ERICOPOLY

I'm sorry, but are you guys talking about the two officers that each spent no more than $7,500? Is it possible that the officers of the company really don't have more than that to spend on the stock if they think it's unbelievably cheap?

Yes, but I didn't buy it. I have an investment in Dhandho. So it's a bit like backseat driving -- I am however riding in the car. I started to get the feeling that the car was headed into a bad neighborhood, so I started to get interested in the story at that point.

It's a good philosophy and mindset but sometimes the risks are not quite so low. He was left holding the bag on Delta Financial and that's heavily talked about. There are other "low risk" positions that went to zero as well, only they went to zero a while after he had sold out. Lear Corp and Pinnacle for example. I guess it's hard for an individual to see and understand all the risks, so sometimes you think it's high uncertainty and low risk, but it turns out later the "low risk" assessment wasn't quite right. Anyways... it's not possible for an individual to be right every single time.

I'm wondering if the comparison is fair. Money backed by gold where the threat of devaluation came from how fast it can be mined. Is that completely comparably to today's fiat system? Does the threat of devaluation feed into interest rates throughout history or has it instead been the case that interest rates are completely decoupled from devaluation? I don't know, because I haven't studied it. My initial instinct is to ask for a higher interest rate if the currency is created by fiat. However I wonder if it is supported by history -- for example, rates are low today and the currency is created by fiat. In fact people say you can't create inflation by fiat -- Japan has already tried, etc...

+1 Bingo! Market prices for the commodity changed while the plant was getting fixed. Double whammy. The tide went out and they were swimming naked. Something like that?

I think the best thing you can do is to constantly deny that you know anything special and remind others that you have no idea how to consistently get even 10% returns. Otherwise they'll look at your past results and ask you for stock tips -- at that point if you indulge them you'll become their savior, and get swept up in it yourself until you start singing "I am the walrus". I believe John Lennon once wrote: "Superinvestor is a concept... by which we measure... our pain."

i would suspect that it is because most of zinc mohnish bought at very low Prices. around $3-4 per share. therefore i think it is growing to 15% ZINC stock chart suggests it hasn't traded at those levels since Feb 2009. It makes sense if there are other foreign holdings skewing the data -- however I thought these were notes from the meeting so it's a little odd if the meeting didn't present the data in a non-skewed manner. Anyways, doesn't really matter.

I don't understand how Horsehead could have started at the maximum size of 10% and have grown to 15%. It doesn't bother me if it's a 15% holding, I'm just curious how it got that way if the limit is 10%. Is it 15% of holdings but only 10% of fund size -- suggesting uninvested cash skewing the data? From the notes: "Pabrai currently holds: Fiat 42% of the fund , GM B Warrents >10% , POSCO ~10% , ~15% Horsehead Holding , ~10% Google" "He doesn’t invest more than 10% into one position but doesn’t mind when a position grows."

Presumably BAC was trading above $18 two months ago on the thinking that a rate increase was in the cards and it would raise their returns to 1% ROA which is about $1.80 per share. So it was 10x that number. Now it's at 10x $1.55. That's a difference of roughly $2.50 a share. So over just two months, it suddenly priced in the scenario that they only earn $1.30 per share for the next five years before they magically hit their 1% ROA. Or another way of phrasing it is that they earn zero for 1.5 years before hitting 1% ROA. There are multiple ways of putting it... but a lot of negativity is priced in at the moment. People have theories that low interest rates lead to bubbles. My ass.

The corporation's legal privileges... Think about how many companies would never be started if there were not legal protections. Society gets much in return for these legal protections. Jobs, innovations, services. Society is definitely getting a positive return here. Put it this way... it's not like society is in a position to revoke a C corp's legal protections if company owners collectively all refused to pay the tax. That would be a lose-lose situation all around. Society is getting paid a double-tax is more or less gratuitous. I'd be in favor of taxing all income the same... which would mean nixing the double-tax so we are all taxed the same. And that would mean real income, so stripping out the inflation component from capital gains and fixed income. Equal taxation of real income -- that would be fair. There is also the issue that 1031 exchanges should be applied to all assets, not just real estate -- shifting your invested equity from one investment to the next clearly isn't income... but I believe one could easily call "income" any equity that is not reinvested.

