ScottHall

Far be it from me to question you on tech stocks, Cardboard. I owe you a debt of gratitude for helping to inspire one of my greatest investments of all time. ThanksSoMuch.bmp

Who's trolling who, here?

Thank you, Flesh. I'm glad you enjoyed my post and that you managed to take something away from it. I'm glad to see another marketer on here. Most people on this site don't appreciate the dark arts.

All Becomes One! These companies are the modern day local media monopolies, except they're more scalable. This is literally an oligopoly market and there are only a few winners. I suspect the growth rate will remain high for longer than most value guys expect... Why settle for buying cheap growth stocks like GOOG and FB when you can burn the midnight oil reading SEC filings of shit-tier companies you're going to try to get one last puff out of, but may be too soggy? It's an interesting question... Too many value guys outsmart themselves. Sad! http://fortune.com/2017/01/04/google-facebook-ad-industry/

Raider, never played Speculator. That's pretty cool. I think it's a pretty small group of people who play these games, so it's cool to see someone else who was into it. My favorite strategy is usually distressed equities early, then forming a bank when I get enough capital, sell off all consumer & mortgage loans and bonds, then selectively put all of the bank's capital into hand-picked distressed business loans. Once I get too big to scale that, I go for whatever loans have the lowest credit rating to serve my capital base. I've figured this mechanic so well that I never lose money on any of my loans, ever, and earn higher interest rates than what's available on any other loan type and in assets with zero mark-to-market fluctuation on my balance sheet.

Thank you Parsad. You are a man who can truly appreciate the finer things in life. We anticipate receiving your $1 billion check by the end of the week. All Become One When Growth Exceeds WACC, so we expect the value of your investments to compound at a rate approaching ∞ for the foreseeable future. Any given year it might be a little more or a little less, but over the long run, we expect our investors to have claims equivalent to the world's annual economic output which we expect to experience hyperbolic growth as the Singularity arrives. My quarterly letter is in the mail. I request that you DO NOT distribute it publicly, as it contains proprietary information regarding our allocation to each of our four holdings and it would cause great financial harm to us if others were to copy our allocations in Facebook, Amazon, Netflix and Google instead of investing in our fund directly. Thank you for your confidence in us. We won't let you down. Scotty Hall Founder & CEO Horsefeather Capital Management

Are there any other fans of this game on the boards? I love to crack this thing out every few months and conquer the world. There are tricks to get mega rich but it's semi-realistic if you don't take advantage of the game breakers. There's dumb shit like discount retailers having 30% operating margins at times, but I find the strategy element pretty compelling personally. There aren't too many games catering to our interests, so I like to note them whenever I find them. http://www.roninsoft.com/updates.htm

Any recommendations? Business Reorganization in Bankruptcy is incredibly detailed, but it's almost so dry and detailed that I wouldn't advise reading it from an investing practitioner's perspective. Distress Investing and the Vulture Investors are much better for distilling a lot of the concepts in a relatively condensed and entertaining way. You sound like some kind of law student on this. Get a prip on it, or stay out. The FELP topic comes to mind. Thanks for making assumptions; I really appreciate that. I don't know what you're talking about. GGP, in percentage terms, was my greatest investment of all time. I bought shares at $2 and sold at $16. My only mistake is that I didn't hang around even longer.

Any recommendations? Business Reorganization in Bankruptcy is incredibly detailed, but it's almost so dry and detailed that I wouldn't advise reading it from an investing practitioner's perspective. Distress Investing and the Vulture Investors are much better for distilling a lot of the concepts in a relatively condensed and entertaining way. Yep. In the last paragraph you answered the only critic I had to make. I especially liked the idea of a diversified portfolio allowing you to try new investing styles and improving your circle of competence (I think you did not use this word... maybe investing mental model toolbox). However, that implies you have the time to do that kind of work. However: - If you had a more limited time, you'd probably be better off maintaining your investing style as long as you got reasonable results - a concentrated portfolio does not exclude you from trying new things, you just have to treat them as if you had a diversified portfolio and keep them small until you get confident with them - a more "growth oriented" portfolio and a more refined investing style might not mean better investing results if you are good at the simple things (ok...I might be saying this because I have no idea of the kind of returns a good growth investor gets) Haha, thanks. In my posts, I like the reader to be in on the joke. In most articles bashing Buffett like this, the reader is the joke. I like all of your takeaways. Thanks, Cigarbutt, for introducing me to a new word for this concept. I'm glad it was able to help you.

That's a sad story. Hope he makes a comeback.

