some of you may know Buffett’s big idol among corporate leaders, Henry Singleton, utilized buyback tenders to great effect, retiring 90% of the shares outstanding of Teledyne in about a decade. The thought of making a tender offer to Berkshire shareholders has most certainly entered both Buffett’s and Munger’s minds more than once. Curiously, I have never heard them consider this action out loud in public. When you think all the questions have been asked at the shareholder meetings…

     

    The big issue with a tender is of course the tradeoff between the acceptance rate and the premium offered.. Would people not just think Buffett was making an offer that was easy to resist? Well, if contrasted favorably with the former buyback level, some amount of private shareholders could probably be persuaded. A PR campaign with a CNBC guest spot by Buffett might also help with that.

     

    There are also lots of big funds and other institutions who hold Berkshire stock and they might take the offer as an easy way to reallocate parts of their position with less friction involved. Correctly structured, the offer could also make the weak hands sell the stocks to arbitrageurs, thus securing even higher acceptance. One shouldn’t underappriecate how enticing a premium can be to stockholders, whether they are Buffett groupies or not. Making a big enough splash with the tender size should ready investors for this to have a one-off character (an argument Bufett time and time again has made against dividends is that when instituted, the owners expect it to be ongoing), thus feeding expectations that the stock price will subside back to lower levels again once the tender is done and dusted, prompting higher acceptance.

     

    Another thing in favor of a tender offer is a fairness argument. As opposed to market buybacks, there is nothing sneaky about a tender offer. We know that Buffett cares about such things, but I dare not say how important this consideration could be. Conceivably more so if the plan is to retire a huge amount of shares, as opposed to in the past.

     

    Last but not least, the combined daily average trading volume of A and B shares amounts to almost $900 million per Yahoo finance. That is, for Berskhire to deploy $100 billion at current prices they would have to be the sole buyer of shares for 111 straight trading days. Of course, that is a literal impossibility, but you clearly see how far the timeline is drawn out by using any reasonable but still aggressive assumption such as 20% of the average volume. The simple fact is that it is nigh impossible for Berkshire to put a really big dent in their cash pile with running buybacks. Additionally, in the pursuit of shares at a fast enough clip, the share price is extremely likely to enjoy a good ride.

     

    For further evidence, consider Apple’s behemoth buyback program of $100 billion, which it manages with a clip of roughly $20 billion per quarter. That’s with a daily average stock trading volume of $4.6 billion (Yahoo), which makes their buyback roughly 7% of daily volume. Apple could conceivably buy back way more way faster than that with a cash balance o $250 billion. Perhaps their reasons not to include that it would move the price too much.

     

    While I think the tender scenario for Berkshire is far above a non-zero percent possibility, a regular, but sizable, buyback is probably still the safest assumption to make. However, a market buyback strategy won’t likely solve the issue of the accumulated cash balance.

     

    An asymmetric situation

     

    No matter what avenue of buying back shares that is chosen, it will be done in size and with relative swiftness. The Q2 report will likely show that Berkshire trades just above 1.3x book at current market prices of just shy of $200 for the B-shares. I will not go into a big valuation exercise here (there are lots of them out there for those so inclined), but suffice to say that I view this as cheap, perhaps very cheap, and see it as unlikely that the stock will move much lower from here, bar unfortunate deaths, a super cat or some macro event affecting all market prices.

     

    I also harbor a great suspicion that Buffett is now actually willing to buy back shares a bit above current levels. In some way or other he is likely to, by sheer necessity, affect the stock price in the coming months. An additional slight upside for the B shares is that the tiny discount that has opened up against the A shares (presumably in part due to technical selling pressure from the Gates foundation), may start closing again when a huge entirely economically motivated buyer enters the market.

     

    My good friend David suggested that the rather muted response to the buyback policy change could depend on the extreme size of Berkshire. ”Who is going to move that much stock in a controlled company in response to such a vague policy change?” Be that as it may, it is a rather scintillating thought that an inefficiency could be because of huge size, rather than in spite of it. No matter if that hypothesis is correct, an agile mind is important in all markets.

     

    Disclaimer: Long BRK

  2. The pattern that I'm seeing is the "oh, they're just looking for attention" which has been said of women talking about these kinds of things forever. We've recently seen just how frequent what they were talking about was with Trump/Weinstein/Cosby/that doctor for the US gymnastics olympics team/etc.

