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What do you think is true, that most everyone believe the opposite?


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In the business realm, what do you think is true, which most everyone believes the opposite?   

 

My answer is that the majority seem to believe that China's housing situation is sustainable. 

I think it is a massive bubble that will pop, with severe emerging market knock on effects.

 

In China

~20% of apartments vacant

Very high price to net rents

Impossible to time but the longer the boom the bigger the bust will be.

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In the business realm, what do you think is true, which most everyone believes the opposite?   

 

My answer is that the majority seem to believe that China's housing situation is sustainable. 

I think it is a massive bubble that will pop, with severe emerging market knock on effects.

 

In China

~20% of apartments vacant

Very high price to net rents

Impossible to time but the longer the boom the bigger the bust will be.

 

I think more people are in your boat than you realize.

 

I'm going to stick with my deflationary thesis - every year we've inched closer and closer to deflation despite the supposed recovery, trillions in stimulus, etc. and yet people still seem to think it's a possibility that is very var removed from reality. I think it's much more likely than most seem to and that the last five years have only served as confirmation of the thesis.

 

To be more localized, I'd suggest that NYC real estate is due for a nasty correction. I understand it could become the next London, but prices have outpaced wages by a significant amount for a significant time. My friends look at me like I'm crazy when I say it - they can't imagine a better investment than buying their own apartment in NYC because the prices "have never gone down" or that "everyone wants to live here." It just seems like prices seem generally unsustainable for the local population but the local population justifies it with the flawed reasoning that doesn't necessarily support the current prices. Seems like the tinder is there - just waiting for a spark.

 

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What makes you think NYC RE prices need to correct, rather than wages? There is "tinder" on that side as well: record corporate profit margins (or so I hear), low tax rates paid by corporations/wealthy individuals, record high income-inequality, etc.

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What makes you think NYC RE prices need to correct, rather than wages? There is "tinder" on that side as well: record corporate profit margins (or so I hear), low tax rates paid by corporations/wealthy individuals, record high income-inequality, etc.

 

Margins will revert like they always have. It appears to have begun, but we'll see. Also, I'd be willing to bet that taxes go up in the future - it's insane to have record levels of deficit/debt while maintaining some of the lowest tax rates we've seen in modern history. I'm generally not for higher taxes, but it's the rational response to the current budget crisis and it will likely hit high earners disproportionately. NYC has a high proportion of "high earners", even if you are just middle class in the city.

 

So, wages haven't kept up with prices, taxes likely to go up on a number of those same individuals at some point, and corporate profits unlikely to last. It's just a guess though - I'm not actively shorting NYC real estate or anything. Just paying rent and using Airbnb to help cover that so my net exposure to prices in NYC, for the time being, is zero.  Really, the only thing that I see that would prevent this is if foreign money continues to flow in and buy the properties at any price. Even that looks like it might be changing with the city considering increased property taxes on properties vacant for the majority of the year and the increased capital controls that appear to be taking hold in places like Russia and China.

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Value and growth investing are not mutually exclusive, and just because an 85-year-old man isn't comfortable with tech stocks doesn't mean you shouldn't be.

 

And just because he built a huge part of his business with insurance companies doesn't mean everybody else should.

Not everybody needs to own an insurance company to be a successful investor.

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Value and growth investing are not mutually exclusive, and just because an 85-year-old man isn't comfortable with tech stocks doesn't mean you shouldn't be.

 

And just because he built a huge part of his business with insurance companies doesn't mean everybody else should.

Not everybody needs to own an insurance company to be a successful investor.

 

I was going to say something about how quoting a great investor (thinker/writer/whatever) probably belies a lack of understanding.

 

I also believe that corporate filings are over-rated. Not that a deep dive into the filings doesn't have its use (complex structures, distressed situations, asset investing, etc.) but typically I think what's going to happen in the future is the domain of business analysis and not financial analysis.

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WEB has become overrated.

