Olmsted

If its a band new drug to market normally it takes 6 months to ramp up the sales process. Around 6 months you will have an idea if the drug will be successful. All the drug tracking companies use statistics to come up with their weekly numbers so they can be off. In the past I have seen drug launches where the IMS weekly script numbers were so horribley off, the difference was over 10,000%. It's hard to look out over a year for a brand new dug b/c alot of factors come into play and really its just guess work. If its a new generic drug coming to market. Full pentration will be achieved within 60 days. Normally its 30 days. PBM's start to dwindle down the brand name drug so that everyone needs a refill around the time the generic is expected to come to market. There is a court hearing if the generic can be sold. PBM's already have the generic on hand and within a week of court approval they are sending out letter letting people now they need to switch to the genric b/c they will not be covered for the brand drug. Generics are where the PBM's get their margins. Interesting - and helpful! Let's just say it is a brand new drug with expected peak sales of $1b/year. You say about a 6 month sales ramp-up. After 6 months, what rate of sales compared to peak might be a reasonable guess? 50%? 75%?

I normally shy away from biotech (ok, not shy away so much as avoid it like the plague). But I'm looking at a couple ideas that require me to determine peak sales for a new drug, how quickly peak sales are reached, and what sales would look like for the first 18 months after approval. It seems that someone, somewhere ought to have compiled data on past drug introductions and the shape of the sales "curve" over time. Having trouble finding anything like that though. Any pointers?

I did very well on this one. :)

I fell into an investment levered to housing recovery by accident. It's GGC, which was recently involved in an exchange offer with PPG that many small investors played for the odd-lot provision. It looks cheap right now compared to competitors; I don't think the market has priced its new structure. Management says a return to normalized housing starts would yield ~$100m in incremental EBITDA, which I think would go straight to the bottom line. If they trade up to their most comparable competitor's valuation at ~8x EV/EBITDA, a good price range would be from $57.5 on the very bearish end (assuming no cost synergies realized and no improvement in housing) to $81.6 (cost synergies realized and housing returns to normalized starts). Other thoughts: timber companies, Tronox...

This could present interesting opportunities for those of us watching the community bank space. Also could be an interesting vehicle for healthy, acquisitive regional banks to do some growth. There's going to be an ongoing arb over the coming years of rolling up deposits and consolidating overhead and regulatory costs. http://www.bloomberg.com/news/2012-05-17/treasury-weighs-selling-tarp-bank-shares-in-pools.html

I voted for "Yes, there should be a divergence by almost 10x real estate valuations." I do think the divergence is probably a little too wide - SPG is overvalued right now as are many REITs, and I think SHLD is a little undervalued. But given the quality differences between the properties the price divergence should be meaningful. Been to a random SPG location recently? Been to a random Sears or Kmart?

25-bagger wasn't enough, I guess he was just holding out for the infinity-bagger. That's buy discipline there. ;)

So the new-issue CDO market is alive again, they're just not calling them 'CDOs' any more: http://www.bloomberg.com/news/2013-01-14/wall-street-returns-to-property-cdos-in-yield-hunt.html plus ça change...

Yep, good point, I was waiting for someone to bring up the oil example. Hadn't thought of the renminbi as a hedge on electronics. In theory I agree - but in practice a lot of these are impractical to spend much time thinking about. If this were a big concern, it would be more effective to go buy futures - but that's really kind of getting goofy unless you're a large industrial user. I still think these are somewhat minor compared to all the goods and services we buy that are not so clearly dependant on exchange rates. Gio - I hear you. Focusing on buying the best out there definitely is the biggest return on a marginal unit of effort.

I'm sorry I don't understand your point - but I've heard similar things from many people smarter than me so there must be something there. My naieve thinking is that, if over the course of one's life one's standard of living will be paid for 90%+ in USD (living in the US, buying services in the US, etc.), wouldn't one want to be very concentrated in USD? I've spent 10 or 20k euros in my life, a couple 100k yen, a handful of pounds, loonies, kroners, francs, and some Afghanis. And waaaay more USD. Figure my currency concentration should match the spend profile.

There are serious thugs in the bad parts of town only a couple miles from me. Put two or more of them in a group intending me harm, and I am in real trouble. Firearms are equalizers in the right hands.

Eric, that's a really hard question if not an impossible one because it's counterfactual. You may be able to count home invasions which were thwarted - if you dig enough you might be able to compile data. You will never be able to count home invasions which never occurred at all because of general deterrence (i.e. would-be burglars/crazies/rapists who know a lot of residents in certain areas are packing and want none of it). Now about high-capacity magazines vs shotguns, I don't know. Note also that that is only one possible scenario. Really that isn't the point I was trying to make. The point was to get some actual perspective on the actual risks. Putting actual numbers to actual risks at least helps us get beyond the emotional reaction. Which is why I chose to focus on the side I could quantify. Rational people can disagree on the magnitude of the benefits - I think those probably defy tangible counting.

