Morgan

I am interested in office space and most of the office buildings in my small town are pretty old (built between 1900-1930) but ornately constructed and would likely need to be renovated on the inside at least to some extant, so it is likely that the first property would be a turnaround play. I think because it is an old building it would be considered a Class B (maybe Class C) building even after renovations. Junto, can you recommend a few good resources to research the cycles of the different types and classes of RE?

Great post bttmline. Would you mind posting that list of books? Or just a partial list? I looked at Professional Real Estate Development, 2nd Edition: The ULI Guide to Business but it is a little pricey on Amazon at the moment. I'm hoping to read, learn and get to know the players in my market and buy a property in the next 12-18 months. Can you recommend any questions that I should ask to brokers, owners and developers?

+1 on that. It was interesting watching the judges and how they watched the teams and how the teams reacted and held themselves throughout the presentations and Q&A.

Great! Thanks! I just ordered two book by Poorvu: - Creating and Growing Real Estate Wealth - Real Estate: A Case Study Approach Hopefully those will come soon and I can dig into them. I have done a good bit of reading about Frank Lowy and Sam Zell. Most of what I've read about them isn't too detailed and doesn't deal much at all with their younger, startup days, which is what I'm particularly interested in. It's difficult to find details regarding that kind of information as it was so long ago and not many people were paying attention to them just as they were starting. Do you know of any sources of information like that?

Does anyone here invest in, or know about owning and operating commercial real estate? I'm interested in learning more about it and how things are handled in general or compared to residential real estate. I currently own and manage four properties with 27 apartments and in the future am interested in expanding into commercial, but I know there is much to learn prior to the first investment. Any tips, book recommendations, case-studies, companies to study, etc? Thanks in advance!

That's really great. I hope they can do more with their money to help others.

If you do this I think it can be done relatively affordably. This guy (http://gsguy.wordpress.com/) rode 250,000 (150k? I can't remember) miles through the world on a motorcycle over 2.5 years for about $100,000. If you have the cash and are interested in that kind of thing, it might be something to look at.

Wheeling, WV. Looks like there are some people sort of in my area (oddballstocks, Vinod, staheyp). It'd be great to meet like minded people. Anyone interested in a meet up maybe in Pittsburgh or somewhere else?

What a great thread! I'm in a similar situation myself. Just graduated from college and am very keen on beginning a career in value investing. Good tips here indeed. Sharper, why don't you think it is good to work for a bank?

Here is a neat video from Ted. In the video he briefly mentions Watson and how it is really good at detecting the nuances of the human language. Imagine when that type of technology is given away (like Wolfram Alpha) and the people all over the world have smartphones with high speed internet connectivity. Imagine someone in the African desert using their smartphone to ask Watson a question. That will change their life dramatically. The future is only going to get better from here on out. Cheers!

Ha! That's pretty cool! I can just see it now... Every doctors office will have a "Dr. Watson Medical Terminal" on hand to speed up patient interactions. Or more interesting yet, remove the doctors office and just visit a "WellPoint Watson Center" for fast and accurate medical diagnosis. Each location could have a number of "Dr. Watson's" there. Put them into little cubicles and have the patient walk in and talk to the machine. The voice would be strong and relaxing to make the patient feel comfortable and confident in its diagnosis. Then have an inventory of medicines on hand that could be spit out to patients. Hmmm. Thinking about how to make sure "Dr. Watson" would stay up to date. Would it simply be software that is updated periodically? I imagine it would. There would eventually be problems with that. I wouldn't be surprised at all if people tried to influence Dr. Watsons decisions. Either for purely nefarious purposes or for economic gain (a la spit out a brand name pill in stead of a generic). How would this be regulated to help make sure that doesn't happen? If the machine is gathering data, how would it determine the good from the bad? So many things to think about... Good share Ross!

I think the attached is what you're looking for. Interview_with_Mohnish_Pabrai_2003.pdf

That was a good read. Thanks for the share!

