ERICOPOLY

But clearly the people who hold everything else in the S&P500 index think it's better to stay where they are than to sell and buy BAC at this price. Ahh.... psychology. 101 ways to fuck with your mind.

Somebody else might do the same trade under the guise of "technical analysis", buying something oversold amid panic and fear, and the "value investor" might come along with his own bible (Security Analysis) and biases that tell him it's undervalued and below intrinsic value by 50%. Exact same company, both people buying the same thing for the same basic reason -- it's dropped heavily in price during massive fear/pessimism. They both buy, one person sells when his "technicals" tell him to, and the other sells when his "IV estimate" is reached. It's just a delusion when you are taking IV estimates on highly uncertain companies -- might as well go the technical analysis route. You have a fighting chance of seeing a reasonably accurate glimpse of IV if you approach only the companies that have a high degree of certainty. Compare that to Pabrai's approach chasing "high uncertainty" stocks -- it doesn't surprise me that he's got the IV so completely wrong when he's trying to value a highly uncertain situation. Of course it's hard if you do that -- you want to make it harder and be wrong even more often, I have some advice for you: seek out even more highly uncertain stocks!

Maybe it's because high uncertainty companies can be traded profitably if you time it right. Swing trading, but you could convince yourself that there is value and that you are a value investor if you approach the POS (piece of shit) company with the right biases.

That's what has always been a red flag to me. He manages $500mil and he can't hire one single analyst? In an average year he should keep 1% which is $5mil, an analyst salary is chump change. Ok if he is buried in paper all day reading fine, but I see him well dressed making speeches and even teaching courses at university......... he can't be devoting as much attention as his partners expect and deserve. And an analyst won't mess up? I've read a lot of dumb things from a lot of analysts. The best is when lousy portfolio managers decide to become analysts, or when bad analysts decide to become portfolio managers. Pabrai had more time and no analyst when he bought Delta Financial in 2007...the idea was wrong, not anything else. Einhorn has a ton of analysts and he still bought and sat on the board of New Century. Concentrated positions in good ideas is what made these fund managers, and that is part of the risk of investing in a concentrated portfolio...there will be volatility. People screw up and adding an analyst is like adding a sixth toe, because you think the other five toes are too busy! We have one brain and one penis...adding more of either doesn't necessarily equate to being smarter or a better lover! :) Cheers! I don't know... the male echidna has a four-headed penis and the female echidna has two vaginas. Sometimes you don't realize the advantages of having more and you can become too entranced with thinking you've got everything you need.

Try $34 billion in write-downs (at a 31% tax rate).

Any idea what "severely adverse" oil price the FED used?

Stop buying LEAPS, it goes down every time you do that. I want to see the stock go up for once.

+1! And in worst case scenario, you can eat cash...high in fibre. Try passing a gold bar through your colon! :) Cheers! http://www.dudeiwantthat.com/food/novelty/sht-gold-pills.asp

Buy your LEAPS, and then get a copy of The Coldest Winter. As your LEAPS get destroyed, keep reading -- the book will remind you that your suffering could be a lot worse, and it will never be as bad as what those men had to endure. No matter how bad your losses, you'll understand that your suffering isn't really suffering.

No, just riding it out.

Looks like I picked the wrong week:

10.4 billion shares outstanding. The last $4 drop in the stock amounts to a missing $41.6 billion in earnings after-tax, or $60.28 billion of pre-tax income at 31% tax rate. Don't think the market knows anything it didn't know a month ago. It's just panic selling in my opinion.

You couldn't have said that a month ago.

It's such a small buyback approval that it won't be hard to complete this quarter. Not sure why they haven't don't 25% of approval each quarter, but leaving the bulk of it for the last quarter might have been a way to look conservative to the Fed. Who knows. The Fed wants the buyback to be something that can be cancelled in the event of downturn -- so front-loading it would make them unhappy, and perhaps back-loading it would have the opposite effect (which may win them a larger approval the following year).

