twacowfca

Kahneman and Tversky, may he rest in peace, tell it like is for the 99 % of investment advisors and fund managers that don't live in Graham and Doddsville or are just visiting. :)

Lots of wishful thinking there. In a liquidation, the US government's preferred comes ahead of the common and the preferred held by the public. There's no margin of safety in a liquidation, but in a restructuring politics and fairness come into play. At this stage, that's what it's about. Don't expect big news till after the 2012 election. :)

Let's cool it. It's not about who swings the biggest, uh, let us say, line. But what we do with what we've got and even more, how we do it. :)

It depends. There is always a cost to trade. BRK is about 20% of our portfolio. With the recent put Warren gave us, I expect it will continue to increase or at least outperform by 20 % in the next few months, based on what happened the last time Warren said he would buy back stock. Therefore, we will almost certainly hold it for some time, probably past the point it becomes a long term gain. However, if an amazing opportunity should present, we could trade out of it at very low frictional cost, especially in tax free accounts. That would not be the case with a sizable position in a small or midcap stock. With Lancashire, our biggest holding, it's almost all long term, but why should we want to trade it with the wind in their sails and the stock still selling way below IV? We like holding it now just as much as we did when the stock sold for BV, especially now that future dividends will be conforming. :) So, are we traders or long term investors? Are we hopelessly at risk with our lack of diversification?

http://www.finalternatives.com/node/18499 Sender Shows Art, Says Fairfax Suit Caused ‘Immense’ Damage Oct 21 2011 | 7:42am ET Hedge fund manager and art collector Adam Sender will display works from his $100 million art collection for the first time next month. Sender, founder and CEO of Exis Capital Management, has selected 70 of the 1,000 pieces in his collection for the exhibition which will run from Nov. 29 to Dec. 4 in his 5,000 square-foot Miami home, reports Bloomberg. The house is conveniently empty, as it’s on the market. “Home Alone,” as the show is called, will coincide with Art Basel Miami and will feature work by artists including Keith Haring, Cindy Sherman and Chris Ofili. “We bought a beautiful house but it wasn’t the right house for us,” Sender told Bloomberg. “We had an ability to rent it but we figured, why not throw a show for Art Basel.” Sender started his career at SAC Capital Advisors (run by another avid art collector, Steve Cohen). He founded Exis in 1998. The firm’s Walrus fund returned 16% in September and has returned 18% YTD, according to a letter to investors seen by Bloomberg. Sender says the fund manages mostly his own money and that of friends and family. “We haven’t been able to raise any significant capital since Fairfax of Canada sued us in 2006,” he told the news agency. Toronto’s Fairfax Financial Holdings sued several hedge fund firms—including those run by Cohen, James Chanos and Daniel Loeb—claiming they’d harmed Fairfax’s business by betting on its stock price declining and demanding $8 billion in damages. Cohen and SAC were let off the hook last month but the case is still pending for Sender and the other parties. “The damage this suit has caused is immense,” Sender said. “A suit which is completely frivolous, and a complete fantasy.”

Nice find onyx1. There is a reason why it's one of Buffett's 4 filters. For the same reason Prem is investing in companies like DELL, RIMM and SD. Being confident in management's abilities is extremely important, especially when investing in the unknown and unknowable. The 4 filters that Prem uses apply perfectly to the company LVLT, he also is a major shareholder of Level 3, if I may carefully add without getting my head bit off. - Like a big bite out of an Apple I remember seeing a lengthy discussion on LVLT in OID about 9 years ago. Graphs showing the intersection of supply and demand indicated a huge potential for increase in earnings when demand caught up with supply. However a variant of Moore's Law threw a monkeywrench into that thesis as advances in technology led to dramatic increases in capacity within fixed pipes. :P

For the second time in five years I was within a whisker of saying yes, but I passed because I thought the huge number of options granted to Steve was overreaching. No regrets though. Our portfolio gain from that point in time was "quite satisfactory" as BG might have put it. :)

Was Apple about twelve years ago the 40 bagger you mentioned? I mention this because I almost bought a substantial amount for the size of my portfolio when it was a bargain by value investing criteria, but did not because my understanding of their product development process under the renewed leadership of Jobs was superficial, not profound.