     

    I'm NOT saying that people should be afraid of kidnappings as something statistically likely (probably more likely if you're a pretty 20yo drunk woman rather than a 40yo man, though), but it's likely that someone traumatized by an attempt would end her post with "be careful out there about people pretending to be uber drivers".

     

    Your objections of no date and police records for an anonymous post don't make sense. It wouldn't be anonymous otherwise. And if you post anonymously with a throwaway reddit account, what attention are you getting exactly? I know we have intuition about how likely these things should be and when we hear about them frequently it sounds fake, but the internet is a big place and if millions of people converge on reddit, there's going to be a ton of unlikely stories that are true.

     

    And how do you share something that happened to you like that WITHOUT looking like you want attention? It's a catch 22 and people can always shoot you down and disregard you with no reason... So these objections are not good enough for me. Doesn't mean you have to believe everything you read, it's a judgement call, but if I think "assume this story happened for sure, how would it be written differently than it is now by a traumatized person trying to stay anonymous" and I don't see too much.

     

    I don't know what happened or not, or if it's fake, but I don't agree with what you call red flags. If she really was attacked by guys speaking another language, is she supposed to not mention it because people will say she's just trying to incite against foreigners? If they really said they were an uber, should she not say it because... But then you'd probably say it wasn't detailed enough to sound credible. With that kind of thinking you can try to tear down any story, real or not, and end up never believing anything that isn't convenient to you, just like people didn't believe women being sexually harassed for so long.

     

    So I just posted it as something that I think probably happened, and if anyone can point to a red flag more specific than yours, I'm totally willing to change my mind. I'm just explaining why I disagree with you on these.

     

    Here's a current story of disappearance, and I don't know what happened there either, but it does happen (or maybe she just ran away or had an accident or whatever):

     

    https://www.cnn.com/2018/07/26/us/missing-university-of-iowa-student-mollie-tibbetts/index.html

     

    You have a presupposition that there is even a woman to "believe in" behind this account. We have no idea if there is even that. But I'm glad the countdown to Trump and Weinstein being mentioned didn't get very far.

     

    My objection wasn't to a poster not giving doxxing info, quite obivously. It was to point out that this story is conveniently completely uncheckable - by design - even in theory. Someone made a police report (not her) and she never gave her name at all to any officials. Why didn't the bouncer ask for her name as he was calling when she was still present? Why didn't police come to down to the club? They come for all kinds of minor happenings at night clubs and they usually come very quickly. Why would the bouncer allow them to leave before police arrived? Also, nobody out of her gang of five people thought this odd at any point in the following minutes, days, weeks? Yeah, this is unbelievable, sorry.

     

    Also, if the club in question was named somebody could easily check this by calling the owner and asking for such an incident, without anyone risking a dox at all (since the owner doesn't know her identity). Very simple.

  3. You're saying something different. I'm not saying it's common, or that we can know it was trafficking and not just rape or something else (she's saying what she thinks it was, doesn't mean it's right). But I know that people disappear and it doesn't always make the media, often because we don't know what happened, especially if it's not blondes...

     

    I was answering your question - the story doesn't sound credible. That doesn't mean rapes or trafficking or kidnapping never happen. Duh. It means the story sounded off to me and I listed some of the reasons why. Telling the statistically likely story of trafficking and stranger rape is mundane - its' a story about drug addiction and social misery at the bottom of society. But that doesn't give many upvotes from middle-class internet strangers because there's way less emotional pull there for them.

     

    Do you want to see their police report too?

     

    Not really, since I know nothing beyond the tweet. There's nothing there to elicit skepticism from me. I have no trouble believing that a victim of kidnapping finds a story of an attempted kidnapping compelling. See how that works? I update based on my evaluation of the information at hand.

  4. Yeah, it could be fake. It's a story shared on the internet. What's your point?

     

    That it does not sound credible, obviously. If there were multiple women randomly nabbed outside of night clubs in order to be trafficked, there would be a media frenzy. But there's no such thing. There's a story posted to a subreddit heavily dedicated towards outrage content.

     

    Would it have been better for you if it was the fabled white van full of dudes with NYC accents?

     

    No.

