racemize

I'm also curious as to the choice of warrants vs equity, but at the same time what leads you to "are comparatively more undervalued than the common"? To me, the warrant price just gives an implied price for the common at 2019 (at this point ~$25), so you should buy warrants if you think it is over that price versus common otherwise.

As if one ERICOPOLY weren't enough...!! ;D racemize, why have you started this thread?! To make me suffer like hell??!! ;D ;D PS txlaw, just joking! And congratulations!! ;) giofranchi hey, I started the other thread for compounding returns! You can blame rkk for this one!

yes, this is one of my concerns as well--hopefully, given that it is an anonymous poll, most (maybe all!) will respond, even if they don't post anything.

Yeah, I just use a spreadsheet (I have one for every year, and one that keeps track of all inflows and outflows since inception). From that, I use the xirr function. I also keep track of the TWRR via a different formula, but it is essentially the same as my IRR at this point.

I'll start it off: 2012 Results: 51.15% IRR based on 40.9% SRR Since October 2010: 40.89% IRR based on 45.46% SRR AUM: ~400k

Since we're doing the 2012 results, let's also see your overall compounding rates since you started (ignore your own fees, but include everything else). If you feel like posting, please indicate date you started and AUM (if you feel comfortable doing so).

Ended up with YTD IRR of 51.15%, based on an underlying gain of 40.9%. My IRR since starting (October 2010) is 40.89%. ~400k AUM right now.

This of course seems the right thing to do, but properly identifying the rise and fall seems hard to do. I tend to think Marks guidance is the most useful for this, and as I said above, each time he's been asked in the last few years, he's said, "neither too optimistic or too pessimistic", or something along those lines. I tend to think that ignoring the macro is the thing to do, unless it is in the extremes (very high or low/very low)--if it is in the middle, stick with micro! racemize, let’s think for a moment at the history of debt super-cycles and where we are today. As the Keynesian Endpoint I posted in the Macro “Musing” thread shows (I think very well), the last time we were so close to the “Detonation Rate” was 1941. Mr. Watsa has repeated many times that the last comparable period in modern history, to the period we are living trough, are the ‘30s and the ‘40s in America (or the ‘90s in Japan). Now, if you read “The Great Depression, A Diary”, you will find that almost nobody got the 1937 “extreme” right, probably because the 1937 extreme was way below the 1929 extreme. And on a 10-year cyclical-adjusted P/E basis the 1937 extreme was exactly where we find ourselves today! I don’t mean to say the stock market will decline in 2013. Actually, I don’t believe that! Instead, it will probably still go up, like Mr. Tepper believes! Maybe a lot! What, on the other hand, I want to say is that to get only the extremes right is very much difficult. Sir John Templeton didn’t believe he was able to do that. Remember Mr. Graham who has said: “anyone who wasn’t defensively positioned by 1925 would have been wiped out during the 1929 crash!”. Or something like that… Mr. John Hussman keeps saying the market is in the worst 1% or 2% of all weekly observations in a century of data. Mr. Jeremy Grantham forecasts no return for US large caps and a negative return for US small caps for the next seven years… who really knows if we will get the chance to see even more extreme valuations? Remember 1968: valuations were not much higher than they are right now, S&P Composite P/E10 of 24 vs. a P/E10 of 22 today. And we know that on an inflation adjusted basis the market declined 63% from 1968 to 1982. I think it is very risky to call both a top and a bottom. Adjusting gradually, you might forfeit some gains, no doubt about that! But I think it is much easier and less risky to do. giofranchi so perhaps I wasn't as clear as I meant--I didn't mean calling the tops or bottoms, but rather, as Marks says, paying attention to market sentiment and adjusting to more cash when the market is optimistic and equities when it is pessimistic. At the moment, people are very aware of the concerns and there are good reasons to be--this is why I think Marks keeps saying it isn't either optimistic or pessimistic. In such situations, I think sticking with micro is the way to go. I agree with your comments on the super debt cycle, but I find it extremely difficult to use that information in a good way. I do have an 18% position in FFH, should it go that way, however.

This appears to be the excerpt from Templeton regarding the Yale Plan (Gio correct me, if not): This of course seems the right thing to do, but properly identifying the rise and fall seems hard to do. I tend to think Marks guidance is the most useful for this, and as I said above, each time he's been asked in the last few years, he's said, "neither too optimistic or too pessimistic", or something along those lines. I tend to think that ignoring the macro is the thing to do, unless it is in the extremes (very high or low/very low)--if it is in the middle, stick with micro!

