Liberty

Well, I think the “macro” drag is an illusion. Instead, I look at it this way: I choose to earn 70 if everything goes right and 30 if trouble comes our way, instead of earning 100 if everything goes right and 0 if trouble comes our way. The total is always 100, that’s why I think a “macro” drag doesn’t really exist... But of course, if everything keeps going right, its illusion will surely be strengthened! ;) Gio Opportunity cost is real. Otherwise, why not be 90% in cash and say "the total is always 100"? :) You can say that it's about having a defensive posture, but if over 30 years the defensive posture reliably leaves you with fewer dollars at the end (see Racemize's paper), it was actually safer to not take the defensive posture. All it does is smooth out volatility, but if you're in good businesses, there'll be more upward volatility than downward, so best to just ride it all out (and let your partners do buybacks and acquisitions for you). That is, unless you believe that there's something on the horizon that could permanently wipe out someone that is entirely invested in the businesses that are in your current portfolio (because your alternative is to own more of those in stead of cash). But if there's something big enough to non-temporarily crush everything you own, you'd probably have bigger problems than investing... Canned food and ammo, etc. Everything else is market timing, IMO, and few people are good enough at that to win more extra performance than they lose (ie. they'll brag about buying something at the bottom but they won't count spending years holdings tons of cash that could have been deployed in attractive opportunities against that win).

Gio, I don't disagree with anything you said in your last comment, and I don't think it changes anything I've said. What you're talking about is degrees. Whatever gearing you give to macro tools (influencing you from 0 to 100% cash or from 10 to 30% cash...), if they are driving you in the wrong direction, you'll still be going in the wrong direction. Nobody knows the future, so maybe from today the right direction is to hold more cash. But the past is known, and it's pretty clear that someone who held more cash because of Hussman or the Schiller CAPE in the past few years has made a mistake (and Hussman himself wasn't spared in the crisis, it's not just the recovery that he missed). At one extreme, someone giving a really high weight to the Schiller CAPE would have been out of the market for decades because it was always "overvalued", but at the other extreme, someone giving only a little weight to the Schiller CAPE might still have been holding more cash than he otherwise would have held by just putting money in what attractive ideas are found, so there's a real "macro drag" there too. My only point is that I'd rather look at companies individually and not take the macro into account, because there are more ways to be wrong than to be right with it, so over time I don't think it helps even if once in a while I succeed in timing things correctly and anticipating the thing that actually ends up happening. If I don't find any good investments, I'll naturally end up with lots of cash. That's just my approach, and it's fine that you have yours. Cheers! :)

If French is your native language, I envy you… Michel Rio is imo the greatest author of “philosophical novels” alive today. And he writes in French! Unfortunately, I was able to find just few novels of his translated either in Italian, or in English, or in Spanish (the three languages that I know)… And I must use Google Translate to read the rest… You might imagine the pleasure of reading gets much diminished that way! :( If I were you, I would visit Amazon.ca, and order all the novels by Michel Rio I could find! Cheers, Gio Merci pour la suggestion. Thanks for the recommendation, I will check out his work :) On a purely pragmatic level, it's hard to recommend using a tool that told you not to invest in early 2009, or that might have kept someone on the sidelines for decades. http://finance.yahoo.com/echarts?s=HSGFX+Interactive#%7B%22range%22%3A%2210y%22%2C%22scale%22%3A%22linear%22%2C%22comparisons%22%3A%7B%22%5EDJI%22%3A%7B%22color%22%3A%22%23cc0000%22%2C%22weight%22%3A1%7D%2C%22%5EIXIC%22%3A%7B%22color%22%3A%22%23009999%22%2C%22weight%22%3A1%7D%7D%7D

Is this phonetic french from memory, or some other language I don't know? :) Raison d'être translates literally to "reason to exist". I get no credit for knowing that since french is my native language.

http://thefatpitch.tumblr.com/post/103291720776/are-low-interest-rates-responsible-for-high-stock As if macro wasn't hard enough to predict, some widely held views don't even seem true...

I just think that Buffett's capital allocation skills are so well known and that his every move is so scrutinized, different rules apply to him than most others (front page news, on every financial channel every time he opens his mouth) that he couldn't do what Singleton and Malone did, not at that scale (for different reasons -- Singleton wasn't known and respected by markets at the time and nobody knew much about buybacks, and Malone likes to create a complexity discount when he buys, which he later reverses when he wants to close the gap, something that Buffett tries very hard to avoid). Maybe a few percents of outstanding shares could have been bought, but but I doubt anything in Malone or Singleton territory. Maybe a few decades ago he could have done something like that. But of course it's speculation. I'm just sharing my thinking on it, not pretending I can read the tea leaves.