  5. No outside confirmation of story beyond forum post:

     

    The bouncer calls the police to report it. It's a whole scene. I left immediately, I rushed home in a panic and didn't stay around for the report. Don't know if anything ever happened with it. I never gave them my information. I was honestly so traumatized and in a state of shock that I never did anything or told anyone else.

     

    Also no date and time to cross-check with any police database or media trail.

     

    Call to action with a very potent emotional appeal and anchored in people's everyday life situations:

     

    Be extremely wary of cab drivers and people claiming they are uber and lyft when you are out. Always confirm on the app that someone is your driver, and never stand too close to cars when you are on the sidewalk. I know that last one may seem paranoid, but if you are in a vulnerable position (I was drunk, dressed sexy, seemingly alone outside of a club), you need to be extremely wary of your surroundings and how quickly the unexpected can happen.

     

    Also posted on a subreddit where this kind of story is like catnip. The implication of the story seems to be that this is an organized, premeditated thing that this "gang of eastern europeans" does repeatedly. Are there any other reports of similar events in the media or to the police?

     

    I'd stay very skeptical of this story until further evidence comes out in support of it.

  6. So what?

     

    Is this a "Canada is better because..." type thing? You have a very nice country, beautiful scenery, very nice people, clean cities, vast natural resources, no enemies.  I've never lived there, but the quality of life seems great.

     

    I only know of a handful of Americans who've moved to Canada.  I looked at it, and according to immigration I don't quality in any capacity to be there.  Even if I go through the questionnaire and say I'd relocate my company and employed 50+ people I wouldn't qualify.  So I'm not sure what it takes to get into Canada.  I messed with the little thing for a while and couldn't trigger any conditions where it would work outside being a student or married to a Canadian.

     

    At the same time I know a ton of Canadians who have moved south and don't intend on going back.  I've never tried to get into the US (since I was born here), but it must be easier.

     

    Is part of the allure of Canada that it's like Switzerland?  It's exclusive to a selected group?  Is that why the average is higher?

     

    Doesn't seem like it should be that hard or exclusive when immigration levels approach 1% of the current population every year, of whom "the economic class" (followed by "the family class") is the biggest group according to this article:

     

    https://globalnews.ca/news/3836805/340k-immigrants-per-year-by-2020-government-unveils-new-immigration-targets/

     

    The figure I could find for the US was 1.49m immigrants (2016) which would equal 0.4% of the US population. So overall it seems markedly easier to move to Canada than to the US, but I guess that depends on who you are and where you come from.

  7. ... You have to sift through lots and lots of bs in all of them. ...

     

    An other way to express my own experience with Shareville, alwaysinvert. [ ; - ) ]

     

    - - - o 0 o - - -

     

    PS : I'm still in love with your idea: Rederi AB Gotlands [mentioned by you in 2014 here on CoBF], but I'm just too lazy to go through the hazzle to get some shares.

     

    It's a very cheap stock (perhaps cheaper than ever) with a rock-solid earnings stream from a monopoly business. They have done large buybacks in the pas, but the latest one was in 2011. I still think that at some point value will be unlocked, but many people are uneasy with being minority shareholders in a company with a very strong majority, especially when they don't dividend out the earnings regularly.

     

    I wrote up the stock on my blog way back (Swedish):

    http://vardeinvesteraren.nu/vardeinvestering/gotlandsbolaget-del-1-presentation/

    http://vardeinvesteraren.nu/vardeinvestering/gotlandsbolaget-del-2-analys/

  8. Have any of these forums been to any value for you?, and if affirmative, which one(s)? [i've got a quite clear perception of your investment style over the years, I think.]

     

    You have to sift through lots and lots of bs in all of them. I skim through forums looking for nuggets of information, links to articles and so on when I'm doing research on specific stocks. For analysis or insight they are generally useless. I used to read Börssnack more frequently, but Twitter has overtaken most of its function. I also give the forums on euroinvestor.dk and hegnar.no the occasional look.

  9. I'll be the first one to admit that I'm no sage short-seller or anything of the sort. And I obviously didn't know anything about outright fraud when this turned up first.

     

    However, her whole persona was the most ridiculously blatant thing ever and could only work in an era when the feminist narrative in some quarters is strong to the point of cultishness. She was a female carbon copy of Steve Jobs with a list of platitudes. How that was ever able to get as big as it did is a fantastic testament to herd behavior.