I completely agree. This is potentially one of the most important threads. Most of what we do is typical Ben Graham buy well below IV and sell as IV is approached. However, when a rare bird like Geico can be snatched well below IV with a franchise that can reliably compound returns at a high rate for decades, it would be shortsighted to sell it when it reaches IV because the taxes will cancel out the gains that could be made from a long term hold that continues to compound at a high rate without losing a large amount of capital to taxation. This doesn't mean that a long term compounding machine should never be sold. Not selling Coke at a PE of 50 was a mistake. But buying Geico or Sees at a PB of 3 and continuing to hold as their franchise is unimpaired is very smart. :)

You live on $1.65 per day? ($50 per month) Is that like 32 cents on breakfast, 33 cents on lunch, and for dinner you pull out all the stops and spend $1? Do you find food scraps in dumpsters? Ate the neighbor's pets? Trapping raccoons? Stealing the neighbor's lemons off the tree? What is your secret? I bought two lemons yesterday and it cost me a dollar. That's 2/3 of your daily budget but you can't survive on 3 lemons a day. Hey! The best food staples are dirt cheap: rice, beans, corn etc. Throw in a few leftovers from mom's table, and you've probably got a diet better than nine out of ten Americans. :)

Yes. Geico had to be held outside his partnership because that would have subjected BG and his partners to treatment as an insurance holding company. BG is said to have made more money by holding Geico for the long term than from everything else he flipped after usually about a 50% gain. However, the reason Geico did so well and continues to do well under WEB is that it has a large sustainable competitive advantage and a broad horizon to grow their business. Both WEB and BG understood that, and that's why holding Geico for the long haul was the exception to BG's normal style. BG followed IBM and its predecessor closely for his entire lifetime, but never bought it even on those rare times when it sold for a bargain price because he was always uncertain about the durability of their franchise. WEB has continued that study of IBM, but has never to the best of my knowledge had enough confidence to be sure that their advantage would continue to be durable over many decades. :)

Same here. We added to our LRE derivative and put all the remainning cash into BRK because the free put on BRK was an offer we couldn't refuse. :)

Zweig spoke at the big CFA conference last year. I was surprised to hear him say that he didn't own any particular stocks, although he did I think own index funds. He sat on the stage with Klarman who is a living testimony that careful value investing works, and Zweig seem to share that view.

Every potentially good book deserves a good editor. The Little Book is the better "after" version. The bigger book is the "before" version.

It's politically correct for Warren in his sunset years to declare: "Tax me more." But would soaking the rich be wise or shortsighted? Let's think about it. People who know Warren say he spends a little over a million dollars a year on himself, mostly for travel. He earns about two billion dollars a year, counting his undistributed earnings in Berkshire Hathaway. But, he only spends about one dollar out of every two thousand that he earns on himself. The rest is invested in profitable businesses owned by his company. These businesses provide useful goods and services that increase the wealth of society by much more than the earnings that Warren is entitled to, but chooses not to spend. What a golden goose Warren is for the rest of us! He's not the only one who lays golden eggs. Most other billionaires also save and invest much more than they spend on themselves. Wouldn't we all be better off if we had a couple of hundred more Warren Buffetts, Bill Gates or Steve Jobs working for us on similar terms? Through an invisible hand, the terms of employment for the very rich usually mean that we ordinary citizens have in effect "sharecroppers" on our land who take only a tiny portion of what their crop yields! :) Raising taxes on the rich might not kill these golden geese, but that certainly would take a big chunk of wealth out of the most productive types of investment so that this flock would lay fewer golden eggs. What would our government do with the increased tax receipts? Would they find a better use? How about extending unemployment benefits one more time?

It really ticks me off when I read off the wall comments about supposedly large large numbers of people starving in the USA. We have no idea of what starvation is like. Muhammad Yunis told what starvation really was like when he returned to Bangladesh in the 1970's: He saw them straggling in from the countryside. Young or old, men or women, they all looked the same. He couldn't tell them apart. They were walking skeletons. They didn't cause any trouble. They just stood around or lay around until they died. That's what starvation is like.

It's a classic! From tulipmania to the dot com of another era: the South Sea Bubble. :)

Yikes!

