ERICOPOLY

Thanks for the helpful comments!

What color did you pick Eric? And the interior? Very nice car! Cheers! It is silver metallic paint with tan interior. All Glass panoramic roof. I chose the fastest one (performance edition) and added the "performance plus" package. As for the rest of the options, I checked all of the boxes ;D

Signing paperwork today and about to pay the money for my Model S. But that's not why I'm posting this... The California sales tax exceeds my tax credits. So there is no subsidy, don't worry fellow taxpayers. Sigh... Recently they brought online new Supercharger stations in Buellton and Atascadero. So now I can pick up the car at the Fremont factory, get a tour, and easily drive it home without worrying about public charging stations.

Does the investor's visa really grant citizenship, or just residency?

I don't suppose it would be popular to try the tactics that the Comanches used to push the Spanish out.

Thanks for the color regarding the treatment of retail investors. What is the cheapest/easiest route to mature into an "institutional" client versus a "retail" client? What kind of a legal entity will they do such business with? Were I to set up an investment partnership, LLC similar to what Sanjeev runs, would that suffice? Even if I'm the only investor in the fund? I'd rather pay the lawyers and accountants than the tax collectors.

I use IB. Given that I have no experience ever talking with the professionals, I have no idea how this is done. But given the trillions in derivatives out there, I feel like the patsy paying the tax and want to get with the program.

Alright... I know next to nothing about this but I have a hopeful imagination. Which door do I knock on to find a counterparty willing to purchase from me a long term deep-in-the-money put contract. For example, if I can write a 5 year put option on WFC with something like a $200 strike, the value of that put would carry a premium that compensates me for a reasonable approximation of the dividends that WFC will pay over the next 5 years. When assigned after 5 years, I get the shares and still no tax bill due yet. Instead, I could just purchase the common stock but California is not the kind of place where you want to earn taxable dividends (better to get them as deferred capital gains). The details aren't clear, but the gist of it is that I would want a super high strike price to ensure I don't get taxed on a put option expiring out of the money (I want to be nearly certain of being assigned the shares). Maybe somebody who has a lot of tax assets to use up in the US would be interested (because they'll be paying the taxes instead of me). Citigroup? Or perhaps an insurance company who only gets taxed at 14.5% rate on dividends. Effectively, I want to pay them a small fee for the right to use their lower tax rate. Surely there is room for us both to come out ahead. Or perhaps just a Bermuda company where they carry no tax burden.

Pre-determinism is a straw man. It is not a requirement for singular intrinsic value per universe. I have mentioned that each universe has but one past. And each will have but one eventual future. Just because it will have but one eventual future does not mean that it is predetermined. It's just the way things actually are. You go through life and at the end (looking back) you have a singular history. Therefore, when you were born there was but one not yet determined path that you would travel (out of many that you could have potentially travelled). Now, after travelling whatever path you travelled through your life, there was only one of them that you actually travelled on a per-universe basis. At birth, you have but one not yet determined future path per universe (out of many possible paths per universe). The concept of the omniscient being is just an instructional aid. You compared the instructional aid to predeterminism, and then threw it all out together under "predeterminism". Perhaps somebody can help me correctly label what logical fallacy that is filed under. Is it guilt by association, or red herring, straw man, or what? Or a combo? Ok, so you are saying that time will pass and a set of cash flows will be experienced (I agree here). And that those set of cash flows are what should have been used when determining the correct IV? Yes.

I just have great Indian trackers (including those on this board) that point out the blood trail of IV leading into the bushes. I don't myself know how to navigate the wilderness. Buffett would be Kit Carson and I would be an ordinary person following behind. This works out just fine though. I retired 5.5 years ago after 10.5 years of work. Today my RothIRA is equal to 60.75 years of my pre-tax salary on the day I quit. It is 175.5 years of my pre-tax August 1997 starting salary. That money comes entirely from what I was able to save in my 401k and IRA plans as a low-ranking employee of Microsoft -- all of it has since been rolled to the RothIRA. Before Aug-1997, those accounts were empty (didn't exist).

You've pointed out a nuance which I think is correct. It's a different point than Eric and I are trying to make, so I'm worried it will confuse the discussion. If we stick with my 1 year note example- what we're trying to say is that from the perspective Day 1, the IV of the note is set in stone- because the future will only have 1 outcome. What I think you're pointing out is that the IV calculation changes depending on which Day you look at the note. Clearly the NPV figure of the note is much higher if you're looking at it on Day 364-- its almost 100. And you could say, Ah-HA! IV has changed! But then you've missed the whole point. What we're saying is that if you're calculating the NPV of the note Day 1, there can only be one correct answer. Likewise- if you're calculating the NPV of the note on Day 364- there can be only one correct answer. Yes it's basically this way by definition. "All the future" distributable cash flows discounted to "the present". You can change "the present" and the calculation changes, because when you change "the present" from the current quanta to some future quanta, then recalculate it, the part about "all the future" has changed. Logically, when you change the inputs to the equation you get a different answer.

