Friday, December 19, 2014


Buffett and Munger on How to be a Hack [H/T The Big Picture] (LINK)
Related book:  The Warren Buffett Portfolio
Benedict Evans on the a16z podcast discussing his article "New questions in mobile" (LINK)

I finally got to the second two segments ("Inside Homs", "Mindfulness")  from the latest 60 Minutes, both of which were interesting (LINK)

The Conventional Wisdom On Oil Is Always Wrong (LINK)

While the title of the above article on oil says "Always", the actual wording in the article is "almost always wrong." This reminded me of an excerpt from George Soros' The Alchemy of Finance
In other words, financial markets constantly anticipate events, both on the positive and the negative side, which fail to materialize exactly because they have been anticipated. No wonder that financial markets get so excited in anticipating events that seem quite harmless in retrospect! It is an old joke that the stock market has predicted seven of the last two recessions. We can now understand why that should be so. By the same token, financial crashes tend to occur only when they are unexpected.

This last point should not be overstated. There are many events that actually occur in spite of the fact that they were widely anticipated. The collapse in oil prices is a case in point; the outbreak of the Second World War was another. It has become fashionable to be a contrarian, but to bet against prevailing expectations is far from safe. It will be recalled that, in the boom/bust model, events tend to reinforce prevailing expectations most of the time and contradict them only at the inflection points; and inflection points are notoriously difficult to identify. Now that the contrarian viewpoint has become the prevailing bias, I have become a confirmed anti-contrarian.

Howard Marks Memo: The Lessons of Oil

Link to memo: The Lessons of Oil
I want to provide a memo on this topic before I – and hopefully many of my readers – head out for year-end holidays. I’ll be writing not with regard to the right price for oil – about which I certainly have no unique insight – but rather, as indicated by the title, about what we can learn from recent experience. 

When capital leaves an industry...

From the book Capital Account:
Just as mixing gluttony with capital investment can destroy industry returns, so capital starvation can be a saviour. When stock market values fall below replacement cost, not only is it senseless to invest in new capacity, but the retirement of capital through share buybacks and special dividends becomes attractive. 

Thursday, December 18, 2014


How levered was John Maynard Keynes' portfolio? (LINK)

What Happened When Marissa Mayer Tried to Be Steve Jobs (LINK)

Eddie Lampert: Is something a “failure” if other successes come from it? (LINK)


Amazon Not as Unstoppable as It Might Appear (LINK)

Andrew Smithers: Poor productivity in developed economies appears to be structural (LINK)

TED Talk - Carol Dweck: The power of believing that you can improve (LINK)
Related book: Mindset: The New Psychology of Success
Winners Announced in the National Geographic Photo Contest 2014 (LINK)

BYD shares sink by a third in mystery sell-off (LINK)
Shares in BYD, the Chinese electric car company part-owned by Warren Buffett, fell as much as 47 per cent during a bout of panic selling. 
BYD’s Hong Kong-traded shares rebounded partially in late trading to close down 29 per cent, at HK$25.05, on Thursday. Trading volumes were very heavy, at 40 times the previous day’s 15-day moving average, according to Bloomberg data. 
In a statement issued after the market closed, the company’s board said it was not aware of any reason for the sharp sell-off.
Having bought into the Shenzhen-based company at about HK$8 a share, Mr Buffett’s Berkshire Hathaway Energy is still sitting on a sizeable paper profit. BYD’s shares peaked at HK$88 in 2009.

Wednesday, December 17, 2014

Henry Blodget interviews Jeff Bezos

Link to interview: I Asked Jeff Bezos The Tough Questions — No Profits, The Book Controversies, The Phone Flop — And He Showed Why Amazon Is Such A Huge Success
HB: You talked about what a lot of CEOs do in terms of trying to drive that stock price, selling the stock. You told me something when we we’re outside that is extraordinary, which is that you spend six hours a year on investor relations. 
JB: Yes. We do a lot of unusual things there. We don’t meet with our biggest investors. We meet with investors who have low portfolio turnover. Many investment funds have very high portfolio turnover. They’re not really investors — they’re traders. There’s nothing wrong with that: It’s just a different thing. Where you are going to spend your time and your energy is one of the most important decisions you get to make in life. We all have a limited amount of time, and where you spend it and how you spend it is just an incredibly levered way to think about the world. If you’re going to spend time explaining the company, you should do it with people who are long-term investors, rather than traders. That’s our point of view.

Related book: The Everything Store (which was also a good audiobook)

[H/T Market Folly]


Howard Marks on Bloomberg TV (video) (LINK)
Dec. 16 (Bloomberg) -- Howard Marks, co-chairman and co-founder of Oaktree Capital Group LLC, talks about investor concerns about Russia's financial markets, investment strategy and the outlook for oil prices and stocks.
Marks also mentioned "Dornbusch’s Law" in the interview: The crisis takes a much longer time coming than you think, and then it happens much faster than you would have thought.
Farnam Street: Albert Einstein on Sifting the Essential from the Non-Essential (LINK)
Related previous post: Memortation, or One Way to Put What You Learn to Practical Use 
William Thorndike, Author Of ‘The Outsiders’, Fireside Chat (video) [H/T ValueWalk] (LINK)
Related book: The Outsiders
How Computer Hackers Could Destroy a Hedge Fund [H/T Will] (LINK)

