Liberty

Bloomberg interview with Ackman: http://www.bloomberg.com/news/videos/2015-02-12/pershing-s-ackman-on-pharma-deals-zoetis-activism

This tool is pretty neat (you can isolate countries in the list on the right, say, Canada and the US): http://www.economist.com/blogs/dailychart/2011/11/global-house-prices

I don't know what stats you are using but remember that averages are misleading. Average U.S. housing prices might appear cheaper but most of the cheap cities are not desirable. Anyone want to move from Toronto to Detroit, Buffalo, or Cleveland? The really desirable cities (San Francisco, LA, San Diego, NY, Miami) are expensive even after the housing meltdown. The other factor that people are ignoring is land use policies. Land is scarce in Vancouver and Toronto. In 2005, the Ontario government introduced the Places to Grow Act designed to promote intensification. This has limited the supply of single family homes (and resulted in a condo boom). Housing prices are certainly elevated but when you can control for supply constraints and interest rates, I don't know that we can be certain there is a bubble. We will only know in retrospect. I know all this. Still doesn't make sense to see housing totally disconnect form wages and inflation for so long. Do we foresee people making 60k/year buying $3-4 million houses in 10 years? Where does this stop? Either wages go up a lot to catch up, or housing comes down a lot. Because in the meantime, the delta between wages/inflation and housing has been filled with debt, and there's a limit on that too.

I'm sure people were saying that in 1998 and 1999 too. The market can stay irrational a very long time. I've always said that I have no idea about the timing of any correction or crash, just that pricing doesn't make sense, and what can't go on forever will stop at some point. In the meantime, I'm renting. All the excuses I hear about Canada being different ring hollow to me. Vancouver is not Paris or New York, Canada isn't 2x more desirable to live in than the US, our economy isn't booming, land is not scarce, our debts are incredibly high (people take out their equity through HELOCs) and now that almost everybody owns, who will the marginal buyer be, esp as boomers retire and downsize (few other investments than their homes, right?), etc. CMHC isn't some magical institution that can snap its fingers and make everything right.

http://media.gotraffic.net/images/i2lc7w7F52GA/v17/1200x-1.jpg I love that photo*. Some people are making fun of it on Twitter, but to me it reminds me of the Tom Murphy stories about painting only two sides of a building to save money, or Buffett's stories about liking managers who will count the toilet paper sheets to make sure they're not being ripped off, the stories about 3G, etc. No money wasted on low-priority stuff here! *No idea how old it is, though. Maybe it was taken right after the Biovail deal and it hasn't been like that since... It does show how the media doesn't seem to like Valeant, though, since there are many other photos of their HQ with real signs. Update: Here's the new Bloomberg piece on the possible bid: http://www.bloomberg.com/news/articles/2015-02-12/valeant-said-to-secure-salix-bid-financing-closing-in-on-offer

Housing is a very emotional purchase. When you buy stocks or bonds, you calculate your returns and (hopefully) are somewhat rational about it. Most houses aren't bought like that. People usually live in them, so there's no rent income, and they tend to be bought because "it's what you do when you reach a certain stage in your life", because "everybody I know is doing it", and because of social pressure from your mother in law or whatever. That's why I think what matters most is sentiment, and who knows what can make it turn, but I know that confidence is built over time, but lack of confidence can be very very sudden. Looking at interest rates is looking at it more rationally than most people look at it; in fact, many people now buy houses like they buy cars (stupidly), just by looking at the monthly payment rather than at the actual price + interests.

That's possible, but I don't think interest rates have to rise for sentiment to change (at least in Canada, I'm less familiar with other markets). The current oil crash could be the final nail in the coffin. Mining (esp. junior) has been depressed for a few years, and now this. That's a big chunk of the Canadian economy, and especially, a very visible chunk. Bad news are hard to ignore when you have no margin of safety (record debt levels, etc).

Interest rates are similarly low in many other places, yet houses aren't as expensive as in Canada. I think what will matter in the end is that house prices have completely disconnected from wages. People are barely able to afford housing even with the help of super low interest rates. Most people justify buying because they think prices will keep rising and 1) if they don't buy now, they'll never be able to and 2) over time they'll make money on their house. As soon as sentiment changes and people realize that trees don't grow to the sky, I think things can start to happen fairly quickly.

AXP to lose Costco exclusivity, stock down over 5% this morning: http://www.wsj.com/articles/american-express-to-lose-costco-exclusivity-1423746408 This should be good for MA and V, more transactions.

