Saturday, January 31, 2015

Marcus Aurelius quote

From Meditations:
You can discard most of the junk that clutters your mind—things that exist only there—and clear out space for yourself:
… by comprehending the scale of the world
… by contemplating infinite time
… by thinking of the speed with which things change—each part of every thing; the narrow space between our birth and death; the infinite time before; the equally unbounded time that follows.

Friday, January 30, 2015

Five Good Questions for Mebane Faber

Link to video


Related book: Global Value: How to Spot Bubbles, Avoid Market Crashes, and Earn Big Returns in the Stock Market

Related link: My Portfolio for 2015 - by Meb Faber


Debt That Once Boosted Its Cities Now Burdens China (LINK)

Watsa's Massive Bet (LINK)

How, and Why, Apple Overtook Microsoft (LINK)

Jack Ma on Charlie Rose (LINK)

Legends Of Indexing: Rob Arnott [H/T The Big Picture] (LINK)

Book of the day: A. P. Giannini: Banker of America

Thursday, January 29, 2015


Seneca: The Man to Know in Ancient Rome (LINK)
Related books: 
Dying Every Day: Seneca at the Court of Nero
The Greatest Empire: A Life of Seneca
Letters from a Stoic
Elizabeth Holmes, Theranos: Transforming Healthcare by Embracing Failure (video) [H/T ValueWalk] (LINK) [There are a lot of other great videos from Stanford listed HERE as well.]

Bill Gates' Reddit AMA (LINK)

a16z Podcast: Coding as a Literacy (LINK)
Related books: 
Mindstorms: Children, Computers, And Powerful Ideas
Code: The Hidden Language of Computer Hardware and Software
Steve Romick's Q4 2014 Letter (LINK)

Buying Warren Buffett, Richard Branson and Steve Jobs at a Discount (LINK)

Aswath Damodaran: The Dance of the Disrupted: Observations from the front lines (LINK)

Rory Sutherland: How consumer habits are subject to the law of unintended consequences (LINK)

DVD of the day: The Prize - An Epic Quest for Oil; Money & Power

Wednesday, January 28, 2015

Roger Lowenstein excerpt...

This seemed relevant given what's going on with oil. From Lowenstein's Introduction to Part I of Security Analysis: Sixth Edition:
The competition for such values is fiercer in the United States, but they can be found, especially, again, when some broader trend punishes an entire sector of the market. In 2001, for instance, energy stocks were cheap (as was the price of oil). Graham and Dodd would not have advised speculating on the price of oil—which is dependent on myriad uncertain factors from OPEC to the growth rate of China’s economy to the weather. But because the industry was depressed, drilling companies were selling for less than the value of their equipment. Ensco International was trading at less than $15 per share, while the replacement value of its rigs was estimated at $35. Patterson-UTI Energy owned some 350 rigs worth about $2.8 billion. Yet its stock was trading for only $1 billion. Investors were getting the assets at a huge discount. Though the subsequent oil price rise made these stocks home runs, the key point is that the investments weren’t dependent on the oil price. Graham and Dodd investors bought into these stocks with a substantial margin of safety.


Sanjay Bakshi: 62 Bagger And Counting (LINK)

Would Keynes Have Been Fired as a Money Manager Today? (LINK)
Related previous post: John Wasik on "Keynes's Way to Wealth: Timeless Investment Lessons from the Great Economist" 
Related book: Keynes's Way to Wealth: Timeless Investment Lessons from The Great Economist
Robert Shiller Says It’s Time to Buy Greek Stocks (LINK) [One possible ETF to consider not just for Greek stocks, but also for other low-priced markets is GVAL.]

More on Greece from Buttonwood: Take the money and run (LINK)
IF the broader markets still remain fairly sanguine about the election of Syriza, that is certainly not true of investors in Greece itself. The yield on three-year bonds is now up to nearly 17% and Greek bank shares are down 20% today, with the broader stockmarket off 8%. 
Neither sell-off is an immediate problem. Greece wouldn't want to borrow from the markets at current rates (or even the rates that prevailed last week) and share prices rise and fall. But both developments are a symptom of wider worries. If there is any chance of Greece leaving the euro, a process that would probably involve capital controls and the forcible conversion of euro deposits into devalued drachma (akin to Argentina's corralito), then why would you leave your money in a Greek bank? Even if that doesn't happen, wealthy Greeks might be tempted to move their money overseas to escape higher taxes.
John Kay: Why worry about deflation? (LINK)

Andrew Smithers: Understanding market momentum (LINK)

Unilever sells 7-year, €750m bond at 0.5% yield (LINK)

How Berkshire Hathaway Can Survive Beyond Warren Buffett [H/T @trengriffin] (LINK)
Related book: Berkshire Beyond Buffett
Jeff Gundlach reveals his biggest mistake — and how you can avoid it [H/T @trengriffin] (LINK)

Review of the book Merchants of Grain: The Power and Profits of the Five Giant Companies at the Center of the World's Food Supply (LINK)

The Apple Watch will be released in April. Here's the Jony Ive narrated promotion video describing it in more detail... (LINK)

Apple also had a pretty remarkable quarter (LINK)

Bringing value investing to football: The Dueling Legacies of Bill Belichick [H/T Matt) (LINK)

Tony Robbins Reveals His Secret to Andrew Ross Sorkin (LINK) ["The most powerful incentive I know is autonomy and growth. The sense that I become more, that I can give more, and create more. I always say to people, if you want to know where happiness comes from, I can give it to you in one word: progress. Progress equals happiness. We're not supposed to sit at the table of success and just feel good about ourselves forever. What makes us feel alive is growing, and when we grow we have something to give."]
Related book: MONEY Master the Game: 7 Simple Steps to Financial Freedom

