Saturday, November 29, 2014


This weekend, receive an extra 30% off when you buy a book on Amazon, using the promo code "HOLIDAY30". Terms and conditions:
▪ To use this promotion, you must enter "HOLIDAY30" at checkout under the "Gift cards & promotional codes" section to receive 30% off any ONE (1) book purchased in your order (up to $10 promotional credit).
▪ This offer is only valid on print books. Excludes Kindle eBooks and Audible Audiobooks.
▪ The promotion is valid for a limited time only, from November 26, 2014 at 9pm PST to November 30, 2014 at 11:59pm PST. Amazon reserves the right to modify or cancel this offer at any time.
▪ Offer only applies to products sold and shipped by
 Given what's happening to oil lately, you may want to consider using it on one of these books:
Mohnish Pabrai's Million-Dollar Advice For A 12-Year-Old Investor (LINK)

James Altuchar interviews Dan Ariely (LINK)

Aswath Damodaran's presentation at the CFA Conference – Numbers and Narratives: Modeling, Storytelling, and Investing [H/T ValueWalk] (LINK)

Ben Inker: Investment hell - or purgatory? (video) [H/T ValueWalk] (LINK)
Related previous post: GMO's Q3 2014 Letter
Russell Napier talks to Merryn Somerset Webb (LINK)

Barry Ritholtz interviews Lakshman Achuthan, Co-Founder & Chief Operations Officer of ECRI (audio) (LINK)

Andrew Smithers: Japan’s disappointing gross domestic product (LINK)

China has ‘wasted’ $6.8tn in investment, warn Beijing researchers (LINK)

Mark Buchanan: Has big business captured the economists? (LINK)

For Amazon, the right price isn’t always the lowest price (LINK)

A Rare Peek Into The Massive Scale of AWS [H/T The Big Picture] (LINK)

Amazon: a valuation debate (LINK)

Stoic optimism: Ryan Holiday at TEDxUChicago 2014 (video) (LINK)
Related book: The Obstacle Is the Way 
Related previous post: Stoicism quotes, thoughts, and readings

Friday, November 28, 2014

Peter Cundill on investment committees...

From There's Always Something to Do:
To my knowledge there are no good records that have been built by institutions run by committee. In almost all cases the great records are the product of individuals, perhaps working together, but always within a clearly defined framework. Their names are on the door and they are quite visible to the investing public. In reality outstanding records are made by dictators, hopefully benevolent, but nonetheless dictators. And another thing, most top managers really do exchange ideas without fear or ego. They always will. I don’t think I’ve ever walked into an excellent investor’s office who hasn’t openly said “Yeah sure, here’s what I’m doing.” or, “What did you do about that one? I blew it.” We all know we aren’t always going to get it right and it’s an invaluable thing to be able to talk to others who understand.

Thursday, November 27, 2014

Peter Cundill on macro forecasting...

From There's Always Something to Do:
Synchronicity begins where pure chance ends, with one event leading to another, like a chain reaction, but all brought about by the initial event which cannot be predicted or explained. In other words – don’t waste your time. Just have patience and make sure you’re confident about the margin of safety in each investment.

Wednesday, November 26, 2014

Best Books for Investors: A Short Shelf - by Jason Zweig

Link to: Best Books for Investors
Here’s a list that I would still be comfortable with decades from now. Every book below has stood the test of time and, I’m confident, will remain useful for generations to come. You will quickly note that some aren’t even about investing. But they all will help teach you how to think more clearly, which is the only way to become a wiser and better investor.

The books:

Why Smart People Make Big Money Mistakes and How to Correct Them

Against the Gods: The Remarkable Story of Risk

Common Sense on Mutual Funds

Triumph of the Optimists

Surely You're Joking, Mr. Feynman! (Adventures of a Curious Character)

"What Do You Care What Other People Think?": Further Adventures of a Curious Character

The Intelligent Investor (or for advanced readers, Security Analysis)

How to Lie with Statistics

Thinking, Fast and Slow

Manias, Panics, and Crashes

Buffett: The Making of an American Capitalist

A Random Walk Down Wall Street

Sceptical Essays 

The Scientific Outlook

The Snowball: Warren Buffett and the Business of Life

Where Are the Customers’ Yachts?

The Money Game


Ndamukong Suh and Warren Buffett: The Bruiser and the Billionaire [H/T Linc] (LINK)

Rick Bookstaber on Uber (LINK)

Pershing Square Holdings' first letter to public shareholders (LINK)

Ten bites of turkey trivia for your holiday meal (LINK)

Tuesday, November 25, 2014


Interview In VII with Larry Pitkowsky and Keith Trauner of the GoodHaven Fund (LINK)

Tom Murphy: The man who taught Warren Buffett how to manage a company [H/T Phil] (LINK)
Related books: Berkshire Beyond Buffett, The Outsiders
A Bearish Hedge Fund Bets Against the Bulls and Still Profits [H/T Jim] (LINK)
Related book: The Dao of Capital
How to compete with Amazon (LINK)

Tim Harford: Why a house-price bubble means trouble (LINK)

Joseph Tainter on the McAlvany Weekly Podcast (from October) (LINK)
Related book: The Collapse of Complex Societies 
Related previous post: Collapse of Complex Societies by Dr. Joseph Tainter
A good summary of the Primal Blueprint Podcast episodes (LINK)
Related book: The Primal Blueprint

Graham and Dodd quote

From Security Analysis:
When in his capacity as investor or speculator the business man elects to pay no attention whatever to corporate balance sheets, he is placing himself at a serious disadvantage in several different respects: In the first place, he is embracing a new set of ideas that are alien to his everyday business experience. In the second place, instead of the twofold test of value afforded by both earnings and assets, he is relying upon a single and therefore less dependable criterion. In the third place, these earnings statements on which he relies exclusively are subject to more rapid and radical changes than those which occur in balance sheets. Hence an exaggerated degree of instability is introduced into his concept of stock values. In the fourth place, the earnings statements are far more subject to misleading presentation and mistaken inferences than is the typical balance sheet when scrutinized by an investor of experience.

