Liberty

I'm not calling anyone crazy. But consider the fact that some of those same people who got that call right before the crisis stayed bearish after it and missed or partly missed one of the best rebounds ever. Crystal balls are rare (John Paulson's halo certainly doesn't shine the way it used to). I certainly don't have one. Every time I say that I don't know, people seem to read "I don't think anything can go wrong, the bull market will continue". That's not what I'm saying. Maybe we'll drop 20% tomorrow. But I can't invest as if that's going to be the case, because I don't know. What do you think should have happened? 15 years or bear market? A break-down of the economy, with soup queues in the streets and 20% unemployment? We've already discussed this. I find this moralistic approach (people should be punished for their excesses) not useful when it comes to investing. And it did take 5 years for the market to go back to its high water mark, so it's not like there was no pain (esp. considering the bubble's epicenter wasn't in the stock market).

Who says I'm not concerned? But I'd certainly be more concerned if people hadn't been predicting a crash for years now. I just realize that I have no ability to time the market - what if I had decided last year that things were too pricey and went to the sidelines and missed 2013? that's an opportunity cost just as bad as not foreseeing a drop - so I don't try, and that goes for either up or down. And I don't think that much about the market in general when making investment decisions, because I don't buy indexes. As long as I find businesses that I like and that are selling at prices I think are fair, I don't feel I have to wait for the next correction to buy because what if we get a 10% correction after another 30% run up? I bet a lot of people in late 2012 though they should just wait for a big drop before buying something... I wonder if people would be as worried if we weren't in "all time high" territory. I think it's a normal thing in a world where the population and economy are growing and there's inflation to eventually start hitting all-time highs and keep hitting new all time highs for a long time (ie. look at most of the past century). There will be corrections, and recessions, but who knows when? Tomorrow? In a year? We hit a plateau for a while? Doesn't mean the landscape will be like in the 2000s, that's just the recency effect. It could be worse, or it could be much better... No idea. People will always point out the long list of reasons why everything's about to go to hell, but that list has always been there (as Buffett says, look at what the world went through in the 20th century and look at how the stock market did -- now look at what above average capital allocators did over long periods of the same). As long as the people I invest in are really talented at creating value in all kinds of conditions, I think in the long term I'll do all right.

http://www.macleans.ca/economy/realestateeconomy/why-canada-isnt-immune-to-a-u-s-style-housing-crash/

Just to invert a bit on the starting point that shorting is out of favor right now; What's the right level of shorting anyway? Is it possible that the 2000s have accustomed us to a certain level because we had two huge crises? What was the right level in the 1990s? 1980s? 1970s? 1960s? 1950s? etc. I don't have an answer, but I think it's an interesting question. Maybe too many investors are still fighting the last war and are expecting a repeat of 2008-2009 any day now?

Nothing goes up 16,500% in less than a year just because of liquidity issues. Something seriously weird is going on here, and I pity anyone who has lost their kids college funds in the past few months shorting this...

http://www.businessinsider.com/a-closer-look-at-introbizcom-2014-7

http://www.thereformedbroker.com/2014/07/10/the-only-reason-investing-works-is-because-things-can-go-wrong/

I'm not sure what you meant here. ???

http://brooklyninvestor.blogspot.ca/2014/07/catmulls-mental-models.html

Thanks Sanjeev! :)

Thanks Ham, interesting read.

If you know the result, any bet is a good bet. I know that. I just meant that we're not talking about the same thing.

I meant the result. I would never make a bet like that.

I'd say that's a pretty good bet:

Thanks Meiroy.

I would not use complex formulas while investing, but I also wouldn't skip a book that otherwise seems interesting because it has formulas. I'm currently about 4 chapters in McKinsey's 'Valuation' and it has some formulas too, but they just help support what they're explaining about ROIC and growth, etc. The book has make clearer some things I had been thinking about for a while about business quality, and just for that the book is already worth it. I hope that Penman's book will similarly contain some interesting ideas that I can incorporate in my mental models even if I never use any of the formulas directly.

Every time I see Vinod Khosla's name I can't help but think about how he used to be a huge cheerleader for ethanol a few years ago. That left a bad taste in my mouth... But thanks for posting the interview, I'll check it out.

Got it in the mail. Looking forward to it.

WWTD? (What would Tepper do?) ;)

Great book.

My favorite is Adapt: Why Success Always Starts with Failure, which I highly recommend. I think this book is so useful I have given copies to my daughter and some of my students. That's a strong recommendation. I added it to the list!

Thanks for the recommendation. I've had Schelling's Choices and Consequences (http://www.amazon.com/Choice-Consequence-Thomas-C-Schelling/dp/0674127714/ ) on my shelf for a while, but haven't read it yet. I think it similarly deals with game theory, so it might interest some people here.

http://greenbackd.com/2014/07/07/john-maynard-keynes-and-the-performance-of-value-glamour-and-the-market-1926-to-april-2014/

I've read the first couple of chapters of McKinsey's Valuation and like it so far. Thanks jschembs for recommending it!

Here's a paper by Damodaran on return on capital and valuation: http://people.stern.nyu.edu/adamodar/pdfiles/papers/returnmeasures.pdf