Liberty

Even the idea for Paulson's CDS trade came from one of his analysts, not him. Now, it took lots of determination and some vision to see it through and make it happen, but one brilliant move doesn't make a track record, so I agree that we're going to see a reversion to the mean even if IMO now is too soon to tell (one bad year doesn't mean much).

I know a fair bit about solar power form the technological and environmental point of view, but not much about it from the business side. After a quick look, I was pleasantly surprised at their operating margins, low debt, and cashflow. It sounds like a capital intensive business, though, and while they might be a low cost producer now, and I can't think of what their moat would be. Might be good as a trade, waiting for it to get back to IV if it's below, but it seems risky, and not an ideal long-term holding since the future is so cloudy (no pun intended).

That's potentially very profitable. What's probably less is $X per month for 'all you can eat', on the netflix model.

This is an interesting company that is slowly making its way in the top tier of my watchlist. I can't do better than the analysis here, so I'll just link it (check out the PDF in that post): http://www.frogskiss.com/2011/10/dreamworks-animation-write-up.html My main worry is that the shift from DVDs to streaming will reduce their post-box office margins significantly... Anyone has thoughts on it?

Are you so sure that this is the case? I've read that most of the emerging countries that are doing so well because they have low debt were forced in that position because their credit was so bad they couldn't borrow. And on the individual level, savings are very high because there's basically no safety net. This obviously had tremendous benefit to them, but who's to say that under different circumstances they won't fall into the same traps as other countries... Some people seem to attribute superhuman powers to the Chinese government, but people are people and we're all vulnerable to the same problems... This time is probably not different.

I've put a hold on "Extraordinary Popular Delusions and the Madness of Crowds" at the public library. Thanks for the suggestion.

Thanks!

Looks like the backlash about the backlash has begun: http://i.imgur.com/4FRxU.png

http://www.bloomberg.com/news/2011-10-10/death-of-jobs-increases-plea-for-release-of-apple-s-76-billion-cash-tech.html

Looks like I was guessing right: http://www.bloomberg.com/news/2011-10-10/alibaba-said-to-seek-financing-from-temasek-to-buy-back-stake-from-yahoo.html

Interesting profile of Steve Jobs's biological father: http://online.wsj.com/article/SB10001424052970203499704576620911395191694.html

Good post. Close to my thinking. There's way too much pessimism. Pretty much everything that has made the US work over the past decades is still there - in fact, some problems have been removed or lessened - while most of what causes it problems right now is solvable. I think Buffett, as usual, got to the heart of the matter. When excess housing gets mopped up by the formation of new households and construction gets going going again, a lot will change. China is doing great, mostly because they are catching up to where they would have been if they hadn't been held back by Maoism, but at some point they're going to hit a significant bump in the road and the flaws in their system that people are willing to tolerate in good times won't seem as acceptable when things are going wrong. IMHO.

1) Isn't the chinese government a total control freak? The last thing they want is to completely lose control of their currency by tying it to gold. 2) China has a lot of US dollar debt, and making the US dollar lose value would hurt them a lot, so it's not in their interest.

Tesla's strategy makes a lot of sense to me (if the goal is to make electric cars more mainstream -- I'm not sure if it'll be a good business for the shareholders). When they began a few years ago, electric cars were 1) very expensive and 2) seen as unattractive glorified golf carts. Obviously you can't sell a golf cart at a high price. So they changed the image of the electric car in the popular mind to show that it can be fast and sexy and attractive. This meant that enough rich early adopters were ready to pay for their first car, though the 2008-2009 recession put a serious dent in that plan. But even Bob Lutz of GM has said that it was Tesla that changed his mind about electric cars and that the Volt wouldn't have happened without Tesla. And now Ford, Nissan, etc, are coming out with EVs. Their goal is to start upmarket, and as costs go down and the technology improves, to progressively go downmarket. So their first car is 100k+ and very niche. Their second car, the Model S, is closer to 50k and more attractive to a larger audience (a more practical sedan). They'll also make a Model X Crossover SUV on the Model S platform. Their third platform should be around 30k, which is very inexpensive if you factor in lower fuel costs and potential tax rebates. Like cell phones and computers and all kinds of other technologies, at first it's expensive and doesn't quite have all the features people want, and as time goes on the price drops and the performance increases. I can't think of a better business model for a startup electric car company (and at the time they started, no big car company was planning to commercialize EVs)... Personally, I don't really see a parallel between Musk and Jobs. But I think he could turn out to be a kind of Tesla or Edison (especially if SpaceX keeps going on the way it's going right now -- I mean, he's the lead designer on space rockets!).