For the $2 price target scenario, what is better... writing that call or buying it? Let's see... It would be a 4 "bagger" (not a 5 as you claim) if you are paying your stated 25 cents for it. So you are risking 100% loss due to option decay alone in order to outperform the plain vanilla common stock and it's 3.5x return. I'm not finding that terribly compelling risk/reward -- you'd better be aiming for a lot more than $2 per share if that's the plan.. However, if you buy the common at 55 cents and write that $1 strike call for 25 cents (a covered call), you are risking 30 cents per share on a longer horizon. And it's 3.03x if the shares reach $1. For that matter, if the stock is still at 55 cents you've made an 83% return. 83% return if the stock goes absolutely nowhere. Or more if they keep paying that dividend. EDIT: I now realize you said "should it get back quickly" meaning you expect there to be a premium still in it, in which case it could easily be a 5 "bagger" at $2... I guess we have differing views on "quickly", but I guess you meant long before expiry.

But it's a very good culture based on sound reason and logic. The tax bill is lower if you go with the first option. The reason is that 100% of the dividend is taxed. So the dividend is the worse option. Only a portion of the buyback (the actual capital gain) is taxed when shares are sold -- that's because your cost basis is exempt from taxation. It's just a mathematical fact. Example: You hold a million shares that are going to pay a 5 cent dividend. That's a $50,000 dividend that will be fully taxed. Compare that to the company that repurchases $50,000 worth of shares on your behalf. All you have to do is sell $50,000 worth of your stock and you get the "dividend" cash in your pocket. Except you only have to pay tax on the gain, if you have any gain at all! Hell, you might even be holding the shares for a loss and be able to offset your tax bill elsewhere!

It's not just a double tax on dividends, but basically on all corporate earnings (unless you die before the shares are sold, in which case you avoid the double-tax here in the US). The alternative to paying a dividend is retaining the earnings, but you'll still get a second tax on those earnings when you sell the shares (retained earnings push up the share price so it winds up as a capital gain... which is thus double-taxed earnings the same as the dividend). Getting rid of the double taxation on corporate earnings would require one of the following: a) eliminating tax on dividends and capital gains. b) eliminating the corporate tax c) allowing shareholders to take a tax credit for corporate taxes paid (similar to Australia's dividend franking system, but applied to capital gains as well to avoid double taxation when earnings were retained instead of paid out). I think it will be a long time before we get rid of the double-taxation of corporate earnings.

Looking at the old prices when the last big fear event happened... I see $327.66 (CAD) for FFH on January 1st, 2008 and $233 on August 1st, 2008. Their hedges were doing great. Price happens. There's a T-Shirt idea for you Forrest Gump fans -- a big yellow smiling face on a T-Shirt where the mouth is a stock chart. Price Happens!

This is a fair point, however it still does matter a little bit. You have to inject cash perhaps in order for the company to pay down debt, and you likely aren't getting a great return on that portion of the investment. So if you initially invested $10,000 at $10 per share thinking you had a 20% FCF yield, and then you had to invest another $5,000 at $5 per share in the dilutive equity raise that doubles the share count, you aren't getting 20% FCF yield on those extra shares -- you're just getting whatever they plow that cash into, like perhaps meeting a 7% coupon debt maturity obligation if they can't refinance existing debt. However you're right that it isn't anywhere near as damaging as having no cash left to invest in it and not being able to participate in the dilution. It becomes perhaps 15.67% FCF yield on the entire $15,000 invested. That's not as good as the initial 20% FCF you thought you had. It declines to 14.96% FCF yield on the entire $15,000 invested if you apply a 30% tax rate to the 7% coupon bond. EDIT: Or you could restate it as the initial investment really happened at a roughly 10% FCF yield (whatever it really is after adjusting for the lower amount of debt) and the new investment happens at roughly 20% (again, after adjusting for the lower amount of debt). I think the diluted FCF yield on the entire $15,000 remains the same. I was phrasing it in a awkward way because I was thinking about where the new cash injected winds up -- this led me to explain it a bit funny. Or perhaps this extra paragraph is wrong (or both) and I should just shut up :)

What's the method of determining the price at which an equity raise would occur? It would permanently devastate the current price if it happened at $1 per share, but I'm just pulling a scary number out of the sky in order to demonstrate a point. What is the rational method of determining what the price will be when/if the shares are diluted? I find it pretty frightening when intrinsic value estimates are given in a situation where there is a real risk of a significant dilutive equity raise, because how do you know at what price that will happen and isn't that the primary driving force of the future intrinsic value per share? It's very maddening to try to predict a future price of an equity raise that would be struck during perhaps maximum pessimism fear. It seems like IV calculations get relatively far more precise if you can get the risk of dilutive equity raises out of the equation. Value investors who are facing a real chance of equity dilution are no longer able to simply discount cash flows into the future -- they have to also pinpoint the price at which dilutive equity raises occur. Gets much harder because you have to rely on the prices that Mr. Market will pay in the dilution.. That all being said, why is the current price the right price for estimates of dilution? Why not the price of a few months ago, or $3, or $2, etc...??? Any reasonably informed guesses? Sorry, I suppose I'm dissing too much on the ability to estimate IV when you have to also deal with an elevated risk of dilution at a price you don't know.

