bargainman

This is the equivalent of just buying calls (synthetic calls). Interesting that you consider the tax angle. I suppose that doing the synthetic call is in fact more tax efficeint? you keep taking the tax losses and can hold the shares and not pay those taxes indefinitely? Is that the strategy?

This is actually quite interesting. I don't know if you read the book outsiders, but he addresses some of this in that book. Apparently there is a study about the schools, and they measured kids at the beginning of the year and the end of the year. What they found is very interesting. Apparently all the kids learned between the beginning and end of the year. But what ended up happening was that the middle class and upper class kids either continued progressing or stayed the same over the summer months, whereas the poor kids ended up regressing during the summer months. That basically suggests that the schools are not really the problem since they are actually teaching all kids equally. Apparently it's the parents that are the problem. Another interesting thing about the United States is that property taxes go to fund the schools. That said there is also a Federal funding and state funding, but my understanding is that property taxes are the bulk. This again leads to the issue that the kids in the better neighborhoods will have better funded schools which will once again propagate their advantages.

Sure, but the point of the article is that overall it's easier to do this in countries outside of the United States even though it is the so called American dream.

Can somebody give me a quick paragraph or two on what Coverdell ESA Are? I have 529 plans for the kids, but have not looked into Coverdell ESA yet. Should I?

http://money.cnn.com/2013/12/09/news/economy/america-economic-mobility/index.html?source=cnn_bin

I am Not sure if I can trust Bruce Berkowitz with my money any further. I just came back from the movies to see the new Thor, and every time I saw Loki, I kept expecting him to bust out Bruce's distinctive drawl and say something like "price is what you pay ... value is what you get!" and then he did something conniving to Thor... you be the judge... ;) http://www.google.com/search?q=bruce+berkowitz&rls=en&tbm=isch http://www.google.com/search?q=loki+thor+images&rls=en&tbm=isch

Anyone else notice this? http://www.formulainvestingfunds.com/

Nothing is my answer!!! Is there anything cheap out there? I guess I bought some IBM leaps a few weeks back. Been selling calls on stocks I own.. Slowly selling a bit here and there.. Anyone buying? Anything attractive?? Even selling puts kind of sucks since Volatility is so low...

An IQ of 100 is just average (50th percentile), where 120 is well into the above average category (89 percentile). I'd believe that someone with an IQ of 120 would do measurably better in most tasks which require some amount of analytical analysis, such as investing. No one would find it surprising if a study found that on average investors with a 100 IQ beat investors with an 80 IQ. But when you are talking about the difference between an investor with a 130 IQ and one with a 160, both of which are above the 90th percentile already, I think the increased intelligence doesn't matter as much. I think once you are "smart enough" (being above some minimum threshold) having the knack for finding good investments isn't something that is measured by an IQ test. It can only really be measured by your returns over a long period of time. Right, it's the common concept of marginal utility. I remember Outliers talked about this a reasonable amount. If you're about 6'3", more height doesn't necessarily make you a better basketball player (depending of the position you play). Apparently they did studies on all lawyers who graduated from a prestigious school (some percentage had entered under a special program for underprivileged people, so those people entering were significantly less 'smart' or 'educated'), and they found there was absolutely no difference in their career path's success rates by any measure. There is an obsession in our society to measure things, and sometimes those things don't matter. Another example was the combine and the wonderlic, apparently scouts use the information to grade football players, but it makes no real difference: http://www.cnbc.com/id/28813545 That said, there is a real difference and correlation up to a point. I do think someone with a 120+ IQ is going to do better in general and in investing than someone with an 100 IQ. That's why Buffet said 130 vs 160, not 100 vs 160... Plus in STEM fields, I think IQ does correlate better to a higher level than an average field.

