Uccmal

Simple answer, we were not comfortable. And we placed our bets accordingly. My initial bets on ffh leaps were quite small. It was only after the stock began to rally that it quickly became 80% of my portfolio and I stuggled with it the whole time, as did many I know. I lost more sleep when my Leap positions had become 10 baggers than when I bought them. I cannot say that I am ever comfortable with a new value investment. It often takes a couple of years, like Seaspan. The problem is that once an investment gets comfortable it no longer is a value investment. The only way to mitigate this is to not back up the truck on any one thing and try to have a margin of safety. There is MOS with BAC at this price. Maybe not so at $18/ share.

We discussed alot of this nearly 9 months ago here: http://www.cornerofberkshireandfairfax.ca/forum/general-discussion/bruce-berkowitz-on-bac/ Berkowitz's thesis is playing out, possibly even faster than he anticipated. He figures 2.50 per share, roa of 1-2 %, 10-15%roe. At 10 x earnings this gets us 25 per share minimum. We are beyond the fire fighting stage with this bird and into the recovery stage. It's amazing to watch - value investing in action.

By Pat Dorsey I believe. I have a copy somewhere and thought it was excellent.

Nice summary redskin, I am in the camp that says this baby is trading off of solvency concerns. I want all cash to go to ensuring a fortress balance sheet. The dividend can wait until the stock is back to thehigh teens. As for buybacks, who cares? Growing earnings wo dilution will be what counts a year from now. A month ago people were still predicting bankruptcy. As the stock rises this could very quickly become my largest position.

This is politically a nightmare. You can bet this is Greece's final chance. Another bailout in the next ten years for Greece would be political suicide for a German Chancellor or French Pres. You can bet the EU is resturctured to turf rogue sates after this. I think Ireland is okay and Italy seems to be muddling along, as is Spain. Domt know about Portugal.

Indeed....

Brings to mind Centralia Pa - where a coal fire has burned unchecked for 40 years; or Kirkland Lake Ontario, where part of the town has sunk into old mine shafts. Cracking up rocks on a large scale underground near Urban centers is probably not a real smart thing to be doing.

With nat gas I will be looking at coventional producers in Western Can, and the US rockies. The whole business of fracking makes me nervous. I can see many local governments shutting it down due to local political pressures. There is also the issue of water contamination, and possible links to Earthquakes. If a major aquifer is poisoned, or an Earthquake related to fracking causes significant urban damage we could be looking at the biggest lawsuits in history. Exploding rock deep underground cant be safe no matter what anyone attests.

If gas is cheap now, during peak season, it will very possibly get alot cheaper as we head into spring. The economy, US at least is performing exactly as it should coming out of a balance sheet recession. Governments are taking on enormous debt loads, effectively transferring private debt to public debt. Corporate balance sheets are way up, and personal balance sheets are starting to show improvement. At some point people will start thinking new car, nice vacation, new appliances, home reno with new carpet, even a new bigger house. The kids may even get around to moving out on their own. This will start to drive spending, which appears to be happening. Companies will start raising wages and hiring. Then, government income will rise, and the need for government spending will decrease. The economic cycle has not been repealed, only delayed, or slowed up. If several megacaps increase or start dividends then the markets will start to rise. Add to all of this, we are now deep into an election year. Obama is pulling every lever his office can and still bypass congress to get the job machine rolling along in the US. They will succeed. I for one plan on holding a portion of my US banks for years to come as well.

no kidding... up around 15% ytd. So there you have it kids.

Getting at your personal property requires a search warrant. I am skeptical that any normal level CRA Auditors have the skills to do this. So, they would need to bring in a special investigation team. BTW - I have some 'real life' experience with search warrants - obtaining them, not being subject to. Do you really think your worth the effort, on a cost benefit analysis for the CRA? If it ever came to it, you hire a tax lawyer, or just pay them the taxes they want, which is likely cheaper than the lawyer.