This is a horrible event and there is a lot of emotion involved in this discussion. There is a lot of emotion involved in most policy debate. But I'm going to attempt to develop some thoughts on that subject that do not rely on an emotional reaction to an especially vivid tragedy, nor a knee-jerk appeal to the purest form of the 2nd amendment. Let's think about the benefit-cost tradeoff with legalized firearms in a structured way, just like we might think about other technology. For example, cars. There is a big benefit: mobility. And there are accidental deaths. That tradeoff is apparently worth it to most of us and to most (all?) societies. Let's attempt to do the same for guns, and inject some fact into how we think about the drawbacks of legal firearms. Pros: -Enables self-defense, security of the home and family -Perhaps provides some deterrent against tyranny, enables citizenry to at least pose some challenge to an abusive government Cons: -Enables bad actors to cause commit homicide much more easily than they could with the next-best weapon -Accidental deaths Clearly this isn't an all-inclusive list, and individuals points may be debatable. I am going to quantify the "cons" first, since the "pros" are somewhat fuzzy. Homicides comprise "normal" (non-mass-event) homicide and the mass-shooting events like today. Let's examine mass shootings first, since they are the homicides that would most clearly be prevented if we could magically eliminate every gun in this country now. (I say most clearly because it is just very, very difficult to kill 10+ people with weapons besides firearms. But you can still stab or beat single individuals without a gun.) Let's put some numbers to it. Mother Jones "Guide to Mass Shootings" details all 61 "mass shootings" in the USA that it could find over the last 30 years (defined as a shooting where the killer took the lives of at least 4 individuals besides himself). In these 61 events (plus today's) there were 983 individuals killed or injured, including the attacker. Since I cannot find the data broken out, let's just count all of these as fatalities to be conservative. That means over this compiled history, there were 32.77 deaths/injuries per year (with no clear pattern over time). This equates to a probability per American of dying in one these events of .000000192. Let's put some perspective on that number. The accidental death rate by automobile in the USA is 1.5 deaths per 100 million miles driven. The risk of death caused by a mass-shooting event is roughly equal to the risk you accept when you drive your car 7.28 miles. That is clearly not a level of risk most of us worry about. I would gladly accept this risk in order to provide safety and peace of mind to my family in my house. (Some may observe that these events seem to disproportionately affect schools. Let's say children are 10 times more susceptible - then that's equivalent to a child driving 73 miles. That's not something most parents worry about either.) Homicides and accidental gun deaths are a different story. The US averages 9 gun-related deaths per 100k people. I am going to disregard suicides - those are tragic but are a choice. The remaining gun-related deaths are 2.98 homicides per 100k and .27 accidents per 100k. This means that the probability of death from gun homicide or accident per year per person is 0000325. Let us say we could eliminate all of these deaths if gun control were enacted (a very debatable proposition) - that would eliminate as much risk as driving 2167 miles in a car. That is still not something most of us fret about too much, but it is starting to get more significant. Of course this risk amelioration could be much less significant if some of these homicides would occur anyway but by different means, or if illegal guns persisted and were used in significant numbers. My takeaway: the category that seems to drive the gun-control debate is mass shootings. It is logical that this category of violence would is most likely to abate given gun control - but the risk is infinitesimally small - equivalent to a short drive to the grocery store for many of us. I believe the debate is driven by emotion not risk assessment.* If one were to develop an argument for gun control based on risk assessment, reducing non-mass homicides and accidental deaths is a more reasonable goal. If gun control would diminish these events by only .5% - it would have a bigger benefit in terms of lives saved than if the risk of mass events went to 0. Now that we have some facts surrounding risk of death by gun in the USA we can weigh the benefits against these risks. To me, the security of my family, peace of mind, and (perhaps slight) hedge against tyranny outweigh the numerical risks I laid out above. This is very clearly the case in terms of mass shootings. It is perhaps less clear in terms of non-mass homicides, and depends on how effectively gun control would decrease non-mass homicide. I hope nobody finds thinking in terms of numbers and risk per person too insensitive after a horrible event like this - for me crunching the numbers and comparing it to a risk we deal with daily is a way to stay sane and grounded, and not get paranoid and freak out about something happening to my kids. Now time to go pray for all the poor people affected by this terrible event. *This is a perfect case study of how our ingrained risk heuristics skew. I vaguely recall from one of my classes that our internal risk perception tends to scale with the number of people involved in an accidents, squared. So 10 dead in one event might have a similar impression to a normal person as 100 isolated events. This may be a rule of thumb, don't take it too literally, but the point is, it's skewed by large numbers. http://www.motherjones.com/politics/2012/07/mass-shootings-map http://en.wikipedia.org/wiki/Transportation_safety_in_the_United_States http://en.wikipedia.org/wiki/List_of_countries_by_firearm-related_death_rate

+1

+1 Well put.

Some Starz news: it plans to sell itself ASAP after the upcoming spin. Also, we have some rationale for why Netflix was able to outbid them for Disney content. (I've heard some analyst griping that Starz is losing too much content.) Knowing how Netflix operates, they probably grossly overpaid Disney. Good discipline on Starz's part. http://online.wsj.com/article/SB10001424127887323501404578161211614586512.html#

OT observation: a COBaF discussion touching on politics that is still somewhat congenial! It can be done.... so far....

