Reflections on Value Investing

Haaretz: Who on earth is Jacob Harpaz?

noreply@blogger.com (Shai Dardashti) — Wed, 15 Jul 2009 16:15:00 +0000

Jacob Harpaz? Who's that, most of you are asking. His name doesn't appear in the papers. Everybody's heard of Iscar, which Warren Buffett bought from its founders, the Wertheimers, at a company valuation of $5 billion. But although it's the most successful company in Israel, nobody knows who its CEO is.

...

Over time I realized the secret of Iscar's corporate culture: Almost all its managers have worked at the company for decades. They grew up together. They come, and they don't go.

Ostensibly Iscar has a clear hierarchy, but it's run practically like a family business. Twenty or 30 managers report directly to Harpaz.

On our third day of nonstop action, we were in South Korea, and I got it. Harpaz is a machine. He showed no signs of fatigue. In late afternoon, after a hideously hectic day of scurrying about with Buffett and the press, Harpaz held a working meeting with the management of Iscar Korea. Some 30 to 40 engineers, department managers, sales and marketing men, all Koreans, clustered in a lecture hall. Harpaz sat in the middle. The screen showed slides of product lines and sales, market size and most importantly, market share.

Night fell and the slides kept coming. Market share is what they dream of at night, at Iscar. That's the parameter by which Harpaz measures the company's performance. Don't think for a moment that Harpaz's crowning moment was the sale of the company to Buffett. No: It was when Iscar passed Kennametal, the biggest American player in cutting technology, and became second only to the Swedish company Sandvik Tooling.

All Harpaz really wants is to be No. 1. That may take a while, because Sandvik is enormous. But the Iscarites are patient.

Iscar has 140 subsidiaries in 65 countries. The management is generally local. The central Iscar management shows great respect to the local culture, and works with it, not against it. Iscar would never force an alien culture onto its units. The only value transmitted from headquarters is: grow. Then grow more. Increase market share.

Full Story

With thanks to Lincoln Minor!

Being first is the most important thing to us, we can and will continue to develop first to market technology. Despite many of our products being copied by competitors, we will strive to stay a step ahead with original and innovative new products – and this is something we at TaeguTec are proud of.

Q. This is a landmark year for TaeguTec as it reaches its 10th anniversary, can you comment on the growth?

A. Yes. The name and company “TaeguTec” is now 10 years old. In the 10 years since the acquisition by the IMC Group we have delivered excellent results with major growth. We have calculated the sales figures from last year and from this we can expect to grow another 4 times larger within the next 10 years. We plan to continuously achieve a global growth rate of 25% and this will be delivered through an aggressive global marketing strategy and an exceptional investment in R&D.

Direct Link

I am confident that TaeguTec will be one of the word's five largest manufacturers of cutting tolls within the next 5 years.

Full article

News from 1930: Daily summary of Wall Street Journal from corresponding day in 1930

noreply@blogger.com (Shai Dardashti) — Mon, 13 Jul 2009 18:14:00 +0000

An Interesting Perspective of the World:

Q. Okay, why are you doing this blog? Are you saying we're in for a replay of the 30's?

A. How did I know you were going to ask me that? No, I don't think things are going to get as bad as in the 30's.

Q. So you're an optimist.

A. Well, that's only mildly optimistic. I mean things in the 30s got really, really bad. For example, between 1929 and 1932, the number of cars produced declined from 4.8 million to 1.2 million ...

Q. Okay - that's pretty bad, but it's only one industry ...

A. Looking at the economy as a whole, GDP went down by 40% and unemployment went from around 3% to 24% ...

Q. Wow! That is really bad.

A. It's actually even worse than that, because back then many more people worked on farms. When you take out farm workers, unemployment hit 37% - an almost unimaginable level for us today ...

Q. You must be a blast at parties ... Well then, if you don't think we'll repeat the 30's, are you saying, in Mark Twain's words, that history won't repeat but it will rhyme?

A. Hey! I wanted to use that line!

Q. Sorry. Well, do you think that?

A. Yes. I believe 1929-1930 has a couple of important similarities to 2008-2009. First and fundamentally, there was a big buildup of debt leading up to both. This was followed by a couple of major economic problems, including many banks running into trouble and a loss in perceived wealth by lots of people. These problems in turn have deflationary implications since they lead to less credit and spending ...

Q. Could you get to the second point before I fall asleep?

A. Second, for the technical stock people, the markets in the two periods do have interesting similarities. In both, the stock markets hit a high and then had a very scary, sharp crash where the panic level was high for a short time, followed by a nice relief rally when the immediate panic abated.

In the case of 1929 this market break is what is commonly known as the Great Crash, including Black Thursday on October 24,1929, quickly followed by Blacks Monday and Tuesday on October 28 and 29. The Dow began 1929 at about the 300 level, hit a peak of about 380, and the Crash cut it almost in half to 200.

