watsa_is_a_randian_hero

On what measure?HuhHuh Regardless, unemployment is at 30 year highs. Also - I look at the unemployment as a positive. You have GDP at pre-recession levels. And we have 5% higher unemployment. Company's are producing the same amount with 5% less people working. How is this not a positive for profits? Companies are running lean and mean. Once these people do go back to work (whether its a year or 5 years from now) it will just provide further boost to recovery.

-Ever since bush years / 2002 recession, average joe has not felt optimistic about economy...this is a long time (about 8 years) to pay for excess of tech years. Ahem -- during this period, we experienced the greatest housing boom/bubble in the history of the country. I grew up in midwest (live in chicago now, cleveland originally). There remained a sentiment that throughout it all, the recovery was jobless and only benefited rich. -Credit card debt is at 8 year low. Credit card debt is same as it was 8 years ago On what measure?HuhHuh Regardless, unemployment is at 30 year highs. This is from an AP article yesterday. I believe measure is average bank issued credit card debt per household. Also, delinquency rates are down. http://finance.yahoo.com/news/Credit-card-debt-drops-to-apf-3078079176.html?x=0&sec=topStories&pos=4&asset=&ccode= relatively low interest rates, investing is relative. True if you follow the greater fool theory. Value investing is ABSOLUTE, always and forever. I think you're wrong here. Like I said above, last time (50's) we had rates this low, the following 15 years averaged 10%+ per year. Quantitative Easing will spur inflation. Study up on a balance sheet recession. You study up on it. How many have there been? Great sample size. What do you think will happen if Ben buys back every treasury, and there are none left? What do you think would happen if tax rates went to 0% and government just printed money. At some point, fiscal/monetary stimulus has an effect at margin. Also, private sector is adding jobs strong In which country? USA http://www.marketwatch.com/story/us-private-sector-employment-increased-by-42000-jobs-in-july-according-to-adp-national-employment-report-2010-08-04?reflink=MW_news_stmp I agree that there are a lot of reasons to be pessimistic, but there are also a lot to be optimistic that shouldn't be ignored. Don't bury your head in sand like rosenburg and permabear crowd. He is actually trying to claim no debt bubble right now in todays issue because you can't have a bubble in a risk free asset?

This is my first post on this...I tend to agree more with Parsad here...a little more optomistic. Parsad brought up a good point - only twice in the last century have we hit a 12 year low...well we are still at the same DOW level as 11 years ago right now, so things aren't much better right now. Here are some reasons I'm not entirely bearish: -Ever since bush years / 2002 recession, average joe has not felt optimistic about economy...this is a long time (about 8 years) to pay for excess of tech years. -Savings rates are back over 6%, this is causing drag on spending and creating deleveraging, but we are still treading water in terms of GDP -Credit card debt is at 8 year low. Credit card debt is same as it was 8 years ago - meanwhile CPI is up 20+% from then -recent WSJ article: $2 trillion cash on S&P 500 balance sheet. If this reverted to historical levels this could provide $500 billion in either capital investment, share buybacks, dividends, ect. Who needs additional gov stimulus if you have $500 billion coming from S&P 500? This doesnt include non-s&p 500 stocks - prob more like a trillion available. -relatively low interest rates, investing is relative. Long stocks short bonds? Dow is yielding higher (2.7%) than US 10 year bond (2.6%), and has growth included. Last time rates were low, in the 1950's, stocks averaged 10%/year for 15 years. -Stocks are still below 1999 bubblicious peak -Large-caps are relatively cheap. Forward PE of S&P 500 is 12.9. Using gordon growth model, and using earnings instead of actual div (to account for reinvestment feeding growth), and assuming equity investors demand a return of Long bond + 6% (9.7% currently), the model implies organic growth (prior to reinvestment growth) into perpetuity of 1.9%. If nominal GDP growth in us long term will be 2%, stocks are priced just like the bond market with 0% long-term inflation expectations. -Investors have negative sentiment towards stocks because of last 3 years. -Corp america is running VERY lean after last few rough years. Recession improved efficiencies. Output, GDP is essentially the same with unemployment 5% higher. We have 5% on sidelines and our factories, banks, engineers, law firms, ect are producing the same amount. -Quantitative Easing will spur inflation. Think ben dropping $ falling from a Sikorsky over compton. First QE will put cash in insurers, pensions, mutual funds, and hedge fund's hands. Then this cash will have to be invested in other financial assets. At the margin, this will compress corporate bond spreads, push real estate and stock prices up, and then spur capital investment. -economy can be sluggish or even shallow double dip and large-caps will still make money. Especially banks. Banks have already taken their loan losses. They are making huge spreads right now with rates at 0%. BV goes up each year; stocks have to follow. -While recovery has been "jobless" to date, greenspan points out workweek is growing (companies using current employees longer rather than hiring), which is positive sign for economic activity. Also, private sector is adding jobs strong; last few months job losses are due to gov cutting jobs (think census).

