LC

My first thought on implications is they are diluting the cash hoards which companies supposedly have. Additionally, diluting the value of the dollar. What do members of this board do (if anything) to manage risk that your portfolio is held in USD?

25 Y/O 15k IRA 5k taxable gotta start somewhere!

Interesting writeup on Fiat done by Greenwood: http://www.gwinvestors.com/Main/Blog/Entries/2012/8/24_Fiat_SPA__Love_For_Sale_files/Fiat%20SpA%20Love%20For%20Sale%202012.08.24%20v2.pdf

What I find ridiculous is that he owned more than 1,000 stocks in his portfolio and still made 29.2% annual return... there must have been tons of 100, 1000, 10,000 baggers He did have massive amounts of token investments for screening purposes, right? While certainly more diversified than Buffett, I don't think he was as diversified as those figures would indicate at a glance. Exactly. He held extremely small positions in a large number of stocks simply because it forced him to actually keep tabs on those companies & industries.

From what I've heard, professional options traders/market makers don't use B-S to model prices anymore. In that case, why does anyone talk about B-S anymore? (I can't help but find it funny that we refer to as BS). Well, it's the "textbook" model. Everyone who goes into finance learns it, or at least learns about it. It's taught in universities everywhere, and is the accounting standard for reporting on stock options. None of that makes it a "correct" model. Options traders think of it as a right of passage: everyone in their profession learns the ins-and-outs of it, but then it is never used in practice.

From what I've heard, professional options traders/market makers don't use B-S to model prices anymore.

Only Seeking Alpha since the quality of the articles there is unquestionably superior to anything one can find elsewhere. I believe that if alive now Graham would probably be posting there as well, it's that good. I think Yahoo message boards as well. There are some top notch investors on Yahoo, people who claim they've had stocks go up 10,000% in just a few days. Buffett's got nothing on these guys.. Thanks for the laugh ;D

I'll disagree....slightly. Because I don't agree with your example. Visibility is the issue your example illustrates, not control. Can the store manager of a random McDonalds get free burgers? Surely. If a portfolio manager whose fund owns 8% of the company walks into that same McDonalds, will he get a free burger? Probably not because nobody working there knows who he is.

Thank you, here's the rapidgator link: http://rapidgator.net/file/39860413/Work_Flow_Management_For_Investors_-_Alex_Rubalcava.pdf.html

My apologies! I did not realize one had to sign up to download. I have the original PDF: It is 2.5 MB which I believe is too big to attach on this forum. If you can you suggest another method I would be happy to distribute it. EDIT: Here we are, this link should work: https://docs.google.com/open?id=0Bxf1UeW1kK_xaGRTMmcxLXVZV2s

I did a search which didn't show this as a repost, so here is a great guide which I use parts of to keep track of my investments in all regards: http://www.scribd.com/doc/98207906/ValueXVail-2012-Alex-Rubalcava Google docs link (to download): https://docs.google.com/open?id=0Bxf1UeW1kK_xaGRTMmcxLXVZV2s It's especially helpful to me to have all the news coming into a central RSS feed so I can plug into all my investment ideas in one single place.

My issue with gold is this: if one holds gold as a hedge against say, the USD devaluation, wouldn't it make more sense to hold a basket of currencies? Or if one holds gold to protect against inflation, wouldn't a basket of commodities make a more useful hedge? Or equity of companies with pricing power? It seems that the only way gold increases in value is due to falling confidence in another currency. As an investor I don't want to invest in falling confidence: I want to invest in future production.

I am a new member here but I will say I have learned more reading this board in one month than in the past six months of digging through the internet for value-related discussions. Thank you all for the education.

Jeeze, sounds like you may want to find a discount broker, unless you are intentionally attracting the negative criticism to test your investment thesis.

