jakarta

Buffett has called Henry Singleton the greatest capital allocator of all time: http://en.wikipedia.org/wiki/Henry_Earl_Singleton

Basically, the Singleton model was to focus on the long term on building his company Teledyne (started out building aerospace systems/microelectronics).

What Singleton did was recognize when his stock was over and undervalued. During periods of overvaluation, he would issue stock and use it as currency to acquire other companies. This was pretty smart because he was able to get new businesses using a currency that was temporarily worth more than cash (the inflated shares). Then, during market downturns, he would repurchase shares. He basically was able to operate efficiently in both periods of over and undervaluation, while creating value for shareholders.

Here's a decent article on Singleton: http://www.observer.com/2003/04/the-brain-behind-teledyne-a-...

I was reading a great investing book this weekend which mentioned that companies seldom stay leaders if they only dominate in one discipline.

The author cited technology companies and how sometimes a great engineering culture simply isn't enough to maintain leadership, you often need to combine it a strong position in another discipline such as sales/marketing.

I think this rings true for IBM. I would guess that around 20 years or so ago, they stopped being primarily a technology company and shifted to offering services that were sold be a great sales force to keep customers hooked.

In Houston there's Studio Movie Grill in City Center which offers a similar concept but more targeted to families/a bit more "corporate".

I haven't been myself (since I like Alamo just fine and only go with friends) but you might want to check it out.

I'm a big fan of Alamo Drafthouse as well. I think their model really brings back a sort of "event" feeling to going to the movies which helps differentiate away from going to an ordinary theater or watching at home.

Stratfor does geopolitical risk consulting.

It's sort of a weird field, I work for a hedge fund so I know that some people do hire these guys / subscribe to their research.

Personally, I think a lot of geopolitical risk analysis work is kind of BS. They are incentivized to freak you out and make you scare of the world so you'll keep buying their research. I was just at a conference where a guy from one risk firm claimed that there was a 60% chance of an attack by the US/Israel on Iran. But he had no real systematic process at work and no track record of making accurate positions, so it's tough to probability weight that kind of scenario from an investor's perspective.

I don't think it's the greatest way to try to make money, but I can understand that guys that are investing in very oil specific/security sensitive plays, this kind of research could add a bit incremental value.

I do this all the time. I spent a summer working in NYC and used to visit Strand Books pretty frequently (at least once a week). Stand has an interesting model because the downstairs is filled with used books. I'd regularly do a price comparison check on the used titles versus their Amazon counterparts.

What I found is that sometimes the brick and mortar bookstore actually had the price advantage with these used books. When you factor in the minimum $3.99 shipping cost on a lot of used Amazon non-prime titles, they came out to being slightly more expensive than the used books I looked at in the store. This wasn't always the case, but it happened at least 30-40% of the time.

Yeah, the supply chain took a pretty decent hit with Western Digital (they make about a third of the market's HDs and are saying production will be 50% lower than usual on their end).

Supply / demand is pretty slanted and it will take probably take while for things to work themselves out:

HDD Demand: 180 mm units HDD Supply: 130 mm units

That's the big downside to having these lean supply chains, a slight hit to one manufacturing site can have a big effect globally.

I tried Duck Duck Go a bit today, switching it as my default search engine for chrome. I liked the search results, they definitely seemed better -- but the major feature it lacked was being able to get instant results right in the search bar.

I do a lot of on the fly math in the search bar because of my job and Duck Duck Go just totally disrupts my work flow for that, so I ended up switching back to Google after the day was over.

I think it can make sense in specific cases.

For example:

I live in Boston and a bunch of people don't have cars. If you don't have a delivery service in your building to take and store your packages, they can be left right outside the door which is kind of dicey, especially if you have valuable stuff.

Some people at my office just have all their packages delivered at work, which makes sense. But if you are going to have a ton of stuff delivered, or heavy stuff, it can be a hassle to then lug that back to the subway whereas it might be easier to have it delivered to the 7/11 that is just a block away from your place.

So like I said, it has specific uses. My guess is that the incremental capital spent isn't much to have the locker system, so why not test it out. Low risk - high uncertainty bet on Amazon's part.