Two points: 1) It's not because something happens in a system that works that the result is good. Natural selection makes us die of the diseases of old age because these happen in an evolutionary blind spot (for most of humanity's existence, people didn't live that old, so there was no selective pressure). In the same way, if capitalism allocates resources to unproductive areas, that doesn't make it good. 2) What we have is a man-made system, not some platonic ideal of capitalism. In an alternate history where there were slightly different rules for the markets and for businesses, the current bloated financial sector that doesn't produce much value and attracts a lot of our best brains wouldn't be the same at all, so it's not like it's an untouchable edifice carved in stone. I'm no expert in those areas, but let's say that the rules said that a lot more collateral was required for most derivatives, and that HFT funds had to pay X cents per share that they hold for less than Y amount of time, a lot of things would change, and our civilization would probably do better, not worse.

Good points, and I don't know enough about Ackman to know how he's 'wired' and what his skills are, but I know that a lot of people with physics and advanced math backgrounds end up in finance, devising complex derivatives and programming quant software... To me that's mostly a waste for our civilization. Buffett is a good example of someone who's pretty specialized in capital allocation, but many other extremely smart people could just as easily have studied engineering or biology at MIT.

Did he work for CNN? afaik he's retired..

I don't know much about MBIA, but I'll check it out. The man seems brilliant, and if I only get one good idea out of it, it'll be worth it. The only thing that makes me sad is that our civilization creates so much incentives for people as smart as Ackman is to become hedge fund managers rather than cancer researchers or engineers working on ultracapacitors or whatever. The world would be a better place if more brainiacs worked in science rather than finance...

Isaacson's biography of Ben Franklin was amazing. I can't wait to get my hands on this one, even if I'm very sad at the circumstances :-[

If you're interested by Elon Musk you gotta watch this: He responded to a couple dozens of questions from the reddit.com crowd. Very interesting stuff. He's a real renaissance man. Edit: Bloomberg also had a good profile of Musk: http://www.bloomberg.com/video/73460184/

All I'm saying is that it's possible that FTP was undervalued at 50, but that because it went to 25 or whatever and became ridiculously cheap, that anything much above that now feels expensive because we've anchored on the new low price. http://en.wikipedia.org/wiki/Anchoring Personally, I think Chad makes FTP a potential very long-term holding, not just a cigar butt that I'll dump when it reaches close to whatever the current IV is (I don't really invest in cigar butts anyway). This is a case where I'm mostly interested because of the owner-manager, and the same assets with a run-of-the-mill CEO wouldn't get a second look from me. There are many other factors, but this is an important one...

http://money.cnn.com/video/news/2011/10/05/n_buffett_full.cnnmoney/ Guess he did that one at the end of his media tour, because he seems a bit more tired, and CNN's crew just isn't as good as some of the others somehow (it seems a bit off -- the interviewer isn't that grew, camera angles.. I dunno, I don't like it much).

Very good post, <IV. That's why I make big efforts not to anchor too much on a single 'ideal' price. Buffett has said that he used to be too price sensitive - holding prayer meetings before raising the bid by 1/8 - and that it made him lose billions on things like Wal Mart. I try to be a long-term investor, and there are very few businesses that pass my criteria checklist. So when one of those is selling much below what I think is IV, I try to remember that in 5 years it might not matter that much whether my average cost was 30 or 33, what will matter is if I decided to make a big enough move when I saw that value was available. This might be less of a problem for someone with a different criteria checklist and more businesses that they are willing to invest in.. But my top tier list is awfully short.

Thanks Tom!

I know trying to time things in the short term is always dangerous, but if you really want to get in, keep in mind two short-term catalysts: Thurso starting to ship DP and a new acquisition, most likely at Level-sur-Quevillon. When either of those happen, it would be very surprising to see the stock not go up a fair amount, because any of those two things would remove a lot of uncertainty about either the capacity of Thurso to ship DP or about the capacity of management to repeat the great deal that they got on Thurso. Latest news are that DP should start shipping in "early November", and most of the signals out of LSQ are that a deal could be announced in the "coming weeks". Who knows what will actually happen, though...