Thursday, August 8, 2019

Links

I may have posted this before, but since I saw it making the rounds again, and in case anyone hasn't seen it..... large Berkshire/Buffett compilation.

Howard Marks on Loans, Distressed Investing, Fed Policy (video) (LINK)

How Economists’ Faith in Markets Broke America - by Sebastian Mallaby [book reviews] (LINK)

Revisionist History Podcast: In a Metal Mood (LINK)
Two seasons after its investigation of the decline of McDonalds french fries, Revisionist History returns to fast-food’s high-tech test kitchens. This time the subject is cultural appropriation. The case study is Taco Bell. Oh, and Pat Boone is involved.

Wednesday, August 7, 2019

Links

Nightline with Warren Buffett in March of 1999 (video) [H/T @Gautam__Baid] (LINK)

Oaktree Insights: Rising Risks Call for a Tactical Approach to Global Credit Investing (LINK)

Inflated Bond Ratings Helped Spur the Financial Crisis. They're Back. ($) (LINK)

America’s Pension Funds Fell Short in 2019 ($) (LINK)

Muddy Waters Research's latest short report, on Burford Capital Ltd. (LINK)

A Framework for Moderation - by Ben Thompson (LINK)

Was E-mail a Mistake? - by Cal Newport (LINK)

The Long View Podcast: Bill Nygren (LINK)

Acquired Podcast: The Shopify IPO (LINK)

Y Combinator Podcast: Russ Roberts (LINK)

Talking Points Podcast: Hospitality Icon Danny Meyer (LINK)

"Blue Sky Metropolis," a documentary mini-series on the untold story of how aerospace was central to the growth of California and its emergence as an economic power. [H/T @AlexRubalcava] (LINK)

Some Fish Are Still Full of Mercury, for a Worrying Reason - by Ed Yong (LINK)

Credit cards and banking...

This was a discussion at the 1995 Berkshire Hathaway Annual Meeting (Q38 & Q39) that I thought was both interesting as well as one that could, and does, occur today. And the book Buffett and Munger were recommending in the excerpt below was A Piece of the Action : How the Middle Class Joined the Money Class by Joseph Nocera. 

***

AUDIENCE MEMBER: Edward Barr, Lexington, Kentucky. I had a two-fold question.

Number one, you mentioned American Express earlier. And I was curious as to whether the fact that credit card usage is only 10 percent of all transactions, and that may continue to grow for some time going forward, was a factor in your decision?

And the other part of the question pertains to the durability and permanence of the banking franchise with regard to alternative delivery channels that may appear over the next few years, including the possibility of the Microsoft/Intuit merger.

WARREN BUFFETT: Well, the specific number you mentioned about credit card usage and so on, that’s not a big factor with us. We think credit cards are both here to stay and likely to grow, to some extent.

Although at some point you start reaching limits, at least in terms of [outstanding credit card debt] that make any sense.

But the credit card field is a very big field. The question is, is who’s got the edge in it? Because everybody is going to want to be in it, and they already are. And there are a lot of different ways you can play the game if you’re in the credit card business.

And you better have some way of playing one part of the game, preferably a large part. But you better have some way of playing one part of the game better than others or natural capitalistic forces are going to grind you down.

I mean, it’s a business that people are willing to change their minds about what they do in. I mean, if you offer somebody a credit card that gives them some advantages that don’t exist on their earlier card, people are quite willing to shift cards.

So, you need some kind of an edge in some particular segment of the market. So, the growth aspects overall of the market are not a big factor with us.

It’s really a question of figuring out who’s going to win what game, and who’s going to lose what game.

And what was the second question again on that?

AUDIENCE MEMBER: The second question pertained to the permanence and durability of the banking franchise.

WARREN BUFFETT: Oh yeah, sure.

AUDIENCE MEMBER: And whether alternative delivery channels over the next few years may erode the durability of that, including the Microsoft/Intuit merger.

WARREN BUFFETT: Well, that’s a good question. You’re certainly seeing the value of bank branches diminish significantly. It used to be a point of enormous pride with managements, in how many branches they had.

And it was, you know, often political influence and everything else was called into obtaining branch permits.

