frommi

Yes because he plays it safe with stocks that have 10-15% forward rate of returns. It was only the process of calculating a rate of return that i was interest in. How do you decide which investment is better for your portfolio, gut feeling? :) There was a poll some weeks ago where >80% of this forum polled that they make position sizing dependend on value. How is that possible without being able to compare the investments? Sorry for derailing this threat.

@stahleyp First i am surely one of the worst investors here. I made so much mistakes in my investing career that i can fill a book with it. But i am able to learn. Your problem of the cycles etc. is only understandable for me when you buy something, hold onto it for 5 years and then come to the conclusion that the bull market is 5 years old and you sit on large gains. I avoid this situation completly because i always look for better values and i have found a way to compare all my investments with one simple number (my forward rate of return, i can even calculate that for my netnets and compare them with good compounders). Thats probably sometimes to easy but it makes my investment process easier and helps me to decide when i have to sell and buy something else (my current rule is when i find something with double the rate under some other conditions like max position size.). I don`t know if these forward rate of return numbers get real but i know that Yachtman and some other value investors use something similar. When they get real in 75-80% of the cases after 5 years i should reach my goal of >15% returns easily. @thepupil +1

@stahlehyp Thats the thing i probably don`t get. For me its a no brainer to sell things that have only a forward return of 10-15% and switch to things that have a 25-30% forward return. That belongs to my investment process. I would only switch to cash when there is no other asset class in the world where i get the returns i search for, or cash yields so much that an risky investment somewhere else is out of question. (I doubt that will ever happen but i can understand that its another story when you handle billions or are bound to invest in equities.) And since i won`t use more than 10% leverage for me there is no more or less agressivity. Perhaps its a matter of each investment style if timing has to be a factor. But why should i make something really unreliable a part of my investment process? Even some of the brightest minds and best stock market timers of the past like Livermore have gone broke through leverage and were not able to time the market every time they tried.

Its simple. When you are able to call market tops do it! I know that i can`t because i have tried this in 2006 and 2007 and lost a lot of money shorting. And guess what, i missed shorting the downmove in 2008 completly. And the perverse thing with shorting is that you hope that something bad happens on the weekend to be up on monday. I couldn`t count the weekends where i thought about nuclear attacks and all these shit, that makes your life really miserable. I bought some stocks in the end of 2008 but much too early and sold near the low of the downmove in 2011. Missed the complete upmove in 2012 because of my german angst. I would have been better off if i just had stayed long since 2005 and that with the worst downmove we had in 30 years in between. But i am able to learn. My lesson was to stay invested no matter what happens, i just try to find the best opportunities available und move my funds there. And stay optimistic about the future, thats good for your mood. :) And btw. I hear that debt argument ever since 1998, debt was always to high in the eyes of the observer. But thats not a reason that the market crashes tomorrow. (And 10-20% corrections are not crashes in my eyes, just opportunities to buy more.). Just look at Japan how long high debt rates can be carried into the future. And btw. value investing even worked there in one of the worst bear market we have ever seen. (source:http://greenbackd.com/2013/07/23/has-value-investing-worked-in-japans-long-bear-market-1990-to-2011/)

That occurred to me. Sort of like real-time self-experimentation on investor psychology. But please don`t sell them because of my stupid comments, i don`t want to be guilty when the market really crashes and you lose money. :)

It is much less work necessary now compared to the old times. The internet has driven the margins for netnet investing down. But that doesn`t mean that it doesn`t work anymore, i put together a little basket of 6 netnets last year in june and the basket has returned 137% till now. But stupid as i am, i put no money in it. ::) Since then i look for opportunities in netnets but haven`t found a lot.

Isn`t this what the FED was trying to do with low rates? And now we should cry because it has worked? Isn`t it natural that margin debt usage goes up when the market rallies and interest rates are low? Should value investing now stop working only because the overall market is slightly overvalued? (Has it in the past?) Shorting has an expected negative real forward return, the only reason to do it is to lower volatility. But that always comes with a cost. (Except when you are lucky.) The best hedges are uncorrelated assets with a positive expected real return, i did this by accident in december/january through my investment in REITs. But i think that was only a by-product of searching for good returns and mispricings everywhere. ERIC found a very good way of hedging with a two sided bet on IWM, but he had to be a bit lucky to set this up with low cost. Had the market surged after he bought the puts he would have not been able to do this.

These puts are not good for you. ;D

So you're the one pushing the stock up.... Sorry. ;D

Couldn`t stop myself from being greedy. Sold JPM, dipped a bit into margin and bought more KMI @ 31.6$. Its now my second largest holding at 9%.

Yes they can but they devalue their currency with that action. I would say its happening right now.

KMI @ 31.02, 5% Position.

