hyten1

luck see i love averaging down but it doesn't always happen it against my nature to average up, but that doesn't mean it hasn't happen before. sometimes with new information the investment you have made is even more attractive even with the run up in price. BUT yes it hard to average up, its just hard :)

i have to say market timing is hard (for me at least), i have never been good at it nor been successful inevitability, everytime i try to time it and sell (base on macro reasons), the stock/market keeps going up after i sold yes the market/stock eventually does turn and go negative but many times the market/stock will turn up again before reaching my sale prices. its frustrating take a look at 2008 my portfolio crash big time (i was down 40%) during that time i didn't time it or sold anything. but i did have about 15% cash, so i pour it back in. I also added some additional cash. i was up 120% in 2009. i wonder if i did time it during that peirod what would happen i am not saying you should not do what you feel comfortable, this is just my experience EDIT: not to say i don't try, my cash level range from 0% to 30%. so i guess that is timing or more like sell/buying base on what i thought the stock was high or low.

putting the recent so call market high into perspective http://www.ritholtz.com/blog/wp-content/uploads/2013/03/inflation-dow.png still about 1000 points below 2000

twacowfca, how do you guys value these, there are tons of prefers, many with low vol, all dividend are non-cumulative - you think they will ever get back to $25/$50? will fmcc or fnma ever pay dividend on these? - considering they still have over 180bil to pay the treasury combine (fnma 88bil, fmcc 42bil)? - i guess you guys are just playing the fact as housing improve prospect fo fnma/fmcc improve their prefers will move closer to $25/$50? - i assume if fnma/fmcc do ever decide to redeem some of these they will start with the higher dividend ones sorry for so many question, all newbie i guess at end of day as long as prospect for fnma/fmcc are improving (housing improving) these prefers will move up, but i have no gage if $3 is a good price or $5, how do you value these? hy

so does this mean to fight inflation we all should lever up with low interest rates :) and use the proceed to pay for cash generating assets (obviously timing is another issue all together)

man you guys scary me with these SHTF talk the only thing i can think of if inflation skyrockets, is buy good asset that generate cash? don't have too much cash lying around in the bank?

packer i track all my trans/investment etc in quicken (and excel for some other things) so i can run reports using quicken which gives me by security performance if you want to its not the best in the world, but its something :)

wow 10bil a lot more than i thought hey its better to underestimate than over :)

axp announced American Express Plans to Increase Quarterly Dividend by 15 Percent and Buy Back up to $4.0 Billion of Common Shares in 2013

yes this was pretty annoying i have been using feedly its prettier, i honestly like google reader better, but feedly is decent

moore, i hear ya, not trying to be difficult and my question sounds dumb i am sure to answer you question, if there are deflation, if money will be worth more in the future than now, then 1% would sound good. i am not trying to argue that our current condition won't change or rates won't go up. just interesting at least for me a chart of rates vs inflation, hmm i would of thought the rate would fluctuate more due to inflation but it didn't seem like it http://www.crestmontresearch.com/docs/i-rate-relationship.pdf honestly i have no idea what is going to happen, most likely the rates will increase in the future, but the question is when the 2 reference i have are japan and our own great depression, both period the rates stay low for decades now at the end of the day i just want to make money, looking for undervalue stocks :)

moore you state "The reason the risk-free rate was always 3-5% was because that was historically the rate at which savers were willing to pile in their savings. That has historically been the magic number that provided almost every level of net worth with sufficient return to cover expenses (avoiding the need to dig into principal). It also ensured that the riskier capital was plowed into higher risk but on he margin productive/necessary ventures which led to growth." but that doesn't mean it has to be 3-5% right? due to past environment/condition the number turn out to be 3-5% now not trying to get sci fiction, but in an alternate universe, could that number be 1-3% or 6-8% and under what condition would be be these #? i am sure other nations on earth didn't all have 3-5%? hy

this is a very stupid question :) but why is 2% not the norm or shouldn't be the norm or put another way, i know historically the interest rate is higher than now, but why is history the norm not now for now. i guess what i am trying to get at is is there some fundamental/structural reason why interest rate was 4 to 5% historically (is that right) vs some other number let say 1, or 10, or 20? this is most definitely a very dumb question. i mean the rate is the risk free rate (gov debt) so is there some psychological/structural/fundamental reason why that rate is 4 to 6%, why isn't it 2% or 10%? hy

