Jurgis

Great article. I agree a lot with it. I am probably more skeptical than he is about active managers' ability to outperform. Whether they are Buffett "phoneys" or anything else. BTW, IMO even people who manage their own money have real difficult time to do "20 stock punchcard" portfolios and sit on 5-6 stocks for 5-10 years+.

I should probably not post here, since I have no interest in SYTE (anymore). And I may remove this message in 10... 9... In the meantime though, I don't see what's to be excited about. So a bunch of smart guys take over SYTE and the best idea they have is ... drumroll ... dilute and invest into a new hedge fund. I thought these are smart guys who are running their own hedge funds. If they wanted invest in stocks, why did they not invest in stocks directly from SYTE? If they have no good ideas where to invest money, then why do they believe that hiring another hedgie is a solution? Overall, what's the point of a structure where hedge fund invests in SYTE which in turn invests into another hedge fund that invests into some stocks? I guess it would look worse if their hedge fund would invest directly into another hedge fund - that would be admission that they don't have ideas themselves, no? To make this post somewhat relevant, I've seen these gymnastics in other places that won't be named (apart from SYTE I'll criticize by category like Buffett ;)) and I haven't seen this lead to great results. IMO every layer added usually means worse results.

Spek, I somewhat agree with the first part, but I disagree with the second part. A lot of things that were theoretically known in 1970s had "complexity ... way beyond our time" then, but they might not have it now. You could not do the first stage rocket return and vertical landing then, but you can do it now. I would assume there are somewhat similar gains in material science. In general though, I'm in the camp that sustainable non-Earth colonies require either autonomous AI instead of humans or human mind in non-human bodies. Our bodies are just not built for space and Elon is kinda brushing off the issues of hard radiation, micro meteorites, long-term living in non-breathable atmosphere, etc.

Couple hundred years is pretty enough. If we don't wipe ourselves out (or kick ourselves back to dark ages), we are very likely have superhuman-AI, consciousness I/O, body manufacture (from various materials too), etc. Might not go interstellar in couple hundred (unless there are some huge breakthroughs), but most solar system pretty sure.

Yeah, pretty much don't buy them. Why add another risk factor? There might be exceptions if you really really want to buy some specific niche and ETF is not available. But these are probably very rare.

Not true. Every organization that deals with fraud already runs everything through automated fraud detection. And there's a lot of money/effort spent on reducing both false negatives and false positives. There are humans in the loop for some of the fraud detected (although your CC gets locked without human in the loop likely), but you said "help" and there's definitely huge computer help in flagging/filtering already. Although I agree that peer-to-peer startups are likely either go BK or not pay out claims in 3 minutes as advertised.

One consideration could be that if you allocate BRK/FFH, then you don't really need to hold bond/cash allocation since these guys hold a bunch of bonds/cash for you already. So even if SPY outperforms BRK/FFH, realistically SPY/bonds-or-cash portfolio may still lag BRK/FFH/no-bonds-no-cash portfolio. Another consideration is that SPY is pretty highly valued now and BRK/FFH less highly valued. So there is higher probability that BRK/FFH will outperform SPY directly (even without considering cash/bond allocation). This is one reason why I hold pretty large position in BRK/FFH. BTW, I would not hold SPY/HYG, because IMO HYG is quite correlated with SPY, so if SPY drops a lot, you won't get a good opportunity to rebalance since HYG may drop a lot too. But that's somewhat separate discussion.

Having cash on hand at current market level and overall situation might not be bad even if you had no concerns about election. Also since bonds yield close to nothing, cash at this point in time is almost a substitute for the bond portion of your portfolio. And bond portion may or may not be 20%-40%...

I'd say "allocate to BRKB and Fairfax and call it a day" But then I'm not super sure that's a good approach either. If I had to select from others, I'd probably go with Sequoia with all the caveats. Other caveats: I haven't looked at Yacktman for a while. I have no knowledge of Hummingbird and Lyrical. I doubt very much that "an average reader of CoBF" will outperform indexes over the next 10 years.

netnet, I believe you've been to DJCO meeting in LA. Then you've seen Munger already and way way way closer than you'll see him in Omaha. @DJCO you can even ask a question. (Though I should shut up before DJCO turns into multithousand people circus too). I disagree with Parsad on Omaha. I haven't been there, but IMO it's a mega circus. I hate crowds. I don't see a point standing in line from 5am, then sitting in huge auditorium and seeing pin-sized Buffett 200 yards away. TV/Internetz is much better. Even if there was no TV/Internetz, I would not go. (I should have gone 20+ years ago, but coulda/shoulda). IMO Omaha makes sense only if you want to meet people from CoBF or other places and hang out with them. Toronto makes sense for that too. The overlap of the crowd is possibly not huge. There's bunch of people who go to Omaha and don't go to Toronto and vice versa. All this IMO. If you love crowds, then maybe Omaha is for you. :) Hope this helps.

