Links

Sequoia Fund defends Valeant, its largest holding (LINK)

John Hempton [other side of the trade from Sequoia]: Comments on the blockbuster Valeant conference call (LINK)

How to Say “No” When It Matters Most (or “Why I’m Taking a Long ‘Startup Vacation'”) - by Tim Ferriss (LINK)

Book of the day (which I was reminded of after a recent re-read of Michael Mauboussin's paper, "Size Matters," where he mentioned the book having "a good discussion of how to understand odds"): Getting the Best of It

Follow-Up: Downloading Earnings Calls

A couple of years ago, I had brought up this topic HERE. Sometimes calls allow one to save as an MP3 file, and sometimes they don't. I am not too tech savvy, so I don't know why. Earnings Cast allows one to download a lot of them, which has been useful. The system I use for those that are available is to download them (you often have to change the name of the file from .m4a to .mp3), put them into Dropbox and then use the view offline feature in the Dropbox app to download them to my phone so that I can listen to them without using data.

But a lot of small-cap and international company replay calls that I'd like to download instead of listening to them on the computer or calling in I still can't figure out. So, if a company streams its replays, does anyone know how to save those audio streams as MP3 files? One example I can think of would be a company like Constellation Software: http://www.csisoftware.com/investor-relations/webcasts/

If you have any insight, please send me an email: valueinvestingworld@gmail.com

Thanks.

Links

Today's Audible Daily Deal looks like a good one for those seeking worldly wisdom ($4.95): Periodic Tales: A Cultural History of the Elements, From Arsenic to Zinc [I'm also nearly finished with a similar book, Stuff Matters, which was a Bill Gates recommendation and is a worthwhile read or listen. And one more similar one in my listening queue is The Disappearing Spoon.]

Jason Zweig on the Fireside Markets podcast (LINK)

Related book: The Devil's Financial Dictionary

1994 article from Jason Zweig on Phil Carret: Buy ‘em Cheap and Hold ‘em (LINK)

Related book: A Money Mind at 90

The new Hardcore History episode is available (LINK)

Often relegated to the role of slavish cannon fodder for Sparta’s spears, the Achaemenid Persian empire had a glorious heritage. Under a single king they created the greatest empire the world had ever seen.

Metaphors and Mental Models: The Key to Understanding (LINK)

Heuermann Lecture: Howard G. Buffett and Howard W. Buffett (video) [H/T ValueWalk] (LINK)

Related book: 40 Chances

Back to the Future: A 100x Perspective - by Chris Mayer (LINK)

Related book: 100 Baggers

Ian Morris' lecture at the LSE (audio) (LINK)

In the last 50 years, knowledge of archaeology, anthropology, history, evolution, genetics and linguistics has exploded. A new synthesis of history is emerging, suggesting that people are all much the same and the societies we create all develop in much the same ways. What varies is the places in which societies develop. Biology and geography have driven a 150,000-year story of cooperation and competition. By projecting forward the patterns of the past and the forces that disrupt them, we can begin to see where the 21st century might take us. 

Steven Johnson lays out the coming arms race in superintelligence (LINK)

Related book: Superintelligence

The Invention of Pad Thai (LINK)

A Genomics Revolution: Evolution by Natural Selection to Evolution by Intelligent Direction (LINK)

Book of the day: Evolving Ourselves: How Unnatural Selection and Nonrandom Mutation are Changing Life on Earth

Links

A good article from Mohnish Pabrai, 13 years ago: Buffett Succeeds at Nothing

Michael Mauboussin: Common Investor Biases and Where They Come From [H/T ValueWalk] (LINK)

Kyle Bass on China's looming banking crisis and the U.S. economy (LINK)

The Increasingly Crowded Unicorn Club In One Infographic (LINK)

This Heroic Captain Defied His Orders and Stopped America From Starting World War III [H/T @TimHarford] (LINK)

What Does the WHO Report Mean for Your Meat-Eating Habit? (LINK)

Richard Dawkins talks with Robert Krulwich at the 92nd Street Y

Discussing his latest book, Brief Candle in the Dark , and many other things (for more related books, see HERE).


Link to video

Links

Transcript of the chat between Sanjay Bakshi and Shane Parrish (LINK)

Transcript of the FRMO Corporation Annual Meeting of Shareholders (LINK)

Fred Wilson: Software Is The New Oil (LINK)

It makes sense to me that software is the oil of the information revolution. Companies that control the software infrastructure of the information revolution will sit back and collect the economic surplus of the information revolution and that will be a path to vast wealth and economic power. It has already happened but I think we are just beginning to see the operating leverage of these software based business models. The capex spending necessary to be a software infrastructure provider at scale has shielded the cash producing power of these companies (and many others) and may continue to do that for a time, but I suspect at some point the profits are going to overtake the capex at a rate that the cash will be flowing out of software companies the way that oil flows out of wells.

A nice chat with Malcolm Gladwell about writing [H/T The Waiter's Pad] (LINK)

Book of the day: Invisible Giants: The Empires of Cleveland's Van Sweringen Brothers

Links

Nassim Taleb on the success of Munger-Buffett (LINK)

So I figured out something about the success of Munger-Buffett. It is not in the strategies they run, but in their very, very, very strong filtering.  