Monday, November 24, 2014


As part of Stoic Week, Stoicism Today: Selected Writings can be downloaded for free from the Amazon Kindle store Monday to Friday [H/T Stoicism Today].

The Wisdom of Alan Watts in Four Thought-Provoking Animations (LINK)
Related audiobook: You're It!: On Hiding, Seeking, and Being Found
Startup Aims to Be of Indonesia [H/T Matt] (LINK)

John Mauldin: Thoughts from the Frontline - On the Verge of Chaos (LINK)

Dilution, Index Evolution, and the Shiller CAPE: Anatomy of a Post-Crisis Value Trap (LINK)

Hussman Weekly Market Comment: A Most Important Distinction (LINK)
“Science is the systematic classification of experience.” – George Henry Lewes  
I’ve noted frequently in recent months that the lessons to be drawn from the recent market cycle are not that historically overvalued, overbought, overbullish extremes can be dismissed. Rather, the lessons to be drawn have to do with the criteria that distinguish when such extremes have little near-term impact from periods where they suddenly matter with a vengeance. 
Although we agree, as John Templeton once observed, that the four most dangerous words in investing are “this time it's different,” the fact is that one very specific effect of quantitative easing made the half-cycle since 2009 different from history, and forced us to struggle quite a bit. Market cycles throughout history have demonstrated an important regularity: once a syndrome of overvalued, overbought, overbullish conditions was established (not one condition alone, but the full syndrome), the behavior of the stock market took on what I’ve often called an “unpleasant skew” – the market would typically follow with a few weeks of persistent small advances, followed by an abrupt and steep vertical plunge that wiped out weeks or months of gains in a handful of sessions. 
In the face of quantitative easing, however, that pattern changed. As short-term interest rates have been held near zero, investors have been drawn into “carry trade” mentality, believing that they must take risk in stocks, regardless of valuation, because they have “no other choice.” Given that mentality – and make no mistake, this ispsychology at work, not financial calculation – overvalued, overbought, overbullish syndromes have persisted and extended in the half-cycle since 2009, often with no downside effects at all. Admittedly, I relied too heavily on the wicked historical record of these syndromes. But rather than discarding the lessons of history altogether, we did what we always do when faced with a challenge – which is to look for adaptations that are consistent both with historical fact and with new evidence. 
The upshot is this. Quantitative easing only “works” to the extent that default-free, low interest liquidity is viewed as an inferior holding. When investor psychology shifts toward increasing risk aversion – which we can reasonably measure through the uniformity or dispersion of market internals, the variation of credit spreads between risky and safe debt, and investor sponsorship as reflected in price-volume behavior – default-free, low-interest liquidity is no longer considered inferior. It’s actually desirable, so creating more of the stuff is not supportive to stock prices. We observed exactly that during the 2000-2002 and 2007-2009 plunges, which took the S&P 500 down by half in each episode, even as the Fed was easing persistently and aggressively. A shift toward increasing internal dispersion and widening credit spreads leaves risky, overvalued, overbought, overbullish markets extremely vulnerable to air-pockets, free-falls, and crashes. 
What’s rather beautiful about this distinction is that it applies equally well to bubble periods such as the late-1990’s, the housing bubble, and on imputed sentiment data, the advance to the 1929 peak, and these considerations help to identify the shifts that invited subsequent crashes. So unless one believes there’s something magical about quantitative easing that goes beyond any well-articulated or identifiable transmission mechanism, it’s quite a good idea to pay close attention to market internals and risk premiums here.

Sunday, November 23, 2014


Barry Ritholtz interviews Robert Shiller (LINK)

Jason Zweig on value in international stocks (LINK)

Richard Duncan on the McAlvany Weekly Commentary (audio) (LINK)
Related previous post: Richard Duncan: Why The Fed Will Launch Another Round Of Quantitative Easing
How Disney Turned ‘Frozen’ Into a Cash Cow (LINK)

Ryan Holiday on Stoic Week 2014 (LINK)
Related previous post: Stoicism quotes, thoughts, and readings

Friday, November 21, 2014


Howard Marks' CFA Institute Conference Presentation (video) (LINK)

Merryn Somerset Webb interviews Hugh Hendry (Part 3) (LINK) [The complete transcript is also available HERE.)

When Stock Buybacks Are Not a Waste of Money (LINK)
Related link: Warren Buffett on Share Repurchases
Related book: The Outsiders: Eight Unconventional CEOs and Their Radically Rational Blueprint for Success
The Difference Between an Investment Firm and a Marketing Firm (LINK)

a16z Podcast: The End of Ownership [Interesting discussion on the trend towards access instead of ownership.] (LINK)

a16z Podcast: The Next Phase of 3D Printing (LINK)

Three books I bought or added to my wish list after reading Jeremy Grantham's latest letter (1 new, 2 old):
  1. The End of Normal: The Great Crisis and the Future of Growth
  2. Economics As a Science
  3. The Image: Knowledge in Life and Society

Thursday, November 20, 2014

Bruce Greenwald: Value Investing and the Mis-measures of Modern Portfolio Theory

Bruce Greenwald's presentation from the Welcome Event for the 12th International Post Keynesian Conference. More details available at Recorded Wednesday September 24, 2014.

