BG2008

So going from 65% retained earning vs 79% (lowering of taxes from 35% to 21%) equates to a 21.5% additional value to the various companies. 2017 S&P 500 return was 21.8%. Coincident?

If you can provide pro/cons of using Fidelity or Vanguard, it would be greatly appreciated. We've used IB exclusively without need to register. Apparently there registration involved at both places? Thanks in advance.

Z, Would love to hear your thoughts on the economics, barrier to entry, pricing power etc of producing the following products from crude: 1) Solvent 2) Base oil 3) Wax 4) Branded synthetic lubricants 5) White Oils and Esters 6) Petrojelly, Parafin wax I hope you see this

No dog in this fight but the crypto thread is so porminent now that you can't ignore it. 1. Will Crypto still have value if it can't be converted into USD? Will people still accept crypto in exchange for goods or service if ultimately the current world power refuse to convert it into fiat currency? 2. It seems like central banks and frankly the US government have a lot of motive/incentives to ban crypto. US citizens benefits tremendously from being the reserve currency. It means that international capital finds its way to the US as a store of value. From an incentive perspective, it seems like the US government have all the motive in the world to outlaw or minimize the value of crypto at some point. 3. Limited supply of specific cryptos is somewhat flawed because new ICOs are constant. Larsen, the founder of Ripple, is more wealthy than the Google founders and Larry Ellison. It kind of blows my mind a bit when a founder of a company in 2012 can be wealthier than Google and Oracle founders. I don't think the latter guys are slouches. 4. I've heard people say that they will use crypto to buy RE and frankly there's a whole ecosystem that will be built out to service the people who made their wealth from crypto. Circling back to point 1) will people still accept Bitcoin or Ripple as payment if it can't be converted into USD? Just some rambling - I'm not smart enough for this stuff.

Ciber Inc liquidation, a total disaster

Fairly flat for the year in my IRA. Held mostly FRPH and other RE names that I have exhaustively researched. Mistake was buying into the Ciber liquidation and then not getting out when it became apparent that the thesis was different than I originally thought. Did much better in terms of position sizing and cutting loss with other people's money than my own IRA. Mistakes to avoid in the future - If you've been sleep deprived for a week due to the birth of your son, don't buy anything. As time goes on, I have a longer list of "don'ts" on my wall. Very impressive results for those that shared.

IB's price/quote subscription is quite confusing. What's the best package or combo that you have seen? I trade mostly US and Canadian securities.

Spekulatius, what exactly is this BG Mlp SEP? I'm also seeing a lot of MLPs in that high single digit distribution yield range

Cubs, Thank you for the kind words. If anything, I'm in need of some sort of social obligation to get myself to the gym on a more consistent basis. Great seeing you. If you're in NYC, give me a holler.

That's unfortunate, where did you move to?

A good friend of mine suggested that I find a buddy/support system to get back into shape. I am a former high school football player/wrestler. I do the standard weight lifting, cardio, HIT routine, etc. Currently, my main objective is to lower my weight as I am not a young buck anymore (mid 30s). Over time, I may try to accomplish more ambitious athletic goals like squatting 400-500 pounds and other things that are more inspirational, run half marathon? learn boxing? Cycle across America? Abalone diving in San Francisco? Pose shirtless for 40 under 40 by Fortune? I have managed my own fund for 4-5 years and I mostly work from home. Working from home has its many pluses, but has also taken about 5-10,000 steps from my daily commute. Hence, I need to be more vigilante about working out. My gym is the NYSC in Forest Hills, it's accessible via the E,F,M,R lines. It's about 20 mins from midtown during offpeak hours even though it looks like it's really far away. 1) The ideal workout partner is likely another value investor who live in the neighborhood and want to get together for an off peak workout between the morning and evening rush. 2) I am even flexible if you're a college student/younger investor who wants to learn value investing from a fund manager. Frankly, I can teach you how to work out as well. In this case, I expect you to work around my schedule and go out of your way a bit. One thing I can't do is mentor AND motivate. The motivation has to come from you. I am fairly old school and believe that respect is earned not given. If you want to do this, please be mindful of this dynamic. 3) Any sort of work from home professional who wants a buddy to work out with and use social pressure to force them to stick to a workout routine. I prefer someone who squat more than 135. It really kills the flow if I'm squatting 315 and we have to take off all the plates to do your set. In 2017, is that a politically incorrect statement? Exceptions made for the secret Charlie Munger that roam among us in the shadows. Anyway, just shoot me a PM, I'm a friendly person. If we can't be gym buddies, it's good to have a few coffee/lunch buds in the neighborhood.

