matjone

this is interesting. Valuechaser & Hielko - where do you look for these deals? I am guessing the mainstream financial press probably misses a lot of the smaller ones.

If I am understanding Buffett correctly, farms are better than stocks during periods of inflation. I'm basing this off his essay on inflation, in which he says that he does not expect ROE to rise with inflation, and the discussion in this year's letter about his farm purchase in which he said that when he bought his farm he expected yields to rise and prices to increase. Looking at the lower quality numbers here: http://farmdocdaily.illinois.edu/2013/07/returns-and-cash-rents-given-prices.html, it seems that farms in my area run about a 30% profit margin. And looking at historical yield data here: http://farmdocdaily.illinois.edu/2012/02/the-historic-pattern-of-us-soy.html, it looks like yields about doubled in 50 yrs, which is about a 1.4% annual increase. Assuming 4% inflation, your revenue would grow at little better than 5.4%, and your costs would only grow at 4%, so your coupon would actually keep pace with inflation and then some, vs. the equity coupon, which provides no protection against it. Am I missing something here?

I would be hesitant to get involved in anything like this in New Orleans. I have a feeling that if you happen to be foreclosing on someone with connections down there you are going to have some headaches. That is true anywhere but I think New Orleans is a place where you may run into more issues. Especially if you are a !@#$ yankee like me. I got a feeling attending some of these auctions that some of the bidders were a little too cozy with the county employees. I think the new treasurer in the IL county where I attended is a good guy with integrity and he saw this and implemented an electronic bidding system to make it fair. That is nice, but unfortunately the properties I was interested in were all going for 1% so I lost interest. I am wondering if money will flow out of these types of things and back into stocks now that animal spirits are starting to stir up. We'll see.

Thanks for that info, Evolveus. That is an interesting process they've come up with. Louisiana always does things a bit differently. Like I said I went to a tax sale in LA (baton rouge) and it was a tax lien sale. Does this mean that the properties you are bidding on were the ones that wouldn't sell in the tax lien sale? Or do they just not have the lien sales in these areas you are working in? Have you talked to some people who have done this? I'd like to hear how it has turned out for them. I am assuming that most of the time the owner redeems fairly quickly and you get your 5% plus a couple months interest. That was my experience with the tax lien sale. That would actually be a great outcome if you could keep churning these, since your annualized rate would be higher the sooner they redeem because of the 5% penalty, and you'd probably have fewer expenses and headaches. I would definitely be interested in hearing how this turns out for you.

I think you would have to do it in a big way. Small dollar amounts don't work in my experience because the liens are redeemed too fast. For example, in Louisiana they paid 12% per year, but they were all redeemed pretty quickly so I only made 3% or so. Another time I went to a sale in Illinois and all of the lower risk ones went for 1%, so I wasn't able to find anything worthwhile. I was looking for the ones with homeowner exemptions. Perhaps I was using the wrong strategy, but that was the only shortcut I could see to ensuring that you were getting something worthwhile. I think the way to do it would be to have a schedule and attend all the sales you could, and do it in a tax advantaged account. I would like to hear more about how your friend is operating, Nate. Also would like to hear more details from Evolveus or anyone else who'd like to chime in. BTW, there was book written about this called "the 16% solution" which lays out a system for this strategy.

Are you talking about tax lien sales, or tax deed sales? I have been to a few tax lien sales. I think you can make good returns on these, but there is a hassle in going to the sales, filing paperwork with the court, and keeping records.

