Uccmal

There is no easy answer to this. I try to keep a buffer (not necessarily cash but liquidity) that isn't subject to market vagaries. Its hard. During times with lots of ideas I overbuy. Then we move into a situation like this August, where I dont see so many good ideas. To me that indicates it may be time to trim positions which I will be doing over the coming weeks. To get around the cash flow situation since I quit full time work, I have been sticking mostly to dividend payers. This meets my cash flow needs at the moment, even after having 2 of my prominent holdings cut their dividends. Two years ago when I stopped full time work I started to focus on buying dividend growers - several in my signature meet this criteria. It is interesting that some companies kept right on growing their dividends through 2008-2009-2010. Similarly, there were companies in every recession/depression since 1900 that did the same thing. Usually they are the companies that provide something essential, that varies not too much in demand over time. This may work better in Canada, than the US, which has punitive double taxation on dividends but I am not convinced. Once our income is totally in our control, in retirement, it is easy to manage it to eliminate taxes. .and sometimes, even these comoanies go on sale, such as last fall and winter in Canada. I also have 3 essentially untapped lines of credit. I rotate money through them and keep some negative balance all the time. There is a possibility that these get shuttered in a major bad economic event, but it didn't happen in 2008-2010, so it is unlikely. This amounts to enough to live on for nearly two years. There is also the real estate. One property is financed by my margin account - another has a mortgage. I could, if needed set up a Heloc against the unmortgaged property. All told, I can probably go for 10 years without appreciably selling the principal in my equity portfolio. By that time a partial pension from my old job, and some government money start arriving, putting off the inevitable forever basically. There is also the skill set of managing money. The results are variable, but as I tell my Wife: I am good at this, and not likely to become stupid all of a sudden (barring outright insanity, or dementia). Something a bit greater than the great depression would have me out of business but that will be the least of our worries. At that point land and weapons are King as it has always been. The problem with setting aside actual cash is that its doing nothing while you sit. This problem has always existed, but has lately been exacerbated by non existent interest. I suppose there is always bitcoin but it seems to be prone to anonymous theft.

I was going to say the same thing. It takes a while to figure out who is swimming naked.

Becoming one of these CEOs is akin to winning a lottery, similar to having a hit record, or being a top tier athlete, or actor. That beng said, for anyone who aspires to this type of position, I know the stress load, and personal commitment is nothing like I have ever experienced in the working world. Most of these people work continuously. They never really get a vacation. They need skin like leather. I am not saying that they deserve to be paid 100 x or 200 x the average worker, but the degree of commitment of their life energy is so distant from the average worker. Its very much a social status thing as well, and not directly about the money. Its bragging rights. That being said I have no doubt the majority of Ceos toil away in relative obscurity, for more reasonable salaries. Perhaps a better measure of CEO pay to average worker is taking a lower chunk of the biggest listed North American companies (say 500-1000 in the ranking) and comparing those CEOs salaries to the 'average' worker. Its also a symptom of social darwinisn. Quite frankly, it isn't going to change, until humanity undegoes some social maturing. Looking at it from a more personal perspective. I have made enough money to live on. So why do I bother with all this investing nonsense anymore? When people ask me what I do, I try to be humble, but periodically I just tell it as it is: I am a very good investor, easily in the top 1%. If thats not bragging rights then what is it? I also think that our personalities (many board members here) drive us to be more than the 'average worker'. We here, on this board, have more in common with the top tier CEO than the averaage worker. As to legislating it away, I am afraid that this is not going to happen. Its undoable. Every piece of legislation creates unintended consequences. Wouldn't you love to own a piece of Koch Industries?

If you're looking for spectacular returns, I agree. Speaking of imagination/insight, I am reminded on Buffett's purchase of Coca Cola 30 years ago. It was already a large, well followed company with scores of analysts. Yet Buffett was able to make a simple extrapolation that vast untapped markets outside of the US could be opened up to Coke's products. It was a simple deduction that a ham sandwich could have made, yet Buffett was the only one to do so. Anyone care to speculate what in plain site opportunity like KO exists today? My thought would be Bank Of America. You have a CEO that is telling you that the company has $35-$40bn in normalized earnings. you have all the wreckage of the financial crisis now firmly in the rear view mirror, you have a stock that's priced well under book value. I don't think it'll be a 20 bagger like KO, but in 5 years time, I simply cannot see how it will not double from today's price. Incidentally, it ticks the value investing criteria ;D single digit PE, priced under book, in a sector that is hated. I have always found Buffett's Coke investment rather un-imaginative. He paid a fair price for a growth company. Thousands, if not tens of thousands of people came to Buffett's conclusion long before him. Coke had already had 50 years of international expansion when Buffett arrived on the scene. IMO, Coke came at a time when Buffett had firmly shifted out of Ben Graham's style into GARP stocks. What he has re-shown the investing world is that buying good companies and never selling is the most productive form of investing, all the better if you get a reasonable price. His ability to let things ride is one of his stronger suits. On the other hand Buffett has always been about minimizing the drag of taxes, and not losing money. Coke is probably the best in breed to do both of these for a very long time. I cant easily come up with a better mega cap that has continued its growth trajectory with such consistency for 26 years. In this era of creative destruction, not losing money has become ever more important.

