thepupil

Taxable 1: 12.5%, (11.2% annualized since 5/2013), this account runs hedged to a max 20% drawdown (via lots of puts), used to short, and owns puts that hedge taxable 2 so it's a little skewed downward but no excuses lol) Taxable 2: Whatever unhedged Berkshire did, more or less, no long term performance data, recently opened Fido account IRA: 18.5% (22.5% annualized since 10/2013), concentrated long only IRA 2 ~16%, Fido account rolled over last year so no long term performance was a 401k in stable value previously Roth IRA: 16.8% (17.8% annualized since 10/2013), concentrated long only Spent a lot on hedges and margin interest in my taxable (which is fine because that's the plan, I invest 100% of my paycheck in my taxable and borrow from it to fund living expenditures, basically I buy 100% of my takehome in hedged Berkshire. The IRA's underperformed but they are very lumpy and I'm okay with that. Worst decision was getting rid of ~200 bps of BTC in 2016 "cleaning up portfolio".

sorry should be more precise with language. They get paid to Hamblin Watsa, which is wholly owned by Fairfax.

have they ever mentioned potentially decreasing the management fee as the entity scales? Not that that's standard PE / HF practice or anything, but standard PE practice also involves a defined fund life and paying only on realizations (not permanent capital / unrealized) and HF's allow for redemption at NAV (quarterly to 3 years). As this goes from $2B to more, the argument for the 1.5% management fee weakens. Let's say they get to $6B in AUM in 10 years from equity offerings + returns. Will shareholders be okay with sending a cool $80 million / year large to a 77 year old Prem Watsa and his team. He's already grown share count significantly and there's more to come on the follow plus they've generated a lot of returns. They've got to run a business and should be paid well if they're delivering value...but at a point the argument breaks down. People won't care if they continue to do well, of course, but there will be the inevitable stumbles at some point.

I'd short a basket of the indirect plays like FRMO that don't have nearly the same upside, but have rallied 100%+ on BTC rally. Find indirect plays, quantify the underlying BTC exposure and downside (upside to the stock) if BTC goes up another 1x 2x 5x 10x, size appropriately and wait for the hype in those types of names to abate. I'm sure there are/will be some penny stock fraud / promotes around coins too.

Since about 1967 (3.4%) http://pages.stern.nyu.edu/~adamodar/New_Home_Page/datafile/histretSP.html

In late '15 / early '16 I started buying LUK 2043's, a relatively illiquid $250mm issue. Generally was able to execute 1-2 points better on the buy on Interactive Brokers for my account than on Fidelity for my parents account. Also Fidelity sometimes wouldn't even show both sides of the bid/offer which I could see existed at IB (and could transact at IB). On a decent amount of notional, the differences in execution on the buy amounted to a few thousand dollars of difference. Executions on the sell were more similar in because i sold when bonds were more liquid.

Bojangles has $540mm revenue in the past 12 months. EBITDA margins have ranged between 13.5% and 14% over its time as a public company. EBITDA over the past 12 months is $76mm. Bojangles has an EV of $622 million (8x EBITDA), EV / Sales is 1.15x Bojangles is having issues. Comps are down and labor costs are rising. That being said, your friends' restaurant is barely breakeven and Bojangles has been around since the 70's. Selling Sweet Tea and Fried chicken is probably more profitable than what your friends restaurant is doing. You would be paying a huge premium to the value of the established business and would be making a venture capital investment in the franchising upside.

maybe a 3% EBITDA margin business, tops? So possible value of company at 15x (just to throw a very high number there) = 0.45x sales = $9B enterprise value as an upper limit. Maybe they make more money, but TravelCenters GAAP financials certainly don't indicate that (EBITDA margins are <3% in all years and <1% in many)It's possible (highly likely) Flying J is much better run, but how much better? In the absence of other info, I think it's fair to say this may be a very small transaction relative to the headline of "one of the largest private co's in America", and doesn't really change the earnings power materially. More of a varmint than an elephant.