Walter Isaacson on CNBC (video) (LINK)
Related book: The Innovators
Related previous posts:  Walter Isaacson in converstaion with two pioneers of the Internet, Vint Cerf and Bob KahnThe Innovators: Author Walter Isaacson in Conversation with John HollarWalter Isaacson interview with Elon MuskWalter Isaacson on Charlie Rose
Expeditor's latest 8-K (LINK)
In the name of full disclosure, we've always subscribed to the late and internationally renowned economist, John Kenneth Galbraith's opinion that "The only function of economic forecasting is to make astrology look respectable."
Russia, oil and stocks, from Meb Faber via Twitter:
  • 1998 oil was down 40% & Russian stocks down 90% from peak
  • 2014 oil was down 40% & Russian stocks down 75% from peak
  • What happened in 1999?
  • Russian stocks were up over 150%. [LINK to August 2006 paper on investing in the Russian stock market.]
Brain Pickings: Carl Sagan Explains How Stars Are Born, Live, and Die (LINK)
Related previous posts: Carl Sagan - Pale Blue DotThe Most Astounding Fact About the Universe
After Oil Spill in Bangladesh's Unique Mangrove Forest, Fears About Rare Animals (LINK)

Book of the day: World on Fire: How Exporting Free Market Democracy Breeds Ethnic Hatred and Global Instability [This book was recommended by Malcolm Gladwell a few years ago. I was reminded of it when I read a Nassim Taleb tweet about his latest article. Specifically, I was reminded of this excerpt from the book that I had saved: “Whenever a market dominant minority [ethnicity, religion, etc.] is present, markets and democracy are not mutually reinforcing but on a collision course."]

Tuesday, December 16, 2014

The Calm Before the Storm - By Nassim Nicholas Taleb and Gregory F. Treverton

Link to article: The Calm Before the Storm: Why Volatility Signals Stability, and 
Vice Versa
The divergent tales of Syria and Lebanon demonstrate that the best early warning signs of instability are found not in historical data but in underlying structural properties. Past experience can be extremely effective when it comes to detecting risks of cancer, crime, and earthquakes. But it is a bad bellwether of complex political and economic events, particularly so-called tail risks—events, such as coups and financial crises, that are highly unlikely but enormously consequential. For those, the evidence of risk comes too late to do anything about it, and a more sophisticated approach is required.
Thus, instead of trying in vain to predict such “Black Swan” events, it’s much more fruitful to focus on how systems can handle disorder—in other words, to study how fragile they are. Although one cannot predict what events will befall a country, one can predict how events will affect a country. Some political systems can sustain an extraordinary amount of stress, while others fall apart at the onset of the slightest trouble. The good news is that it’s possible to tell which are which by relying on the theory of fragility. 


Related book (which I re-read again this year): Antifragile: Things That Gain from Disorder


Paul Graham: How You Know (LINK)

Eddie Lampert on Sears: Moving Forward (LINK)

Arnold Van Den Berg at Century Management’s 2014 Client Review [H/T GuruFocus] (LINK)

Graham - Newman Letters to Partners 1946 - 1958 (LINK) [I've mentioned these before, but since they are making their rounds again, they are always worthy of mentioning again. As are the papers and lectures of Ben Graham.]

Book of the day (a novel): Waccamaw Gold

Quote of the day: “There never was a sounder logical maxim of scientific procedure than Ockham’s razor: Entia non sunt multiplicanda praeter necessitatem. That is to say; before you try a complicated hypothesis, you should make quite sure that no simplification of it will explain the facts equally well.” -Charles Sanders Peirce

Monday, December 15, 2014


Michael Lewis: Eight Things I Wish for Wall Street (LINK)

Tom Russo, Susan Decker, Lawrence Cunningham, and Brad Kinstler discuss Berkshire Hathaway at Stanford (video) [H/T ValueWalk] (LINK)
Related book: Berkshire Beyond Buffett
Matthew McLennan on WealthTrack (video) [H/T ValueWalk] (LINK)

Inside Mark Zuckerberg's plan to get every human online (LINK)

Talks at Google: John Heins & Whitney Tilson: "The Art of Value Investing" (video) (LINK)

Hussman Weekly Market Comment: A Sensible Proposal and a New Adjective (LINK)
My impression is that the recent weakness in the equity market and the plunge in Treasury yields have not been “caused” by weakness in the energy market, but that all are joint symptoms of a synchronous downturn in global economic growth, most obvious in Japan and Europe, and increasingly developing in England, China, and elsewhere. It's a reasonable concern that this softening may include the U.S. economy. In U.S. data, we don’t observe much evidence of recession risks at present, but that evidence can emerge fairly rapidly. A large-scale credit event would obviously heighten our immediate economic concerns. We’re particularly attentive to clear upward pressure on credit spreads and risk premiums here.
Ebola: An eyewitness account from Sierra Leone [H/T The Browser] (LINK)

Book of the day: Fast Forward: The Technologies and Companies Shaping Our Future

Saturday, December 13, 2014

Peter Cundill on selling too early

From There's Always Something to Do:
This is a recurring problem for most value investors – that tendency to buy and to sell too early. The virtues of patience are severely tested and you get to thinking it’s never going to work and then finally your ship comes home and you’re so relieved that you sell before it’s time. What we ought to do is go off to Bali or some such place and sit in the sun to avoid the temptation to sell too early.