Tuesday, January 27, 2015


Apollo Asia Fund: the manager's report for 4Q2014 (LINK)
Amidst all these distractions, I omitted to post a link to GMO's 3Q report, with another compelling exposition from Jeremy Grantham on what I consider the key issue of our time. While acknowledging short term benefits from the fall in the oil price, as income is transferred from producers to consumers with a greater propensity to spend, he explains with great clarity why the current fall in the oil price 'does nothing to offset the squeeze on the total economy from rising costs', and provides some alarming illustrations of the magnitude of that squeeze. We differ on coal: as mentioned here six months ago, the usage of coal in Asia is rising and not falling, as oil and gas production falters. However, Grantham's central message could hardly be clearer - or further from complacent assumptions of business-as-usual. '... other parts of the complex economic system have to be sacrificed to retain the ability to acquire sufficient oil... if oil costs continue to rise the trade-offs become more and more painful. Our complex system has been trained by experience to deal with steady growth. Now it must deal with slowing growth and one day it may face contraction. In this changed world we can only guess how robust the stressed system will be. We may hope it will be tough but quite possibly it will be brittle. At the extreme it might even threaten the viability of our current economic system. It is vital therefore, if we want to reduce these stresses, to emphasize fuel efficiency, reduce wastage of all kinds, and encourage the rapid development of sustainable "alternative" forms of energy... Clearly the writing is on the wall. It is now up to our leadership and to us as individuals to read it and act accordingly.' First read the rest: 'The Beginning of the End of the Fossil Fuel Revolution (from Golden Goose to Cooked Goose)'. 
If only we knew how to invest accordingly. Portfolio turnover in 2014 was low, at 12%. With the world in turmoil, we may well need to make more changes in the year ahead. Some of the changes we made earlier have not, as yet, gone to plan. Suggestions, as always, are welcome.
See’s Candies Case Study (LINK)

One Powerful Success Secret I Learned from Warren Buffett (Hint: It’s Not about Investing) (LINK)
Related book: Daily Rituals: How Artists Work
Buffett, 'Dilbert' creator Scott Adams differ on passion [H/T Will] (LINK)
Related book: How to Fail at Almost Everything and Still Win Big
Scott Adams: Speed is the New Intelligence (LINK)

The Shake Shack Economy [H/T The Big Picture] (LINK)

Mark Hanson's latest on the housing market (LINK)

Ray Kurzweil’s Mind-Boggling Predictions for the Next 25 Years (LINK)
Related book: Bold: How to Go Big, Create Wealth and Impact the World
William Ury, co-author of the Charlie Munger recommended Getting to Yes: Negotiating Agreement Without Giving In, is out with a new book; Getting to Yes with Yourself

Monday, January 26, 2015

Davos 2015 - Sustainable Development A Vision for the Future

Link to video


Related link: Bill and Melinda Gates' 2015 Annual Letter

Davos 2015 - How Did We Get Here? Big History 101

Link to video


Related links:

Big History Project

David Christian: The history of our world in 18 minutes


Book of the day (praised by Dan Carlin in Hardcore History Episode 32, which was also very good): Over the Edge of the World: Magellan's Terrifying Circumnavigation of the Globe

Scott Adams: Reaction to Bad News (LINK)

The man with 26 million students [H/T Mish] (LINK)

Dakshana Recognition Ceremony Dec 2014 - Address by Mohnish Pabrai (video) [H/T ValueWalk] (LINK)

Preview: Mohnish Pabrai Office Tour and Conversation with Guy Spier (video) [H/T ValueWalk] (LINK)

Technology and Finance: Drivers of a Profit Margin Explosion (LINK)
In this piece, I’m going to show that the profit margin expansion seen in the U.S. corporate sector over the last two decades has been driven largely by gains in the financial and technology sectors.  I’m then going to examine arguments for and against the sustainability of this shift.
Barry Ritholtz talks to Bill Gross (Part 2) (LINK)

All of the videos from Davos [H/T ValueWalk] (LINK)

Hussman Weekly Market Comment: Is Q-ECB a Favorable Development? (LINK)
Last week, the ECB announced that it will begin a new program of quantitative easing on March 15 – a delay that allows plenty of time for various rugs to be pulled out, if the experience of recent years is informative. Assuming that the program proceeds as announced, the ECB envisions bond purchases of 60 billion euros per month. Fully 92% of these purchases must be made by the central banks of individual countries in the Eurosystem, with the ECB sharing the risk of losses on only 20% of it (12% being investment-grade institutional debt, and 8% being the sovereign debt of Euro-area countries). This was essentially as expected, but - thus far - without an option for national central banks to treat their share of purchases as discretionary. I still suspect that this shoe will drop in the weeks ahead, but there's actually a much more important factor driving our outlook.
Broyhill Case Study: Time Warner Value Creation (LINK)

The Brooklyn Investor discusses Cowen Group as a potential investment (LINK

I don't know much about the company yet, but Cowen Group was also mentioned by Ariel Investments last year in their 3/31/2014 report: 
Once a year, I consider the question, “If I could own only one stock, what would it be?” This year I wrote about Cowen Group, Inc. & Co. (COWN) in my first-quarter letter. Cowen is traditionally known for being a boutique broker-dealer which has been around for nearly 100 years. Actually, the public company, Cowen Group, Inc. & Co., was bought a few years ago by Ramius LLC, which was a 20-year-old privately owned alternative equity management firm. It was a very successful firm and bought the broker-dealer to have a permanent capital base, expand its operations and capitalize on the synergies between the two firms. What we have seen is a very successful turnaround of the broker-dealer business—it has now been profitable for the last five quarters. Ramius LLC has grown its assets under management from $9.4 billion to $11.6 billion from year end to July 1, 2014. The stock still trades below its tangible asset value despite having two businesses that are operating very solidly now. We think it is a very misunderstood company. If you said “Cowen Group, Inc. & Co.,” most investors would still think of the broker-dealer business, which was in trouble a few years ago, and not even realize that this successful $11+ billion asset management business was the driving force behind the company. Additionally, it has very strong leadership. The CEO is Peter Cohen, who was the CEO of Shearson Lehman Hutton from 1983 to 1990. He and his team, who founded Ramius LLC years ago, have very significant stock in the company, so we feel good about the incentive structure.
And for those micro-cap investors out there that might be interested, we recently released our Boyles Q4 letter and mentioned two recent purchases: Mastermyne Group Limited (ASX:MYE) and Cambria Automobiles plc (AIM:CAMB). As always, this is for information purposes only and not a recommendation to buy or sell a security. We currently own shares in both companies but that may change at any time. Please do your own work before making an investment decision. 