Link to video


Merryn Somerset Webb interviews Hugh Hendry (Part 2) (LINK)

John Malone Talks At Liberty Investor Conference [VIDEOS] (LINK)

Evan Osnos wins the non-fiction National Book Award for his book Age of Ambition: Chasing Fortune, Truth, and Faith in the New China (LINK) [The MP3 CD also comes out in a couple of weeks and is currently priced at just $12.33.]
Related previous post: Evan Osnos on Charlie Rose
Behavioral market failures (LINK)

Rick Bookstaber: On Death with Dignity (LINK)

Christensen Institute: What else should KIPP be doing with blended learning? (LINK)
Related book: Blended: Using Disruptive Innovation to Improve Schools
Farnam Street: How Do People Get New Ideas? (LINK)
Related quote: "I have been speculating...what makes a man a discoverer of undiscovered things, and a most perplexing problem it is. Many men who are very clever, -- much cleverer than the discoverers -- never originate anything. As far as I can conjecture, the art consists in habitually searching for the causes and meaning of everything which occurs. This implies sharp observation and requires as much knowledge as possible of the subject investigated." -Charles Darwin

Peter Cundill on statistical overvaluation

From There's Always Something to Do:
I almost stopped selling Japan short in the last quarter of 1989 because I couldn’t stand it anymore. But intellectually I was convinced that I was right and so I carried on and then in the first quarter of 1990 the Japanese market fell by 25% in eight weeks and I made back everything I’d given away since 1987 plus a good deal more. But I tell you statistical overvaluation is a funny thing – it can go on for a very long time, far beyond the limits of rationality, and it is a problem for the value investor in two ways: it can tempt one to compromise standards on the buy side and it may lure one into selling things far too early. I have less of a problem with the selling temptation because I have always loved cash – if you’ve got lots of it you will never have to pass up a great opportunity.

Wednesday, November 19, 2014


Merryn Somerset Webb interviews Hugh Hendry (Part 1) (LINK)

Bob Rodriguez's speech to CFA Society of Reno [H/T ValueWalk] (LINK)

Steve Keen: Launching Kingston University's Rethinking Economics group (video) (LINK)
Related book: Debunking Economics
He had good timing calling bubble tops with his first two editions, and now a third edition of Robert Shiller's Irrational Exuberance will be coming early next year (LINK)

Scott Adams on A Life Well-lived (LINK)

“Please Don’t Abandon Me” - By ASHIQ MASIH (LINK)
Note: Asia Bibi, a Christian Pakistani woman, was sentenced to death for blasphemy against Islam in 2010. The year before, while picking fruit with Muslim women, she took a sip of water from the local well. She was immediately accused of making the water impure by ​the other workers, ​who told her that they could no longer use the well. A​ccording to her husband, Ashiq Masih, and others, men and women started beating her and accusing her of making derogatory remarks against the Islamic prophet Muhammad, a charge she denies. Asia is currently in prison waiting to be hanged after losing an appeal ​on ​Oct. 16. She has told her story in a memoir, Blasphemy: A Memoir: Sentenced to Death over a Cup of Water, written with French journalist Anne-Isabelle Tollet. 

The Cult of Busy - by Dina Kaplan

Link to article: The Cult of Busy
Busy can become a way of life. We’re seduced by all the incoming – the emails and text messages that make us feel wanted and important — stimulating our dopamine, as research shows, but in an exhausting, ultimately empty way. Busy has a dangerous allure. If your normal is busy, it’s tough to sit quietly with your thoughts or to really feel what you’re feeling. What if, instead, everything became a choice – how we spend time, who we respond to and how much or little we write? What if we recognized the difference between accomplishing our goals for the day and responding to other people’s requests? What if we learned to say no – a lot? 
For many of us, our ego soars when people make demands on our time. What if we could free ourselves from needing, or even wanting, this validation? What if, instead, we carved out the time and space to be productive however it best serves us? That may be consciously keeping ourselves not busy. We equate busy with productive but, as Ori Brafman writes in The Chaos Imperative, many great discoveries — from Einstein’s theory of relativity to Donkey Kong — were invented by people who built white space into their day. 
Imagine asking “How are you?” to one of the most successful people you know or, say, Elon Musk, Sheryl Sandberg or Warren Buffett. I’ve never heard anyone at that level respond, “busy.” By most people’s definition they are, constantly making high-level strategic decisions with a large impact. 
What are they doing differently? 
Two things. One, they aim to project an image that things are under control. Two, they actually have things under control. They’ve hired excellent staff, implemented thoughtful processes and spend time only on tasks that require their attention. Is that not something to strive for?

Related book: The Chaos Imperative: How Chance and Disruption Increase Innovation, Effectiveness, and Success

[H/T Daniel]

Tuesday, November 18, 2014


Catching up on some things after a few days with limited internet access...

As a reminder, Tony Robbins' book, MONEY Master the Game, is out today. For more, see THIS previous post and article link. James Altucher also just interviewed Robbins about his book, HERE.

Another new investing book mentioned to me by my friend James East, which is more of a book for the value investor and fan of Ben Graham: Brandes on Value: The Independent Investor. As James mentioned in his Amazon review of the book:
All in, if you are willing to spend the time and do the work, whether reading annuals, 10-Ks, 10-Qs, then reading this book will assist you in becoming a better investor. Other references and fine books in the same genre are as follows:

The Intelligent Investor: The Classic Text on Value Investing by Benjamin Graham
The Little Book of Behavioral Investing: How not to be your own worst enemy by James Montier
There's Always Something to Do: The Peter Cundill Investment Approach by Christopher Risso-Gill
The Dhandho Investor: The Low-Risk Value Method to High Returns by Mohnish Pabrai
Value Investing: From Graham to Buffett and Beyond by Bruce C. N. Greenwald
Joel Greenblatt on WealthTrack (video) (LINK)
Related books: The Little Book That Still Beats the Market and You Can Be a Stock Market Genius
Guy Spier Boston College Presentation on October 2nd, 2014 (video) (LINK)
Related book: The Education of a Value Investor
Michael Lewis reviews the book Billionaires: Reflections on the Upper Crust (LINK)

Buffett Thoughts on GEICO in 1976 (LINK)

Steve Romick Q3 FPA Crescent Webcast Slides And Transcript (LINK)

Valuation from All Angles: S&P 500, Russell 2000, and the 10 GICS Sectors (LINK)

Aswath Damodaran: Twitter's Bar Mitzvah! Is Social Media coming of age? (LINK)

Google's Larry Page: The most ambitious CEO in the universe (LINK)

EBITDA Is 'BS' Earnings (LINK) [There's some related EBITDA quotes from Buffett, Munger, and Klarman at the end of THIS post.]