 

With a few exceptions, the worst financial advice comes from articles the have WEB's name in the headline.

 

The 21st century will have fewer deaths from war on a per capita basis then the 20th century did.

 

The USA will continue to dominate the world economically and culturally in the 21st century.

 

The % of US pop that attends college will decline.

 

 

 

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In the business realm, what do you think is true, which most everyone believes the opposite?   

 

My answer is that the majority seem to believe that China's housing situation is sustainable. 

I think it is a massive bubble that will pop, with severe emerging market knock on effects.

 

In China

~20% of apartments vacant

Very high price to net rents

Impossible to time but the longer the boom the bigger the bust will be.

 

I think more people are in your boat than you realize.

 

I'm going to stick with my deflationary thesis - every year we've inched closer and closer to deflation despite the supposed recovery, trillions in stimulus, etc. and yet people still seem to think it's a possibility that is very var removed from reality. I think it's much more likely than most seem to and that the last five years have only served as confirmation of the thesis.

 

To be more localized, I'd suggest that NYC real estate is due for a nasty correction. I understand it could become the next London, but prices have outpaced wages by a significant amount for a significant time. My friends look at me like I'm crazy when I say it - they can't imagine a better investment than buying their own apartment in NYC because the prices "have never gone down" or that "everyone wants to live here." It just seems like prices seem generally unsustainable for the local population but the local population justifies it with the flawed reasoning that doesn't necessarily support the current prices. Seems like the tinder is there - just waiting for a spark.

 

Totally agree with you on NYC real estate.  Cap rates are way too low.  Similar bubble dynamics at work.

The great interest rate reset (when interest rates rise) should be interesting.

 

 

 

 

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In the business realm, what do you think is true, which most everyone believes the opposite?   

 

My answer is that the majority seem to believe that China's housing situation is sustainable. 

I think it is a massive bubble that will pop, with severe emerging market knock on effects.

 

In China

~20% of apartments vacant

Very high price to net rents

Impossible to time but the longer the boom the bigger the bust will be.

 

I think more people are in your boat than you realize.

 

I'm going to stick with my deflationary thesis - every year we've inched closer and closer to deflation despite the supposed recovery, trillions in stimulus, etc. and yet people still seem to think it's a possibility that is very var removed from reality. I think it's much more likely than most seem to and that the last five years have only served as confirmation of the thesis.

 

To be more localized, I'd suggest that NYC real estate is due for a nasty correction. I understand it could become the next London, but prices have outpaced wages by a significant amount for a significant time. My friends look at me like I'm crazy when I say it - they can't imagine a better investment than buying their own apartment in NYC because the prices "have never gone down" or that "everyone wants to live here." It just seems like prices seem generally unsustainable for the local population but the local population justifies it with the flawed reasoning that doesn't necessarily support the current prices. Seems like the tinder is there - just waiting for a spark.

 

Totally agree with you on NYC real estate.  Cap rates are way too low.  Similar bubble dynamics at work.

The great interest rate reset (when interest rates rise) should be interesting.

 

Very high end NYC real estate has already cracked (~$10M and up) over the last year and $3M+ is also not selling as well. There already has been a correction in a large part of the market.

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That if Warren Buffett had only a small amount of money to his name he would invest his capital primarily in ugly cigar butts, classic Graham style. Not in quality businesses. He has even said this once publicly when asked by a student (there's a Youtube video), but I think most investors still strongly disagree with this statement.

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In the business realm, what do you think is true, which most everyone believes the opposite?   

 

My answer is that the majority seem to believe that China's housing situation is sustainable. 

I think it is a massive bubble that will pop, with severe emerging market knock on effects.

 

In China

~20% of apartments vacant

Very high price to net rents

Impossible to time but the longer the boom the bigger the bust will be.

 

I think more people are in your boat than you realize.