Yeah I remember that interview. I think I also remember Schloss quitting when he thought valuations had gotten ridiculously high and he couldn't find anything. Also, when Buffett closed his partnership bonds were yielding more than stock earnings yields. My lesson from all this is that I should just keep my money in whatever has the best expected return, and not sit in cash waiting on better times. Maybe it is a good idea to put some floor on what you are willing to accept though- maybe make a rule that if you can't find any decent companies with greater than say a 6% yield earnings yield, and bonds are yielding low single digits, maybe it is time to switch at least part to cash and wait for better times. But I think even a rule like that is only necessary when you are working with many millions of dollars. For investors of small means such as myself I think there is probably always a juicy deal out there, it is just a question of whether I am hard working enough to find it. Buffett pretty said pretty much that in '99 and I think I remember someone on this board bringing up some examples of ridiculously cheap things in the walker's manual from back then that worked out very well. Of course, if another great depression hits, and earnings dry up and dividends get cut and banks and companies are failing left and right, and I have to live like Tom Joad for a while, then I may come around to Graham's more conservative views. It is interesting how well Schloss performed during bear markets. That is one reason why I wish there was more on him. Graham and Klarman are two others who I believe did well during down markets, but I think their style is harder to copy. Graham was very talented at finding arbitrage opportunities that weren't correlated to the market, and Klarman tends to invest in things that are too complex for me, and unavailable to me anyway.

Tom1234 that is one side of the argument and I think it makes sense, but I can see some sense in Graham's allocation rules too. It comes down to a personal decision. I think if I had a billion dollars or even 20 million I probably wouldn't worry about having cash either. Graham's rules kept him safe while allowing him to still make good returns. He might have made more money if he was less cautious and I think investors will probably end up richer in the end always being fully invested, but that doesn't mean the allocation rules were a bad idea. One thing I like to think about is how things would have changed for people had they been born at different times. What if you push Buffett's birth date back to say 1901? He starts his partnership and is a couple years into it around 1929. Would he have made the same decision to wind it up, like he did in '69? I think that is an easier decision when you are old and wise and rich, but it's hard to have patience when you are young and hungry. Maybe he would have gotten hit by it and would have come away with a more cautious attitude.

I remember reading this in one of his books, but I am not sure where I stand on this. Some of the greats like Schloss, Lynch, and Buffett would probably say that if you like mandel at 13 you should buy it and not worry about the valuation of the general market.

One thing you could do is go through Sonkin's old holdings. I purchased one in january for about 70% net cash. Oddballstocks and otcadventures are both good and fun to read anyway.

Right now I figured it was a good idea to put the money in europe rather than the u.s. PE ratios are quite a bit lower. I wish we had an emerging markets fund, or a financials fund.

I contribute as much as I can without going over so that I can be sure to not miss any matching contributions. I don't want to try to beat a dollar in a tax free account with 70 cents in a taxable account. No reason to make things difficult.

I saw that mentioned in the documentary on him on netflix, which was pretty interesting if you are a Salinger fan. I think the popular image of him was that he had quit writing, become a recluse, and gone crazy. That was the impression I had until watching the documentary. He had actually kept up relationships with people and had continued writing the whole time. There are supposed to be more Glass family stories coming out and maybe some more Holden Caulfield stuff if I remember right.

This is a fairly serious crowd, what with everyone reading reports and seeking wisdom and collecting mental models. We need more jesters.

I too would like to find some books or pdfs for basic farmland valuation. Especially for corn and soybean farming. In the past there was farm crisis after farmers went in debt and bid prices up and restrictions were placed on exports. I don't know if that will repeat exactly, but my dad has told me he has heard of people purchasing farmland for 0 down 0% interest, and there has been a runup in grain prices the past several years. You can look into in a lot of detail, but I think Buffett's simple reasoning in his last report seems sensible. Over the long haul yields will probably go up and grain prices probably will too, so buying at a reasonable multiple of past average profits should give you a decent return. Back then he seemed to be looking for a 10% growing yield. I am thinking maybe a little higher multiple is justified today considering the low interest rates and high pe ratios. I think prices would have to come down 30% or more to get to the level that would get Buffett interested. It is a little difficult to figure, because costs and grain prices are volatile, but I am thinking looking at 5 year average for costs and grain prices and the trend yield can give you an idea. The question I have is whether the run up recently in grain prices will be sustained. The universities have good info so I would pick the one in your area. For illinois it is http://farmdocdaily.illinois.edu. I'd be interested to hear about any resources you find.

twacowfca, did you put on hedges or go to cash because of this?

it's in his signature

I suspect ScottHall doesn't really give a damn what we say. After seeing this thread I checked out his twitter and he seems pretty focused on investing. While we were bickering over whether he should buy furniture he probably just made some more money. I do envy him a little and I remember fantasizing about going to live in a cabin in the woods after reading Walden in H.S. I lived a pretty spartan lifestyle while I was single, but once I moved in with my girlfriend that all went out the window. Roughly 75% of the items in our house aren't necessary from my utilitarian male point of view.