The world will change in banking, probably in some very major ways, over a 20 or 30-year period. Exactly what players will benefit and which ones will be hurt is a very tough question.

I don’t think I’d expect really significant change in banking over the next five years, but I’d certainly expect it over the next 20 years.

And there are a lot of people that have their eye on that market, including Microsoft, as you mention.

It may be to their advantage to hook up with the present players. I mean, I know it’s certainly something that gets explored. But they may figure out a way to go around the present players, too. And that’s one investment consideration.

Charlie?

CHARLIE MUNGER: Yeah. The interesting player that went around the rest was Merrill Lynch. Merrill Lynch went heavily into banking with its cash management accounts. And I don’t think it’s the only innovation that’ll come along.

WARREN BUFFETT: What’s the name of that book?

CHARLIE MUNGER: You know, I’d forgotten, that’s a marvelous book.

WARREN BUFFETT: Yes, there’s a great book.

CHARLIE MUNGER: Maybe Molly remembers. What was that book you gave me? It was the history of the credit card.

WARREN BUFFETT: Was it Joe Nocera’s? Yeah, Joe Nocera was the author.... It’s a terrific history of the credit card business.

And if you read that you will get some idea of the amount of change that can occur in something like the movement of money. And my guess is that if there’s another edition of it in 20 years, there’ll be plenty more to write about. 

CHARLIE MUNGER: By the way, that is a fabulous book. Most of the people who are here will not be able to put it down. I mean, for a book about an economic development, it captures the human background in a very interesting way.

Tuesday, August 6, 2019

Chris Bloomstran on the Invest Like the Best podcast

I've been hoping for this conversation for a while, and Chris and Patrick O’Shaughnessy finally got a chance to chat about quality companies, Berkshire Hathaway, and plenty more. In case anyone missed it, Chris has gone deep into the Berkshire weeds over the last few years with his 2015 letter, 2016 interview with Kate Welling, 2016 letter, 2017 letter, and then his most recent 2018 letter; all of which can also be found on the Semper Augustus Investments Group website. Chris is a close friend and I'm glad he's starting to get out in public a bit more, as he's one of the best investors and business analysts I know. I also think he could manage a lot more capital without having any effect on his ability to earn good absolute returns and beat the market over time, as he's done for Semper's first 20 years in business.



Monday, August 5, 2019

Links

"The investing public is fascinated and captured by the great financial mind. That fascination derives, in turn, from the scale of the financial operations and the feeling that, with so much money involved, the mental resources behind them cannot be less. Only after the speculative collapse does the truth emerge. What was thought to be unusual acuity turns out to be only a fortuitous and unfortunate association with the assets. Over the long years of history, the result for those who have been thus misjudged (including, invariably, by themselves) has been opprobrium followed by personal disgrace or a retreat into the deeper folds of obscurity. Or it has been exile, suicide, or, in modern times, at least moderately uncomfortable confinement. The rule will often be here reiterated: financial genius is before the fall." --John Kenneth Galbraith (A Short History of Financial Euphoria)

A Story of Courage and Hope from the Life of Charlie Munger (LINK)

Why Aren’t Investors Worried? Ask Howard Marks ($) (LINK)
WSJ: Are you concerned about investors’ enthusiasm for profitless technology companies? 
MR. MARKS: The more enthusiasm there is in the world, the harder it is to live up to people’s expectations and the easier it is to disappoint. When a stock goes from great optimism to the optimism sobering up, it’s very painful for investors. What you really want to know is how much optimism is in the price. If you can buy things where the level of optimism is unjustifiably low, that’s where you make a lot of money.
The hidden costs of unreliable electricity - by Bill Gates (LINK)

Greenhaven Road Capital's Q2 Letter (LINK)

Raoul Pal's takeaways from his two week recession watch series (video) (LINK)

David Skok of Matrix Partners: Driving SaaS Success Using Key Metrics (2016) [H/T @MinionCapital] (LINK)

Why Doctors Should Organize - by Eric Topol (LINK)

The Resilience of Analog - by Peter Osnos (LINK)

Peter Thiel's Religion - by David Perell (LINK)

