oddballstocks

Why should the SEC give preferential treatment to Warren? Because you're a fan? Rich people always get special treatment.... having to report your holdings to the SEC isn't exactly a preferential treatment... I meant being able to hide certain trades from the public. He's allowed to keep trades confidential because he's building a position. This isn't common, everyone else just has to disclose their positions regardless.

Why should the SEC give preferential treatment to Warren? Because you're a fan? Rich people always get special treatment....

Another way to think about what Ham Hockers is saying is "What is my edge?". Do you have one, do you think you have one? "If you've been playing poker for half an hour and you still don't know who the patsy is, you're the patsy." For example, I know that quantitative analysis is not my edge. I never let myself think that it is. I believe that my edges are ability to deal with volatility, ability to stick to the facts and ignore noise, good judge of character/management and willingness to have a long time horizon. Howard Mark's in an interview once said something along lines of (paraphrasing) "You have to ask yourself, what do I see/know that the market does not?". Trying to answer that question has been helpful for me. I'm not sure you truly need an edge to do well investing. If you buy something at a reasonable valuation and have no edge and are patient you will do well. The edge all retail investors have is they don't have a boss looking over their shoulder daily/weekly/monthly making sure they make the numbers. There are only a few places in the market where one can get truly superior information. And even then I'm not sure it matters much. I've had superior information on a few companies, but having less information vs more wouldn't have made a difference in the outcome. Buying cheaply and being patient is all that mattered.

I think no matter the age there will always be some regret that you didn't discover something much earlier. Many have said they regret not finding out about investing until their 30s or 40s. You're asking on an investing message board, so that's clearly not something you'll regret. I guess I'd recommend doing more before you have kids. Before you have kids (if you ever want to have them) you have so much freedom, but you don't realize it until it's gone. It doesn't disappear, it just changes. We travel extensively with our kids, but it's different. Take advantage of that while you're young. I'd also say to enjoy the moment. You're young, you feel invincible. Don't fritter away the time worrying about the future or your career. Decisions you make now don't determine the rest of your life. You can always change direction, nothing is set in stone. You can't plan your life when you're 20, it doesn't work that way. Take things as they come and adapt. I'm sure there are many on here who'd never have guessed they'd end up where they did in their 20s, yet it isn't a regret.

Agree with thepupil. Earning 3% is extremely difficult if not impossible without some risk on this. So you can either go high yield savings account, or just stick it in a Vanguard bond fund. If this is emergency cash I'd just resign yourself to the fact that you'll be losing money (inflation vs interest) and accept it. Maybe one day we'll have real rates, but it's unknown. I'm sure the Japanese have been thinking the same thing for decades.

I've had a few: 1) One day woke up to fine I had $13m in my account. They had marked a stock's value to $9,999 a share, I owned thousands, normal price in the $3s. I called and asked if I could somehow borrow or withdrawal the amount before the market opened. They wouldn't let me, the market opened and my $13m vanished. 2) Had a position replaced overnight for me. The shares I held were about $80 a share, replaced with some Australian gold miner for a few pennies a share. Called Fidelity, first few reps had no clue, acted like this was something I had requested, even though it wasn't on file. Eventually got to an IT support person, looked for about 20s and said "yup, CUSIP changed, we failed to update our system", they corrected it. 3) Have had various foreign held positions 'converted' into terribly illiquid USD positions by some computerized sweep system. Had to call about that, they eventually turned it off for my account.

Agreed, why are lower input prices a bad thing? It might shake out a few weak players, but overall for the economy paying less would be good. Wall St has this tendency to make anything that isn't the status-quo bad. So commodity prices low, if they go high it's bad. If they're high and go low it's bad. Doesn't make sense.

Wonder how long until we see a post on here from a brand new handle, something like: "SoCalClonerAndBuffettFan1234 - Mohnish? I've heard he's such a great guy, so nice, so friendly, a guru investor for sure, you guys should really listen to him, even clone him or invest in his fund."