World’s ‘Unbanked’ En Route to Financial Inclusion With Mobile Money (LINK)

Grant Williams interviews Ben Hunt (video) (LINK)

Hussman Weekly Market Comment: These Go to Eleven (LINK)
The current market environment joins the full range of ingredients that have characterized the most extreme market peaks – and preceded the deepest market plunges – in more than a century of history. On the basis of measures that are best correlated with actual subsequent market returns (and plenty of popular measures are not), we observe the richest market valuations in history with the exception of the 2000 peak. Even then, current levels on the best performing measures are only about 15-20% below the 2000 extreme. Current valuations now exceed those observed in 1901, 1929, 1937, 1972, 1987, and 2007. The 5-year market advance from the 2009 low, encouraged by yield-seeking speculation, now places the S&P 500 at more than double the level that we would associate with historically normal returns. Put another way, we presently estimate S&P 500 prospective nominal total returns of just 1.4% annually over the coming decade, with zero or negative average total returns out to roughly 2022. These valuations are coupled with extremely overbought conditions and the most lopsided bullish sentiment since 1987. Bearish sentiment is now down to 14.8% (Investor’s Intelligence), close to the low of 13.3% reached in September. Prior to this year, the last two times sentiment was nearly as lopsided were the April 2011 peak (just before a near-20% dive), and the October 2007 peak.
Mosaics Revealed at Ancient Greek City of Zeugma in Turkey (LINK)

GMO's Q3 2014 Letter

Link to: GMO's Q3 2014 Letter 
GMO's 3Q 2014 Letter includes Ben Inker's "Is This Purgatory, Or Is It Hell?" and Jeremy Grantham's "Bubble Watch Update" and "The Beginning of the End of the Fossil Fuel Revolution (From Golden Goose to Cooked Goose)"
As always, the prudent investor (unlike the political year three) should definitely recognize overvaluation, factor in regression to the mean, and calculate the longer-term returns that result from this process. More easily, such prudent investors can use our seven-year numbers, which have a decent long-term record measured when we have viewed markets as overpriced, as we believe they are today, and a better record measured in the periods after bubbles break. The other necessary ingredients to the investment mix are suitable measures of risk, and when these are added to estimated returns we believe efficient portfolios can be produced. On our data, with U.S. large cap equities offering negative returns (-1.5%) except for high quality stocks (+2.2%), with foreign developed and emerging equities overpriced (+3.7%), and with bonds and cash also very unattractive, investors have to twist and turn to find even a semi-respectable portfolio. It is a particularly tough process today with nowhere to hide and no very good investments compared to, say, the time around the 2000 bubble when there were several.
...My personal fond hope and expectation is still for a market that runs deep into bubble territory (which starts, as mentioned earlier, at 2250 on the S&P 500 on our data) before crashing as it always does. Hopefully by then, but depending on what the rest of the world’s equities do, our holdings of global equities will be down to 20% or less. Usually the bubble excitement – which seems inevitably to be led by U.S. markets – starts about now, entering the sweet spot of the Presidential Cycle’s year three, but occasionally, as you have probably discovered the hard way already, history can be a snare and not a help.

Seneca quote

"...a man cannot stand prepared for the approach of death if he has just begun to live. We must make it our aim already to have lived long enough. No one deems that he has done so, if he is just on the point of planning his life. You need not think that there are few of this kind; practically everyone is of such a stamp. Some men, indeed, only begin to live when it is time for them to leave off living. And if this seems surprising to you, I shall add that which will surprise you still more: Some men have left off living before they have begun." -Seneca

Monday, November 17, 2014

Nassim Taleb: The core generator of Fooled by Randomness

From the end of Fooled by Randomness:
I have been periodically challenged to compress all this business of randomness into a few sentences, so even an MBA can understand it (surprisingly, MBAs, in spite of the insults, represent a significant portion of my readership, simply because they think that my ideas apply to other MBAs and not to them).

This brings to mind Rabbi Hillel’s story, when he was asked by someone particularly lazy if Hillel could teach him the Torah while the student was standing on one leg. Rabbi Hillel’s genius is that he did not summarize; instead, he provided the core generator of the idea, the axiomatic framework, which I paraphrase as follows: Don’t do to others what you don’t want them to do to you; the rest is just commentary

It took me an entire lifetime to find out what my generator is. It is: We favor the visible, the embedded, the personal, the narrated, and the tangible; we scorn the abstract. Everything good (aesthetics, ethics) and wrong (Fooled by Randomness) with us seems to flow from it.

Sunday, November 16, 2014

Marcus Aurelius quote

From Meditations:
Give yourself a gift: the present moment.  
People out for posthumous fame forget that the Generations To Come will be the same annoying people they know now. And just as mortal. What does it matter to you if they say x about you, or think y?

Saturday, November 15, 2014

Seneca quote

From Moral letters to Lucilius/Letter 44 (Kindle):
Suppose, then, that you were not that Roman knight, but a freedman, you might nevertheless by your own efforts come to be the only free man amid a throng of gentlemen. "How?" you ask. Simply by distinguishing between good and bad things without patterning your opinion from the populace. You should look, not to the source from which these things come, but to the goal towards which they tend. If there is anything that can make life happy, it is good on its own merits; for it cannot degenerate into evil. Where, then, lies the mistake, since all men crave the happy life? It is that they regard the means for producing happiness as happiness itself, and, while seeking happiness, they are really fleeing from it. For although the sum and substance of the happy life is unalloyed freedom from care, and though the secret of such freedom is unshaken confidence, yet men gather together that which causes worry, and, while travelling life's treacherous road, not only have burdens to bear, but even draw burdens to themselves; hence they recede farther and farther from the achievement of that which they seek, and the more effort they expend, the more they hinder themselves and are set back. This is what happens when you hurry through a maze; the faster you go, the worse you are entangled. 