Sunday, January 25, 2015


A Dozen Things Learned from Joel Greenblatt about Value Investing (LINK)
Related books: The Little Book That Still Beats the Market and You Can Be a Stock Market Genius 
Related video: Joel Greenblatt on WealthTrack
Macau High Rollers Leaving For Philippines and Vietnam [H/T @Wexboy_Value] (LINK)

Disruption Is Not About Slaying Giants but about Serving New Customers (LINK)

Book review of Michael Shermer's latest, The Moral Arc: How Science and Reason Lead Humanity toward Truth, Justice, and Freedom (LINK)

Saturday, January 24, 2015

Charles Brandes quote

From Brandes on Value:
With each ebb and flow, Mr. Market entices investors with the “quick and the new,” leading them to believe that this time is very different, and that we’ve never seen the likes of this before. His pattern of tricks changes slightly each time, but usually only enough to mine the one constant: investor behavior. Why doesn’t investor behavior change? We like to think it would, especially when you look at all the lessons of past markets. Short-term thinking, however, is human nature—it’s in our DNA. It’s how we are wired. We tend to process decisions relatively quickly based on what we see in front of us at the moment, or on what we believe others may be seeing. Such irrational behavior is ages old and is based on primal instincts like fear—we are afraid of either getting hurt or missing out. Many years later, this behavioralism was recognized as a key feature of value investing.

Related link: Charles Brandes' Q4 2014 Commentary

Friday, January 23, 2015


For some good info on the current oil and gas industry and to learn about a decent business, check out the TGS-Nopec Capital Markets Day 2015 (LINK)

A Few Savvy Investors Had Swiss Central Bank Figured Out (LINK)

The Age of Unicorns (LINK)

The Difference Between A Joke And A Billion Dollar Company Isn’t As Big As You’d Think (LINK)

Book of the day: The Genome War: How Craig Venter Tried to Capture the Code of Life and Save the World

Thursday, January 22, 2015

Bill and Melinda Gates on Charlie Rose


Related link: Bill and Melinda Gates' 2015 Annual Letter


Wired talks to Bill Gates about his letter, and other things (LINK) [Gates had extremely high praise for the book On Immunity: An Inoculation.]

Bill Gates on Bloomberg TV (video) (LINK)

Lagarde, Cohn, Summers, Botin, Dalio on Bloomberg Panel (video) [H/T ValueWalk] (LINK)
International Monetary Fund Managing Director Christine Lagarde, former U.S. Treasury Secretary Lawrence Summers, Goldman Sachs Group Inc. President Gary D. Cohn, Banco Santander SA Chairman Ana Botin and Ray Dalio, who runs the investment firm Bridgewater Associates LP, speak on a Bloomberg Television debate on quantitative easing. Francine Lacqua moderates the session at the World Economic Forum's annual meeting in Davos, Switzerland. 
11th Annual Demographia International Housing Affordability Survey (LINK)

Google to Sell Wireless Service in Deals With Sprint, T-Mobile (LINK)

It’s not hard to close the cash-rich split-off loophole [H/T Linc] (LINK)

Philosophical Economics: Intrinsic Value: Interest Rates, Inflation, and the Forgotten Concept of the Time Value of Money (LINK)

Accounting For Long-Term Debt (LINK)

Hoisington Q4 2014 Letter (LINK)

William White interview from last month, discussing the Swiss Franc and the SNB [H/T Jon Shayne] (LINK)
Related previous post: Is Monetary Policy a Science? - The Interaction of Theory and Practice Over the Last 50 Years – by William R. White
Michael Pettis: Inverted balance sheets and doubling the financial bet (LINK)

Frilled shark caught off Australian coast (LINK)

Book of the day (I've heard a few people say this is their favorite Jim Grant book): Money of the Mind: How the 1980s Got That Way

Bill and Melinda Gates' 2015 Annual Letter

Link to: 2015 Gates Annual Letter
Forty years ago, Bill and his childhood friend Paul Allen bet that software and personal computers would change the way people around the world worked and played. This bet wasn't exactly a wager. It was an opportunity to make computers personal and empower people through the magic of software. Some people thought they were nuts. But the bet turned out well.
Fifteen years ago, the two of us made a similar bet. We started our foundation in 2000 with the idea that by backing innovative work in health and education, we could help dramatically reduce inequity. The progress we've seen so far is very exciting — so exciting that we are doubling down on the bet we made 15 years ago, and picking ambitious goals for what's possible 15 years from now.