Simply it is generalized flaneuring. Charlie Munger: "We have no system for estimating the correct value of all businesses. We put almost all in the "too hard" pile and sift through a few easy ones". "Warren (Buffett) talks about these discounted cash flows. I've never seen him do one".

Related previous posts to the above: 1) Filters; and 2) Memortation, or One Way to Put What You Learn to Practical Use

And Peter Bevelin also shared some wisdom in this regard in my interviews with him:

I found that I could increase my chance of making better judgments if I could learn what works and not, if I adapt what I do to my personal situation, and if I could establish some values and preferences. If I then could set up some avoid-rules and filters/tests to judge what make sense or is important or not, life could be improved (even if I still do some mistakes; but hopefully I am less of a fool now). Also remember that all decisions aren’t important. Some people spend more time making a judgment on what TV to buy or where to go on vacation than a life-changing decision like marriage. 

..... 

Generally, keep it simple and use some filters. Some questions I ask myself: Is it important? If yes, is it knowable? If yes, is this within my circle of competence? Which of course assumes that I know what I know and can do, and what I don’t know and can’t do. Otherwise I exclude and throw it in to too hard pile. If within, then, any testable argument should be tested – What is the evidence? Can I disprove it? Compared to what (including negative cases and non-events)? Randomness content? If I believe this, what would follow? What would I have to check out? What ideas can help me?

A Dozen Things Learned from Charlie Munger about Ethics (LINK)

Great investor videos from the team at BeyondProxy [H/T csinvesting] (LINK)

The Best Value Traps (LINK)

Valeant Case Study in Progress (LINK)

Hussman Weekly Market Comment: How Market Cycles Are Completed (LINK)

Even in periods where interest rates have been quite depressed, not a single market cycle in history failed to end with estimated prospective 10-year S&P 500 returns close to 10% annually, if not dramatically higher. Based on the most historically reliable valuation measures, the S&P 500 would have to lose literally half of its value for prospective returns to rise to that level. A 50% market loss isn’t a worst-case scenario. Given current valuations, it’s the standard, run-of-the-mill outcome that investors should expect over the completion of this cycle. 

The measures we find most strongly correlated with actual subsequent S&P 500 total returns now project zero total returns for the S&P 500 on a 10-year horizon, and about 1% annual nominal total returns for the index on a 12-year horizon.

Paul Graham: Write Like You Talk (LINK)

Laszlo Bock on Charlie Rose discussing his book, Work Rules! (video) (LINK)

Neil deGrasse Tyson talks to the WSJ [H/T Will] (video) (LINK)

9 Learnings from 9 Years of Brain Pickings (LINK)

Howard Marks Memo: Inspiration from the World of Sports

Link to Memo: Inspiration from the World of Sports

I’m constantly intrigued by the parallels between investing and sports. They’re illuminating as well as fun, and thus they’ve prompted two past memos: “How the Game Should Be Played” (May 1995) and “What’s Your Game Plan?” (September 2003). In the latter memo, I listed five ways in which investing is like sports: 

·  It’s competitive – some succeed and some fail, and the distinction is clear. 

·  It’s quantitative – you can see the results in black and white.  

· It’s a meritocracy – in the long term, the better returns go to the superior investors. 

·  It’s team-oriented – an effective group can accomplish more than one person. 

·  It’s satisfying and enjoyable – but much more so when you win. 

Another angle on the investing/sports analogy has since occurred to me: an investment career can feel like a basketball or football game with an unlimited number of quarters. We may be nearing December 31 with a substantial year-to-date return or a big lead over our benchmarks or competitors, but when January 1 rolls around, we have to tackle another year. Our record isn’t finalized until we leave the playing field for good. Or as Yogi Berra put it, “It ain’t over till it’s over.” It was Yogi’s passing in late September that inspired this memo.

Links

How Tom Wolfe Became … Tom Wolfe - by Michael Lewis [H/T Phil] (LINK)

The last voyage of the cargo ship El Faro [H/T Phil] (LINK)

What to Read in Investing? Lesson from A 2,000-Year-Old Stoic Philosopher (LINK) [I have done the same thing as Vishal has in this regard: "As years have passed, I have turned from trying my hands at speed reading – acting like Holmes’ fool who takes in all the lumber of every sort that he comes across – to slow, thoughtful reading and re-reading."]

How Amex Lost Costco (LINK)

Aswath Damodaran on the ABInBev/SABMiller Merger (LINK)

Paul Tudor Jones On Advice He Would Give To His 18 Year-Old Self (video) (LINK)

Distinctions and Differences (LINK)

Two thirds of antibiotics are needlessly prescribed [H/T Chris] (LINK)

A Brief History of U.S. Dietary Guidelines (LINK)

William Thorndike: "The Outsiders" | Talks at Google

Link to video

..................

Book: The Outsiders: Eight Unconventional CEOs and Their Radically Rational Blueprint for Success

Theory-structure as a superpower...