In a previous thread someone linked to a presentation by some value investors who said they predict 10 years of cash flows and then invest at a discount to that. Seems all well and good, sort of standard investment advice there. So my question is this, does anyone look back at their cash flow predictions 10 years later and see how accurate they were? I'd love to see the predictions these guys had 10 years ago and then compare them to how they really came out. Does anyone do this? If not then how do you know your predictions are accurate? Or does it even matter?

I don't think any of us hate him or even dislike him (speaking at least on my end). I actually like him. He's a solid investor and does a lot of good around the world. With that said, I am a bit surprised that his 10 year returns are around the 10% or so mark when I hear so much about the 25%+ since inception returns so often. That leads me on of a few things: 1) the article is incorrect. His returns are better 2) As others pointed out, he has a few funds. Perhaps that 25% annualized return is based on that 3) His outperformance over the first 4-5 years was so incredible that it still generated the hefty long term numbers in spite of the solid, but not spectacular 10 year mark. I've learned some things from him and I enjoy his presentations. However, the returns seem a bit different than what we all hear. I believe most of(all?) of his returns come from his private fund in the previous decade. I agree that there's a lot to learn, the guy is a brilliant businessman. He sold an engineering company and has re-emerged as this "guru" of his own making. A guy who was doing well with his own capital marketed his performance and then purchased a lunch with Buffett, the ultimate advertising. Asset management is probably one of the best businesses out there. You contribute no capital of your own and you make money with other people's money. Some of the money in his funds is his, but there is no regulatory requirement like a bank or insurance company. In asset management you are rewarded for raising assets. Larger asset base means more income. If he would have stayed at say $10m and done 25% a year on his own money he'd have about $225m right now. I believe his own wealth is below that. But he preaches compounding, and this is crucial. As his assets grow his fee stream will compound at such a high rate that his personal wealth will far surpass what could have been generated on his own. So he's at $700m someone said. He gets 25% of everything above 6%. He's a cloner, so say market returns plus a few percent. Market does 10%, he makes $28m a year on this fund. At 10% he doubles every seven years, so when he's 57 he's managing $1.5b or so (market returns alone), that's $60m in income. Another seven years and he's at $120m a year in income. By the time he hits his 70s he'll be making $250m+ a year and growing. At that rate he hit's his $1b goal in four years, and that's not counting the hundreds of millions he's made to that point. You simply can't get to $1b managing your own money without some crazy outsized leveraged bets on something.

You're right of course. I didn't think my words through carefully and looking back on it my statement was wrong. It's really not a dichotomy like that at all. The reason I said what I did was thinking about reading 500 pages a day (I know that's apocryphal) and also thinking about the many other things there are to do in life as well. I like reading, but I don't want to be only a book with legs, as Munger says. The book that really got me turned on to investing was the Snowball - but I liked it also because it talked about the personal costs of being obsessed with investing. The image of Buffett ignoring his family and having Susan move out because she couldn't bear it anymore is to me a cautionary tale. I think the question is also whether one's goals are to be a great investor or to invest for the purpose of meeting one's own personal financial (or I suppose) goals. By the way, I've been a subscriber to your blog for quite a while now and really appreciate your writing. Not just the companies you cover, but especially when you talk about what it means to invest in stocks and what it means to do business. I find your approach and synthesis of ideas very fresh. Thanks, appreciate the kind words. Snowball is an enlightening book, it really does cover the costs. There's another book that's worth reading, "How To Get Rich" by Felix Dennis. He poured his life into money and then wrote this book on the other side. It's very Solomon-esqe wisdom. Essentially if you think that money will make you happy it won't. It's a nice refreshing break from all of the success stories where no one regrets trashing their life in pursue of the dollar. This guy trashed his life (literally) and then said it wasn't really worth it. You could probably read the book in a sitting. He doesn't just talk about being rich, he talks about how to manage people, sell companies and all sorts of other things. For a few bucks used on Amazon it's worth a few afternoons. If you're not turned off by religious things I'd encourage a read of Ecclesiastes as well. It's really the ancient version of the above. A king gets the world then realizes "what's the point of this?" A lot of people are in blind pursuit of success without ever really thinking about what success is or what it means.