Why would it be "hard not to buy a place" when you have kids? In many countries, most people rent, and I think they still manage to reproduce.

It's not correct to give the statement like this. Market-cap weighted index funds are very hard to beat for mutual fund managers, net of fees and costs. The considerations are different for disciplined, trained and skilled individual investors. Indeed. The question is always, will I find out too late that I'm not a disciplined, trained, and skilled investor, but am actually just a schmuck pretending to be one? Heh.

The chest-puffing and self-back-patting by Canada about all this reminds me of Europe right after the subprime crisis started in the US. I remember reading Economist articles quoting European politicians gloating and saying that American capitalism was dead, the European model had triumphed, and Americans should come over to Europe to see how it's done, etc. How did that turn out?

I think that's likely correct. Canada benefited from the commodities boom while pretending that what made it get through the crisis was actually prudent citizens and institutions. It's quite clear that debt levels higher than the U.S. at its peak and houses that cost almost 2x what they cost in the US aren't exactly a prudent state to be in...

Icahn has a new letter out about Apple: http://www.shareholderssquaretable.com/letter-to-twitter-followers-regarding-apple/

Yes, good post. There are times when I wonder if I should just index everything and forget about it. I'm already mostly just holding high-quality companies for the long-term, so it's not like I'm trading a lot and puffing and discarding cigar butts with a big churn, but there's something about it being "out of your hands" that reduces stress even if ultimate results aren't as good. It's more about psychology than anything else. Not intending to do anything like that, but it's a thought that crosses my mind once in a while...

OK, I like Tim Cook. But this is facepalm worthy. "made up law"? WTH? This is stupid. Of course there are limits to which companies can grow. You cannot have more than 100% of market share. And even assuming you create new products, there's still a limit. Thinking that there isn't is pure stupidity. Except that's not what he was saying.

https://glennchan.wordpress.com/2015/02/11/ocwenaltisource-what-went-wrong/

I think they're aligned over the long-run and if you look at the whole (ie. shareholders are part of the economy). Might not always appear to be in short run because they might be counter-cyclical and avoid excesses, though. But they also don't go bust and destroy tons of capital doing stuff things that don't even earn cost of capital...

http://www.bloomberg.com/news/articles/2015-02-10/comcast-time-warner-deal-chances-improve-with-tighter-web-rules

http://ir.valeant.com/investor-relations/news-releases/news-release-details/2015/Valeant-Pharmaceuticals-Announces-Expiration-Of-Bid-Deadline-In-Connection-With-Agreement-To-Acquire-Assets-From-Dendreon/default.aspx

Live stream of Cook speaking at the GS conference: http://events.apple.com.edgesuite.net/15pibuasfvoihbeafv02/event/index.html Update: That was a very good presentation to get a feel for Tim Cook (if you haven't already). It's clear the man is very genuine, no BS, extremely competent, keeps his eye on the important things and can ignore the noise. Certainly qualities I want in a CEO.

I wonder if tender offers were considered to be different from buybacks in the open market.

That's where the nomenclature gets confusing. I was talking about Pershing as a whole, sorry for the confusion.

There's a lot of other concerns that can make different people prefer certain things, though. For example, if you are living off of your portfolio, getting dividends can make it easier to get through downturns without being forced to sell at the wrong time because you have bills to pay.

I look at PSH more as an holding company than a fund. It is true they don't have any operating business... But it is also true they concentrate their investments in just a few names they know very well and hold for the long term... To hold for the long term doesn't mean to hold "forever"... And that's why they don't have any wholly owned business. Imo they hold an investment until they see the opportunity to implement changes in order to achieve outsized returns. Then they sell and go looking for the next business that is underperforming because of mismanagent. It not clear, to me at least, which vehicle is more valuable: an holding company with wholly owned businesses, or a vehicle which is built to do what PSH does. To have a permanent stream of cash is useful indeed, but, once the business has been "fixed" incremental return on capital cannot stay as high as when changes are successfully implemented. Selling and looking for the next business which needs the same treatment, might not be a bad idea after all. :) Gio That's certainly how Ackman has been selling it, and I tend to agree with him to a certain degree, though unlike a pure holding company, he does have non-permanent capital that can flee at the worst time, he's charging fees, and he's regulated as a hedge fund. That does make a difference. When I made my comment about big funds, I was thinking of Fairholme (whether that's a fair comparison or not, they both are pretty huge), ie, big enough that it becomes harder to play in small and mid caps and move the needle.