I also own PVD. I think I found out about this based on posts on this board??? May have been you??? I like the moat of the business. Chile is growing fast (some say its very overheated), but long term should be solid. I picked up around 46. Earlier this year. At 54 now, +$3 dividend.

Stock is trading VERY high PE relative to others like Nike. UA's original product (that dry-fit stuff) is copied by everyone now. UA is running out of room to expand into. Also, notice almost all my shorts are related to consumer discretionary - I think **IF** we double-dip, consumer discretionary will be the hardest-hit sector.

Oh its in the burbs? Figured it'd be in the city. I'm in the city so if its in the burbs I probably won't be able to make it out.

When is the meeting? Any extra time to meet for dinner or a drink?

I like the flexibility.

Not to excited about any particular merger trades right now...those are all lower return trades. I've been short VXX since 28. (1) Vix is mean reverting, and it is not a matter of if it goes back to its historical average in teens, but it is a matter of WHEN. It will go to 15 again at some point. VIX of 30 is definitely much higher than historical average and unsustainable (2) VXX is long VIX futures. Typically futures curve for VIX is upward sloping, and therefore every month when VXX roles its futures the ETF loses money. Essentially, the ETF was designed to fail. 2nd trade I did on VXX involves just selling out-of-money calls each month. If VIX jumps again I'll just role forward until it falls back down. Thanks. Have been thinking for some time about the very same VXX trade for the same reasons. However, I would only want to do this if I could minimize the unpleasant aspects of shorting. Puts are the usual way we limit risk, but puts on VXX seem too pricey for us. Your idea of selling out of the money calls on the forward month looks good. Are they usually selling at about the same implied volatility as comparable puts? Or are they not usually nearly as pricey? There is always the possibility the trade could go against a short position, but here as an index that is mean reverting, it seems that the range is much more definite than with a stock that can often go up 10 times or more with a short squeeze or bubble. Could this risk be limited by sequestering the trade in a separate account that would limit the possible loss? Or do all margin agreements make the account holder liable beyond what's in a particular account if the value of that account is insufficient to meet a margin call? The other question is practical , the availability of shares in the VXX for shorting. It seems like this would be a popular trade and that it might be difficult to borrow shares at a reasonable price. Or is this no problem with this ETF? You said "we"/"us" above...are you referring to a company your with? Private fund? I have a Reg D Rule 506 exempt fund I set up for friends/family. About 1.5 million AUM right now. These are all of the trades currently in that fund. Because it is mean reverting, I am not worried about if it spikes and I'm short; it will go back down eventually. It does not constitute a large position, and the portfolio has plenty of excess liquidity / margin capacity. I'm selling $30 strike calls on VXX, which is equivalent to VXX 33. The trade has a lot of daily P&L volatility, but low real long term risk because of the mean-reverting nature of VIX, and the unlikelyhood of some paradigm shift from 15-20 being the range that VIX reverts to, to a new range greater than 33.

All long in-the-money call spreads that dont expire until 2012 - with the exception of JNJ. That was a call spread I bought a longer time ago, that one expires JAN 2011.

Not to excited about any particular merger trades right now...those are all lower return trades. I've been short VXX since 28. (1) Vix is mean reverting, and it is not a matter of if it goes back to its historical average in teens, but it is a matter of WHEN. It will go to 15 again at some point. VIX of 30 is definitely much higher than historical average and unsustainable (2) VXX is long VIX futures. Typically futures curve for VIX is upward sloping, and therefore every month when VXX roles its futures the ETF loses money. Essentially, the ETF was designed to fail. 2nd trade I did on VXX involves just selling out-of-money calls each month. If VIX jumps again I'll just role forward until it falls back down.

