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frommi

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Posts posted by frommi

  1. The Berkshire performance collapse is my concern.  Over the past 10-years it has approached the performance of the S&P 500 as its P/BV has declined and BV growth has slowed.  You have the best capital allocator in the world whose performance is approaching the S&P 500.  I like the Markel team and approach my only concern is if size has reduced the best capital allocator in the worlds returns, why would it not do more so for others?

     

    Packer

     

    I think the reasons to pay more than bookvalue are the insurance operations and the outperformance of the manager which is partly discounted. Insurance operations have become more competetive and the outperformance in the past 5 years was mediocre for most managers, so thats probably the reason they are worth lower multiples these days. Most people in this forum have probably a different view on this than me, but i think insurances are a commodity business where more companies in this business will lower the returns for all. So this is not going to change. After all i calculate with a fair value of 1.5x bookvalue for most insurance companies to calculate my forward rate of return. LRE.L is the only one where i go lower to 1.3-1.4xbv, because they have a bad capital allocation. ( my opinion :) )

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

     

    +1! I don`t want to propose asset allocation, but when you study the permanent portfolio construction of Harry Browne you understand how powerful this can be.

  3. @yada you bring on some good points. But shorting is about down side protection for the overall portfolio. I wouldn`t need that when i have only netnets @50% of cash value in my portfolio. But i have only found one that was investable in the last 6 month and that trades now at netcash value. And i could never put more than 2-3% of my hard earned and saved cash into such ideas. So i need a lot of them. I am pretty sure that Buffet had a lot more investable net nets in his time, but nowadays everybody finds them with one mouseclick. But maybe i complain too much and should work harder.

  4. The timing aspect should be less of a factor if you buy the longest dated put options. Buying jan '16 now and rolling them over to jan '17 in a few months should give enough time for your thesis to play out given that we would be 8 years into a raging bull market. Sure the market can stay irrational longer than you blabla... Oddly enough some people have no problem buying shorter term bac calls (after a 200% run up) while cloud company put leaps could offer the same returns with the potential to a lot more.

     

    Am I nuts? Please confront me! TIA. :)

     

    After running a lot of numbers i can only agree. In the current market its much easier to find something that is only worth 10-20% of its price than something that is worth 3x. The forward return on some shorts is a lot higher than on most long investments even when you factor in some growth. Most people underestimate how long it takes until growth will bring the value of something that is worth only 20% to its current price.

    So its probably a good idea to mix in some shorts. I really changed my mind on this, because the numbers look so compelling. And i think that Prem or Einhorn are not stupid, it looks like this year will be in their favor. And even Schloss has shorted the market in 2000, so its not something a value investor should never do.

     

    I think of selling Russel 2000 futures for the summer and going something like 100% long, 80% short because there are some facts like seasonality, the january effect, the presidential cycle and the overvaluation all coming together this year. Only the sentiment is currently not fitting for a crash, perhaps we have one upspike left.

     

    Now confront me on that! :)

  5. Then it's too small to hold it all the way to 90% of IV.

     

    The rule should be "buy at 50% and sell at 70%".

     

    Or is 60% too small?

     

    "buy at 50% and sell at 60%".

     

    You can do this, but than you need a probability of profit of >80% to come out ahead in the end. Some investments might go to zero, so the rest has to bring more profits than you lose on your losers. Its much easier with buy @50% of IV and sell at 100% because then every loser is made up by one winner. I am pretty sure that you beat the market even when you are only right 55% of the time. In trading you would normally record all trades and balance your pop (probability of profit) and your profit targets to maximize your return on invested capital.

  6. You see it with investors who claim to only buy at 50% of IV and only sell as it approaches 90% of IV.  Well, if they didn't already own it, why wouldn't they buy it for 70% of IV and hold it until 90%?  The part about it going from 50% already to 70% is water under the bridge.  Yet they behave this way.

     

    Margin of safety is too small.

  7. I should perhaps better not post this, but i am bored :D. There is a fourth reason to hold a stock and that is uncertainty in the comparison method between investments. Given that you want to allocate capital to the best possible idea, you have to make a tradeoff when to switch investments. Perhaps you want to switch when the new idea has double the upside of the old one, but allocate new capital to your mathematically best idea. So you hold onto your old investment, but would buy the better idea.

  8. I was obviously wrong here, there are forces that want a war. It looks like some big players in the US (and probably even russia) have a high interest in a destabilized europe where everbody needs more weapons. Its really sad to realize that the weapon industry has such a massive influence on the politicians.

  9. 0.1%, its just a gamble with good odds. But i forgot to look at dividend paydates, wednesday is the ex-div date. The last time i did these kind of things was 3 years ago, but i was not very successful doing only this. (Because i was too greedy, let my profits run away and overtrading.)

  10. I don`t know if this was a great idea, but i just bought a lottery ticket. I bought BP 52$ Calls for 0.04 that end on friday next week. When BP rises by 8-10% this is a 100 bagger which is possible when it breaks out through its february top next week. Slowly my old demons are coming through again, but i found this a good risk/reward scenario.

    Anybody out there who likes to punch me in the face for throwing my money away gambling?

  11. Yeah thanks for posting, you killed all hope for me :D . Im a terrible salesman, couldnt sell a cure for cancer. Just curious oddball, you run a fund?

     

    I would feel really awkward asking people I know to get them to give me money to manage. Even with a nice track record of at least a few years. Unless they know quite a bit about investing. So the only route I guess is apply with a hedgefund.

     

    I know a lot of people in here will roll their eyes when they hear the name Timothy Sykes, but he wrote an interesting book about this topic. I just read it for entertainment, its title is "An American Hedge Fund: How I Made $2 Million as a Stock Operator & Created a Hedge Fund". He describes very good how hard it is to raise capital for a small fund.

  12. Added to my position in WSTG @ 16$.

     

    Hi frommi - what is your thesis on this?

     

    It looked cheap to me, is growing and pays a healthy dividend. I first bought this at 13 and sold 30% @23, thats the part i just rebought because it got hammered pretty hard without reason in the last two weeks. My fair value was around 25$.

    Its possible that the business model sucks and will be killed in the future, but its not visible in the numbers and i will only sell when i see it there. I think it popped up in a magic formula screener.

    But i have to admit that i feel really bad for not selling the position completly at 23 and than forgetting about it. Right now i am pretty feared that it collapses completly perhaps thats the reason i bought more. :o

  13. and now for some on topic macro stuff: i get 1.38 dollars for every euro i have. right now i feel like investing in north america might make more sense.

     

    Thats one of the reasons i have only a very small portion of stocks in the EU. Its just a matter of time that the ECB has to print money or that whole things collapses with people rioting on the street in spain and greece. The situation in these countries has not really improved, but nobody talks about it and the going back to the capital markets in greece was much to early in my view. In some years they have to be bailed out again. And germany has a massive problem with its pension system that will come to the surface in 10-20 years. For me that are enough reasons to avoid the euro zone. But thats probably because i am living here, the grass is always greener somewhere else. :)

  14. But, Tom, most of those people you refer to have only the illusion to know what they are doing! And that illusion is kept alive by nothing more than a market which went up 30%+ in a year! You really think everyone can jump in and out of a lot of different businesses, only because someone like Packer is successful in doing that?! I am sure I cannot!!

     

     

    I was always under the impression that you can learn from the good investors like Kraven, Packer, Nate or Schloss. You could do it when you really would like to, but you just gave up before you tried it and learned nothing in the end. Perhaps an index fund is the right decision for you. :)

    Why not look exactly what these investors do and imitate it with a small part of your money?

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