So I've been reading the discussion about Sears, http://www.cornerofberkshireandfairfax.ca/forum/investment-ideas/shld-sears/1775/?topicseen and like a lot of discussions on message boards on the web, even the best boards like this one, there seems to be a reasonable amount of emotion, and also some amount of black and white thinking, or at least people arguing either just one perspective or the other. There is also a lot of great information. I personally try to think of things in less of an "either or" way. I think of things, especially these sorts of scenarios, in both probabilities for the short term and the long term, and also decision trees to analyze actions that I might take on those probabilistic scenarios. Well, that was certainly a bunch of mumbo jumbo and jargon, so let me get started on the actual meat: Before I get started on the probable scenarios in the short term and long term, these are my potential actions on the stock: inaction purchase by proxy by participating in fairholmes fairx fund, purchase directly by buying shares and potentially participating somewhat in lending out my shares to shorts and making some money that way, buying longer term options primarily call leaps, and or selling short term options, primarily puts. With that out of the way, let me list the short term scenarios and the long-term scenarios and attach probabilities to each. Short term possible events Bankruptcy - very low probability Stock dropping to 30 -low to medium probability Short squeeze -low to medium probability Spin off of some sort which may cause annoying taxable or tax related event -medium probability Eddie brilliantly turns around the business and makes it profitable - pretty low probability Long-term possible events and outcomes Bankruptcy -very low probability Lost opportunity cost where assets follow or slightly trail inflation before Eddie is able to monetize properly -low to medium probability Short squeeze that pops the stock up at least 50 to a hundred percent -high probably Eddie becomes the next Jeff Bezos and turns this operation into an Amazon like machine -very low probability Stock goes below 30 permanently reasonably low probability Eddie winds down ESL and makes this his primary investment vehicle -medium probability Now I have my reasons for assigning these probabilities but if I went into all of those this message would never end :-) so let me analyze my possible actions. I already own a reasonable amount of the fair holme Fund so no action required there, I will participate in Sears depending upon the whim of Mr Bruce Owning Sears directly might be OK, especially since my broker gives me some interest for lending out the shares, but the factors here are that I only get half of the total amount of interest for the shares lent, I also feel the pain when a split or spin-off happens and I have to figure out what to do with some spin off stock. Also in the scenario where the stock does nothing I have the lost opportunity cost, minus of course the interest I was paid. But generally here I am using a reasonable amount of capital and betting on Eddie monetizing quickly enough that the stock becomes worth something, or waiting for a short squeeze and selling out then. Options, now here is where it gets interesting . First a word on pricing, for some reason at this stage, short term close to the money Puts are earning 40 to 50 percent annualized. Long-term calls are charging about 12 percent annualized at the money 2015 leaps. So if I believe that in the short term the stock won't drop too far below 30 and that in the long term it won't do so either, I can probably make a reasonable amount by selling short term close to the money puts and rolling them as necessary. How long those premiums will last, at those strike prices, I do not know, but they have been pretty high ATM consistently. Now if I believe that in a slightly longer term there is a reasonable chance of a short squeeze, it doesn't cost me a whole lot to buy some out-of-the-money call leaps so that I am exposed to any possible upside without a large investment of my own capital. You can probably guess what my actions have been and will be going forward. I agree with many that this is not a slam dunk 1 foot hurdle. I also agree that Eddie didn't become stupid all in this recent period. I also agree that there is a reasonable difference between somebody running a hedge fund and that same person running as CEO of a retail business successfully . I see a significant difference between him and Jeff Bezos merely starting with the fact that Jeff Bezos is a trained computer scientist with significant interest in other sciences, while Eddie is a trained economist. Jeff Bezos also seems to be very inspiring and visionary whereas Eddie seems to be reclusive uninspiring but still rather data-driven. This is not to say that Jeff Bezos does not have his faults. But enough about that. I won't draw too much of a comparison with Warren Buffett other than to say that we all know he studied Warren deeply and we all know about Eddie's record. As far as the actual end game goes I really do not see a way out for Eddie, he either needs to fix the retail side of Sears, monetize the assets and invest in something else, do some combination of the two, or just keep sinking slowly. So what am i doing then? I trust Mr Bruce enough that I am willing to keep holding My fairholme shares. I feel like the stock is paying significant short term options premiums with reasonable downside risk that will be offset by those premiums in reasonable order by rolling. It also feels like those short term premiums make up for the potential opportunity cost outlined above if Eddie is too slow to monetize and the business keeps deteriorating too fast . I feel like in the long term and even the shorter term there is enough impetus for a short squeeze that could spike the stock given the short interest and the small float. As such with the leaps costing a reasonable premium, I am exposed to this potential upside for little cost or at least reasonable cost. Now both sets of options would be exposed to the spin-off issue, but I guess you can't have everything. Now if I could do that in my non taxable account that would be great, but I cannot. I would be interested in hearing how others are trading this stock and dealing with the possible probabilities and different scenarios (also what probabilities people assign to the possible scenarios). I started a separate thread because I didn't want this particular thread to turn into something focused on what could happen, but rather something focused on what actions one could take to take advantage of the possible scenarios. Hopefully that makes sense but since it's late over here maybe it doesn't :-)

so what is the best way that people have found to read this site? I have both a smartphone at a little under 4 inches and a tablet close to 8 inches, and using the standard website view is far from ideal especially given all of the small links to click. any suggestions?

looks like there are social based apps and sites looking to crowd source taxis too: http://news.cnet.com/8301-1023_3-57596389-93/airbnb-lyft-and-taskrabbit-partner-with-share-economy-advocacy-group/ Lyft, sidecar. Relayrides looks like another version of getaround.. It's getting interesting in terms of making currently unused assets useful..

You didn't mention http://www.getaround.com/ which I think already has as many or more 'available cars' than zipcar. It's a pretty ingenious model. http://www.getaround.com/about http://www.getaround.com/tour

I agree in general with this approach.. Who says you need to buy all at once. One guy at the fool I used to listen to, who had years of experience and was very successful at holding many many stocks over years, talked about buying in thirds. I think it's a good approach Buy a core, never sell position. Then buy another third when it reaches a good valuation, and another trading position. It's averaging in. You never know if the stock will come down to your required valuation, and if you like the manager, time is the friend of the great business...

