Liberty

I think we're missing some variables to be able to compare. If someone is getting 30mbps internet with a small monthly cap and the other is getting 200mbps with 1tb/month, the difference in price could be easily explained.

I figured I'd try starting a thread about movies and TV shows that you liked enough to recommend. General rule of thumb would be, only post about it if you think it's better than 75% of what you've seen in the past couple years (obviously there's no way to enforce that, but I'm just trying to avoid having the thread flooded by everything people are watching). Please tell us a little about what the thing is and why you like it. I'll start. I watched 'The Death of Stalin' (2017) yesterday and really enjoyed it. It's definitely not for everyone, it's pretty dark satire, but I think the minority of people who will like it will really like it. It's kind of similar to some of what the Coens bros do, but talkier, kind of like if Aaron Sorkin wrote dialogue for a Coens movie, with a few bursts of Tarantino violence. https://www.imdb.com/title/tt4686844/ Interestingly, after seeing it I looked up a few things and while there's obviously a lot of fiction, it's not as fictionalized as one might think. They even had to tone down a few things because the reality would've seemed unbelievable on screen, apparently. If you see it and want more, there's an interview with the writer here: https://www.newyorker.com/podcast/political-scene/armando-iannucci-on-the-death-of-stalin/

We've reached the Marie-Antoinette phase:

Guessing that on average, yes. But for the top value investors, not falling for it is probably part of what makes them so good.

You do whatever you want. Fiserv opened the day at US$78.86 Jack Henry at US$130.07 Altius at C$11.31 Fiserv not a dividend payer. JH pays a 1.2% dividend. Altius pays a 1.4% dividend. I’m betting against the long uptrends. Back to earth over the next decade. Do you often make long-term bets on companies you presumably don't know anything about just based on eyeballing their charts? I could've mentioned Visa and Mastercard or MCO and SPGI too, JKHY and FISV were just too examples off the top of my head. Want to bet against those too?

You do whatever you want.

Sorry if I wasn't clear. I'm not saying I don't think copper will be there in 50 years. I'm saying that the fact of it being there doesn't mean you'll be able to make good returns mining or selling it. Television sets also have razor-thin margins and are commodity businesses, but at least there's some predictibility in pricing (deflation, mostly). What if the price of TVs went up and down 20-30% a year? How hard would it be to support building new factories and operating expenses? Add debt to it, along with managements known to screw shareholders by paying themselves high salaries and issuing lots of stock, and you're getting close to it.. Kind of like what Buffett said about air travel... Since Kitty Hawk tremendous progress, better planes, orders of magnitude more people flying... But cumulatively the industry has destroyed capital. Why? Because they aren't in control of their inputs and their outputs are commoditized, so they aren't in control of pricing either. Recently they've been doing a bit better because consolidation has lowered competition, but the point still stands, and it's easier to start a new miner than to start a new airline. Lots of fortunes have been made playing the lotto too, but that doesn't make it a good bet. It just means you're looking at the winners and not the losers (survivorship bias). Anything at the right price can be a good investment, but what separates investing from speculation IMO is the ability to make intelligent predictions about what is likely to happen rather than being along for the ride ("oh, oil just fell from 100 to 30, guess that wipes out everything we've made over decades, oops").

There's a lot to unpack here: It's not so much about certainty, which you'll never get in investing, or if you get it, you won't get any risk premium (T-bills), it's about comparing options. Can you be sure anything will be there in 50 years? Probably not for most things. Can you be a lot more sure that they'll make good economic returns on their capital than a commodity business for the next 5-10 years? Often, yeah. Copper being there in 50 years doesn't mean anything. Water and air will be there in 50 years. What matters is can you make excess profit with that business, or will that be competed away until you basically make your cost of capital? Or worse, destroy capital because your are riding a wild bronco with debt and lots of fixed assets creating operating leverage (which cuts both ways).. What needs to be predictable about a business is not whether someone will still do it in a long time, it's the stability of the ROIC in excess of your cost of capital (that's what a competitive advantage protects). Businesses with no moat tend toward that over the cycle, which is why when you look at long-term table analyzing the ROIC in various industries, commodities is usually the lowest with mid single digit returns. I'm trying to find a certain table that I know I saw where they show returns over long periods for various industries, probably in a Mauboussin paper... Can't find it right now, but there's good stuff in his base rate book and his roic paper: https://research-doc.credit-suisse.com/docView?language=ENG&format=PDF&source_id=csplusresearchcp&document_id=1065113751&serialid=Z1zrAAt3OJhElh4iwIYc9JHmliTCIARGu75f0b5s4bc%3D https://research-doc.credit-suisse.com/docView?language=ENG&format=PDF&source_id=csplusresearchcp&document_id=806230540&serialid=C0owv4XbV7zL%2BTQLggWqjPthH7IUpSwUZpiIwdvDgtA%3D

https://www.theverge.com/2019/1/23/18193994/youtube-tv-now-available-nationwide "Google launches YouTube TV in 95 new US markets, says it now covers 98% of US households"

New acquisition at Vela: http://velasoftwaregroup.com/vela-software-acquires-financial-risk-solutions-frs/ h/t @Pearnick