I've mentioned it before, but I think it is one of the most important quotes from Charlie Munger in showing why the latticework of mental models can be so powerful, so I thought I'd post it again after the most recent re-read. It is from his talk "The Psychology of Human Misjudgment" in Poor Charlie's Almanack:

When I started law practice, I had respect for the power of genetic evolution and appreciation of man’s many evolution-based resemblances to less cognitively-gifted animals and insects. I was aware that man was a “social animal,” greedy and automatically influenced by behavior he observed in men around him: I also knew that man lived, like barnyard animals and monkeys, in limited size dominance hierarchies, wherein he tended to respect authority and to like and cooperate with his own hierarchy members while displaying considerable distrust and dislike for competing men not in his own hierarchy. 

But this generalized, evolution-based theory structure was inadequate to enable me to cope properly with the cognition I encountered. I was soon surrounded by much extreme irrationality, displayed in patterns and sub patterns. So surrounded, I could see that I was not going to cope as well as I wished with life unless I could acquire a better theory-structure on which to hang my observations and experiences. By then, my craving for more theory had a long history. Partly, I had always loved theory as an aid in puzzle solving and as a means of satisfying my monkey-like curiosity. And, partly, I had found that theory-structure was a superpower in helping one get what one wanted. As I had early discovered in school wherein I had excelled without labor, guided by theory, while many others, without mastery of theory, failed despite monstrous effort. Better theory, I thought, had always worked for me and, if now available, could make me acquire capital and independence faster and better assist everything I loved. 

Links

If you have haven't listened to Shane Parrish's interview with Jason Zweig yet, I highly recommend it. Jason mentions a number of great books (fiction and nonfiction) in his interview, which can be found in the show notes. For those that are interested in audio versions, you can get the Crime and Punishment audio for pretty cheap if you're interested in that one by buying the Kindle version first for $0.99. Once you own the Kindle version, you can then download the Audible version for $2.99 (there is a box you can check when buying the Kindle version to buy both at the same time). 

Warren Buffett’s Lucky Millionaires Club (LINK)

Elizabeth Holmes Discusses Theranos at WSJDLive 2015 (video) (LINK)

Pershing Square's Bill Ackman Buys Two Million Valeant Pharmaceuticals Shares Amid Plunge (LINK)

John Kay discusses his latest book, Other People's Money: The Real Business of Finance (audio and podcast) (LINK)

TED Talk - Jennifer Doudna: We can now edit our DNA. But let's do it wisely (LINK)

Genetics probe identifies new Galapagos tortoise species (LINK)

A New Thermodynamics Theory of the Origin of Life [H/T James] (LINK)

Links

Nassim Taleb - The Most Stubborn Wins: The Dominance of the Minority (LINK)

Latticework of Mental Models: The Power Law (LINK)

Negative Gross Margins (LINK)

The Individual Investor’s Edge (LINK)

John Hempton: Some comments on the Valeant conference call (LINK) [The stock was also halted earlier today as it took a nose-dive.... Some well-known investors that have this as a huge position, as of the end of Q2, may have some explaining to do.]

Leithner Letter Nos. 192-195 (Part 1, Part 2)

Claire Barnes' Q3 Report: Tides and tsunamis (LINK)

Tectonic plate shifts have far-reaching consequences that are hard to time or predict: as with geology, so with geopolitics. The great realignment now under way in the Middle East and worldwide may have momentous consequences. Many people seem oblivious to the dangers, and to the need to discriminate between news and propaganda. There is much talk in the investment world of innovation, and much excitement about powerful disruptors - but perhaps too much in the context of new technologies, and too little in relation to political and military strategy. We too spend a lot of time thinking about innovation and potential disruptors in the context of business models, but try not to be so focussed on our own sandcastle that we fail to notice incoming tides and occasional tsunamis. 

In the event of an approaching tsunami it may be advisable to run for the hills - if the hills themselves remain stable, and not too far undermined or overloaded. Another option is to head for deep water and float. In this world of rapid and interconnected change, traditional safe havens may be unavailable. Neither bonds nor bank deposits now offer safety, and a new War on Cash seeks to block savers fleeing in that direction. (The unintended consequences of this may well cause as much disruption to efficiency as the closure of physical borders.) We have no great confidence about price performance, but are more concerned about optimising our chances of preserving purchasing power and minimising the risks of permanent loss: in this context a portfolio of carefully chosen equities still seems a relatively attractive option.

Poo turns naked mole rats into better babysitters (LINK)

100-baggers since 1962...

Some interesting stats and thoughts from Chris Mayer in his book 100 Baggers: Stocks That Return 100-to-1 and How To Find Them:

There are 365 stocks that have met our 100-bagger threshold since 1962. 

The 100-bagger population seems to favor no particular industry. There are retailers, beverage makers, food processors, tech firms and many other kinds. The only thing they seem to have in common is the subject of the study: they returned at least 100 to 1. 

It’s also worth considering the size of these companies when they started their march. Now I hesitate to make generalizations from the statistics, as I’ve said. And that’s why my focus is more on anecdotal evidence and the ideas or theories behind 100-baggers. With that warning, I’ll add that the median sales figure for the 365 names at the start was about $170 million and the median market cap was about $500 million. 