This. But sure, for a lot of grocery-type products both Amazon's and its 3rd-party merchant pricing sucks. It's not "Amazon flexing it's pricing power". Their grocery prices sucked, suck and will probably continue to suck. No change. For groceries and big ticket items I price-compare. For books, cheap things, and things I price-compared before, I don't. YMMV, do your own dd, have fun.

Merge threads? http://www.cornerofberkshireandfairfax.ca/forum/investment-ideas/lxu-lsb-industries/msg244334/#msg244334

OTOH, if SYTE returned cash, minorities would have received ~book == ~$4.X Now they can sell their shares at >1.5 book or so assuming market is liquid at $7 and laugh their way to the bank. The patsies are minorities buying at $7-8 IMO. But sure they have some motivation to pay >1.5 book for a diluting hedge fund... ::) Edit: and BTW, you could invest with Dave directly without paying 1.5x recently. Maybe no longer ...

Which downturn? Did I miss anything? I think he meant up-coming downturn, but he/it won't come because of Hillary. So there is a downturn because it's not coming up. You know what I mean, eh? 8)

Petec, I think that the answer lies somewhere between two extremes. I think you are closer to one end and I am closer to another end, but neither of us are at extreme. How close we are is unclear. :) I disagree that all consumption is borrowing from the future. Clearly at extreme if a person dies from hunger, they will not consume (or produce) anything in the future, so you'll have a better future (with more production and consumption) if they are fed now. Similar argument can be made about healthcare consumption, possibly shelter, etc. (I'll skip the argument that one person's consumption is also another person's production - it's there, but it might get hairy ;) ). Now, you are right that at personal level if person has no money and has to eat, they can only borrow from the future, since that's how obtaining-money-when-you-have-none is structured. But I disagree that this is true at society level. Like you said, society can focus at productive vs. non-productive spending and it's likely that feeding the person is one of the most productive things society can do. Now, we are back to "moral hazard" issues and yeah, these are hard, but IMO these belong to another discussion. Going to society level, IMO you guys are making a mistake looking at country (society) as individual investor. For individual investor it is almost always true that saving is the way to go, but that's because of the way our society is structured. If person does not save, they won't have anything to live on when they are not productive anymore. It is also likely that individual investor does not have many productive uses of their money assuming they are fed, have shelter, healthcare, education and any professional needs. Although they can invest in businesses and I wonder if you count that as saving or as spending. I'd think it is not saving, but possibly this is OT. This is quite different at country level: country will never go old and unproductive. Also the goal of a country is not to amass enormous fortune while its people are left at worse productivity level than they could be. So assuming country has productive uses of money, it should allocate it to those uses now. And when I say productive, I mean something that is either consumption or infrastructure but what enables better future production and consumption. Now, I think your example of "building a five lane highway between two villages in rural China" is intentionally exaggerated to be wasteful (you say it's unproductive, I say it's productive but wasteful). However, building a road between these two villages, or paving an existing road is likely to be quite productive. Now, we get to the question: what if country has a lot of productive uses of money, but it has no money? My argument is that it should borrow and spend and that this would still bring a better future than not borrowing. But, yeah, I see how this probably would be a point of contention between us. I think you'll have no issue if country borrows, spends money productively, then later when internal production/consumption rises, the debt is repaid. But what if the debt continues to grow. I say that assuming productive uses, this is still a "good thing". But I am aware that our society does not have a great way to delever that debt in the future. Money printing or default are two options. You don't like them, I don't particularly like them too although I find them somewhat acceptable. There likely should be a way to get rid of debt without the pain of two methods above, since debt is a financial construct (and not a real world construct), but I'll leave finding the solution to some Nobel winning economist. ;) Anyway, everything above is for ideal world where unproductive-use-of-money does not exist. In real world, unproductive use of money exists in spades and moral hazard exists in spades. I am sure there are examples where even productive and useful money spent ends up not as productive as expected. So it's possible that something closer to your position is a good heuristic to ensure that countries and people don't overspend on unproductive uses and don't get rewarded for it. I still think that pretty large portion of spending is productive and therefore I still remain somewhere farther from your position on the line of how much to borrow and spend. Hope this explains my position. Not sure if this is Keynesianism or some other -ism.

