Liberty

You've just found out you are not like most random people off the street. Congrats. This can be good or bad. Thanks. 8) I knew it already. I'm not even like most random people on CoBF. 8) This is good and bad. ::) Join the club.

You've just found out you are not like most random people off the street. Congrats. This can be good or bad.

I'm not sure if you posted this because I started about luck but I obviously agree. ;) As I said, the skills are needed. They are an entry pass to roll the dices of luck over the longer term. You could objectively be the best investor in the world and not come even close to others because you happen to lack some luck in some departments of life. No biggie, you'll do fine regardless. I didn't mean to imply that that's what you believed. I saw survivorship bias mentioned a few times lately on twitter and elsewhere, and this reminded me of this. Another interesting aside, cached thoughts: http://lesswrong.com/lw/k5/cached_thoughts/

A little aside on something that's been bugging me: Mention survivorship bias, and a lot of people's brains turn off. "Oh, of course, they're successful, but survivorship bias, so it doesn't mean anything." This bias doesn't mean that these people haven't done anything except be lucky to be successful. In a coinflip contest, sure, that's what it is. But in other areas of life, there's still things to be learn from studying winners even if they aren't representative of the average person that tried to do what they did. Evolution by natural selection shows you the results of a contest between adaptations. Sometimes it can be luck that made certain genes succeed, but many times there's a reason why these genes were passed on. The same can be true for studying successes and failures, unless you think you're just a feather on the wind, with no control on your life.

That's true. But the question here is about success, not failure. If you read Nate's post, you'll see that he isn't talking about just financial leverage, but also operational, and what I would call "putting yourself in situations where success is scalable". Leverage is kind of an ambiguous word for that. Buffett himself has done quite well with leverage, as have many of the companies in which he's invested.

http://www.oddballstocks.com/2015/03/leverage-and-success.html Food for thought by Nate.

http://brooklyninvestor.blogspot.ca/2015/03/zero-based-budgeting-book.html

More or less about the book: http://brooklyninvestor.blogspot.ca/2015/03/zero-based-budgeting-book.html

Thanks for posting.

If you want to know what's wrong with the Isaacson bio, listen to this: https://overcast.fm/podcasts/episode/9510458169793

When you have lots of money, the IT people will convince you it's required ;)

Could be. Some sites launch with a bunch of content that was produced pre-launch to avoid that empty look when people first see it.

In the mail today. Really looking forward to it.

It would indeed be simpler, but this would be one heck of a big vehicle. The way they're going now, soon they'll have a Malone-like constellation of entities. If you want it all, you can always just buy a basket, or pick those that have a profile that you prefer. Not a bad deal.

http://brooklyninvestor.blogspot.ca/2015/03/kraft-heinz.html

Thanks Sanjeev and Aurelius!

I think you might be right. I think higher retained earnings because of a lower dividend payout does make a difference compared to the historically higher dividend payout, but not buybacks. My original post on this was about reinvestment in the business, and then this shifted to buybacks and I lost the thread. My bad. True, but not really relevant today in practice. Maybe if no secondary market existed, people would insist on a higher payout.

Here's how I understand it: If you're looking at it from the point of view of the investor, then yes. The value will be roughly the same (adjust for taxes and such) whether you get dividends or buybacks or a mix of both. If you're looking at it from the point of view of the business/index, then there's a difference; dividends leave the system, capex and buybacks stay in it.

http://scottgrannis.blogspot.ca/2015/03/the-reluctant-recovery-continues.html Another perspective that might interest some of the macro tourists.

Are buybacks so different from capex when it comes to measuring the growth of the SP500 or another index, though? Say the index is 500 businesses, a composite of their share prices. If buybacks help increase earnings per share, and stock prices go up, all else being equal, the index goes up too, right? If that money had been paid out in dividends, maybe some of it would have been reinvested in stocks from the index, affecting the supply-demand balance, but not all of it for sure. So buybacks, like capex investments in more capacity or productivity, should make the index go up more on average than if they hadn't taken place. If buybacks are made at bad times, like at market peaks, the effect might be a lot weaker, but is it weaker than if the money had just left the system via dividends? In other words, the buybacks might have been a bad deal for shareholders, creating only, say, 70 cents of value with a dollar, but that value still accrues to the stock (fewer shares to divide the earnings by) rather than leaving the system via dividends. Is that so different from mediocre capex that creates only 70 cents of value per dollar invested (it's not like that doesn't happen all the time)? Again, it's not something we want. But if we compare it to dividends, I think we can see how it would have a different effect on the index price over time. Could it be that people and businesses are deleveraging but governments are leveraging up? It would be interesting to see the breakdown of that new debt. It could certainly have a deflationary impact on the economy overall since government going in debt because of, say, lower tax intake, isn't something that will stimulate the economy the same way that spending on more stuff would. As I said, I'm not making predictions, except maybe in the Buffett way of believing that over the long-term, things should get better and good companies should keep creating value. My main point was that it's not as easy to predict as some people who look at a few convincing charts or ratios seem to believe.