That’s interesting on two levels: One, it dispels a myth that to get a 100-bagger you have to start with tiny companies. True, these are small companies. But $170 million in sales is a substantial business in any era. It’s not a tiny 50-cent stock with no revenues or barely any revenues. 

Secondly, these figures imply a median price-to-sales ratio of nearly three, which isn’t classically cheap by any measure. Going through these 100-baggers, you’ll find stocks that looked cheap, but more often you find stocks that did not seem cheap based on past results alone. 

So you must look forward to find 100-baggers. You have to train your mind to look for ideas that could be big, to think about the size of a company now versus what it could be. This doesn’t mean you have to have a huge market to address, although that helps. Even a small company can become a 100-bagger by dominating a niche. Polaris was a 100-bagger and makes snowmobiles. 

Despite occasional exceptions, you do want to focus on companies that have national or international markets. Far more common than niche companies on the 100-bagger list are companies such as Comcast, Aflac, Dollar General, ADP and Lockheed Martin. These companies came to dominate big spaces, though they all started small. 

In 1982, Aflac had just $585 million in sales. By 2002, by which time it was a 100-bagger, Aflac had sales of $10.2 billion. Aflac’s price-to-sales ratio, by the way, went from about 1.7 to 5.4. So, you had the twin engines: sales growth and multiple growth. Sales went up roughly 17-fold and the price-to-sales ratio went up roughly 3-fold. In combination, and including reinvested dividends, they worked the stock up a hundredfold. Even if we exclude the dividends, Aflac became a 100-bagger two years later, in 2004. 

Another interesting chart to look at concerns how long these stocks took to become 100-baggers. The average time was 26 years. That was also the median.

Links

Shane Parrish talks to Jason Zweig in the latest The Knowledge Project podcast (LINK)

Related book: The Devil’s Financial Dictionary

Rationally Speaking podcast with Phil Tetlock [H/T @jasonzweigwsj] (LINK)

Related book: Superforecasting: The Art and Science of Prediction

Jim Chanos' Grant’s Conference presentation (LINK)

An interview with Eric Schmidt [H/T Matt] (LINK)

There is a size at which companies begin to fall in on themselves. Google has done well because the founders are so talented and brilliant. Google, Amazon, Facebook — they all have strong founders and leaders. Steve Jobs thought Google was doing too many things. 

We spent two years arguing about whether we should change the logo. Our mission is to organize all the world’s information. The three of us visited Warren Buffett in Omaha. Alphabet is an attempt to build a holding company like Berkshire Hathaway out of an existing operating company. It’s never been done before. 

We didn’t even know how many Alphabet companies there would be. Google Life Sciences will be one. Calico, Google Fiber. 

We’re trying to push the Alphabet companies to be separate companies, not divisions. Warren Buffett loves to hire people who would run the companies whether he hired them or not.

Links

Yuval Harari on EconTalk (LINK)

Related book: Sapiens: A Brief History of Humankind

Why Americans Don’t Trust the Fed - by Roger Lowenstein (LINK)

Related book (comes out tomorrow): America's Bank: The Epic Struggle to Create the Federal Reserve

a16z Podcast: Dell + EMC — Why the Python Just Ate the Cow (LINK)

Winner Takes Most (LINK)

Hoisington Quarterly Review and Outlook, Third Quarter 2015 (LINK)

Hussman Weekly Market Comment: The Hinge (LINK)

It’s not Fed easing itself that supports the market. What matters is the risk-seeking behavior of investors. Fed easing can contribute to that, but the two do not overlap nearly as well as investors seem to believe. The Fed eased repeatedly during the 1981-82 bear market, the 2000-2002 plunge, and the 2007-2009 collapse. Fed easing simply does not provide reliable support for the market once investors become risk-averse, because in that environment, low-interest but safe liquidity is a desirable asset rather than an inferior one. 

... 

The latest QE bubble has not only been reckless, it has been senselessly encouraged by blithe central bankers who seem concerned about neither speculative risks, capital misallocation, nor the fact that their policy tools have no meaningful historical correlation with their primary policy targets. The Fed might as well be using a Ouija board as a policy tool. While Ben Bernanke’s new book, The Courage to [Violate the Federal Reserve] Act reflects the self-important delusion that Fed action ended the global financial crisis, the fact is that Fed-induced yield-seeking speculation had a much greater role in causing the crisis than any other factor, by feeding demand for mortgage securities – regardless of the creditworthiness of the borrowers – and fueling a housing bubble. 

As the bubble collapsed, banks and other financial institutions plunged toward insolvency, as losses on mortgage-backed securities dragged the assets on their balance sheets toward - or below - the value of the liabilities they owed to depositors and bondholders. The crisis effectively ended with the stroke of the pen by the Financial Accounting Standards Board. That happened on March 16, 2009, when the FASB announced its intention to abandon mark-to-market rules, in response to Congressional pressure by the House Committee on Financial Services on March 12, 2009. The final vote was on April 2, 2009. Read those links, and the reality of what happened will become clear. The decision gave banks and other financial institutions “significant judgment” in the values that they assigned to assets, rather than booking them at market value. With that discretion, financial institutions could use cash-flow models (“mark-to-model”) to instantly transform previously insolvent balance sheets to solvent ones. They immediately did just that, and in hindsight, regulators went along with it.