I think there has been plenty of rational discussion. But, the message you just wrote does not fall into that category. The original message does.

I have just learned that the bill probably lied! :-) Here is what just happened. My doctor sent me a 'prescription' to a MRI place. I noticed that this place was not 'in network' in my insurance. I called them up and asked them about it. They said that the MRI price was $2700!!! I asked them what my insurance would pay? They said probably $2100! Amazing.. Then I called up a few of the "in network" MRI places which agreed to the Insurance 'contract pricing'. When I asked them the price they said the same thing about $2500. But then I asked about the cash price and one place quoted $500! Then I asked them about the insurance contract pricing and they said it was $475! (called 3 places and they were all within that range.. list price 2500, contract price 475) So like many things, it seems that the 'list price' or "MSRP" is a bunch of baloney. I still can't believe that the out of network place would cost $2100 vs $475. I suspect I would not know the actual price unless I actually went through with the procedure, but I'm not going to tempt fate. I will go "in network".

Care to guess how many times Buffett has punched his card? Saying things in an interview as a public figure is fraught with peril. Almost anyone can be quoted arguing against themselves, even Buffett.

Well, you left out the options strategies ;-) But wrt Meditation I would encourage you to look at HRV training. Here are a couple of interesting ted talks: It's basically a biofeedback device that gives you some hard data on what the state of your biology is while you're meditating. The problem with meditation in general is that it's very easy to do it 'wrong'. With realtime data, it's a lot easier to get yourself into what's called a 'coherent' state.

Definitely do some studying on options. You can always find something to do with them regardless of the market's bubbliness. One example is to hedge by doing a ratio spread (or backspread, I forget the exact term). For example you can usually buy 1 put at the money, and then sell 2 put options at a lower strike, for net of zero or a slight credit. That will basically hedge you part way, but give you some downside protection if the stock/market tanks. Up until the lower strike price, where you will be forced to buy a stock at that price (since you sold 2 puts). But if the market stays stagnant or goes up, the hedge doesn't cost you anything out of pocket. But it does cost you buying power (It's not free for sure). Anyway there are a ton of credit or debit strategies that wlll keep you busy and let you profit in whatever scenario you choose. Just make sure you don't use all your cash or buying power, or you wont have money to take advantage of the eventual swoon.

It's impossible to achieve the returns in the screens since they are theoretical, rebalance monthly, don't take slippage and liquidity into account, etc. The Shadow Stock portfolio, however, is a real money portfolio. If you follow the trading guidelines, you have a good chance of replicating the results. Beware that it is a very volatile portfolio, though. Their screens performance is flawed, although in the grand scheme of things it shouldn't matter that much. Their performance assumes that each stock in a screen is purchased at the beginning of the month based on the end of the prior month's closing price. However, the screen itself doesn't come out until the middle of the month (each screen is updated on the 15th day of each month). So they have assumed a purchase based on "future" information. Of course the screens are just representative in a sense and it could be argued that it all evens out over time, but still it feels wrong to me to publish data that would be impossible to actually replicate. I think this is true if you go for the standard subscription, but if you get their 'pro' product, then you get to run the screen yourself whenever you want.. I wonder what the slippage is on a real implementation...

Does anyone out there follow AAII's screens and/or shadow portfolio? Their returns are pretty phenomenal, but I wonder how easy/difficult they are to actually follow, especially in a taxable account.

Just FYI: Investment Objective and Strategy The investment seeks to replicate, net of expense, the Morningstar Wide Moat Focus Total Return Index. The index contains companies that have sustainable competitive advantages and that trade at discounts or Morningstar's determination of their fair value. It contains approximately 20 companies.

You also might be earning $500k from your labors, but if you neighbor "earns" $500k from passive income while hiking the National Parks that is an entirely different meaning of rich. Eric, Excellent observation. It is what I live for.. freedom! Thankfully freedom can be had for much less. 8) Reminds me of the story of the businessman and the mexican fisherman: http://www.wanttoknow.info/051230whatmattersinlife

mpauls, Couple of things that should provide some food for thought to you (and the other detractors): 1. Which set of investors have been with Sardar the longest? 2. How have they responded to the incentive agreement and Sardar's subsequent actions? Best, Ragu 1. Lion fund investors 2. they don't care since they always paid him the pound of flesh he's requiring of all SNS and BH holders now. A few of questions for you. You have 70%+ of your portfolio according to another post. Why? Also, there are several members on this board who have interacted with and done direct business dealings with Sardar, have you? Those members have left Sardar and concluded he's arrogant, has an enormous ego, will not listen to anyone else's opinion, the board has no governance, he's not to be trusted by shareholders, among other things. What makes you discount those opinions of direct contact by very smart and high integrity individuals enough that you would risk most of your portfolio capital with this man? Disclosure: I own BH, but very low single digit percentages. I would put giofranchi's 5% as the upper limit of any portfolio amount to go into BH given his history.

THis was a really inspiring talk: