Friday, August 28, 2015


Horizon Kinetics - Under the Hood: What’s in Your Index? (LINK)

The ETF Flash Crash (LINK)

Stock Halts Added to Monday’s Market Chaos [H/T Matt] (LINK)

Many Psychology Findings Not as Strong as Claimed, Study Says (LINK)
Related link [mentioned by Peter Bevelin in one of my interviews with him]: Why Most Published Research Findings Are False
Josh Foer on the James Altucher podcast (LINK)
Related book: Moonwalking with Einstein 
Related previous post: Memortation, or One Way to Put What You Learn to Practical Use
Stoic Mindfulness (LINK)

The Really Big One: An earthquake will destroy a sizable portion of the coastal Northwest. The question is when. [H/T Phil] (LINK)

Book of the day [H/T Phil]: Shaky Ground: The Strange Saga of the U.S. Mortgage Giants

A rule of intuition...

From Thinking, Fast and Slow:
It is wrong to blame anyone for failing to forecast accurately in an unpredictable world. However, it seems fair to blame professionals for believing they can succeed in an impossible task. Claims for correct intuitions in an unpredictable situation are self-delusional at best, sometimes worse. In the absence of valid cues, intuitive “hits” are due either to luck or to lies. If you find this conclusion surprising, you still have a lingering belief that intuition is magic. Remember this rule: intuition cannot be trusted in the absence of stable regularities in the environment. 

The above also reminded me of some Graham and Dodd comments, from Security Analysis:
Intuition Not a Part of the Analyst’s Stock in Trade. In the absence of indications to the contrary we accept the past record as a basis for judging the future. But the analyst must be on the lookout for any such indications to the contrary. Here we must distinguish between vision or intuition on the one hand, and ordinary sound reasoning on the other. The ability to see what is coming is of inestimable value, but it cannot be expected to be part of the analyst’s stock in trade. (If he had it, he could dispense with analysis.) He can be asked to show only that moderate degree of foresight which springs from logic and from experience intelligently pondered. It was not to be demanded of the securities statistician, for example, that he foretell the enormous increase in cigarette consumption since 1915 or the decline in the cigar business or the astonishing stability of the snuff industry; nor could he have predicted—to use another example—that the two large can companies would be permitted to enjoy the full benefits from the increasing demand for their product, without the intrusion of that demoralizing competition which ruined the profits of even faster growing industries, e.g., radio. 

Thursday, August 27, 2015


Ruane, Cunniff & Goldfarb Investor Day Transcript (May 2015) [H/T market folly] (LINK)

Pershing Square Holdings' interim report [H/T Will] (LINK)

Jim Grant: The Fed Turned the Stock Market Into a 'Hall of Mirrors' (video) (LINK)

Are You a "Ben Graham Defensive Investor"? (LINK)

The Absolute Return Letter - August/September 2015 (LINK)
This month's Absolute Return Letter is a little different. It was a very eventful summer with many incidents impacting financial markets and we have compiled all these topics into one letter. China is, not surprisingly, a core subject. If the Chinese economy is slowing (and it is), we don't think China is in for a hard landing. If anyone is in the near term - and this may surprise you - we think the U.S. and the euro zone are far more likely candidates.
Kazakhstan to host IAEA nuclear fuel bank to assist non-proliferation [H/T Linc] (LINK)
One of NTI's supporters, U.S. billionaire investor Warren Buffett, contributed $50 million to "jumpstart" the project, Nunn said. 
"I look forward to the time soon when the fuel bank will become an operational reality," Buffett said in a message read by Nunn. 
"Please tell all the decision makers that I am a patient and long-term investor and I know that international agreements take a considerable amount of time. But please also tell them that I am 84 years old."
Book of the day: Men to Match My Mountains

Wednesday, August 26, 2015


The Trajectory of a Crash (LINK)

Glut of Chinese Steel Looms Large [H/T Matt] (LINK)

The 27 Must-Follow Feeds in the World of Science (LINK)

Last Week Tonight with John Oliver: Televangelists (video) (LINK)

Book of the day (recommended by Marc Andreessen): Technological Revolutions and Financial Capital: The Dynamics of Bubbles and Golden Ages

Structuring compensation incentives...

From Charlie Munger: The Complete Investor:
Munger believes that structuring compensation incentives is critical. If the right structure exists, then a seamless web of deserved trust can be created which lessens problems related to this tendency. For example, it is surprising how many people fail to recognize how performance suffers if you pay someone in advance rather than after the work has been completed. It’s precisely because of the dangers of misaligned incentives that Munger and Buffett chose to make compensation decisions themselves, whereas they delegate almost all management responsibilities.

Tuesday, August 25, 2015

The importance of an above-average sales organization...

From Common Stocks and Uncommon Profits:
In this competitive age, the products or services of few companies are so outstanding that they will sell to their maximum potentialities if they are not expertly merchandised. It is the making of a sale that is the most basic single activity of any business. Without sales, survival is impossible. It is the making of repeat sales to satisfied customers that is the first benchmark of success. Yet, strange as it seems, the relative efficiency of a company's sales, advertising, and distributive organizations receives far less attention from most investors, even the careful ones, than do production, research, finance, or other major subdivisions of corporate activity.  
There is probably a reason for this. It is relatively easy to construct simple mathematical ratios that will provide some sort of guide to the attractiveness of a company's production costs, research activity, or financial structure in comparison with its competitors. It is a great deal harder to make ratios that have even a semblance of meaning in regard to sales and distribution efficiency.
... Again, the way out of this dilemma lies in the use of the “scuttlebutt” technique. Of all the phases of a company's activity, none is easier to learn about from sources outside the company than the relative efficiency of a sales organization. Both competitors and customers know the answers. Equally important, they are seldom hesitant to express their views. The time spent by the careful investor in inquiring into this subject is usually richly rewarded.

Monday, August 24, 2015

Charlie Munger on practice evolution

From Whitney Tilson's 2000 Wesco Annual Meeting Notes:
Practice Evolution 
"This is really important. For example, Hertz and Enterprise Rent-a-Car through practice evolution have developed personnel systems, etc. that work for them. They are like different species in similar ecological niches. 
"Common stock investors can make money by predicting the outcomes of practice evolution. You can't derive this by fundamental analysis -- you must think biologically. 
"Another example is Tupperware, which developed what I believe to be a corrupt system of psychological manipulation. But the practice evolution worked and had legs. Tupperware parties sold billions of dollars of merchandise for decades. 
"We wouldn't have bought CORT if we didn't like the culture, which resulted from long practice evolution." 


Rescuing Mes Aynak: Mega Copper Deal in Afghanistan Fuels Rush to Save Ancient Treasures (LINK)

a16z Podcast: Tech’s Biggest Ideas and How They Take Hold (LINK)

Nate Silver on the Masters in Business radio podcast (LINK)
Related book: The Signal and the Noise
Evan Osnos' article on Donald Trump and his campaign (LINK)

Scott Adams continues his look into Donald Trump's persuasion tactics - Trump VS Bush: Persuasion Wars (LINK)

Brad Katsuyama’s Next Chapter (LINK)

In Times of Market Panic (LINK)

The Method in the Market’s Current Madness - By James Surowiecki (LINK)

James Grant on CNBC this morning (Video 1, Video 2)

Hussman Weekly Market Comment: Risk Turns Risky: Unpleasant Skew, Scale Dilation, and Broken Lines (LINK)
The same lesson has been learned and re-learned by investors across a century of market cycles. When a previously overvalued, overbought, overbullish market is joined by internal deterioration – with numerous securities, sectors, industries and securities simultaneously breaking down, accepting market risk is typically not rewarded, and stocks instead become vulnerable to air-pockets, free-falls, and crashes. Range-bound markets, particularly at elevated valuations, often offer a false sense of security; making investors believe that their risk is low because day-to-day volatility is contained. Last week's market loss was initial and quite contained from the standpoint of current valuations. My view is that under the market conditions we presently observe, investors face the continued potential for steep, vertical losses. That outlook will change as market conditions change. 
I’ll emphasize, as usual, that the message here is not “sell everything.” The message is to understand where we are in the market cycle from the standpoint of a century of reliable evidence, and to act in a way that meets your investment objectives. Align your portfolio with careful consideration for your tolerance for losses over the market cycle; with your willingness to miss out on interim market gains should they emerge; with the horizon over which you will actually need to spend from your investments; with the extent that you believe that history is actually informative for making investment decisions; with the extent to which alternative investment outlooks are supported by evidence, ideally spanning numerous market cycles. I am not encouraging buy-and-hold investors to depart from well-considered investment plans or to abandon their discipline; only that they take every step to ensure their portfolio is actually aligned with their true risk tolerance and investment horizon.
Quote of the day:
"I think it’s essential to remember that just about everything is cyclical. There’s little I’m certain of, but these things are true: Cycles always prevail eventually. Nothing goes in one direction forever. Trees don’t grow to the sky. Few things go to zero. And there’s little that’s as dangerous for investor health as insistence on extrapolating today’s events into the future." -Howard Marks, The Most Important Thing

Sunday, August 23, 2015


A Dozen Things Learned from Charlie Munger about Making Rational Decisions (LINK)

A Dozen Things Learned from Charlie Munger about Mental Models and Worldly Wisdom (LINK)
Related book: Charlie Munger: The Complete Investor
Jason Zweig: 5 Things Investors Shouldn’t Do Now (LINK)

Benedict Evans: Ways to think about cars (LINK)

The Short-Termism Myth - By James Surowiecki (LINK)

Why One Of The Best Athletes In The World Refuses To Compete (LINK)

Scott Adams: The Day You Became a Better Writer (2nd Look) (LINK)

Your Brain, Your Disease, Your Self (LINK)

Friday, August 21, 2015


This looks like a great event if you're in NYC on November 11th: Berkshire Hathaway 50th Anniversary Symposium [H/T @CunninghamProf] (LINK)

Creating an ideal environment for optimal investment decision making (LINK)


Bernstein: Investors Need to Completely Rethink the Way They Value Media Companies (LINK)

No End in Sight for Oil Glut (LINK)
When oil prices started to edge down a year ago, most energy mavens thought the drop would be small and short-lived. 
Instead, the price of crude has plunged by almost 60% from its 2014 peak—and suddenly looks likely to stay low for months and maybe years to come. The reason: In the global battle for market share, nobody has backed down. Nobody has even blinked. Not Saudi Arabia, not the U.S., and not even troubled producers from Russia to Iraq. Everyone who can seems locked into pumping as much oil as possible.
Aswath Damodaran - Beijing Blunders: Bull in a China Shop! (LINK)

Jim Chanos on CNBC -- Links to videos:
Legendary short seller: China worse than you think 
Chanos: Today's emerging markets not quite like '97 
Chanos short SolarCity 
Chanos remains short Hewlett-Packard
Ant knows how to self-medicate to fight off fungal infection [H/T @SciencePorn] (LINK)

Book of the day: A Short History of Financial Euphoria