Sunday, August 4, 2019

Links

Advantage Flywheels - by Max Olson (LINK)

Where Did This ‘Bull Market’ Come From, Anyway? - by Jason Zweig ($) (LINK)

Buffett Steers Clear of Buying Stocks; Berkshire’s Cash Pile Hits a Record (LINK)

Bill Murray and Warren Buffett spotted at Ted and Wally's in downtown Omaha (LINK)

Good for Google, Bad for America - by Peter Thiel (LINK)

The latest Ken Henry blow-up - by John Hempton (LINK)

The Tides Trump the Waves - by Frank K. Martin (LINK)

Focused Compounding Podcast: 103. Ian Cassel and The Power of Capacity Constrained Investing Strategies (LINK)

Techmeme Ride Home Podcast: The State of Amazon With Jason Del Rey (LINK)

The Rank Hypocrisy of Trump’s Ebola Tweets - by Ed Yong (LINK)

Incredible, must-see video: 'The Comet,' a film noir view of 67P (LINK)

Thursday, August 1, 2019

Links

"At Oaktree we say, 'Well bought is half sold.' By this we mean we don’t spend a lot of time thinking about what price we’re going to be able to sell a holding for, or when, or to whom, or through what mechanism. If you’ve bought it cheap, eventually those questions will answer themselves. If your estimate of intrinsic value is correct, over time an asset’s price should converge with its value." --Howard Marks ("The Most Important Thing")

Board Upgrades Its Scrutiny of Financial Planners - by Jason Zweig ($) (LINK)

Boyar Research's Q2 Letter (LINK)

The Absurdities of 'Franchise Fatigue' & 'Sequelitis' (Or, What Is Happening to the Box Office?!) - by Matthew Ball (LINK)

Notes on the book Let My People Go Surfing (LINK)

Video: Software Eats Care Delivery (LINK)

Revisionist History Podcast: Descend into the Particular (LINK)

Astronomers are watching a star die in real time - by Phil Plait (LINK)

The Tumor That Broke All the Rules - by Ed Yong (LINK)

A Scientist Witnessed Poachers Killing a Chimp - by Ed Yong (LINK)

Wednesday, July 31, 2019

Links

"If you make yourself a very reliable person and stay reliable all your life, faithfully doing whatever you engage to do, it will be very hard for you to fail at anything you want."  --Charlie Munger (2007)

Looking for a Financial Planner? The Go-To Website Often Omits Red Flags - by Jason Zweig and Andrea Fuller ($) (LINK)

Universal Laws of the World - by Morgan Housel (LINK)

The Investing City Podcast: 32 - CEO of Sarah Cannon, Dee Anna Smith: Doing the Rounds (LINK)

Venture Stories Podcast: The State of Fintech in 2019 with Seth Rosenberg and Sheel Mohnot (LINK)

Radiolab Podcast: G: The World’s Smartest Animal (LINK)

Bugged By Insects? 'Buzz, Sting, Bite' Makes The Case For 6-Legged Friends [H/T Linc] (LINK)
Related book: Buzz, Sting, Bite: Why We Need Insects
Why the Placental Microbiome Should Be a Cautionary Tale - by Ed Yong (LINK)

Tuesday, July 30, 2019

Links

"There are lots of things in life that come to you where you have no option to not consider the issue. But where it’s voluntary, like choosing one investment from many, then the 'too difficult' pile is a marvelous way of sifting your daily grist." --Charlie Munger (2007)

Horizon Kinetics 2Q 2019 Portfolio Update - July 17, 2019 (audio) (LINK) [If anyone at Horizon Kinetics reads this blog, it would be fantastic if you make these podcasts available for download on Overcast, etc.]