In order of weightings. Top 2 stocks are weighted heavily. Weights don't add up to 100% due to leverage in portfolio, but because of longs & shorts total portfolio beta is about 1.1x right now. Longs, 68% weight FCBN - 15% of total portfolio FFH - 13% of total portfolio BRK.B NVS JNJ XOM APOL TRK NATL CVX GE PVD ATW PKX TSE:8031 UG MOCO CLCL Shorts, 17% weight GLD NFLX UA GRMN PLL GET CETV WFMI GMCR WMK CMG ALGN RNIN TELK Option Trades (Longs and Shorts), 33% weight FAZ JNJ DNB DELL KFT BRK.B PKX SPY WMT BAC TZA EBAY BP QCOM MSFT Fixed Income (Bonds & Preferreds), 10% weight GS PRD First Data Bonds BAC BML PRJ VCI Bonds WFC PRJ Merger Arb Plays, 15% weight ACF DYN FMMH MFE PSYS SWSI ATAC PPCO Macro Trades, 5% weight Short MXN Peso VXX trade Puts on Long bond

I agreed (above). Not only are expenses more stable, but taxes for people are different depending on their deductions and source of income, and therefore pretax vs aftertax income can differ for many.

I think a more relevant figure that I keep track of is the ratio of portfolio size to annual personal spending (rather than to income). net worth (portfolio) / pre-tax income = about 1.45x pre-tax income net worth (portfolio) / expense = about 4.2x spending net cash (net of margin & credit card debts) / net worth (portfolio) = about -0.5% cash (gross of margin & credit card debts) / net worth (portfolio) = about 5.0% While the cash balance is probably very low relative to others here, I keep significant margin borrowing capacity available, and have very little expense (single, no kids), and am well insured in terms of health/disability.

rats...I dont know much about rick's but it is in that trading range (pe 8.8, pbv 0.82). Ricks also owns a lot of their properties (thought that could be your rationale for bv being undervalued), is small cap, and definitely is "well known."

Rick's Cabaret

Would you mind sharing which ones. I have been trying to find more of these and having difficulty. right now, just goldman & bofa's.

I agree that a large tax credit is unlikely. However, keeping taxes rates the same, boosting government spending, and buying back government bonds (QE) has the about the same effect, does it not? They both create deficits financed by printing new money. In terms of your specific investments question, I'm long financials (return on capital businesses, not reliant on nominal GDP growth for stock returns), long levered energy & basic materials (should pay off in event of inflation), long variable rate preferred stocks (should also pay off in event of inflation). Also have about 30% of portfolio in LEAPS that will pay off about 20-30% returns as long as the market doesn't fall more than about 20% over the couple years. Also have about 10% of portfolio in merger arb plays that are less correlated to short-term market movements. Short gold (I think this falls whether we have inflation or deflation, barring hyperinflation. The same weaknesses people point out in fiat money exist in gold. Gold is top performing asset class over last 10 years. Also, read buffett on aliens & gold), short weaker/pricier consumer discretionary (I think consumer remains weak regardless of monetary outlook) such as garmin, netflix, chipotle, whole foods, green mountain, underarmour. Short some other stuff as well.

Japan never took drastic enough steps. US ultimately may not either, because of fear of overshooting, and the anger of destroying the wealth of upper class. All I'm saying is deflation is problem that is "simple" to fix...albeit with consequences. Again, I submit that giving every citizen a $1 million tax credit would solve the deflation "problem."

The moves in the past were not large enough. How about a $1 million tax credit (refundable) to every citizen? You still think we would have deflation? The idea that deflation can't be stopped is laughable.

Anyone see this hoisington WSJ article? http://online.wsj.com/article/SB10001424052748703988304575413441738553222.html?KEYWORDS=hoisington I'm leading more towards inflation...

I think 1.25 book would be pretty reasonable. This assumes ROE of 15% and cost of equity of 12%. A P/BV of 1.5 would require a cost of equity to be 10%; that is pretty low for a levered financial institution with cat exposure.

It is especially interesting to see them add to the hedge significantly as the market declined. I was buying as the market was declining. Typically we have seen them act in a contrarian manner as well

MBIA (and ambac) committed fraudulent conveyance through its transact to separate its guarantees into "muni" and "structured credit." MBIA under capitalized the structured side (non-recourse to parentco), to the benefit of muni bondholders and MBIA shareholders but to the detriment (I believe illegally) to holders of structured bonds guaranteed by MBIA. This good bank/bad bank structure was approved by the New York Insurance Commissioner, but they are being sued by all of the creditors who had guarantees from MBIA on CDO's ect. The only reason for MBIA's continued survival is because of this transaction...who knows if justice will ever been served in the court room.

Autozone