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Show me your Timely's and I'll show you mine. Have a Cigar...
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Started by Timely,

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adamstrange

adamstrange

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I think Buffet stated a very important principle for investing, where you are typically focused on maximizing return on invested capital and where cash coming from one sale can typically be easily be used to purchase an alternate investment that is more profitable.  Even so, Buffet oversimplifies because there is always some level of uncertainty in these decisions.  That is, even if I would not want to buy, I might not want to incur the transactional fees if I sell but rather stick with the horse I'm on for the time being.  Transaction fees for buying and selling are a guaranteed net loss of wealth.  Do it too much, and you'll dwindle the value to nothing like what a churn happy broker did to my great aunt.  (Note:  Her executor was my aunt and she got it all back.)

 

If you own a comic, there are only two options:

1) Part with the book resulting in:  assets= $0k, cash=$5k, pride of ownership=none

2) Keep the book resulting in:  assets=$5k, cash=$0k, pride of ownership=100%

If you sell the book, all you have is cash whereas if you keep the book you have an asset still worth $5k (subject to the vagaries of the market) and pride of ownership.  If pride of ownership is important to you and the cash can't be deployed to obtain some other object the evokes a similar response, you are still the "poorer" for having made the sale and you've most likely incurred selling fees.

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Sqeggs

Sqeggs

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On 6/13/2018 at 6:42 PM, adamstrange said:

I think Buffet stated a very important principle for investing, where you are typically focused on maximizing return on invested capital and where cash coming from one sale can typically be easily be used to purchase an alternate investment that is more profitable.  Even so, Buffet oversimplifies because there is always some level of uncertainty in these decisions.  That is, even if I would not want to buy, I might not want to incur the transactional fees if I sell but rather stick with the horse I'm on for the time being.  Transaction fees for buying and selling are a guaranteed net loss of wealth.  Do it too much, and you'll dwindle the value to nothing like what a churn happy broker did to my great aunt.  (Note:  Her executor was my aunt and she got it all back.)

 

If you own a comic, there are only two options:

1) Part with the book resulting in:  assets= $0k, cash=$5k, pride of ownership=none

2) Keep the book resulting in:  assets=$5k, cash=$0k, pride of ownership=100%

If you sell the book, all you have is cash whereas if you keep the book you have an asset still worth $5k (subject to the vagaries of the market) and pride of ownership.  If pride of ownership is important to you and the cash can't be deployed to obtain some other object the evokes a similar response, you are still the "poorer" for having made the sale and you've most likely incurred selling fees.

But ... the case here is different:  You won't sell for $5K a book you wouldn't buy for $5K if you didn't already own it.  What you do or don't do with the $5K in the instance where you own the book and are considering selling it is a side issue that isn't relevant to explaining the basic inconsistency in this behavior, 

It's a situation most of us have found ourselves in (repeatedly).  It's not rational, because when we fail to sell a book for $5K, we have effectively bought it at that price (leaving aside transactions costs).  That's why it needs something like the endowment effect to explain why the behavior is both seemingly inconsistent but very common. 

The related phenomenon with investors is an unwillingness to unload an investment at a loss (despite the tax benefits of doing so) because you don't want to acknowledge the crappy decision you made.  But the decision was a crappy one whether or not you realize the loss.  The price you bought a stock for is irrelevant to whether you should continue to hold it (again, leaving aside transactions costs and the tax implications), just as what you paid for a comic is irrelevant to whether you should keep it (again leaving aside transactions costs, etc.)  But both investors and collectors often act as if the purchase price is relevant.

The stock I bought for $100 that's now at $50 isn't really a $50 stock and I don't have a loss -- unless I sell it (true in a tax sense but not otherwise).  The $5K comic I own isn't really a $5K comic because I bought it for $500, so I'm not really giving up $5K by keeping it.  Magical thinking in both instances, but very common. 

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PopKulture

PopKulture

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On ‎6‎/‎12‎/‎2018 at 9:25 PM, Sqeggs said:

Looking at it logically, if you wouldn't buy a book at its current FMV, then you should sell it, because by not selling it, you have effectively bought it at that price. 

This is quite a conundrum, stated thus. As you and others have discussed in subsequent posts, some of the logic seemingly short-circuits at that collector/investor intersection.

Thanks for making me feel even MORE conflicted now!!  hm

Edited by PopKulture
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Badger

Badger

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Here, think of it as Sqegg's Comic Book.  Just as with Schrödinger's Cat, where we do not know if the cat is dead or alive until we open the box, we do not know if you should keep or sell a book until we determine the fair market value.  Until we do, it is equal parts sell and keep.  In this unknown, yet known, state you can comfortably keep your book, or sell it, as determined by when the FMV is established.

 

If you want the cat to be alive, don't look in the box.  If you want to keep the book, don't worry about its fair market value.

 

:) 

 

Edited by Badger
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MrBedrock

MrBedrock

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15 hours ago, Badger said:
16 hours ago, bc said:

My copy doesn't have it notated, but isn't there an earlier ad for Cap 1 in HT 3(2) (cover date Winter '40)?

ht_2.jpg

image.png.9045d02863adbe0aa1cda97f93a4cafc.png

It might be the first published image of Cap...

ht2.jpg

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