Is it wrong if its just investing, that creates value over time?

If you're looking for spectacular returns, I agree. Speaking of imagination/insight, I am reminded on Buffett's purchase of Coca Cola 30 years ago. It was already a large, well followed company with scores of analysts. Yet Buffett was able to make a simple extrapolation that vast untapped markets outside of the US could be opened up to Coke's products. It was a simple deduction that a ham sandwich could have made, yet Buffett was the only one to do so. Anyone care to speculate what in plain site opportunity like KO exists today? My thought would be Bank Of America. You have a CEO that is telling you that the company has $35-$40bn in normalized earnings. you have all the wreckage of the financial crisis now firmly in the rear view mirror, you have a stock that's priced well under book value. I don't think it'll be a 20 bagger like KO, but in 5 years time, I simply cannot see how it will not double from today's price. Incidentally, it ticks the value investing criteria ;D single digit PE, priced under book, in a sector that is hated. I have always found Buffett's Coke investment rather un-imaginative. He paid a fair price for a growth company. Thousands, if not tens of thousands of people came to Buffett's conclusion long before him. Coke had already had 50 years of international expansion when Buffett arrived on the scene. IMO, Coke came at a time when Buffett had firmly shifted out of Ben Graham's style into GARP stocks. What he has re-shown the investing world is that buying good companies and never selling is the most productive form of investing, all the better if you get a reasonable price. His ability to let things ride is one of his stronger suits.

Nothing has changed under the sun. How many have invested in oil related companies this year? Canadian stocks? The whole cdn. market was in a bear this year, and has rebounded in less than 6 months. Its all about temperment. Blainehodder can stick to the magic formula. SD and I are in oil related stuff, Oddball is in banks. Somewhere soon something else will go on sale but most people will be debating who should be president, or whether Apple is a value play, or not. My observation is that most cant pull the trigger. Its a temperment thing. The process of buying undervalued stocks is very hard. The easy part is reading the numbers. Right now, the big money is being made in oil. But one had to invest when things were real bad. It was the same with BAC at $5.00, everything in 2009, Fairfax in 2004/05, etc.

+1 This morning---11 Gold Star family members penned an open letter to Trump demanding he apologize to the Khans for his "repugnant" remarks made in response to the Khan's appearance at the DNC. Mr. and Mrs. Khan both spoke on CNN this morning about their love of the U.S. and the character of son who made the ultimate sacrifice in service of his country. I invite all of you to watch the interview and attempt to connect with their grief as well as with their love of the U.S. How can any active military person or veteran not be disgusted by Trump's comments. Why would anyone enter any branch of military service in the U.S. if Trump became President knowing that if you die in service that Trump would respond by ridiculing your parents in the time of their ultimate grief. Trump is not fit to be President---I am not sure how any sane person can think or believe otherwise. + 1 Trump is serving as a wake up call for the American political system. The Republican party needs to be slaughtered in this election and remake itself after the election. The republicans created this monstrosity. A reasonable moderate republican could easily have beaten Clinton. But they created such an anti-progressive negative environment, since 2008, that they gave rise to this buffoonism. At this point the Republican ticket is completely unravelling: Trump is self destructing. He fired the manager he just hired. Now he is claiming the system is rigged against him, I guess just like the Republican primaries were rigged against him. He is thin skinned and cant take criticism. He operates without a political platfrom, with nothing to say on real issues, because he actually doesn't know or read anything. I have alot of respect for Romney, Mccain, Boehner, Ryan, as high level republicans. But Trump is a piece of garbage as a human being. Why wont Trump issue his tax returns? The answer is so obvious: he is essentially broke. This is his biggest lie of all. I am a great businessman, a great deal maker. If the tax returns were released everyone would see the truth. He is a lousy businessman, who has relied on bullying to get his way to the extent that no one of business quality will deal with him. So, we, the world are stuck with Clinton for 4 years, and its all the Republicans fault.