People: the buyback approval is for 12 months, not 9 months.

There is an explicit display of arrogance in that catch-phrase. It's pretty much the last thing I want my investor to be telling me. It's a more discreet form of... "Ah, don't worry... we can only make a ton of money! Can't lose!"

I've seen you make this argument before but it's too simplistic. It's not necessarily a trading skill to sell a company if something material in intrinsic value estimations changes. It would be including spidey senses in intrinsic value to expect sudden value destruction from capital allocation not to be grounds for selling on value factors. I'm not saying it's easy to tease out what you are after currently, but what you are suggesting doesn't solve the problem. Selling can be just as much a value skill as buying and just because you can construct scenarios where it is not doesn't make it invalid to sell in value investing per se. A new CEO going out on a diworsification spree needn't be any more a failure of value than a meteor wiping out headquarters. TL;DR: Why should a wrong valuation in buying count against you and a correct valuation in selling not count for you? These businesses he has bought that are going to zero... Were they "low risk" businesses? I am really only picking on him because I am invested with him and I want him to look harder before buying these things (I don't want to lose more money on one of these picks). He goes out on interviews defending his picks as "high uncertainty but low risk". High uncertainty things swing in price a lot and I think he can/has made money trading these swings. I just want him to drop the "low risk" bit -- I want him to go back and look at everything he's bought and see how they've done if held to the present day. That's going to force him to reconcile their performance with his "low risk" statement. It's also expressed as "heads I win, tails I don't lose much". What the fuck, 100% is "much". Examples of businesses that really are low risk -- JNJ, PG, etc... Can you hold them for 10 years and not worry whether or not the markets are open for trading? Yes. As Buffett says, businesses so simple an idiot can run them, because eventually one will. So yes, you can say it's okay for him to sell when an idiot takes over, but if the business is safe enough for an idiot to run... well then. I would back off if he acknowledged that they have indeed been above average risk and not low risk. I can't tell if he's fooling himself or not. He does have the "high uncertainty" part right. I wasn't making an argument in defense of Pabrai's investments. I do understand the difference in argument that you are making. An example is Buffett exiting his GSE investment. Regardless, the intrinsic value is all future distributable cash flows discounted to the present. I'd like to see if people are really buying things below intrinsic value or if it's an industry wide delusion. It still might be a profitable approach because it seems safer than seeking out the most seemingly expensive things, but as an intellectual exercise I'd be interest in knowing which "value investors" are really not buying (on the whole) below intrinsic value. I believe Buffett recognizes my argument, and he has adjusted for it by trying to seek out only the most enduring businesses that an idiot can run. I think that's his reasoning for doing so -- because he's like a monk about this intrinsic value stuff and has honed his approach to increase the certainty that he doesn't make a mistake assessing IV.

I've seen you make this argument before but it's too simplistic. It's not necessarily a trading skill to sell a company if something material in intrinsic value estimations changes. It would be including spidey senses in intrinsic value to expect sudden value destruction from capital allocation not to be grounds for selling on value factors. I'm not saying it's easy to tease out what you are after currently, but what you are suggesting doesn't solve the problem. Selling can be just as much a value skill as buying and just because you can construct scenarios where it is not doesn't make it invalid to sell in value investing per se. A new CEO going out on a diworsification spree needn't be any more a failure of value than a meteor wiping out headquarters. TL;DR: Why should a wrong valuation in buying count against you and a correct valuation in selling not count for you? These businesses he has bought that are going to zero... Were they "low risk" businesses? I am really only picking on him because I am invested with him and I want him to look harder before buying these things (I don't want to lose more money on one of these picks). He goes out on interviews defending his picks as "high uncertainty but low risk". High uncertainty things swing in price a lot and I think he can/has made money trading these swings. I just want him to drop the "low risk" bit -- I want him to go back and look at everything he's bought and see how they've done if held to the present day. That's going to force him to reconcile their performance with his "low risk" statement. It's also expressed as "heads I win, tails I don't lose much". What the fuck, 100% is "much". Examples of businesses that really are low risk -- JNJ, PG, etc... Can you hold them for 10 years and not worry whether or not the markets are open for trading? Yes. As Buffett says, businesses so simple an idiot can run them, because eventually one will. So yes, you can say it's okay for him to sell when an idiot takes over, but if the business is safe enough for an idiot to run... well then. I would back off if he acknowledged that they have indeed been above average risk and not low risk. I can't tell if he's fooling himself or not. He does have the "high uncertainty" part right.