Cardboard, I agree with Beerbaron. It would ultimately be up to the CRA to prove you are running a business and not just living off your investments while you look for work. The only thing they can really see is your trading records. I think your worrying excessively about getting a fine. I would be inclined to let them figure it out and prove it. I get mini-audits every year - requests for info which I fulfill. Never have I been approached about running a business even though in the past 3 years (prior to 2011) my investment gains exceeded my work earnings. In the meantime you may want to keep a record of all of those investment related expenses such as your phone, internet, car, gas usage, residential (office) expenses. When the day comes, if it does, you can write all of these things off as business. Even travel could be written off - dropped into Aapl store in Madrid. The easiest way to keep track of all of the above is to dedicate one bank account, credit, or debit, and print out and itemize it once per year. As an aside I have toyed with turning part of my investments into a business in order to write off assorted expenses. So far it does not appear worthwhile. I will probably contact a good tax accountant when that day arrives.

yellow, try this: http://www.cornerofberkshireandfairfax.ca/forum/index.php?topic=5342.0 essentially, the d's and c's (i think) cannot be converted and are cumulative. The debentures are convertible and will be converted in March.

Funny how people react. Down $10. so what has changed between yesterday and today. Everyone already knew the dividend was coming. No one has any idea what the exact bv is certainly not within a plus or minus 10 precision. I think they are taking the middle road. Maintain a dividend at a high enough level for major individual sharehoders to take money out without having to sell shares. By using the dividends they dont piss anyone off with egregious salaries, and obscene bonuses. I prefer this method of paying people over many others.

Hah! I'm just waiting for some poster who shall remain unnamed to jump all over you for that one! Yeh, the unnamed did cross my mind when I was writing, as to LVLT, if there are no improvements in cash flow in the next few qtrs. I'll have to bite the bullet and move on Strikes me Lvlt is going to get slaughtered by White Space.

Two or three reasons: 1) not enough money - spent alot on the house. cant generate consistent enough returns yet to cover all fixed costs of two little kids, cars, daycare, mortgage. 2) not as savvy as Eric 3) I am kind of an eclectic. Investing full time would just drive me nuts. I need the diversion. I took an extended leave over a year ago after my daughter was born and made myself crazy. 4) As per 3) i would probably trade myself into oblivion. Buffett alludes to behaviour and knowing yourself as being more important than outright smarts. He has been proven right over and over again. Now, Eventually I would like to follow my heart more, but right now I cannot figure where it wants to go. Al.

hi twacofca, can you elaborate a bit on the LRE total return swaps: Assume you guys use a full service broker Is there active trading with quotes or are they only available by appointment? Who are counterparty to these? Do you buy the swap, write the swap etc. Thanks, uccmal

Hi baoxiaodao, Common stock holdings in approximate size order: ffh ssw ~ 15%, will be tendering some early next week - credit jeast, Irwin Michael - 3+ yrs others <10% cfx:t. - had for 2.5 yrs. sell some when it reaches16-17, buy back below 12 ylo.pr.d - perpetual preferreds - face value 25- position will be covered by dividens within 1.5 years. credit to ubuy2wron, ffhwatcher, and rstuzu. rbs.pr.p - rbs perpetual prefs. dividend in suspension until April - no sign dividend will not be restarted - credit dcollon mtl - maturing position assured dividend. bac and wfc tarp warrants wfc common mfc common - stuck in RSPs - dont want to sell at a loss bce - bought after merger blowout - double in 3 yrs with dividend bby common - small pos. A smattering of other tiny positions. There is nothing above the board has not discussed. This years results were so bad due at least 50% to RIM. One of my major goals is to practice patience when buying. I am starting to learn that cheap stocks dont require immediate action and can often be had for cheaper after the knife has fallen. Virtually all of my major mistakes have been from acting too fast. Nothing fancy except the leaps.

cwericb, Just an Fyi, you can move mutual fund holdings you want to keep, such as Sprott and Chou into your own discount account. A phone call and a few forms should do it. The receiving entity will do the work for you.

Ha Cardboard, I didn't need to learn this... Lol. I think I'll leave these accounts as they are. Btw, I still owe you for all I learned about FFH from you back in the dark days. I recall following your commentary here and on the yahoo board. You and Bsilly. Baoxiaodao, I'll have to get back to you tonight on the common stocks query. Thanks...