Valuehalla, nothing against you personally. I get a chuckle when the world meltup is used on a value blog. I wouldn't be surprised if the price action agrees with you.

I guess the only way to hedge this is to own some real assets?

So, I just booked a room via AirBnb today in a college town that has a defined safe area and areas that are rather undesirable. I hate that AirBnb recently started not disclosing addresses of the apt or house. I booked what I thought was a decent accommodation, at least via the interior. Once I received the address, it became very apparent that I would not have booked the place had I seen the location from the outside. This is likely a situation in New York City, Chicago, and really any city that has potential rough neighborhoods. By omitting the address, AirBnb is really offering a Priceline Express like product. I am also getting fed up with low headline figures and then they add on all the cleaning fees etc. I feel that for a neighborhood that is consistent, AirBnb is fine. But for neighborhoods where 2 blocks makes all the difference, this can be a game changer when I know exactly where the Marriott or Hyatt is located at. Has anyone else experience this lately?

FRPH owns an aggregate royalty business - They don't mine, they just collect royalty and has a 63 year life at 6.5mm tons of depletion a year. From 2006 to 2016, aggregate volume dropped from 10.3mm tons to 5.5mm tons, yet revenue increased from $5.3 to $6.1mm. Avg royalty per ton increased from $0.52 to $1.07. See attached slide. They even increased unit price in 2009!! The cement business was able to hold steady on the royalty, but couldn't increase price. I wish every company that I owned had pricing power like this. The best part is that in 50 years, Amazon, Google, and Facebook, won't do anything to change this dynamic. Aggregate_Unit_Volume_and_Unit_Price_Sep_2017.pdf

Since you didn't talk about the specific concept, here's the way that I would frame it 1) 2x sales seems expensive just based on the number. 2) When we sold our Chinese takeout, it was done at a 0.35 times sales back in 2004. I structured the sale myself for my family as a 22 year old at the time. 3) Carrols which owns 800 Burger Kings franchises (no real estate) would buy mismanaged restaurants at about 0.25x sales. They implement some operational improvements and they can increase EBITDA by 2-400bps. 4) 2.0x sales with no profit seems like a stretch 5) 10% net margin is very hard to get. The only public chain that accomplished that was Chipotle before the health crisis 6) There is a situation where it could be cheap if you think you're buying the next five guys, shake shack, Halal Guys etc. If you think you've stumble upon the next original store of a 500 store chain roll out, then 2x sales is likely fine. But that's a huge stretch. If you can't tell, you're likely the patsy at the table. 7) If they own real estate in NYC/SF and the RE comes with it, view it through the RE angle. Restaurants in NYC really live on borrowed time if they don't own the RE as every rent renewal means the operator can't afford the new rent. So it's really a 10 year DCF. Same likely applies for SF and other cities experiencing high rent growth. Hope this helps.

Has anyone been to NAREIT events? Are they worth the price of admission at roughly $1,500 for a two day event? Is it worth it if you've never been to one before? Greatly appreciate any input.

Ok but, why 6%? Why not 5% or 7%? In Buffett's time, 6% was the 30 year coupon.The idea (as I understood it) was that managers are paid in excess of the risk-free rate. Clients moving outside of t-bills are assuming risk. They can either pay themselves for that risk, or pay someone else, presumably a professional. The real question is, why are value fund managers stuck on 6%, versus payment for the intelligent assumption of risk above the risk-free rate? Note: I think his actual fee structure for the multiple partnerships varied: 33% above 6% 25% above 4% 16.6% above 3% But (1) he provided liquidity back to his clients from the fund at 6% (again, the risk-free rate), and (2) I think when he combined all the various partnerships, he adopted 6% as the rate. I believe the 6% is closer to a risk free rate associated with the US treasury back then. I think a manager charging a performance fee above the risk free rate actually makes a lot of sense. In short you're getting paid for performance above what the clients can easily achieve by holding treasuries. When I was launching my fund, I wanted to tie my hurdle to the 10 year treasure with the hurdle reset every month or every year. After talking to enough fund admins and lawyers, they essentially told me that a floating hurdle is very had to administer. Hence, I think today's hurdle should be closer to 2% if we apply the same philosophy. I winded up picking a fixed mgt and performance fee structure that I thought was fair to my investors. Buffet has actually written extensively about expected returns and interest rates. In short, he's saying that it's easier to earn more in a higher interest rate environment.

