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General Discussion / Re: 3 Rules for Rulers (CGP Grey video, 19 minutes)
« Last post by Liberty on Today at 07:06:36 AM »
Somehow now, maximum life expectancy seems to be stuck.
Hope may lie in regeneration biology.
But that field is only in infancy.
The clock is ticking.

http://www.fis.org/public/survivalcurve-2020.html

If you want to learn more about the potential to cure (or at least delay long enough that new cures can be worked on) the diseases of aging, this is a good start:

https://www.amazon.ca/Ending-Aging-Rejuvenation-Breakthroughs-Lifetime/dp/0312367074

Short overview: https://www.ted.com/talks/aubrey_de_grey_says_we_can_avoid_aging

This is from 2005, so a decent amount of progress has been made since:

http://www.sens.org/research/introduction-to-sens-research
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Berkshire Hathaway / Re: MidAmerican upgrading wind turbines early
« Last post by jeffmori7 on Today at 07:05:41 AM »
I've also heard the argument that it takes more energy to make them then they generate, but I too find that almost impossible to believe.  Especially if they have a 30 year expected life.

Don't believe the FUD propaganda by the fossil fuel lobby. That industry has gotten hundreds of billions in direct an indirect subsidies over the decades but now they feel threatened because they suddenly have competition from a few sources that relentlessly keep getting better every year...

https://en.m.wikipedia.org/wiki/Energy_returned_on_energy_invested
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The Intelligent Investor mentions three general types of stock price drivers. I don't recall the exact wording, but these are:

A. Stock-specific drivers - perhaps newsflow, shifts in sentiment or financial results specific to the company in question change people's opinion.

B. Sector-specific movements - newsflow and shifts in sentiment relating to the majority of companies in a certain industry. For example, tobacco stocks, tech stocks, oil & gas, banking have all had well-known positive or negative sentiment swings and sometimes a sector-wide crisis.

C. Market-wide movements - General market over-optimism or panic, political of fiscal influences (e.g. inflation, interest rates, war fears etc.) and sometime a rush of new market participants entering or exiting positions.

You might imagine it as three levers driven by opinion, all exercising a degree of influence on an individual stock price.

At one time such as the Global Financial Crisis bear market, market-wide movements may have been huge, but equally sector-specific worries were hitting the banking/financial sector very hard indeed, and specific rumours about a company's danger or resilience against certain risks could affect a specific company even more or limit the decline compared to its competitors.

The whole thing can work the other way too, such as during the dot-com boom or other bull markets.

When market wide movements dominate there may be a rush to or from non-equity assets like cash and precious metals. If you're in equities, having so-called 'defensive' stocks is believed to limit your upside in 'good times' but protect you in 'bad times' perhaps letting you switch into more beaten-down sectors. The other choice is to switch to cash ahead of perceived trouble, but potentially missing out on gains or dividends by doing so, especially if you turn bearish far too early.

When individual stocks or sectors are in-favour or out-of-favour there can be opportunities for value trading from an over-valued position to an under-valued position (or a low-dividend yield to a higher yield). The danger is in getting the long term valuations wrong and trading out of a position set for strong fundamental compound growth and into a position set for weaker growth whose relative IV we have not estimated well. (Or for switching for yield just before a dividend cut).

And when we have cash, we can just wait for great opportunities offering margin of safety however they arise. As I'm in the saving phase, this is almost a permanent position.

And when we hold stocks that get to nosebleed prices offering presumably small gains looking forward, we can sell and hang on to the cash. (I've never really done this - I've always switched to another equity position almost as soon as I've sold, but I am prepared to do so).

And if we seek to spend our invested savings, such as in retirement, we could have a blend of three sorts of options:
1. Look for healthy dividend yield to automatically withdraw some of the earnings stream rather than reinvest it.
2. Look to sell some of our positions - either spread across our portfolio or strategically, perhaps avoiding sales of things we feel are deeply undervalued or focusing sales on positions that are more fully-valued or even overvalued.
3. Sell most or all of our equities and obtain lump sums to make large purchases such as property or buy annuities.

I'd be interested everyone's thoughts about downturns.

Perhaps we should include how we think about preparing in advance and what actions if any to take. Perhaps the options depend on whether we have specific information such as realising the state of mortgage delinquencies leading into the GFC (which Prem Watsa and others worked out how to profit from), or just a general feeling that valuations are too high or that all the gains in the market are concentrated in a small number of stocks such as the FAANGs and that this is predictive of an imminent bear market (was it Semper Augustus's letter that took this as a strong bearish sign?).

And then, we could discuss what to do once the downturn has taken hold. Should we go for the most troubled beaten-down sectors (e.g. banks in 2009) or just look at our circle of competence and wait for good margin-of-safety opportunities within our usual universe of stocks? Should we actively try to learn about the beaten down sector if we don't already know so that we're armed to make reasonably good decisions?

My only active downturn: The only downturn I was fairly active in was October 2001 a month after 9/11 attacks. Fear of war and potential inflation was in the air, and a number of quality companies I'd been looking at in the London market reached my buy price. I had accumulated a good deal of cash, and pulled the trigger on quite a few, sowing the seeds of a reasonable portfolio. The argument that resonated with me at the time was a sort of Buffett/Phil Fisher one that inflation if it came as a result of war spending would erode the purchasing power of cash over time, but quality companies with moats sufficient to let them raise prices in line with inflation should be able to increase their profits in line with inflation, so at these reduced prices offering FCF yield of maybe 8.5% of more and decent dividend yields, that was a good time to buy. I had accumulated a fair amount of cash awaiting investment by then at the maximum saving rate then allowed into UK ISAs and had an idea of minimum position size to keep my dealing costs and other frictional losses down, so I was able to make quite three of four decent purchases in Oct 2001 to add to the purchases I'd previously made without sufficient regard to valuation and margin of safety.