Everyone is talking about how great it is that Buffett is going to win his bet that the hand-picked hedge funds are going to lose to the S&P 500 index, but how about we ask some tough questions around here for once instead of worshipping a fallen god? Let's face it, folks. Berkshire's 2016 growth in book value per share clocked in at 10.7% vs an S&P 500 that was up 12.7%. It was another year of ass dragging by Uncle Warren, not that we should be so surprised at that anymore. Berkshire has failed to compound book at a rate exceeding the market for four of the past five years. It is not for Warren Buffett's lack of talent. No, rather it is because the glory of his past success has now become an albatross; he's stuck with a huge amount invested stocks of companies that used to represent the timeless quality of American business. The very best of the best. The operative words are "used to." Now he owns a big slug of Coke, American Express and Wells Fargo with massive unrealized gains that he can effectively never sell because the deferred tax liability represents an obscene portion of their value. This float is supposedly not a real liability, despite the fact that it has shackled Berkshire with large equity stakes in declining businesses. Some are declining directly, like Coke, while the others have simply been eclipsed by a new breed of companies with zero capital intensity and nearly unlimited growth runways. Maybe they'll do okay, but is it really any shock he's lagged the market when his internal R&D for understanding these companies failed? It's like in the new Cars 3 movie trailers where Lightning McQueen gets the shit kicked out of him by the new sleek, high tech race cars. My nephews will be so sad, but to me it's a great lesson that unless we constantly improve ourselves, we will become dated before our time. The fact is that just like Lightning, many of the companies in Berkshire's portfolio are losing relevance in the modern economy, and in a market dominated by tech giants that enjoy economics that were previously not thought possible, they're likely to continue to do so. If anything, the trend will probably accelerate. I think Buffett probably understands this, which may be part of the reason he's invested in Apple. It's funny to me, to watch so many people criticize him over this. Don't you realize that constant internal R&D is what made him so successful as an investor? Charlie Munger alluded to this recently, and it's obviously true. If he had never gotten beyond that Ben Graham mindset, he'd wouldn't be what he is today. If he never got past his "I don't understand technology" phase, his lessons could be relegated to the dustbin of history as dated and no longer applicable. That'd be a very sad thing to see, for a man who has contributed so much to the field. What I care about is what Berkshire and Warren Buffett have taught me about human nature and the internalization of wisdom. All of those value guys shit talking Buffett because of his Apple purchase? They're so interesting to see; because they learned from him, and are now using his own teachings to reject him. I want to touch on this, because I think it's probably the most underdiscussed aspect of investing and the art of learning it, and many other humanities subjects. The internalization of wisdom can come with some horrendous side effects; in some cases, becoming a better investor actually cuts you off at the knees. I know this from experience, because I used to be a value guy that rejected growth. Out of hand. You're paying 100x EPS for that? You're stupid. Dumb. The history of investing doesn't support it. There will always be a better mousetrap. It'll never grow long enough to justify that value. All of these beliefs were based on wisdom I internalized from the past. Buffett taught me how to become a business-focused investor, and he says he doesn't understand tech. It must be uninvestable. If my idol can't do it, how can I? The key insight is that our progress as learners necessarily suffers from path dependency; from the time we are babies, we learn one new thing about the world, and build upon the foundations we were taught previously. But if those foundations are wrong, we are building a defective latticework that may serve to hinder us from future growth, even if it is sufficient enough to provide us with a decent result. Because wisdom is branching, having a defective branch not only stops us from learning positive mental models... the truth is, it can actively create negative ones, which can infect our other ideas. In a previous thread I discussed how it can be useful to be wrong. If you block yourself off from one style of investing to focus purely on deep value, for instance, there's a pretty good shot you'll become good at that niche. But in doing so, you're foregoing potentially even more profitable situations by refusing to do the mental work required to understand them. Opportunity cost becomes a very real enemy, and errors of omission become more frequent. The trouble is that this may be unavoidable at the outset. We all learn from each other; there is no one who is successful on this planet who has not built their foundation of wisdom on the ideas or work of others that came before them. It's made us an incredibly versatile and successful species, but it comes with one major downside. The downside is that we don't always just absorb the wisdom of our teachers, but their defects too. Instead of letting Buffett teach us just about the business and investing techniques that have worked for him over the years, we might also pick up his aversion to tech & growth stocks more generally. And through social conditioning, over time that can become the accepted standard for being a value investor in forums just like this one. I like to call these Second Order Traits, because we pick them up by accident through learning from our predecessors and colleagues. Smart people and thought leaders don't only have good ideas, or good traits; at the end of the day, their shit stinks too. By mimicking them, and by studying them, we can learn much about the world. Intergenerational transfer of wisdom has been a boon for society. But while we internalize what made those thought leaders successful, we can inadvertently internalize their mistakes that kept them from becoming as successful as they could have been. The trouble with Second Order Traits is that they're hard to get rid of, once you have them. Path dependence being what it is, what we learn often ends up leading to the next subject we learn. I got hired as a junior investing analyst for an investing newsletter publisher, and because of that, ended up learning about marketing & copywriting in particular. Path dependence; learning about investing led to learning about marketing. So it can be hard to go back and look at what we've learned, at what has been so successful for us... and admit that we're wrong, and that there are alternative, better paths. For years I refused tech stocks out of hand. It took some long and hard thinking, and direct and indirect guidance from investors who already made the transition, for me to get over that bias. I started investing in my own account in early 2008; it wasn't until 2014 that I really allowed myself to abandon this Second Order Trait. It was so hard, because guys like Ben Graham and Warren Buffett helped inspire me to become an investor. They had taught me things that made me a lot of money, it felt like I was turning my back on them and my beliefs. But, because wisdom is branching, it opened me up to a whole new world of investments and I'm glad now that I bit the bullet and rejected that part of the value dogma. I describe myself now as a hybrid investor, because I don't shy away from pretty much anything. I've read textbooks on bankruptcy law, stuff from Peter Thiel, Marc Andreessen and other Silicon Valley boys, and all of the classic value tomes. That's not to say that I'm without fault; I fuck up all the time. ALL THE TIME. And it'd be absurd for me to claim I've internalized all of the lessons these people have to offer just because I've read their shit. But that's part of the system. When you do constant R&D on your investing style, you will fuck up. It's a cost of doing business, but net-net it has been very rewarding. That's why I think it's odd when people ask me why I'm always changing my style up, when what I have works for me. The reason what I have works for me is because I do change my style up and make investments in styles I'm not familiar with. One of the biggest benefits of having a diversified portfolio is that it allows you to do more internal R&D on your investing process without betting the farm. If you have 20 positions of 5% each, it's not that big of a deal if you take a 100% loss on a few, because your winners are likely to make up for it. As a result, I actively look for unusual situations; no one stock is likely to make or break my returns at 31 positions, but the mental models I pick up from trying out so many different styles are likely to be useful. Some ideas lead to each other (FB led to GOOG for me) and it's a much broader universe to learn from. Being a concentrated investor gives you more leverage to your favorite ideas. Being a diversified investor gives you more leverage to learning new investment styles without a lot of risk. You can do this without heavy diversification but the way my mind works, it's best for me to have a brokerage account that I can look at at the end of the day. It's real; those are the decisions I made, staring in my face every morning. Path dependence in learning is a very real thing we should be aware of. All the time, we're picking up bad habits that are embedded inside good ones. And over time, unless we can cut out that cancer, those habits will stunt our growth. I'm going to be straight with you. I don't really care about Berkshire or its ass dragging ways. It's a single digit percentage of my portfolio. Intrinsic value per share probably is growing at or above the market return, despite book. But it was useful for framing, and since when have I let facts get in the way of a good story?

