frommi

Thanks, looks like my feelings were bullshit! :)

I would like to hold cash in € sometime in the future and that gives me some problems. What happens with € at IB if one of the banks IB holds its cash in goes bankrupt? Into what currency is it converted should the € break? At a german bank i can be sure to get german marks, but at IB i am not sure, a basket of currencies? What if my account is at a german bank that was bought by a france bank, is my account than switched to the france currency? Is there a tradeable money market fund with only german short term bonds?

Since this is such a nice graphic do you have one with TLT and FFH? I have this feeling that they are more correlated, but i have no easy way to check it.

Because when i discount everything with 10%, a RoE of 10% means fair value is around bv. But maybe i just misunderstood your post in this regard, we are probably talking about different things.

Agree. Investment returns are really what would drive book value growth for Fairfax. So you have to ask what rate did they earn in the past? What was their return compared to the relevant benchmark i.e. the value add? What are the benchmarks likely to yield in future? Is the value add likely to be less, more or about same as in the past? This is what I tried to do in this blog post. http://vinodp.com/blog/?p=34 Vinod So following your logic, FFH is worth ~0.7*bv? And every insurance company is worth a lot less than bookvalue because stock and bond returns are lower going forward? :)

Since no one knows the future, i valued it a bit different. Book value: 395$ Unrealized gains not included in book value: ~39$ Float: (Long term interest rates - cost of float) * Float Per Share * 10= (2.6%-0.3%) * 711 * 10 = ~163$ ------ Fair Value: ~598$

Isn`t it that the FED was forced to raise rates because of inflation? I think inflation was caused by the huge amounts of government spending during the war and the recreation of infrastructure after it, but thats only my guess. Following this logic the governments of the world (and/or businesses) would have to spend a lot more money to create inflation.

You are right, not directly. But with the wealth effect rising stock prices create money when the stocks are used as a collateral for more debt. People paying back their debt reduce the amount of money in circulation so the FED has to print new money to compensate for that or we get a shrinking monetary base and a rising dollar which is deflationary. @Zorrofan Watch Ray Dalios video ( ), without printing money the debt problem can not be solved in a "beautiful" way.

I may be wrong but banks are linked to the credit cycle and look cheap at market tops. Autos the same, AAPL is hugely dependend on one product, its only cheap when they can sell more iphones every year. Maybe that happens, but i am not so sure. IBM has huge problems and still trades at an FCF/EV yield of around 6.4%, thats hardly very cheap when you compare it to JNJ,GIS or MMM (~5% FCF/EV, most consumer staples are around 4% FCF/EV.) VRX is cheap when you believe in the story, but only the future will show if it was cheap in hindsight.

If we get into deflation the markets are also expensive because growth and revenue volume assumptions will come down. The only market where stocks may be fair valued at the moment is when inflation is stuck between 0.5-1.5% for a long period of time. I really doubt that central banks all over the world are able to get this done when you look at current currency, commodity and bond volatility.

The bubble is not really in tech this time, just pick a random stock in a biotech index to see where it is.

Until the FED realizes that for a reflation/deleveraging it is necessary to print money until debt levels are back to normal, i doubt that we get rising stockprices. So perhaps we get QE4 at the end of the year and stock prices will rise again. Without it, all money coming in goes to debt repayments and not into the stock market. Thats my little theory, but who knows maybe i am wrong. When the FED doesn`t react after a 15-20% market correction we will get the ugly bear market of the thirties again.

Since the bear in me has awakened again and i thought a bit about the content of the book "The Big Short", i am searching for similar bets in case we really get a big crisis and deflation. Since i can`t buy CPI contracts like FFH, i thought about long dated far out of the money put options on banks and insurances as good candidates, especially here in europe but i am not sure who will survive this and how long it will take. And since most options here in europe are from banks, the counterparty has to survive this disaster, too. So i am ideally searching for companies where the equity is wiped out in 2-3 years should deflation or a big crisis start soon, because most put options have no longer timeframes. I am looking for payoffs of at least 1:50, so that i can waste 1% of my capital on this. Any ideas?

I have a gtc buy order in for 17.5 on CHEF. Rinse and repeat on this one. The $23 month out options were going for $1.3 in March. I couldn't resist... I once had a limit order in for FIAT. Guess what happened. :)

Bought CHEF and QQQ puts.

Shorted more XBI, VRX and TIME.

Interesting view on china and biotech stocks: http://www.brontecapital.com/files/amalthea/Amalthea_Letter_201503.pdf Maybe i should increase my short exposure a little bit more.

Perhaps i do it wrong, but thats the way i can sleep at night. I will probably never post a year with a return of >50%, but i am pretty sure that i will never post a year with a 30-50% loss either. With Intralot i fear the GR-Exit and the loss of the high margin contracts in Romania?/Greece they mentioned in the last call. Made me think about what i really understand of that business. AIQ may be worth holding, but i didn`t want to lose my profits and i was not sure if i am mentally able to hold it when they tank below 19$ and they are not able to grow EBITDA. (or even worse) And i really hate how the stock price has moved, there is a big barrier around 25/26$ now. The next stocks i buy will be better businesses with growth, a moat and where i truly understand the business, that gives me a lot more confidence to hold for longer. (And especially over the summer).

Sold Intralot and AIQ and started my summer hedging program. Bought Gold, TLT, IWM Puts and shorted XBI. Still hold FFH, OUTR and NWH.AX. I just can`t get rid of the bear inside of me, i have that nagging feeling that the bull market ends this summer with at least a 20% correction. Its about time.

Yes sorry i have a skittish mind.

frommi, Just curious why sold out of SEC.TO? Regarding QVAL, do you have a % of your assets in quantitative value funds? Have you looked at other funds? Thanks, AtlCDore Because after the discussion and looking at historically P/B ratios for SEC.TO i see a P/B of ~0.6 as fair value of SEC.TO and because it is now close to that number and the stock is so illiquid i wanted to get out on the way up. QVAL is only a small part of my portfolio at the moment, but i can imagine buying more of it because i can compound tax efficient and with a small TER there with a tested value strategy that is proven to beat the market. But in the first place i bought it because i had no other good idea at the moment. But that can change daily.

Sold out of SEC.TO and bought QVAL.

I think the argument that stocks are not expensive because the yields on treasuries are low is a bit dangerous. Low yields on treasuries imply that we are close to deflation and this means that growth rates in the future will be a lot lower than we are used to. If the bond markets in the world are pricing the bonds correctly we are going the japanese way in the world economy and i am not sure if this is a good sign for equity markets. The question is only when the stock market will realize this.

Perhaps they just wanted control of BRIT`s investment portfolio and now want to reduce debt or they found some compelling things in india. I am pretty sure Prem is doing a good job in managing my money.

ENTJ