What's not as commonly known about 1929 is that the Great Crash was followed by a nice rally with the Dow almost hitting 300 again in April 1930, and, at the point where we begin this blog in June 1930, still hovering in the 270's - not that far off where it was at the start of 1929. The real damage was done in the following two years when, following a spectacular series of further declines and rallies, the Dow bottomed out at 42 - almost 90% off its peak.

More recently, of course, we had a brief period of sheer panic in March 2009 when the Dow hit the 6500's, down from a high over 14000, then had the nice rally we're currently in ...

Q. Zzzzzz ... *snort*! Ah yes, that's all very interesting, but are there any other similarities between the two times?

A. Umm ... homina homina ... other similarities will be left as an exercise for the reader.

Q. Well, have you noticed anything interesting yet?

A. In histories of the Depression the leaders of the time are commonly portrayed as oblivious to what was going on, do-nothing, and stupidly optimistic. For example, every schoolkid has seen the much ridiculed pronouncement by Herbert Hoover that "prosperity is just around the corner." Even from my limited reading so far it's clear this criticism is mostly unfair. It appears that the people in charge at the time were well aware of what was happening, and did most of the things that we're doing now to alleviate it (with a couple of notable exceptions). And as for unjustified optimism, we will see that at least in mid-1930 there was a fair amount of good news coming out about the economy. And I mean actual good news where things were improving month-to-month, not the asinine stories we see today where bad numbers are interpreted as good because they were "better than expected," and declining numbers are called good because the rate of decline is slowing down (AKA second derivative stories).

Q. Anything else interesting?

A. Well, I'm a history buff, especially New York history, so it's interesting to me to see a day-by-day chronicle of a pretty eventful period. Or, as Warren Buffett said in The Snowball by Alice Schroeder (Bantam 2008, pg. 148):

"I would get these newspapers from 1929. I couldn't get enough of it. I read everything - not just the business and stock-market stories. History is interesting, and there is something about history in a newspaper, just seeing a place, the stories, even the ads, everything. It takes you into a different world, told by someone who was an eyewitness, and you are really living in that time."

Q. I knew you wouldn't be able to go the whole interview without sneaking a Buffett quote in. Does he have you on commission or something?

A. No comment. Seriously, though, I do think you get a different feel for history seeing it day-by-day like this - less tidy, but more real. And it just might give you a useful skepticism for some of the more Panglossian commentary we're seeing today when you see that similar things were said back then - and probably with more reason!

Q. Oooohhh ... Panglossian! Fancy Shmancy! You couldn't just say optimistic?

A. So – you want to suppress the truth just like the rest of the mainstream media! This interview is over!

Direct Link

USA & China: Reflections on The Electric Grid

noreply@blogger.com (Shai Dardashti) — Fri, 10 Jul 2009 04:47:00 +0000

Where Is The Puck?

Per capita electricity consumption:
China is on par with Jamaica and Bosnia (!)

Electricity Consumption, by country: USA (#1) vs. China (#2)
Electricity Consumption, by country, per capita: USA (#9) vs. China (#91)

Where Is The Puck Going?

USA

Overview of the Electric Grid

In 1940, 10% of energy consumption in America was used to produce electricity. In 1970, that fraction was 25%. Today it is 40%, showing electricity's growing importance as a source of energy supply. Electricity has the unique ability to convey both energy and information, thus yielding an increasing array of products, services, and applications in factories, offices, homes, campuses, complexes, and communities.

The economic significance of electricity is staggering. It is one of the largest and most capital-intensive sectors of the economy. Total asset value is estimated to exceed $800 billion, with approximately 60% invested in power plants, 30% in distribution facilities, and 10% in transmission facilities.

Annual electric revenues - the Nation's "electric bill" - are about $247 billion, paid by America's 131 million electricity customers, which includes nearly every business and household. The average price paid is about 7 cents per kilowatt-hour, although prices vary from state to state depending on local regulations, generation costs, and customer mix.

There are more than 3,100 electric utilities:

213 stockholder-owned utilities provide power to about 73% of the customers
2,000 public utilities run by state and local government agencies provide power to about 15% of the customers
930 electric cooperatives provide power to about 12% of the customers

Additionally, there are nearly 2,100 non-utility power producers, including both independent power companies and customer-owned distributed energy facilities.

The bulk power system consists of three independent networks: Eastern Interconnection, Western Interconnection, and the Texas Interconnection. These networks incorporate international connections with Canada and Mexico. Overall reliability planning and coordination is provided by the North American Electric Reliability Council, a voluntary organization formed in 1968 in response to the Northeast blackout of 1965.

Electric Generation

America operates a fleet of about 10,000 power plants. The average thermal efficiency is around 33%. Efficiency has not changed much since 1960 because of slow turnover of the capital stock and the inherent inefficiency of central power generation that cannot recycle heat. Power plants are generally long-lived investments; the majority of the existing capacity is 30 or more years old.

