bizaro86

I dont believe anyone thinks the market makers should be forced to keep trading. I certainly don't. If they had pulled out of writing new GME calls a long time ago this never would have gotten so out of hand, because regular market participants would have charged much more given the risk. Those MM are sophisticated institutions and can own their decisions. I think the complaints are mostly about brokers restricting access. The stock and options aren't halted, and with current margin rules there is no risk to the brokers.

I agree it must be a regulator enforced ban. You could easily not lend margin on long GME options and only allow covered short options. That would make the risk to the brokerage zero. And they would still keep making money from the current frenetic trading environment.

No $41t Sherlock. Would have never guessed stock prices would drop when people are not allowed to buy them. ::) These newly minted millionaires need to move to a real broker. IB lets you buy anything. Got an limit order for NOK below $4 in just in case things get really funny on the downside. IB is currently not allowing new GME options trades.

CBOE would have hard feelings about that. I think options are a slight net positive. GME will work itself out, probably with the company doing a big issuance, and I think it would be a shame to neuter markets as a result.

Yeah. I've used RBC, iTrade, and BMO. IBKR is way better than any of them. I compare executions between IB and RBC, and I save more on spreads than I pay in commissions. Plus the commissions are less.

Another way to look at this -- they converted their long duration bond portfolio into a set of income producing real assets at BHE and BNSF. The yields are better and the risks are better than long duration bonds at this point in the bond market cycle. Further, based on Christopher Bloomstran's deep dive, they used the accelerated depreciation credits at BHE and BNSF as a secondary method of reducing tax payments and increasing cashflows. As well, based on Brooklyn Investor's charts, they have built up a large cash component in their portfolio to backstop insurance losses and to provide optionality for opportunistic acquisitions. This is not all black and white but the big asset allocation shift of the last ten years (see attached) has been the movement of funds from longer term fixed income to cash and equivalents. This movement raises two questions (the indirect one raised by wabuffo and a direct one). The indirect (and retrospective) one: Returns would have been better if the longer term fixed income portion would have grown proportionally to float. The direct one: Does the current (and growing) allocation offer potentially significant optionality value? (my answer is yes) Part of the decision in shifting from bonds to other assets (cash, owned income producing assets) is about expected future returns. The move seems correct, but the unexpected happened during the recent COVID panic -- government became a lender of first resort where normally Berkshire would have had its pick of distressed assets. A similar crossroads is appearing now for Berkshire. AAPL is starting to flatline in terms of its EBIT growth and topline sales growth, but it's priced for some large expectations out of the business. Does Berkshire exit, partially exit or hold due to the expected tax hit? In 1998, Berkshire was facing a similar question with very sizable paper gains in Coca Cola, Gillette and American Express in particular. Berkshire had an out where they turned a ~3x BV share price into General Re with a merger where they acquired a substantial amount of float and a bond-heavy portfolio that they turned into cash. So, giving up a bit of equity to acquire a cashable asset was enough to de-risk an overvalued portfolio without incurring a very sizable capital gains hit from selling KO, G or AXP. Do they interrupt compounding at lower rates going forward and take the sizable capital gains tax hit? History says no, but the new answer may be something creative just like the last time. IIRC he has said not selling KO at the peak was a mistake. I think he is an expert at learning from mistakes. Maybe a swap for like the deal they did with Graham holdings somehow?

Lol. Maybe r/Wallstreetbets had it right. Hard to argue when even Charlie Munger is buying electric vehicle stocks on margin. I guess he did it before it was cool.

I like the Brookfield Office Properties prefs, BPO.PR.N and BPO.PR.P specifically. They are priced about $14 up from $10 but still very cheap. I thought this piece on BPO prefs was pretty good. https://seekingalpha.com/article/4398071-brookfield-property-partners-canadian-preferred-shares-will-remain-outstanding-and-are

12 months ago I would have given you 1000-1 odds that wouldn't be true.