Links

An Interview with Bill Gates on the Future of Energy (LINK)

A Dozen Ways Charlie Munger Thinks like Philip Tetlock Suggests in his New Book Superforecasting (LINK)

Related book: Superforecasting: The Art and Science of Prediction

Horizon Kinetics: 3rd Quarter 2015 Commentary (LINK)

Presentation from Hewitt Heiserman: Ben Graham and the Growth Investor (LINK) [H/T Chris Mayer]

100 Baggers in India (LINK) [H/T Chris Mayer]

Links

The WSJ has written a couple of critical articles on Theranos, HERE and HERE. Theranos responded with a statement HERE. Elizabeth Holmes was also on CNBC discussing things HERE.

Bethany McLean talks to Felix Salmon about Fannie and Freddie, and her book Shaky Ground: The Strange Saga of the U.S. Mortgage Giants [H/T Abnormal Returns] (LINK)

Aswath Damodaran on the Ferrari IPO (LINK)

Niall Ferguson on Charlie Rose discusing his latest book, Kissinger: The Idealist (video) (LINK)

Malcolm Gladwell's latest article, on school shootings (LINK)

Elon Musk and Y Combinator President Sam Altman on Thinking for the Future

Link to video

Links

What They Don’t Teach You in Business School (LINK)

Thoughts on Fastenal (LINK)

Bill Miller on CNBC (videos) [H/T ValueWalk] (LINK)

Paul Graham: Default Alive or Default Dead (LINK)

The Upside of Having to Pee - by Jonah Lehrer (LINK)

When Prime Minister David Cameron is giving an important speech, or in the midst of difficult negotiations, he relies on a simple mental trick known as the full bladder technique. The name is not a metaphor. Cameron drinks lots of liquid and then deliberately refrains from urinating, so that he is “desperate for a pee.” The Prime Minister believes that such desperation comes with benefits, including enhanced clarity and improved focus. 

.....

This new study suggests that the discrepancy depends on timing. When self-control tasks are performed sequentially, such as resisting the urge to eat a cookie and then working on a tedious puzzle, the ego gets depleted; the will is crippled by its own volition. However, when two self-control tasks are performed at the same time, our willpower is boosted: we perform better at both tasks. “We often do not realize the many situations in our daily lives where we’re constantly exerting self control and how that affects our capacity,” wrote co-author Iris Blandón-Gitlin in an email. “It is nice to know that we can also find situations where our mental resources can be facilitated by self-control acts.” 

There are some obvious takeaways. If you’re trying to skip dessert, then you should also skip the bathroom; keep your bladder full. The same goes for focusing on a difficult activity  – you’re better off with pressure in your pants, as the overlapping acts of discipline will give you even more discipline. That said, don’t expect the mental boost of having to pee to last after you relieve yourself. If anything, the ego depletion effect might then leave you drained: All that willpower you spent holding it in will now hold you back.

Teeth from China reveal early human trek out of Africa (LINK)

Book of the day [H/T to the friend who recommended I listen to the LSE podcast with Trott]: One Plus One Equals Three: A Masterclass in Creative Thinking

Investing quote of the day: "There are ways of looking for stocks that take advantage of specialization and of these human tendencies to buy lottery ticket stocks, which investors do because they think they know more than they do. We are refining valuation methodologies all the time by carefully looking at and thinking about what outstanding practitioners like Warren Buffett do and integrating that into consistent, remarkably effective strategies." -Bruce Greenwald

The cost of self-indulgence...

From Phil Fisher in Common Stocks and Uncommon Profits:

...there is a complicating factor that makes the handling of investment mistakes more difficult. This is the ego in each of us. None of us likes to admit to himself that he has been wrong. If we have made a mistake in buying a stock but can sell the stock at a small profit, we have somehow lost any sense of having been foolish. On the other hand, if we sell at a small loss we are quite unhappy about the whole matter. This reaction, while completely natural and normal, is probably one of the most dangerous in which we can indulge ourselves in the entire investment process. More money has probably been lost by investors holding a stock they really did not want until they could “at least come out even” than from any other single reason. If to these actual losses are added the profits that might have been made through the proper reinvestment of these funds if such reinvestment had been made when the mistake was first realized, the cost of self-indulgence becomes truly tremendous.

..................

Related excerpt from Tren Griffin in Charlie Munger: The Complete Investor:

The deprival super-reaction tendency is more commonly called loss aversion, and it can cause investors to irrationally avoid risk when they face potential for gain, but irrationally seek risk when there is a potential for loss. In other words, people tend to be too conservative in seeking gains and too aggressive in seeking to avoid losses. The most important point to remember about this tendency is that it causes investors to do things like sell stocks too early and hold on to them for too long. It is very common for investors to hold on to losing stocks in the hope that somehow the price will rise and they will somehow break even.

