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merkhet

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Posts posted by merkhet

    A new message board?

    in General Discussion

    Posted

    I reckon I'm probably just in a crotchety old man mood today, but I feel like a lot of the complaints that people have levied at the site is that sometimes there are threads that get long, and you have to read through the WHOLE DARN THING to get information.

     

    Cry me a river. It's like asking for Spark Notes for the 10-K. Tough shit. Read the whole damn thread.

     

    You want to get caught up with a company that has a 100+ page thread? Read page 1. Then read the page right after it until there are no more pages left. There are greater tragedies in life than having to spend a couple hours reading what a bunch of pretty bright people have written...

     

    (It's also possible that in my befuddlement I'm confusing this with something that was posted on the Sears thread about there being too much to read...)

     

    I stand by my previous comment. It ain't broke.

    Best Newspapers/Magazines for a value investor

    in General Discussion

    Posted

    I read the following:

     

    WSJ

    FT (occasionally)

    Fortune

    Economist

     

    I would say that I have historically gotten the most out of Fortune. I bought into Bank of America after reading a particularly great interview with Brian Moynihan (something like "Can this man save Bank of America?") and I became comfortable investing in Fiat last summer when I recalled a Fortune interview with Sergio Marchionne entitled "Chrysler's Speed Merchant."

    Fairholme Opens up Hedge Fund

    in General Discussion

    Posted

    Checking in on the Fairholme Partnership one year on...

     

    http://www.cnbc.com/id/101341966

     

    Berkowitz's no-hedge hedge fund up 33%

     

    Now a year old, the equity and bond-focused fund doesn't have a billion dollars—it managed $206 million as of Jan. 1—but is up from $140 million in October.

     

    While the new vehicle is technically a hedge fund, it doesn't act like one. The average net market exposure was 100 percent over 2013; the fund does not short, or bet against the market. A more typical hedge fund net exposure is about 20 percent, meaning long bets only slightly outweigh shorts.

     

    Does that mean that the fund has to file now that it's over $150 million?

    How do you handle financial questions from friends/family?

    in General Discussion

    Posted

    That is exactly why the B-shares were created... Buffett didn't like that people got screwed over by intermediaries.

     

    I also doubt how big the impact of ETF's is. People used to invest in mutual funds with high fees that were often closet indexers anyway. Now they simply pay a low fee, and there is no pretense of what they are buying. I do think that (some) small mutual funds are able to outperform, but I think that has always been the case.

     

    I agree with Heiko -- I'm not sure ETFs means crowded competitors -- perhaps it's just shifting mutual fund owners to ETF owners.  Maybe if the total number of people investing in equity vehicles is increasing...

    Keep an eye on the Bakken

    in General Discussion

    Posted

    Again, history is on my side.  ;D

     

    SJ

     

    Said the turkey to the farmer. :P

     

    I actually agree with most of what you said, but let's not forget that technology adoption does not filter to everyone equally. Again, you are likely to be able to extract significant value from emerging markets that have to depend on older technology.

    Keep an eye on the Bakken

    in General Discussion

    Posted

    I have a feeling that this will be a long discussion purely because I think you have strongly held views, which tends to lead to long discussions.  Disclaimer that I will be drunk in approximately 2 hours because there is a NCAA Championship game tonight, so if I come back on here to respond to your response, I may be nonsensical.  Though you may think I'm nonsensical now. :P

     

     

    - How do you know that oil will be the most important commodity? I know you addressed this, but I think this is crucial to consider.

     

     

    I don't think I ever said oil would be the MOST important commodity. Explain to me why this is crucial to consider.

     

     

    - Who is "you"? :) More specifically, is the US really the owner of the oil that sits here? Does it not belong to the owners of the land/mineral rights?

     

     

    There are some strategic reserves in combination with some private reserves.  Query to you.  How likely do you think it will be for Lukoil or CNOOC to drill on American soil?  (Think CNOOC & Unocal.)

     

     

    - When you are a monopoly owner of oil, what will happen to the price of oil? How will that benefit Americans?

     

     

    Well, Americans in that case would be the only ones with a functioning transportation system, so... it would benefit them greatly.  Think about it in terms of food.  Substitute oil for food.

     

     

    - What happens when prices of one commodity rise? You don't believe there will be substitution?

     

     

    Fill your car up with natural gas lately?  If I had all the food, would you suddenly substitute rocks for protein?

     

     

    - How much income will Americans give up by not drilling oil? How will that compare against the benefits from keeping it all?

     

     

    Again, you're not thinking probabilistically.  In one future, it will benefit Americans greatly.  In another future, maybe not so much.

     

     

    - I disagree with you on every last drop. I have no problem with the US drilling it all, I just do not see it as strategic, but I'm flexible on this point. :)

     

    The crux of the argument - I think you agree with the fact that there are many arguments in favor of exporting, do you see why the comment of "the height of stupidity" sounds so ridiculous?

     

    I think whether you think it's the height of stupidity depends on a number of factors:

     

    (1) The speed at which each individual economy can develop their substitutes

    (2) Whether you can still extract a pound of flesh from emerging markets long after you have substitutes

    (3) How important you think the oil is to our country's survival in short-, medium- and long-term

    (4) etc.

