no_free_lunch

Tilson has an updated IV presentation out. He has them at $296k per A share, based on I believe year-end numbers. So probably a bit higher now. http://www.tilsonfunds.com/BRK.pdf

Thanks for bringing this up. Volatility is one of the few cheap "asset classes" currently so we need to at least consider investing here. I purchased today some deep out of the money puts on Netflix (NFLX). Of all the big tech companies that have boomed, this one seems the least solid to me. Don't get me wrong, I like the company but from a valuation standpoint it is shaky. The cost of content is huge which should inhibit profits. Stock is selling at 7-8x revenue and an ungodly pe multiple. They are competing against Amazon and to a lesser extent the cable companies. I very well could be wrong here but the options are priced such that they could go 10x-30x if there is a large crash. I think it is possible for NFLX to crash entirely on it's own independent of the market. This is just a tiny position to help hedge my portfolio. Interested to hear any other option plays, calls or puts welcome. I actually suspect the best opportunities are in the call market as everyone is convinced we are at a peak.

That is where my vote goes.

I believe this is highly likely. After all, one of the first things Mnuchin starts every interview with is "I've followed these companies closely for 30 years..." He might as well say, I'm an expert and don't need help on what to do here but I'm a politician now so I might as well make people think they have input so they can tell their constituents they were involved in the outcome. I don't look at these type of articles as having any impact on policy makers directly. However it does provide political support for their agenda since blackrock isn't a fannie shareholder. As long as Mnuchin picks one of the middle ground approaches favored by blackrock he can avoid "recap and release", continue to provide low rate mortgages and avoid all but catastrophic risk to tax-payers. Oh and perhaps he can also save fannie preferred holders at the same time by swapping their equity to the new entities.

I think they are talking both MBS and GSE replacement capital. However having re-read it about a dozen times it is certainly a bit ambiguous. Here is the full excerpt:

HERA provides the framework and legal authority to the regulator to send the GSEs into receiver ship. While in r-ship they can create a new entity (Limited Life Regulated Entity) and the charters will transfer to the new entity. Shareholders cannot have ownership in the new entity. Assets will be liquidated and pay off any outstanding claims. This is where liquidation preference of the jr pref kick in and you will need to pray to God Mnuchin considers the outstanding sr prefs paid which I think he will. That's the end game. Why would they potentially raise a ridiculous amount of capital on a dirty capital structure? Clean slate IMO. Well what do I know but with Citigroup I believe they swapped the preferred's for the new common's. I assumed something similar would happen here as well. If they go through liquidation, I mean there is what $3-4B equity depending on whether they just paid the treasury. If that happens preferred's are getting 10-20 cents on the dollar.

I strongly encourage GSE investors to read the whole blackrock piece. I am just a novice here but I view the contents as being very positive for existing preferred shareholders. Based on this and the price slump I have upped my investment.

Devil is in the details but as you have pointed out it will be hard to transfer to a new entity and wipe the preferred share holders. Directionally this is the type of proposal I want to see. Maybe it is best for now that there aren't too many details on how it is implemented or which "hedge fund" stands to benefit. Flynnstone, I think there would be some type of exchange.

Pulled this from the blackrock proposal. They are basically asking for government guarantee to continue with private investors being first at bat to take losses. This could work.

FBI firearm background checks have been strong so far this year. Definitely down from last years highs but in march april only down 5% or so. Given where AOBC is trading, it seems the market is pricing in a much larger decline. I continue to hold AOBC. https://www.fbi.gov/file-repository/nics_firearm_checks_-_month_year.pdf/view

Its just the government involvement they don't like. Then they look for reasons to kill it. GFC does the trick so thats it. Read the breitbart article, its full of half truths but in politics its about agenda rather than truth. End of the day getting rid of gses is a good idea but they will mess up housing market for years.

Yes, and in the May 1 fox interview he specifically and clearly stated that the current setup is putting tax payers at risk. Of course there are numerous ways to resolve that and still burn fnma common and preferred's.

Flynnstone5, It was around $20B for fnma in December. I think there has been 2 payments since then.

Yes, that's the one. Thanks for the link.

