west

They haven't gone up in large metropolitan cities in Canada. We have plenty of crackheads and drug addicts here. We have a few burglars, serial killers and just plain psychopaths too. Cheers! Are the police halfway good in those places :) ? So just to clarify, you believe guns should be banned outright?

Disclosure: I feel myself agreeing more with rkbabang and ragnar here. That being said, just to turn this on it's head a little, if we banned *all* gun ownership, could that result in burglaries and gun related violence going *up*? I know there are plenty of places in the US where the police are of marginal benefit. If all of a sudden criminals, who may still have guns despite any bans, don't have to worry about being shot when breaking and entering, and the police are so worthless they might as well not even be in the picture, wouldn't banning guns, in all probabilty, result in more crime? If I needed money for crack, or if I just felt like it or whatever, and I knew if I broke into a house in all probability I wouldn't get shot, and I knew I could easily get out in time before the police showed up, what would be my incentive *not* to break into someone else's house/property? Maybe I'm misunderstanding something with the gun control argument. Are people generally arguing for a complete gun ownership ban? If not, could people be more specific on what they want done? I have a feeling there are shades of grey here.

lol. At least it looks like they had buckles :D

Mr. Frog, That's not what I've found, at least for the periods that I've collected data. Oddly, the Minimum Market Cap of $5b, 50 company dataset seems to perform the most reliably, with the least amount of volatility, and with the fewest amount of "torpedo" stocks. Fwiw, I'm still not 100% convinced I would use the Magic Formula blindly quite yet though. It's promising, but I must collect more data! :) (And, again fwiw, I'd like to be able to reliably reproduce the list on the website using my own code. If I can't do this, there may be more Greenblatt tampering going on with the website list than I'd care for.)

Because you don't get backlinks that way :D

Ah, I missed tombgrt's post. I think he is dead on with his "I personally [would] consider trying it once I have $50,000 to spare for a separate portfolio" comment. For what it's worth, I have not been investing in it myself. I've just been collecting data.

mysticdrew, I would *not* just pick a small basket of companies from the set and invest in them. I've seen a couple of sets where the 30 company data set loses to the market, but the 50 company data set blows it out of the water. And, if you look at the individual returns of companies, they vary wildly. So diversification is *key* here. If you're dealing with $10k, I think it's probably best to avoid using the Magic Formula for now. Really, because of transaction costs, you need around $100k - $200k to be at the point where MF investing beats the market by enough to make up for transaction costs/taxes, if you're dealing with the 50 company data set. At least from what I've seen so far.

As I mentioned in another thread (the Benjamin Graham Screen one?), I've been collecting Magic Formula data for about 2 years now. You can find it here: www.dusthimer.net/MF_DATA In summary: - It does work! (For the most part... at least what I've seen so far) - I've seen a lot of churn in what does and does not show up in the $50m minimum market cap category. For example, there used to be a lot of Chinese fraud companies (that *destroyed* performance). Suspiciously, now they've disappeared. This leads me to believe what's posted on the website gets edited to a certain degree. - If I was going to invest using it today, I would go for the 50 companies, $5000m minimum market cap group. This seems to perform the most reliably, and gives pretty good returns from what I've seen so far. west

Forewarning: I'm jumping into this thread without having read the full thing... I have been forward testing the data from the Magic Formula website for about two years now. I wanted to see that it actually worked in real life before throwing any money at it. I'd say, for large caps, the screen does pretty well vs. the market for *almost* all periods I've tested it for. The thing that's scary to me is watching how the construction of the lowest market cap limit dataset has changed over the years. For example, in October 2010 the dataset had lots of Chinese fraud companies in it. The results from that dataset were *terrible*. In October 2011 that same dataset was full of pristine businesses and did pretty well over the next year. Did the MF actually adjust so the bad businesses "magically" disappeared? Or does the dataset get edited? At this point, I would feel very safe investing in the $5b floor, 50 company dataset screen (which, oddly, has been one of the most consistent and better performers of the datasets I've collected). It does about 2%-6% better than the market on average. I'm not 100% sure if this would be worth it outside of a tax free account though. On the other hand, I would not touch the $50m/30 company dataset unless I went over the companies myself. Too much potential for bad companies to show up again.

bathtime, I've got the exact same thoughts. I've had a longer discussion with one of the engineers at Tesla, and he was just amazed at both Musk's lack of understanding of some of the basic mechanical engineering aspects of building a car, and his complete disregard for engineering reality when things didn't work the way he imagined they would. I guess you could say he's one of those people where when the q-tip stops going in, he keeps pushing! Probably not a terrible trait for a "visionary" and someone who has access to a very large supply of cash I suppose.

Ah ok. Thanks for clarifying.

Plan, what do you mean by "Baindead"? I know of Bain, but I'm not familiar with that term.

I don't know about oil rigs but many of the laptops controlling the Mars Rover seemed to be Macs. :D That's because engineers love macs (as laptops)! They're UNIX underneath the hood, but we don't have to dick around with small stupid hardware configuration stuff like we do with other UNIX systems. However, we can also maintain our own systems and network setups, and don't have to bother IT when things don't work quite right. Let's agree to disagree. I do offer this though: If MSFT does fall, within say the next twenty years or so, I will more than happy to meet up, say I was wrong, and give you one free beer :D.