Pre-determinism is a straw man. It is not a requirement for singular intrinsic value per universe. I have mentioned that each universe has but one past. And each will have but one eventual future. Just because it will have but one eventual future does not mean that it is predetermined. It's just the way things actually are. You go through life and at the end (looking back) you have a singular history. Therefore, when you were born there was but one not yet determined path that you would travel (out of many that you could have potentially travelled). Now, after travelling whatever path you travelled through your life, there was only one of them that you actually travelled on a per-universe basis. At birth, you have but one not yet determined future path per universe (out of many possible paths per universe). The concept of the omniscient being is just an instructional aid. You compared the instructional aid to predeterminism, and then threw it all out together under "predeterminism". Perhaps somebody can help me correctly label what logical fallacy that is filed under. Is it guilt by association, or red herring, straw man, or what? Or a combo? I'd be more charitable than to call it a logical fallacy - it's just a false premise. Okay, I'm bad at coming up with the appropriate labels for these things.

Forget about omniscience for a moment. Take a person who is 100% lucky all of the time. Ask him to take a guess at the company's future distributable cash flows and proper discount rate. That's the singular IV of the business. Without determinism! It might be unnatural to find somebody that lucky, but I'm not arguing that it's natural for somebody to be that lucky. It is an instructional aid.

Pre-determinism is a straw man. It is not a requirement for singular intrinsic value per universe. I have mentioned that each universe has but one past. And each will have but one eventual future. Just because it will have but one eventual future does not mean that it is predetermined. It's just the way things actually are. You go through life and at the end (looking back) you have a singular history. Therefore, when you were born there was but one not yet determined path that you would travel (out of many that you could have potentially travelled). Now, after travelling whatever path you travelled through your life, there was only one of them that you actually travelled on a per-universe basis. At birth, you have but one not yet determined future path per universe (out of many possible paths per universe). The concept of the omniscient being is just an instructional aid. You compared the instructional aid to predeterminism, and then threw it all out together under "predeterminism". Perhaps somebody can help me correctly label what logical fallacy that is filed under. Is it guilt by association, or red herring, straw man, or what? Or a combo?

No. Intrinsic value of the business is measured by all of it's generated distributable cash, discounted to the present. The distributed cash is certainly included by the omniscient towards the IV calculation -- it's not lowered by actions of the business owner post-distribution. He can roll up the dividends and smoke them, or let them sit there in his separate account until the "heat death of the universe". Now, the omniscient won't include any assets still belonging to the company at the time of "heat death of the universe" -- after all, they're not distributable. Businesses can also be wound up early with the remaining assets sold and distributed to the owners (before the "heat death of the universe"). Now, under the current dividend policy Berkshire may well become a zero as nothing will have been distributed on the day that the heat death arrives. It's really risky what Buffett is doing here -- perhaps you can point out this risk to him at next years AGM.

The theory is extensible to a multiverse, as I have pointed out. There is one IV per universe. You merely suggested that there is one IV per universe. Exactly as I claim.

Non sequitur. An omniscient being knows everything (inclusive of IV). How is my proposition flawed? What are the huge known flaws? So far you have found none, you have only suggested that each parallel reality has an IV of it's own. That's fine, because we experience only one reality. That's not a flaw, it's a feature. In your coin toss example, think of the alternate outcome as a fork() in unix, where the alternate path takes place in a new process instance. There is still one true IV per process instance because what we think of as ourselves is bound to a single process instance where there is a single IV. Once again, let me suggest that it isn't "known" that there is a multiverse. I haven't found a time issue that Boiler has raised. The IV of a business is all future cash it makes, discounted to the present. You can take that cash and throw it over your shoulder and claim that none of it is left, however it was still made by the business.

However, before they are worth zero, they potentially will distribute earnings. That is true, but as they distribute earnings the IV changes. One thing for sure, the IV of all companies will cease to exist the day I die! The Berkshire model of sweeping the earnings and allocating it to purchases of new businesses reduces the chance of zero. The more independent businesses they own, the less likely that they will all be zeros at the same time. Now, if Berkshire instead were to buy back shares with the earnings, they would be doing nothing to reduce the probability of the shares being worth an absolute zero. How do you think about the IV of BRK? Did the IV change when Buffett bought BRK? I believe Buffett has referred to his purchase of BRK as an investment mistake. So did the chance event of Buffett buying BRK change the IV? Did BRK go from a possible zero IV to whatever it is today? You need to think about the meaning of omniscient. It's clear what my answer will be once you do this, as the omniscient being knew that Buffett would buy BRK and he knew everything that Buffett would do up until this day.