How exactly are multinationals supposed to win here? The dollar has a fire lit under its butt. And aren't multinational earnings just a function of global GDP? Look at bond rates across the world, they are super low. If anything multinationals from a U.S. investor perspective are probably guaranteed underperformers. Also, how are US banks supposed to be winners over the next few years? We're closer to the end of the cycle than near the beginning, the yield curve is flat to inverted for all intents and purposes, and they won't be able to return nearly enough capital to shareholders because they constantly have to ask for permission. What exactly is going to change all that? It just seems like a lot of investors on this board see "cheap" bank stocks that are down a lot and the first reaction is that it's overblown and time to buy. We're probably looking at artificially low default rates from all this cheap money (look at what happened with energy default rates as soon as they lost access to the capital markets), so if we do end up seeing a recession ever again (I know, hard to imagine with tons of money printing) these banks are going to get hit from both sides of credit losses and further flattening and inversion in the yield curve. If central banks weren't so fixated on keeping short-term rates low, what would the yield curve look like right now? It would probably be massively inverted. The 10-2 spread is the lowest it's been in a super long time. So saying bank stocks are cheap is just a bet that you think they can keep this game up forever and we wont have to worry about a down cycle for a long time. Plus all these bank stress tests are complete garbage. No one knows what to stress test for under all this market nonsense. If they don't know what they're doing now, how are we supposed to think they know the proper range of outcomes in the future? Sorry just had to rant with all these bank knife catching I see going on lately. Thats a good assessment of the situation.

Interesting question that sent me on a search. This article is interesting: http://www.bbc.com/news/magazine-19876372 The entire system is designed to stifle innovation and promote obedience. It seem to be democratic but not a fully representative democracy. But then, what government is? The US only elects the elites or those who are already established. Canada has elected a prime minister who grew up surrounded by power. Wherever you get populist governments the countries go to the dogs real quick.

Interesting, or not so interesting week. The big Opec meeting amounted to a yawn. The price of oil barely moved. Natural gas in up 30% from its lows for the year, for some reason.

This is certainly what I am noticing. I have never tracked it specifically. Price paid is still relevant. From my signature I wouldn't buy Enb, Ry, BCe, fn, or Rus at todays prices. All were at least 20-50% lower within the past few months. It is nice to have a good stable of good companies to add, when there are economic related downtrends - In Canada, everything seemed to balance on the trends in oil price regardless of their relationship to the commodity or Alberta.

Does anyone really believe he eats like that all the time? I dont. I have read somewhere that he drinks diet coke when he wants to keep his weight in check and works out with a personal trainer. I think it was discussed in Snowball.

Thanks for the link Phil. I read through few of his articles. It is a very viable strategy, and as he says relatively cheap. Basically he picks companies that are heavily leveraged in some way to the economy, and buys way out of the money puts. He allows them to expire worthless, unless there is a significant market pullback. He spreads them across industries. The bulk of his 'normal' portfolio is in dividend growers, which he mostly leaves on autopilot unless they become way overvalued, and it seems unsustainable. So, recently he has shorted (via puts) capital one financial (cof) the premise here is that in a recession/pullback credit defaults in cards will rise. The stock always tanks with the general market. Ual - United Airlines parent - heavily leveraged to all sorts of good economic news - very vulnerable in a downturn - It is near cyclical highs and always crashes with the markets. Why anyone would ever buy this company is beyond me. Gt - goodyear tire and rubber - leveraged to the auto industry Maasco - levered to home sales and home repairs marriot hotels - levered to a healthy economy Generally all the companies he has picked also have greater than industry financial leverage as well. He has several more suggestions. I have been looking for ideas to protect my assets without going to cash, and am exploring this. In the past I have tried index puts, with little success - they tend to be expensive and decay quickly.

It seems from the price reactions today that nothing any jurisdiction tries to do in terms of oil manipulation is having any effect in the face of supply and demand. What remains to be seen is if more projects come on line or get resurrected as the prices march higher. My best guess is that huge, long lead time projects (>10 yrs) will never come back. A paradigm shift is happening that is making long lead projects risky.

Agreed, its brilliant. If you must hedge. I have been greater than 100% invested for nearly 20 years.

