LC

We have internet+streaming services. If it were up to me i'd ditch the streaming and just download everything but the wife is still living in 2003 and thinks the RIAA is going to come sue us to the stone age.

I don't own a house.

I hope so. It's also a good case study of where government subsidies have worked to spur demand/investment, to the point where the technology is cost competitive.

Really good article, even better than his recent Dept of Energy piece. Some quotes I liked: “There’s a real idealism that you have to indulge to think that people in New Orleans were now going to pull themselves up by their bootstraps. There were no bootstraps.” "We don’t really celebrate the accomplishments of government employees. They exist in our society to take the blame. But if anyone ever paid attention they would note that Woteki’s department, among other achievements, had suppressed the potentially catastrophic 2015 outbreak of bird flu. They’d created, very quickly, a fast new test for the disease that enabled them to cull the sick chickens from the healthy ones. Because of their work the poultry industry was forced to kill only tens of millions of birds, instead of hundreds of millions. In the early 1990s, the U.S.D.A. had also dealt with the outbreak of ring-spot virus in papaya trees, when the papaya industry in Hawaii faced ruin and extinction. Inside the little box marked “Science,” the U.S.D.A. helped genetically engineer a papaya tree that was resistant to ring-spot virus." The whole section on the Rural Development division was fascinating (who knew they had a bank with $220B in assets sitting there?): “I am absolutely convinced about one thing: there are conversations going on right now in New York and Washington between people in the Trump administration and Wall Street bankers about how to get their hands on the bank portfolio. Folks in banking: I’m sure they are nice people—they just can’t help themselves.” Would love to hear the thoughts of fellow board members.

Well remember, book value is simply the cost of the assets at time of purchase, less accumulated depreciation. There are two issues: (1) the price of a company's assets may have risen or dropped since the company purchased it, and (2) depreciation may or may not reflect current economic reality. The general idea is "how much would it cost to replicate this company's operations". That is the true "capital employed" number. I think one (if not the best) measure of a company's profitability would be: owner's earnings/replication cost.

If indexing were creating a bubble, should we not see SP500 companies trading at outlandish valuations compared to non-SP500 companies? Or is the argument that indexing is in equities in general, not just the SP500? Then should we see equities trading at crazy valuations compared to other asset classes? Or is the argument that indexing is creating a bubble in all financial assets? In that case, how is indexing the culprit?

In addition, depreciation usually understates true maintenance capex costs. LC, can you please provide an example ? Like a very basic one - thanks Well, the general theory is that inflation will cause prices to go up. So when you're replacing some asset in the future, you will be paying more for it. Buffett wrote a really good article on inflation back in the 70s: http://fortune.com/2011/06/12/buffett-how-inflation-swindles-the-equity-investor-fortune-classics-1977/ For a practical example, take any company without growth capex and compare their annual depreciation vs. capex. Let me see if I can find a good example... Ok found one. I just screened for companies with 5yr sales growth under 10% (i.e. not a lot of growth) and sorted by market cap. Walmart was #5 on the list. Take a look at the CF statement: http://www.rocketfinancial.com/Financials.aspx?fID=4876&p=2&pw=160866&rID=3 Capex: -10,619.0 -11,477.0 -12,174.0 -13,115.0 -12,898.0 -13,510.0 -12,699.0 Depr.: 10,080.0 9,454.0 9,173.0 8,870.0 8,478.0 8,106.0 7,641.0 Generally capex has been higher than depreciation. Recently the gap is falling which could provide some insights (or not). I don't really follow Walmart but I don't see their business model changing drastically over the last few years, so my first guess is they are under-investing in their stores.

In addition, depreciation usually understates true maintenance capex costs.

Found an interesting article which is related to this topic: https://fivethirtyeight.com/features/science-isnt-broken/ If we’re going to rely on science as a means for reaching the truth — and it’s still the best tool we have — it’s important that we understand and respect just how difficult it is to get a rigorous result. I could pontificate about all the reasons why science is arduous, but instead I’m going to let you experience one of them for yourself. Welcome to the wild world of p-hacking. “You can do it in unconscious ways —I’ve done it in unconscious ways,” Simonsohn said. “You really believe your hypothesis and you get the data and there’s ambiguity about how to analyze it.” When the first analysis you try doesn’t spit out the result you want, you keep trying until you find one that does. Scientists who fiddle around like this — just about all of them do, Simonsohn told me — aren’t usually committing fraud, nor are they intending to. They’re just falling prey to natural human biases that lead them to tip the scales and set up studies to produce false-positive results. Nosek’s team invited researchers to take part in a crowdsourcing data analysis project. The setup was simple. Participants were all given the same data set and prompt: Do soccer referees give more red cards to dark-skinned players than light-skinned ones? They were then asked to submit their analytical approach for feedback from other teams before diving into the analysis. Despite analyzing the same data, the researchers got a variety of results. Twenty teams concluded that soccer referees gave more red cards to dark-skinned players, and nine teams found no significant relationship between skin color and red cards. My take on this: it's very hard to be a scientist in the truest sense. A real scientist has one motivation: discover the truth. But it's quite insidious how human biases creep into this. Take the example from the article about analyzing how soccer refs give red cards based on skin color. Even if you don't give a damn about soccer, about people's skin color, or anything related to the topic, maybe you just want your job to have some meaning in the grand scheme of things. So already you have a bias to create something significant where nothing of significance may exist. Researching a stock, how easy is it to begin by saying "I want to make money". Then this bias creeps into the research. You can interpret pieces of information in a way that seems more profitable. For example: "Oh well Sears just HAS to turnaround with all of that real estate - then I'll make buckets of cash!" This is a damn hard bias to overcome (and also why I think Buffett's rules #1,#2 are the types of bias you need in your head).