A potential drawback of absolute hurdles is the nature of equity returns, where average and median annual returns are higher than the long term CAGR; this is because stocks generally make more than their long term return in a given year and then have rare years where there is a big drawdown. (high yield is the same way, high yield bonds never really return their coupon, they generally tighten and outperform their yield and then blow up occasionally) From Jan 1 1989 - Dec 31 2016, the S&P 500 returned 10.1%. 23 / 28 years were positive (82%) and 17/23 (60%) were above the long term 10.1% return. Assuming performance in line with the index, having an absolute hurdle of 6% will pay a median incentive fee of 1.3% and an average of 2.0%. With a strictly absolute fee (no hurdle), these values increase to a whopping 2.5% and 2.9%. this is the appeal of passive / no incentive fees. people don't want to hire a manager at 50bps and 20% over 6% (which sounds very reasonable) when in the average year you'll be starting out 250 bps behind the benchmark (unless there is VERY high confidence in the strategy or it's truly differentiated). This is particularly hard when you as an LP are comp'd against the benchmark! Over very long periods of time (times which include one of the big drawdowns), the high water mark helps mitigate this phenomenon dramatically, but in this 28 year period there is are very long stretches of positive returns (1/1991 - 12/1999), (1/2003 - 12/2007) (1/2009 - present). So if you hire someone at the beginning of one of these time periods, you can end up paying a boat load of incentive for no "value add". The opposite is true if you hire someone before a big market drawdown. The market return from 1/2000 - to 12/2008 was -28% (-3.6%) so if someone made 7% a year and had a 6% hurdle, they'd make very little incentive relative to value add. In my opinion the most LP friendly benchmark is one that most closely resembles the managers strategy (to avoid years where there is a big mismatch and paying a huge incentive fee for no value add) OR an absolute hurdle resembling the long term return of the strategy's asset allocation with a multi-year clawback / vesting schedule and HWM (these mitigate this issue if the LP is adequately long term in outlook/duration of investment). these structures are rare. it's really hard to build a business around them. Another solution is to have family office / HNW clients with an absolute hurdle and institutional clients with an index hurdle that diversifies your business. So when you lose 15% when the market is down 30% (you may have done a great job, despite losing money), your institutional clients are happily paying you 300 bps. EDIT: to take the data a bit further back, the median return for the S&P from 1952 -2016 is 10.8% whereas the CAGR is just above 7%. not taking into account a HWM, 20% over 6% pays a median incentive fee of 96 basis points and an average of 1.6%. the average 5 year rolling period return is 7.2% and the median is 8.6%, median incentive paid for index like performance with 20% over 6% drops to 50 bps the average 10 year rolling period return is 6.8% and the median is 7.0% the longer you go, the more closely the absolute hurdle resembles an index hurdle. so as long as investors are adequately long term, a 6-7% hurdle is fair (the clawback makes the fees more long term too). But in the short term, you can pay a lot of incentive and be underperforming, which is tough to stomach for many institutional LP's (and probably many individuals too)

And that scary sentence right there is why a company with $1.3B of assets and $400mm of equity should not insure 8% of the residential property value of Florida. $2.6B of losses for a single event is not impossible given their market share ($127B of insured value). this is not how I understood things originally. if UVE (and other similarly miniscule insurers) own the tail risk, that sucks for Floridians / the government.

there's $2.1 Trillion of insured personal residential property in Florida. The state insures about 5% of that (Citizens). Annual gross premiums are about $10B / year. State Farm Florida has the largest share. Then there are the small balance sheet guys who arbitrage the premiums versus the cost of reinsurance. For example, Universal, Heritage, and United are the primary insurers for about 13% of Florida. That's $276 Billion of risk where the primary insurers have equity of $600 million. they can do this because they buy re-insurance. EDIT: At one time Odyssey Re was UVE's largest re-insurer I should re-confirm thisUniversal's largest reinsurer is Odyssey Re (Fairfax) for example. UVE has the highest share of new business also. A real Cat 5 hitting Palm Beach, Broward, or Miami Dade or any other high RE value high population place would cause $100B+ and the industry would lose many years of premium. Those losses will be borne by the re-insurance industry, cat bond holders, and eventually the government. The free lunch is being eaten by the likes of UVE and UIHC and HCI who make ridiculous ROE's writing puts on large swaths of Florida and then buying puts from the re-insurance industry. They have not been tested administratively by a large cat 5 making landfall in their areas of concentration. They'll be fine from a balance sheet standpoint as they seem very hedged. But the re-insurance industry is in for a hurting if this thing really hits. https://www.citizensfla.com/documents/20702/93160/20160331+Market+Share+Report/ab841adc-d5fb-45ca-bff6-8dbd15d5cac5

Originally: South Florida 7/10 most recent years: Raleigh-Durham Now: DC Metro

Indeed https://www.oaktreecapital.com/docs/default-source/memos/2006-07-12-you-cant-eat-irr.pdf