If an activist or PE shop runs capital that is long-term focused, then yes, it's a good thing. If it's someone looking to juice short-term numbers at the expense of the business's long-term viability - in order to flip it quick or IPO it - then no (this all presumes that analysts and investors cannot detect that type of behavior). PE gets accused of this quite a bit, and I'm sure it happens sometimes. Not sure if CP is a good example though. It's always too bad to see people layed off, but the usual "feel-good" response does more harm than good. We need to ensure that our labor markets are low-friction to get people working again. Smart policymaking should encourage transparent and low-friction labor markets, not the retention of unproductive jobs for their own sake. My $.02.

That's exactly right. In 2002 I had an Audi S4 parked in my driveway at my home in West Seattle. I got up in the morning to go to work, and once I looked at my car it took me a second to figure out what didn't look quite right. All four wheels were stolen and the car was on blocks. That's cost over $2,000 to "fix". I called the police and reported the crime. They just made a report and that was all. They never even sent anyone out to the home to investigate! Now, if I instead had reported a $10 million worth of artwork stolen they might have shown more interest -- perhaps even sending an officer to the house to investigate. On the one hand, the police can't be bothered with every petty theft. On the other hand, all citizens deserve equal protection and a 'petty' theft may be more of a hit to the median citizen than a million dollar theft would be to a billionaire. My idea on this: randomly pick a small number of minor crimes to investigate as if they were murders. That is, if a random number generator at precinct spits out a "1" when Ericopoly calls, send out the forensic unit, dogs, and everything. The goal is twofold: 1) you will start to actually catch some repeat offenders and shut down black market networks and; 2) you will create a vivid enforcement image, which will deter others. (Since humans' risk heuristics are based on how dramatic something is, seeing a forensic unit investigating some missing tires would create an impression in the would-be thief that that heretofore-riskless activity is actually quite dicey). In this system, police would never draw an imaginary line, below which something is not important enough to investigate. They would simply adjust the probability of investigating it thoroughly. I guess this is kind of a take on Giuliani/Bill Bratton's broken windows approach. I am happy to consult for any police chiefs who happen to be reading the board. ;)

An interesting article about cognitive biases in the context of military intelligence analysis, but I think it can be just as applicable to value investing: Using incomplete information to develop an estimate of current ground truth and predict the future. http://live.psu.edu/story/62664 The method that worked best was developing and then competing alternative hypotheses. To me, this sounds like trying to figure out what the guy on the other side of the trade is thinking. Asking oneself what can go wrong. Trying to "kill" your company conceptually. Etc. Interested to hear about how others confront and overcome cognitive biases in investment decisionmaking.

Oozing Alpha used to do this for free, but you pay for it now. It could be affordable for some.

I think a lot of folks think this means twinkies will no longer exist. And of course the viable brands will just be bought by another bakery. But because of this misperception, wouldn't it be funny if publicity from this liquidation resulted in a nostalgia-fueled twinkie-buying binge, saving the company? Okay, not going to happen, but would be humorous.

I was in Imperial too. What a management sh**show. Thankfully was able to exit before the loss got too bad.

Good comic! XKCD? This train of thought is just for fun, and I know it's easy to poke holes in some of the setup below. Anyway, just for kicks, here goes! I was a little puzzled by the market reaction following the result. It surprised me - not because I think Obama is good for business - but because I thought his victory would have been baked in. Perhaps not. If the market is at least a pretty efficient discounting mechanism most of the time, the market price on Tuesday should have been anticipating the expected value of two states of the world dependent upon a discrete event - the election. Here goes: Price on Tuesday = p(Romney wins) x (Value of market given a Romney presidency) + p(Obama wins) x (Value of market given an Obama presidency) Let's say that the Intrade odds are the best reflection of how the marginal sophisticated investor was thinking about the election. I couldn't find the Intrade odds at 1600 on Tuesday, so let's use the title odds of this post. For the left side of the equation, let's use the closing price of the Dow on Tuesday. And the closing price the day after the election for the term on the far right. 13245.68 = (.28) x (Value of market given a Romney presidency) + .72 x 12932.73 We can infer from Wednesday's price drop that the market would have been worth 14050 on Wednesday had Romney won. A full 1117.69 points. The market told us that the value of American business under Romney would be worth a full 8.64% more than it is worth under Obama! Actually sounds about right to me...

50% FB 50% CRM ;) Seriously though: 28% AIG/warrants 15% GKK 12% BAC warrants 10% NCT 20% smaller positions: CVLY, NSM, C, HIG, FIG, SNFCA, LINTA, LVNTA, ADFT, TMA.GB (scaling out of/into/price got away from me) 5% DBLTX 9.98% cash .02% Pork Bellies (the bacon curing in my garage) I'd probably have less cash and bonds, but I need to stash some away for my pending unemployment.