I'm lazy and unmotivated. I bought more GOOG the other day because I looked at the numbers, did a few rounds of division and decided the multiple was a good price to pay. You don't have to read all this shit to do well in the market. Most of the stuff in Ks and Qs is useless.

I am interested in all named. I will listen to your show.

we agree for once, Cardboard. We probably disagree on the solution though; Obamacare is a government handout to the health care industry. It is the worst form of corporate welfare payment. Moving to single payer, with the negotiating power of all becoming one, is probably the best way to lower prices substantially. The second or third order effects could be very interesting, however...

Who gives a shit about the market. There are fewer than 500 companies worth holding; DCFs are going to be horribly wrong anyway as cos. blow through "free cash" with piss poor capital allocation that most don't model out because they know it's pretty much impossible. Even if the core business generates strong returns on capital, the actual return on capital can be nothing-to-negative b/c of bad acquisitions, mistimed share repurchases and stupid expansion plans that we don't see in the immediate future. Free cash flow comes in... but how much comes out? How much of it are you going to see? Of the part you don't see, what's going to happen to it? Sure, the business may be great, but... If you don't value excess cash on a company's books at dollar for dollar, it's philosophically inconsistent to value its free cash flow at dollar for dollar (exc. time value effects) unless management is intent on paying it all out or has an admirable track record of reinvestment. Are the high multiples of the old blue chippers like KO, JNJ, MMM because the market is yield starved, or is it because the market understands that the shareholders are used to their dividends and that sort of shareholder culture acts as a natural check on management's ability to blow through shareholder capital? Or else the stock price gets slashed and nobody gets rich on their options? Often, a DCF can be a ceiling for valuation that management detracts from, rather than being a sufficient valuation that encompasses the entity as a whole. In rarer circumstances, we can incredibly underestimate the value of companies by assuming the cash they generate will be distributed to us rather than reinvested at a rate in excess of a company's cost of capital. The DCF would be right, save for man's strange inability to fit the world into a spreadsheet. Which companies have hidden compounding machines within them and which ones look like cash generating machines, but are actually cash dumpster fires? Most companies are not worth owning. Very few are. Who cares about the market if your companies can do well?

