obtuse_investor

LOL! And do you usually have precognitive dreams? Ha! I wish. This is the very first time I had an earnings call in my dream. I didn't tell my wife-- she may require me to see a psychologist. :-)

Because I am getting nervous… During the last few weeks we have witnessed a short market correction… Which nonetheless was painful enough to prompt the FED into saying it is ready to stop the slow unwinding of QE and therefore to resume its stimulus… And the market promptly recovered… I like it less and less… And I demand more and more protection, meaning insulation from the general market. Gio I observed that too. These actions tell me that the market is very precarious. In a similar vein, last week I decreased some of my most bullish positions (call LEAPs) and bought some more 30yr US treasuries.

Gio, Why today? (this is neither here or there-- I had a dream last night that in Q3 filing, FFH announced a 100M unrealized profit on their deflations swaps, with guidance of billions to come)

I have been toying with this same idea in my head but didn't take any action the last 3 years. On hindisght, a good move. How are you doing your 25x leverage?

Thanks for posting this Gio. Looking at last 5 years (see attached chart) there have been much juicier opportunities than 1.15xBook.

Thanks Gio. Curious that that excerpt is from 2004.

Feels that way, and a lot of commodities point that way too. The options are a way off strike, but my understanding is that their price can rise in the market regardless. That is my understanding too. If and when the deflation expectations become the norm, then the market will discount that. That is when these defaltion swaps will shine. We don't have to see actual deflation ever be all that low for these swaps to pay off big. Today's expectations are that ECB's Draghi has a bazooka in his backpocket with a QE sticker on it.

The data is freely available to play with: http://www.econ.yale.edu/~shiller/data.htm

I am considering launching a sentiment tracking ETF that will track Tepper's nervousness. Blackrock is interested.

A similar question was asked of Markel management during Q1 2014 conference call. They admitted that the market is soft, but they didn't resort to hyperbole. It is still available at https://www.markelcorp.com/ and transcript is available too at http://seekingalpha.com/article/2205213-markels-mkl-q1-2014-results-earnings-call-transcript

I enjoyed that essay quite a bit when I read it last week. The common thread in all those crisis was greed- which isn't surprising to anyone. Furthermore, it was the general confidence that it is a one-way bet and there being plenty of credit. While reading the essay, I was thinking of today and the whole notion of the Yellen put and low interest rates. I don't think we are at the heels of another 1929 or 1850, but I wouldn't be surprised if a little panic happens in the next 2-5 years.

I fear that if FFH is proven right on their current macro call, then they would be more likely to make future macro calls! Successfully forecasting macroeconomic events is inherently hard. As a shareholder I want them to simply stick to their knitting. I almost wish that they are proven wrong so that they can dust off and get back to real work.

Excellent post. Thanks!

Fortress Paper (FTP.to)

Check out the INK reports. Your broker may provide this.

I recall Eric mentioned that he invested in FFH options at some point in the past. Eric: Did these exist in the past or did you do some fancy OTC deal?

Commodity deflation marches on... Full article: http://www.economist.com/blogs/buttonwood/2014/03/commodities-and-economy Excerpt:

It is a small world. :) Will reach out to you via PM.

You could put that poster's page through page2rss and subscribe to that RSS feed.

This video report from the FT is appropriate for this thread and quite timely. Barbarians back at the gate http://video.ft.com/3325299108001/Barbarians-back-at-the-gate/Markets

I couldn't agree more. I am sure you meant short instead of buy ;-) Which company is it?

These filings are located on SEDI (https://www.sedi.ca/)-- a horribly unusable site. Canada really needs to shape up on this front.

phil_buffett: It is certainly a conversation worth having-- I just wanted to point out their different situations. That being said they both are/were more Graham like in their style. It is quite impressive that Klarman has stayed a cigar butt loving investor as his AUM has gotten quite big. As far as I understand, he has ventured outside of classic equity market and does a lot more work in the relatively inefficient fixed income market. Anyway, to answer your original question, I tend to see cash accumulate as ideas mature and new ideas aren't that easy to find. I know that I am not looking hard enough-- and I am ok with that. I am not all that bright and looking hard would make me reach for ideas that are of lower quality; thus leading to permanent loss of capital. I know some of my psychological failings and I like to make rules that help me mitigate those to some degree.

This isn't a very fair comparison. Klarman has $30B in assets, while Schloss had about $250M AUM. The universe was far bigger for Schloss and opportunities plentiful. I think both are doing / did the right thing for their size.

This may be a case of preaching to the converted, but here is some philosophical perspective. In Praise of Idleness by Bertrand Russell https://libcom.org/files/Bertrand%20Russell%20-%20In%20Praise%20of%20Idleness.pdf