Wednesday, January 21, 2015


Tim Ferriss interviews Peter Diamandis (LINK)
Related book: Bold: How to Go Big, Create Wealth and Impact the World
Scott Adams: From Magic to Science (sort of) (LINK)
Related book: How to Fail at Almost Everything and Still Win Big (The MP3 CD is still priced low as well, currently at $8.19)
TED Talk - Matthieu Ricard: How to let altruism be your guide (LINK)
Related book: Happiness: A Guide to Developing Life's Most Important Skill
Paul Graham: The Ronco Principle (LINK)

The Hedge Fund Manager Who Nailed The Oil Crash Made $1 Billion From His Bet Against Oil (LINK)

Andrew Smithers: The political consequences of poor economics (LINK)

Venezuela’s economic collapse owes a debt to China (LINK)
It is hard to exaggerate the magnitude of the Venezuelan collapse. People are queueing for hours to buy food, stores are empty, and the country is in a deep recession. Venezuela has the fastest inflation in the world, while its government debt is the most expensive to insure against default. 
How did we get here? Venezuela used the period of high oil prices to quadruple its public foreign debt, in order to fuel a domestic spending boom. By 2012, when Venezuelan oil averaged $103, the country was spending as if the price was $194, running up a fiscal deficit of 17.5 per cent of gross domestic product. That is why the economy went into crisis in early 2014, when the oil price was still $100. The recent drop has just made a hopeless situation worse. Who gave the country the rope with which to hang itself? Mostly China. 
China started to lend massively to Venezuela in 2007. Since then it has lent more than $45bn, of which about $20bn is still outstanding. After a visit to Beijing on January 8, President Nicolás Maduro said he had won further “investment”. 
What makes China unusual is not just the amount it is willing to lend but the way it lends. First, Beijing has chosen to be opaque: we know neither the terms of the loans nor the uses of the money. The debt is repaid in oil, making Wall Street bondholders junior to China.

Tuesday, January 20, 2015


Sixteen Investing Lessons From Walter Schloss (LINK)

Greenlight Capital Q4 2014 Letter to Investors (LINK)
At last year's Sohn Investment Conference, Stan Druckenmiller introduced Zachary Schreiber as a rising star. Zach lived up to the praise with a compelling presentation predicting a sharp fall in WTI oil prices, leading us to review our exposure. In mid-June we sold enough WTI oil futures to offset the subsequent declines in our positions in Anadarko, BP, McDermott International and National Oilwell Varco, all of which we effectively exited at their higher June prices
Tim Harford: The power of saying no (LINK)
Related book: The Power of No
John Mauldin's Thoughts from the Frontline - The Swiss Release the Kraken! (LINK)

Mark Buchanan: Presuppositions and idealizations... (LINK)

Lunch with the FT: Marc Andreessen [H/T The Big Picture] (LINK)

Albert Edwards – “Markets to Riot” (LINK)

Michael Covel podcast episodes with Daniel Simons (LINK) and Meb Faber (LINK)

Some people really are better at predicting the future. Here are the traits they have in common. [H/T @PunchCardBlog] (LINK)

Cone snail deploys insulin to slow speedy prey (LINK)
Fish-hunting cone snails release insulin that can work as a weapon, sending nearby prey’s blood sugar plummeting and making the groggy fish easy for a less-than-speedy snail to catch.
Cringe away, guys — this spider bites off his own genitals (LINK)

The importance of food, jealousy, and paternal care in the evolution of owl monkey monogamy (LINK)

Monday, January 19, 2015


Nassim Taleb on EconTalk (LINK)
Nassim Nicholas Taleb, author of Antifragile, Black Swan, and Fooled by Randomness, talks with EconTalk host Russ Roberts about a recent co-authored paper on the risks of genetically modified organisms (GMOs) and the use of the Precautionary Principle. Taleb contrasts harm with ruin and explains how the differences imply different rules of behavior when dealing with the risk of each. Taleb argues that when considering the riskiness of GMOs, the right understanding of statistics is more valuable than expertise in biology or genetics. The central issue that pervades the conversation is how to cope with a small non-negligible risk of catastrophe.
Pat Dorsey talks to Google about his book The Little Book That Builds Wealth (video) [H/T ValueWalk] (LINK)

Horizon Kinetics - 4th Quarter Market Commentary (LINK) [Their individual strategy letters also have their investment theses on several companies, HERE.]

Paul Graham: What Doesn't Seem Like Work? (LINK)
Few people know so early or so certainly what they want to work on. But talking to my father reminded me of a heuristic the rest of us can use. If something that seems like work to other people doesn't seem like work to you, that's something you're well suited for. For example, a lot of programmers I know, including me, actually like debugging. It's not something people tend to volunteer; one likes it the way one likes popping zits. But you may have to like debugging to like programming, considering the degree to which programming consists of it. 
The stranger your tastes seem to other people, the stronger evidence they probably are of what you should do.
Barry Ritholtz talks to Bill Gross (Part 1) (LINK)

MLPs: Looking for Value in Oil’s Bargain Bin (LINK)

Behind the 8% plunge in China's stock market (LINK)

Grant's made it's call on the Swiss franc from September free for all to view (LINK)

No One Was Supposed to Lose This Much Money on Swiss Francs (LINK)

Swiss Franc Wiped Out Everest’s Main Fund (LINK)

Hussman Weekly Market Comment: QE and the ECB: "Authorize" is a Slippery Word (LINK)
Last week, the Swiss National Bank abandoned its attempt to tie the Swiss franc to the euro. For the past three years, the SNB has been trying to keep the franc from appreciating relative to the rest of Europe by accumulating euros and issuing francs. As the size of Switzerland’s foreign exchange holdings began to spiral out of control, Switzerland finally pulled the plug. The Swiss franc immediately soared by 49% (from 0.83 euros/franc to 1.24 euros/franc), but later stabilized to about 1 euro/franc. While numerous motives have been attributed to the Swiss National Bank, the SNB made its reasons clear: "The euro has depreciated considerably against the US dollar and this, in turn, has caused the Swiss franc to weaken against the US dollar. In these circumstances, the SNB concluded that enforcing and maintaining the minimum exchange rate for the Swiss franc against the euro is no longer justified." In effect, the SNB simply did what the German Bundesbank wishes it could do: abandon the policies of European Central Bank president Mario Draghi, and the euro printing inclinations he embraces. 
A quick update on what we call our "joint parity" estimates of currency valuation (see our recent discussion of the Japanese Yen in Iceberg at the Starboard Bow). Considering long-term purchasing power parity (which certainly does not hold in the short-run) jointly with interest rate parity (see Valuing Foreign Currencies), we presently estimate reasonable valuations of about $1.35 for the euro, and about $1.13 for the Swiss Franc - so after the wild currency moves of last week, we suddenly view the Swissie to be almost precisely where we think it shouldbe relative to the dollar. At least one hedge fund and a number of FX brokerages were wiped out last week as their customers were caught with leveraged short positions against the franc. Data from the CME shows asset managers and leveraged money heavily short the euro (with commercial dealers on the other side), and by our estimates, the decline in the euro is overextended. That's a high-risk combination for euro shorts. 
This week, the European Central Bank will authorize a fresh program of quantitative easing in Europe. My impression is that the structure of this venture will be far different from what seems to be commonly envisioned (and priced into an exchange rate that is has already overshot to the downside). The political realities for Germany have led it to shift its focus from opposing QE outright to changing the structure under which QE will proceed. It’s that potential impact on the structure of QE that seems underappreciated. Germany has two primary interests here. One is to ensure that any losses are borne by the individual member states, and the second is that as few euros as possible are created with the backing of questionable sovereign debt. Put simply, Germany’s agreement to allow QE to proceed is likely attached to particular strings that limit its exposure to the sovereign debt of its less credit-worthy neighbors.