Interesting that his stats imply that there are some 1200 psychos in TSA and CBP. Not to mention the ones that think they're doing the best job they can but are wrong. One wonders though why one doesn't hear about these type of stories coming out of let's say.... Germany or.... Japan. Cause God knows when someone think German of Japanese border guards they don't picture warm and cuddly. I just wish I possessed Rat's thought process. Life would be so much easier. Couldn't you find two better examples? Merkel is DOA and Japan is dying because of xenophobia. Do better! isnt it great when we use untestable variables as the basis of our policy making ideas economics is science desert rat for fed chair

you guys are wasting each other's time in a screaming match and nobody is going to change anybody's mind this is boring

this is boring

You get more reactions with buzzwords; it's marketing.

Yeah, no lol It may be worth considering more than five seconds. We are very, very bad at accurately representing history and our elders with nuance. In the case of Munger he has hints of many controversial views which you sometimes see outrage about (some cultures work better than others is an example which sets the "bigot alarms" blinking). A strange stance to take when you lap up every word he says in all other areas as if was the epitome of intellectualism. Suddenly his views are all down to age and senility, it couldn't possibly be because he read and reasoned his way to them just like in every other area. Only ideology can shut down an otherwise open mind so completely. My view of Munger is more akin to something I've written about here in the past. That you can be wrong, and that it can be very useful for you to be wrong. For example, I don't think Ben Franklin worship and puritanism makes pretty much any sense in the modern age with modern technologies. But I do think it can be useful to its practitioners, because a puritan work ethic should lead to at least decent results more often than not. That doesn't make it ideal for an accomplished or happy life, necessarily, merely that it's reasonably certain to work "well enough" that you're going to do alright. So all of the other stuff that goes along with that work ethic is comorbid, and not really necessary. But if it's the only way to get it to "click" in the mind of that person, then it can be extremely necessary for that person. We all react somewhat differently to different triggers and form of stimulus, and we can pick up many good traits this way. But they often come tied to other, unnecessary traits because of the unique way the concept clicked for us. I call them Second Order Traits. For example, there are times when I've been recommended a "life changing" book, and thought it was completely useless. It didn't find a way to connect with it like the other person did. Just like I've recommended books that changed me, but others didn't get much of use out of them. We're influenced not only by the core message of whatever media it is that helps ideas "click" for us, but also the gloss, spin, and bull that comes along with it. Medicine might be good for you, but it's not without side effects. This is why I do not judge Buffett for his joke. It's also why I think it's in bad taste. The same thing applies to my view of Charlie Munger. I think he's picked up a whole lot of really good traits, I just think they're comorbid with a few bad ones. I know I've done this multiple times in my life. My initial admiration for Benjamin Graham helped teach me the concept of value investing, but brought with it a comorbid ideology that was very dismissive of growth stocks. It's not even what Ben Graham wrote, specifically. It's from how I interpreted it at the time. Benjamin Graham teaching me about value investing was very useful and profitable to me, but it brought with it an albatross of lost opportunity, that I had to work to get rid of. Traits are not so often wholly good or wholly bad for us; the truth is more that traits are mostly good and bad, in different quantities and qualities. I don't think anyone, Buffett and Munger included, has reasoned their way to all of their views in life. Or even reasoned to the same views in two identical ways, that bring along two identical sets of these Second Order Traits I mentioned before. That's why I think it's a perfectly reasonable position to view both men as intellectual giants, but also capable of being incredibly awkward at the same time. I'm perfectly comfortable with my ability to make up my own mind about when they're being which, thanks. :)

Yeah, no lol

While I agree, you have to put things in the correct context. The guy is 86 years old. Good luck finding any person who was alive in the thirties who is perfectly aligned with today's standards and ethics. Munger too can say stupid shit IMO, but I can place it given how he lived most his life in a completely different world. I think this is the right way to approach it. Is anyone really shocked that a couple of old white guys have some backwards views that were ingrained in them when they were younger? Munger hates pot and is a puritan, which I find ridiculous, but I don't let that stop me from learning from the overwhelming amount of good he brings to the table.

+1 But I think the point of the OP was to discuss the Unilever fallout, maybe? Oh, yeah, could be. If that's the case, ignore my comment. I just thought it was about his joke, because it said he "crossed a line" in the excerpt.

He makes dumb jokes all the time, who cares. SJWs ruin everything. This is not aimed at you in particular... I just think we care way too much about what comes out of people's mouths vs. what's inside their hearts.

Welcome, Cigarbutt.