The roughly 5,600 distributed energy facilities typically combine heat and power generation and achieve efficiencies of 65% to 90%. Distributed energy facilities accounted for about 6% of U.S. power capacity in 2001.

The profile of the electric power generation industry is changing rapidly, however. A shift in ownership is occurring from regulated utilities to competitive suppliers. The share of installed capacity provided by competitive suppliers has increased from about 10 percent in 1997 to about 35 percent today. Recent data suggest this trend is slowing.

...

America operates about 157,000 miles of high voltage (>230kV) electric transmission lines. While electricity demand increased by about 25% since 1990, construction of transmission facilities decreased about 30%. In fact, annual investment in new transmission facilities has declined over the last 25 years. The result is grid congestion, which can mean higher electricity costs because customers cannot get access to lower-cost electricity supplies, and because of higher line losses. Transmission and distribution losses are related to how heavily the system is loaded. U.S.-wide transmission and distribution losses were about 5% in 1970, and grew to 9.5% in 2001, due to heavier utilization and more frequent congestion. Congested transmission paths, or "bottlenecks," now affect many parts of the grid across the country. In addition, it is estimated that power outages and power quality disturbances cost the economy from $25 to $180 billion annually. These costs could soar if outages or disturbances become more frequent or longer in duration. There are also operational problems in maintaining voltage levels.

America's electric transmission problems are also affected by the new structure of the increasingly competitive bulk power market. Based on a sample of the nation's transmission grid, the number of transactions have been increasing substantially recently. For example, annual transactions on the Tennessee Valley Authority's transmission system numbered less than 20,000 in 1996. They exceed 250,000 today, a volume the system was not originally designed to handle. Actions by transmission operators to curtail transactions for economic reasons and to maintain reliability (according to procedures developed by the North American Electric Reliability Council) grew from about 300 in 1998 to over 1,000 in 2000.

Additionally, significant impediments interfere with solving the country's electric transmission problems. These include: opposition and litigation against the construction of new facilities, uncertainty about cost recovery for investors, confusion over whose responsibility it is to build, and jurisdiction and government agency overlap for siting and permitting. Competing land uses, especially in urban areas, leads to opposition and litigation against new construction facilities.
Electric Distribution

The "handoff" from electric transmission to electric distribution usually occurs at the substation. America's fleet of substations takes power from transmission-level voltages and distributes it to hundreds of thousands of miles of lower voltage distribution lines. The distribution system is generally considered to begin at the substation and end at the customer's meter. Beyond the meter lies the customer's electric system, which consists of wires, equipment, and appliances - an increased number of which involve computerized controls and electronics which ultimately operate on direct current.

The distribution system supports retail electricity markets. State or local government agencies are heavily involved in the electric distribution business, regulating prices and rates-of-return for shareholder-owned distribution utilities. Also, in 2,000 localities across the country, state and local government agencies operate their own distribution utilities, as do over 900 rural electric cooperative utilities. Virtually all of the distribution systems operate as franchise monopolies as established by state law.

The greatest challenge facing electric distribution is responding to rapidly changing customer needs for electricity. Increased use of information technologies, computers, and consumer electronics has lowered the tolerance for outages, fluctuations in voltages and frequency levels, and other power quality disturbances. In addition, rising interest in distributed generation and electric storage devices is adding new requirements for interconnection and safe operation of electric distribution systems.

Finally, a wide array of information technology is entering the market that could revolutionize the electric distribution business. For example, having the ability to monitor and influence each customer's usage, in real time, could enable distribution operators to better match supply with demand, thus boosting asset utilization, improving service quality, and lowering costs. More complete integration of distributed energy and demand-side management resources into the distribution system could enable customers to implement their own tailored solutions, thus boosting profitability and quality of life.

Summary

North America's world-class electric system is facing several serious challenges. Major questions exist about its ability to continue providing citizens and businesses with relatively clean, reliable, and affordable energy services. The recent downturn in the economy masks areas of grid congestion in numerous locations across America. These bottlenecks could interfere with regional economic development. The "information economy" requires a reliable, secure, and affordable electric system to grow and prosper. Unless substantial amounts of capital are invested over the next several decades in new generation, transmission, and distribution facilities, service quality will degrade and costs will go up. These investments will involve new technologies that improve the existing electric system and possibly advanced technologies that could revolutionize the electric grid.

Direct Link

The Economist: Building the smart grid

According to projections from America’s Energy Information Administration, electricity generation around the world will nearly double from about 17.3 trillion kilowatt-hours (kWh) in 2005 to 33.3 trillion kWh in 2030. Poor countries will show the strongest growth in electricity generation, increasing by an average of 4% per year from 2005 to 2030, compared with 1.3% per year for their richer counterparts. In some countries, including America, the grid has not kept up with the growth in demand for power. The deregulation of America’s utilities in the 1990s encouraged companies to transfer power over long distances. At the same time, regulatory uncertainty and increased competition led to reduced investment in new transmission lines. As a result, some parts of the system have become increasingly congested. Black-outs cost America an estimated $80 billion a year, according to a study by the Lawrence Berkeley National Laboratory.