So essentially they all lied about their track record? Did you ever follow up on that and ask them about the reason for the discrepancy? - B It's probably that they had high IRR's and low multiples, though it would be tough to have 20-30% IRR's without a 2.0x multiple unless it was a very short duration fund / strategy. You could have a gross IRR in the 20's and a net multiple below 2.0x, so that could be the discrepancy. Private equity guys speaking in gross IRR.

if you are logging in from work, your work's firewall/security may muck up IB's data feeds. TraderWorkStation is virtually unusable at work for me (which is fine, because I have a phone and because I don't trade often). Other than that, absolutely love IB, have had for 4 years and would estimate overall value add in the thousands if not tens of thousands.

is the hypothesis that there's a "PFIC premium" ( or in other words a PFIC discount in pricing,ie you get paid more to own PFIC's) because of their onerous filing requirements? I think my largest holding, TFG NA, would trade a bit higher if it wasn't a PFIC, but there's no way to prove how much of the discount is related to fees / management / illiquidity or PFIC status as all of those apply

If anyone happens to be in old market, happy to grab a beer, PM me, free until 7 ish

Emerging world. Developed world. I think.

$1mm education $1mm healthcare $3.5mm everything else ($140k gets you to top 10% U.S.) That's kind of where I'm at in terms of what I think I would "need" to feel zero pressure to work for $. That's enough to have most of the niceties of the mass affluent and fit in with my fellow coastal elite scum on a relatively permanent basis. In reality, I'll probably punch out of the w-2 world before I hit those numbers and will probably revise down over time.

the guy charges 1.9%, has had lots of cash and is at 5.77% annualized since inception compared to ACWI in USD at 5.95%. He's not that bad. He just charges too much and chose the wrong benchmark and countries / currencies. ;D I have no idea how he's marketed his fund over time. If he presented it as a global strategy, he'd be delightfully mediocre. Remove the onerous fees and he's a market beater since inception and a market loser by 0 - 200 bps in more recent history. Remove his cash drag and he's probably actually beat the market in more recent time periods. I recognize that you can't just hold him harmless for his hugely negative country and asset allocation, but feel the need to point that packaged differently he'd be half decent.

I don't think I understand this debate.... Let's say an index of stocks has 100 stocks that begin at 1.0% weight. 99 of them are flat for the year. 1 of them goes up 3X and becomes 2.9% of the index (3/103). 99% of the initial dollar weighted index under performed the index, correct?

Agree that AAMC is a spectacular cautionary tale. I tried to short it after the run-up and lost a little then tried again and made a little, then watched in glee as it collapsed, but the benefits were solely psychic as I had not the cajones to short it on the way down. Here is a smart sounding short thesis @ $98, which lost about 1100% at peak https://www.valueinvestorsclub.com/idea/Altisource_Asset_Management/88060 Here is the COBF thread http://www.cornerofberkshireandfairfax.ca/forum/investment-ideas/aamc-altisource-asset-management/

Taxable: 37.9%, 10.8% CAGR since May 2013 IRA: 35.2%, 23.2% CAGR since Oct 2013 Roth: 26.9%, 17.4% CAGR since Oct 2013 I made a lot in my taxable from using high leverage and concentration in hedged bonds and a low net basket in select value equities. My IRA's were heavily concentrated in tetragon. nothing special in my book given the concentrated risks I take. Post from last year:

press release is dated November 3rd.

The HRG setup is interesting. The co looks kind of like a rollup which I guess partly explains the yields and hedging. What's your "effective" yield after the hedge? my average cost on the actual bonds is about 98, i've spent about 2 points on hedges, and also shorted FGL (closed at a ~10% profit that made 3 points to the bonds), so all in (after taking into account the short profits) I'm in at the HRG 7 3/4% at about 97 (bought at 98, will lose 2 points on hedge but made 3 points on short, 8.3% YTW with optionality to a call in '17 or '18 if the FGL deal closes). They currently trade in the mid 103's (call it 6.5% YTW) and I would be trimming a bit more if they weren't in my taxable and 2016 has been a year of lots of realized ST gains (same situation with the LUK's which have risen to par from the mid 80's). I'd like to see the FGL merger close before my options expire (this merger closing would make this a no net debt entity and they'll likely tender for the senior bonds ahead of mine and cause additional spread compression). If that doesn't happen, I'll probably sell more, though it probably won't be expensive to roll my SPB hedges given how much that stock has rallied and the bonds don't get impaired unless SPB falls by 60%+ (and FGL collapses / merger breaks).