Warren Buffett at Fortune's Most Powerful Women Summit 2015

Link to video


[H/T ValueWalk]

Links

Fall 2015 Issue of Graham & Doddsvile (LINK)

The new issue features Alex Sacerdote of Whale Rock Capital, Ed Bosek of BeaconLight Capital, Jane Siebels of Siebels Asset Management Research and the team at Global Endowment Management.  It also features three investment ideas from CBS students.

Warren Buffett expected to win over regulators on reinsurers (LINK)

Intermediary Influence and Competition: Berkshire versus KKR - by Lawrence A. Cunningham (LINK)

Tim Harford: Should we trust the young Turkers? (LINK)

Fred Wilson on the book The Prize (LINK)

The Tim Ferriss Way: Life Is a Choose-Your-Own-Adventure Game (LINK)

Hunter S. Thompson on Living versus Existing (LINK)

Links

In case you haven't bought your copy yet, I just noticed that Chris Mayer's latest (and excellent) book is now available on Amazon (I think it started as only being available through Agora): 100 Baggers: Stocks That Return 100-to-1 and How To Find Them

And speaking of Chris Mayer, I know he's liked Nobilis Health (HLTH) fairly recently, and it has gotten beaten up over the last couple of days due to fraud allegations that were posted on Seeking Alpha (HERE). The company has responded HERE. I don't know anything about it yet, but it may be an interesting situation to look into.

Ken Feinberg talks to Barry Ritholtz on the Masters in Business podcast (LINK)

Piketty Versus Kuhn. The Debate Over a New Economic Paradigm - by George Cooper (LINK)

Related book: Money, Blood and Revolution

An excerpt from Niall Ferguson's book on Henry Kissinger (LINK)

Ferguson also had an opinion piece in the WSJ: The Real Obama Doctrine (LINK)

What Really Killed the Dinosaurs? (LINK)

Quote of the day, from Seth Klarman, 7 years ago this month as the crisis in 2008 was continuing its downward spiral:

In terms of our firm, I tried so hard to learn the lessons of 1998 in particular, which were: Don’t be unprepared for something out of the blue that’s really bad.  

To some extent, we were prepared this time.  However, you can never be prepared enough.  We had a lot of macro protection in terms of credit default protection on bonds where we were just betting that credit spreads would widen. That’s been incredibly helpful.  But we’ve gotten really tired of buying market puts, or anything like that, because they inevitably are expensive and expire worthless.  

So as an investor, you have terrible trade-offs.  Do you overpay for insurance — or do you go uninsured? That’s just one of those dilemmas for which there are really no perfect answers.

Links

A Dozen Things Learned from Charlie Munger about Moats (LINK)

Why Falling Oil Prices Startled MLP Investors - by Jason Zweig (LINK)

John Burbank warns of liquidity crisis (LINK)

The Manual of Ideas interview with MIT Investment Management Co. [H/T @jasonzweigwsj] (LINK)

Fred Wilson | Talks at Google (video) (LINK)

Hussman Weekly Market Comment: Not The Time To Be Bubble-Tolerant (LINK)

In this environment, we cringe to see analysts explaining the recent bounce by saying that the market cannot suffer extreme losses once short-term conditions become oversold and bearish sentiment increases (oversold conditions have cleared in recent weeks anyway, on enthusiasm that economic weakness will tie the Fed’s hands). Even if this explanation seems to have been true in recent weeks, it is emphatically not reliable more generally. The most severe market losses in history – for example, 1973-74 and 2008 – occurred despite persistently oversold conditions and bearish sentiment that far exceeded bullish sentiment. Analysts forget that the 2000-2002 and 2007-2009 collapses occurred in an environment of persistent and aggressive Fed easing. These analysts are making a version of the mistake that we made in this cycle prior to mid-2014, and it’s a dangerous one: placing greater priority on overextended market conditions than on measures of investor risk-preferences.

Book of the day: Work Rules!: Insights from Inside Google That Will Transform How You Live and Lead

Links

A transcript of Sanjay Bakshi's latest talk (LINK)

Stock Certificate Signed in 1956 by Warren Buffett Offered at Auction [H/T Linc] (LINK)

Howard Marks on Bloomberg from a few days ago (videos) [H/T ValueWalk] (LINK)

"All prudent investing starts from reasonable expectations." 

"The best defense against illiquidity is not needing it...not needing liquidity. It's buying things you can hold for a long period of time."