Analysts at bank tend to be too short term focused. That's pretty much it.

It's next to impossible to figure out how things are going to change in just 3 months, but analysts tailor their estimates and reports to arrive at where stocks will be within that timespan.

The best use of analysts is not so much to arrive at where to buy and sell a stock but rather to obtain data on supply / demand which you can use to come to your own conclusions.

Those are referred to as Chaebols in Korea, in Japan they're called Keiretsu (pre WWI these were Zaibatsu). I think the family ownership involved in the Chaebols somewhat helps them remain innovative. You have a centralized force that can guide the ship during particularly important junctures in history.

I don't know where you live, but I've had a lot of good luck finding nice libraries. When I spent a summer working in NYC, the SIBL library was just awesome in terms of facilities, hermann miller chairs, etc.

In Boston there's a few good ones too.

Not to quibble, but I would say that using SRS and SKF doesn't really qualify as using "complex derivatives" to bet against the market.

For most investors there really wasn't an optimal way to do this, using ultra-short ETFs carried a lot of drawbacks. The best way (which I found and put 50% of my PA into) was to go long a Canadian insurer which had a ton of credit default swaps on most of the levered investment banks.

The other thing I would say is that, unless you are somehow exacerbating a problem (e.g.: somehow creating rumors to cause bank runs) then picking up cheap insurance isn't the same as being the guy controlling the predator drone in a strike. You'd instead be simply offsetting someone else's risk.

To me, this underscores one of the key risks to having an AirBnB room for rent.

I think if you are going to do it, you really have to be careful.

1. You should probably be someone that works from home / is home often. At least then you can monitor your place more often. You wont be seeing inside the room, but you could at least hear if anything insane is going on in it.

2. You should not have much by way of valuables around your place, nothing easy to steal. The first place I rented on AirBnB was like this. There was no TV/dvd player/ps3, the host had a laptop which he took with him. It consisted mostly of cheap Ikea-ish furniture. This works in my mind because it mitigates what can/can't be stolen.

The mom and her family should have been investing in side income streams along the way.

My grandfather came over to America, worked in a box factory. At nights he took courses in accounting. When his kids were old enough he had them working part time jobs and they all pooled their money together. Eventually, they started investing in businesses where they could earn alternative forms of cash flow.

First it was bars/mechanic shops/restaurants, then it went into rental properties whenever real estate markets got very cheap (e.g.: he bought 10+ houses in Texas post-S&L crisis). This worked out pretty well.

Most of the successful immigrants I know did this. They came over, most were poor. They would sleep 4 to a 1 bedroom apartment. But eventually they found steady jobs, lived cheaply, and then invested the savings into a bunch of different things whenever the right opportunities came up. (The Patels in the motel biz are a good example of this).

The idea that your job/your one career should provide enough for you the rest of your life is just foolishly optimistic. You have to diversify to build in a margin of safety for when life throws a curve ball your way.

At my work, we like to invest in companies that we think would be attractive LBO Candidates... Blackboard really fits the profile.

1. Entrenched business model

At my school we used Blackboard and we had about 50,000 students. Getting everyone on board to switch from Blackboard to a new system would be pretty tough. The university would have to spend a lot in terms of re-training which would make it tough for a new system to gain traction.

2. Recurring revenue stream

Blackboard has a recurring revenue stream which is pretty awesome for a private equity buyer. You see, the PE game is pretty simple. You buy a business for X, where about only 10-30% of X is actual cash you put up. The rest comes in the form of debt.

A recurring revenue stream is great in that your subscription fees can cover the interest payments on your debt and in many cases will allow you to have more debt as part of your capital structure than normal. Lenders will see that your business can generate a stable enough cash flow to support such large amounts of leverage. A business such as Blackboard could potentially support leverage that's on the high end of the scale because of its recurring revenue stream.

3. Ripe for cost cutting

A company like Blackboard is bound to have a good deal of fat that can be cut. Slashing R&D funding and whatever growth spending will increase the amount of cash flow that goes to investors. My guess is they will streamline the company to be more focused on its sales force than whatever developer-base they have in place at the moment.

Peter Thiel is largely regarded as a failure of a hedge fund manager. For a while he had a good record but he did the decoupling/long oil trade which blew up in 2008.