I am in the camp of the techo-optimists as well. I also agree that computers are basically calculators, although they have been programmed to calculate many, many different things and as times passes they will only become more competent and less expensive. An example of this is the Watson computer that was on Jeopardy!. It is a very powerful computer that has been programmed to analyze many different things to spit out an answer. It did quite well on Jeopardy!. The computational power and storage space used on the machine will eventually become commonplace, although I don't know the timeframe for this. As an example, think about the computational power used in the first manned space flight compared to a modern smartphone; 1,000 times more powerful, 500,000 times more memory capacity and probably 1/1,000th of the cost. (those numbers may not be exactly correct). The point is that technology moves more and more quickly and gets better and better and cheaper and cheaper all the time. Bargainman's post was very good. It outlined some of the ways that technology is being used to enhance our lives. As humans have (almost) always done, we use the best tools we have access to to create newer and better tools and continually increase our knowledge. It seems logical and likely that humans will continue to develop more and more sophisticated tools to do more and more things. Whether the Singularity will happen I'm not sure, but it sure does seem logical. One of the serious issues as pointed out by Liberty is the potential for humans to use our phenomenal technology in a destructive manner. Technology is inherently neutral, but can be used for both good and bad. We as a species need to make sure we continue to use it for good as much as possible. So yes Parsad, technology will almost certainly save the world. ;)

Here is a link to the full Newsletter as a PDF. http://www.fairfax.ca/Theme/Fairfax/files/newsletters/FairfaxNewsletter7%2012-20-11.pdf

Great Video. Really fantastic to see Rose and Klarman together. I've always wanted to see Rose interview Klarman. See here for my notes: http://www.bottomupanalysis.com/2011/11/26/seth-klarman-interviewed-by-charlie-rose-notes/

If you want to save some time check out my notes. Although I really recommend you watch it if you have time. Guy is straightforward and to the point. Check them out: http://www.bottomupanalysis.com/2011/11/23/guy-spier-interview-from-the-manual-of-ideas/

Apple will not be the same. Jobs has without question built a solid organization, but he is absolutely the heart and soul of that very organization. Without him the essence of the company will change. Apple will remain powerful and innovative for some time, but Jobs' influence and demand for perfection will disappear. Cook and other employees will work to preserve the culture, but they will fail. Even if they preserve 90% of it, they will fail. Current and new employees will get lazy. They won't demand the perfection Jobs would demand and the level of innovation and overall quality of the Apple experience will deteriorate. Just my two cents.

He shared so much greatness with the world. Such a terrible loss.

I don't. Also, I don't make money from my site as there are no ads.