    Keep an eye on the Bakken

    in General Discussion

    Posted

     

    Would you like to do the same process with the revolution of food sources?  It's really the same thing.  We develop/discover superior products over time and the new superior products displace the old.  It is baffling that people have such a short term perspective that they think the process has ended and that our current dominant energy sources and our current dominant food species are somehow the end of the line.

     

    SJ

     

    It is equally baffling the certainty with which you present our ability to invent our way out of trouble.  Think about it from the point of view of a person taking on a lot of future liabilities from a loan shark.  On the one hand, it may be likely that one's income grows to make sure that those future liabilities are not a problem.  After all, you still have your knees.  On the other hand, this does not mean that prudence and conservation of existing assets for the payment of those future liabilities all of a sudden becomes silly.

     

     

    I agree with SJ. You put it way more eloquently than I can. Oil is not a strategic asset in the same way that some rare earth metal is, it's a valuable commodity that everybody on the planet needs regardless of nationality. If the rest of the world dries up, and US is the only one that has oil, it will not be a good situation even for the US. At that point, if you're going to sell oil to the rest of the world, how exactly will Americans benefit again? Don't Americans also benefit from low oil prices? Don't Americans also trade with other countries?

     

    Furthermore, tomorrow we may develop new sources of energy, say solar, what then?

     

     

    When you are a monopoly owner of assets, then... well, good things happen to you via value extraction from the other people.

     

    I don't remember which thread had the quote from Howard Marks saying that we need to think in terms of probabilities.

     

    There is some probability X that we develop sustainable new energy sources and some probability Y=(1-X) that we do not.  Thus, a probability tree is formed. 

     

    In the X world, we must remember that oil is also used in such things as plastics, which are fairly important to industry so even if we suddenly removed the 2/3 dependency for transport, it's not as if the oil suddenly becomes useless -- much in the same way that a put option expiring in January 2014 is not useless to its holder for the duration purely because it has lost value.

     

    In the Y world, things are obvious.

     

    FWIW, I think you're both right that there's a likelihood that we find something else before oil runs out.  (Notably, I do not think this because of past history, but that distinction is negligible.)

     

    Let me flip this and invert it.  (A Munger favorite.)  Would you both be in favor of using every last drop of our oil over the next 12 months?  I suspect the answer is no.

    Keep an eye on the Bakken

    in General Discussion

    Posted

     

    I agree completely.  On rare occasions, Munger fails to take a multidisciplinary analytical approach before coming up with a dogmatic one-liner.  A rudimentary review of history would yield the observation that the western world has had several energy revolutions, with wood, peat, coal, whale oil and petroleum all being dominant for some purpose at some stage of our development.

     

    A version of Munger from the 14th century might have said, "It's the height of stupidity to cut our own wood", while in the 16th century Munger II might have said, "It's the height of stupidity to dig our own peat", in the 18th century Munger III would have said "It's the height of stupidity to harpoon our own whales", and so on.

     

    So, we are currently dealing with Munger V saying that we would be better to not fritter away our own petroleum.  Munger VI will probably say that we shouldn't export natural gas (LNG).  Munger VII will say that we really shouldn't dig our our own uranium.  And then Munger VIII will eventually realise the dream of renewables or perhaps fusion.

     

    Now, none of the future sources of energy are obvious from the current perspective with existing technology.  However, a cursory review of history would tell us that there will almost certainly be something else before we fully exhaust our reserves of petroleum.  Dogmatically declaring that we're bonkers for using the most best source of energy economically available today seems like a bizarre thing for a man of Munger's learning.

     

     

    SJ

     

    The very definition of cursory, in fact. There is some survivorship bias in your statement.

    Secular Bull?

    in General Discussion

    Posted

    Merkhet,

     

    I used to be the same way, but after little success relying upon valuation and sentiment, I have found there to be far more merit to Dow theory-type methods than you would imagine. Those type of methods if utilized within a holistic market analysis help one participate and avoid major up and down moves.

     

    Just my two cents.

     

    To each their own -- I just know it's not for me. 

     

    I find great benefit to being able to stare at a large down move in one of my investments and test my conviction and my mettle.  When I took the LSAT a decade ago, I took two practice exams a day for ten days preceding my actual test date.  The actual test day was a bit of a breeze as my thought was "this is nothing I haven't seen before."  I have a similar approach to not finding too much value in avoiding, what in my opinion are largely unavoidable, large downward movements in price.

     

    So I guess if one could consistently avoid large down moves (100%) with those "theories," then there would be some merit to learning them.  I suspect that El Dorado does not exist.  As in many things in life, it's highly likely that outsized return comes at the expense of some initial measure of hardship and sacrifice.

    Your returns in 2013

    in General Discussion

    Posted

    You have to ask though how many independent samples there really are in the CoBF results (and the same can be said about the bogleheads performance). If almost everybody invests in AIG, BAC and a few other names, and those names outperform: what does it exactly say?

