DocSnowball

I have both the book and pdf, so the search is easy. 8) From Chapter 4 +1 Being relatively new to individual security investing (2 years), I've built this line into my checklist as to the expectation of the story and what to watch out for that will change the thesis significantly. Another selling issue that came up for me running a concentrated portfolio (focused on biotech mostly micro cap and small cap, apart from one other investment) is how to handle successes when they conflict with asset allocation. I read in Beating the Street even when Lynch "backed up the truck" for Fannie Mae it was at a limit of 5% of portfolio set by Fidelity. For my tax deferred IRA I've made a rule to sell if asset allocation to an individual security exceeds 25% of total portfolio. This was very hard to follow when the story did not worsen but actually changed for the better on a company whose market capt went up more than 6 fold in 6 months (Achaogen). Curious how others with concentrated portfolios handle this part of selling versus asset allocation. I think in the end it is the original point made, judging what kind of return did the reinvested capital make on alternative investments in the long run, that matters.

Tell me you're glad you didn't dump your whole position on the Feb verdict now that it's been halved. One wrong statement from Mnuchin and this goes on sale again. Like I said, kept half of a large position. Either my downsides limited, I'm successful with half or I get an opportunity to buy at lower price if that seems intelligent at the time. Makes pretty good sense IMO. I've spent way to much of my life trying to time stocks, but I made most of my money sitting on a few. That's where I'm at. I'm good with the odds here. Page 12 of this memo by Howard Marks on Second level thinking answers the when to sell dilemma https://www.oaktreecapital.com/docs/default-source/memos/2015-09-09-its-not-easy.pdf?sfvrsn=2

Interesting. Added 50% more of Freddie preferred at 4.50ish cost basis in the last week to Fannie preferred after reviewing Moelis proposal and listening to audio presentation as well as CATO institute discussion.

I understand the market is overvalued in general, and cannot force myself to buy overvalued indexes. I was fully invested in S&P 500 from 2010 to mid 2015, and then moved to a very concentrated portfolio while learning value investing starting the fall of 2015. A discussion for those getting antsy should be where to patiently park your cash while the markets are overvalued! ` Howard Marks "In my opinion, the key to dealing with the future lies in knowing where you are, even if you can't know precisely where you're going. Knowing where you are in a cycle and what that implies for the future is very different from predicting the timing, extent and shape of the next cyclical move. And so we'd better understand all we can about cycles and their behavior." https://www.oaktreecapital.com/docs/default-source/memos/2001-11-20-you-cant-predict-you-can-prepare.pdf?sfvrsn=2 ` "Every decade or so, dark clouds will fill the economic skies, and they will briefly rain gold. When downpours of that sort occur, it’s imperative that we rush outdoors carrying washtubs, not teaspoons. And that we will do." Buffett

The Moelis proposal did add to my investment thesis by making the restructuring scenario realistic and a higher probability outcome. It helped me move this from a legal thesis to a restructuring one with activist investors involved. It is now the path of least resistance and the benchmark to beat in terms of profit for Treasury and viability Or I could be fooling myself with confirmation bias. But it seems like an asymmetric bet in our favor to me. What prices the securities are sold at has no bearing on the final outcome

Great idea and thread, am reading about the biases also this summer. My only hope is to know the biases and build them into a checklist that I review before making an investment decision. It helps to have a very concentrated portfolio and not make more than 1-2 decisions a year. Love this quote from Phil Fisher, which brings in my own anchoring bias to the price I first purchase a stock, which then becomes a strong anchor for valuation, and of course should not. When the investment is a mistake, holding on to that anchor price is further complicated by loss aversion bias and sunk costs bias. “There is a complicating factor that makes the handling of investment mistakes more difficult. This is the ego in each of us. None of us likes to admit to himself that he has been wrong. If we have made a mistake in buying a stock but can sell the stock at a small profit, we have somehow lost any sense of having been foolish. On the other hand, if we sell at a small loss we are quite unhappy about the whole matter. This reaction, while completely natural and normal, is probably one of the most dangerous in which we can indulge ourselves in the entire investment process. More money has probably been lost by investors holding a stock they really did not want until they could ‘at least come out even’ than from any other single reason. If to these actual losses are added the profits that might have been made through the proper reinvestment of these funds if such reinvestment had been made when the mistake was first realized, the cost of self-indulgence becomes truly tremendous.”

