Liberty

2014 Q2 letter: http://www.scribd.com/doc/236712968/Pershing-Sqr-1Q-2Q-2014-Investor-Letter-1-1 Nice shoutout to Ian Cummings and Joe Steinberg in the intro. 21% after-fees CAGR over 10.5 years with average of 14% cash. 27.7% gross CAGR over same period. Not bad. The part about Allergan's management is worth reading.

Not that it really matters and I like both Buffett and Greenblatt just fine without having to choose between the two, but if we could rerun history, I'd be curious to see how Buffett would have done with Greenblatt's starting AUM during the 1985-1994 period during which Greenblatt had his amazing run. Buffett's famous "I guarantee you I could do 50%/year with small amounts" (which might actually mean it's what he was doing at the time in his personal account with small sums) during a nice steep bull market would be fun to see.

If someone dies from brain cancer, you don't blame them. Severe depression can be just as out of the victim's control as brain cancer.

http://www.beyondproxy.com/berkshire-hathaway-longevity/ Article by Lawrence Cunningham about BRK's shareholder culture.

How about: "Why should these businesses be together?" If you can't find a good reason, probably best to split them off.

Very sad.. In memoriam, here's one of my favorite scenes he did:

I think it would be a very good thing. I would love to see all those people doing something more beneficial to the civilization. I think this is a case of the broken window fallacy. http://en.m.wikipedia.org/wiki/Parable_of_the_broken_window

For the sake of argument, what if you had bought all of amazon for $20bn in 2004 and sold it to a private buyer in 2014. How much do you think they'd be ready to pay for it? What if you had bought it all in 2004 for $20bn and had stopped all investments in growth and just tried to maximize FCF as fast as possible. How much money do you think you could have taken out of it in 10 years? One step further: In scenario 2, let's say that after maximizing FCF instead of growth for 10 years you sold it all to a private buyer. How much do you think they'd be willing to pay for it, and is that more than what they'd pay in scenario 1? I have no idea how to answer these questions, but if I was trying to value the company, I'd be thinking about that kind of stuff and not just how much actual FCF they actually made in the past 10 years and putting a multiple on that.

Yeah, the very restrictive definition means that this is a floor. The real number is probably much higher, especially for all those pre-construction condos that people like Brad Lamb are flogging to the unsophisticated masses, claiming they can make triple-digit returns in a few years... I think it's said well here: https://twitter.com/benrabidoux/status/497780348299018241

17% of condo owners in Toronto, Vancouver bought for investment http://www.cbc.ca/news/business/17-of-condo-owners-in-toronto-vancouver-bought-for-investment-1.2731289 This won't end well...

Here's a tip: Don't click on those threads ;) They're usually labelled pretty explicitely, and when they aren't and you end up clicking on one, hit the "back" button in your browser and don't come back to that particular discussion. I feel a lot like you about these, and get sucked in and I know it's mostly a waste of time... But I know I only have myself to blame. No need to change the forum when we can simply change our behavior and nobody's forced to read anything they don't want to read. :)

This makes no sense. Things can exist even if they are evolutionary adaptations. Anchoring bias is a heuristic programmed into us by evolution because it's quick and works in most situations we would encounter in the simpler society where our bodies evolved over tens of thousands of years. Is anchoring bias not real? Thinking is just an electro-chemical phenomenon that takes place in the brain, something that we can clearly observe with all kinds of equipment, and we can see how it changes or stops if we damage various parts of the brain. Yet thinking is still real. It doesn't need to be magical and supernatural to exist. Ethics are real, even if they only come from human thinking; just like love is real, even if all love would disappear if all sentient thinking disappeared too. Thousands of years ago, less sophisticated civilizations with no good methodology (science) to figure out how things work attributed everything to the supernatural, but we've moved passed that now; I just wish more people would realize it. There's a quote I like about all this: "Yes, you could say that it is all just a game evolution has programmed us to play, but it's an important game for those so programmed."

I agree that top notch capital allocation isn't as important in every company, but it's never a bad thing to have. Even a company as focused on products and organic growth as Apple became a better investment for shareholders when they stopped just sitting on their growing cash pile and started doing buybacks, dividends, raising some debt, etc. And I wasn't saying that it's a mistake for most companies to pick internal candidates that might not have capital allocation experience. Life is all about tradeoffs and doing the best with what you have. Especially in tough businesses, having good operations is crucial above all else. But it's still a shame that most companies are not structurally built to foster that kind of talent explicitly (there's a few companies that I like that train their managers to use all kinds of ROIC, cashflow, and capital intensity metrics and tie their compensation to those, and over time that makes them think in very clear real-economic terms that I think does help with company-wide capital allocation).

Good points. One should be honest and know thy self. After 7-8 years ( two business cycles) one knows there strengths and weakness's in business/investing. There is no shame for ceo's to outsource there investing to someone that is talented. I think most ceo's think they are better than the results show. So its a ego and pride thing. Rarely, is the Ceo a great capital allocator and operator. These guys are the superstars. In a ideal world every ceo throws there ego to the side and hires./partners up with a talented operator or allocator. Creating a win/win for shareholders. I think there's a whole other discussion in there; where are you supposed to find great capital allocators? There's a path within most businesses for great salespeople to climb the ladder and eventually reach the C suite. There's a path for all kinds of people, but there's not really a specific capital allocation career path in the lower ranks that feeds you the best capital allocators to the top. You almost have to be lucky and get a salesperson, or an engineer, or a bean counter who rises up the chain of command and who also happens to be great at capital allocation. A lot of great capital allocators go into investing, and there's a path from there for them to take over a business and make it their vehicle, but even that is relatively rare and doesn't always work if they don't have the operating talent (or can't find it in others) to make that work.

Indeed. I think that many of the best CEOs out there have probably studied Buffett and other great capital allocators, at least a little, and some will still go against these teachings because they have compensation incentives that make it better for them to do so. But when it comes to the average CEO, I have little faith in them having thought much about what their capital allocation framework is. They probably do things the way they've always been done at the firm, or copy what their competitors do, or follow the various fashions from the management consulting industry... Independent thinking is too rare a thing.

Most? What makes you say that? I don't think most Buffett fans have read all the berkshire letters...

Good answers above. I'd add: A lot of it is short-term thinking vs long-term thinking. Also, capital allocation is basically investing, and as we know, that's simple but not easy. Most CEOs might be good salespeople or good operating people, but they are poor investors.

If you eat badly and don't exercise, you potentially rob your wife of precious years of your life. We need to implement a paternalistic totalitarian fascist state to make you eat your veggies, take the stairs, and brush your teeth...

The Gates Foundation would probably gladly pay for them.

I love your enthusiasm, but just to avoid any confusion, I'm not the author. I'm just sharing the piece because I enjoyed it :)

I find your dogmatically anti-dogmatic phrasing ironic and amusing (and also am saddened a bit by it). This isn't computer code. You know what I meant, no need to be pedantic.

http://basehitinvesting.com/buffetts-petrochina-investment-finding-large-gaps-between-price-value/

I think you're absolutely right. Unfortunately, not everyone looks at things pragmatically/rationally and at the actual results of policies versus the alternatives. People who see the world through a moralistic lens will take the wrong decisions every time as long as they can claim good intentions and purity.

I don't think this claim has a factual basis. For one thing, you do get to invest at book (retained earnings). Over the life of a great company, the retained earnings will be much higher than the initial book value. There are all kinds of structural factors too. Murray Stahl has tons and tons of pieces on owner operators explaining why the market constantly undervalues these companies.

Good piece by Nate on 'bull market thinking': http://www.oddballstocks.com/2014/08/bull-market-thinking.html