They also issued quite a bit of debt from 2010 to 2011: http://i.imgur.com/K4Hbf.png

At 5 times cashflow, do you really need a good idea of what the business looks like in ten years? If the cashflow is spent on buybacks and acquisitions at reasonable prices, isn't it hard to come up with a scenario where the investor loses here? What makes you say the cash will be spent on the shareholders vs being wasted trying to innovate within a shrinking business?

I had to google what life settlement was. I can only imagine what a terrible industry that would be to work in. It makes me queasy just thinking about the horror stories you probably have.

Yes

Agreed. From what I remember when I looked at their financials upon IPO, most of their profit is going straight to employee stock options. And if I recall this fact didn't look like it would change for at least a year or so. Same story with Zynga as well.

I love the idea- I didn't post because I did not feel I could add anything valuable, however I think it is an excellent idea and hope you continue.

Thanks for the response. You're right...they seem to just develop audio technology and then license that tech out to the manufacturers. Their 10-K states they are trying to develop audio technology for mobile devices, but most people use headphones and not speakers for their mobile phones, so I'm not sure how profitable that can be. I see that I have to do more research, so again thank you for the concise point in the right direction.

I'm not sure...what happens when you invest in 8-track players? I'm OK with the tax structure the way it is in terms of short/long term capital gains. I think a tax on transactions is a healthier option.

What do you use to screen for these companies? I use the financial times screener but like to use 2-4 screener with the same criteria to make sure the companies I invest in are showing up in all, therefore removing any data/system errors one screener may have.

Market making is about speed and algorithmic innovation. The MM with the fastest connection wins, all else equal. This requires a lot of tech reinvestment to keep updating hardware and connections to stay ahead of the game. However most firms have the means to get the best tech. So it comes down to the quality of your algos. Those with the best talent can outmaneuver competitors to find & provide liquidity where it is needed. So winning in the MM arena is make the best tech allocation investments and attract the best talent. But IMHO it's not extremely difficult to become the winner in this industry. If your quants have a light-bulb moment and design a great algo, you can dominate the industry overnight. The first part of your post makes sense. The second part doesn't. If a quant with a light-bulb moment can dominate the industry overnight, you have no moat at all! I work at a different HFT firm - the industry is extremely competitive. I wouldn't say any company in our sector has a moat like Coca Cola or Microsoft. Electronic stock exchanges are almost anonymous and nobody outside the industry had ever heard about KCG before the disaster. I think that if there is a moat it is in the IP of the company and the people who work there. And KCG could lose a lot of their IP now, either because they have to axe a boatload of people, or because the bonus pool is empty now and employees leave the sinking ship. Another part of their moat (and revenue stream) is formed by their institutional client base and their proprietary trading platforms. Guess what will happen here after KCG has shown that their IT systems are capable of blowing up, their risk monitoring is worthless and they are in dire need of more capital. Would that be your preferred counterparty? And what about the reactions from the media + general public after another accident caused by "rogue computers" pillaging the market (in fact these guys gave 400$ million away to other market participants. I have no clue why anyone should have a problem with that, but apparently it is fine if KCG makes a lot of money quietly, but it is terrible if they piss it all away in a single trading session :) ). Wouldn't surprise me if the SEC launches a probe, or if congress panics and passes a bill to annoy HFT-ers (this already happened in France). KCG might survive and if it does it could be a 4-bagger but there is definitely no margin of safety here. If forced to do something I would buy some options, but they are probably extremely expensive now. I completely agree: I never argued there was a moat. I agree there is no moat in this industry. Brainpower is extremely mobile. I would not buy.

Market making is about speed and algorithmic innovation. The MM with the fastest connection wins, all else equal. This requires a lot of tech reinvestment to keep updating hardware and connections to stay ahead of the game. However most firms have the means to get the best tech. So it comes down to the quality of your algos. Those with the best talent can outmaneuver competitors to find & provide liquidity where it is needed. So winning in the MM arena is make the best tech allocation investments and attract the best talent. But IMHO it's not extremely difficult to become the winner in this industry. If your quants have a light-bulb moment and design a great algo, you can dominate the industry overnight.