     

    Had she looked, dressed, and spoke exactly the same, yet her product worked exactly as she said it did with no lies and/or fraud would you still have said this?  I don’t see how any of that matters.

     

    I did find her ridiculous from the very beginning, but that's not actually the point; I may very well be equally as biased in the opposite direction. The point is why did people not stay *agnostic*? Because they badly wanted to believe.

  10. I'll be the first one to admit that I'm no sage short-seller or anything of the sort. And I obviously didn't know anything about outright fraud when this turned up first.

     

    However, her whole persona was the most ridiculously blatant thing ever and could only work in an era when the feminist narrative in some quarters is strong to the point of cultishness. She was a female carbon copy of Steve Jobs with a list of platitudes. How that was ever able to get as big as it did is a fantastic testament to herd behavior.

  11. Here is my take on no-go zones:

    1) They are real but they primarily impact government and police not normal people and this is why when you look for who actually complains about this...its all quotes from government and police.

     

    2) Normal people will never observe a no-go zone both because they aren't in places most people go and because they have no impact on normal people. A normal person would be unmolested in a no-go zone. But Police or government might have so many problems in no-go zones that they can't do their jobs effectively.

     

    AFAIK, every single comment in this thread agrees with the statements above.

     

    You are correct, the direct problems with no-go zones (clan culture, Islamism, mob-like crime gangs, etc) primarily impact the inhabitants of the no-go zones. Middle-class people, journalists and cosmopolitans do not know any inhabitants of these areas and never ever go there. If they know any "ethnically diverse" people, those are among the few ones who are just as middle-class as themselves. These are the perils of a heavily socially stratified society, like all Western countries have become.

     

    That's why university-educated professionals of the politician and bureaucrat class tend to think the problem is smaller than it really is. It's a real catch-22 when most of the people noticing the true extent of a problem do not have the verbal ability to convince anyone and much less the social network to do it.

     

    Of course, now these areas have grown to the extent where they start to put big strains on the resources of all citizens. The health care systems are built for much smaller populations, the police force is too small and trained for other purposes, social services have no idea how to handle big cultural differences. And not least, we are starting to learn about the high trust that we have taken for granted and what it means for a society when that is slipping. Or worse: getting ethnically coded. So now we are finally noticing. 

  12. My favorite part was when Joe K was needling him about Android versus IPhone etc. Subject moved to Samsung, Buffett chirping that Samsung’s earnings was an impressive $45 billion, not too many companies with those kind of earnings. Which lead to Betty Q asking if he had ever owned Samsung stock. Buffett chimed in, yes, they did indeed. It was not included in the 13f because it was a small position. Betty pressed him asking when it was. Buffett was struggling to remember, Betty helped asking if it was during the Asia trip that she accompanied him? Buffett confirmed that. Betty asked how big that position was? Don’t remember. All he remembered was that the price paid was 1 million and sold at 2 million. But we made “several 100 million”.

     

    No shite, only at Berkshire and Buffett. What if Buffett motors on and doesn’t remember billions?

     

    You misunderstood that exchange quite a lot.

     

    1. It was not included because it is foreign, size is irrelevant

    2. He was probably reluctant to say exact size, rather than not remembering

    3. She asked about him owning OTHER Korean stocks when they traveled together (Buffett traveled to South Korea in '06, I'm guessing this was the same occasion). The stocks Buffett bought at that time include the "famous" Daehan Flour. I don't know what retail company Becky Quick was referring to.

    4. This couldn't have that far back since the stock traded far lower then. At 1m level would have been 2-3 years ago (maybe preferred since that traded at that level for a far longer time)

     

    You can refer back to this clip in case you don't believe me:

     

    https://www.cnbc.com/video/2018/02/26/buffett-we-bought-samsung-in-the-past.html

     

    An interesting follow-up question would have been if they have owned or own Hyundai pref, since Munger owns it in DJCO. Or why they sold a not obviously overvalued stock with unrealized gains when they have $100b in cash to throw around.

  13. Grit is self-help stuff with great marketing appeal but dubious to non-existent scientific value.

     

    https://www.npr.org/sections/ed/2016/05/25/479172868/angela-duckworth-responds-to-a-new-critique-of-grit

     

    Grit is nearly identical to conscientiousness, which has been known to psychologists for decades as a major dimension of personality. It is not something that's necessarily open to change, especially in adults, whereas Duckworth in her writings suggests that grit is.
  14. Played professionally for 5 years or so. Munger remarked something about him being good, but not smart enough to not let on that he thought he was the best player in the room. That's something I was certainly very guilty of in my youthful arrogance.