...

The American government is spending some $4 billion from its economic-stimulus package on smart-grid initiatives, but providing a smart meter for every American home would cost far more: California’s investor-owned utilities alone are spending about $4.5 billion on deploying smart meters over the next few years. That implies that a nationwide implementation could cost around $50 billion. But PNNL estimates that $450 billion would have to be poured into conventional grid infrastructure to meet America’s expected growth over the next decade anyway. Mr Carlson, who now works for GridPoint, argues that a bit of thought is called for if the aim is to move to a new energy-management model, “as opposed to building more of what we’ve already got.”

Direct Link

***

Reuters picture taken February 26, 2009

The State Grid Corp of China, China's leading grid operator, aims to at least triple its ultra-high voltage (UHV) power transmission lines by 2012

***

CHINA

China, the world’s second-largest energy user, may spend as much as 680 billion yuan ($100 billion) building so-called smart power grids, said Huang Shouhong, an analyst at Essence Securities Ltd.

The nation may need to spend as much as 68 billion yuan annually on the grids from 2011 to 2020, Huang, a power equipment analyst, said by phone from Beijing today. China may spend 4 trillion yuan on the overall power grid from 2009 to 2020, he said.

Full Story

In 2002, China established five independent electricity generating companies and several transmission companies. The five generators have an equal share of the assets — China Huaneng, China Datang, China Huadian, Guodian Power, China Power Investment — and compete to sell electricity.

The State Grid Corporation of China (SGCC), the Southern Power Grid Corporation and the Eastern China Grid Corporation are among China's transmission companies. The largest utility in the world, SGCC serves 26 provinces and 1.08 billion people with a peak load of 343 gigawatts (GW) and total investment in grid construction valued at US $31.8 billion in 2007. China's second largest utility, China Southern Power Grid, is ranked 226th in Fortune Magazine's Global 500 listing with revenues exceeding US $30 billion.

Throughout China, the existing regional grids have weak interconnections between provinces and largely non-existent interconnections between grids. In order to solve this deficiency, the Chinese government has plans to create a unified national power grid network by 2020.

The plans include what is known as the "West-East Electricity Transfer Project," which requires the construction of three major west-east transmission corridors: North, Central and South. The transmission capacity of each corridor is expected to reach 20 GW by 2020. While planning for such major infrastructure investments, the government would be well-positioned to lay the foundation for "smart grid" capacity across the country.

The Eastern China Grid Corporation initiated a feasibility study of "smart grid" technology in October 2007. Shi Junqing, the General Manager of Eastern China Grid Corp. described the findings earlier this year. In terms of the large load on its grid, the assets that it has built into its system, the necessity of continuing to build out the network and the increasing environmental, safety, reliability and efficiency pressures that it faces, Eastern China Grid Corp. believes that the conditions are now ripe for it to put in place a smart grid system; to that end the company has established a goal of gradually putting in place the elements of a "smart grid" over the coming years.

Full Story

China's power distribution monopoly State Grid Corp. has set a goal of building a smart grid by 2020 to improve efficiency and distribute power more flexibly, the company's general manager Liu Zhenya said Thursday.

The so-called "strong and smart grid" would help increase the share of clean energy in China's energy mix.

Clean energy such as wind and solar generate electricity intermittently; a smart grid is more "intelligent" in terms of electricity storage, stable transmission and power allocation, Liu said.

With the smart grid completed in 2020, China's clean energy installed capacity is expected to increase to 570 million kilowatts, or a 35% share of the total, State Grid said.

Planning will start this year, including establishing technical standards and equipment research and development.

The smart grid will be based on the current national grid, including ultra- high voltage power transmission lines. State Grid is increasing capital expenditure on its UHV projects, exceeding CNY200 billion ($29.3 billion) by 2012.

Full Story

Despite the chilly wind, the erection of electricity pylons and the building of converter stations on one of China's most remarkable technological achievements goes ahead full swing across the mountains and plains from southwest China's Sichuan province to east China's coastal Shanghai.

Even the Spring Festival does not hold up work on the electricity power line, the world's only 800 kv direct current UHV line.

"We cannot suspend our work even in the week-long Spring Festival holidays, which began on January 26. We must complete the project by 2010," said Li Wenyi, general manager of the Direct Current Engineering Construction Co Ltd under the State Grid Corporation of China (SGCC), in Yibin, Sichuan, on Tuesday.

Construction kicked off on Dec 12, the pilot project will wind 2,000 km eastward over eight provinces and municipalities to join up Yibin, in Sichuan with Shanghai. It will transmit hydropower generated at Xiangjiaba Hydropower Station and Xiluodu Hydropower Station on Jinshajiang River, the country's second and third largest hydropower projects, after the Three Gorges project.