Tim, Could you provide some specific examples? I noticed that many REITs were paying double digit dividends in the late 90s. Owning real estate must of have felt so "old economy" and boring back then. If you can delve into specific names or specific industries, it would be extremely helpful. I find it fascinating because during 2008/2009, most value fund went down roughly the same as the market. So, it seems like the out performance among value managers following 2000 was across the board rather than isolated to specific manager.

I noticed that many of the value managers really outperformed during 2001-2005. Can someone share the why's of that time period?

New York City isn't cheap at all. But if you buy a multi-family and put 20-30% down and take out a fixed 30 year mortgage, the rental incomes can service the mortgage quite well. Hence, this provides "staying power" to the owners in case of a 2008/2009 event. This is my experience from the Class B assets near public transportation. I think for a bubble to occur, it would involve some sort of inability to hold onto the assets when the market is stressed. I kind of hate saying this because the market is certainly not cheap. It never was in NYC.

Prasad, Mohnish, is certainly impressive in that he had the integrity to make his clients whole: + 6% / annum after 10 yrs. However, 6% return in 10 yrs is a 80% gain, the S&P 500 TR has return more than that in 10yrs, so as you said, he made a profit something like $8M above expenses, all for lagging the S&P500 TR. Just want to clarify things for real...... thanks I've mentioned it before but it amazes me how misguided the entire "he did/didn't beat the index" logic is. When someone puts their money in a CD, they'd be foolish to then say "darn, I under performed the S&P". If one buys a government bond, I'm sure they are not thinking about "beating the index". It is about risk adjusted returns and ultimately there are tons of different products out there that offering varying degrees of risks and rewards. There is a reason one puts money with, and pays a guy like Pabrai. Maybe it's just me, but at the forefront of the list would be the fact that he is both a talented investor, and a good, honest man, so he will be prudent with my money. There was a time when hedge funds were viewed as alternative investments with little correlation to the markets and security against big declines. I guess now a days there is sooooo much focus on this "beat the index" syndrome that the by-product is 90% of fund managers, guys like Ackman, are just gunslingers who redefine "value investing" so they can sell excessive risk taking as "safe" to the investors, and then swing for the fences with OPM. I have a ton of respect for guys who under perform the almighty index because they stick to their core investment philosophy and er on the side of caution with their investor's money. In relation to this thread, as nice a guy as Tilson was, he was not one of those guys. Pabrai is. This is well said. Disclaimer, I am a fund manager. I think measuring yourself against the S&P has hazards in that it becomes the benchmark that you care about the most. In an 8 year bull market, it forces you to take on risk that you normally will not. It is well known that you should lower your exposure when you can't find any value. The markets give you returns when it is available not when you need it. Let's assume that you gave money to a manager that hold 20-40% cash and he manage to compound it at double digits, but he trails the S&P by 1-2% a year, is he a bad manager in the post 2009 era? His plan is to deploy the capital when we experience sell off periodically. Is he providing value add? I would say that from the LP's perspective the best value add of working with a good manager is the elimination of the risk of "buy high and sell low." With a S&P 500 index, who knows where it will go. With a manager that you trust, it is easier to send him money when the market and/or his portfolio is down 20% assuming that the portfolio experienced merely price movements not permanent impairments. We have conversations with our LPs about this topic all the time. We talk about when may be a good entry, i.e. large 15+% selloffs in market, finding opportunities is like shooting fish in a barrel, etc. As managers, we have an inherent understanding of our portfolio's private market NAV and the current price. It is easy for us to know when our basket has gotten too cheap. I tend to have two kinds of investor conversations these days. The first group looks at my track record and noticed that we've held 40% cash and are very impressed by what we've done. We spend a ton of time on my investment process and my circle of competence. We talk about ways that family office and HNW clients can collaborate on certain co-invest deals etc. We talk about how families can add capital over time as opportunities arose. The second group is married to "I need my manager to beat the S&P by 3% a year." I don't care that you hold 40% cash. I allocate my capital to you and I expect you to beat the S&P. I don't care that the market is very high and good value opportunities are few. I suspect that the first group will do well over time and the second group will likely put capital into the S&P index at exactly the wrong time. Lastly, I think one must also consider the absolute level of return. If the S&P is doing 13-15% annually, it will be harder to beat. If the S&P is hovering around 3% CAGR or negative, it tends to serve the value investor better. Finally, are you really providing a value add if the S&P is down 3% CAGR over 5 years and you're flat during that time frame? The early 2010s were considered the lost decade where 10 year CAGR were flat or in the low single digits. People seem to have no memories of that anymore. I think the LPs would rather that you be up 8-12% CAGR during that time. I think any manager who return double digits CAGR deserve credit (assuming no risky capital allocation). Even Baupost couldn't beat the S&P in the 90s. Does that mean that they are not good managers? They had 10 years to beat the index and trailed the S&P 500 by roughly 5.5% a year. The math works out to roughly 13% for Baupost and 18.5% for the S&P index. THE BAUPOST FUND S&P 500 12/14/90 $50,000.00 $50,000.00 10/31/91 $59,787.28 $61,807.01 10/31/92 $65,471.39 $67,963.62 10/31/93 $82,134.71 $78,116.01 10/31/94 $91,217.43 $81,134.73 10/31/95 $98,430.31 $102,587.46 10/31/96 $120,583.20 $127,306.16 10/31/97 $153,193.22 $168,186.49 10/31/98 $128,220.00 $205,175.00 10/31/99 $138,845.00 $257,840.00 10/31/00 $169,995.00 $273,545.00 I would say the difference in this situation is you're holding cash because you can't find opportunities in the US market which has rational reasoning behind it while Tilson was holding 60% cash because he thought the world was going to end because of an elected official. One of these things is not like the other. I agree that Tilson holding cash due to his political believes was not a logical investment choice. My "rant" is more directed at the fact that world has gone partially mad over "beat the S&P" or not and I want to highlight that it can lead to some pretty stupid decision making as beating the S&P by 2% with an absolute CAGR of 0% is not that helpful to the LPs. Frankly during my experience as a fund manager, investors want certain type of exposure via a manager that can be very different than the exposure gained through the S&P 500.