I would be surprised if we were at a top too, but it's just a feeling, as you can't really analyze commodities (well, you can, but that doesn't increase your chances of being right much -- all the smart analysis in the world could never predict the moves in the price of oil/gold/copper/whatever). My guess would be that ALS creates some value over time, but I don't have much confidence that they can compound much higher than 5-12% over longer periods (which would be an improvement over the past decade+), which doesn't make it an attractive investment when considering the alternatives. Sometimes the best way to win is not to play. That's my approach with commodities. You say it's for long-term holders, but to me it seems more like it's for short-term traders who can successfully ride cycles and benefit from volatility, or speculators who like buying lotto tickets (usually negative expected return when opportunity cost taken into account, but hey, some people do get lucky). To me, good long-term holdings have time on their side and are decently predictable, two things that commodity businesses don't have. FISV and JKHY can know with decent certainty how sticky their customers are, what margins they can sell their products to them, etc. Some miner or royalty holder can't know how much ore they'll get out, at what grade, be able to sell it at what price, what kind of cost inflations will hit its mines, and whatever it knows today, it can all change tomorrow and the commodity price can spike up or plunge down or whatever. Tough business...

https://www.marketwatch.com/story/liberty-latin-america-kills-millicom-talks-2019-01-22

Nice goats

- [ ] https://skift.com/2019/01/21/jonas-software-rolls-up-hospitality-tech-group-to-compete-against-bigger-players/

A man comes to the rabbi and complains about his life: "I have almost no money, my wife is a shrew, and we live in a small apartment with seven unruly kids. It's messy, it's noisy, it's smelly, and I don't want to live." The rabbi says, "Buy a goat." "What? I just told you there's hardly room for nine people, and it's messy as it is!" "Look, you came for advice, so I'm giving you advice. Buy a goat and come back in a month." In a month the man comes back and he is even more depressed: "It's gotten worse! The filthy goat breaks everything, and it stinks and makes more noise than my wife and seven kids! What should I do?" The rabbi says, "Sell the goat." A few days later the man returns to the rabbi, beaming with happiness: "Life is wonderful! We enjoy every minute of it now that there's no goat - only the nine of us. The kids are well-behaved, the wife is agreeable - and we even have some money!" -- traditional Jewish joke

If you read this thread, or basically any commodity business thread, you'll see that people have been saying we've been "just about to inflect higher from this temporary bottom" for many years, sometimes that was said right before another leg down (when oil went from 100 to 70, it was now cheap, and then it went much cheaper). If commodities were easy to predict, it wouldn't be such a graveyard for investors and companies, and the industry as a whole wouldn't have so much trouble barely making its cost of capital in ROIC. Commodity price movements are basically random, and commodity companies are levered to those movements and have to spend capex ahead of unknown revenues, and since there are no barriers to entry, high prices always plan the seed of low prices. Just when you start to get used to decent results, the rug is usually pulled from under your feet before you can react. Tough business...

Royalty revenue grew a lot because they spent a lot of cash for royalties. They traded cash for cashflowing assets. The question is, what will the return be on that investment over longer periods? When you have a corporation that is basically a pile of cash and non-cash flowing assets that trades a big chunk of cash (and takes up debt and sells shares) for cash-flowing assets, it's normal to see revenues "grow like a weed", especially from such a small base. But looking at that alone doesn't tell us much about value creation.

http://europa.eu/rapid/press-release_IP-19-582_en.htm

https://www.reuters.com/article/us-amazon-com-brazil/amazon-com-starts-direct-sales-of-merchandise-in-brazil-after-delays-idUSKCN1PG0AG

+1 Funny how no-one ever talks about cash drag at Berkshire. No, that’s optionality for the next downturn. Buffett has shown the ability to deploy large amounts of capital at good returns. When he was dealing with amounts similar to what Altius is dealing with, he was doing 40-50% a year, and even with hundreds of billions he's been doing pretty well. What I'm saying is that I haven't seen that out of Altius lately. And if you can't deploy the money at high returns to make up for the drag during times when the cash is sitting there, then it's a real problem.

I know the theory of buying low and selling high. I'm saying that once in a while, you have to stop looking at the theory and see if it has been working in practice. In this case, I'm not seeing anything very impressive in a long long time, ever since they were a tiny micro cap that nobody here knew about. Whether they invest more in the bottom of the cycle or not doesn't change that the cash drag impact must be taken into account, and whatever value they can add by timing things has to more than make up for years of little-to-no-returns on that cash. There are businesses out there that can consistently reinvest retained earnings year after year, and sometimes it's better to do 10-15% consistently every year than to do 20% for 1-2 years and then 4% for 5-6 years...

I was trying to nudge you in the direction of taking time into account. Multiplying a bunch of numbers together based on press releases and going "$62m!" is of little value, and it makes a big difference if they get that money over a few years or over a few decades. Not to mention that they have no control over the price of the commodity, so if lucky it'll be high, but if unlucky, it could stay low for extended periods and make the deal a mediocre one.

So you don't know. Ok.

http://reactionwheel.net/2019/01/schumpeter-on-strategy.html Nice post summarizing a bunch of concepts that we probably all know about, but I find it useful to refresh the basics over and over (if you don't, feel free to skip). Via Patrick O'Shaughnessy.

Over how long do you expect to see this $62m?