Five Books For Writers to Read (and read again) in 2015


The books (I've read the first two, and strongly agree with those recommendations.):

  1. The War Of Art by Steven Pressfield
  2. Talent Is Overrated by Geoff Colvin
  3. The Hero With A 1000 Faces by Joseph Campbell
  4. Make Every Word Count by Gary Provost
  5. Effortless Mastery by Kenny Werner
I also have a few other writing-related books HERE, for those interested.

Sunday, January 18, 2015

Peter Cundill on skepticism

From There's Always Something to Do:
Scepticism is good, but be a sceptic, not an iconoclast. Have rigour and flexibility, which might be considered an oxymoron but is exactly what I meant when I quoted Peter Robertson’s dictum ‘always change a winning game.’ An investment framework ought to include a liberal dose of scepticism both in terms of markets and of company accounts. Taking this a step further, a lot of MBA programs, particularly these days, teach you about market efficiency and accounting rules, but this is not a perfect world and there will always be anomalies and there is always “wriggle room” within company accounts so you have to stick to your guns and forget the hype.

Saturday, January 17, 2015

Warren Buffett on having an extra level of safety...

This seems to be a fitting quote after the failing of some of the foreign exchange brokers that occurred after the Swiss National Bank move. As quoted by Peter Bevelin in one of my interviews with Peter:
Buffett: “We want to always keep a lot of money around. We have so many extra levels of safety we follow at Berkshire…. in financial markets, almost anything that can happen does happen. And it pays to conduct your affairs so that no matter how foolish other people get, you’re still around to play the game next day.”
In Seeking Wisdom, Peter also wrote:
Some systems are more prone to accidents than others because of the number of components, their connections and interactions. The more variables we add to a system, and the more they interact, the more complicated we make it and the more opportunity the system has to fail. Improving certain parts in highly interconnected systems may do little to eliminate future problems. There is always the possibility of multiple simultaneous failures and the more complicated the system, the harder it is to predict all possible failures. 

Value investing is not necessarily absolute...

From Brandes on Value:
What resonated most with me was [Ben Graham's] prescient view that value investing, while fundamentally sound, is not necessarily absolute. Its principles can be adapted in different ways based on one’s own unique and independent way of looking at the world and at individual companies.

Friday, January 16, 2015


Excerpt from Grant's back in September, where Jim Grant basically called the Swiss National Bank move (LINK)
Like a celebrity in flight from the paparazzi, the Swiss Confederation demands protection from its pesky admirers. To beat back the unwanted appreciation of the Swissie, the Swiss National Bank is--once again--vowing to move heaven and earth. Now under way is a speculation. Prompted by a friend (that's you, Harlan Batrus), we venture that the SNB will sooner or later be forced to permit the franc to appreciate and thus to enrich the holders of low-priced, three-year call options on the Swiss/euro exchange rate. It's a long shot, to be sure--the options are cheap for a reason--but we judge that the prospective reward is worth the obvious risk.
Swiss shock: Two FX brokers fail, FXCM teeters (LINK)

Jim Chanos: Days of drilling for cheap oil over (LINK)

Jim Chanos: I'm short Intel on PC concerns (LINK) [Videos from his appearance this morning are available, HERE.]

Five Good Questions for Vitaliy Katsenelson (LINK)
Related book: The Little Book of Sideways Markets
Peter Diamandis introducing his book Bold: How to Go Big, Create Wealth and Impact the World (video) (LINK)

What Is Neurofeedback? How Brain Training Can Benefit Kids, Families, and Adults (video) (LINK) [There is also a longer interview with Dave Asprey discussing his experience with Neurofeedback, HERE. This is the mental training discussed in the video: Europe’s top long/short hedge fund says mental training part of “secret sauce”]

Peter Cundill quote

From There's Always Something to Do:
Routines and discipline go hand in hand. They are the road-map that guides the pursuit of excellence for its own sake. They support proper professional ambition and the commercial integrity that goes with it.