Well, I see a lot of value in knowing that there is one single IV. It helps in scoring whether or not you are actually being a value investor, or whether you are just well intentioned to be a value investor but are following the wrong path. The idea is to buy at a discount to the one true IV, not just an imagined one that's way off the mark! So when we hear people saying that the IV of RIMM was something really high early on when they first bought the shares, but that the IV then collapsed, we know that what really happened is they bought at a discount to an IV they pulled out of their imaginations. Then their imaginations created a new one after time passed. Etc... etc... Is that value investing when you pick a target that is extremely difficult to get right due to the high degree of unpredictability? It might be good speculation, but I am going to say it's not value investing if you readily admit upfront that you haven't really got a good chance of getting the IV right. You may argue that the price is low enough to compensate you for the uncertainty, but I still throw that in the speculation pile. The uncertain businesses have too much potential for your estimates to be wrong, and thus it's unclear if that discount is really there. Yet still there may be a right price -- it's just too hard for me anyway to call that anything but speculation. I'm a speculator though if you measure my past behavior by this standard. Once you get into the "wide range of outcomes" businesses and start assigning probabilities to each outcome, this is where you are most likely to get it wrong because your bias has an influence on the probabilities that you assign. So it's inherently unreliable given that you are human. I think a better path is the one that Buffett and Munger follow where they study the long term durability of the business and reduce their chance of bias being a weakness by only sticking with businesses that are nearly certain to last a long time. Rather than trying to assess the odds of RIMM being around in 5 years, they'd rather just narrow their universe of stocks to the relatively few that almost certainly will be around in 5 years, and either buy them today or wait for a discount in them. I think Buffett and Munger have evolved to become true value investors in that they seek to get as close as possible to the one true IV and they stay away from businesses where they have too variable of outcomes. That's why they would never invest in RIMM -- "too hard" pile means that it's too hard to get a (relatively) highly reliable estimate of the one true IV. They have deep religion, almost like monks. Me, am I a true follower of this religion? I hope to be, but my past record is one of speculator.

However, before they are worth zero, they potentially will distribute earnings. That is true, but as they distribute earnings the IV changes. One thing for sure, the IV of all companies will cease to exist the day I die! The Berkshire model of sweeping the earnings and allocating it to purchases of new businesses reduces the chance of zero. The more independent businesses they own, the less likely that they will all be zeros at the same time. Now, if Berkshire instead were to buy back shares with the earnings, they would be doing nothing to reduce the probability of the shares being worth an absolute zero.

However, before they are worth zero, they potentially will distribute earnings.

Furthermore, the omniscient one knows of all future universes, and he knows the singular intrinsic value for each universe. Thus for the one we live in there is a singular intrinsic value. Simply stated, in our universe there is a singular real intrinsic value. Should we worry about another universes' intrinsic value, they ought to tell us to just stick to our own knitting.

There isn't one past. Suppose at this moment you flip a coin. One universe is created where the result is heads, and one is created where the result is tails. Do it again. Now you have 4 universes. There are some parts of the past that are in common, and some parts where the past is not in common. The problem with your argument is that you're saying that when you flip that coin and it comes up heads, that means that in your universe, it was always going to be heads. That's not true, because the alternative universe, where it came up tails, is also your universe and also contains the same you. Each Ericopoly in each universe could argue that the coin was always fated to come up heads/tails, but it doesn't make any sense to completely ignore the other universe which is also you, and where the opposite result occurred. It's still you. That's creative but I contend that a new universe is not created when I flip a coin. Others disagree. Separately, remember the idea of multiverse is hypothetical, yet you state it as if stating fact. By the same token, the concept of singular universe may also be hypothetical :) Regardless, I will be happy to restate my claims as the following: One past sequence of events per universe. One future sequence of events per universe. Each business has but one real intrinsic value per universe. The claims I make in this discussion pertain to the universe that we are presently communicating within. The question then of one or many universe is irrelevant no matter which universe you live in, as you have a workable model that fits your universe. I would be happy to think of a single universe as similar to a single instance of a computer application. The application has global data structures that always have a single value assigned within their process space. Yet there may be multiple instances of this application running at the same time, and each may have a separate value assigned for those same global data structures. The logic within the program knows only the values of the global data structures belonging to that single instance, and for all intents and purposes of that program these are the only real values. The existence of other instances is irrelevant.

I agree. But I find it even more puzzling when people say cash or another defensive asset is "the ultimate hedge" or something like that. Nope, short positions are the ultimate hedge. Short positions need to be hedged or theoretically they can completely wipe out your portfolio.

I left my comparison to 2008 only, because in early 2009 FFH's equity position wasn't hedged. A good deal of that March 2009 correction in FFH's stock price was just a reflection of their book value dropping.