Raghuram Rajan's book Fault Lines is a great read. It was selected as the 2010 Financial Times and Goldman Sachs Business Book of the Year award, beating out stiff competition. The global economy is of course a complex machine and Rajan's book offers a interesting look into how it fell off the tracks in the last few years and what we may be able to do about it. The main reasons from the book are as below, but you'll have to read the book to learn about the potential solutions. 1. Income inequality and easy access to credit: <blockquote> "The everyday consequence for the middle class is a stagnant paycheck as well as growing job insecurity. Politicians feel their constituents' pain, but it very hard to improve the quality of education, for improvement requires real and effective policy change in an area where too many invested interests favor the status quo. Moreover change will take years to take effect and therefore will not address the current anxiety of the electorate. Thus, politicians have looked, or been steered into looking, for other, quicker ways to mollify their constituents. We have long understood that it is not income that matters but consumption... the argument is that if somehow the consumption of the middle-class households keeps up, they will pay less attention to their stagnant monthly paycheck. Therefore, the political response to rising inequality... was to expand lending to households." </blockquote> 2. Export Dependence: <blockquote>"The ability of countries to supply the goods reflects a serious weakness in the growth path they have followed - excessive dependence on the foreign consumer. Eventually high household or government indebtedness in these countries (the USA) limits further demand expansion and leads to a wrenching adjustment all around. But so long as large countries are structurally inclined to export, global supply washes around the world looking for countries that have the weakest policies or the least discipline, tempting them to spend until they simply cannot afford it and succumb to crisis."</blockquote> How does this affect the export driven economies? <blockquote>"Governments intervened extensively in the economies to create strong firms and competitive exporters, typically at the expense of household consumption in their own country. Overtime, these countries created a very efficient export-oriented manufacturing sector, but banks, retailers, restaurants and construction companies have, through their influence over government policies have managed to limit domestic competition in their respective sectors. As a result, these sectors are very inefficient. Not only is it hard for these economies to grow on their own in good times, but it is even harder for them to stimulate domestic growth in downturns without tremendously wasteful spending. Therefore, these countries become dependent on foreign demand to pull them out of economic troughs."</blockquote> 3. Clash of Systems: <blockquote>"Export-lead developing countries initially helped absorb the excess supply from the rich exporters. But developing countries experienced a series of financial crises in the 1990's that made them realize that borrowing large amounts from industrial countries to fund investment was a recipe for trouble. These economies moved from helping to absorb global excess supply to becoming net exporters themselves and contributing to the problem." "In the competitive financial systems in countries like the US and UK, the accent is on transparency and easy enforceability of contract through the legal system. As a result, they are willing to hold long-term claims and finance the final user directly rather than going through intermediaries like banks. The financial systems in countries where government and bank intervention was important during the process of growth are quite different. Public financial information is very limited and closely guarded within a group of insiders. Because of the paucity of public information, enforcement of contractual claims largely depends on long-term business relationships. This means that outside financiers, especially foreigners, have little access to the system." "So what happens when arms-length, industrial-country private investors are asked to finance corporate investment in a developing country with a relationship system? Foreigner investors who do not understand the murky insider relationships do three things: Minimize risks by offering only short-term loans. Denominate payments in foreign currency so that their claims cannot be reduced by domestic inflation or currency devaluation. Lend through the local banks so that if they pull their money and the banks cannot repay it, the government will be drawn into supporting its banks to avoid widespread economic damage. Thus foreign investors get an implicit government guarantee." </blockquote> 4. Jobless Recoveries and Political Stimulation: <blockquote>"The US was politically predisposed toward stimulating consumption. But even as it delivered the necessary stimulus for the world to emerge from the 2001 recession, it discovered, much as in the 1991 recovery, that jobs were not being created. Jobless recoveries are particularly detrimental because the prolonged stimulus aimed at forcing an unwilling private sector to create jobs tends to warp incentives."</blockquote> How long-term, and frequently detrimental policies are enacted. <blockquote>"Unfortunately, the US is singularly unprepared for jobless recoveries. The public pressure to do something quickly enables politicians to run roughshod over the usual checks and balances on government policy making in the US. Long-term policies are enacted under the shadow of an emergency. This leads to greater fluctuations in policy making that might be desired by the electorate. It also tends to promote excess spending and impairs the governments long-term financial health."</blockquote> How this promotes the buildup of bubbles. <blockquote>"Monetary policy is the domain of the Federal Reserve, but it would be a brave Federal Reserve Chairman who defied politicians by raising interests rates before jobs started reappearing. When unemployment stays high, wage inflation is unlikely. But there are consequences... prices of commodities are likely to rise. And so are the prices of houses, stocks and bonds as investors escape low short-term interest rates. The Fed added fuel to the fire by trying to reassure the economy that interest rates would stay low for a sustained period. Such assurances only pushed asset prices even higher. Finally, in a regulatory coup de grâce, the Fed Chairman, Alan Greenspan, effectively told the market in 2002 that the Fed would not intervene to burst asset-price bubbles but would intervene to ease the way to a new expansion if the markets imploded."</blockquote> 5. Consequences for the US Financial Sector: <blockquote>"Here, unsuspecting foreign investors relied a little too naively on the institutions of the arms-length system. They believed in the ratings and the market prices produced by the system, not realizing that the huge quantity of money flowing into subprime lending had corrupted the institutions. One of the weaknesses of the arms-length system, is that it relies on the prices being accurate. But when a flood of money from unquestioning investors has to be absorbed, prices can be distorted. However the central cause for the financial panic was not so much that the banks packaged and distributed low-quality subprime mortgage-backed securities but that they held on to substantial quantities themselves, either on or off their balance, financing these holdings with short-term debit."</blockquote> <blockquote>"A bank that exposes itself to such risks tends to produce above-par profits most of the time. From society's perspective, these risks should not be taken because of the enormous costs if the losses materialize. Unfortunately, the reward structure in the financial system emphasizes short-term advantages. Particularly detrimental, the actual or perspective intervention of the government or the central bank in certain markets to further political objectives, or to avoid political pain, creates an enormous force coordinating the numerous entities in the financial sector into taking the same risks. As they do so, they make the realization of losses much more likely. Each of the sectors - bankers, politicians, the poor, foreign investors, economists and the central bankers - did what they thought was right."</blockquote> 6. The Challenges Ahead: <blockquote>"If such a devastating crisis results from the actors' undertaking reasonable actions, at least from their own perspective, we have considerable work to do. Much of the work lies outside of the financial sector; how do we give the people falling behind in the US a real chance to succeed? Should we create a stronger safety net to protect households during recessions in the US, or can we find other ways to make workers more resilient? How can large countries around the world wean themselves off their dependence on exports? How can they develop their financial sectors so that they can allocate resources and efficiently? And, of course, how can the US reform its financial system so that it does not devastate the world economy one again? There are no silver bullets. Reforms will require careful analysis and sometimes tedious attention to detail. They will involve significant short-term pain in return for more diffuse but enormous long-term gain. Such reforms are always difficult to sell to the public and hence have little appeal to politicians. But the cost of doing nothing is perhaps worse turmoil than what we have experienced recently."</blockquote> From www.bottomupanalysis.com. Sanjeev, please feel free to remove this post if it violates any forum rules.