Full Story

Railfax Report - North American Rail Freight Traffic Carloading Report

noreply@blogger.com (Shai Dardashti) — Fri, 10 Jul 2009 04:33:00 +0000

A Weekly Report of North American Rail Freight Traffic by Major Railroad and Commodity

What is Railshare

Railshare is a comprehensive database of North American rail traffic. The data are provided each Thursday by the Association of American Railroads. Atlantic Systems Inc. processes this information and redistributes the data in an easy to use format. Each week's report covers the seven day period ending the preceding Saturday. Rail traffic is disaggregated between carload (traffic moving in traditional freight cars such as box cars, tank cars and hoppers) and intermodal traffic (containers and piggyback service). Railshare provides commodity breakdowns for carload traffic; commodity detail for intermodal traffic is unavailable. Railroads originate and also move traffic jointly with other originating carriers. The carrier totals shown in Railshare aggregate all traffic handled by individual carriers. Market shares are calculated as total handlings by carrier divided by total U.S. originated rail traffic. Railshare graphs show four major breakdowns of rail traffic. Total traffic includes all carload and intermodal traffic; carload traffic is further divided between economically sensitive commodities (cyclical) and those that are less affected by the business cycle (baseline).

Direct Link.

Hat tip to oldye, thank you!

A Look at POSCO.

noreply@blogger.com (Shai Dardashti) — Wed, 08 Jul 2009 14:56:00 +0000

The Timeline...

2007 - March 1: POSCO surged on Friday after U.S. investor Warren Buffett's firm Berkshire Hathaway said it owned a 4% stake in the South Korean steel maker as of the end of 2006.

2007 - March 16: In a pre-emptive move to guard against a hostile takeover bid by the world’s largest steelmaker, Arcelor Mittal, the world’s third-largest steel producer, Pohang Iron and Steel Company (Posco), on Friday said it had started acquiring shares from friendly investors.... Posco’s shareholding is highly disintegrated. The Korean government exited Posco in 2000 after privatising it. Bank of New York is the largest shareholder with 22.6%. Legendary investor Warren Buffett owns 4% and Nippon Steel, 5%. Some 212 institutions and mutual funds own 28% of the company. Fidelity Management & Research (with 1.82%), Barclays Global Investors (1.76%), NWQ Investment Management (1.65%) and Third Avenue Management (1.51%) are among Posco’s top institutional holders. Among mutual funds, Ishares MSCI owns 1.61%, Fidelity Low-priced Stock Fund 1.31% and Third Avenue Value Fund 1.05% are the largest.

2007 - October 24: "POSCO is invited to a reception held by Buffett. POSCO Chief Financial Officer Lee Dong-hee will attend it," the official told Reuters.

2007 - October 25: Berkshire said in March that it had paid $572 million for a 4 percent stake in a South Korean steel company, Posco...Buffett said Thursday that Posco was the only Berkshire Hathaway investment in an independent South Korean company, with Berkshire holding the equivalent of 3.4 million shares..."It's a great company," Buffett said. "And great companies get worth more and more all the time."

2009 - February 28: Warren Buffett’s Berkshire Hathaway Inc. increased its stake in Posco, Asia’s third-largest steelmaker, to 5.2 percent as the Korean company’s stock had its worst year since 2002... Posco “was quite happy that Buffett increased his stake,” spokeswoman Ko Min Jin said in an interview.

2009 - May 4: The legendary investor then said he bought shares in one Korean firm and put money into corporate bonds issued by POSCO in 2008, as part of his private investments. The steel maker issued dollar-denominated bonds worth $700 million late last year to raise fresh money amid the worsening credit shortage. He reportedly purchased $100 million POSCO bonds... "POSCO is the world's best steel products maker. It has high productivity and efficiency, as well as practicing sound management. Currently, it is facing hardship at home and abroad amid the sluggish demand for steel products. But the difficulty will not last forever and good times will soon come,'' Buffett said.

2009 - May 11: Mr Warren Buffett CEO of Berkshire Hathaway said that POSCO is the best steel company in the world. He also mentioned that he had purchased the company's five year dollar bonds issued in March and emphasized once again that the steelmaker is a wonderful company with an excellent level of efficiency in engineering, production and management.

"Posco's Competitive Advantage in the Global Steel Industry"

A Look at Daehan Flour Mills.

noreply@blogger.com (Shai Dardashti) — Tue, 07 Jul 2009 20:24:00 +0000

My broker at Citigroup told me to look through this Korean version of the Moody’s guide. He said it would look just like 1951. He was right. I began flipping through the pages and found a lot of good companies trading at very low multiples. In 5-6 hours I put together a small portfolio of 20-25 stocks – about $100 million total. One example was DaeHan Flour Mills. It has a 25% market share in wheat flour in South Korea. Book value was 206,000 Won and the company had 201,000 Won in marketable securities and was trading at 2x earnings. The market is clearly not efficient all the time. There are certain opportunities that can make you fabulously rich.