I did a period of dropping resumes in person, and cold calling people on the phone, in the early 1990s during our most severe recession. I figured just mailing them was pointless. I would tape myself on my little cassette recorder to rehearse, build up the courage, and make a call. It took an enormous amount of will power to do it. Among the most terrifying things I have ever done. The personal visits didn't amount to much... too many gatekeepers. The phone calls bore fruit. I went and talked to one guy about my most recent job... he didn't have anything but gave me the time. At another company I talked to the VP. He said to send a resume. So I did, and noted in the cover letter that I had called him and spoke with him. I got called for an interview and the person I met with had the fact I called underlined on my resume. I got the job. I truly think direct contact is best whenever possible. Everyone can email resumes all day long. I have done many jobs (some of the dirtiest you could imagine), run a couple of small businesses, and even worked three years in an office ( torture). In the mid 90s I had dozens of job interviews (I dont interview well - the very characteristics that make me a good investor). Around that time I read Lowenstein and decided I had enough of trying to impress stupid people and was going to get wealthy enough to never have to look for work again. I am there. No linked in.. no pimping on FB... ooh the joys I have missed. So, I am in the camp of getting out there and doing something, on your own, no matter what it is. As they say, one thing often leads to another. In the rearview mirror, everything looks connected now.

Paul, whaddareya expecting? Landscape with stone and woodchips... Better for the environment... they dont waste water at the peak of summer, dont need cutting.. dont need hauling away.... and saves money... blah, blah, blah. Congrats...er, soon. Al

+1 God grant me the serenity when I see nothing intelligent to do the courage to do something when I see an opportunity and the wisdom to know the difference +1 to both of you. I think you meant "..grant me the serenity to do nothing when I see nothing intelligent..." but anyway that about sizes it up. These very public blowouts weve observed recently show us how much people Dont or Cant know when it comes to investing. Those who believe they know anything or have some sort of circle of competence are delusional. The same applies to Gurus. When I think about it the mistakes I have made have never been because I missed a big piece of the balance sheet or the finances. I just assume I dont know all of what is going on and handicap for that by not buying stuff like Valeant that is just way too complex and dynamic. My mistakes involve too large concentration on things where I have placed too much "HOPE". Hope for higher oil prices ; hope for better pulp prices; hope for better Blackberry sales in the face of a global onslaught of competition. I am trying to train myself to deal with what is, rather than what I hope things to be.

+1 to writser. I also worry about rising nationalism. However, about Trump - I don't support him, but I think I prefer him to the Christian right ideologues of Republican party. Trump is a clown and a55hole, but he's somewhat "our" a55hole. Just look at his past opinions about hot topics: he opined with Democrats more than with Christian right. Of course, it's impossible to rely on his past opinions, since he's a loose canon and he can change his opinion tomorrow. But I'd rather have that than someone who has these opinions set in stone and will never change them. I think that people comparing Trump to Hitler are taking an easy and false strawman shortcut. This is not something to be proud of. finally I agree with Jurgis on a political post. The growing nationalism and xenophobia scares the hell out of me, but all and all Trump isn't any worse than the other candidates on many issues and a hell of a lot better on others. He's bombastic and I think this started as a publicity stunt that turned serious when he started leading in the polls. I'm sure it surprised him as much as it did everyone else. Hillary probably scares me the most out of all of them, because I fear that she is solidly in the pocket of the military industrial complex, where I've heard Trump say things like the world would be better off if the US never invaded Iraq, which is a more sane thing then anything I've heard from any of the other candidates. And I also am glad that he isn't a loony religious nut that thinks god tells him what to do. The other reason I almost hope Trump wins (I won't be voting though) is that people actually see his insanity, where they ignore it in the others almost like its invisible. Take his insane statements about bombing the Terrorists AND their families. People get outraged when he says it, but ignore the fact that Obama quietly does it (link). Since they are all about the same, I'd rather have a president that people get angry at. I don't think any of the candidates will be worse or better for the stock market, unless of course Hillary gets in and starts WWIII to satisfy her buddies in the defense industry, that couldn't be good for stocks. Good points. The US, or any country, for that matter, is run by its bureaucracy (with obvious exceptions). Trump would be required to politic, the same as anyone. If he proved incapable of getting consensus, the worst case scenario would be a do nothing congress. Not an ideal outcome in our dynamic world, but not a total disaster, either. The world survived the Reagan's astrologer.