I haven't been shy in the past about calling out mistakes at the namesake firms here. But I think the risk reward from switching to short term bonds makes it hard to call it a mistake. BRK doesn't have a big loss from interest rate derivatives, although they did miss a chance for profits in bonds from falling rates. But they also avoided a potentially large loss (if rates had risen). Buffett has consistently said his priority (rule 1) is to not lose money, and long bonds are a great way to do that if sharply rising rates are on the table. Because he is consistent with his stated plan and the overall results have been acceptable, I think its hard to call that a mistake. YMMV.

It seems to me that it makes sense to layer in here. My track record of hitting top/bottom ticks isn't that good. But I was buying at the end of March, because I figured that was pretty low and if it went lower I could always buy more/add leverage. This sort of feels like the opposite. The story stocks seems obviously very high to me. They could absolutely go higher (in which case I'll keep slowly adding) but I don't want to miss the window either. YMMV, obviously, because there is no hard catalyst for this merry-go-round to stop, and the stim checks are a catalyst for it to keep going. But I think everything that can't go on forever does eventually stop. I really like stuff like this - while I haven't looked yet I suspect the puts are going to be way cheaper on old line industrials trading at high valuations than new economy moonshots trading at absurd valuations, which might make the profit potential bigger.

Sorry, I didn't know that or would have been less generalist. I've been frustrated as I finally found a couple of decent long/short funds, but even they've had a rotten couple of years e.g. they were very early on Wirecard, and were just PUNISHED for it. Personally I agree with you that in a bubble environment Puts are heaps more sensible than direct Shorts, though Gregmal's ARK approach is interesting. p.s. Thanks for the colour from the Hockey Forum - that's interesting stuff. I remember in '99 as a young 'un, all my friends not in Finance were trading tech stuff. Haven't seen that for a while... No worries at all - that was definitely good advice. My track record shorting is good, but also brief, because I barely ever do it, so I definitely don't think it makes me infallible or anything. I think everyone needs to pick a strategy (especially on the short side!) that they can stomach. I can't short this stuff directly, because I'm too chicken and would close it if it ran against me. But puts I can mentally write off as a hedge cost and just let them ride.

Having a valuable business be a huge percentage of your net worth can be financially stressful. Especially if the business is growing it probably doesn't throw off much cash if they're reinvesting.

I'm copying this from the hockey forum I mentioned previously. "SPCE is stellar. I had to walk away from my computer yesterday because of that move, as i was so excited. I parked 40% of my capital in that at $24, and am holding til $40" The move this person is talking about is from the announcement that ARK is launching a space ETF. The market has concluded that they will raise a bunch of money, and that when they put that in it will drive up these stocks. And so a huge number of people are trying to front run, and then others see the momentum and jump in.

I really like this idea, and might use it to add an AirBNB position. Quality business that's overpriced right now. Have to think about what the right offsetting pair would be. Worth mentioning that in round numbers TSLA is more like 1400x earnings.

Thanks! I'll look at those names. Thinking of taking this up to 6-7% or so. I was actually joking about the "lose all my money" comment. I think I've followed FFH long enough to realize that naked shorts of momo stocks is too risky for my constitution. I think the psychology is key here more than the valuation in some ways. I follow a forum for my favorite NHL team, and have started to see posts there about riding the SPAC boom. Once all the marginal $$ are in the game the end is near.

Thanks! I have a pretty good track record shorting historically, mostly because I only do it when I see a fat pitch (typically every couple of years I find one). I'm looking at this as more of a hedge/basket approach. I think the market as a whole is getting expensive-ish, and this gives me the confidence to remain invested, because in a crash this basket should overshoot to the downside. But I agree that the market can remain irrational a long time. That's the primary reason I'm using puts vs direct shorts. At my current exposure my maximum loss is 4%, which doesn't threaten my solvency at all. Obviously a direct short of something that goes up 700% (TSLA, eg) could be very bad. I'm also leaving room to double down if things continue to be absurd for another year. Maybe all the stimulus checks go into otm calls on fad stocks and it goes up for another year. In that case, I'll likely reload for over time.