     

    All the points writser made are good. 

  15. BTW, this tendency might also explain why fewer women reach the C-level roles. At some level when you make enough money, women tend to find and prioritize values / meanings in other things such as families. Men still pursue higher pay / positions, as a way to keep scores from their corporate competitions, and more frequently end up at executive management positions.

     

    In every single society that has ever existed historically for which we have good records or been observed directly by anthropologists its always been the case that men dominate all roles with high formal social status and power, regardless of what those roles are. My view is that the simplest explanation is that men are biologically wired to strongly desire to ascend status hierarchies. Thus they are much more willing to sacrifice to do it than women are.

     

    Consider a guy like Warren Buffett. He spent most of his life, holed up in rooms, reading financial statements. I think Susan Buffett, his first wife, commented on how this was a poor way to live life. I completely agree with her.

     

    This isn't uncommon. I remember reading about Julius Caesar as a young man seeing a bust of Alexander the Great and feeling like a failure because he realized that when Alexander was his age, he had already conquered the known world. Julius Caesar wanted to be a great Conquerer, Buffett and Rockefeller wanted to be enormously rich....same underlying motivation (ascend a status hierarchy) but filtered through a different society with very different values (military conquest vs money). In India, men dominate the "spiritual guru" role. Does anyone really think men are more capable at being spiritual than women. Or better at cooking than woman.

     

    Women also tend to prefer to date men who are likely to or end up ascending a hierarchy. So men's mating strategy is "ascend the hierarchy". Women's is to get noticed by and marry the guy who ascended or will ascend it. This actually provides an extremely good explanation of one thing I have always but puzzled by...why women put so much effort into their appearance when in other animals the male usually is more colorful and tends to do more visual displays to attract the female.

     

    I don't really think women are any less capable or intelligent than men. I just think the priorities are way different and dictated by different mating strategies.

     

    This is all correct. In addition, men also have a flatter bell curve for psychological traits, including IQ. The societal implications of that are pretty clear for those inclined to ruminate over it.

  16. A market systematically undervalues a growth company. It is warranted as the future growth is uncertain for most firms. The ones that continues to defy odds and grows gives tremendous returns to the shareholders.

     

    These lines are perfect in more ways than I can properly express. It represents both bull markets and survivorship bias flawlessly.

  17. Just saying "Hey fuck it, let's buy these mega large cap companies that have outperformed massively and call it a day." is not a strategy, it's just following the crowd imo. The general market knows these companies are scalable monopolies, that's why they are priced the way they are. In fact, over time I believe most face plenty of regulation risks. But we'll see.

     

    This should remind people of the Nifty Fifty really. As with those, returns can be very satisfactory for most of those stocks over the long run. That doesn't mean buying them now at current valuations is the best way to go at it. I'm not willing to take that bet at market highs, in a low rate environment, great economy and a super low volatility period. No thanks! Better opportunities might be around the corner and if they don't show that is also fine. No need to swing when feeling uncertain. Anyway, very few people are able to withstand the pain of losing most of their wealth during 5-10 years because they paid too much over the short term.

     

    edit: To be clear, I otherwise agree with your point that investors often make it too hard. Most just can't make it investing in mediocre companies. I too wished I focused on quality a little more than pure valuation in the past. Being wrong isn't as painful either. That said, some people just like to read obscure fillings. Rare creatures but they exist!  ;)

     

     

    I mean to be fair you could have said the same thing about Amazon 3 years and 200% ago. I am not a big fan of "the market knows" arguments b/c you don't know what the market is really forecasting; all you know is the aggregate superficial valuation.

     

    These stocks have traded at high multiples consistently, and they've done well regardless thanks to the underlying business performance. The biggest edge on any company is having the ability to wait; most investors are way too short term oriented, and don't have time to let the world's best companies work their wonders for them. As good as the market thinks these companies are, they may actually be perpetually undervalued because a lot of people are scared away by high multiples. It's arguable the multiples aren't as high as they should be and that's why they consistently outperform.