 

I'm going to stick with my deflationary thesis - every year we've inched closer and closer to deflation despite the supposed recovery, trillions in stimulus, etc. and yet people still seem to think it's a possibility that is very var removed from reality. I think it's much more likely than most seem to and that the last five years have only served as confirmation of the thesis.

 

To be more localized, I'd suggest that NYC real estate is due for a nasty correction. I understand it could become the next London, but prices have outpaced wages by a significant amount for a significant time. My friends look at me like I'm crazy when I say it - they can't imagine a better investment than buying their own apartment in NYC because the prices "have never gone down" or that "everyone wants to live here." It just seems like prices seem generally unsustainable for the local population but the local population justifies it with the flawed reasoning that doesn't necessarily support the current prices. Seems like the tinder is there - just waiting for a spark.

 

Totally agree with you on NYC real estate.  Cap rates are way too low.  Similar bubble dynamics at work.

The great interest rate reset (when interest rates rise) should be interesting.

 

Very high end NYC real estate has already cracked (~$10M and up) over the last year and $3M+ is also not selling as well. There already has been a correction in a large part of the market.

 

I've seen different sources come to different conclusions. I've seen articles talking about how high-end apartments sit for months before selling and that there is a general glut at the high-end, but then I also see articles that point that point to record sales prices for individual units and that average sales prices are also up due to the price/volume at the upper end. I haven't dug into the data to figure out how both can be true, but it's not clear to me, or anyone else I know, that there's been a large correction anywhere yet...just slowness in selling some units.

 

Average sales prices and average rents were both up in 2015 - significantly over 2014. If you have seen otherwise, than I would be glad to see you source and become the prophet with 20/20 hindsight. Not looking to derail the thread though so we can move this to PM if you'd like.

 

 

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FWIW: I just watched a relative sell a high end vacation home.  It took him about 5 years to sell it.  The problem is that the location is extremely rare but the market of buyers is equally small.  It sold for about $440 per square foot and sat on 5 acres.

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That if Warren Buffett had only a small amount of money to his name he would invest his capital primarily in ugly cigar butts, classic Graham style. Not in quality businesses. He has even said this once publicly when asked by a student (there's a Youtube video), but I think most investors still strongly disagree with this statement.

 

I think the times were different when he did it. He had an information advantage that doesn't exist today. Genessee Gas was one IIRC, selling for $50 with $200 in cash.

He did the legwork that nobody else did to find these gems. Today every stock website in the world makes it very easy to find this kind of thing.

 

In the '50's this worked like a charm for him but today the net cash companies don't always work out.

 

But I think you're right that he wouldn't do that today but if he went back in time he would do the exact same thing.

I would assume Buffett of 2016 would be a micro/small cap investor looking for a fantastic CEO building a business to last decades.

 

Edit: Actually a quick Google search found this from the '99 meeting notes on doing it the same way or doing it different.

I guess I’d do it the same way: maybe I’d start with small companies and buy good businesses.
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That if Warren Buffett had only a small amount of money to his name he would invest his capital primarily in ugly cigar butts, classic Graham style. Not in quality businesses. He has even said this once publicly when asked by a student (there's a Youtube video), but I think most investors still strongly disagree with this statement.

 

I think the times were different when he did it. He had an information advantage that doesn't exist today. Genessee Gas was one IIRC, selling for $50 with $200 in cash.

He did the legwork that nobody else did to find these gems. Today every stock website in the world makes it very easy to find this kind of thing.

 

In the '50's this worked like a charm for him but today the net cash companies don't always work out.

 

But I think you're right that he wouldn't do that today but if he went back in time he would do the exact same thing.

I would assume Buffett of 2016 would be a micro/small cap investor looking for a fantastic CEO building a business to last decades.

 

Edit: Actually a quick Google search found this from the '99 meeting notes on doing it the same way or doing it different.

I guess I’’d do it the same way: maybe I’’d start with small companies and buy good businesses.