Yep and yep.

[amazonsearch]The Intelligent Investor - Benjamin Graham[/amazonsearch] A quick overview of Graham's famous book.* The Intelligent Investor is an excellent book and is absolutely worth reading. The key chapters are eight and twenty, regarding Mr. Market and the concept of Margin of Safety, respectively. Summary of Chapter 8: The Investor and Market Fluctuations When referring to the markets from 1850 – 1950, Graham notes that, “Nearly all bull markets had a number of well defined characteristics in common, such as: - A historically high price level - High P/E ratios - Low dividend yields as against bond yields - Much speculation on Margin - Many offerings of new common-stock issues of poor quality.” Following this Graham notes that a stock is not a sound investment simply because it can be bought close to its asset value, but that an investor should require in addition to a good P/E ratio, a strong financial position and the ability for a company to maintain it earnings for a number years into the future. Later in this chapter Graham introduces the irrational character Mr. Market. He comes to you everyday and offers securities at a certain price. Sometimes, Mr. Market is overly optimistic offering high prices, and other times he is down right depressed and wants to sell at a large discount. Graham stresses the importance of Mr. Market’s irrationality. Stating that one shouldn’t buy simply because a stock has gone up or sell imply because a stock has gone down, but to “acquire and hold suitable securities at suitable prices.” In this sense, movements are important only because “they create low prices at which to buy and high prices at which to sell.” Summary of Chapter 20: “Margin of Safety” as the Central Concept of Investment In this chapter Graham emphasizes the importance of Margin of Safety when buying a security. By definition Margin of Safety is, “A favorable difference between price on the one hand and indicated or appraised value on the other. That difference is the margin of safety.” Stating that this is key to “absorbing the effect of miscalculations or worse-than-average luck.” In a similar vein, he encourages investors to be weary in times where business conditions are favorable because purchasers “view the current good earnings as equivalent to ‘earning power’ and assume that prosperity is synonymous with safety.” Later he says that during these times, “common stocks of obscure companies can be floated at prices far above tangible investment value, on the strength of two or three years of excellent growth.” Implying that these securities do not offer a sufficient margin of safety for a prudent investor. At the of the chapter Graham ends with a few business principles – two that stuck with me: [*]Keep away from business ventures in which you have little to no gain and much to lose. [*]Have the courage of your knowledge and experience. If you have formed a conclusion from the facts and if you know your judgment is sound, act on it – even though others may hesitate or differ. You are neither right nor wrong because the crowd disagrees with you. You are right because your data and reasoning are right. Table of Contents: Chapter 1: Investment versus Speculation: Results to Be Expected by the Intelligent Investor Chapter 2: The Investor and Inflation Chapter 3: A Century of Stock Market History: The Level of Stock Market Prices in Early 1972 Chapter 4: General Portfolio Policy: The Defensive Investor Chapter 5: The Defensive Investor and Common Stocks Chapter 6: Portfolio Policy for the Enterprising Investor: Negative Approach Chapter 7: Portfolio Policy for the Enterprising Investor: Positive Approach Chapter 8: The Investor and Market Fluctuations Chapter 9: Investing in Investment Funds Chapter 10: The Investor and His Advisers Chapter 11: Security Analysis for the Lay Investor: General Approach Chapter 12: Things to Consider about Per-Share Earnings Chapter 13: A Comparison of Four Listed Companies Chapter 14: Stock Selection for the Defensive Investor Chapter 15: Stock Selection for the Enterprising Investor Chapter 16: Convertible Issues and Warrants Chapter 17: Four Extremely Instructive Case Histories Chapter 18: A Comparison of Eight Pairs of Companies Chapter 19: Stockholders and Managements: Dividend Policy Chapter 20: “Margin of Safety” as the Central Concept of Investment *This is from my site www.bottomupanalysis.com.

Wow! Congratulations Tariq! Your site was a great resource. Thanks for the hard work and good luck at GMO! Morgan

In regards to the entrance fee for the forum - please don't have one. I'm a college student and can assure that I would not have paid the entrance fee. If there was a one/three month free trial period I would have done that and made multiple accounts, annoying both of us - I have to make lots of accounts and you are stuck with a ton of never used accounts. Donation button is the way to go. And yes, this site is great.