Like I said, it is the worst case scenario. MSFT's moat comes from switching costs. Windows 8 increases the cost of staying within the Windows platform. While the differential cost for your company might be high, there are companies out there for whom the difference may not be that high. We are moving to a world of cloud, tablets, smartphones, etc. Not everything has to be a forklift change. More than likely, a small percentage is going to switch over and then more and more users start requesting Macs Hey valueInv. I just wanted to say that I really respect what you say in most of your posts, but, if you're implying medium to large companies will or can switch to Macs in the near future, I don't think you're quite right here. Enterprise isn't going to switch anytime soon, if ever. First, there are too many custom legacy applications (let alone mission critical Windows specific documents!) out there for corporations to realistically make the switch. That software running on your oil rig? Yeah, it's not going "cloud" or Mac anytime soon. So, Windows it is. Two, Macs cost too much to be deployed in scale and there's too much vendor lock in. Battery died? Well, send your laptop to Apple. I hope you don't need it charged for your presentation tomorrow. Three, Apple doesn't do pure enterprise. Period. What Windows offers, network management wise, just destroys what Apple offers. There's no contest. Four, think incentives. Many CIOs and other IT higher ups are MCSEs or have other forms of Microsoft certification. Think they're going to throw out their accumulate knowledge just to "go Mac" anytime soon? My guess is no. So, like kevin4u said, I don't think you understand the stickiness of Windows. It is very, incredibly sticky! By the way, just for reference, I live in Silicon Valley, and I see all the Macs people use (and I use one myself!) And, in a previous career, I was a Linux network software engineer for a larger networking hardware company. So I'm not exactly a MSFT fanboy :). Oh, and sent from my iPhone :D.

Hi all. Just wondering, but does anyone know of any value funds in the San Francisco Bay Area, or where to find out about value funds in the area? I'd love to join one for the experience, even if that required volunteering full time. Just for some background, I just passed the CFA Level II exam and have a background in system software (specifically in distributed systems and networking). I haven't done anything professionally as far as finance goes. Thanks, west

My feeling on whether to invest in Fairfax or not has to do with whether you're investing in a taxed account or a non-taxed account. For example, let's say Fairfax will grow by 13% every year, on average, for the next 21 years. You can invest in Fairfax and hold it for 21 years or, alternatively, invest in your own, personally selected securities and, say, get 20% on average every year, but you have to sell your positions every three years. In a non-taxed account, this is a no brainer. You go with the 20% return selections. However, in a taxed account, it may make sense to just buy Fairfax and hold! If your long term capital taxes, between state and federal, are 25%, your total returns would be: 1.13 ^ 21 years * (100% - 25%) - 100% = 877% total after tax returns for Fairfax, assuming it returns 13% on average and you buy and hold for 21 years. OR 1.20 ^ 3 years * (100% - 25%) - 100% = 30% after tax returns for the 20% return selections after 3 years. For 7 periods (read: seven 3 year periods is a total of 21 years, or the total Fairfax holding duration in this example) this results in: 1.20 ^ 3 years * (100% - 25%) * 7 periods - 100% = 807% total after tax returns for the 20% selections. So you actually get better returns over the long run if you just stick with Fairfax, returning 13% a year, than if you pick your own stocks returning 20% a year, but you have to sell every three years. At least in a taxed account. The question I can't answer though, is will Fairfax actually be able to sustain 13% returns, on average, for the next 21+ years. I'm guessing they will, but I'd be lying if I said I knew for sure. What do you guys think?

Whoo hoo! How'd you guys do?

Attached is a print out of the website listing for future reference. west valuewalk.pdf

Assuming this post is for real, it looks like Jacob is trying to sell ValueWalk.com: https://flippa.com/2770343-premier-financial-news-website-w-increasing-traffic-and-revenue-every-month I can't say that I know everything that's going on with the SNPK scandal, but dumping ValueWalk.com seems pretty drastic. Assuming he didn't design the site from the get-go just to flip it/use it as a pure anything-it-takes cash flow generation website that is. west

Just curious, for those of you who have beaten the market, about how long did it take before you could do it reliably? A few years? A decade or more? I'm still fairly new at investing. I've only got about two real, understanding what I'm doing years under my belt (but lots and lots of hours). And I'm still stuggling with the psychological aspect of things. I'm guessing this goes away quite a bit once you've "broken through"?

Huh. I didn't know that. (Just for future reference's sake, do you have a source for that?) I'll probably end up finishing it. I'm just... nervous that after learning so much practical stuff from Level 1 and 2, that Level 3's going to be a let down in comparison. Honestly the portfolio theory stuff is the most worthless material on the Level 1 and 2 exams. I can't imagine it taking up 50% of the Level 3 exam.

Good luck to both of you. I'm finishing the last bit of studying I've got for the level 2 exam myself :D Ed, I've been hesistant about taking the level 3 exam since it looks like it's heavily weighted toward portfolio management theory stuff (which, for the most part, I think is a bunch of nonsense). What do you think about it?

Just my two cents (if it's worth that much), but my fear is that if you can't sit down with a 10-K and read it from front to back and understand a business without any problems, one day a "sound" gut value investment may end up being not so sound. And that's all it would take to ruin a long run of above average returns. This being said, reading 10-Ks is a skill that can be learned. It just takes time. When I was first getting started, I'd go to a local library with no laptop, no cellphone, no nothing. Just a notebook and a 10-K. (And an easy one at that.) I'd outline the 10-K section by section, and then go through it section by section. Do this enough times and you'll get fast at it :). As far as whether value investing is impaired by being right brained, I've got no idea. However, I'd like to think everything in life is learnable if you just practice enough. And +1 on twacowfca's checklist idea. It's a great idea regardless if you're right brained or left brained :).

+1 on the Bay Area meetup. San Francisco, CA here.

Isn't the financial information a little out of date though? I'd be amazed if there wasn't some other source out there for this. I mean all it is (coming from a software engineering background here) is data fetching and collating. It shouldn't be that hard. And I feel like there would be at least a small market for the product...