     

    There might be such an effect in "value circles" . God knows I'm guilty of having rejected stocks outright because they traded at 25x. But most of the market is not like that. Most of the market loves companies where they can extrapolate a good CAGR from the historical stock price action. Preferably without going against recent trends in the price and the news.

     

    Your argument is somewhat contrarian on this board and that is a decent start for any thesis. Now it just has to be right too. And the momentum traders which you find yourself in company with are sometimes right for incidental fundamental reasons, so it's not like it's impossible.

     

    Your case is well-argued. It is also the same case which has been made in any financial mania in history, they are never illogical at their core. The problem is that you can't reason very well against them with only logic, you have to use analogies. Analogies are poor persuading techniques because they are never perfect, they always have ill-fitting aspects to them, which a well-read bull can point out quickly. And obviously they could be the wrong lens, it really might be different this time. I think most people by now have realized that America in 2016 was not Germany in 1933, but many people believed that sincerely recently. Some might still do. Consensus is very alluring to humans, we find consensus so appealing that we actively distort reality to fit our logic into the consensus.

     

    Have you noticed that mean-reversion of profit margins is almost laughed at these days? It's so blatantly obvious that the composition of the economy is different. Making steel versus social media. But are historical competitive pressures on margins forever a thing of the past? Will crowded areas of tech never see competitive margin pressure? Is modern network effects the end of free capitalism? Some people are in the middle of very high jumps, but I still believe in gravity.

     

    Historically, the highest valued quartile of stocks has performed abysmally. In light of that I find it not a tantalising prospect to bet on megacap high-flyers despite seemingly convincing arguments in favor of it. I'll take my middling returns if that's the price I have to pay. 

  18. From the letter, we can infer that he has maintained a high cash and cash equivalent balance overall.

    His conservative approach is heavily weighted towards downside protection. Since inception, this has "cost" some return.

     

    First, from an outcome-oriented analysis: I think only Baupost has been able to actually post "great" return while holding a sizeable chunk of cash relative to the portfolio size. And what Klarman invests in, I have no idea what his thinking is so I can't comment on that. Maybe he's just that damn brilliant. The dude is holding 20% cash and beating the market in weird pharma stocks. But otherwise, I can't think of an investor holding 20+% cash and outperforming.

     

     

    We're no Baupost or Klarman, and we manage a fraction of what they manage, but we've averaged at least 20% cash historically and beat the market from May 2005 when we launched.  Bull market, bear market, bull market, sideways market, bull market...we just keep chugging along.

     

    And you can check it for yourself in our Annual Reports by simply adding cash at brokers to any T-bill securities we held!  Yet, like so many managers, we struggle to find partners and keep the ones we have.  Go figure!  Cheers!

     

    When is your annual report out?

  19. Even the very concept of beating the market is completely unknown and/or meaningless to most people. They can't visualize how good a return like 10% p/a is, let alone how good it would be to beat the index with 20 bp. Numbers - not to talk of exponentiality - are completely non-intuitive to human beings. It's expert's curse which makes us forget that.

     

    Have you talked to friends who recently entered the stock market, perhaps again? Do you think they have any concept whatsoever of reasonable annual returns in the long term when they consider buying Snapchat? Of course not. The only difference between that and playing slots is that even otherwise reasonable people can fool themselves into thinking they have an edge.

  20. Scott,

     

    I wasn't implying they are incapable of ill-thought out statements. In Buffett's case, seeing as he hates controversy above all, this clearly was as such an instant as he seems blissfully unaware of some prudish aspects of our social morase. Some of which have rendered it a faux-pas to allude to innate differences in sexual strategy between the sexes.

     

    What is socially acceptable and not varies with time and culture and we are prone to view everything through the moral lens of the current climate. I don't mean we shouldn't stand up for what we believe in, just that we could use some epistemic humbleness; after all there is no inherent reason why every single moral stance is better today than it was in the past. It may be the most common fallacy of our era to view moral evolution as a progressive deterministic force ever upwards.

     

    There Munger's and Buffett's views "from the past" are worth considering as it seems exceedingly likely they are thought true as most of their views are. The same goes for all the other "old white guys" who have contributed to Western thought, by the way. If you consider and then dismiss them based on balanced personal judgement, that is great. It was dismissing out of hand with buzzword thinking which was what I was criticizing. 

     

    And we are now talking past each other to some extent, I don't actually disagree with anything you wrote in this post. Just thought I should clarify what I meant.

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