Demography is hard. Makes my brain hurt when I think too much about it. In a way, a lot of the extra growth that comes from higher population growth only goes to create jobs and stuff for those new people being added, right? So if they aren't there, growth being lower doesn't necessarily make things much worse per capita (the pie's a bit smaller, but there are fewer slices, so maybe the surface area of each slice doesn't change that much). And since a lot of what people are spending on now tend to be more intangible and qualitative (media content, IP in things like smartphones, telecommunications, services, better foods, better cars, etc), it's a lot easier to keep increasing consumption per capita than back when most things that people spent on where physical and about sheer quantity of stuff (you reach a hard limit on how much crap you can consumer faster). But I don't know about demography. It's outside my circle, for sure. Certainly seems like you'd rather want fewer healthier and richer people than more poor unproductive people (birth rates falling rapidly in poorer countries as they get richer and more educated aren't necessarily negative for global businesses selling to them). So that's good. As for the US and such, I don't know. Immigration seems like it still has a long runway, and what truly matters is per capita anyway, so this goes back to my first paragraph above.

Wrong, if it is a) being malinvested which is sadly quite normal when money is this cheap or b) being spent on buybacks (which obviously grows per share earnings but not earnings per se). You think that the world's entrepreneurs and businessmen all lost any ability that they had to invest capital when they reduced dividends on average? I mean, sure lower interest rates can lead to some stupid things taking place, but plenty of stupid stuff happened in the 60s, 70s, 80s, etc. It's just one factor. When you almost have deflation in many places because people are still deleveraging from the last crisis, high interest rates aren't exactly required to cool things down... I don't know. I look at all the things that I have in my life that didn't exist, or weren't nearly as good a few decades ago, and I read a few articles about all the things going on around the world, and the hundreds of millions of people getting out of abject poverty over the past few decades, and I'm thinking we're not wasting all this capital (or 'malinvesting' it, to use the ever-pessimistic Austrian terminology). Sure, but some industries are inherently higher margins and scale better than others (software), and things like globalization and the internet make it a lot easier to reach more customers quickly. Facebook was barely a dorm room project a decade ago. Youtube was founded 10 years ago. Heck, the modern smartphone didn't exist 10 years ago (iPhone came out in 2007) and look at the size of that industry now. There's fast growing and fast growing.

I guess technical analysis isn't just for individual stocks, eh. Just a few thoughts. I'm not making a prediction - we could have a crash tomorrow, who knows - my point is that things aren't that easy to predict. You can't eyeball a chart and say "oh, see, things moved like that, so they're bound to move like that again". Thinking that everything stays the same is just as bad as thinking that everything is different. For example, consider that for most of the past couple centuries, businesses paid out a lot more of their earnings in dividends than they do now. Now a lot more is reinvested internally. That has to change growth rates, right? Also, consider that what you're looking at is an index. Is that index static? No. What changes? Well, maybe now there's more things like services, pharma, software, etc. More business with very large international operations in faster growing economies rather than just national. Etc. Is that stuff higher margin than what was in the index in 1950 or whatever? Probably, right? Markets are unpredictable. Animal spirits, feedback loops, black swans, etc. But also entrepreneurship, resilience, billions of people trying to do something constructive every day. Could go one way, or another, but over the long arc of time, things usually keep getting better. That's why I try to focus on quality businesses that sell things that people want, run by good capital allocators that will find ways to create values in all kinds of environments. Otherwise, if you're eyeballing a few charts and ratios to make decisions, many would have been out of the market for most of the past 20 years, and where would that have gotten you? Buffett is buying a big business today, and he'd do more if he could, I'm sure. And yes, all long-term exponential charts look crazy on the right compared to the left. Log would be better. Tell someone in 1965 that the Down would be 18,000 fifty years later...

http://www.philosophicaleconomics.com/ Lots of good related stuff. Dig in and see for yourself.

I heard 100k from a good source too.