If he wasn't him, sure. But he's set the precedent of announcing buybacks ahead of time to be fair to his shareholders, so he couldn't have bought much. Even if he hadn't said anything (and the big buyback program approval hadn't tipped people off), maybe it would have worked for a quarter, but as soon as there's a filing showing he's buying a lot, price would run up.

The difference between 25% and 60% might be like the difference between someone who's 6-foot 4 inches and someone who's 7-foot 4 inches, though. Both are tall, but one's a lot more extraordinary and rare than the other. I don't think the difference can be hand-waved away. I don't use this stuff to invest at all. Macro's too hard (who predicted the recent oil moves?). I just find it interesting because so many people cite Hussman and Schiller, and base investing decisions on their work as if it was gospel, so it's nice to see their stuff scrutinized by someone smart.

How do you know that as soon as buybacks were announced the price wouldn't jump up? I doubt he'd be able to buyback any significant amount, unless it's at a time when other things are more attractive anyway (2009).

I think it depends on how you interpret that part I bolded. I think to him, if these shareholders don't want to sell anymore after he says that at "1.X of book the stock is undervalued enough to buy back", then after getting the information that he'd like to have if he was in their place, these people aren't sellers anymore, they've decided to remain partners. If they only sell because they don't have that information (imagine an alternate universe), then he's actually doing a disservice to people who actually want to remain his partners. (did that make sense? not sure I phrased this well...)

Thanks Kraven, you've just saved me a few bucks and a few hours..

2007 is just one data point, though. I was curious to see how consumer confidence looks most of the time, including in the early days of long bull markets. Found this page that uses data from the Thomson Reuters/University of Michigan consumer confidence survey (which is the same one cited by Bloomberg): http://www.tradingeconomics.com/united-states/consumer-confidence Here's the graph from 1952 to today: http://i.imgur.com/HCOXeGH.png

They certainly found an attention-grabbing title ???

While we're at it, if anyone still hasn't seen the 1979 Forbes article on Singleton, here it is: https://www.scribd.com/doc/18173672/fs1979 Also a great podcast episode (2 hours long) on Singleton here: http://seekingalpha.com/instablog/315877-the-manual-of-ideas/30189-the-manual-of-ideas-on-business-leader-henry-singleton-founder-of-teledyne-audio

Ok, I've had a look at the paper via a trial DeepDyve.com subscription (pretty easy to do if you want to do that too). Fairly short (4-5 pages of texts and a few graphs).. Kind of disappointing, I was expecting a 40-page deep-dive into Singleton. Oh well.

Anyone has a copy of this paper? Please PM me ;) http://www.emeraldinsight.com/doi/abs/10.1108/10878571011088041

The easiest way is to use a free image hosting site like http://imgur.com an just copy/paste the BBC Code that they give you here, or to use the "insert image" button right above the first smiley to put the bracketed BBCode around the image URL.

http://videos.nyssa.org/a-case-study-in-financial-brilliance-dr-henry-e-singleton-of-teledyne-inc Thanks to @exMBB on twitter. Haven't watched it yet, but how can it not be at least worth watching? ;)

I'm thankful to have had the luck to exist in the first place (what are the odds?), and to have been born in a relatively rich and free corner of the Earth (low odds too - maybe I'd enjoy life less, and have fewer opportunities to develop my potential, if I had been born, say, a female in Afghanistan...)).

His personal money is run differently probably out of neglect. It's insignificant compared to his Berkshire holdings. It's not his life's work, his passion, his canvas, his legacy... I wouldn't read too much into how he runs his PA, as I doubt that's where his real efforts go. Maybe it was interesting when he was starting it and building it from nothing to millions, but now that it's more than enough to pay for his lifestyle (and more), it's probably not top of mind.

Hussman not only prints graphs about stock market predictions and subsequent actual returns, he also give a numerical correlation. Does the blog point that out? If it doesn’t, I am already suspicious… ;) Gio Why not just read a few of his articles and find out? The primary source is easily available. I think you'll be pleasantly surprised. Here's a few to get you started: http://www.philosophicaleconomics.com/2014/06/critique/ http://www.philosophicaleconomics.com/2013/12/shiller/ http://www.philosophicaleconomics.com/2014/01/cape/ http://www.philosophicaleconomics.com/2014/05/profit-margins-dont-matter/

On profit margins, this is worth reading: http://www.philosophicaleconomics.com/2014/05/profit-margins-dont-matter/ Businesses optimize for ROE, not for profit margins.

Thanks, makes sense now that they are public. Cheers!

Ackman's Q3 letter: http://www.scribd.com/doc/248310494/Ackman-Pershing-Square-Holdings-Ltd-Q3-Investor-Letter-Nov-25 (If anyone has just the PDF, not the horrible scribd version, I'd appreciate it)

I'm fully invested.