Friday, November 14, 2014

Peter Cundill quote

From There's Always Something to Do:
For all my emphasis on the virtues of patience in value investment it has to go hand in hand with minute attention to the detail, with conviction and determination, otherwise patience is just futile endurance.


From Capital Account:
Regardless of the individual manager's particular investment discipline, superior investment returns come from one source -- the investment outcome must differ materially from that already discounted by the market at the moment when the stock is purchased. The gap between perception and reality is best thought of as a mispricing. 

Thursday, November 13, 2014

Peter Cundill quote

From There's Always Something to Do:
The ultimate skill in this business is in knowing when to make the judgement call to let profits run. While it is true that 99% of investment effort is routine, unspectacular enquiry, checking and double checking, laboriously building up a web of information with single threads until it constitutes a complete tableau, just occasionally a flash of inspiration may be necessary. Once we have begun to build a position it has to be recognized that our intentions may change in the course of its construction. An influential, or even controlling, position quite often results from a situation where a cheap security does little or nothing price-wise for such a long time that we are able to buy a significant percentage of the equity. Whether our intentions remain passive under these circumstances depends on an assessment of the outlook for the company and the capability of its management, but I don’t think that we ought to be pro-active merely for the sake of it. My task is principally the identification of opportunity and the decision to press the buy button. This may sometimes turn out to be a catalyst in itself, but normally we should rely on others to do the promotional work or to put the company directly into play. Otherwise it will turn into a constant and time-consuming distraction from our prime objective of finding cheap securities to buy.

Howard Marks quote

From The Most Important Thing:’s important to bear in mind that in addition to times when the errors are of commission (e.g., buying) and times when they are of omission (failing to buy), there are times when there’s no glaring error. When investor psychology is at equilibrium and fear and greed are balanced, asset prices are likely to be fair relative to value. In that case there may be no compelling action, and it’s important to know that, too. When there’s nothing particularly clever to do, the potential pitfall lies in insisting on being clever.

Wednesday, November 12, 2014


Rational Walk reviews the book Berkshire Beyond Buffett (LINK)

Elizabeth Holmes at TEDMED 2014 (video) [H/T Will] (LINK)
Related previous post: Elizabeth Holmes interview at TechCrunch Disrupt San Francisco ’14
Andrew Smithers: The US is a huge hedge fund (LINK)

Investing in the Unknown and Unknowable by Richard J. Zeckhauser [H/T @trengriffin] (LINK)

Michael Mauboussin 2005 Presentation: Attributes of a Good Investment Process [H/T @trengriffin] (LINK)

And finally, a quote from Eric Hoffer that I have posted before, but that I think is worth posting here again given what continues to go on around the world. It is from his book The True Believer: Thoughts on the Nature of Mass Movements:
It goes without saying that the fanatic is convinced that the cause he holds on to is monolithic and eternal - a rock of ages. Still, his sense of security is derived from his passionate attachment and not from the excellence of his cause. The fanatic is not really a stickler to principle. He embraces a cause not primarily because of its justness and holiness but because of his desperate need for something to hold on to. Often, indeed, it is his need for passionate attachment which turns every cause he embraces into a holy cause. 

The fanatic cannot be weaned away from his cause by an appeal to his reason or moral sense. He fears compromise and cannot be persuaded to qualify the certitude and righteousness of his holy cause. But he finds no difficulty in swinging suddenly and wildly from one holy cause to another. He cannot be convinced but only converted. His passionate attachment is more vital than the quality of the cause to which he is attached.

Tuesday, November 11, 2014

Chart of the Day: Research Affiliates - 10-Year Real Expected Equity Returns, by country

Incentives, Downsizing, and Value Creation at General Dynamics (August 1994 Paper)

This looks like an interesting paper, and it reminded me of THIS previous post/quote.

In 1991, defense contractor General Dynamics engaged a new management team which adopted an explicit corporate objective of creating shareholder value. The company tied executive compensation to shareholder wealth creation, and subsequently implemented a strategy that included downsizing, restructuring, and exit. Paying large executive cash bonuses amid layoffs ignited controversy. However, by 1993 shareholders realized gains approaching $4.5 billion, representing a dividend-reinvested return of 553%. The study shows how incentives assist in shaping strategy, illustrates the political costs and economic benefits of downsizing, and demonstrates that even firms in declining industries have substantial opportunities for value creation.

Monday, November 10, 2014

East Coast Asset Management's Q3 2014 Investment Letter: Grove of Titans

Link to: Grove of Titans
In our third quarter letter you will find our portfolio update and general market observations. Each quarter we highlight one component of our investment process. This quarter, in the section titled Grove of Titans, I will discuss the attributes of what we think constitutes an enduring business.
I recently invited Peter D. Kaufman, CEO of Glenair, Board Member of the Daily Journal, and Editor of Poor Charlie’s Almanac, to come speak to the Security Analysis class I teach at Columbia Business School. Peter Kaufman is an exceptional business operator and is also one of the great multidisciplinary thinkers of our time. On the topic of multidisciplinary learning and rational decision-making, Peter shared the approach he uses, which he refers to as his “three-bucket” framework, to arrive at universal principles that have high utility. Peter shared:
Every statistician knows that a large, relevant sample size is their best friend. What are the three largest, most relevant sample sizes for identifying universal principals? Bucket number one is inorganic systems, which are 13.7 billion years in size. It's all the laws of math and physics, the entire physical universe. Bucket number two is organic systems, 3.5 billion years of biology on Earth. And bucket number three is human history, you can pick your own number, I picked 20,000 years of recorded human behavior. Those are the three largest sample sizes we can access and the most relevant.
Peter then walked the class through how compounding and the law of reciprocity can be applied to these data sets and therefore applied to reason. A light immediately went on. Applying questions to these three large data sets simplified and strengthened how I was organizing and applying mental models. Kaufman’s approach provides a framework of general laws that have stood the test of time – invariant, unchanging lenses that we can use to focus and arrive at workable answers. A multidisciplinary framework helps shift the human paradigm to one of an empathetic perspective, as if we were looking from the outside in. Just as I began this letter with the three foundational insights of Dialectical Materialism, we want to be constantly searching for these types of invariant strategies that can serve us in rational decision-making.
Seeing the Forest and the Trees:

One of the most limiting biases for individuals attempting to make sense of complex systems is that they are a part of the systems. When you are part of the system it becomes increasingly difficult to see the forest for the trees. Each individual tree’s uniqueness and complexity can lead to confusion and ambiguity. The key is to attempt to step outside of the system and see the forest and trees for the essence of what they are. How can we find these groves or islands of simplicity in an infinitely complex world?

