JRH

To be clear, I'm not advocating the use of any sort of macro forecast. What I am saying is that if you DO attempt it, single-year P/E ratios have zero predictive power, in the data. You could probably come up with other methods to inform that single-year P/E ratio to be predictive, besides a cyclically-adjusted methodology such as Shiller's. Who knows what else might work? You might be able to use private debt-to-GDP levels to distinguish good from bad? However, most likely, nothing is going to save you from "false positives" on a year-by-year basis (you might go defensive years too soon). In my opinion, better to just pick bottom-up. Besides that, just having a sense of the nature of catastrophe (basically, that it is always possible and that you cannot count on seeing it coming in time) is useful.

The key point to pull out of the excerpt of Hussman you quoted was the Shiller P/E ratio. If Hussman read the excerpt from Marks you quoted, he would point out that one-year P/E ratios have zero predictive power going forward. Therefore, the fact that P/E ratios have come down considerably from 1999 should not be relied upon to construct a macro forecast.

Ultimately, both parties will tell the lies that they can get away with. What starts with principle slowly turns into "whatever it takes" to get the votes. If people are less willing to pay attention and hold their feet to the fire for lying, then the lies will increase. It is sort of like what Steve Jobs said regarding television - and I paraphrase - that when he was younger, he thought there was a conspiracy to put bad programming on TV, but when he got older, he realized that the stuff on TV was exactly what people wanted to see.

often I'm able to repeat it through multiple cycles on the same stocks...the stock may be even flat over a holding period, but I end up with gains in the IRA and losses in the taxable account. Just make sure you don't sell in taxable account, then buy immediately in the IRA. I believe you'd run into the wash sale rule here even though one is in a taxable and one is not. Not 100% sure but I'm pretty sure... http://www.fairmark.com/capgain/wash/wsira.htm This explains it very well. Sounds like it is perfectly fine to sell in an IRA and buy in taxable, just not to capture losses in taxable and move it into an IRA. I can't say that I understand PERMANENTLY losing your access to the deduction, but that's the IRS for you. Overcompensate in severity for what they can't effectively police.

I've been successful with this exact strategy the last couple years. Personally, looking for any screaming local real estate deals. Aside from money that is sort of "earmarked" for that until it does or doesn't pan out, I've been hanging around a ~15% cash buffer since the beginning of the year. I also have a 401k for which I have very limited options, but am 25% in cash there with 75% of it in American Funds EuroPacific Growth. I've been reallocating into it as a decent proxy during periods of European pessimism (last fall, recent Spain clobbering) with success. I don't even bother to try to outguess the market's specific reactions - just add automatically on severe pessimism - basically just employing a Shiller CAPE-type theory to long-term return potential. For some reason, it's so much easier to accept the potential for extreme volatility and an extremely long horizon with my 401k than my self-directed accounts. I need to start thinking about that as an advantage and not a disadvantage.

Read it again - probably not fair to say it is a fluff piece. Plenty of facts, they just don't add up to a quantified investment thesis the way his other presentations do.

New presentation by Berkowitz on Sears: http://www.fairholmefunds.com/sites/default/files/120815%20SHLD%20Presentation.pdf Somewhat more of a fluff piece - in my opinion - than the earlier presentations on BAC and AIG. Still worth seeing.

I have seen a video interview where he said something somewhat different. To paraphrase, he said that anyone who does not have the mental fortitude to watch one of their holdings fall in value (alluding to the stock market) by 50% deserves the mediocre returns that they will experience.

Not sure when it was posted but the newest semi-annual letter is available: http://fairholmefunds.com/sites/default/files/2012%20Semi-Annual%20Report%20Letter.pdf No huge changes. Nice table of prospective returns on the TARP warrants assuming book value appreciation and market/book convergence by warrant expiration. His spreadsheet must look very similar to mine! :) AIG is 38% of FAIRX. Can't say that I'm quite that concentrated in AIG...

This is a question of economic theory, something I have been scratching my head on. Why would a country that was re-introducing its own currency need to redenominate any existing assets? I hear this a lot lately, given the Eurozone situation (and maybe it is just incompetent journalism). Greece (or Spain, or Germany) can leave the Euro, but they have to have a bank holiday in order to introduce the new currency and redenominate all Euro assets, and it will be a mess for financial institutions, existing contracts, etc... Here's an alternate idea from Warren Mosler (MMT): http://moslereconomics.com/2011/11/17/my-big-fat-greek-mmt-exit-strategy/ Basically, let anything Euro-denominated remain so, and just start deficit spending and collecting tax in the new currency. In other words, the only thing re-denominated are fiscal actions taken by the government. The first time I read it, my mind jumped to some rather "trained" conclusions that don't hold up under closer examination. Of course, the key is what happens to the national banks holding the Euro-denominated sovereign debt. Equity + some or all debt probably gets wiped out and recapitalized with the new currency. Could all this currency creation produce hyperinflation? Well, if civil unrest led to a collapse of the productive economy, yes. In Greece, then? Possible but unlikely even there, I think. In Spain? I can't imagine. In Germany? Quite the opposite, the DM would probably soar in value. Agree/disagree? Think I'm insane? Thanks in advance.

Just to offer another anecdotal perspective (from Omaha). The market here - and particularly for the types of homes typically used as rentals - has gone through a significant firming through the spring and into the summer. Up through the first of the year, the game was being a discerning buyer in a market with lots of choices. Now they are turning very quickly. I have no perspective on whether this activity is the entire market or just the subset that I keep an eye on. It is rather curious to see this here because although our home prices never fell (at least not more than single digit %'s), the average time they stayed on the market was still increasing late last year. Now, boom, 180. I don't wish anyone bad fortune, but I'd give my right arm for one more down leg in the RE market here in town...

Some more facts + some speculation: http://soberlook.com/2012/06/strange-story-of-rescap-bankruptcy-that.html