Santayana

They don't necessarily have to fail to trigger the CDS. What should be illegal is selling the CDS without adequate capital behind it a la AIG.

ubuy2wron-- Twice you've mentioned that gold bugs would be unhappy if the US reverted to a gold standard by using the ratio of money in circulation to the amount of gold in Fort Knox. With M2 currently around $9.3 Trillion and Fort Knox officially holding 147 Million ounces of gold, I think most gold holders would be quite happy if that happened. Even if you were much more conservative and used M1 at $2 Trillion, and added the Federal Reserve's 225 Million ounces to the government's holdings, you would end up with gold priced at over $5000/oz.

That doesn't mean that everyone who wanted to sell was able to find a buyer though.

Prem has said he thinks US debt is good for the long term. Does anyone think he'll be taking profits at these levels?

It all depends what you want to insure against. I have a small amount of physical gold in case I ever experience that unlikely scenario where my family was forced to become refugees. I really don't ever expect that to happen to me, but it does happen in this world from time to time, and gold has proven itself through history to be the best way to transport wealth should that happen.

Take a look at the DXY chart and ask yourself if you see support anytime soon. I wonder how long gold can keep it up as well, but I think pretty much the only thing that can slow it down is strength in the USD. For someone who wants to short gold, going long UUP could be a way to play that gold/USD correlation. It may not be perfect, but at least you get the known potential downside of a long position vs. the unlimited downside of a short.

Treasuries don't seem convinced that we had a bottom. The action on the 10 year is keeping me nervous.

I think the opportunities will keep coming for a while here. Whether or not the reasons for it happening make any sense, I think BAC is going to be under some serious selling pressure for a little while here, and as long as they are dropping double digit percentages every day the rest of the market will get pulled down with them.

:D Great chart!

Bought some Dell at $14.15 today. On Friday I bought my first ever brk.b shares and BAC Jan '13 $5 calls. Looking to add some more Fairfax and LVLT. Or maybe I'll just buy the FRFHF and let Prem take care of my LVLT position.

That would presumably mean they were bankrupt, no? You are saying the common has no value at all? Either way, all else being equal the price of the common has no bearing on their capital ratios. If BAC issued and sold 100 shares of stock to someone for $6, they would have $600 in capital added to their ratios. It doesn't matter if tomorrow the stock is $5 or $50. Why would that mean they were bankrupt? A $0 price basically just means there are no bids. Just because nobody wants to buy a business doesn't mean that it is bankrupt.

Political operative??? Are people saying that even if a bank's common went to $0 that it would have no effect on their regulatory capital ratios?

Stupid yet true.

I think you're spot on Munger. Common stock valuation counts as part of Tier 1 capital.

Didn't he call pretty much all the finanicals a "generational buy" in April 2008?

How do the options provide more downside protection?

That is a great quote! I think it's going to become my new sig line. ;D

Of course the difficulty is determining how much is an "appropriate allowance" for those things, and it's much harder if you're talking about 1-2 properties vs. a larger number where you can rely on averages a bit more.

I've been out of the business since 2007 when we moved away from the SF Bay Area, so I don't have any specific insight to conditions right now. I just want to stress to anyone considering getting into the rental business to account for the fact that your property won't always be occupied, or even worse may be occupied by someone who stops paying their rent and trashes the property while they are there. Evictions are not always easy or quick, and are yet another expense to deal with if you engage legal counsel.

How are you calculating that 12-14% yield? It sounds like you may be assuming $0 for vacancy loss, management expenses, and maintenance costs. After 15 years in the rental business I can tell you that 1 bad tenant can wreck your numbers in a hurry!

I think the deflation argument centers around debt destruction and dollar demand. Not really dependent on capacity, or even supply and demand of the end products. We saw what can happen in 2008-09 when demand for dollars to pay back debts started to bring on deflation. QE interrupted that process, but I don't think it's done. I'm positioned very defensively right now.

I think in our current environment if interest rates rise, everything tanks, not just REITs.

http://seekingalpha.com/article/263227-fairfax-financial-part-i-underappreciated-insurance-holdings

And back on topic, I've learned more from Ericopoly than pretty much anyone else in my investing career.

LOL. :D What ever happened to the woman in the big hat who used to invite board members to call her so she could show them a really sweet place where they could deposit their assets? I increased my net worth 10x after following Amy's tips for just 6 months.