Thursday, January 15, 2015


Have a room to rent? Buffett expects record crowd at Berkshire shareholder meeting for his 50th anniversary [H/T Linc] (LINK)

Prof. Sergio Marchionne's bravura performance at the Detroit auto show (LINK)

Seth Godin: Five thoughts on software (LINK)

How Amazon Tricks You Into Thinking It Always Has the Lowest Prices (LINK)

How Bitcoin's Blockchain Could Power an Alternate Internet [H/T @WalterIsaacson] (LINK)

Steve Keen's Economic Outlook for 2015 (LINK)

Jeffrey Gundlach's 2015 Market Outlook Slides (LINK)

Scientists Discover Potent Antibiotic, A Potential Weapon Against a Range of Diseases (LINK)

50 Of The Most Majestic Libraries In The World [H/T @TimHarford] (LINK)

"I have no use whatsoever for projections or forecasts. They create an illusion of apparent precision. The more meticulous they are, the more concerned you should be. We never look at projections, but we care very much about, and look very deeply at, track records. If a company has a lousy track record, but a very bright future, we will miss the opportunity..." -Warren Buffett

Wednesday, January 14, 2015


Farnam Street: How To Think (LINK)

Andrew Smithers: The myth of the balance sheet recession (LINK)

The Brooklyn Investor on the hedged Gotham Funds (LINK)

Coke Confronts Its Big Fat Problem [H/T Will] (LINK)

It's about a month old, but the James Altucher podcast with Adam Grant about his book Give and Take was interesting. (LINK)

Another good podcast which I went through last year, but may need to revisit: A History of Oil

Buddhism 101: A Short Introductory Lecture by Jorge Luis Borges (LINK)

Carl Icahn’s progression to full-blown corporate raider....

From Deep Value:
Icahn’s progression from arbitrageur and liquidator of closed-end funds to full-blown corporate raider started in 1976 with a distillation of the strategy into an investment memorandum distributed to prospective investors: 
It is our opinion that the elements in today’s economic environment have combined in a unique way to create large profit-making opportunities with relatively little risk. [T]he real or liquidating value of many American companies has increased markedly in the last few years; however, interestingly, this has not at all been reflected in the market value of their common stocks. Thus, we are faced with a unique set of circumstances that, if dealt with correctly can lead to large profits, as follows: [T]he management of these asset-rich target companies generally own very little stock themselves and, therefore, usually have no interest in being acquired. They jealously guard their prerogatives by building ‘Chinese walls’ around their enterprises that hopefully will repel the invasion of domestic and foreign dollars. Although these ‘walls’ are penetrable, most domestic companies and almost all foreign companies are loath to launch an ‘unfriendly’ takeover attempt against a target company. However, whenever a fight for control is initiated, it generally leads to windfall profits for shareholders. Often the target company, if seriously threatened, will seek another, more friendly enterprise, generally known as a ‘white knight’ to make a higher bid, thereby starting a bidding war. Another gambit occasionally used by the target company is to attempt to purchase the acquirers’ stock or, if all else fails, the target may offer to liquidate.  
It is our contention that sizeable profits can be earned by taking large positions in ‘undervalued’ stocks and then attempting to control the destinies of the companies in question by:  
a) trying to convince management to liquidate or sell the company to a ‘white knight’; b) waging a proxy contest; c) making a tender offer and/or; d) selling back our position to the company.

Tuesday, January 13, 2015


Meb Faber: The Most (Not) Hated Bull Market (LINK)

A Dozen Things Learned from Tom Murphy About Capital Allocation and Management (LINK)

Paul Graham: Don't Talk to Corp Dev (LINK)

A Startup Just Got $30 Million to Shake Up the Garbage Industry (LINK)

Tim Harford: How much is a (micro)life worth? (LINK)

Steven Brill on Charlie Rose [He comes on around the 24-minute mark.] (LINK)
Related book: America’s Bitter Pill 
Related link: Malcolm Gladwell reviews Steven Brill's America's Bitter Pill
Norman Doidge, who wrote The Brain That Changes Itself, is coming out with a new book: The Brain's Way of Healing: Remarkable Discoveries and Recoveries from the Frontiers of Neuroplasticity

Peter Cundill quote

From There's Always Something to Do:
Curiosity is the engine of civilization. If I were to elaborate it would be to say read, read, read, and don’t forget to talk to people, really talk, listening with attention and having conversations, on whatever topic, that are an exchange of thoughts. Keep the reading broad, beyond just the professional. This helps to develop one’s sense of perspective in all matters.

Monday, January 12, 2015


Jason Zweig: Here’s a Tip: Buy More TIPS (LINK)
Energy stocks aren’t the only investment taking a beating from the collapse in oil prices. 
Treasury inflation-protected securities have suffered as crude’s 50% decline erodes the chances of a meaningful pickup in the cost of living. 
That creates an opportunity for investors who think that inflation is far from dead: TIPS, as the bonds are known, are priced reasonably now.
BeyondProxy: The Biggest Investment Mistakes — in the Words of Jean-Marie Eveillard, Howard Marks, et al. (LINK)
Related previous post: Quotes on the mistakes investors make…

Amazon's Instant Refund Aims to Get You Spending Again Quickly (LINK) [Sanjay Bakshi mentioned this article as an example of the types of things Amazon does with its float to widen its moat.]

Getting More Cash Out Of SaaS: Timing Is Everything (LINK)

Google Tests Car-Insurance Sales [H/T Matt] (LINK)