Prasad, Mohnish, is certainly impressive in that he had the integrity to make his clients whole: + 6% / annum after 10 yrs. However, 6% return in 10 yrs is a 80% gain, the S&P 500 TR has return more than that in 10yrs, so as you said, he made a profit something like $8M above expenses, all for lagging the S&P500 TR. Just want to clarify things for real...... thanks I've mentioned it before but it amazes me how misguided the entire "he did/didn't beat the index" logic is. When someone puts their money in a CD, they'd be foolish to then say "darn, I under performed the S&P". If one buys a government bond, I'm sure they are not thinking about "beating the index". It is about risk adjusted returns and ultimately there are tons of different products out there that offering varying degrees of risks and rewards. There is a reason one puts money with, and pays a guy like Pabrai. Maybe it's just me, but at the forefront of the list would be the fact that he is both a talented investor, and a good, honest man, so he will be prudent with my money. There was a time when hedge funds were viewed as alternative investments with little correlation to the markets and security against big declines. I guess now a days there is sooooo much focus on this "beat the index" syndrome that the by-product is 90% of fund managers, guys like Ackman, are just gunslingers who redefine "value investing" so they can sell excessive risk taking as "safe" to the investors, and then swing for the fences with OPM. I have a ton of respect for guys who under perform the almighty index because they stick to their core investment philosophy and er on the side of caution with their investor's money. In relation to this thread, as nice a guy as Tilson was, he was not one of those guys. Pabrai is. This is well said. Disclaimer, I am a fund manager. I think measuring yourself against the S&P has hazards in that it becomes the benchmark that you care about the most. In an 8 year bull market, it forces you to take on risk that you normally will not. It is well known that you should lower your exposure when you can't find any value. The markets give you returns when it is available not when you need it. Let's assume that you gave money to a manager that hold 20-40% cash and he manage to compound it at double digits, but he trails the S&P by 1-2% a year, is he a bad manager in the post 2009 era? His plan is to deploy the capital when we experience sell off periodically. Is he providing value add? I would say that from the LP's perspective the best value add of working with a good manager is the elimination of the risk of "buy high and sell low." With a S&P 500 index, who knows where it will go. With a manager that you trust, it is easier to send him money when the market and/or his portfolio is down 20% assuming that the portfolio experienced merely price movements not permanent impairments. We have conversations with our LPs about this topic all the time. We talk about when may be a good entry, i.e. large 15+% selloffs in market, finding opportunities is like shooting fish in a barrel, etc. As managers, we have an inherent understanding of our portfolio's private market NAV and the current price. It is easy for us to know when our basket has gotten too cheap. I tend to have two kinds of investor conversations these days. The first group looks at my track record and noticed that we've held 40% cash and are very impressed by what we've done. We spend a ton of time on my investment process and my circle of competence. We talk about ways that family office and HNW clients can collaborate on certain co-invest deals etc. We talk about how families can add capital over time as opportunities arose. The second group is married to "I need my manager to beat the S&P by 3% a year." I don't care that you hold 40% cash. I allocate my capital to you and I expect you to beat the S&P. I don't care that the market is very high and good value opportunities are few. I suspect that the first group will do well over time and the second group will likely put capital into the S&P index at exactly the wrong time. Lastly, I think one must also consider the absolute level of return. If the S&P is doing 13-15% annually, it will be harder to beat. If the S&P is hovering around 3% CAGR or negative, it tends to serve the value investor better. Finally, are you really providing a value add if the S&P is down 3% CAGR over 5 years and you're flat during that time frame? The early 2010s were considered the lost decade where 10 year CAGR were flat or in the low single digits. People seem to have no memories of that anymore. I think the LPs would rather that you be up 8-12% CAGR during that time. I think any manager who return double digits CAGR deserve credit (assuming no risky capital allocation). Even Baupost couldn't beat the S&P in the 90s. Does that mean that they are not good managers? They had 10 years to beat the index and trailed the S&P 500 by roughly 5.5% a year. The math works out to roughly 13% for Baupost and 18.5% for the S&P index. THE BAUPOST FUND S&P 500 12/14/90 $50,000.00 $50,000.00 10/31/91 $59,787.28 $61,807.01 10/31/92 $65,471.39 $67,963.62 10/31/93 $82,134.71 $78,116.01 10/31/94 $91,217.43 $81,134.73 10/31/95 $98,430.31 $102,587.46 10/31/96 $120,583.20 $127,306.16 10/31/97 $153,193.22 $168,186.49 10/31/98 $128,220.00 $205,175.00 10/31/99 $138,845.00 $257,840.00 10/31/00 $169,995.00 $273,545.00

