merkhet

You didn't like the movie?

The Fighter is next on my list. I think Bale's a bit of an ass (with the yelling at that stagehand), but he's still a seriously talented actor.

Great movie list. I recently watched Black Swan. Amazing movie. Slightly disturbing. True Grit is pretty good as well -- sort of a comedy, which was unexpected.

That's exactly what I thought too! Not a lot of people refer to Berkshire Hathaway as BH. Usually it's BRK.

I think Berkowitz said $1 per share in earnings power on Wealth Track. http://seekingalpha.com/article/222733-bruce-berkowitz-on-financials

I would think that the caffeine hit from a 31 ounce coffee would almost certainly be fatal.

A contrary view: http://www.ritholtz.com/blog/2011/01/is-equity-sentiment-really-overbullish/

Does anyone else remember the KAL cartoon in The Economist the week the Delta-Northwest merger was announced? http://media.economist.com/images/20080419/D1608WW0Blog.jpg That's the image that immediately popped into my head when they announced that Japan was buying Portugese bonds this week.

I agree that it's completely fair to make a distinction between pros that run billions and deal with a smaller universe of stocks and small guys who deal with a bigger universe of stocks -- however, the underlying assumption here is that a small guy would be able to generate something like 30% returns over a decade. I think that's harder than many on the board seem to think, but it's possible that I'm wrong.

I'm merely pointing out that there seems to be a large amount of distaste for this guy because he "hasn't done all that well." However, over a 12 year period, a 16% year-over-year return is pretty decent. He seems to have a good head on his shoulders and does decently well at compounding his money. There aren't very many people in the world that can compound at rates over 20% for long periods of time. It seems like the board believes otherwise.

I think his CAGR is around 16%. That's not bad for a 12 year streak. I think Seth Klarman is at around 18%? Additionally, he might have volatility, but volatility is not risk.

I thought David Einhorn was on the outs with the SEC precisely because of the fact that he's a vocal short-seller.

Thanks for the links. If you guys are interested in complex systems (and the Woody Allen problem), I would suggest picking up Sync or Deep Simplicity. They can get a little math heavy at times, but I think even non-math nerds can glean a lot from reading them.

Old School Value had a few writeups on GRVY. http://www.oldschoolvalue.com/featured/3-unloved-stock-updates/

That's sort of my point though -- how do we know that the initial rate is the correct rate? As you state, by Nixon's time, the $35 per ounce was a fiction, but what was it that makes the 1930's $35 per ounce ratio not a fiction? There are significant issues with determining that market prices necessarily provide the "correct" intrinsic price (to the extent that we can say that gold has an intrinsic price). After all, it wasn't so long ago that the market believed that dot-com companies with no revenues were worth multiples of eyeballs, no? I agree with you that the calculation is so complex, with so many known and unknown variables, that it's tough to come to a correct pricing for gold -- even if we can make the case that fiat currencies, by virtue of various structural issues, will continue to devalue in terms of gold. (And we can make that case -- and it is likely a correct prediction.) However, there is still a missing step between what I just wrote and saying "gold price bullish" -- since the assumption underlying "gold price bullish" necessarily requires that the current ratio of fiat currency to gold not be unduly skewed on the dollar side by speculation of some sort. It's like when Howard Marks wrote in his last missive that he was sure currencies will depreciate against gold in the future; he was just uncertain if this was the price at which to add a position in gold. In terms of another framework, it would be like saying that Facebook will likely become more valuable in the future as their network effect continues to increase based on new entrants, which is likely true. However, it would be another thing entirely to say that a market capitalization of $56 billion (at likely a 150x+ P/E ratio) means that we should be "Facebook price bullish." Having said all that, I do hold some positions that are somewhat dependent on the price of gold, since I believe, as you do, that the continued depreciation of fiat currencies against gold will provide a good backdrop against which those positions will eventually reach fair value. I'm merely more... uneasy... than you are that the current price is within hailing range of the "correct" price. As always, I try to be mindful of the Mark Twain quote that "It ain't what you don't know that gets you into trouble. It's what you know for sure that just ain't so." Cheers!

As you say, we might be splitting hairs at this point, but in the interest of lazy Sundays.... I understand your point, but I do not believe you understand mine. It's possible that you read through my initial post and somehow gleaned that I believe the price of gold should be fixed to fiat currency, and now it's tough to see that I actually didn't make that claim. (See "...stays roughly constant such that when a currency is compared TO [GOLD]" and not when gold is compared TO A CURRENCY. A distinction with a difference, in this case.) It's much like that visual illusion of the old woman and the young lady -- once you've fixed on one, you might be able to see the other, but it's likely that you'll come back to the initial view. (Confirmation and/or status quo bias.) Happens to all of us. Crucially, we are making the same point! In exactly the same way! I really don't know how else to show this to be true... The unfortunate thing is that this statement is impossible to verify. There is no natural occurring experiment through which this can be proved. Importantly, because there is speculative activity (both greed and fear based) in gold, commodities, and securities, there is no way to fix supply and demand fundamentals. Additionally, because the market is a dynamic system best described in terms of a non-linear open-looped system, there are serious issues with respect to fixing not only initial conditions to an exact specificity but also with respect to nonlinear effects of tiny perturbations in supply or demand that feed back on the speculative activity. And that, by the way, is exactly why I said that "relative comparison does not really give way to an easy reference point to gold's value." For instance, let's say 1 ounce of gold is equal to 100 bushels of wheat. If you fix that as your reference point (Einstein's relativity, anyone?) then you can evaluate the movement of the gold/wheat ratio in the future. However, the point that I was trying to make is -- given the inability to determine starting points in a dynamic system (and even something as seemingly simple as the gold for wheat system is a dynamic system) or determine whether subsequent movements in either the gold or wheat markets are on the basis of fundamentals or speculation or determine the effect of any given move in fundamentals or speculations (Soros' reflexivity, anyone?) -- how do you know what is the correct initial setting for gold to [insert relative comparison commodity, security, fiat currency here]. For all we know, the correct gold/wheat ratio is 1:10 and the 100 bushel ratio we used at the outset was taken at the time of great disturbance from equilibrium. Remember also that we need to be skeptical of even a long-term historical relationship because of Bertrand Russell's Inductivist Turkey -- imbalances can stay imbalances for long enough to fool a person into believing it is equilibrium. So... again, let's throw out the fact that you seem to think that I think gold is "just another floating monetary currency." I do not. I'm really hoping you see that now. The questions that give me pause are the following: Since we do not know the initial setting at time zero (i.e. the initial equilibrium rate between gold and [choice of fiat currency]), how do we figure out where we are in the dynamic system? Is our current relative ratio at equilibrium or disequilibrium? And how confident can we be in the accuracy of our answer? broxburnboy, it seems like you've given this a lot of thought, so I really hope that we don't continue talking past one another, because I'm intensely curious as to whether you have answers to my questions above. My answers are currently (1) do not know, (2) do not know, and (3) not applicable. Cheers.