Claire Barnes' Q2 report for the Apollo Asia Fund (LINK)

Is CVS A Value Trap Or A Fallen Angel Ready To Rise Again? - by Jonathan Boyar (LINK)

GMO White Paper | Risk and Premium: A Tale of Value - by John Pease (LINK)
The performance of U.S. value over the last decade has led many to wonder whether the value premium has been completely eroded. We analyze this question by decomposing the relative returns of cheap stocks in order to understand what has driven this change in performance. Our return decomposition suggests value stocks’ performance erosion can be evenly attributed to a reduction in the value premium and a widening of the value spread. Though value might deserve to trade at a greater discount today due to the market’s current dynamics, we believe that cheap stocks are still likely to deliver a premium and are therefore well-positioned to outperform the broad market.
Passive investing boom could be causing a market bubble, but not in the stocks you would expect (LINK)
Critics of passive investing argue it is inflating the prices of high-flying stocks such as Amazon and creating a bubble in those names. However, data compiled by Ned Davis Research shows the bubble may be forming elsewhere. 
The firm found that real estate and utilities stocks are the two sectors that have benefited the most from the rise of passive investing vehicles including exchange-traded funds. ETFs hold more than 11% of the real estate sector and 9.8% of the utilities sector. 
At the individual stock level, Tanger Factory Outlet Centers, a real estate company that invests in shopping centers, has had nearly 32% of its available stock, or float, taken over by ETFs, by far the most of any stock.
With Stocks at Fresh Highs, Investors’ Portfolios Look Alike ($) (LINK)
A rally in stocks has triggered unusual circumstances for some of Wall Street’s biggest investors—they are holding many of the same companies. 
A list of the market’s most crowded trades includes Mastercard Inc., Microsoft Corp., Amazon.com Inc., Abbott Laboratories and PayPal Holdings Inc., according to analysts at Bernstein, who tracked institutional ownership, price momentum, earnings forecasts and valuations. 
The overlap in the top 50 stockholdings between mutual funds and hedge funds—two types of investors whose styles typically differ—now stands at near-record levels, a study by Bank of America Merrill Lynch found.
Hidden Networks: Network Effects That Don’t Look Like Network Effects (LINK)

Albert Wenger: World after Capital | Rise of AI conference 2019 (video) (LINK)

BIS Annual Economic Report 2019 (LINK)

Invest Like the Best Podcast: Brian Christian – How To Live With Computers (LINK)

North Star Podcast: Tren Griffin: The Love of Learning (LINK)

Hidden Forces Podcast: Raoul Pal | The Fourth Turning: Generational Theory and the Future of Global Money (LINK)

5 Mindsets that Create Success - by Mark Manson (LINK)

They Found 43,130 of Her Relatives Before Solving Her Cold Case - by Sarah Zhang (LINK)

Monday, July 29, 2019

Industry growth and competition...

"Investors have consistently lost money by assuming that if they invest in the equity of companies engaged in a growth market it is logical that they must make money. They should take a leaf from the book of US investors in the 1970s who correctly identified air travel as a growth market and then underperformed the market by investing in airline stocks. How? Because they missed the point that the link between growth in air travel and the profitability of airlines was about to be broken by the intervention of a force called deregulation. More air miles were flown, but at lower and lower fares." --Terry Smith ("Accounting for Growth")

"Any time you get more and more people competing in any given area, generally, the economics deteriorate. And the economics have deteriorated for newspapers, although they’re still enormously profitable in relation to tangible equity employed, but they do not have the same economic prospects, if you look at the future stream of earnings, that it looked like they had 20 or 30 or 40 years ago. And television, again, the margins have been maintained surprisingly well, but the audience keeps going down.... So, that has to erode economics over time. Cable was thought to operate pretty much all by itself, and the telecoms come in. Very few businesses get better because of more competition." --Warren Buffett (2006)

"It’s simplicity itself. It will be a rare business that doesn’t have a way worse future than it had a past." --Charlie Munger (2006)

"There’s industries we know that may have a wonderful future, but we don’t have the faintest idea who the winners will be, so we don’t think about those.... So there’s a whole lot of things we don’t think about. Charlie and I have a number of filters that things have to get through very quickly before we’re willing to think about them. And sometimes we’re thought of as rude...because people will call us and they start explaining some idea to us, and it just doesn’t make it through the first filter or two. So we...think we’re saving their time if we just politely say, you know, that we just have no interest, and we don’t want to have you finish the sentence."  --Warren Buffett (2012)

"We have found in a long life that one competitor is frequently enough to ruin a business." --Charlie Munger (2012)