Correct, although I do have his performance numbers for each fund. So it isn't as much extrapolating verses looking at them. I don't know how he's done in 2014, but if he's not having a good year the 9%-ish returns annualized make sense. He had a fund from 1999-2002 that did 21% annualized, maybe that's where the returns of 20% plus come from? I believe that was his own money thought, so not sure if any investors participated in that. Some of his funds have done well, they've all beaten the benchmark, which is the name of the game if you're in asset management. The guy is very smart and very savvy. Like Picasso said he's clearly cloning Buffett in more ways than one. The biggest is he's monetizing his reputation and connections to grow his capital base. He purchase the insurance company and now has this platform to grow on. If he wanted to do 25% annually and kill it on performance he's not going to raise capital, he'd stay small. But he has said he wants to be a billionaire, you don't become a billionaire by returns alone. You do it by besting the index and raising funds and earning fees from said funds. I have no doubt he'll reach his goal someday. Kudos to him, hopefully he can enjoy it. I think from where we sit it looks like he's invented a perpetual motion machine, this thing that just spits off cash with no work. But my guess is he works much harder than anyone imagines. I think the afternoon naps and biking are the narrative he wants, just like Buffett wants to be this nice old grandfatherly figure, not a ruthless investor.

I do a lot of my own research, I'd disagree that it has effected the quality of my life for the worst. Sure, you can't be obsessed about something, but who does their best work when obsessed? Best work is done when disciplined. Liberty has mentioned the keys to the kingdom though. Find small and simple companies that are overlooked. Some publish reports once a year so keeping up is a 30m activity. Others publish updates quarterly, but it doesn't take long to read through a 5-8 page report. Why do these opportunities exist? Try to pitch a small stock to any professional, the first response is "I can't invest in that stuff." So you're investing with management, families and other retail investors. In so many of these companies shareholders are legacy and have mostly forgotten about their holdings. It's not hard to have an information advantage when everyone one else has tuned out! But an information advantage isn't even necessary, just enough information to know a company is safe and cheap, then the patience to see the investment through. You can spend as much time as you want on this, but I don't think it takes much. Imagine a portfolio, you want to own 25 positions. To build this you need to find two positions a month, not a terrible task. It takes maybe 30s to 1m to eliminate a company if going A-Z, most of the time even less. The crap pink sheet stuff can be eliminated in seconds. If you have an efficient setup you can churn through a list of 100 stocks in a hour or less. I have done some smaller exchanges in under an hour, Canadian National Exchange comes to mind. Maybe took me two days to go through Portugal a few years back. If you're looking for two investments a month you're going to find those and plenty more going through a list like this. If you want to clone or find ideas from others you could probably build a portfolio quickly. The problem with cloning is it takes almost as much time to find out if the person you're cloning is decent verses doing your own work. I prefer small unlisted unfollowed stocks myself, I mostly write about them on a blog I keep. The link under my username links to my blog. If you truly like this space there are some posters on here who own a lot of these stocks and are great resources. A sort of community within a community. There are many ways to make a buck. Most on here would rather find high ROE companies or read the AIG filings, and that's fine. There are some wealthy investors on here that've gotten there from doing that sort of stuff. You need to find what works for you. I wanted a strategy that fit my life, that wasn't consuming and was built with companies that I trust if I don't hear from them for months or even all year. Just because people on Wall Street run around like maniacs and are glued to every tick doesn't mean that everyone needs to be. Heck most of my portfolio doesn't even trade on any given day. Hope this helps.