It is for me at least. Or I just suck at finding undervalued companies. Probably a bit of both :D

Nerd joke incoming: Heisenberg, Schroedinger and Ohm are in a car. They get pulled over. Heisenberg is driving, and the cop asks, 'Do you know how fast you were going?' 'No, but I know exactly where I am,' Heisenberg replies. The cop says, 'you were doing 55 in a 35.' Heisenberg throws up his hands and shouts, 'Great! Now, I'm lost.' The cop thinks this is suspicious and orders him to pop the trunk. He checks it out and says, 'Do you know you have a dead cat back here?' 'We do now, asshole!' Shouts Schroedinger. The cop moves to arrest them. Ohm resists.

Changed to what? Taxing revenues? Just saw this. I was talking about tax rates. It makes sense to defer taxes now as long as Amazon's future tax rate is the same or less.

This is going to be a bit of a ranty post! Warning ;D ROC ROIC ROE ROA yada yada yada I kind of hate them because it's all backwards looking. And it promoted false accuracy. Let's use Hayden Capital's example because its there (no hate on that dude, seems bright as hell). Delivery has better margins than sit-in restaurants? A first year business student could tell you this. Does it really matter whether the margins are 76% or 80% higher? The REAL questions are on slide 17: 1. How much can delivery grow to? 2. What are the most effective methods to promote delivery? New Customer Discounts? Advertising? 3. How can you make delivery costs cheaper? Drones & their unit economics? (ok maybe not the drone question) But that first question is the most important question and it has everything to do with the whole reliance on measuring a bunch of historical "Return on XYZ" metrics. I'll talk about Nike since I'm a shareholder. Retail sales are falling, online/direct-to-customer sales are increasing. The company is actively moving towards direct-to-customer sales. Now any freaking genius can tell you online sales will have higher returns on XYZ. Because there's no footlocker or whatever retailer taking a cut. So as an investor, I'm not taking the time to calculate ROICs of the marginal sneaker sold in each channel, because it really doesn't matter. The real question is, as traditional customers move from purchasing in-store vs. online, what are the implications for sales volume? (i.e. question 1) from hayden capital's deck) Online, customers will see many many many more brands/varieties. You go into footlocker, there are 5 brands and Nike owns the prime viewing location. But when you go online and sit down and look at running sneakers, you have so many more options. How will that dynamic affect Nike brand value and sales volume? That is the question. Is it going to be a simple replacement? 100% of customers going from Footlocker will go to Nike.com? 75%? 50%? Will shifting attention online actually improve sales? Communication, information travels much more quickly online. Essentially, cool sh1t goes "viral" fast. And its also forgotten fast. And brands can communicate more directly with customers. Will kids in Tokyo see meme's of kids in New York running around in a pair of Nike's and want them? Or will it be some Adidas, or J.Crew, or whatever? So I hate using ROIC and ROC because they don't even come close to answering those questions. They are more useful when the business environment is not changing. Great for monopoly-esque situations.

The reason I still use my digit key code on my iPhone is that if you are arrested or whatnot, or if you record the police doing something illegal, the cops can open your phone with your fingerprint/face ID. But you are not legally obliged to give up your passcode. I doubt it'll ever happen on my life but I just don't like the principle of somebody opening my phone up without my consent or a warrant

Philosophy IMHO. How else can you tell if you are skilled or if you suck? Otherwise my benchmark would be the 30 day treasury.

We truly can be a dramatic group over here @ COBF ;D

Gotta tell ya, this whole thread is pretty funny ;D

FWIW, the HBS alum status that is granted for the YPO program is absolutely at least equivalent to a HBS MBA and actually vastly superior (in my opinion). Maybe advertise that fact, then?

And as long as current tax laws remain in force. Aggressively reinvest, build a huge empire, 'lobby' the government to change their tax laws.

Thanks for sharing all your work! I was looking forward to this after you were asking for all these guys' records.

i know the company (have seen their products on farms, parks, etc.) couple of things: 1) everyone i know who uses these types of products (construction people, maintenance people, etc.) is often oddly emotionally attached to a certain brand. but the more of these people i've met, i find no logic to their attachment. a guy could have used a damn good makita drill 15 years ago and now that's all he buys. takeaway is i don't have much insight into the customer purchasing mindset. 2) this kind of goes hand-in-hand: i find product quality all over the map with these small/mid-size equipments. one year XYZ is making the best product, five years later (next purchasing time), ABC is making the best product. 3) they're not big/expensive enough to "lock in" customers to long contracts. think of the airplane or heavy construction service contracts. i'm not saying it's a good company or good business, i just don't quite understand it well enough to jump in.

Fixed that.

Perhaps include a tag to note whether an article is behind a paywall or not

Bought my first stock (JPM) at 13 because of a school project. Although it was in my father's account so he is the one reaping the benefits now... I started investing for myself in 2010...also have always been a value investor, although I perform some mental gymnastics and tend towards the GARPy side of things.

so an economic or market slowdown happens. ETF holders sell their ETFs (lets assume a SP500 ETF). the price of the ETF goes down and this pushes market prices down further. which in turn forces more ETF holders to sell. This is the general logic underlying the argument against ETF, right? My question is...what are the flaws in this logic? For example, Okay so ETF holders sell...now they have some capital sitting around. What do they do with it? My other question...imagine there are no ETFs and everyone just owns those shares. Would this change anything?