- Warren Buffett circa December 2005 (University of Kansas)

***

A closer look...

The firm's flour mill market share is 25.1%, which is the market dominant firm along with CJ. Both firms account for about 50% of market share together. Performance is impacted by international wheat price and exchange rate fluctuation, since the flour milling business has high ratio of raw material, although it's seasonal or economic cycle fluctuation range is not great. The ordinary income and net profit of the 53rd accounting year (Jul. 2003 ~ Jun. 2004) were 43 billion won and 31.2 billion won, up 38.3% and 56.7%, respectively, on a year-over-year basis.

Direct Link

Point-in-Time Analyst Reports

June 13, 2005

May 5, 2007

Warren Buffett Gives Advice to Girl Scouts at Dairy Queen

noreply@blogger.com (Shai Dardashti) — Thu, 02 Jul 2009 17:14:00 +0000

Thank you, Matt Miller!

Any Reflections Readers in South Korea?

noreply@blogger.com (Shai Dardashti) — Fri, 19 Jun 2009 17:58:00 +0000

Please email ReflectionsInKorea@gmail.com

Is Tiger Woods Loss Averse?

noreply@blogger.com (Shai Dardashti) — Fri, 19 Jun 2009 17:36:00 +0000

There has always been a bit of crossover between golf and poker. Whether it’s the legendary wagers placed on the course between poker giants Ivey, Brunson and the like or Dusty Schmidt’s million dollar golf and poker hybrid challenge, some similar threads undeniably run between the two games. That’s why a new study that focuses on risk aversion in professional golfers may be especially interesting to poker players.

The study in question, “Is Tiger Woods Loss Averse? Persistent Bias in the Face of Experience, Competition, and High Stakes”, is the work of University of Pennsylvania professors Devin G. Pope and Maurice E. Schweitzer. Pope and Schweitzer studied over 1.6 million putts...

Full story, at PartTimePoker.com

(The actual study)

Annals of Innovation: How David Beats Goliath (Malcolm Gladwell)

noreply@blogger.com (Shai Dardashti) — Fri, 19 Jun 2009 17:28:00 +0000

When Vivek Ranadivé decided to coach his daughter Anjali’s basketball team, he settled on two principles. The first was that he would never raise his voice. This was National Junior Basketball—the Little League of basketball. The team was made up mostly of twelve-year-olds, and twelve-year-olds, he knew from experience, did not respond well to shouting. He would conduct business on the basketball court, he decided, the same way he conducted business at his software firm. He would speak calmly and softly, and convince the girls of the wisdom of his approach with appeals to reason and common sense.

The second principle was more important. Ranadivé was puzzled by the way Americans played basketball. He is from Mumbai. He grew up with cricket and soccer. He would never forget the first time he saw a basketball game. He thought it was mindless. Team A would score and then immediately retreat to its own end of the court. Team B would inbound the ball and dribble it into Team A’s end, where Team A was patiently waiting. Then the process would reverse itself. A basketball court was ninety-four feet long. But most of the time a team defended only about twenty-four feet of that, conceding the other seventy feet. Occasionally, teams would play a full-court press—that is, they would contest their opponent’s attempt to advance the ball up the court. But they would do it for only a few minutes at a time. It was as if there were a kind of conspiracy in the basketball world about the way the game ought to be played, and Ranadivé thought that that conspiracy had the effect of widening the gap between good teams and weak teams. Good teams, after all, had players who were tall and could dribble and shoot well; they could crisply execute their carefully prepared plays in their opponent’s end. Why, then, did weak teams play in a way that made it easy for good teams to do the very things that made them so good?

Direct Link to full article

1927-1933: Chart of Pompous Prognosticators

noreply@blogger.com (Shai Dardashti) — Tue, 16 Jun 2009 14:34:00 +0000

Berkshire Hathaway Letter to Shareholder, 1980:

We believe that short-term forecasts of stock or bond prices are useless. The forecasts may tell you a great deal about the forecaster; they tell you nothing about the future.

When a picture is worth a thousand words
(...and the thousand words that make the picture)

Buffett on Inflation: A Compilation of Writings

noreply@blogger.com (Shai Dardashti) — Fri, 12 Jun 2009 17:49:00 +0000

100 page compilation, courtesy of Reflections contributor Joe Koster.

Thank you, Joe!

