racemize

Perhaps it is different in Texas, but it has been very straightforward here, and I've owned three different houses. For my second home, I showed up with my purchase price and the guy stamped it as the value--no questions asked really. Since then, I've hired tax guys to go do the negotiating for me and I pay them some percentage of the savings. It is an amazing deal and almost always results in some kind of savings without me doing anything.

He should never manage other people's money again. Totally irresponsible and reckless behavior.

https://www.forbes.com/sites/nathanvardi/2017/03/16/the-34-year-old-hedge-fund-manager-who-bet-everything-on-a-stock-that-tanked/2/#444e23357fcf

I'm a little confused--Crum's record does seem to speak for itself, but that speaking seems to be mediocre to me?

Why is this thread still going?

Is there a period of time for which the fund did not underperform the index? Also, interesting that he does not mention Consolidated Tomoka, one of his largest holdings, and where he is amidst a long fight with management(that he put in place). He outperformed in the first year or two of starting and that was it.

Race, Just curious, why don't you have any other choice than IB? There really aren't many choices for small funds, and it is the cheapest of that small set.

Well as soon as the fund is big enough or I can live off my savings! Realistically, I think that's 3-5 years. I've already started to taper off work though.

Well, I'm convinced I'm at least going to save money on switching to tiered, so I got something out of all of this! Do you get credit for providing liquidity on trades with this pricing too? I've never really understood how that works other than hearing it exists (my trading sophistication is clearly showing--which is why I don't trade that often and just stick to analysis...) I also do find it believable that algos could improve execution enough to take care of the commission, it is just hard to verify. It's a bit of a non-issue anyway, as I really do not have any other choice than IB for the fund, and it seems fine.

Ok, it is certainly true that I was using fixed. And it does appear that tiered is better across the board. Why is fixed offered at all? I'll see how much better it gets on future trades. I would also buy that execution improvements could make the cost worthwhile, but that is hard to measure. Still though, I've done larger trades on a single price with fidelity. My fund partner makes trades bigger than our fund in his personal account on etrade, and I'm confident it is better pricing than we are getting at IB, at the fixed cost at least. E.g., yesterday I sold Leucadia on IB and it cost me $63 dollars, and it occurred in less than a second--I'm sure it would have gone that fast in Fidelity too, for $5 apparently. It is true that you can't change the price, but they will keep executing at the price for the rest of the day if need be, using the same commission.

Honestly, I've never understood the IB price advantage. When opening my fund, I shopped prices. Indeed, IB is the best and lowest price on a per share commission basis. But I was used to individual accounts with a $7.95 trade at the time. At any decent size, I don't think IB is cheaper. For example, let's say I want to buy $50k of BAC. BAC trades ~$25, so the IB commission is $10, which is clearly worse than fidelity, schwab, whatever. I routinely have block trades in IB with commissions of $20-$60 dollars, which I would have never seen at fidelity. So I guess IB has a pricing advantage if you are a tiny account and do a lot of trades? I personally would rather have fidelity or schwab for an individual account, but I guess I do bigger trades than normal. For funds, it definitely has a pricing advantage, as you can't really use fidelity or schwab. Addendum: I will say hands-down, IB is definitely better for options and margin.

There are lots of court cases and the liquidation preference bit is being remanded, so the legal battle goes on. However, the actual thesis at this point is Mnuchin is going to take care of it this year in some form or fashion, hopefully in a manner that is good for shareholders (I personally wouldn't touch the common). As to "needing" this money in 2-5 years--this is clearly a uncertain investment with a wide range of outcomes and at least one of them is that this is worth nothing. I wouldn't invest any in this if it is actually needed.

Well, again, I was making the argument that a common assertion is that the leverage was what was the driving force for the hedges and the hedges were therefore only the result of having that leverage. My argument is that the driving force must be the view that they took, not the leverage. In other words, the argument I am rebutting is that the hedges depend on leverage. It is easy to test this argument. Do the hedges vary with leverage? The answer is no, they do not. FFH had leverage before, with no hedges. Then they added 50%, then they added to 100%, then they said they would roll off invoking this "leverage" argument, then they increased in 125%, then they killed them off entirely. During all this time, they had a lot of leverage. So I think it is very safe to say that the variable "hedges" did not depend on the variable "leverage". Instead, it depended on the variable "macro views". Thus, it does not make sense to say that the hedges were driven by leverage--they were driven by their particular macro view. Anyway, both of you seem to agree that this was a choice and not required by the leverage, which is all I said in the first place. Then we all agree. Why are you arguing with me?