Jason Zweig of the Wall Street Journal asked Charlie Munger to describe a key attribute of Berkshire Hathaway’s evolution over the years. His response: “There isn’t one novel thought in all of how Berkshire is run. It’s all about what [Mr. Munger’s friend] Peter [Kaufman] calls ‘exploiting unrecognized simplicities.” Peter Kaufman was sitting with Charlie during this interview after the recent Daily Journal annual meeting. The entire quote that Charlie was referencing was one that Peter attributes to a 28 year old writer for Sports Illustrated named Andy Benoit, who wrote these words to describe the essence of a particular quarterback’s genius: “Most geniuses—especially those who lead others—prosper not by deconstructing intricate complexities but by exploiting unrecognized simplicities.” This quote captures the essence of genius and can serve as a roadmap to the Grove of Titans.

Finding unrecognized simplicities requires one to step outside the forest, outside of the human system to see and measure holistically without biases


The first part of the book MONEY Master the Game [H/T Will] (LINK)

Atul Gawande talks to The Aspen Institute about his book, Being Mortal (LINK)

Buffett Said He Paid a Steep Price. $15 Billion Later, BNSF Is a Cash Machine. 'He Stole It' [H/T Matt] (LINK)

Bob Rodriguez talks with ThinkAdvisor [H/T ValueWalk] (LINK)

John Hussman talks with Chris Martenson (audio) (LINK)


For those looking for places to make some year-end donations, I wanted to introduce you to the recently launched Gerald Boyles Student Investment Fund. As many of you are aware, Dr. Boyles is the one that introduced me as well as my partner Matt to value investing. That introduction as well as the life lessons he has taught us led us to name our firm after him. He also had a big impact on the man brave enough to hire Matt and me right out of school, Mike Pruitt, and was big influence on Mike hiring us and starting Chanticleer Holdings, which Mike discusses a bit in THIS interview.

Our friend Mark recently sent out an email to former students describing what's going on, much of which is pasted below. If this is something you have any interest in, please contact Mark at his contact information below. 
Dr. Boyles had a profound impact on so many of us who majored in finance and/or had him as an adviser.  He was passionate and dedicated his time, energy and work at CCU to helping his students succeed.  Dr. Boyles was an excellent professor and encouraged us both in- and outside of the classroom. He also helped us find that first job, find our calling, find our own passion in the world of finance.  If you look back, I am sure it's easy to see the meaningful and eternal impact he had on your life and career. 
The Dr. Gerry Boyles Student Management Investment Fund is a tribute to all that he has done and will keep his "pay it forward" and long-term investment passion moving ahead at CCU for decades to come.  This link,, provides more information about him and the fund.  Nearly half of the $100,000 goal has already been raised. 
For those who give $1,000 or more, your name will be recognized on a plaque inside the investment lab as well as on the fund website; gifts of $2,500 or more will receive additional recognition in the entrance to the Wall College of Business foyer. 
Thank you for your time and consideration to give back to the man who means so much to all of us. 
For more information or to make a donation, please feel free to contact me. 
Mark Kiskunas '96
Senior Director for Philanthropy 
Coastal Carolina University
Office: (843) 349-2010

Seneca quote

"...why should I demand of Fortune that she give rather than demand of myself that I should not crave? And why should I crave? Shall I heap up my winnings, and forget that man's lot is unsubstantial? For what end should I toil? Lo, to-day is the last; if not, it is near the last." -Seneca

Sunday, November 9, 2014


Q&A with Guy Spier about his book, The Education of a Value Investor (LINK)

Buffett’s Private Analysis of Geico in 1976: ‘Extraordinary’ But ‘Mismanaged’ [H/T Lincoln] (LINK)

Aswath Damodaran on corporate break-ups, using EBay and PayPal as an example (LINK)

Common Sense Podcast 283: Dan Carlin discusses Ebola and Artificial Intelligence (LINK)

The Future of Cities: The Internet of Everything will Change How We Live [H/T Abnormal Returns] (LINK)

Hussman Weekly Market Comment: Do the Lessons of History No Longer Apply? (LINK)
Our valuation concerns don’t rely on any requirement for earnings or profit margins to turn down in the near term. Valuations are a long-term proposition that link the price being paid today to a stream of cash flows that, for the S&P 500, have an effective duration of about 50 years. In evaluating whether “this time is different,” it should be understood that current valuations are “justified” only if 1) the wide historical cyclicality of profits over the economic cycle has been eliminated, 2) the average level of profit margins over the next five decades will be permanently elevated at nearly twice the historical norm, 3) the strong historical advantage of smoothed or margin-adjusted valuation measures over single-year price/earnings measures has vanished, and 4) zero interest rate policies will persist not just for 3 or 4 more years, but for decades while economic growth proceeds at historically normal rates nonetheless. Believe all of that if you wish. Without permanent changes in the way the world works, on valuation measures that are best correlated with actual subsequent market returns, stocks are wickedly overvalued here. 

