twacowfca

Just finished a short historical study of King Richard III. Objectively, everyone on this board is almost certainly much better off by any criterion -- "richer" -- than the king or his peers, even if your net worth is no better than middle class. Likewise, a middle class person in a developed country is wealthy, compared to 99% of the people in some of the poorer countries of the world. Would you then be doing your children a favor if you clothed, fed, educated and gave them resources equivalent to upper middle class in medieval times?

There seems to be a bubble of interest among the members of this board in..........BBBBBubbles Why Stock Markets Crash by Didier Sornette is the most insightful book for understanding bubbles : how they begin, inflate and when they will predictably pop/crash. I have used his models successfully more than once to time exits from positions and markets quite profitably close to the top of the bubbles. For example, I was 70% to 90% cash in 1997-1999 and completely out of the market when the mkt crashed in 2000-2001 because bubbles scare me. During the recent unpleasantness, however, with my new understanding of bubbles, I was able to work through the volatility successfully with better results than if I had gone completely to cash in the summer and fall of 07. :) Since Sornette published his book his models haven't worked quite as well as before. But they are still very helpful if you make allowance for the observation that intervention by financial authorities may sometimes alter the dynamics of a bubble.

Good point, Philassor. But, did you know that their flagship TAVF has had positive returns in recent years ( +35.73% YTD +5.57% TTM & +3.84% avg annual for last 5 years ) I know this because we offer it in our 401K although I don't own it personally because I self direct. That's after fees, and those results are better Than the other domestic equity funds we offer in our 401 K menu. Not a bad record For a long mutual fund, all things considered. Re: TAFC. There is no impact on price per share if others come to share my view. It will always trade At NAV / share no matter how popular it becomes. :)

Oh, one more thing. The only other funds that I'm aware of That are very hands on activists in distressed debt and that have good track records are hedge funds that charge 2%&20% or private equity funds that take a similar big bite of the upside. Beside them, TAFC's 1.4% is a mere pittance. IMHO Third Ave Funds is second to none in realizing value from distressed debt. Plus, the managers of TAFC are going to be eating their own cooking! Yum yum!

This isn't an ordinary bond fund. They will be sifting through thousands of possibilities of often illiquid distressed debt such as bank loans to ferret out the best values. If a performing loan that they've bought at a bargain price stops performing, they may load up on it so that they can establish a controlling position to give them leverage in a reorganization and likely receive securities of greater value post bankrupticy. In summary, they will be focusing on securities that, if wisely selected, should have a much better payoff than funds that merely buy only publicly traded debt that in the event of a reorganization will have less seniority than what they will be buying. Needless to say, this involves much work and requires a long track record of past success, which they have, to be predictive of future success. Therefore, 1.4% is a bargain for all the work they will be doing.

Do you know of one and only one outstanding value available now? If so, what is it, and what's your thesis briefly for your idea? I like the new Third Avenue Focus Credit Fund. (I have never before invested in a fund) Why? Its fees are resonable, and it's managed by a team that's the best in that field. It's not something that would be expected to be correlated closely with the stock market, usually, and it's net asset value IMHO should have very low volatility on its prospective upward climb. That's my idea; what's yours?

Lets flip the interest in this topic upside down. Does this obsessive interest mean that............ THERE ARE NO GOOD VALUES OUT THERE ?

Al, If you want to hedge/speculate in oil, a better Idea is Macro Oil Up (or Down) if still available. They had to liquidate that fund in June or July of 08 because it had advanced beyond their preset limit. However, I believe they were planning to relaunch Those funds with new limits a few weeks later. (I haven't checked to see if they followed through on the relaunch) The advantage of their fund is that it's a pure derivative; There are no frictional costs from constant rebalancing. Even better they take the money they get from selling shares and buy T-Bills. If the forward month contract rises, people who bought Oil Shares Up not only get a higher net asset value on their shares, but also a proportionally greater amount of interest on the T-Bills than those who bought the inverse mirror image fund, Oil Shares Down. The concept is investor friendly, unlike many funds.

Netnet, what if the underlying security first falls 16.666% and then rises 20%? would this not cut in the other direction in relation to the capital base? Or is there not some other complication related to the constraints these funds are under because of the swaps contracts they have with banks?

Zorro, whatever you do, don't touch leveraged ETF's even with a ten foot pole! They are toxic and destroy value for anything other than strict 24 hour day trading because of the way they reset each day. They reset by rebalancing in the last few minutes of each trading day. This means that traders can front run their anticipated buying or selling when the market underlying their fund makes a move up or down. The result is an accurate reflection of that day's change in the underlying values, but erosion in the long term value of the leveraged ETF because of the frictional costs of daily rebalancing compounded by frontrunning on days when there is a substancial move in the market value of the underlying equities.

Here' my two cents worth as a disinterested observer from south of the border. I don't think you are going to have a general residential crash in Canada. Here's why: Vancouver may be a special case of perpetually inflated prices because of restrictions on development, including a deliberate planning decision not to build a robust freeway system that would support distant development, compounded by the geography there. The inability to deduct mortgage interest removes a huge driver of inflated prices in Canada, compared to the US. The risk being born by a government agency means that Canadian banks are unlikely to go into a death spiral because of forced deleveraging if residential property values decline. Finally, if prices haven' crashed yet after the three year decline in the US, commonsense would argue that any Canadian decline would be relatively mild.

Sanj, I think we're like the blind men describing the same elephant from different perspectives. It's true that FFH's primary purpose for buying CDS was to hedge, but they do point out , in their 2006 letter, the enormous upside in an extreme market event. This is the most astute form of value investing, something that has intrinsic value plus a kicker that would be pure speculation without the underlying value.

It ain't over till it's over, and it don't happen until it happens. You are the guinea pig. We are eagerly awaiting your result:)

Psssst : I have it on good authority that tulip bulbs are even better than garlic for preventing swine flu.

Shah, gold was probably the ideal investment for your family when they were in Iran. Your dad would have been able to add value to it as a jeweler, and it was certainly ideal that it would very likely appreciate in value and be easily moved to a place of safekeeping in time of trouble. We are very blessed in North America that we have not experienced such trouble in recent history. I think I'll buy a few Maple Leafs, just in case...

Historically, the value of gold is positively correlated with the degree of political instability in a country or region. In such places and times it can indeed be a store of value. :)

IMHO, owning gold is like buying a put on a major index. Periodically, it will pay off nicely, but it's a very poor use of capital, generally -- owning a mostly useless metal that has almost no intrinsic value other than what's in the eye of the beholder.

Did you know that gold can actually depreciate in value? The importation of gold from the rich mines of Mexico and Peru to Europe by Spain after the conquest caused gold to lose @ 2/3's of it's value in the two centuries following.

Oldye, please explain how one can do this. Is there a point where margin requirements are waived for out of the money puts and calls? How can a put be caped on the downside?

You are almost certainly right. Shelby (the first) bought AIG after his first trip to Japan and the Far East in the 1960's. It became a long term 100 bagger for him. It's likely that AIG was a legacy holding for the Davis family and that they were not diligent to keep a close eye on it after Greenberg stepped down.

The public record shows a history of picking fights at the drop of a hat. This may be one fight too many.