Unless they disagree with your preconceived notions!!! Exactly. I find it hard to believe that the few facts brought to light by Mr. Oliver are somehow the whole truth(just watched that episode). He would have you to believe that all Trump achieved in his life were a bunch of lawsuits and failed business ventures. Hence I'm asking for a more detailed account of Mr. Trump's exploits - oh wait, he did file a bunch of info just a few months ago. Let's see now... he reported receiving 213M$ from the Apprentice, and he is worth 4.1B$ according to Forbes. His father only died in 1999, so he didn't inherit anything until that time. Got a nice head start in life though, that much is true. So he probably did something right businesswise. http://www.businessinsider.com/donald-trump-nbc-apprentice-payment-disclosure-2015-7 The Wikipedia article is much more enlightening. Everything about Trump's alleged net worth is based on what Trump says. That is the problem. The wiki article details his various business forays and multiple bankruptcies and lawsuits. He has even filed lawsuits against people publishing that his networth was low compared to his claims, lost them, and appealed, and lost again. One thing for sure Edward, is that he is a tireless self promoter, and a pathological liar, and he has you fleeced. I am going to invert this for you: Would you invest in a business venture with him? We have already surpassed Godwin's law on this thread, so it cant degenerate much more.

Your numbers are flat out wrong. And you didn't watch the John Oliver episode on Trump, did you? He is a terrible businessman with a string of bankruptcies, rip offs, and lawsuits a mile long behind him. Most of the money he has today was made on the apprentice. His networth, as reported by him isn't even accurate. Most of it is his own invention fabricated by giving goodwill to his brand.

Well,he has a dismal track record as a businessman. Read the wiki on him. Or watch the John Oliver Trump show. Both are more factually accurate than Donald himself.

it's too bad that this piece of Fairfax always gets the focus, but just to put some #'s. GD GDP decline was 40%. Notional portfolio of CPI puts for Fairfax is like $110B. So... yes, Petec is right. the gains on the swaps would cover not just the EQUITY portfolio, the gains would cover a wipeout of the equity & fixed income portfolio.... or really, a zeroing out of 100% of Fairfax assets. Again, this doesn't defend Fairfax's stance, or how they frame their letters to shareholders which I think deserve some valid critiques, but arguing against a bar bell portfolio by claiming extreme outcomes will kill it without actually running some basic numbers is probably not the way to critique FFH. The size of their CPI bet appears to clear be designed to protect the entire company from world ending loss... whether that was worth betting 8% of common equity on is another question... but it will protect them in a GD scenario, however unlikely. The criticisms of my stance from Petec and you are fair. Assuming all goes well, or badly, perhaps they survive. Following on Vinods comment about the odds of a Gd repeat, we cant really know. To follow on to your later comments Ben: It is a heck of a drag on investment performance. Maybe, just collecting cash onto the balance sheet instead would be another strategy, which is what Buffett does. That being said, Brk. cash flow would dry up in a GD scenario. A GD or slightly less noxious scenario is certainly something I give some thought to, but dont dwell on too much. We, who were on this message board, in 2008/09 have some real experience to apply, should such a situation recur.

From meetings etc. I think that's about right. He's well aware the world might muddle through. He just wants to make 100% sure that Fairfax survives if it does not. I dont think the implications of a great depression scenario have been thought through by Prem, or the posters here. Fairfax would not survive a great depression on the scale of the 1930s - It simply wouldn't. Blackberry would cease to exist in days, the entire restaurant business would collapse, the Greek Banks would shut, insurance sales would stop... most of the insurance business would close. The least of his problems would be collecting on his negative bets. All of the money, if it could be collected, would be eaten up to pay back the float due to shrinking premiums. Never mind the civil disruption, violence etc - The property/casualty business would be sunk under massive, continuous claims. This would not be a gentle, civil 1930s depression - the world has changed and gotten more crowded. Prem keeps stating that governments have used up their ammunition to fight another financial crisis/recession. I disagree. Governments, excepting China and India, have done very little infrastructure spending, above the normal run rate. Much of the world could easily ramp this up to fend off a great depression. All they have to do is print money - in a deflation that should not be a problem. The US could have done it in 2009, but for the gridlock in congress. It was easier to let the fed lead the way. FiNally, and perhaps most telling is that FFH keeps on investing in its future. Prem hasn't even skipped a beat. This is contrary to the way the press gloms onto the negative bets. He is not a pessimistic as everyone thinks by the way the letter reads. Look at the actions of FFH. Not a month goes by without an announcement of another aquisition or deal.