The charts below show several of the measures that have the strongest relationship (correlation near 90%) with actual subsequent 10-year S&P 500 total returns, reflecting data from the Federal Reserve, Standard & Poors, Robert Shiller, and valuation models that we have published over the years. The first chart shows these measures as the percentage deviation from their historical norms prior to the late-1990’s equity bubble. While it’s easy to lose sight of the extremity of the present situation, these measures are well over 100% above their respective norms, on average. On the most reliable measures, we estimate that S&P 500 valuations are now only about 15-20% short of the 2000 extreme, and are clearly above every other extreme in history including 1901, 1929, 1937, 1972, 1987, and 2007. Again, these measures are also better correlated with actual subsequent market returns than popular alternatives such as price/forward operating earnings and the Fed Model (which adjusts the S&P 500 forward operating earnings yield by the level of 10-year Treasury yields). 

As of last week, based on a variety of methods, we estimate likely S&P 500 10-year nominal total returns averaging just 1.5% annually over the coming decade, with negative expected returns on every horizon shorter than about 8 years.

Friday, November 7, 2014


Meb Faber with an excerpt from the Paul Tudor Jones interview in MONEY Master the Game (LINK)
I mentioned the new Tony Robbins book out “Money: Master the Game” in our prior post “The All Seasons Portfolio“.  I think it is a good book, especially for the newbie wondering what to do with their money.  It is really long, but market pros could probably skip to the last 25% of the book for the interviews, and honestly the Paul Tudor Jones one made the entire book worthwhile.  I would buy it for that alone.
Steven Johnson on The Colbert Report (video) (LINK)
Related book: How We Got to Now 
Related link: PBS Series: How We Got to Now
Planetary birth revealed in best image yet from world’s most powerful telescope (LINK)

Thursday, November 6, 2014


Great post from Shane over at Farnam Street: Adding Tools to Your Mental Toolbox (LINK)

Boyles Q3 letter excerpt: Skill, Luck, and Gaining an Investment Edge (LINK)

Boyles Q3 letter excerpt: Gumption (LINK)

Greenlight Q3 letter excerpts (LINK)

Forbes profile of Jeffrey Gundlach: Glory To The New Bond King (LINK)

Nearly starless galaxies found in nearby cluster (LINK)

How We Got to Now [H/T Lincoln] (LINK)
How We Got To Now with Steven Johnson is a six part documentary series that reveals the story behind the remarkable ideas that made modern life possible; the unsung heroes that brought them into the world – and the unexpected and bizarre consequences each of these innovations has triggered.
Related book: How We Got to Now

Walter Isaacson in converstaion with two pioneers of the Internet, Vint Cerf and Bob Kahn

Link to video 


Related book: The Innovators

Related recent post: The Innovators: Author Walter Isaacson in Conversation with John Hollar


Areté a concept worth being familiar with. It is essentially what the Stoics mean by "virtue" and it is probably closer to what Ben Franklin was aiming for than the way many define virtue today.

From Wikipedia:
Arete, in its basic sense, means "excellence of any kind". The term may also mean "moral virtue". In its earliest appearance in Greek, this notion of excellence was ultimately bound up with the notion of the fulfillment of purpose or function: the act of living up to one's full potential.

The term from Homeric times onwards is not gender specific. Homer applies the term of both the Greek and Trojan heroes as well as major female figures, such as Penelope, the wife of the Greek hero, Odysseus. In the Homeric poems, Areté is frequently associated with bravery, but more often, with effectiveness. The man or woman of Areté is a person of the highest effectiveness; they use all their faculties: strength, bravery and wit, to achieve real results. In the Homeric world, then, Areté involves all of the abilities and potentialities available to humans.
In this light, Ben Franklin is supremely admirable. Born in Boston in 1706, he was apprenticed at the age of twelve to his older brother James, who owned a printing shop. After many disputes with (and beatings by) his brother, he yearned for freedom, but James would not release him from the legal contract of his apprenticeship. So at the age of seventeen, Ben broke the law and skipped town. He got on a boat to New York and, failing to find work there, kept on going to Philadelphia. There he found work as an apprentice printer and, through skill and diligence, eventually opened his own print shop and published his own newspaper. He went on to spectacular success in business (Poor Richard’s Almanack – a compendium of sayings and maxims – was a hit in its day); in science (he proved that lightning is electricity, then tamed it by inventing the lightning rod); in politics (he held too many offices to name); and in diplomacy (he persuaded France to join the American colonies’ war against Britain, though France had little to gain from the enterprise). He lived to the age of eighty four, and enjoyed the whole ride. He took pride in his scientific discoveries and civic creations; he basked in the love and esteem of France as well as of America; and even as an old man he relished the attentions of women and the art of flirtation.

What was his secret? Virtue. Not the sort of uptight, pleasure-hating Puritanism that some people now associate with that word, but a broader kind of virtue that goes back to ancient Greece. The Greek word arete meant excellence or goodness, especially of a functional sort. The arete of a knife is to cut well; the arete of an eye is to see well; the arete of a person is... Well, that’s one of the oldest questions of philosophy: what is the true nature, function, or goal of a person, relative to which we can say that he or she is living well or badly? Thus in saying that happiness (eudaimonia) is “activity of soul in conformity with virtue,” Aristotle wasn’t saying that happiness is giving to the poor and suppressing your sexuality. He was saying that a good life is one where you develop your strengths, realize your potential, and become what it is in your nature to become.
"What moves the Greek warrior to deeds of heroism," Kitto comments, "is not a sense of duty as we understand it... duty towards others: it is rather duty towards himself. He strives after that which we translate 'virtue' but is in Greek areté, 'excellence' — we shall have much to say about areté. It runs through Greek life."

...Kitto had more to say about this areté of the ancient Greeks. "When we meet areté in Plato," he said, "we translate it ‘virtue’ and consequently miss all the flavor of it. ‘Virtue,’ at least in modern English, is almost entirely a moral word; areté on the other hand, is used indifferently in all the categories, and simply means excellence."