Last year around this time I started getting antsy about the market valuation and bought puts on some well thought of companies that had relatively high financial leverage. That worked out ok for a completely different reason than I thought (although in hindsight Clorox was a bad pick...) Anyway, I'm getting that same antsy-about-the-market feeling, and I'm looking to express it with puts on companies that have high leverage to the current r/wallstreetbets style insanity. I'd be very interested in hearing what other people are thinking on this, and if anyone has ideas for things you've come across that have upcoming lockups, etc. In the interest of adding value and not just taking, here is what I have so far: ARKG - This is the Ark genomics fund. I'm sure some of these firms are really great. But I think if the bubble pops all the ARK funds will get killed. They have reflexivity as well, because outflows will put pressure on the holdings they need to sell, lowering their price, causing more outflows. ARKK - same thesis as above for their diversified ETF DASH - these guys deliver food. Some day COVID will end, and with it the huge tailwind. Combine that with a high-competition business, and I think their bubble gets popped. Obviously its up huge recently. Recent IPO, so VCs exiting once their lockup ends is a potential catalyst here. LMND - fancy online insurance co. I think they'll probably get killed at some point on claims, as I doubt their G&A is actually that much cheaper. Another recent IPO. NIO - Chinese electric cars. Valuation is very high. TSLA - American electric cars. Valuation is very high. SPAK - combination of post-deal SPAKs. This is probably my favorite of the bunch, because someone has a plan to aggregate the future issuances of crap for me. The SPAC bubble means the quality of SPAC deals will go way down, and the promote already makes post-deal SPACs a negative expected value game. Options here only go out to August, unfortunately, but they aren't that expensive compared to some of this stuff. GME - added this today on the short squeeze. Because this business isn't very good and the short squeeze won't last forever. On the risk side, you need to be right on timing and valuation. The puts on this stuff are all very expensive (maybe there is a bubble in puts on bubble stocks?!?!) I've allocated about 4% to this theme so far, and am adding everyday. I have the strikes and expirations staggered, which is why I didn't list them, as there are lots. Generally all very far out of the money with expirations ranging from May 2021 to Dec 2022. If this bubble keeps going for a whole year more I'm looking at a total loss on that percentage of my portfolio, which is acceptable. If there is a big crash, probably a 5X gain on it. I like the optionality of big gains at the bottom, because it's likely that I'd be able to re-deploy those gains into beaten down stuff at the bottom. I'd be very interested in comments, ideas, and especially explanations of why I'm going to lose all my money.

Fair enough. Are there any other large holders of the A? After WEB's shares all get converted to Bs and sold it seems like there could be a bit of a power vacuum. And I think the one-time gains from the split would be pretty attractive.

You're making an assumption about the "tons of corporate employees" producing accounting reports. The quarterly reports are prepared at headquarters - I heard that directly from someone in accounting at HQ. Berkshire doesn't produce monthly consolidated financials. The subsidiary financials would remain and still have to be prepared. You'd have 1 & 1, but they'd still add up to 2. No change in costs. Same with the tax return: two smaller piles adding up to the same size as before. It seems improbable to me that the 20 some odd people at HQ can consolidate that many different subsidiary financials on a quarterly basis, and file the consolidated tax return. Plus I'm pretty sure I've seen job ads for a corporate office elsewhere in Omaha. Not "HQ" obviously, but people doing corporate functions. Maybe I'm wrong, and I don't think its that important anyway. This won't get broken up or kept together for G&A savings. It will get broken up when the discount to the sum-of-the-parts value gets too large for shareholders to justify keeping it together. Almost certainly after WEB has passed away. At some point the market won't like management, and will wonder why it makes sense to keep these disparate businesses together. Because WEB's shares are getting converted to B shares and sold that will leave Munger's estate beneficiaries with a great deal of voting power, so they will control the timeline here to a certain degree. But I think there will be significant spin-offs/break-up of BRK within the next say 30-40 years.

You would probably save on overhead. I know they are always saying they have some absurdly low number of employees at hq, but there are tons of corporate employees not at hq who do things like generate consolidated financials and tax returns. Maybe the savings don't outweigh the benefits of 1 tax return and less public company costs though not sure. I think eventually it will get broken up, because it will become too unwieldy to manage.

That makes sense - thanks! Does increasing bank reserves increase the banks capacity to lend? I suppose they would be limited by the amount of risk weighted assets their equity can support. In that case the Fed taking treasuries in exchange for fed deposits probably isn't inflationary, but the Fed taking junk bonds might be, as more equity would be required to support $1 in junk than $1 in fed deposits, meaning excess equity is available to support new loans. If that's true, then is the limit on money supply in the real economy bank equity?

I think the consensus appears to be that the Fed expanding its balance sheet (aka printing money) doesn't cause inflation. That doesn't seem intuitive to me, but Wabuffo's points seem logical and well thought out. It also matches with recent history from an empirical stand point. As there has been significant QE but no significant inflation. I'd like to invert this with a question (selfishly to aid my own understanding). What would cause inflation? We know inflation is possible because it has happened in the past. Would it require the velocity of money to go up? What if the fed stopped balancing its assets and liabilities and just started writing cheques to the treasury with no offset. I believe that would effectively expand the money supply?

I was just over +30% in 2020. The vast majority of my alpha this year was made in late March when I went from around 75% net long to around 140% net long. Mostly with in-the-money call options on quality businesses (the calls I bought on DIS when it was less than half its current price helped quite a bit). The other big winners were a good size position in TZOO (which I still like) and a special situation trade around the Just Energy restructuring. That one was the largest absolute dollar return on a single trade of my life. My biggest loser of the year (by far!) was BRK.B. I bought some puts on various things I thought were overleveraged in Jan/Feb. That worked out well, but I closed them too soon. Around the same time, I sold some BRK.B puts (short expirations). Then when they were in the money I rolled them out, and added more to try and make it up. This process ended up with me getting put a huge BRK.B position in the 200s when it was trading considerably lower. I ended up selling most of the excess BRK at pretty low prices. I knew it was low, but wanted to put the money into higher beta names, which ended up being the right call. Still, I'm probably the only person on the board who has BRK as their largest absolute dollar losing position of all time. IMO this slightly underestimates my true return for the year, as I have a relatively large position in the debt of a firm that went through bankruptcy. The debt no longer trades and the reorg equity I got isn't trading yet, and IB has it marked at an unreasonably low price (imo). So I should get a free boost on next years numbers. @Writser- I'm sorry to hear this board hasn't been useful for you this year - I have huge respect for you as one of the best posters here. I can relate on the kids front - I made a number of unforced errors due to exhaustion when my kids were little. Mine are 5/6 now and it does get easier. **lesson learned - you don't need to make it back on the same trade. If I had just closed the BRK and taken the first loss it wouldn't have been that painful. The losses on the roll were brutal. When I finally pulled the cord and reinvested in other stuff at the bottom I made it all back and then some.

There are many remote communities. Some of those are indigenous communities and some are not. The characteristics of those communities (fly-in, fly out, hospitals quite distant) are what matters, not the genetic or cultural background of the people who happen to live there. Agreed, people are people and all should have equal rights and equal protection under law. But once governments start giving people privileges based uniquely on their ancestry, you have shifted drastically away from the principles of a pluralist society in a liberal democracy. Some of those race based (or if you prefer, ancestry based) privileges are historical artifacts created by our forebears 300 years ago and are thus entrenched in law, but to the extent possible, let's not create new ones. If you start providing preferential access to vaccination on the basis of ancestry, do you finish in a world where hospital beds, waiting lists and organ transplants are not provided to all equally, but rather preferentially to certain groups because of their genetic make-up? That's certainly not a world that I would want to live in. SJ Exactly. Remote communities should rank high on the list, although maybe not above paramedics, who I really do believe should be high on the list. As a work-from-home young-ish person I'm way down the list, which is completely fine. But I'm not sure that the people who live on the reserve near my house (the one closer to a major hospital than my house in the suburbs, the reserve that has a Costco) need to be getting first dibs based on race.