Direct Link

In Tribute to Peter L. Bernstein

noreply@blogger.com (Shai Dardashti) — Wed, 10 Jun 2009 16:00:00 +0000

Video: Peter L. Bernstein on risk

Remembering Peter Bernstein: When it came to writing the history of finance, he had the Midas touch

Watching the money flow...

noreply@blogger.com (Shai Dardashti) — Fri, 22 May 2009 03:38:00 +0000

An obscure story...that might be a sign of where the world is going:

May 22, 2009 (China Knowledge) - Coca Cola Co Ltd, the U.S.-based soft drink giant, plans to invest US$2 billion in China in the next three years, which is more than the total investment Coca Cola poured into China in the past 30 years, sources reported.

Full story

South Korea: Party like it's 2004?

noreply@blogger.com (Shai Dardashti) — Wed, 20 May 2009 19:53:00 +0000

Then:

On Korean stocks
Citicorp sent him a manual on Korean stocks
Within 5 or 6 hours, and found 20 stocks selling at 2 or 3x earnings with strong balance sheets
Korea rebuilt itself in a big way post 1998. Companies overbuilt their balance sheets
Daehan Flour Mill – 15,000 won/year earning power. Stock was selling at 2 and change times earnings.
Warren’s strategy was to buy the securities of 20 companies thereby spreading his risk. Some of the companies will be run by crooks.
He doesn’t know any of the companies and he’s never been to Korea before. Information on these companies is available over the Internet in English.
Also, the won has strengthened, which was an added bonus.
The investment presented an opportunity to make 150% at which point the stocks would still only be selling at 7 or 8x
It’s ridiculous to say there’s an efficient market.
They put $100MM into this by doing very little work.

Original Link

...And some further insights, courtesy of Sham Gad

...Visited in 2007

Now:

The billionaire yesterday told reporters he had a book about South Korea’s publicly-traded companies that he studied for possible investments, and had bought a stock for his personal portfolio...Buffett said he would consider only investing in South Korean companies if he was starting an investment firm from scratch because of the extent of their undervaluation.

Direct link: Bloomberg

Buffett told reporters Sunday (local time) that the world's 13th largest economy will better weather the current global economic downturn than other major economies, and will resume an ascent as soon as the world economy returns to normal. He held a press conference after Berkshire's shareholders' meeting in Omaha, Nebraska.

``The Korean economy will cruise smoothly over the next few years. In particular, the manufacturing sector has achieved an outstanding performance over the years and will do the same in the future. Berkshire is now seriously considering purchasing shares of several Korean companies,'' he said.

Direct Link: The Korea Times

Video: Barry Schwartz On Our Loss Of Wisdom

noreply@blogger.com (Miguel) — Mon, 18 May 2009 06:49:00 +0000

Dear Readers,

I want to thank the Reflections On Value Investing Crew for allowing me to become a regular contributor . Thank you again for the opportunity. I hope you enjoy my first post.

-Miguel Barbosa
Founder Of SimoleonSense.com

Barry Schwartz, author of The Paradox of Choice has a recent Ted Talk titled: Our loss of wisdom. This talk stresses the importance of practical wisdom in a complex world.

About The Video (Via Ted.Com)
Barry Schwartz makes a passionate call for "practical wisdom" as an antidote to a society gone mad with bureaucracy. He argues powerfully that rules often fail us, incentives often backfire, and practical, everyday wisdom will help rebuild our world.

About The Speaker (Via Ted.Com)
Barry Schwartz studies the link between economics and psychology, offering startling insights into modern life. Lately, working with Ken Sharpe, he's studying wisdom.

Click on The Image Below To Watch The Video

Buffett, Munger, and Gates - Together & Unleashed

noreply@blogger.com (Shai Dardashti) — Mon, 18 May 2009 04:18:00 +0000

Eitan Wertheimer, Chairman of Iscar, Discusses the Global Recession

noreply@blogger.com (Shai Dardashti) — Mon, 18 May 2009 03:54:00 +0000

The Paradox of Choice, Barry Schwartz

noreply@blogger.com (Shai Dardashti) — Fri, 15 May 2009 05:07:00 +0000

Psychologist Barry Schwartz takes aim at a central tenet of western societies: freedom of choice. In Schwartz's estimation, choice has made us not freer but more paralyzed, not happier but more dissatisfied.

- TEDtalks

Outliers, by Malcolm Gladwell

noreply@blogger.com (Shai Dardashti) — Thu, 14 May 2009 18:56:00 +0000

It is a terrific book, a bestseller. There is a reason why it is a best seller. The guy has a way of picking out examples that guide reason well. I tend not to read self-help investment books. Like soap operas, I know the plots.

Charlie Munger
May 6, 2009

(Notes courtesy of Peter Boodell)

The Birth of Plenty, by William Bernstein

noreply@blogger.com (Shai Dardashti) — Wed, 13 May 2009 21:18:00 +0000

A history of the world in 58 minutes:

The Auto Industry: Where the Puck is Going.

noreply@blogger.com (Shai Dardashti) — Tue, 12 May 2009 19:11:00 +0000

Where the puck has been.

Circa 1926

Where the puck is going.