I believe the gap between the perceived and real is why getting a hold of his letters is impossible. ' Yeah, Nate. I just don't know man. I like Pabrai from everything I've read. He seems really smart and cool. With that being said, a 1.5% outperformance of the S&P 500 over 10 years is good but not outstanding, especially when one figures taxes into the equation (and the roughly 70% drawdown). I'm guessing the article is incorrect or else Eric wouldn't have invested with him. I agree, I have a lot of respect for the guy. He gives great talks and seems like a really nice guy. But something in this interview sent up red flags for me. Saying it'd be illegal to discuss performance is weird, if he were up 30% this year would it be illegal? So many managers openly discuss how they've done for the year, it doesn't seem like an issue. One of his talks really helped me understand marketing in a new light, for me the talk was invaluable. Here's the rub for me. Everyone will underperform at some point, it's just how it works. So he's underperforming this year, big deal. But just come out and say that and move on. We can't control when what we own realizes fair value. All we can do is buy and wait. I don't like how he was trying to dodge the question on some weird technicality.

I believe the gap between the perceived and real is why getting a hold of his letters is impossible.

I am not a fine-lady but that sounds pretty dismal to me too. Maybe worth spending a little time today cleaning?

Maybe look at midstream? Was at an event where an energy insider spoke, discussed industry dynamics. Said most midstream players have take or pay contracts for up to 20 years out. Seemed like buying into one of these guys sold down with oil might be good.

Why not ask Bill? He's a member of the board. Now I can see him not being able to comment or not wanting to comments, but you can surely send him a PM asking permission.

Are you sure? I thought there would be no tax until you sell. Just like an ordinary stock holding. Or even worse a PFIC. That's a separate level of hell altogether... If this is a PFIC and you're in the US avoid investing in this in a taxable account unless you have a killer accountant, or want to mess with the taxes on this on your own. If this is a PFIC (from some Googling I believe it is) you have to pay taxes on the increase in NCAV over the year regardless of your holding period. For example, if the fund trades at $10 on Jan 1st and $12 Dec 31st you have to pay taxes on the 20% gain even if you purchased at $11. If you purchase at $11 and sell at $10 you still pay taxes even though you lost money. Brokerage fees aren't the issue here, it's the tax classification. For many investors this is stuffed in a trust, or in a fund where the manager/custodian doesn't worry about these issues. For individuals it's a different story. This is why many fund companies list the management company to get around these restrictions. Yes that would be bad, but any type of pass through would be annoying if PSH didn't distribute everything. And I would hesitate to buy this in a retirement account without fully understanding the ERISA restrictions (as I don't). I suggest people read the prospectus ... I read through the prospectus but didn't see any mention of PFIC. If this is indeed incorporated as a PFIC, I would at least expect some mention of that in the prospectus. Weird.... http://pershingsquareholdings.com/media/2014/09/Prospectus-Dated-2-October-2014.pdf So what you are saying is that if this is a PFIC, and someone bought in January and sold in Feburary to another guy. The NAV increased from $10 on Jan 1st to $12 on Dec 31st. Then at year end, both persons are subject to paying that 20% increase in NAV? If this is listed in Holland why would they need to detail US tax issues in a prospectus? Investors are on the hook for PFIC themselves. Some foreign companies will mention that they might be considered one to US investors, but the majority I've seen completely ignore the issue. If more than 50% of the company's assets are securities and the company isn't a bank or investment bank then this most likely qualifies. Not sure what Pershing does, but if he just listed his fund then this is a PFIC. Same thing as if you went and purchased a TOPPIX ETF, you'll get nailed for it, but the TOPPIX ETF won't mention PFIC in the prospectus.

Why is that? I use IB and I could buy the PSH shares with no problem at very low cost. Fidelity can do it too but would charge you a pretty big commission. I'm with Schwab and PSH doesn't even show up in their database. Lame, I should switch brokers. Do you have the Schwab International account? I believe you can buy on Amsterdam there without an issue. I purchased some stocks in Japan with them easily. It's a separate product though (international trading).