The Future of Medicine Is in Your Smartphone (LINK)
Related book: The Patient Will See You Now: The Future of Medicine is in Your Hands
Hedge Funds Take Cautious Line on Stocks (LINK)
Wall Street analysts are recommending investors buy stocks of large U.S. companies. But some hedge funds are holding back. 
Prominent firms like the $14 billion CQS LLP and Passport Capital LLC, which manages $4 billion, have cut their exposure to stocks recently following six straight annual gains for the Dow Jones Industrial Average and three consecutive yearly wins for the S&P 500 index. Hedge funds’ use of borrowed money, or leverage, to amplify the effect of their bets dropped last week to the lowest level in more than two years, Morgan Stanley told clients in a confidential memorandum. The drop in leverage signals a dwindling conviction that markets will push ever higher. 
The increased caution from these investors, who charge higher fees than other funds in part because of their promise to make money in good times and bad, is at odds with Wall Street banks’ predictions of another strong year for U.S. stocks. 
None of 22 bank and money-management strategists surveyed by research firm Birinyi Associates believes the S&P 500 will end 2015 below where it began. They forecast an average rise of 8.2% for the benchmark this year, a more bullish stance than they held one year ago. By contrast, roughly one-quarter of hedge-fund managers predict the S&P 500 will end the year flat or in the red, according to a survey of nearly 200 managers by Aksia, an investment consultant.
Hussman Weekly Market Comment: A Better Lesson than "This Time is Different" (LINK)
I generally discuss valuations on the basis of the measures we’ve found best correlated (about 90%) with actual subsequent 7-10 year S&P 500 total returns over a century of history. On the most reliable measures, stocks are about 120-140% above historical valuation norms – yes, more than double the level that one would associate with historically adequate expected returns. On the basis of a broader group of reliable measures, we estimate prospective 10-year S&P 500 nominal total returns of only about 1.4% annually over the coming decade, with negative returns over horizons of 8 years or less.  See Ockham’s Razor and the Market Cycle for the derivation and arithmetic of these estimates.  
Below are some alternate measures which suggest the same broad conclusion. The first chart comes from Doug Short, which shows current valuations now beyond the 1929 peak, exceeded only by the 2000 bubble. Below Doug’s chart, I’ve aligned a chart of the actual subsequent 10-year total returns of the S&P 500 on an inverted scale (so lower points on the chart represent higher subsequent returns). Note that points of “secular” undervaluation such as 1922, 1932, 1949, 1974 and 1982 typically occurred about 50% below historical mean valuations, and were associated with subsequent 10-year nominal total returns approaching 20% annually. By contrast, valuations similar to 1929, 1965 and 2000 were followed by weak or negative total returns over the following decade. That’s the range where we find ourselves today. Of course, we also won’t be surprised if the S&P 500 ends up posting weak or negative total returns in the 2007-2017 decade, which would require nothing but a run-of-the-mill bear market over the next couple of years.

Sunday, January 11, 2015

Peter Cundill's book recommendations

From There's Always Something to Do:
There are a few books – really not that many – which I believe are indispensable reading for every serious investor in whatever facet of investment practice they may favor:

Price and the wonderful company...

From Deep Value:
We know that a wonderful company will earn an average return if the market price reflects its fair value. To outperform, the price must be discounted—the wider the discount, or margin of safety, the better the return—or the business must be more wonderful than the market believes. Wonderful company investors must therefore determine both whether a superior business can sustain its unusual profitability, and the extent to which the stock price already anticipates its ability to do so. This is a difficult undertaking because, as we’ll see, it is the rare company that does so.

Saturday, January 10, 2015

Peter Cundill on the worst investment he ever made

From There's Always Something to Do:
The worst investment we have ever had was Cable & Wireless, which had built up a large cash pile through the sale of telephone companies in Hong Kong and Australia and their mobile telephone business in the UK. They were well negotiated, judicious sales. What they had left was a stand-alone operation in the Caribbean, which still exists, and they were in the fibre optic business that was blowing cash. So we said, look they’ve got cash, they’ve got a valuable, viable business and let’s assume the fibre optic business is worth zero – it wasn’t, it was worth less than zero, much, much less! Their accounting was flawed to say the least and they became obsessed by a technological dream. In this respect it was reminiscent of Nortel and that should have caused me to think twice. 
I talked to John Templeton about it afterwards and he took a worse hit than us. He said “this is why we diversify, if you are right 60% of the time and wrong 40% you’re always going to be a hero, if you are right 40% of the time and wrong 60% you will be a bum.” I think he probably put it more elegantly than that! But there’s one more thing. We had put a huge amount of time and energy into that one and we were willing it to save itself and, on the face of it, it could have. What we needed was a dissenter in the team – a contrarian among contrarians, a lateral thinker watching out for the left field. On that occasion there wasn’t one. So my thought is, if there’s no natural sceptic on an investment maybe it would be wise to appoint one of the team to play Devil’s Advocate anyway.

Friday, January 9, 2015

Five Good Questions for Mohnish Pabrai and Guy Spier (Part 2)

Link to video


Related books:

The Dhandho Investor

The Education of a Value Investor


The Absolute Return Letter - January 2015 (LINK)
January each year brings with it a host of forecasts, many of which are 'pie in the sky' – silly predictions on equity markets, interest rates and currency movements. We are not in that game. Instead we focus on structural trends when analysing the future. In this letter we argue why these are more relevant for investors.
The Perils of Trying to Time the Market III (LINK)

Is this the best-performing VC fund ever? (LINK)

Robber barons and silicon sultans [H/T Will] (LINK)

The Cook & Bynum Fund visits Peru and Bolivia.

Tailored Accounting at IPOs Raises Flags (LINK)
Zoe’s Kitchen Inc. is serving up profits—but only after leaving some of its expenses off the menu. 
Zoe’s, a chain of 125-plus Mediterranean-theme restaurants that went public in April, reported an adjusted profit of $13.2 million for the first nine months of 2014 under its own accounting treatments that strip out a variety of expenses. 
Including those expenses, as is required under standard accounting rules, Zoe’s reported a loss of $8.4 million. 
It is far from an isolated example. Forty companies went public in 2014 reporting losses under traditional accounting rules but showing profits under their own tailor-made measures. That is 18% of all U.S. initial public offerings for the year, according to consulting firm Audit Analytics, the highest level since at least 2009. Of 2014’s 10 biggest IPOs, nine used nonstandard earnings measures alongside the official accounting treatment to some degree.

Thursday, January 8, 2015


James Grant discusses his book The Forgotten Depression on the McAlvany podcast (audio -- and also available on iTunes) [H/T ValueWalk] (LINK)

The Q Ratio and Market Valuation: Monthly Update (LINK)

For curiosity, and to some extent to show the importance of ignoring the headlines and focusing on valuation, here are the Yahoo! Finance front pages both today and exactly 5 years ago. You can see the prices of a few stocks (Berkshire included) on the right of the 2010 file, and on the upper left for the 2015 file.