Pluto's Sky Is Blue! Well, Kinda. (LINK)

Thomas Russo: "Global Value Investing" | Talks at Google

Link to video

Links

The Collected Wisdom of Seth Klarman (via Santangel's Review) (LINK)

The rest of the questions I answered for the great team over at ValueWalk (LINK)

Buffett builds rail superhighway to grab truck freight [H/T Linc] (LINK)

Why Michael Lewis Likes Tech Bubbles (video) [H/T Linc] (LINK)

Learning from the Past, Part 6 (LINK)

Ben Bernanke on Charlie Rose talking about his book, The Courage to Act: A Memoir of a Crisis and Its Aftermath (video) (LINK)

Carol Revisits the 'Growth Mindset' [H/T The Browser] (LINK)

Related book: Mindset: The New Psychology of Success

5 questions with Stephen Hawking [H/T Daniel] (LINK)

Researchers modify more than 60 pig genes in effort to enable organ transplants into humans (LINK)

Book of the day [H/T @ChrisMayerAgora]: The King of California: J.G. Boswell and the Making of a Secret American Empire

Links

Today's Audible Daily Deal looks interesting ($2.95): So You Want to Start a Brewery?: The Lagunitas Story

Latticework of Mental Models: Alternative Histories (LINK)

Influencer Interview: Bill Ackman (video) [H/T Will] (LINK)

Berkshire's Abel Targeted by Pilots Union Over Board Secrecy [H/T Will] (LINK)

The latest in the 'Under the Hood: What’s in Your Index?' series from Horizon Kinetics: How to NOT Invest in the Dynamism of Emerging Markets: Through Your Emerging Markets ETF (LINK)

Scott Adams' Explanation of Trump’s Persuasion Skills (among other things) (video) (LINK)

Daniel Kahneman on confidence

From Don't Blink! The Hazards of Confidence:

“The confidence we experience as we make a judgment is not a reasoned evaluation of the probability that it is right. Confidence is a feeling, one determined mostly by the coherence of the story and by the ease with which it comes to mind, even when the evidence for the story is sparse and unreliable. The bias toward coherence favors overconfidence. An individual who expresses high confidence probably has a good story, which may or may not be true.”

..........

This also reminded me of something Peter Bevelin mentioned in one of my interviews with him:

On the other hand, when reading, we must constantly watch out for the sensemaking trap (19 in my book) since we are so easily influenced when we are told stories or given information in a “story-format.”

Links

I answered a few questions for the great team over at ValueWalk (Part 1)

Outsiders in chemicals, the story of Rockwood Holdings (LINK)

Buybacks and Debt (LINK)

The share buyback mirage (LINK)

Under the Radar: Bank Executives Not Aware of Key Fintech Startups (LINK)

Now on Audible: The Money Game

TED Talk - Siddhartha Mukherjee: Soon we'll cure diseases with a cell, not a pill (LINK)

Related books:  

The Laws of Medicine: Field Notes from an Uncertain Science 

The Emperor of All Maladies: A Biography of Cancer [PBS also did a documentary based on this book, HERE.]

Links

For those interested, this course from The Great Courses has been recommended to me by a wise man, and it seems like a good Charlie Munger/worldly wisdom type of course (the video download version is currently on sale for $109.95): The Origin and Evolution of Earth: From the Big Bang to the Future of Human Existence -- Professor Robert M. Hazen

Another interview with Tren Griffin about his book on Charlie Munger [H/T Linc] (LINK)

Ben Bernanke was on CNBC talking about his book, which was released today: The Courage to Act: A Memoir of a Crisis and Its Aftermath

Operant Conditioning, Market Trends, and Small Bets: A 2012 vs. 2008 Case Study (LINK)

While Hussman has been saying similar things for a couple of years, all three of John Hussman, John Mauldin, and Richard Duncan have issued similar recession warnings over the last few days, and think we're basically heading into a downturn in both the economy and a further decline in the market. It's hard to predict anything like this, but all three were fairly accurate about things leading up to 2008, so I thought it was worth a mention, and maybe a reminder to think about how one's investments would fare in another very tough environment, whether or not it actually comes to pass. 

Peter Lynch quote

From One Up On Wall Street:

"If I had to choose a great single fallacy of investing, it's believing that when a stock's price goes up, then you've made a good investment."

Links

A Dozen Things Learned from Charlie Munger about Capital Allocation (LINK)

Jason Zweig: CAN YOU SEE THE FUTURE? PROBABLY BETTER THAN PROFESSIONAL FORECASTERS (LINK)

Related book: Superforecasting: The Art and Science of Prediction

John Burbank at UC Berkeley from April of this year (video) [H/T ValueWalk] (LINK)

Barry Ritholtz talks to Gary Shilling on this week's Masters in Business interview (LINK)

a16z Podcast: Money, Risk, and Software (LINK)

Financial services are overdue for an overhaul. With a16z’s newest general partner, Alex Rampell (who just officially started), this segment of the podcast explores the world of fintech… How software backed up by data is being brought to bear on lending, insurance, and the science (oftentimes art) of underwriting risk.

The 5 Things Tim Ferriss Did To Become a Better Investor (podcast) (LINK)

Links

Munger residents praise unique living environment [H/T Linc] (LINK)

Are Buybacks an Oasis or a Mirage? (LINK)

Key Points 

1. In 2014, the S&P 500 Index’s dividend (1.9%) + buyback (2.9%) yield = 4.8%, but this yield was not realized by investors. 

2. As in most years, in 2014 issuance of new shares—for management compensation, new investments, and funding mergers and acquisitions—exceeded buybacks. 