Should the fair market cap/GNP ratio be adjusted account for the balance sheet strength of the companies? If U.S. companies have a lot of cash and no debt then should they get a higher multiple than if the reverse were true?

What is it they would gain by doing this? The articles I saw stated that Crimea was the strategically important part. If he wanted the eastern half then why didn't he take it a few weeks ago when they took Crimea?

$8k, damn. I thought I was cheap. I would like to see your budget to see how you are pulling this off. Maybe it would give me some ideas. What are you doing for phone, transportation, housing, etc? I think ScottHall revealed the secret in not being with a woman. It's a rare woman that is going to be willing to sleep on the floor and not have furniture.

I have many of these in my feedly, but only a few that I make sure to follow. I like the ones that give out ideas and do a good job of explaining them. Some of them are more of a journal of someone's musings about investing techniques and philosophy. I think that can be beneficial but I'd usually rather skip it and hear another idea. Oddballstocks, otcadventures, ragnarisapirate, whopperinvestments, and alphavuture are the ones I've found that seem to consistently offer up good ideas along with good explanations. Someone on here posted something the other day advising people to find ideas on value blogs and he was definitely right. If you are too lazy to search for your own ideas I think you could pick off of good investing blogs and 13-F's and do fine. here is my list Wide Moat Investing Under The Rock Stocks Expecting Value - UK Value Investing Blog Mr. Money Mustache Whopper Investments Above Average Odds Investing Ask Kuppy - AdventuresinCapitalism BoothLaird Investment Partnership Canadian Value Investing CHEAP STOCKS: Below Net Current Asset Value, Real Estate, and other Value Strategies Distressed Debt Investing Fat Pitch Financials - Special situation stocks and value investing FrankVoisin.com Gemfinder Greenbackd Hardcore Value Hedge Fund Blogger.com Inelegant Investor Investing In Knowledge Investor's Anthology Long Term Value Blog Market Beating ME vs. EMT (Efficient Market Theory) MicroCapClub | The Premier MicroCapClub neat value Norman Rothery's model value portfolio - The Globe and Mail Posts by Elie Rosenberg (ValueSlant) Pretoria Investment Reminiscences of a Stockblogger SAHARA Investing | Seeking undervalued investments worldwide Shadow Stocks Sharesleuth.com Sportgamma.net Stevens Fund Stinginess works: Why I'm a value investor - The Globe and Mail The Frog's Kiss The Graham Disciple The Rational Walk the red corner The Variant View Valuehunteruk ValueInvestingBlog.net Value Investing France ValueSlant's CAPS Blog - Motley Fool CAPS Value Uncovered Variant Perceptions

I wouldn't be going out to eat either with that set up, rkba. When can I come over for dinner? I am pretty frugal. My family went bankrupt in the 80's during the farm crisis. We made it out better than a lot of people thanks to my dad having a job and a great work ethic. Any pain you suffer from being frugal does not compare to the pain you and your family will suffer if you go broke from being too careless. Also, you should think really hard before you borrow money. I think this is something a lot of people don't learn until it is too late, and people today think they need a lot more than they really do. I was half hoping they would let the depression hit back in '08 to restore a little discipline and humility in people. Ok I am going off on a rant, I'll stop now.

DEMBF, AOBI, SSY. I don't know if they are good deals or not now. I am starting to think some of them may have been mistakes. There was a blogger posting the other day about a german open end real estate investment funds that are being forced to liquidate. I can't remember the name of it. AlphaVulture blog has some interesting ones from time to time. As does whopper investments. The RMGN situation was interesting. I missed it and I am not sure if it was doable or not anyway. If it was it would have been a hell of a deal.

I should listen to you more as well. I didn't make a resolution this year so maybe that will be it. I didn't buy CASA. If you find any more like that let me know.