constructive

The 2011 crisis was eased in part because implementation of Basel III was pushed back. Those capital ratio deadlines are quickly approaching again. This time market values are higher, so forcing banks to raise equity will not be quite as painful. http://en.wikipedia.org/wiki/Basel_III#Capital_requirements_2

Gio, if I was half as successful as you, I wouldn't be half as modest. :) Building a business as you have is very impressive, not only financially but also in terms of personal teamwork & leadership. Cheers!

400% gross leverage seems unsafe. Hopefully they have a good plan for unwinding in a hurry. I believe this paper assumes 50 / 50, not 100 / 100. So that might mean the fund is losing half of the hypothetical return to transaction / margin costs.

The evidence is solid but the magnitude seems a little disappointing. ~6.7% annual, and the borrow rate on the short side would eat up a significant amount of that, What is the borrow rate? There is no borrowing cost to shorting, I thought. http://www.cornerofberkshireandfairfax.ca/forum/general-discussion/borrow-rates-lookup-please/msg163287/#msg163287

The evidence is solid but the magnitude seems a little disappointing. ~6.7% annual, and the borrow rate on the short side would eat up a significant amount of that, especially in a normal interest rate environment. People generally want to short "junk" - I think short interest will have a higher correlation with this factor than other risk factors. Of course if you change the strategy to long bias instead of market neutral, returns would be better. Thanks for the link.

Hey Parsad, I gave C$150 yesterday. The best part is, it's super cheap! It only cost $138 in real money! :D Cheers

The funny thing is that the reasoning in this thread is probably more credible than "What stocks will make their owners rich over the next generation?" Which is pure pie in the sky. Remember, the problem with short term stock picks is not that they're short term. It's that they're so often wrong.

Short Foot Locker.

I'm also confused. Context suggests maybe Brookfield?

On the other hand if it's barely trading now, and you think trading might dry up even more if it delists, then it would make sense to exit the position now without holding out for the last bit of profit.

Delisting is usually no problem. You should be able to get out of your position even if it moves to the pink sheets. If it's not DTC eligible (which I believe most OTC stocks are), the trade might cost more but a decent brokerage should still be able to execute it. If the SEC puts a halt on shares that lasts weeks or months, that can be a bigger problem. But generally a high borrow rate or getting shares called in will be a bigger issue than getting out of the trade.

ACGL has a very good reputation and their move into mortgage insurance seems agile and smart. But it is a little more expensive at 1.4x tangible book.

Return on tangible equity has been trending down since Packer's post, now around 12 - 13% for both companies. And expected to decline further next year. Still pretty good, but the insurance industry in general is not the pound the table buy it was a few years ago. In 2010 (or maybe 2011), the average life insurer traded for 0.6x book value and the average P&C insurer traded for 0.8x book value. Those numbers are now much higher. Right now I see GLRE as the most attractive growth opportunity in insurance. If Einhorn continues to work his magic, their business model will earn higher returns than their competitors in soft markets.

Source? I thought Liberty/Malone had reduced DTV ownership to ~0 since 2009.

I'd say the Zenolytics report is substantially less informative than the shareholder letter. Tangible book value is negative and profits are still elusive, several years after Stilwell took control. I don't see how KFS is attractively priced now, or at any time in the last 10 years. If management is successful, I suspect there will be many more opportunities to buy at more attractive prices. Here's the direct link to the PDF: http://www.zenolytics.com/wp-content/uploads/2014/04/T11-KFS-research.pdf

See attached example. Financial_Comparison.pdf

I like to see how the share price and value range change over time, like FAST Graphs. Also how a company's financial metrics compare with their competitors.

Gio, does the book have any financial statements for the bank? I'm curious how leverage, ROE, etc. compared to the present day.

I think you might underestimate the importance of correlation in portfolio construction, especially the value of negative correlation.

DirecTV has grown to be my second largest position. Anyone want to make the case for selling shares ahead of a potential bid by AT&T? Obviously, negotiations could go nowhere if there's a wide gap between the price AT&T is willing to pay and the price DirecTV demands. DTV management can be pretty hard-nosed on price, having walked away from several acquisitions in the past few years.

Air T, I see the appeal of a profitable unleveraged company trading at a low multiple to sales and barely above book value. But with margins declining, it is not increasing in value very quickly. Hopefully there is a near term catalyst for the business or the valuation? What is it? I ask myself, do I want to own this company 5 years from now? If not, I demand a cheaper price. Is this cheaper and a better business than other small companies with similar financial metrics, for example KTCC, NTWK, CMT, WILC or VSR?

Buffett did not get rich by following 80 year old Buffett's advice. In many cases he did the opposite of what he now counsels (short positions, arbitrage, microcaps, activism, etc.)

It's not easy to get As at Harvard. It's just easy for the type of people who are admitted.

The Neiderhoffer story seems like more mythology than fact. It's believable that he missed classes as a result of his extracurriculars, but it's not really believable that he didn't earn As the normal way, through his tests and coursework.

Most of it seems pretty tame, but this stands out as potentially incriminating.