Lightened up a bit more on this yesterday. Now a 2% position. I am completely manic on the pref's, I am going from thinking it is a multi-bag to a zero. Steven Bannon is Trump's chief advisor, and also former editor of Breitbart. There was a lengthy article I found on Breitbart, about a month old talking about Fannie. They were very critical of the enterprise, to put it lightly. They basically said that the company should not exist and that Obama's NWS was about the only thing he did right in his administration. Now who knows the link from Breitbart to Bannon to Trump but this isn't reassuring. I am also displeased with the amount that Trump got done with the latest spending. It doesn't feel that he is able to implement his agenda and completely subject to whims of congress/senate. Again not a good thing to see given the general concensus on Fannie in either party. I still think there is a reasonable chance the government provides some compensation on the pref's but this is increasingly in the too hard pile and I can't have it a meaningful position.

A twitter user I follow (fcfyield) mentioned that you could short these Canadian residential bonds. Could anyone confirm that it is possible? I assume this isn't feasible for a regular joe investor but perhaps some could make money here. https://www.bloomberg.com/news/articles/2017-04-17/bank-of-montreal-to-offer-mbs-as-canada-shrinks-mortgage-support

I do tend to agree with a lot of the negative sentiment however I think the prefs have it priced in. I don't have much to base it on but I feel they would at least settle with the prefs and at current valuations that would cost them what, $6-7B? I wouldn't go near the commons.

I agree with rkbabang 100%. I guess the size of the off-lease pool will affect overall demand for used cars but I think you are overthinking this. The cars are just very reliable and so they hold their value.

I would personally aim lower than 4pct. 4pct doesnt always work and what they dont tell you is how many times it does work but only after putting you through insomniac decade. Last thing i would call retirement is stressing over money and holding back on purchases. 70 30 and a 3 pct withdrawal you weather near everything. Agree though that there are ways to limit expenses without hurting quality of life. Mexico for sure but south america and asia has many safe cheap options as well. Also agree you dobt need to sit and relax in retirement. Sounds like hell to me. I would try to start a capital light business.

I think it will be very difficult to find what you are after and still keep the expense ratio down. However, it might be worth paying 1/2 percent for a few years on something a bit more market neutral. In the long term though it seems like a gamble. I am in the camp that those higher expense ratios are a high hurdle over decades. Why not just use a screener to come up with a list and just buy 30-40 stocks that meet your criteria?

One other one I am considering is VIG. Yes, it has probably been mentioned already and investing in it will be like watching paint dry but nevertheless it is promising. I will lay out a quick thesis for my own notes if nothing else. - Low expense ratio .1%. - Companies with history of increasing dividend. - Results in a list of stable high quality US companies. - Neck and neck with S&P since inception, I think it is very marginally ahead but we'll call it a tie. - Down 27% in 2008 vs 37% for S&P 500. - Under-performed S&P for the past 2-3 years. - Grantham has high quality US stocks as being one of the more promising stock areas in his 7 year forecast. Seem to recall there being another forecast with similar conclusion.

The numbers for hedge funds are just as bad. I think the study is legitimate. It is just really hard to beat a broad market iindex. We can talk around it all we want but there is ample evidence that it is true.

It is a good link, the growth/value performance since 08 was interesting (3:40). I like that he is shifting to growth because value just isn't doing it these days. He can follow the momentum, I will try to do the opposite. Here is another one, https://www.fidelity.com/learning-center/trading-investing/trading/value-investing-vs-growth-investing. If you look there, all of the value indexes out-performed over the last 26 years vs their growth peer, albeit by small margins. However, large value significantly under-performed since 2008 vs growth. It looks like things are tighter though for small and mid-cap. Who knows how much merit this type of analysis has but given how bleak the return outlook is I am looking for any edge I can find. I am just a bit more comfortable holding a value index if we go into a downturn.

You did and I'm not trying to steal your idea but just wanted to add my 2 cents. Look at the valuations of FB,AMZN,TSLA, sure not as extreme as 2000 but there is still a lot of skew in the market. Some areas are more bubbly than others. I think there is still an opportunity to out-perform go forward albeit not the same divergence as in 2000. I am not too worried about changes to the underlying index. As long as the expenses are low and it is diversified and it is avoid the bubbly areas that is all I am after.

You could look at iusv. It is hugely diversified and has an extremely low expense ratio at .05%. It looks like it has beaten the S&P since inception in 2000. I have a decent chunk in it. Like everything else in the US it is quite expensive right now.