Hedges are great when they are cheap, but the cost of most hedges now is such a drag that cash would be a better alternative. Our four significant holdings have internal hedges or ultra low beta characteristics with good upside potential. One is a speculative Cpt 11 workout that has lots of risk, but no general correlation with the market. Another is LRE with an ultra low duration AA+ portfolio. Practically all their earnings are returned to shareholders, so it makes little difference to long term holders if the price should drop. If their stock price should drop 25% or so, that would merely provide another opportunity to repurchase shares in the zone of up to 110% of BV as they have done with gusto in the past. Our third holding, FFH is almost entirely hedged internally. Last, but not least, BRK now has a free put for anyone who owns the stock. :)

Mungerville, I am following you comments with much interest as it seems to be somewhat in line with my own thinking. If I may restate or summarize you point as below, would you agree? Most of the time it makes sense to ignore the macro because it is really difficult for one person to be able to assess with any degree of confidence how the economy and stock markets would fare. However, there are few occasions, very few and far between maybe once or twice in an investor's lifetime where it does make sense to pay attention to macro. These could be for example, extremes of valuation (say using Shiller's PE) or some other form of excess (say very high leverage among companies, consumers, governments). In these few cases it would make sense to take this into account and position once's portfolio appropriately - higher levels of cash, active hedges, etc. We take these precautions not because we predict or know something is going to happen, but because we learned from history that such occassions have led to severe losses. We fully understand that such precaution would necessarily penalize returns if such a risk does not actually materalize. Vinod Good advice. :)

http://travel.state.gov/travel/cis_pa_tw/cis/cis_1753.html U.S. law does not mention dual nationality or require a person to choose one citizenship or another. Also, a person who is automatically granted another citizenship does not risk losing U.S. citizenship. However, a person who acquires a foreign citizenship by applying for it may lose U.S. citizenship. In order to lose U.S. citizenship, the law requires that the person must apply for the foreign citizenship voluntarily, by free choice, and with the intention to give up U.S. citizenship. Thank you. That makes sense. :)

a permanent resident of Australia may become a dual citizen by becoming an Australian citizen. Prior to 4 April 2002, Australian citizens who became citizens of another country lost their Australian citizenship automatically. http://www.citizenship.gov.au/current/dual_citizenship/ Just curious. Does the US allow dual citizenship? Yes. My mother gave up her Australian citizenship when she became a US citizen. Then after 2002 she got her Australian citizenship back (while still keeping her US citizenship). Now she is a citizen of both. But does the US know about her Australian citizenship? Did she notify the US? I have it in the back of my mind that with the US it has to be either/or, not dual. Is that correct? Way back when, it was not allowed for US Citizens to have divided citizenship. There was even a story required for US schoolchildren to read, "The Man Without a Country." Some people thought Lindberg should have his US citizenship revolked when he accepted an award from Hitler, as receiving awards from foreign governments was not allowed for US Citizens. It didn't go quite that far, but he was disqualified for military service. Later, he did manage to sneak into the war as a civilian consultant and shoot down five Japanese planes, as well as making significant contributions to US air operations. What if the US went to war with Australia? Stranger things have happened. Would your mother then be an enemy alien? Or if she owned a firearm, perhaps an enemy combatant? Would she then be carried off to a concentration camp as possibly having divided loyalty? These are absurd suggestions, of course, but they do highlight the complexities of dual citizenship. I think that particularities of exclusive citizenship should be liberalized. This is an anachronism in a mostly peaceful world. But what is the current US position on this?

I'm skeptical. I think she should show us her assets. 8)

Great summary, Sanj. This puts relative performance in perspective. :)

oec2000 Not meaning to belittle Soros. His returns have had highly significant alpha even without the huge bet against the British Pound. However, he used great leverage early in his career, and he had at least one or two near blowups of funds he backed late in life. His book that revealed his methods is mostly incomprehensible. The only takeaway I got from it is that he was very nimble, willing to change his thesis on a trade at the drop of a hat as circumstances changed or sometimes when things just didn't feel right or when he realized that he had overlooked something that was important. Nevertheless, I do think his alpha was not a random fluke. He seems to have developed many rules of thumb that have given advantage over a lifetime of trading that he hasn't articulated.