His fund had a bunch of redemptions and is now mostly his own money.

Centuries of financial crises and speculative contagions seem to be enough evidence for me.

If majority of market participants were value investors you simply would not have bubbles to the degree that we have seen historically.

Value investors buy assets at a discount to their intrinsic value and they derive that intrinsic value using conservative assumptions on factors such as liquidation value and future cash flows.

If majority of market participants were value investors you would not have had the Dutch Tulip Mania, South Sea Bubble, or more recently the Dot Com Bubble / pre-GFC highs reached in 2006/2007.

It might not be everyone, but I can say for certain that most market participants are NOT value investors.

Why's it silly? He's buying a commodity business (thats what VOIP is) for 32x earnings.

There's a reason M&A is often referred to as a winner's curse -- because winning the bidding typically means overpaying. The synergies execs often talk about almost -always- fail to be realized.

Shareholders of Microsoft would have been much better off if the company just bought back $8.5bn in stock. A dividend would have been out of the question due to tax repatriation issues.

From the estimates I have seen, Skype generates $250mm in EBIT per year.

That would mean that Microsoft is paying 28x earnings. If we want to approximate EBIT as free cash flows (not the same, but this is back of the envelope) and assume a 10% discount rate, to break even Skype would need to be growing EBIT at 6.4% annually for the next 10 years or so.

I don't know how achievable that really is, but maybe they could test raising prices to get some of that growth.

I'm just curious - why do you need one that's higher quality?

You know what's exactly on it and I mean it's a white board drawing... you could go out and buy your own white board and some markers and make the exact same diagram yourself!

Many top schools have a policy which allows students who drop out to come back and finish up their degree if they want. So it is not a risky decision.

Original content is a natural evolution for Netflix. Look at most of the pay-tv channels (HBO, Showtime, now Starz). All of them started as just ways to monetize existing content but realized that original content could make them more money and boost subscribes while reducing churn.

This is why Chris Albrecht (the new CEO at Starz) is pushing for original content. They've tried a couple shows so far (Spartacus, now a show about Camelot) and continue to be moving ever increasingly in that direction.

To those of you who are complaining about it only being one show or that it is going to be too narrow of an audience, sure. But to me this is Netflix just dipping their toes in the original content game.

Yeah, if you read "The Pixar Touch" you get a good picture of what Jobs hoped to achieve with Pixar (focusing on selling the hardware to consumers). His main contribution was money. I think it was only after Toy Story did he truly "get" how good the computer animated films could be.

It's funny because in the book they describe the brief period where Pixar was owned by George Lucas, and he too did not have faith in computer animated films.

I thought this was a great quote:

“You have got to be willing to be poor [as an entrepreneur],” he says. “There was a time when I was living out of a single suitcase. I had a rule that I wouldn’t stay on one person’s couch for more than two weeks because I didn’t want to become a bother.”

You've got to be willing to make sacrifices if you want to chase your dreams. A lot of people don't fully grasp that when they are coming in.

If you want to quibble about his use of the "6 times" figure, go ahead.

The fact remains that we live much better today than in 1930, when Buffett was born (during the Great Depression).

My favorite quote:

"The Flat Earth Society probably views a ship’s circling of the globe as an annoying, but inconsequential, anomaly"

You honestly have to ask this question? In the 1950s a significant percentage of our population was without civil rights. Beyond that:

Life expectancy at birth: 69.9 to 77.9 (we live longer)

Infant mortality: 26.0 to 6.7 (less of us are dead on arrival)

% of population over 25 with 4 yrs or more of college education: 7.7% to 29.5% (access to education has improved)

Estimated Hourly Wage PPP, 2009 USD: $16.87 to $25.31 (we are making more money)

Real labor productivity index (in 1960): 100 to 172.8 (we are more productive)

I don't think you should take much stock in Japanese business culture. While there are some great aspects 'toyota way'/continuous improvement...

There's also a lot of drawbacks. The management by consensus, hammering the nail that sticks out, the lack of willingness to deal with real problems, putting cultural norms before economic logic -- these are all major issues with Japan that are partly responsible for why they have been stuck in an economic malaise for the last 20 years.