Why not setup a deal with Buffet? Buffet infuses money for the recap for 50% of the required capital ratio, government increases its strike price to an amount that fills the remaining gap for full capitalization through exercising warrants? Give large plaintiffs warrants in the new company structure (what leverage do they really have now) and then sell off the governments position slowly to the public. This won't happen. But it's an illustration of one of a million ways where Mnuchin can stay consistent with what he's said while screwing public shareholders. Seems like the preferred would survive that scenario.

I think this house insurance analogy isn't that good though. Ignoring that it is required for most people since they have a mortgage, house insurance is a typically prudent thing to do, that almost everyone does. They also do it consistently. They don't decide, this year, no insurance! And then next year I'll insure half my house. And the year after that all of the house. And then later I'll insure more than the value of my house. And a few years later, no more insurance. Thus, if the leverage alone caused hedging to be necessary: 1) other companies with similar leverage would also be hedging their portfolio completely, and 2) FFH could not continually change the hedging amount between 0 and 125% based on factors other than the leverage itself. Thus, my point is that the argument "the hedges are required because of the leverage" is not plausible, because 1) it was not required by others; and 2) the fluctuations in hedges were not tied to their leverage, but instead to their macro views. The hedges are there because they had an expectation of some particular scenario to happen, which they've changed their mind on. If we are sticking with some kind of house insurance, it would be buying flood insurance in an area that doesn't flood based on a reason that changes and no one else participates in. Richard's example also has a lot more consistency than Fairfax--his was based on the amount of money he had saved. In contrast, at one point Fairfax tried to say that they would let the hedges roll off naturally, but then they changed their mind and increased to over 100% and then reduced it completely, again not based on leverage, but their changing macro views.

100% agreed - it was a choice. Question is, was it a good one because the thinking was sound (there is a risk of a depression; history suggests a depression could cost us the company; we are prepared to pay a high price to avoid even a small risk of that); or was it a bad one because there wasn't a depression? Easy to argue both ways but for me the key is that 1. they were very clear about what they were doing so if you didn't like it you didn't have to own it, and 2. they didn't make hay on the long side when they should have done. I agree, I've just been a little tired of the "hedges were required" argument--Markel didn't do it, BRK didn't do it, and FFH varied the amount of hedges based on their macro whims (first 0%, then 100%, then they said it would slowly fall off as they grew, then it was 120%, then it was 50%, now it is 0%). I was in it for some of the hedges, but after one of the meetings where they said they were convinced you could make no money until the next crash and still beat the market--that was just too much. So I was out for the last 3-4 years. Just got back in now that the hedges are off. I just want them to do their bread and butter.

It is by definition not required if you can and do choose not to have it. "essential, needed, or necessary--set out by rule; compulsory"

If it were actually for protecting their float, then they couldn't take them all off now that "Trump" has happened. If they can choose when to put them on or off then they simply are not required.

Well, honestly, the court outcome never seemed like a strong bet to me in the first place--courts have a way of not coming out the way you think it should, as it just did. I think Mnuchin is the reason this thing became much more compelling. He's basically the same type of guy that would hold these things, and he wants the government to get out. If he wants the government out, he needs private shareholders to be at the table. If he kills all these shareholders, then they aren't coming to the table. But maybe someone can throw out an interpretation where Mnuchin can get it out of government control, replace it with something else, and still kill the value of the companies? He could liquidate, but that doesn't seem like the language he's using. If he isn't liquidating, then there needs to be some public value to the companies for them to exist.

The language on the contractual claims doesn't look that great--just that it needs to be looked at, it seemed to me. So no positive language on the merits of these things. (Very open to correction here)

I knew you'd get the reference. But I still mean every word... What is going on with you two?

Also, the logic is pretty hilarious. What exactly would he know that the market didn't at that point? I guess that the bombs would stop?

I'm also blown away by it, but I hated their hedges before, so...

goodbye hedges. Does the $1 billion from OMERS cut down the dilution from the allied deal significantly? I can't remember how much needed to be soaked up.

I don't really understand this article--Buffett hasn't said anything recently, and this is just some dude talking about what Buffett said a few years ago. Misleading title honestly.