I don't think you can measure the success of a "value investor" by his long term portfolio compounding track record. You could be fooled by the record of a person who might be a nimble trader and make his money despite not buying things below intrinsic value. So merely having a good track record along with a self-ascribed "value investor" label is not enough. Instead, look up everything he has ever bought for his portfolio. Recreate his returns as if he'd bought each one of them and held them to the present (never selling), and see how his portfolio returns are under this experiment. The ultimate test of whether or not he's been a true "value investor" is if the companies have performed in a manner to indicate that he indeed was buying them well below intrinsic value. A confusing contribution to his track record is LEAR, for example. I think he made a gain on that even though it eventually went to zero. That's misleading to include in his track record, because he didn't make the gain as a result of buying below intrinsic value, instead he made the gain for being a nimble trader. HNR looks pretty bad. Then DFC, PNCL, and ZINC and maybe others. I'm just picking on the bad ones. There must be good ones too that have outperformed. But what's the real record if you measure him based on his ability to identify names trading under intrinsic value? You know, "you take the good, you take the bad, you take them all and then you have the facts of life?". The industry measures results in a funny way if trading gains (which could just be a case of outstanding spidey senses) can muddy our perceptions of a person's valuation abilities. And for goodness sakes, stop saying "high uncertainty, low risk" -- too many blowups to bear that out.

They are difficult because you don't know what the price is going to be for the commodity. The prices swing like a wrecking ball on a long pendulum chain, and some combination of demand and extraction price ultimately guides it. It can swing a long way out, and then take far too long to swing back the other way -- far too long for these high-risk companies. XOM isn't doing too much worse than the general market. So you can avoid getting completely cleaned out by going with a low-risk commodities company. Anyway, ZINC seems to be a high-risk company, not a low risk company like XOM. I don't really think it fits the slogan "high uncertainty, low risk". The risk is certainly not low, otherwise they would be able to ride out a zinc commodity crash just fine (similar to XOM riding out a low oil environment).

The lesson to be learned here is to stop investing in businesses that go to zero.

More people work in solar than in oil -- why not let oil do it's thing and increase the subsidies for solar? That's where the jobs are and it's good policy. Solar energy jobs double in 5 years http://money.cnn.com/2016/01/12/news/economy/solar-energy-job-growth-us-economy/index.html?iid=surge-stack-dom

And then you normalize that against US population and find they're both up by roughly equal percentages over that span. # of vehicles per household has risen as well.

With commodities it goes like this: First you speculate on the future price of the commodity. Then based on that speculation, you state how much margin of safety there is in the stock. Therefore, tons of varying views among value investors. And the views are based on speculations. I think this is why Buffett wants to avoid "price taker" businesses. Commodities seem cyclical though. What if you assume low prices (close to marginal cost of production)? There is a degree of gravity that affects prices, no doubt. But the price of Coca Cola at the grocery store doesn't swing as much. I think Buffett has a point. If you truly want to be a value investing "monk", you would do best if you could seek out a company that was an absolute price setter, with a massive moat, trading at a discount to IV. No argument there. Commodities undergo long periods of "price taking", and these fragile leveraged commodities companies are toast -- so they aren't "value investor" fare.

With commodities it goes like this: First you speculate on the future price of the commodity. Then based on that speculation, you state how much margin of safety there is in the stock. Therefore, tons of varying views among value investors. And the views are based on speculations. I think this is why Buffett wants to avoid "price taker" businesses.