I think some of these gained about 30% in around a year, and by then I wasn't so convinced about the quality and resilience of their moats in a couple of cases. I'd also saved some more money by then and developed my strategy for buying more, so while I retained Halma (highly resilient moats that compounded my return at about 14%p.a. over 14¼ years) and Johnston Press (mostly local newspaper monopolies I couldn't see the internet destroying) I sold a couple of positions to end up with 50% of my portfolio in PIZ (Pizza Express) at 299p amid reduced sales in the City of London, hit by the bear market. My badly priced purchase of my smaller stake at 655p a couple of years earlier meant that my average price was about 390p, so I roughly broke even by the time of the management takeover at 387p in July 2003. By that time I had switched to a broker that allowed me to buy US stocks in my ISA and I decided to buy Berkshire Hathaway with the proceeds, plus cash, and I also sold a high-risk low-probability position, being content with a high certainty of a good return in the long run (BRK.B) rather than a low chance of a great return (TRK.L). As an engineer/physicist I liked that company and saw it had about a low probability of making some serious money over a 10-15 year window of opportunity before patents expired and before I imagined electric cars might make it obsolete, but you don't get rewarded for degree of difficulty in investing, unlike in Olympic diving, as Warren Buffett says. It turns out they're now valued about 1/160th of the 2003 share price I sold at, so I'm very glad I took the loss and didn't try to make it back the way I lost it!

By this stage, the bear market was over and I then stayed quite passive due to the family business and having no new money to invest in stocks. I passively watched the GFC bear market in 2008-9 and sat tight. I had a few corporate actions to raise funds for the local newspaper company, and wasted some of my accumulated dividends there. I finally saw the writing on the wall in 2014 as I took more control of my investments and closed that thankfully modest position at a loss, probably having lost 80% of the money I'd ever put into it, thankfully dwarfed by the gains in Berkshire and Halma.

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Somehow now, maximum life expectancy seems to be stuck.
Hope may lie in regeneration biology.
But that field is only in infancy.
The clock is ticking.

http://www.fis.org/public/survivalcurve-2020.html
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General Discussion / Re: Cryptocurrencies
« Last post by rkbabang on Today at 06:32:17 AM »
Podcast on blockchain and cryptocurrencies:

http://investorfieldguide.com/hashpower/

In case anyone missed this, episodes 2 & 3 are now out (only episode 1 was available when Liberty originally posted this) and all of them are excellent.
 
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General Discussion / Re: 3 Rules for Rulers (CGP Grey video, 19 minutes)
« Last post by Liberty on Today at 06:25:26 AM »
Another CGP Grey video worth watching:

https://www.youtube.com/watch?v=C25qzDhGLx8
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Berkshire Hathaway / Re: MidAmerican upgrading wind turbines early
« Last post by Liberty on Today at 06:19:06 AM »
I've also heard the argument that it takes more energy to make them then they generate, but I too find that almost impossible to believe.  Especially if they have a 30 year expected life.

Don't believe the FUD propaganda by the fossil fuel lobby. That industry has gotten hundreds of billions in direct an indirect subsidies over the decades but now they feel threatened because they suddenly have competition from a few sources that relentlessly keep getting better every year...
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General Discussion / Re: Garth Turner - Real Estate in Canada
« Last post by Liberty on Today at 06:15:37 AM »
I have noticed many first time buyers in the GTA seem to get help with the down payment  from their parents/relatives who are in turn depending on the equity in their own house for retirement.

Yeah, and that help for the downpayment seems to often come out of a HELOC, just to make sure that everybody is leveraged to local real estate to the max.

Or perhaps the parents are adopting the Chinese practice of making sure their children have homes so can attract a desirable mate and produce grandchildren. If so prices have a long way to go before they match the levels in China.

The motivations are varied, I'm sure, but the financial logic remains. Borrowing to borrow on elevated asset, and putting your whole net worth into one asset, at historically low interest rates at a time when regulators are tightening the screws isn't exactly a low risk approach.
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Investment Ideas / Re: REV - Revlon
« Last post by Cigarbutt on Today at 06:09:44 AM »
In a letter sent last September 15th, Mr. Perelman stated that he was not "presently" intending on taking the company private.
My understanding is that he has continued to buy shares after that date.
89% ownership could be a potential trigger.
Feels like a creeping tender offer but the trouble is that Mr. Perelman does not mind "messy" undertakings and legal disputes.
He could also opportunistically wait for share price weakness.
There may be a last puff in this but timing will be very tricky.
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Investment Ideas / Re: ALS.TO - Altius Minerals
« Last post by Cigarbutt on Today at 05:54:51 AM »
"Let me translate the argument of Fairfax Watcher: Fairfax traded near 600 in 1998, and is only 648 today. I guess it's been stagnant money for the last 20 years. Why is this stupid message board named after them? Grump, grump, grump."

"Touché!!"

Maybe, that's a reason to consider timing of buying and selling decisions.
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