Table 2

Chart 1

Chart 8

Worldwide, Cars per Capita

Roads, USA / Roads, China

Passengers, USA / Passengers, China

The Road Ahead (2.0)

The Picture Worth a Thousand Words: Slide #6

China, 1
Detroit, ?

Shai

Dallas jewelry exec Beryl Raff treasures new role as head of Helzberg

noreply@blogger.com (Joe Koster) — Thu, 07 May 2009 20:50:00 +0000

Dallas jewelry executive Beryl Raff figured that going to work for Warren Buffett would be an unusual gig. But after spending last weekend in Omaha at Berkshire Hathaway Inc.'s annual meeting, Raff feels like an adopted member of his extended family.

Last month, Buffett hired her away from J.C. Penney Co., where she was executive vice president of fine jewelry, to head Kansas City, Mo.-based Helzberg Diamond Shops Inc., a 94-year-old chain of nearly 270 jewelry stores owned by Berkshire Hathaway.

Her trip to the three-day corporate fete was her first official encounter with all things Berkshire.

She felt the energy of 35,000 people converging on the Nebraska city of 433,000. She hosted a dinner for the Helzberg team. She gawked at acres of "spectacular buys" under one roof at the Nebraska Furniture Mart and thought about throwing out all her stuff and starting over.

She met Bill Gates.

"There were so many moments when I pinched myself and thought, 'Is this real?' " says Raff, who, for the time being, is keeping her home in Dallas and commuting to Kansas City. "I asked my husband, 'Do you believe we're so fortunate to be part of this whole thing?' It really felt like a family to me."

Link to Article

What business is BYD really in?

noreply@blogger.com (Shai Dardashti) — Tue, 21 Apr 2009 20:25:00 +0000

Interesting to explore the obscure statement below attributed to "BYD insiders"

...Plans to be a total provider of power in China, meaning that it wants to control electricity generation, battery manufacture and the vehicles to use them.

- http://www.autocar.co.uk/News/NewsArticle/AllCars/239616/

What might "total provider of power" actually mean?

China's leading battery producer BYD Co., Ltd. starts building a solar cell project in Shangluo, Shaanxi Province. The company plans to invest CNY 450 million in the first phase of the project, which is expected to be able to turn out solar cells of 100 mega watts per year and create sales revenue of CNY 1.024 billion.

The first phase, covering a plot of land of 270,000 square meters large, will be built up one year later. The total investment in the project is expected to reach CNY 2.5 billion, local media said. It is the largest project in terms of investment in Shangluo City.

Shangluo has rich mineral resources, especially the high-purity silicon ore, which is the main raw material for solar cell production. Wang Chuanfu, chairman and president of BYD, had led a team to survey Shangluo at the end of this November and inked development contract of a solar cell plant with the local government.

- http://www.yourrenewablenews.com/news_item.php?newsID=18550

What I didn’t know before this meeting was that BYD is creating energy storage systems that hold energy that can be used later, say, during peak hours of transmission between noon and 5pm in the United States.

- http://www.carlist.com/blog/?p=1148

BYD is also researching a product it calls a Home Clean Power Solution -- a set of rooftop solar panels with a battery pack for backup power.

- http://www.treehugger.com/files/2009/04/buffett-byd-china-electric-cars.php

Detroit is in the business of making (or rather, assembling) 20th century motorized vehicles.

BYD appears to think both outside and beyond our American box.

a) Electricity, first. (David Sokol is now a board member)
b) Batteries, second. (Wang Chaunfu's lifelong expertise)
c) Vehicles, third. (And, yes, BYD happens to also make cars...)

Appears to be a strategic, long-term bet -- on both a car company and a joint-vision of the future:

MidAmerican's decision to invest in BYD follows two months of talks between the companies, BYD Chairman Wang Chuanfu said.

- http://www.bloomberg.com/apps/news?pid=20601080&sid=a4RH6K5uUB70&refer=asia

Munger tells Fortune, "[BYD's CEO] is a combination of Thomas Edison and Jack Welch - something like Edison in solving technical problems, and something like Welch in getting done what he needs to do. I have never seen anything like it."

- http://money.cnn.com/2009/04/13/technology/gunther_electric.fortune/index.htm

Shai

Charlie Munger Speaks Out: How We Can Restore Confidence

noreply@blogger.com (Lincoln Minor) — Wed, 11 Feb 2009 03:42:00 +0000

Our situation is dire. Moderate booms and busts are inevitable in free-market capitalism. But a boom-bust cycle as gross as the one that caused our present misery is dangerous, and recurrences should be prevented. The country is understandably depressed -- mired in issues involving fiscal stimulus, which is needed, and improvements in bank strength. A key question: Should we opt for even more pain now to gain a better future? For instance, should we create new controls to stamp out much sin and folly and thus dampen future booms? The answer is yes.

Direct link to February 11, 2009, Washington Post article