Are you sure? I thought there would be no tax until you sell. Just like an ordinary stock holding. Or even worse a PFIC. That's a separate level of hell altogether... If this is a PFIC and you're in the US avoid investing in this in a taxable account unless you have a killer accountant, or want to mess with the taxes on this on your own. If this is a PFIC (from some Googling I believe it is) you have to pay taxes on the increase in NCAV over the year regardless of your holding period. For example, if the fund trades at $10 on Jan 1st and $12 Dec 31st you have to pay taxes on the 20% gain even if you purchased at $11. If you purchase at $11 and sell at $10 you still pay taxes even though you lost money. Brokerage fees aren't the issue here, it's the tax classification. For many investors this is stuffed in a trust, or in a fund where the manager/custodian doesn't worry about these issues. For individuals it's a different story. This is why many fund companies list the management company to get around these restrictions.

There was a value book floating around a year or two ago by Wes Gray and Toby Carlisle. Wes Gray runs some sort of quant shop and recently started his own ETF. I read in either an interview, or on his twitter stream that startup costs for an ETF are in the $250k range. So this isn't for the faint of heart. That said, if you can front the $250k and have a compelling strategy and a way to gather assets managing an ETF is a heck of an annuity. Best of luck! My guess is you're going to need to contact a securities lawyer for next steps.

Great point, even beyond that each vertical is likely to have giant texts on minute details for that vertical. I recently found a series of books on Amazon focusing on M&A accounting and valuation for specific industries. For example there is a 300+ page book discussing M&A for banks, that's a lot of pages on a very narrow topic. There are entire books on inventory accounting if that's your thing. A better way to look at this is to determine your goal, the find what you need to get there. In my experience if you need a book on inventory accounting to determine if something's a good investment it's more than likely not a good one. Or if it is you'll be facing an impossible uphill battle trying to teach the world arcane accounting concepts that might be masking true value. The suggestions on here are great, for most investment activities I think these books would easily suffice.

Best of luck. I took the Level I six years ago this month. The test was hard, but not impossible. The best feeling was the one I had walking out of the place. I was free, there was a tangible burden that was lifted once I was done with the test. I failed Level II and never re-took it, but at times I think I wouldn't mind trying to conquer the beast again. I've learned a lot since I failed L2 and I think I could probably pass L2 and L3 if I wanted. Maybe someday.. I agree that the books are great. A lot of efficient market stuff, but much of the market believes this, so it's good to know.

Looking at the arc of my career these past 30 years, I notice I've made some kind of major change approximately every 5-10 years. I realize now that, whatever my stated reasons for making the changes at the time, subconsciously I was fighting against becoming an intellectual vegetable. Becoming a drone was the risk of inertia, and I suspect this is true not only in the medical profession. I'll go out on a limb and hypothesize this reason was a less obvious factor for why the Buffett Partnership lasted . . . 10 years. First, I started out in academic research. The colleagues who recruited me, of whom I was awestruck initially, eventually became . . . boring. Then I left and moonlighted, but travel and irregular locum tenens positions eventually became . . . boring. Got married, had a kid, bought a private practice, which over time led to . . . tedium. A simple solution turned out to be moving the office to a new location, and it felt like a completely new job. Now I'm "retired" (I can completely quit medicine) with office hours 4 days/week seeing about 5 patient/day, so more time for the value investing pastime, not to mention spending an inordinate amount of time on CoBF. Really interesting observation, really interesting. When I think about my own career and that of close friends the 5-10 year mark certainly holds true. On an unrelated note I find it fascinating that two career profiles take to investing almost intuitively, doctors and engineers/IT. My cousin is a doctor and knows zero about investing, asked about value investing, I gave a short little explanation and he 'got it' right away. I've had a similar experience with other doctors, must be how they think. I find it interesting that this board is full of doctors, engineers and IT people. But not full of purchasing managers, marketing specialists, traffic cops and teachers.