broxburnboy, I actually don't think we're in disagreement here, but it seems like you think we are. I don't believe I made any such supposition that "the fiat currency tail wags the gold dog," but I'm happy to be shown evidence that I did. My statement that "I don't see how it's necessarily any different than denominating your cash in Swiss francs" was meant to provide a framework with which to think about holding gold as investors would normally hold "cash" (U.S. dollars) when they can't find anything else worth investing in. It was not meant to say that gold does not have benefits when compared to fiat money. So I guess I'm still a little confused on why you think that I don't believe that fiat money purchasing power decreases in response to national fiscal mismanagement, etc...

Niall Ferguson touches on this a couple of times in The Ascent of Money. Highly recommended reading if anyone here hasn't picked it up before. I've come to a similar conclusion as other individuals that gold is either money or has enough money-like characteristics to be viewed as money. The problem with which I am struggling right now is that there is no way to find the intrinsic value of money. For instance, if I handed a person a dollar, and I asked them how much it is worth, they would respond that it is worth a dollar. (A true mathematician's response. It is absolutely correct and essentially useless.) However, if you're given a dollar and a loonie, you can look up the foreign exchange rate and provide some commentary on relative value based on relative strengths of the countries. (Fiscal strength, fiscal responsibility, etc.) I think that with gold, you can make a cogent argument that it stays roughy constant such that when a currency is compared to it, you are examining the weakness of the issuing country's finances vs. the constancy of gold. However, that relative comparison does not really give way to an easy reference point to gold's value. Perhaps the way to view it, and how I've been using it, is roughly the way that you sit on cash when you can't find anything of value. It's just that your cash is now denominated in another "currency" than U.S. dollars. It's a slightly more volatile currency, but I don't see how it's necessarily any different than denominating your cash in Swiss francs.

I think you got a quick glimpse of the current bullishness today from comparing the a priori NFP numbers with the eventual NFP number. People were thinking 140K-160K with possible upside, and we got 100K. (Putting aside the fact that even 140K would really only cover new entrants and makes no progress towards plugging the old hole.)

http://www.sequoiafund.com/reports/transcript10.htm I don't think this has been posted before. I always love reading the Ruane, Cunniff & Goldfarb Investor Days.

I really love that last one from Munger.

I think there are certainly significant risks on the horizon, but I wonder a little bit as to whether I'm fighting the last war. For instance, I hear a lot of people saying that they're not finding as much value as they'd like to in the markets, but the question is whether they're subconsciously comparing the current market to the 2009 lows. In other words, if they're finding companies that are potentially selling at a 50% discount, do they automatically think, "well, that's great, but it's not selling at a 75% discount like in 2009." Feet to the fire, I'd obviously err on the side of caution, but I do wonder whether the recency of the last crash is causing some bias.

I would hold the Owners set, and I would churn and burn the Deep Value set. I would expect the former to be able to allocate capital correctly, but most Deep Value companies require a catalyst to get to fair value and post-catalyst, they may not have a lot going for them. But I guess it should be stock specific.

Happy Holidays, everyone, and many wonderful returns in the new year. (Literally.)

oec2000, I've got NAV pegged at somewhere between $6 to $7 accounting for the 7 million share buyback. I think Orion Oil is trading a bit low based on comparable sales estimates per flowing barrel @ around $64,000/boepd last I checked. I prefer to use a multiplier on steady-state flows based on management's statements that they're trying to build Orion for sale in the future, so I think using comparable sales metrics is the better way to view Orion rather than the current market cap. It's likely that I won't sell even if they hit my NAV estimates though. I saw (still see) Sprott Resource Corp. as a way to buy into a growth company (subsidiaries) at a discount to what the company would be worth even sans growth. omagh, for the most part, I actually agree with you here - though I would be quick to point out that Buffett owns some Exxon and Klarman owns a large chunk of Breitburn Energy Partners (though BBEP is largely hedged) - so I wouldn't entirely write off all commodities. For me, I like traditional value-type investments (Graham, early Buffett, Klarman) like Kirkland's Inc., and they constitute a pretty good chunk of my portfolio. However, I also like less traditional "value"-type investments (Munger, late Buffett) like BYD Company. Long runway, a nice (hopefully growing) moat, and something that, if all goes well, I never have to sell so I can save a few percentage points a year that I don't have to give to the government, etc. I think there's a benefit in keeping an open-mind in applying the value approach to different kinds of investments.