frommi

And now don`t directly short it but buy the etf and sell 3xatm call options. That way you profit when is goes down a bit or it goes up a bit. That looks like a fireproof way to make print money. For example for SOCL, when you sell 3 22$ Feb14 Calls and buy 1xSOCL you win when in 6 weeks the etf is between 19.8$ and 23.1$. You make the greatest profit when it stays at 22$, then you make 84% annualized, at 21$ around 47%.

Why not D) Be a value investor and find opportunities yourself?

NLY

Yes but i have a diversified portfolio of mainly bluechips at the moment, so it moves with the market up and down. (But with a little bit of alpha on my side at the moment) And i am currently only 4% on margin, thats hardly game breaking. With a concentrated portfolio approach in smallcaps or high beta stocks i wouldn`t mind doing it. I am perhaps a little pussy but i don`t like high volatility when it runs against me and on the other side i am not able to sit on huge amounts of cash. Everytime its there i want to lift my passive income with it. ::)

In the last 44 years there were 13 drawdowns greater 20%, thats around one every 3.3 years. When i buy every year a one year put option for the portfolio, at the current prices of the options that costs me 5% in every year that that doesn`t work. So i loose 3.3x5%=16.5% in 3.3 years. In that one year it works i win ~15% assuming that the put option goes up 3x. (with volatility increases that can work). In the year following the crash year i will get 15-20% higher returns as without the puts because i can invest at lower prices and the following returns are on a higher base. This can be surely be optimized because i don`t have to hedge every year. But for 2014 its probably not a bad idea to do it. There is only 1 crash in the next 3 years necessary to profit from the hedges. (It surely doesn`t work when the market rises to the middle of the year and then crashes to the level of the start of the year.) Any thoughts?

Ah thank you tombgrt, i just slapped myself for not thinking about buying a put on the index. That is a lot cheaper than on something like TWTR. After reading a lot i really don`t like to directly short a stock. Something that happened at VW can happen in every stock and i really don`t want to get caught in that kind of situation. I looked it up for SPY, a at-the-money put option has around 5-6x upside if the market crashes by 40%. So in that case with a 5% short position i can reduce the maximum drawdown of the whole portfolio to around 10% ( in theory :) ) and have a big buffer to invest when that situation unfolds. That can even allow to get deeper into margin. I should do a backtest and see if that was adding value in the past. I allways liked to go out of the market from may to october, but that can be the solution i looked for.

google spreadsheet with a lot of numbers.

I use gurufocus for the numbers and then yahoo finance for news, management pay and links to sec-files.

While thinking about the short context, i thought about shorting and what is the best way to do it. Looking at some stocks like DDD or TWTR i thought that the mispricings on the upper side are a lot greater than on the lower end of the spectrum in the current market. So how is the best way to profit from that? For example for DDD (current price 92.5): - Sell 95$ Calls pros: get 20% if the stock stays below 95, get money upfront cons: unlimited downside - Buy 90$ Puts pros: limited downside, upside around 200% when the stock is halfed cons: high premiun, cost of leverage > 20% - Naked short selling: pros: get money upfront, don`t have to worry about options, can put that money to work in undervalued stocks? cons: unlimited downside, if short selling is banned you can loose your shirt - Sell Calls, buy puts with the money? isn`t it the same as naked short selling? Is hedging the portfolio that way a good idea, and if yes how would you do it? (I thought about hedging with gold/bonds, but they are too expensive for that at the moment for me.)

Thats one reason not to invest in index funds. ;D In 1998/1999 we had a similar overvaluation, but were the following years so bad for value investors?

ALXN AMAVF ASOMY DDD DSNY FB FNGN GENT GILD ILMN LGND LNKD SSTK TSLA TWTR ULTI WETF

@Edward Look at the Strayer thread under Investment Ideas there are enough arguments to destroy the bull thesis. I don`t want to discuss it in this thread, perhaps we can resume the discussion there.

Ouch, i don`t think he would ever invest there. The numbers look good, but who said that education has to cost money? (There are enough countries in the world where education is free.)

BP should do well in 2014, when it goes above 50$ it breaks the 3 year trading range. But that is a purely technical view, i don`t know if that is worth something in this forum. ;D

Merry Christmas from germany and thanks for providing so outstanding knowledge nearly for free :)

Around 5 Years with a 80% savings rate. www.earlyretirementextreme.com ;)

I would buy the book http://greenbackd.com/2012/12/26/quantitative-value-a-practitioners-guide-to-automating-intelligent-investment-and-eliminating-behavioral-errors/ it gives some really great insight about that with sharpe and sortino ratios for a lot of ratios. But for your case a nice overview over mechanical strategies with returns per year of the last 13 years: http://www.oldschoolvalue.com/stock-screener.php

Sold WMT,MT and bought more CHL. Initiated a position in WSTG. I hope my turnover gets lower over the next year, but currently i am optimizing my holdings with all the new knowledge i got from here and elsewhere. A big thanks to all :-*.

After reducing my leverage over the last days, i sold off the last bit of my AAPL position today. It was a trading position, my price target was 580. It has not reached it but it was close enough to close the position. It was never a high conviction idea for me, so taking profits and putting it to work somewhere else with a better upside potential looks like a good idea to me. Will buy more TI/ARCP over the next days.

Holding up to 50% Cash makes sense when cash yields are near S&P500 earnings yields, because than the opportunity cost is really low. In 2000 and 2007 this was the case, in 2000 it was very extreme with 2% earnings yield vs. 6.5% cash yield. (Whats the point in holding stocks then?) In 2007 it was 5.5% earnings yield vs. 4,75% cash yield. In 1987 before the crash 10y treasury bond yields were 2% higher than earnings yields = no reason to go 100% stocks. (i have to data about cash yields here, probably nearly the same) But nowadays we have the opposite case, the spread between cash yields and earnings yields are extremely high. Currently there is no reason to hold cash.

I understand why a fund manager or a business like berkshire or ffh holds cash, but as a single person i don`t see that reason being valid. What i need is a cashflow for my running expenses, thats the reason i love dividend paying stocks. Holding cash will always come with a cost.

He doesn`t seem to be that stupid, he found an inefficiency and exploited it. But now that this secret is official, people will adept and reduce or remove the inefficiency and the only one thats going to get rich is the man who sold him the tips. :)

The outperformance of the strategy comes from the years after big market crashes and you can only expect to outperform with stocks <50M market cap. This seems to capture the price-to-book premium and the smallcap premium. When you look at the data on greenback`s site you can see that the -ev strategy with <50m stocks is only loosing money in recessions, what is exactly the kind of behaviour i expect from a value investing approach. Perhaps its a good idea to start with a small part of the portfolio to get in touch with the approach. And its totally clear that these stocks are something where you are better off not thinking about what you buy, because its allways something ugly otherwise it wouldn`t be so cheap. The only thing to do is perhaps try to detec fraud. (so exclude chinese stocks for example.)

Sold FUJIY, bought ARCP.

When you look at the greenbackd`s portfolio you see that the outperformance comes only from 1 or 2 stocks, where one was a 4 fold and another an 8 fold. I know that i couldn`t stand the psychologic pressure to hold onto them after they have doubled. But doing so will drive down returns to normal market levels. But when you really can avoid touching these stocks for one year, its possible that you are outperforming the market by wide margins. I can only imagine myself doing that by not looking at the portfolio for one year. (But really who is able to do this?)