the moelis presentation is huge -- these guys are pros -- and I advise paying attention. +1 it's about time some financial restructuring sanity was introduced in the debate relating to $5T financial entities! the thought occurred to me during the presentation: this is something that certainly speaks to financial pros like mnuchin and that blackstone guy he hired, whether or not corker/crapo get it +1 Sound outline that could be acceptable to most shareholders and end lawsuits Nice to see the initiative to put a sensible plan out there - very good example of activist investing Would need to get past those in the value chain who will not reap the benefits like politicians and big banks

We legally own the companies We do own a fractionable ownership in the firm. Undisputable fact, and will so remain, unless changed by legislature My reason for not selling any, will sleep on this peacefully for a year

Understood - it's a speculative bet. +1 on that. EDIT: just trying to disconfirm my thesis Legal thesis: disconfirmed after Perry (bought in 2016) Privileged documents thesis: disconfirmed, nothing crazy released so far Mnuchin will not accept NWS: disconfirmed There is no alternative to FnF: disconfirmed, easy to spin off Stalemate cannot go on: no reason why not if Watt's buffer set up - So for those of us who still have a valid thesis: Trump acknowledges supporters and has not yet screwed any of them , and here they are legally in good standing to own shares, as are we - this is one part that is not yet disconfirmed.

http://www.schroders.com/getfunddocument?oid=1.9.2228909 Thanks so much! Appreciate it

Can any one on the board guide me how to find out if Paulson owns any FnF still? Thanks

No worries Emily I'll raise my hand to be the most stupid. Just trying to disconfirm every day, and after Perry ruling which stated it is legal for our companies pay all their profits to Treasury but they don't even count as repayment, I wonder everyday why I'm still in this. Why doesn't Mnuchin just expose what the previous admin is trying to hide? No better time!

All preferred - 8% of portfolio

Could he be doing all this to avoid being fired for cause? Why wake up now to risk of capital depletion? He's been driving this car without airbags all along? Either way actions speak louder than words - looking to see how much capital will be held? Magic number would be enough to pay par in case of liquidation! Even for that we are in line behind senior preferreds which Mnuchin is in charge of.

Bruce Berkowitz will play the lead when a movie is made on this lol

Maintain liquidity in the mortgage market, and not put taxpayers at risk...

I have wondered that if Ackman has been buying preferreds, someone else with a large position has been selling them. Don't know who but given the question above I am curious.

I'd only have house money if Berkowitz and Paulson were not in this. It's speculative at best even with their involvement - dishonest management with no margin of safety after Perry ruling It could be a solid long term investment after restructuring, so that is the alternative to investing right now. Less upside then but less downside imo. I'm saving half of my position for then in case the current shares stay at equivalent or lower values after restructuring. If they go to 3-5x it's a big position already at 8% of portfolio

What would benefit treasury the most in the short run(1-4 years)?

Companies working on treating resistant bacteria - last week - PRTK Paratek pharmaceuticals, based on successful phase 3 trial results of a new once daily oral drug for pneumonia treatment (Seth Klarman from Baupost Group owns a large chunk as well).

Didn't Mnuchin state in that briefing exactly what he did on TV on day 1? And ruled out two ways to zero - status quo and nationalization. One way to zero still would be spin offs without anything to existing shareholders if courts permit? Otherwise it would be a question of how much which shares get diluted? @rros not sure what your advice meant, I'm thinking of half position now and half after "reform". What did you mean by accumulate before the cold water splash?

Novice question- does it make sense to build half position now, and half after restructuring/release to average out gains/risks? They are reformed now with a solid business model, but struggling with the binary nature of this investment.What do those who have been watching this game longer think?

This is for sure the education of a lifetime!

Being a novice I made an error going up to 20% of my portfolio on this - after this investment, I'm never going outside my circle of competence!

"An investor should ordinarily hold a small piece of an outstanding business with the same tenacity that an owner would exhibit if he owned all of that business.” And another one... To make money in stocks you must have “the vision to see them, the courage to buy them and the patience to hold them.”