Back in 2009/2010, I was riding the subway in NYC and I saw Tilson standing in front of me in a packed morning train. I whispered to him in a bit of value fan boyish tone "you're Whitney Tilson", despite my effort to keep the voice as quiet as possible, people heard it on the train. A few heads were turned and I was slightly embarrassed. But like most New Yorker, no one gave a damn after the first few seconds. Tilson was polite and went on to invite me to his gathering in Omaha. I do not have a ton of interaction with him, but I generally agree that he's a nice guy. I think shorting is extremely difficult. Fundamentally it has to do with how the nature of shorting affects your psychology and position sizing when price moves against you. A long value position has antifragile and/or negative feedback loop characteristics when price goes down (assuming business and management fundamentals are still intact). It naturally leads to buy low and sell high. Short positions are the opposite, it has finite upside and unlimited downside. It can't be sized large. Time works against your position. It's just a tough way to make a living and tough way to sleep at night. I also question the true alpha generation over time. Back in 2011-2012, I tried shorting and buying puts. Nothing work. Overtime, I've wised up and resort to just buying deeply undervalued that I can hold for the long term. There is a lot of wisdom in being able to hold onto a position for 3-10 years despite a lower rate of compounding. I think it wasn't just Tilson's short performance that hurt his long term performance, it was also the brain damage and the resources that it soaked up. I wish him best luck in his endeavor. I think he can do wonders by focusing his energy and communication skills into social changes. He's a phenomenal communicator and seems to have the energy to write 10 page communications every two weeks.

The comment section is a gold mine 1) "The nails on Michael Jackson's coffin is about to come off (this is atrociously bad dancing). Both Coffin and nails were purchased from Taobao, fakes!!" 2) He dances like a old grandma 3) The back up dancers are worth billions each 4) Jack Ma was rumored to pay for prostitutes in Macau - Who cares if Jack Ma got some prostitutes 5) Every other comment was about how back the dancing is