A candid conversation with Pixar's philosopher-king, Ed Catmull [H/T Abnormal Returns] (LINK)
Related book: Creativity, Inc.
Scott Adams: Attention All Smart, Cheap Bastards! [i.e. Those waiting for the paperback version of How to Fail at Almost Everything and Still Win Big.] (LINK)

Farnam Street: Vincent van Gogh on How To Live (LINK) [I especially like the excerpt Shane posted from van Gogh below.]
The sooner one seeks to become competent in a certain position and in a certain profession, and adopts a fairly independent way of thinking and acting, and the more one observes fixed rules, the stronger one’s character becomes, and yet that doesn’t mean that one has to become narrow-minded. 
It is wise to do that, for life is but short and time passes quickly. If one is competent in one thing and understands one thing well, one gains at the same time insight into and knowledge of many other things into the bargain. 
It’s sometimes good to go about much in the world and to be among people, and at times one is actually obliged and called upon to do so, or it can be one way of ‘throwing oneself into one’s work unreservedly and with all one’s might’, but he who actually goes quietly about his work, alone, preferring to have but very few friends, goes the most safely among people and in the world. One should never trust it when one is without difficulties or some worry or obstacle, and one shouldn’t make things too easy for oneself. Even in the most cultured circles and the best surroundings and circumstances, one should retain something of the original nature of a Robinson Crusoe or a savage, for otherwise one hath not root in himself, and never let the fire in his soul go out but keep it going, there will always be a time when it will come in useful.

Wednesday, January 7, 2015


There a connection I just noticed between Peter Kaufman's idea of ‘exploiting unrecognized simplicities’ and Nassim Taleb's idea of implementation and the half-invented, for those that also find it interesting.

Robert Shiller Spotted the Last Two Bubbles—Here’s What He Says About the Bond Boom (LINK)
Related book (soon-to-be-released 3rd edition): Irrational Exuberance
The Simple Concept of Intrinsic Value (LINK)

Kyle Bass: We'll go after drugmakers' patents (LINK)

Investment Firm 3G Capital Eyes Next Targets (LINK)

Darren Gee's Monthly Report for January 2015 - A Whole New World (LINK)
At year end, it wasn't the weaker gas prices that were particularly newsworthy - we've been there for a while - it was the new oil price which, if it stays here for long, creates a whole new world.
Miners face challenge tapping copper opportunities (LINK)
To meet global demand over the next decade, the industry “will have to add the equivalent of a new Escondida every 15 months”, says Jean-Sebastien Jacques, head of copper at Rio Tinto, which owns a minority stake in the mine. First Quantum, a mid-tier copper miner, says that if China, India and Brazil were to reach EU levels of copper use by 2020, it would imply nine new Escondidas. 
Such predictions explain why big UK miners are talking up their growth potential in copper, even though worries over Chinese demand have driven the price of the metal to its lowest since 2010. 
Both Rio and BHP believe the copper market is oversupplied now but will tighten from 2018, with growing deficits.
The real story behind Jeff Bezo’s Fire Phone debacle and what it means for Amazon’s future (LINK)

The Economics (and Nostalgia) of Dead Malls (LINK)

Author Says a Whole Culture—Not a Single 'Homer'—Wrote 'Iliad,' 'Odyssey' (LINK)
Related books: Why Homer MattersThe OdysseyThe Iliad
Book of the day, which I just added to the list of other books that I mentioned in the "Fundamentals..." post: Understanding Michael Porter: The Essential Guide to Competition and Strategy

Tuesday, January 6, 2015

CornerCap on Oil

Link to: Oil in Flames: Game Changer?
Our clients know that we do not use macro predictions or “big picture themes” to drive our investment decisions. Instead, we base our decisions on fundamental financial information that is objective and measurable. We believe this minimizes human error, helps us recognize valuation extremes, and improves our chances of buying at low prices and selling at higher prices. 
Still, we must be vigilant for rare events that change an industry or render financial data less meaningful. We saw this when sweeping regulation changed the profit models of for-profit education stocks. It’s also why we historically tend not to invest in airlines, given the industry’s high fixed costs and lack of pricing power. We risk buying low and selling lower. 
Amid the historic drop in oil prices, we thought we’d review the implications for the industry, sovereign nations, and our portfolios.

Related previous post: Howard Marks Memo: The Lessons of Oil

Elon Musk quote

From his Reddit AMA:
One bit of advice: it is important to view knowledge as sort of a semantic tree -- make sure you understand the fundamental principles, i.e. the trunk and big branches, before you get into the leaves/details or there is nothing for them to hang on to.

Related previous quote:
“As to methods there may be a million and then some, but principles are few. The man who grasps principles can successfully select his own methods. The man who tries methods, ignoring principles, is sure to have trouble.” -Ralph Waldo Emerson
Related link: Richard Feynman: The Difference Between Knowing the Name of Something and Knowing Something


Malcolm Gladwell reviews Steven Brill's America's Bitter Pill: Money, Politics, Back-Room Deals, and the Fight to Fix Our Broken Healthcare System about how health-care reform went wrong (LINK)

Love Him or Hate Him, Bill Ackman Now Runs the World’s Top Hedge Fund (LINK)

NetJets Unrest Puts Buffett in Rare Pinch (LINK)

Martin Wolf reviews Richard Koo's The Escape from Balance Sheet Recession (LINK)
Richard Koo has a big hammer: it is the idea of the “balance sheet recession” — which happens when the indebted focus on paying down debt. But people with hammers tend to view everything as a nail. Here, the chief economist of the Nomura Research Institute shows the virtues, but also the limitations, of his intellectual tool.
Bill Gates’ Plan to Help the Developing World Profit From Its Sewage (LINK)

Elon Musk: Ask Me Anything (LINK)

The Power of Market Creation: How Innovation Can Spur Development (LINK)

Related book: The Halo Effect