And sometimes the obvious needs to be bolded :) If the market being high is followed by a general decline in prices, do you still believe the rebound in the housing and auto sectors will be unaffected? giofranchi I would also point out that Marks has described the current market as neither high nor low. In any case, I have cash incoming for any drops in market prices, so I can be full in without too much of a concern for them.

I don't think the health industry is a good example here--you could have said the same thing about health care cost increases for more than a decade.

+1

http://www.livestream.com/dealbook/video?clipId=pla_e5b533db-8859-4de5-bdbb-a4bb95d3f715&utm_source=lslibrary&utm_medium=ui-thumb

Looks like this is from November:

Which is why, Eric, that when you say you are headed to the sidelines (clipping dividends from high quality, low risk stocks) after the next wave of wealth, I don't believe you! :) There is a lot of truth in the old cliche: "It is the journey, not the destination." I see it time and again including my personal experience. When I first started working I dreamed of making six figures annually and felt that a after a few years at that level I could walk away and live on easy street. Two years later I had reached that goal at the age of 27. I took me about a week to get accustom to my new "wealth" and realize there was more, much more, if I wanted to stay the course. I ended up working for another 20 years. And my income went up exponentially with over the years. By any objective measure I could have walked away anytime, but I couldn't break away from opportunity. It was just too exciting and fun. I stopped working for others five years ago at 47. I thought I would play lots of golf, travel on Netjets, and spend lots of time relaxing poolside in my new mansion as that is all easily in my budget. What actually happened? I live in a modest home, travel coach, and spend my time reading financial reports. I commit more energy to wealth creation now than ever before but enjoy every minute of it. It's just too fun and to walk away would be a setback to my level of life satisfaction. Right now you see it as a stressful rollercoaster and you want to get off, and sit on the sidelines in the shade. But as time passes you will remember the thrill and forget the anxiety which makes it very hard to stay away from a significant allocation of assets to the next "inevitable". I hope BAC rallies like crazy, and that you at least have a chance to prove me wrong, but until then I'm betting against because I believe wealth doesn't change our fundamental approach to life. Thanks for sharing!

You've come a long way on FFH in the last couple of months!

That was my understanding, though I don't know what the marginal difference is.

apparently around 500 million to settle. http://www.businessweek.com/news/2012-12-03/ubs-close-to-a-settlement-over-libor-rigging Was going to post in UBS investment idea, but we don't have one yet--worth starting one?

I suspect that the reason is that not everybody wishes to hold FFH for a decade like you and me. Some people are more active investors and want to pick up a 50-cent dollar and then turn around and sell it for 80-cents in a year or two. People who are able to do that reliably can have a better return than just holding FFH or BRK for lengthy periods. I suspect that people are now looking at FFH as an opportunity to buy very cheap and sell a little bit less cheap sometime during 2013 for a quick 20%. As an observation, back when ORH was still publicly traded, many of us made good money by flipping back and forth between FFH and ORH depending on which looked more attractive. For whatever reason, the relative valuation of the parent and subsidiary would swing perhaps 30% back and forth a couple of times per year so you could play the relative valuation while retaining a long-term exposure to the basic P&C business and to the investing prowess of Prem et al. Too bad we can't do that anymore! SJ Or it could be that FFH at the current price meets these investors' hurdle rates for investing. I can tell you that I don't just go by the rule of thumb that FFH will increase BV by 15% and, therefore, I will get a 15% return over time if I buy at BV. I have my own assessment of when I think FFH is cheap, and it's not dependent on nominal IV (i.e., BV). Would you mind sharing your thoughts on when it is cheap? e.g., if you agree with their current bets (such as hedges), hardening market, etc?

they get the cash flows from the life insurance I believe.

gains in RIM should help book value this quarter, though there is Sandy...

wow.

He is the man! (and it looks like I am just a clone) http://variantperceptions.wordpress.com/2012/03/07/munger-on-the-perfect-turnaround/ I thought you promised us a new blog post soon? Your readers demand it! =p

yeah, that video ended rather abruptly--couldn't find another one this morning.

interesting that he said most of his capital gains were from bonds which didn't have double taxation.