Thus the hero of the Odyssey is a great fighter, a wily schemer, a ready speaker, a man of stout heart and broad wisdom who knows that he must endure without too much complaining what the gods send; and he can both build and sail a boat, drive a furrow as straight as anyone, beat a young braggart at throwing the discus, challenge the Pheacian youth at boxing, wrestling or running; flay, skin, cut up and cook an ox, and be moved to tears by song. He is in fact an excellent all-rounder; he has surpassing areté.

Areté implies a respect of the wholeness or oneness of life, and a consequent dislike of specialization. it implies a contempt for efficiency — or rather a much higher idea of efficiency, an efficiency which exists not in one department of life but in life itself.

Wednesday, November 5, 2014


Don Graham’s Insights Into Berkshire Hathaway And Warren Buffett (LINK)
Related book: Berkshire Beyond Buffett
Andrew Smithers: Buybacks and the parallel universe of investment bankers (LINK)
The damage done to the UK and US economies by buybacks in preference to capital investment was a central theme of my book The Road to Recovery, and it has found its way, not too often I hope, into these blogs. I have therefore been heartened by the growing interest shown by the financial press in this threat to our economies.
Brain Pickings: Richard Dawkins on The Science of Why You Are Lucky to Be Alive (LINK)
Related book: Unweaving the Rainbow
An excerpt from the book Animal Weapons: The Evolution of Battle (LINK)

Tuesday, November 4, 2014


Munger’s Psychology Mindmapped (LINK) [A great post, and similar to what I'm doing with Munger's speech via a memory palace. The one thing I would recommend is using the speech from Poor Charlie's Almanack and not the online text from 1995, as Munger added and re-organized his thoughts for the book. And note, if you buy the book on Amazon you can usually save some money compared to buying straight from the book's site, as the publisher is selling it on Amazon but with a lower shipping cost. Go to the Amazon link, click on "15 New from $53.99", and the ones being sold for $53.99 come from the publisher with just an additional $3.99 in shipping cost. They are $49.00 on, but the shipping cost makes it more expensive overall, at least to ship to where I live.]
Related books, HERE. Related link: Mind Mapping Software
A Dozen Things Learned from John Malone (LINK)
Related book: Cable Cowboy
Brain Pickings with a great overview and excerpts from E.O. Wilson's The Meaning of Human Existence (LINK)
Related link: E.O. Wilson on Charlie Rose
Slides from some of the speakers at the Grant's conference (LINK)

Howard Marks on Bloomberg (video) [H/T ValueWalk] (LINK)

Bill Gross' latest Investment Outlook: The Trouble with Porosity and Prosperity (LINK)

The Absolute Return Letter, November 2014: Snail Trail Vortex (LINK)
The world is undergoing a radical shift towards lower economic growth at the moment. Some of the dynamics driving growth down are structural in nature (e.g. demographics), and even the most extreme monetary or fiscal policy will not change that. We are in for a period of lower, but still positive, global growth whether we like it or not. Despite the somewhat muted outlook, we continue to expect significant regional variations in growth and therefore also in interest rates and equity returns. Global GDP has averaged almost 4% per annum over the past few decades, but we are now closer to 3% and the number continues to shrink. It is almost unthinkable, at least the way we see the world, that this number will begin to increase any time soon and portfolios must be constructed accordingly.

Monday, November 3, 2014

What you like a CEO of a portfolio company to say (and hope he's right)...

From the Zicom Group (ASX: ZGL) Chairman's Address to Shareholders:
I am pleased to announce that your Board will henceforth focus on enhancing shareholders’ value. At the end of the financial year just ended, the net asset value per share of the Group was S$0.417 cents and the net tangible asset value per share was S$0.348 cents. At current conversion rate they are approximately A$0.369 cents and A$0.308 cents respectively. The Group has been continuously profitable since 2006 and has proven its resilience in having successfully navigated through unprecedented global financial crises. The last transacted share price on Friday 31 October at A$0.21 therefore does not reflect the true intrinsic value of the Group.  
In pursuit of this objective your Board has commenced to seek opportunities to unlock value in some of its investments concurrently undertaking relevant corporate initiatives primarily to re-align the Group’s new directions so as to maximise value for shareholders. 
The stock is still hovering close to the same price as when my colleague at Boyles, Matt Miller, gave his Value Conferences Idea Presentation.

Disclosure: I am a portfolio manager at Boyles Asset Management, LLC ("Boyles") and the fund managed by Boyles owns shares of stock in Zicom Group Ltd.  We may in the future buy or sell shares in the fund and are under no obligation to update our activities. This is for information purposes only and is not a recommendation to buy or sell a security. Please do your own research before making an investment decision.


Scott Adams: Loser Choices (LINK)
The loser worldview is that whoever is causing the problem needs to fix it for you. 
The problem with the loser worldview is that in many cases the only person who CAN fix the problem is you, even if you had nothing to do with causing it. A winner in that situation fixes his own problem. A loser sits indefinitely waiting for others to solve it for him, even knowing that won't happen. 
When indoor smoking was my problem, the fault was clearly with the smokers and with management that allowed it. So I went after them and made them fix their problem for my benefit. That plan worked because the problem was fixable. 
When I hit the diversity ceiling on two occasions, I chose to run instead of fight because in those cases victory seemed impossible. I also ran from my hometown because staying and convincing everyone to build some industry so I can get a good job seemed impractical.
Daron Acemoglu on EconTalk (LINK)
Related book: Why Nations Fail
A 2009 conversation between Dan Carlin and Gwynne Dyer [H/T Raptitude] (LINK)

Mastering the art of self-control: Psychologist Walter Mischel discusses the science behind willpower (LINK)
Related book: The Marshmallow Test
An interesting-looking biography that comes out tomorrow (recommended by Walter Isaacson): Havel: A Life
Václav Havel was one of the most prominent figures of the twentieth century: iconoclast and intellectual, renowned playwright turned political dissident, president of a united then divided nation, and dedicated human rights activist. Written by Michael Zantovsky—Havel’s former press secretary, advisor, and longtime friend—Havel: A Life presents a revelatory portrait of this giant among men and the turbulent times through which he prevailed.