TwoCitiesCapital and petec, I disagree that "discipline" the way you mean it is a good thing. I talked about austerity because IMO this is the closest to "discipline" we have in fiat currency society. I agree that there is a large amount of waste, especially trillions spent on wars. "Discipline" would be good if it cut the waste. But I doubt that the waste would somehow disappear under "discipline" of gold standard. IMO the productive parts would suffer, likely more than wasteful parts. And that's why I am against "discipline" as you define it. If the goal is to reduce waste - and I think this is a real and good goal - then we should be talking about that. But solutions for that would likely be political and policy solutions rather than monetary ones. And I still disagree with the whole "borrowing from the future" mental model even though I have a pretty good picture where you are coming from. Anyway, we'll probably continue to disagree. Good luck.

Petec, I disagree with most of what you write. The "borrowing from the future" is incorrect mental model and IMO dangerous model to have. Economic activity and growth as early as possible is positive and should be encouraged. It compounds into the future. The fact that you build university, factory, bridge, etc. today rather than tomorrow means that it will have multiplicative effect for the future: its use and its products will allow you to build other needed things sooner than otherwise. Growth into productive fields such as infrastructure, tech, etc is especially beneficial. You are not borrowing from the future, you are actually enabling the future to be here sooner than later. Sure, there is waste and mismanagement due to too much money available, but IMO austerity is never a solution, especially not global austerity. Now, I will say that unfortunately we do not have a good mechanism to produce growth without waste. Austerity isn't that mechanism though. Pretty much every country that may have had issues would be better of if their debts were forgiven and productive growth resumed instead of wallowing in recessions. Now, the issue is "moral hazard" and that is a real risk. But even with that I believe that growth is more important than the risk in a lot of cases. I'll also say that we possibly don't have a great mechanism for global delevering without consequences. Debt cancellation has consequences and hasn't been tried on large scale. So you may be right that our societies may not figure out a painless way to delever and then we may have tough time in the future. IMO we don't have to have tough time, but we may have it because we don't have a mechanism to get rid of debt that is financial construct (and not something reflected in reality). My guess is that printing money is the best known mechanism for solving this, though I am open to others. Anyway, I doubt we'll agree. :) Good luck

It's not really worth responding, but just in case: 2016 - 50 = 1966. Just FYI WW2 ended in 1945 and most of post WW2 rebuilding was done by the time US went off gold standard. I guess it doesn't trouble you at all that a great economic activity can happen with fiat currency. And then you accuse me of religion. ::) I am fully aware what Bitcoin computations are. Yes, they are there for reason. They are still fruitless in terms of results: their only reason is to solve hard problem for security, but the problem solution itself is worthless. Once someone creates computations that are both useful and provide the security we could talk about Nobel prizes. The rest is just a bunch of venting and personal attacks which is par for the author. Unfortunately, moderators do nothing about it in this forum.

Any proof for this? Let's see: People are happy and yet somehow everyone is worse off for it? And BTW before you go on your gold bug bandwagon, maybe you should explain why the last 50 years of fiat money was one of the best times of the history of our civilization. For businesses and entrepreneurism too. Or will you claim that it made everyone worse off and it would have been so much better on gold standard? Edit: it's also rather funny seeing people railing for gold standard at the time when there is no inflation, no inflation on horizon and there might be deflation because of a number of reasons. So you want to go back to gold standard why? BTW both gold standard and bitcoin are bad because they encourage spending resources on unproductive endeavors: gold mining and fruitless computations. There's already way more gold in the world than there's need for it. If you're so smart, at least tie your bitcoin computations to finding cure for cancer. I'd vote for "cancer-cure-coin" maybe. ::)

Not sure if this is aimed at me, but no, I did not forget 2009 and yes, I bought crap during it. I'm not telling you what to do. You're free to make your own mind. I'm not even saying that I will buy crap if the crash comes. It will depend. Good luck

It's almost guaranteed that the next crash won't involve US banks. Everyone is usually fighting the last war and US banks are overcapitalized and derisked like heck. Which doesn't mean that they won't trade way below 1xbook, since investors are also fighting last war and may sell of banks even if it's not warranted.

https://www.washingtonpost.com/business/economy/us-household-incomes-soared-in-2015-recording-biggest-gain-in-decades/2016/09/13/a832da44-79e0-11e6-ac8e-cf8e0dd91dc7_story.html

I am not predicting a major correction. (I'd still like a definition: 20-30%? 30-50%? 50-??%?) I think 20-30% is likely in next couple years. Higher percentages less likely. My guesses would be: Likely: - No big reason - Meh generic recession after long business cycle (Much?) Less likely, but possibly bigger crash: - EU falls apart - US presidential election (I have some scenarios, but won't post so this doesn't turn into another ... thread).

Sure. Makes sense. Thanks for posting. ;)

Best year ever 2009, around 3-digit percentage returns buying crap. And the crap wasn't even 100% of my portfolio. http://www.siliconinvestor.com/readmsg.aspx?msgid=26212212 But, yeah, there is some risk. Buying crap oil in 2015-2016 so far has lead to losses. ::) Peace.