XL Media’s Salad Oil Scandal

The Salad Oil Scandal of 1963 was a crucial event in the career of Warren Buffett. In the aftermath of massive fraud, Buffett concentrated a large part of his portfolio in the stock of American Express (the victim of the scam) after its market value had dropped by more than half. For Buffett, the scandal … Continue reading XL Media’s Salad Oil Scandal →

How did the Exchanges do in the Financial Crisis of 2008?

The companies that operate exchanges for securities, commodities and other financial instruments robust institutions. These companies are extremely profitable, with operating margins usually in the high teens. Extreme market turbulence has been caused by the coronavirus. As a result, stock markets globally have taken big hits since the beginning of the year. That the damage … Continue reading How did the Exchanges do in the Financial Crisis of 2008? →

Embedded Optionality | FRMO Case Study

When people talk about the Quality of Earnings, what they usually mean is how well do current earnings predict future earnings. This is, literally, the textbook definition of earnings quality. The problem with this definition, however, is that it favours the stability of earnings above anything else. What if, as an example, a future stream … Continue reading Embedded Optionality | FRMO Case Study →

Mental Model: Defined benefit pension plans

This is a dossier with resources and material regarding the valuation of defined benefit pension plans. This PDF is a selection from an out-of-print volume from the National Bureau of Economic Research Pension Plan Calculator (spreadsheet provided by aliactuary.com) Actuarial Methods and Assumptions used in the Valuation of Retirement Benefits in the EU and other … Continue reading Mental Model: Defined benefit pension plans →

Ryan Morris and the Value of the Activist Option

Ryan Morris of Meson Capital has been showing up on my radar frequently over the last six months (often through SumZero). From what I have read, he seems very capable and his write-ups have struck a chord with me. Investment Approach There is something about his approach that makes me think of the old Buffett … Continue reading Ryan Morris and the Value of the Activist Option →

Mental Model: Booms, Busts & Fragile Systems

What I hope to collect here is a collection of resources that handle the historical representation of the booms and busts of fragile financial systems. Articles & presentations "Who´s Holding the Bag" by Pershing Square Capital Management (May 2007) "The Age of Balance Sheet Recessions: What Post-2008 U.S., Europe and China Can Learn from Japan … Continue reading Mental Model: Booms, Busts & Fragile Systems →

Bruce Berkowitz on Accounting for Debt

From a transcript of Bruce Berkowitz AAII presentation from June 1, 2011: It’s not easy; it’s a painful process. You climb this wall of worry eventually over a multi-year period. You get sharp drops like we had today in the market-place. You have to deal with this crazy accounting that companies have now. The companies … Continue reading Bruce Berkowitz on Accounting for Debt →

Changes in Lease Accounting

A lease is a contractual agreement between an owner of an asset and a counterparty that intends to utilize that asset in exchange for periodical payments. Examples of assets, often used in lease agreements are real estate, ships, aircraft and cars. Types of Leases There are two general types of leases: operating leases and financial … Continue reading Changes in Lease Accounting →

Mental Model: Ecological Systems

A mental model is an explanation of a thought process about how something works in the real world. Mental models help shape our behaviour and define our approach to solving problems (akin to a personal algorithm) and carrying out tasks. Mental models have been studied by cognitive scientists as part of efforts to understand how … Continue reading Mental Model: Ecological Systems →

Mental Model: Evolutionary psychology