 

I think it was in his partnership letters when he was dissolving the funds that he mentioned that he was intending to participate in a new form of investment that had similar amounts of risk and lower levels of return but did not require him to be fully focused on finding the absolute cheapest/best bargains available and would still have suitable returns. Probably right around the time he started making the bulk of his investments through Berkshire Hathaway.

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That reading too much watching TV surfing too much doesn't cause myopia.

 

Remember reading about this in the Economist. Those activities require spending a lot of time indoors --> less natural light --> vision deteriorates. Have to remind myself, especially during winter, to spend time or at the very least look outdoors for the sake of my vision.

 

The biggest factor in short-sightedness is a lack of time spent outdoors. Exposure to daylight helps the retina to release a chemical that slows down an increase in the eye’s axial length, which is what most often causes myopia.

Here:

http://www.economist.com/news/china/21631113-why-so-many-chinese-children-wear-glasses-losing-focus

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Blackberry is out of business.

 

But, they have positive free cash flows and positive total equity.  And will probably have positive earnings this year.

 

That high priced handsets (smartphones) will be consigned to history, and BB, Apple, and Samsung will all suffer.

 

That tech ecosystems are overrated, except google and facebook - for now. 

 

That a healthy balanced diet of real food is better than a low carb, high fat; high carb, low fat; paleo, or probiotic diet, or anything else some d**k invents to make money.

 

That the way to stay healthy and fit is to eat less crap, and move around a lot.  That WEB eats better than he lets on. 

 

That the reasons many 70 year old rock musicians are still alive, well, and energetic is because they got up and moved around their whole lives - exceptions apply as always. 

 

Okay, so the last ones are not business related.

 

That 99.9% of Outside Passive Minority Investors returns will revert to the mean, and below,  leaving a few thousand outliers, worldwide. 

 

 

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That the way to stay healthy and fit is to eat less crap, and move around a lot.  That WEB eats better than he lets on. 

 

That the reasons many 70 year old rock musicians are still alive, well, and energetic is because they got up and moved around their whole lives - exceptions apply as always. 

 

It's sex, drugs and parties man.

 

For WEB too.

 

8)

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That if Warren Buffett had only a small amount of money to his name he would invest his capital primarily in ugly cigar butts, classic Graham style. Not in quality businesses. He has even said this once publicly when asked by a student (there's a Youtube video), but I think most investors still strongly disagree with this statement.

 

I think the times were different when he did it. He had an information advantage that doesn't exist today. Genessee Gas was one IIRC, selling for $50 with $200 in cash.

He did the legwork that nobody else did to find these gems. Today every stock website in the world makes it very easy to find this kind of thing.

 

In the '50's this worked like a charm for him but today the net cash companies don't always work out.

 

But I think you're right that he wouldn't do that today but if he went back in time he would do the exact same thing.

I would assume Buffett of 2016 would be a micro/small cap investor looking for a fantastic CEO building a business to last decades.

 

Edit: Actually a quick Google search found this from the '99 meeting notes on doing it the same way or doing it different.

I guess I’’d do it the same way: maybe I’’d start with small companies and buy good businesses.

Did some digging and managed to find the video: https://youtu.be/BPTz-jLkPOc?t=9m52s. He also discusses his South Korean cigar butt investments he made in his personal account 6-7 years before.

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In the business realm, what do you think is true, which most everyone believes the opposite?   

 

 

I believe that profits matter more than cash flow.  I am amazed at the discussions on the forum regarding the total disregard of P/E ratios and book values, as if they don't matter.  CF without profits is a waste of my time.  I'll now return to my bunker as the mud starts to fly. 

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Why do you think most people think the Chinese real estate craze is sustainable? There was a segment on 60 Minutes like a year in a half talking about it being a bubble.

 

For one, the Chinese property craze is sustained by the Chinese in China watching China Central Television. 60 minutes is irrelevant.

 

Also, in China, people don't trust anything intangible - they don't even trust things that are tangible - there are fake goods everywhere.

 

Real estate is as real as it gets there. 

 

 

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