3. The dilution rate for the U.S. equity market in 2014 was 1.8% compared to the historical dilution rate of 1.7% over the 80-year period from 1935 to 2014.  

4. U.S. equity investors in aggregate—contrary to appearances—have not realized a benefit from the recent spate of stock repurchases.

Related link to the above: Warren Buffett on Share Repurchases

Mutual Fund Observer, October 2015 (LINK)

Value Investing Podcast: Christopher Pavese on His Value Investment Philosophy (LINK)

Deutsche Bank Mistaken for Bundesbank Saved on Funding Costs [H/T Phil] (LINK)

How Steve Jobs Fleeced Carly Fiorina [H/T The Big Picture] (LINK)

Richard Dawkins discusses his book Brief Candle in the Dark with the WSJ (video) [H/T Will] (LINK)

Behold, the Mess That Is Pluto's Moon Charon (LINK)

Phil Fisher quote

From Common Stocks and Uncommon Profits:

All types of common stock investors might well keep one basic thought in mind; otherwise the financial community's constant worry about and preoccupation with the danger of downswings in the business cycle will paralyze much worthwhile investment action. This thought is that here in the mid-twentieth century the current phase of the business cycle is but one of at least five powerful forces. All of these forces, either by influencing mass psychology or by direct economic operation, can have an extremely powerful influence on the general level of stock prices.  

The other four influences are the trend of interest rates, the over-all governmental attitude toward investment and private enterprise, the long-range trend to more and more inflation, and—possibly most powerful of all—new inventions and techniques as they affect old industries. These forces are seldom all pulling stock prices in the same direction at the same time. Nor is any one of them necessarily going to be of vastly greater importance than any other for long periods of time. So complex and diverse are these influences that the safest course to follow will be the one that at first glance appears to be the most risky. This is to take investment action when matters you know about a specific company appear to warrant such action. Be undeterred by fears or hopes based on conjectures, or conclusions based on surmises.

Links

I had posted a link to the videos before, but here's the full show of... Ray Dalio on Fed Policy, Hedge Funds, China (Full Show from 09/16/2015) [H/T Exploring Markets] (LINK)

Ray Dalio, Bridgewater Associates' chairman and founder, talks to Bloomberg's Tom Keene and Mike McKee on the eve of a critical U.S. Fed policy decision in "Bloomberg Surveillance Primetime" special. What does the head of the world's biggest hedge fund firm have to say about the domestic economy, the future of China and the volatile market? 

The Absolute Return Letter, October 2015: The Real Burden of Low Interest Rates (LINK)

Almost the entire world is concerned about the high levels of debt, should interest rates begin to rise again, but we are not. Don't get us wrong; a meaningful increase in debt service burdens could do substantial damage to a global economy so loaded with debt. We just don't think it is going to happen. 

Economic growth and inflation are likely to stay comparatively low for many years to come, and so are interest rates, but that raises another question. What damage can very low interest rates for an extended period of time actually be expected to do?

Sohn Canada Investment Conference Notes 2015: Capitalize For Kids (LINK)

McKinsey warns banks face wipeout in some financial services (LINK)

The digital revolution sweeping through the banking sector is set to wipe out almost two-thirds of earnings on some financial products as new technology companies drive down prices and erode lenders’ profit margins. 

This is one of the main predictions by the consultancy McKinsey in its global banking annual review to be published on Wednesday, portraying banks as facing “a high-stakes struggle” to defend their business model against digital disruption. 

McKinsey said technological competition would reduce profits from non-mortgage retail lending, such as credit cards and car loans, by 60 per cent and revenues by 40 per cent over the next decade. 

It predicted a smaller, but still significant, chunk of profits and revenues would be lost from payments processing, small and medium-sized enterprise lending, wealth management and mortgages. These would decline between 35 and 10 per cent, McKinsey said. 

Philipp Härle, co-author of the report, said: “The most significant impact we see in price erosion, as technology companies allow delivery of financial services at a fraction of the cost, and this will mostly be transferred to the customer in lower prices.”

Investing in Commodities - by Paul Lountzis (LINK)

Given the recent declines in a broad range of commodities, we are often asked about our views on investing in that space. We have always felt that one of the most challenging areas to invest in are companies in the commodity sector, which includes many diverse areas, such as energy (oil, gas), agriculture (corn, soybeans, wheat), and hard assets (iron ore, copper, lead). According to Kessler Companies, commodities are at new 13 year lows and are off 25% over the past year, and lower than their 2008 trough by 6.2%. If you had invested in the Bloomberg Commodity index in January 1991, you would not have made any money for 24.5 years

Trade Secrets From Two Investing Legends - by Chris Mayer (LINK)

Einhorn Has Brutual Q3, Down 16.9 Percent Year To Date (LINK)

Fred Wilson: A Different Approach To VC (LINK)

The future of cryptocurrencies: Bitcoin and beyond (LINK)

Why Aren’t America’s Shipping Ports Automated? (LINK)

Related book: The Box

Book of the day: The Making of a Blockbuster: How Wayne Huizenga Built a Sports and Entertainment Empire from Trash, Grit, and Videotape