It sounds like you are saying the "TAILS I DON'T LOSE MUCH" case is that the stock doubles from here. Is there really not a realistic case where you lose?

Perhaps at 70 MPH it docks directly with a driverless refueling tanker truck and therefore we don't necessarily need a refueling station ;D

Porsche all-electric car: http://www.latimes.com/business/autos/la-fi-hy-porsche-electric-sports-car-20150914-story.html The German sports car company has announced its all-electric Mission E sports car. The concept vehicle, which will be on sale within five years, boasts a 600 horsepower motor, a range of more than 300 miles, and a recharging time of under 15 minutes. Using the auto industry's first 800-volt electrical system, the Mission be will be able to charge to 80% of total battery capacity in 15 minutes -- when, that is, a system of 800-volt charging stations are built. It will also feature some dramatically futuristic electronics. An eye-tracking system, able to sense what part of the dashboard the driver is looking at, will hi This part sounds childish though (oh yeah, this has nothing to do with Tesla... right): "We don’t do a car because Telsa has done a Model S," he said. "We have our own plans. The time was not right before now to bring a pure battery car onto the market. But now the time is right."

I did eventually stop but it was at a higher threshold than $5m. Mostly because BAC just looked like the last time I'd ever have to do it (and I think it was).

Time is a big factor. While the driver is sleeping, eating, going to the bathroom, etc. The merchandise is sitting in the truck not going anywhere. Shipping would be quicker if done by robot vehicles. One obstacle I see is that you would need full service at truck stops and some way to guarantee payment, because there is no longer a driver to get out, swipe a credit card, and put the nozzle in the tank. I think you overcome that obstacle by paying somebody minimum wage to occupy the vehicle during the entire journey. His primary job is to swipe the credit card and put the nozzle in the gas tank when refueling mid-route. His secondary job is to be with the vehicle so that it doesn't get robbed. Sounds less complicated than clerking at 7-11. So it's minimum wage. No need for commercial vehicle drivers license. I doubt that is the long term solution. Truck stops will likely accommodate robotic trucks with some type of easy pay system and more minimum wage staff to pump gas. Afterall there are less refueling stations than there are tucks, this would be many times fewer people. Also removing humans from the tuck entirely releases the design constraints having a passenger cab puts on truck design. Trucks can be designed without cabs, mirrors, etc. The engine can be put in its best position for stability and fuel economy. The same with the design/shape of the exterior of the truck. Just not having huge mirrors on the outside will save fuel. Putting a person in the truck defeats many of the gains of having an autonomous truck. True about the streamlining/aerodynamics, but the person doesn't have to sit in the front of the truck nor does he need mirrors if he isn't driving. Could be a rear-facing seat at the tail of the vehicle (although that doesn't fit with the existing design of trucks and perhaps isn't workable). I think you could keep the man riding upfront but occupying a center seat so that the nose could be more streamlined. Just a guess though. Eliminating the person entirely is more optimal still.

Hi Eric, I'm wondering how do you know that Dhandho Holdings is an investor in ZINC? I don't. However what are the chances that it's not given the guy calling the shots?

Time is a big factor. While the driver is sleeping, eating, going to the bathroom, etc. The merchandise is sitting in the truck not going anywhere. Shipping would be quicker if done by robot vehicles. One obstacle I see is that you would need full service at truck stops and some way to guarantee payment, because there is no longer a driver to get out, swipe a credit card, and put the nozzle in the tank. I think you overcome that obstacle by paying somebody minimum wage to occupy the vehicle during the entire journey. His primary job is to swipe the credit card and put the nozzle in the gas tank when refueling mid-route. His secondary job is to be with the vehicle so that it doesn't get robbed. Sounds less complicated than clerking at 7-11. So it's minimum wage. No need for commercial vehicle drivers license.

How much of the cost of trucking is the cost of the truck driver himself? Drivers need to stop to eat, rest, or perhaps sleep for example. He also needs to be paid. Would driverless trucking put pressure on rail traffic, or are railroads still much more efficient?

Agreed. However the phrase is "Heads I win, tails I don't lose much." It is still a valid question irrespective of whether the coin has yet to be flipped, is still flipping, at the top of it's arc, near the ground, etc... In other words, if it settles on tails, is this "I don't lose much"?