Rabbitisrich good point, i was actually just thinking of options/warrants when i am talking about leverage. i would never use margin or have more on the hook than i actually have. options/warrants allows you to leverage without recourse hy

well for me leverage is like alcohol - some people are social drinkers - some people are heavy drinkers and it affects how they are as a person - some people drink so much it ruins their live - etc. its really up to you, its not for everyone alcohol can either ruin your life or enhance it, its up to the individual (you need to know who you are) just my humble opinion hy

i agree with what people said, envy/greed, leverage(double edge sword etc) for me i don't plan to do what eric has done (in terms of 1 or 2 position lever up to 2x), its not for me, i don't think it ever will be :) but for investment that i had fairly high conviction in, investment that i had in the past put in 20 to 35% in, i could of use some portion of the 20 to 35% and lever it up a little bit. i guess this sounds good because my past investment were i put in 20 to 35% have all turn out well, does that mean they will in the future i don't know. but the point is it will still be 20 to 35%, the only difference is now there will be options involve where time frame is some what restricted (max 2 yr leaps, you can roll over etc.) i wonder what this will do to my returns, hopefully not worst ... long term of course

eric that is what i was trying to get at what if you use leverage on very solid companies like BRK not on some fly by night riskier assets or use part of lever like 50% just equity but 50% leverage BRK, if 50% is leverage at 100% that gives you 150% on BRK something to that effect what are some other investment that can be use for this other than BRK? GE? WFC? buffett said he would go all in when WFC was at $9 back in 2008 or 2009, i am sure if you use leverage (which i am sure he would of done) that return would of been massive (obviously these are all in hindsight) obviously you can't go in when they are at 52 week high (maybe you can depending on what you value them at etc) i definitely will incorporate some leverage using options in my future investment, but not like eric, i am not ready for that, if ever :) the point is apply this to very sound/solid investments and then use leverage (how much leverage? that is up to your comfort level) etc. but definitely leverage is double edge sword, but using it on very sollid investment like BRK, remedy that to some extend hy

sorry i had to do this if you had to BUY one stock right now to do what eric has done (lever up, concentrate) what would it be :) for me hmmm ..... maybe HHC or BAC :) sorry for the lord of the ring reference. EDIT: I know it might not be the best time considering many stock have went up, but just trying to force the idea, so you will really think about it which stock to pick if you had to pick one. EDIT #2: I check options for HHC, not much there hy

liberty i am sure this is nothing new, its new to me, prob people are doing it also the leverage/option going in at the right time is in itself not trivial also the amount of free time you have sitting around waiting, prob most people can't handle, people are trigger happy. hy

i wonder what if you let picking the stock to Berkshire and implement all the other stuff (leverage, concentrate, options etc) that is prob all you need to do, go into BRK maybe 1 or 2 other at the right time and lever up :) this will prob get a better return historically than my 18% annualized, haha, and its less work :) hy

so in summary, what eric do - pick the right stock / concentrate / high conviction - leverage / using options when appropriate / taking advantage of mis price option to get cash etc. - fully invested sometimes i wonder 1) if you just invest in index fund (basically means you are not picking stock) you prob do what the market does, lets say its historical 8%. no leverage/option/etc 2) now if you pick stock (no leverage/option/etc) many people do 12% to 25% on this board (i am included) 3) now what if you do #1 with leverage (what would the return be?) 4) now what if you do #2 with leverage (what woudl the return be?) 5) this is erics which is #4 + concentrate (we know what this is) obviously it depends on the person, how its implemented etc etc. i wonder what are the historical average for the above 5 ways, i know it depends on a lot of things, just trying to get some idea, we prob don't know. just like #1 above we have a historical average of 8%, what are the others? i know its impossible to get. just interesting thought for me at least. i definitely learn from the eric experience leverage/concentration can make a world of difference ( A WORLD) and it doesn't necessrily mean its more risky, more volatile yes! i guess you read about it, but its never the same when you have someone flesh and blood who actually did it that you interact with in real time on the message board that have been doing for over 1 decade. EDIT: I guess another way to think about it if you get the picking the stock right (this is not trivial in itself) the other stuff, makes a world of difference. hy

eric i agree with your reasoning

http://online.wsj.com/article/SB10001424127887324582804578346710363561582.html?ru=yahoo&mod=yahoo_hs

folk has anyone look at http://www.federalreserve.gov/newsevents/press/bcreg/DFAST_2013_results_20130307.pdf on page 21, which has "Projected losses, revenues, and net income before taxes for 18 participating bank holding companies Federal Reserve estimates in the severely adverse scenario" anyone have any comments, BAC's net income before taxes is -51bil (in this severe adverse scenario). which doesn't bode well for capital return, this the fed base their decision on this

just a thought i think so much time/article/books are spent which stock to pick (its important very important don't give me wrong) but not enough time is spend on what you do after you found that stock after you done your analysis (at least its true for me, i usually just by the stock) eric is a clear example of the difference btw someone who have conviction went all in vs some one else (like myself) who didn't but both thought BAC are undervalue.