So you lagged into a straddle on IWM? Thats absolut brilliant! What expiration date did you use?

This overvaluation can go away when the market just goes sideways. But you are far more successful than i am in investing, perhaps i should listen to you :).

Its possible that you are right and after reading these stories i am scared, too. But in the end thats always the reason why something becomes cheap, because the majority is scared that the world goes to hell. Nobody knows how this all will play out, perhaps the property market in china crashes and it doesn`t influence the stock market? Or the government/central bank does something surprising? Shorting means to bet against the humans that are working for success in all these companies/countries, so you have a lot of headwinds. And as soon as you are in your position you are actively searching for reasons why the world has to go to hell. And you get angry when the market doesn`t react like it should.

Gio would you invest in bonds at the current rates? I can`t really imagine how anyone can really hold bonds at the current point for the longer term. Heck i am even thinking about shorting them for a lower overall portfolio risk. (I have some REIT`s) And i bet that FFH is already back to zero when it comes to gains this year, because the Russel has broken the top and interest rates have risen since the letter. For me Prem`s actions look like someone who has made a macro bet, has proven to be wrong and he doesn`t correct himself. For a trader this is a no go, an investor might be getting away with subpar returns. (look at the performance of the last 4 years) FFH looks like a giant levered long/short hedgefund which for me seems to be overvalued at current prices. What if the market repeats 2013 for the next 2-3 years like in 1997-2000? When i read the letter correct book value has declined in 2013 from 378$ to 339$ thats -10.3%. When that repeats for 2-3 years its very hard to recover that loss and this is totally possible when the market rallies further and interest rates go back up to 4 or 5%.

When you withdraw not more than 4% per year you should be safe as long as you can generate market like returns. Perhaps you find these links helpful: www.earlyretirement.com www.mrmoneymustache.com In the end it all comes down to your expenses.

If this is true, than where has that money gone? The chinese stock market has gone sideways for more than 3 years now. Bank of America has sold its stake in china last year. It looks like they are now talking china down. http://ftalphaville.ft.com/2014/02/03/1759962/in-defence-of-chinas-shadow-banks/

For me russias move looks like a friendly takeover. The ukraine marine has just turned over to follow the russian friendly crimea government. What can the EU and the USA do, if the crimea population just votes to be russian? All the screaming from Kerry is worth nothing to solve the problem. Crimea belonged historically more to russia than to the ukraine.

The country is split, half of it is more russian oriented, the other half inclusive kiew is more oriented to the western world. Russia has an important military base on the Krim and i think that is the reason they are sending their troops. I don`t think that the situation will end in war, but its possible that the Ukraine will split itself into two pieces.

I think a lot of the problems that can arise in china are already priced into the stocks. I see a lot of negativity about investing in chinese companies, but when you look at the numbers some are so cheap that you have a problem believing the numbers. How can stocks crash that are already so cheap? This is the total opposite of Japan in the 1990. When they get some of the problems like the city polution or the shadow banking system under control, china has the potential to be the worlds (consumer-) power house for the next decades.

Hi, i just came across a funny 8-k and i am wondering if this is legal. http://biz.yahoo.com/e/140224/mrna8-k.html The investor buys 6 million stock for 0.75$ and gets 6 million warrants for free. The stock is at 1.6$ after the press release and they can simply sell the shares, make a quick buck and still have the warrants left. That is an investment without risk. I want that, too! (and at that point i was really wondering if this is legal.)

When you look at the history of us debt levels you would see that current levels are not that high. Around 1945 we had a similar situation when you only look at the numbers and the next 20-25 years were very good for stocks. So its possible that you have to wait a long time until that situation is gone. And the crux is that as the debt levels hit a low of 20% of GDP the stock market crashed in 1973. http://www.multpl.com/u-s-federal-debt-percent/ Thats probably because fresh money is not flowing into bonds when interest rates are low, its going to stocks.

Because i invest internationally i use VT as a benchmark. Using an US based smallcap index would not be fair to my portfolio. I have a problem with an absolute return as a benchmark because i like to have a smooth ride instead of volatile up- and downswings you would see with pure smallcap indices. And its probably stupid to compare a 2x levered portfolio to a normal index because the risk of losing everything is endlessly higher. So i would vote for a risk adjusted measurement like sharpe ratio or something else, because risk control is the reason i have become a value investor. But thats just me, Eric has surely a different opinion on that topic. :)

I am 100% sure that even in that scenario you can find stocks with higher earning yields or alternative assets like junk bonds, corporate bonds or REITs that give you a better return. And yes as long as cash as an asset class is not beating inflation i don`t even think of going to cash. In the current environment you are losing purchasing power every month you are in cash, its like a ticking clock that works against you.