Hi Baoxiaodao, I don't know Howard Marks methodology. I can only describe what I do. In straight dollar returns, non notional, it may not seem as risky. To provide context, I have a full time job, not in the investment industry. So, there is little correlation between career risk, and investment risk. I have a certain amount of money in RRSPs, and a pension. The RRSPs are self directed and there are no options allowed in them. As for the dollar value breakdown of common stock versus leaps it ranges around 15-20% in leaps versus common stock holdings. I haven't included the Tarp warrants in this calculation. The leaps I have right now consist of GE, wfc, BAC, jpm, and bby. They are a mix of Jan. 2013s and Jan. 2014s. I only buy leaps when I have analyzed the underlying company and determined that it meets my definition of a value investment based on the common stock. If I am willing to buy the common stock as an investment, only then do I consider the leaps. I will only buy leaps that trade in dozens or hundreds of contracts per day. This excludes all small caps, and all leaps on Canadian exchanges. I have had bad experiences with illiquid leaps in the past. In Sep/oct/nov I started to roll over my leap positions from 2013s to 2014s opportunistically. This year for the first time I took major losses on some of these positions. I was in rimm and bailed out completely - I didn't see it coming back until at least the end of next year. I have not advanced the GE leaps. The company is not at enough of a discount to make it worthwhile. The jpm and wfc, and about half the bby leaps are positions I initiated this fall as 2014s. The BAC is a mix. As soon as the 2013s BACs come back into the money I will start reducing the position. That is sort of the general strategy. I don't write puts anymore, having been killed virtually very time. I have pretty much stopped buying puts for now. Markets are cheap, and puts lose value quickly unless markets tank. Part of the reason I Took so much of a haircut this year is the large amount I have in leaps. I normally wouldn't have anywhere near this amount. The only other time was in the spring of 2009. The stocks I have as leaps are by my analysis extremely cheap. Excepting bby they are also all financials. There is a bit of counter intuition going on. If BAC goes in the tank the beneficiaries will likely be jpm and wfc. If BAC succeeds there will be no effect on wfc and jpm. GE benefits every time someone needs capital or wants to sell a good asset at a crappy price which is happening alot in Euroland these days. The leaps are assymetric investments. The downside is zero, which is the same as common stock. The upside is huge. I control for market risk these days by holding a 40% position in ffh. As stocks rebound I will convert some leaps to common to catch rising dividends, others I will sell, and I will not renew positions unless there is a sizable discount on the common. I have about 7 years of experience with options and have refined the strategy to be quite successful. It is similar to Greenblatt or FFH itself. I only report my most recent 7 years because before that I was putting in money from the outside. I stopped that 7 years ago when it no longer moved the needle. Also, my earlier results were not as good. This is a long game, and I think about risk every single day. Generally I think the 10000 hour rule applies. I have probably spent at least that amount of time over 15 years learning value investing, and I still make new mistakes every year. Unfortunately for me, I learn by actually doing, and trying things.

Actually, in Canada we can use the capital losses against past years capital gains at the same rate of taxation. I don't know if that is the same in the US for individuals. Anyways, I will get cash back from 2010, and possibly some of 2009s back as well. A dubious benefit of sorts. Best to use the losses up as fast as possible. Governments sometimes change the rules suddenly - advice from a friend.

Incidentally, my 7 year numbers are after tax - pay annual cap gains out of brokerage account. S&p total return to the end of 2011 over same period are < 2%. After tax probably 0.

This year down 34% 7 yr. Cagr: 26% The bad: rimm leaps, GE leaps, BAC leaps, BAC common, wfc warrants, bby leaps, ssw, mfc, slf, other small positions of small caps. Obviously the leverage of leaps has worked against me this year. The neutral: ssw- bought a whack more to arbitrage after proxy came out, mtl, pd, rbs preferreds, ylo preferreds, Cfx, sfk Positives: ffh, Bce, Present position - most leaps have been significantly reduced in value. The bets are now all asymetric, except rim which I sold out. I.e. A 10% drop of the underlying common will not cost me a further 10 % on leap positions, where a 10 % increase will result in an overall gain of 30-50%. Ffh is well - my better than cash position and I won't be parting with the position below 800/ share. Planning to tender some ssw next week to solidify the arbitrage. Glad to see the back end of 2012. - plan to trade alot less and take more time putting on new positions.

Welcome to the club..... Eventually the States will be the odd one out. I am still rolling my eyes over Amazon's US customers not being taxed.