     

    That they were really undervalued. :)

    Totally possible, but how many simply followed the few great investors that really recognized this?

     

    Hypothetical; lets say you had a group of people who simply copied Buffett a couple of decades ago. They would have outperformed, and you probably should give them some credit for choosing to follow Buffett. But it would be really one guy that would have been the great investor, not the group of followers (imo).

     

    So how many great investors versus followers are there on this board?

     

    I think the board, collectively, has had this conversation a few times already -- but there is a difference between (1) seeing that someone else has bought something and buying it based on that alone and (2) seeing that someone else has bought something and buying it after doing your own research to see if you understand it and agree with the valuation.

     

    It is difficult on results alone to say who falls into which camp.

    Your returns in 2013

    in General Discussion

    Posted

    You have to ask though how many independent samples there really are in the CoBF results (and the same can be said about the bogleheads performance). If almost everybody invests in AIG, BAC and a few other names, and those names outperform: what does it exactly say?

     

    That they were really undervalued. :)

    Your returns in 2013

    in General Discussion

    Posted

    I wholeheartedly agree with the last ten posts or so.  For myself, I know that my 100%+ returns this year were a combination of fundamentally cheap stocks and really good timing on entering and exiting certain positions. (If I had held MBIA past the week of the settlement, my returns would have been materially lower.)  This is unlikely to repeat in 2014.

     

    Also, I suspect that the average retail investor will be quite envious of the 30%+ move in the markets, and they're liking having quite a bit of FOMO.  I would expect them to start wading back in soon, and that's as good a contrarian signal as anything else.  As Mr. Buffett says, "the less prudence with which others conduct their affairs, the more prudence with which we must conduct ours."

     

    This is really good advice. All the threads started about leverage are just confirmation.  The process is far more important than the result. Pay attention to what SharperDingaan said as well:

     

    I thought the exact same thing when I saw those threads pop up!  My spidey-sense was tingling.

     

    The only caveat to my increasing levels of fear is the fact that the economy may actually be picking up steam for the first time in the last five years...

    FNMA and FMCC preferreds. In search of the elusive 10 bagger.

    in General Discussion

    Posted

    Now that I've read this a few times, I think that Professor Epstein's view of the case is extremely colored by normative beliefs as opposed to the actual legal positioning.  It's clear that he finds the entire 2008 situation and the 2012 Amendment reprehensible on a basic level (as do many of our posters here), but it looks as if even he's softening a little in respect to his position on the cases.

     

    There's a perfect example of what I mean on page 6:

     

    So where does it leave you?  On the normative side, this case with respect to the amendment should be toast and it’s difficult with respect to the 2008 reorganization.  Given the current law, what one has to remember is that there is always a strong government finger on the scale.

     

    And what that does is it means that basically whenever you litigate against the government, the stronger your case may be, the more powerful you may think it to be, getting yourself over better than even money on winning that thing is extremely difficult.  It is hard for people to realize what the extent of the deference is that is given to government.  And if you don’t get yourself within the contract or the regulatory or the occupational sides that I’ve talked about, then the case is over.

     

    Notably, this seems to be a bit of an about face in what he was saying at the earlier conference at NYU where he said that these were "winning cases" or something to that effect.  If memory serves me correctly, one of the panelists says "You have a pretty good case on [whatever]." and Epstein replies "A winning case." to some laughter in the audience.

     

    And ultimately, let’s put it this way.  If the government win down below, I think there’s still, since the case is so big, a chance that the Supreme Court will take it.  But I can guarantee you, if the Solicitor General shows up and says, you know, there’s just been a government judgment entered into against us for about $120 billion, cert granted.  That's all they have to say.  They don’t have to write up a petition.  They don't even have to send a live body into the Supreme Court in order to get it.

     

    The Solicitor General has an enormous advantage in big cases in essentially commanding the attention of the Supreme Court, at least with the courtesy of a hearing.  So I think in the end, this thing is likely to be resolved by the Supreme Court.  And on that particular point, it’s actually not as clear as one might think.  Remember, Winship was done six or so years ago.  And there were several liberal Democrats, I think it was Souter in particular, who sided with the bank.

     

    This was fairly interesting to me given that the balance of the court has shifted slightly to the right in the last few years (though I can't seem to find the Winship case that he's referencing to figure out which remaining Justices voted which way...)

     

    It's also notable to me that basically if the government loses in the lower courts, it's likely not going to be resolved until it gets all the way to the Supreme Court -- which is a good way to gauge a timeline for this stuff...

    FNMA and FMCC preferreds. In search of the elusive 10 bagger.

    in General Discussion

    Posted

    I just started reading the transcript, and I realized what bothers me slightly about Epstein.

     

    When it comes to law professors (especially at the top schools) there is a strong sense of "The World According to (insert professor name here)" -- where they've spent their entire academic life "branding" themselves with a particular framework approach to [Con Law/Property/IP/etc.] -- and they are flabbergasted that others cannot see their brilliance.  This then leads them to also be flabbergasted if and when certain court rulings go against them.  I have a sense that Epstein falls in this category.

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