frommi

Make 70% per year .... and lose everything and a bit more in the next. Shorting levered VIX ETFs might make sense when the VIX is at 40-50 but not at 12. And even then its probably safer to choose something like going long XIV. The article is trash, but the idea behind it is not bad at the right time.

Q1 US GDP revised to -1%. http://hotair.com/archives/2014/05/29/boom-q1-gdp-revised-downward-to-1-0/ Oh, don´t worry it was just the weather ???.

Thanks that's just the vacation home in Germany. I spend a week there every few years. I almost forgot I owned it. I'm so unorganized I had to dig around the house to find the hope diamond to take a picture of it. It was under the couch cushion. Man, the next time you are in my neighbourhood give me a call.

The seasonal patterns exist for a very long time and are recorded for nearly all stock markets around the world. (Bouman and Jacobsen 2002, 36/37 markets) http://seekingalpha.com/article/1183461-seasonal-patterns-in-stock-markets-319-years-of-evidence http://papers.ssrn.com/sol3/papers.cfm?abstract_id=1697861 There are lots of possible explanations like tax effects, holidays, hurricane season or that people look at the forward-pe after Halloween.

14 pages and nobody mentioned WFC. Why? :) It has one of the highest growth rates in bookvalue of all mature companies i have seen (and when you factor in dividends it crashes everything), and is still not overly expensive. And the environment can get a lot better than the last decade for them. There is a reason Buffett and Munger love this bank.

Thanks for your feedback tng! I know a lot of professionals scoff at saisonal statistics, but have you considered hedging only in the month from may to september, where the market has statistically a negative return? I would really like to see or hear from a backtest that does this. You are probably right, in a high interest environment cash might have a better return than going long-short.

Oh, i thought it was just 100%/100% in the paper, as i said i wouldn`t invest in their fund and wouldn`t lever it up that much. You can reduce the borrowing cost if you use the Russel 2000 future, it costs around 1.5-2% per year and has enough junk in it. (at the moment)

Perhaps you can translate this with Google: http://www.faz.net/aktuell/wirtschaft/eurokrise/omt-schaeuble-kassiert-die-wunderwaffe-der-ezb-12955803.html In essence, because germany will not allow the OMT program and can veto against it.

Mr. Asness has set up a hedge fund in 2013 using this approach that is 200% levered on each side and has delivered around 13.5% in the last 11 months, thats is nearly exactly what the paper suggests. Personally i would use this only when the broad market is running hot like currently and not levered up so just 100% long and beta adjusted 100% short. Imagine you could dodge most of the crashes by using this approach and even make money when you are not right on the timing. And then when the market has tanked you slowly get rid of the hedges. Sounds like a perfect plan. :D

I found this last week and think this is interesting. http://papers.ssrn.com/sol3/papers.cfm?abstract_id=2312432 Happy reading!

The whole world is a mess with the right glasses :). Since i am now fully hedged i am a lot more pessimistic and believe that Mr. Watsa is right in doing what he does. Chinas growth slowing, europe near deflation, the us is in trouble because the dollar will rise and cause deflation there. The FED and ECB are nearly out of bullets and debt levels are still growing and not shrinking. I doubt that the FED is really aware of what is coming, they are still in their tapering plan. When they act it will be too late and then they have to press the pedal to the metal and cause hyperinflation. And the ECB can do nothing, does it really make a difference if interest rates are 0.25 or 0? As long as the banks don`t lend money because of the Basel rules nothing will change, and now the ECB can`t even buy bonds anymore. (Look at what Mr. Schäuble said last week.) I am really afraid at the moment, and i don`t see a lot of people that share my view. Colleges talk about the stock market like there is no easier place to make money, we have a record year for IPOs, margins are at the upper limit and now even the VIX made new 5 or 6 year lows. It smells like 1999/2000 even if it looks a bit different. But who knows, it rarely pays to be pessimistic but since i have put my rosy glasses off i am full of fear and can`t put them on again.

Shorted a basket of stocks (DDD,CRM,P,LNKD,ULTI) and the Russel 2k. I am now fully hedged and plan to surf the time as a long-short fund until the next big downmove.

Its because there are 250 million migrant workers that come into the cities every year for some month and then move back to their farms to support their families. When they stay someday they can fill a lot of these ghost cities. If that ever happens is on a different paper, but i am pretty sure that the government can make some moves to get more families from the hinterland into the cities. Its not set in stone that china has to crash. But its probably wise to be prepared in case it does.

I am a happy shareholder of a chinese bank, because i think these risks are already discounted in the stock prices. But i am pretty sure that the US stocks or german stocks have these risks not in their stock prices and will suffer the most when the crisis hits. So i hedge the cheap chinese banks with expensive german and us stocks. Thats a risk on its own, but i think its worth it in the end.

That book value multiples are lower these days can also be a factor of the current non-inflation environment. In higher inflation the float should be more valuable, because you pay no interest on it. When interest rates are 0%, the float is worth nothing, because you can lever with borrowed money for zero. But when interest rates are 10%, a 0% float gets you easy money.

Thats a bit misleading, after a good year like 2013 ROE will always be high if the book is invested in equities. Perhaps you can take the average ROE of the last 10 years, but that should equal the book value growth over the last 10 years. Thats only the growth component of the return you can achieve when the manager gets the same returns like the last 10 years. It tells you nothing about the fair book value multiple.

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 :) )

I am really infected now with a short bias, i have to get rid of it somehow. Perhaps its best when the market once again gives me a lesson and rallies up without me.

Sell SPY futures with SL on the YH or buy short term SPY puts.

Sold Oracle and RDS.B and bought MDAX puts dec 2014, 16500€ strike.

Made some big changes today. Sold KHOLY. Short TESLA,RH,AMZN. Sold Russel 2000 Futures. I am now at 100% long, 30% short and plan to short more in the next days.

+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.

@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.

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! :)

Oh and when you lower your profit target, you increase your turnover which means a lot more transaction costs.