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zippy1

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Posts posted by zippy1

  1.  

    No. 

     

    The macro certainly affects individual companies and stocks.  With that said, I am not trying to time the macro.  If great companies were valued at 5-7x earnings, I would buy hand over fist today, regardless of the macro.  And don't be so naive, Buffett understands the macro risks probably better than anyone on the planet.  Buffett looks for a margin of safety that allows him to ignore any macro risks -- important distinction.

     

     

    I guess this above quote may be the reason why some have the wrong impression that the suggestion is to wait for coke to go to ~5X cashflow to buy.

     

  2. Have enjoyed reading your responses to my post. To reply to some comments:

     

    Zippy1: you said in #2 in your list that "I can't time the decline". I agree with you. Is there anybody out there who can??  But I'm not trying to time anything. As I said earlier, I am getting more and more cautious with all the gains I have made. I will still buy here and there, but I'm not going in 90-100% again for some time (when: who knows?). You know, all those big problems out there have not gone away. There is the European debt problem, the state and municipal deficits and debts, the spiralling food prices causing revolts and hardship and starvation, etc. I want to have plenty of cash around when and if the market stumbles for whatever reason.

    Hawk: I guess our opinions are not so different as I also have some cash (25%) that I did not deploy right now. The idea like you say is that if the market stumbles, one would like to be able to take advantage of the market decline.

     

    However, the return on cash is low. The policy response by goverments for the European debt problem, the state and municipal deficit and debts that you cited likely are to print more money. That further dilutes the purchasing power of cash. As we wait for these issues to be resolved (and the market decline), the cash's purchasing power is going down. This is actually reflected in the spiralling food price that you mentioned.

     

    Personally, I am willing to hold some cash but I am not comfortable to hold a large amount of cash.  I prefer to hold undervalued securities/businesses if I can find them.

     

    Also, everyone's risk tolerance is different depending on factors such as age, income, spending, financial obligation to children/parents....

     

    I can see why someone want to hold a large percentage of cash in their portfolio.

     

     

  3. Hi Liberty, good discusion...I think I understand a bit better now the buffer idea.  I was thinking of a live example, where there might be an issue.  lets say you are in 2007.  You have 3 year buffer capital in cash.  in 2008 you have used up 1 year of capital, so inorder to restock buffer, you sell 1 year worth of securities, and are back at 3 year buffer of cash.  That is ok, because it is before the crash.  then the market collapses in 2009 you have a decision to make.  Do you sell 1 years worth of securities to go back to 3 year buffer or do you let your buffer slide to 2 years worth of cash (again, you don't know at the beginning of 2009 whether the dow will stay at 7000 or go to 5000 in the next year).  You start thinking "what if the dow is at 5000 next year. if i don't sell any security then i'll only have 1 year of cash"  This may tempt you to sell even in a depressed market.    This is just a consideration... I don't mean to be negative just working through some issues.  Overall though i do see how the buffer would work...I also think some sort of cash % in relation to market overvaluation might work also (you approach seesm similiar to this anyway)

    If I am employing this strategy, by Oct 2008, it should be clear to me that market was getting cheap.  I would have try to squeeze myself to further curtail my expenses so that the amount needed for a 3 year buffer also shrink.

     

    This is nothing new. Many people around me started cutting down their expenses around that time just because of the uncertainties.

  4. I am currently about 25% cash for investable part of networth and I am not sure I would feel comfortable to go to 100% cash.

     

    Several reasons,

    1. the purchasing power of cash appears to be going down fairly quickly.  If the market dont' crash and I am holding cash, I will see my purchasing power going down.

    2. I can't time the decline.

    3. there are still some bargains in the market such as P&C insurance companies.

    4. other stocks that I own are at reasonably valuation but not crazy valuation. ( Ok, I admit I still hold a few share of Contango spinoff thing, but we are talking about a couple hundred dollars.) If they reach my sale targets, I will sell.

    5. Even if I took a 30% correction and never bounce back, it would mean that I have to work 3-4 extra years.  It is not the end of world.

    6. I lost ~10% in 2008 and made 50% in 2009, thanks to this board, with a big chunk of portfolio in Fairfax. I was not and am not owning the index. 

     

    best regards,

     

    Zippy

     

     

  5. I would like to thank board members for sharing with me on this so generously.  The experience and advice sharings are really beneficial to me.

     

    I will definitely get Dr. Miller's book.  Interestingly, even though it is out of print in US, it is still available here in Taiwan in a Chinese translated version.

     

    One aspect to "retirement" though is that I am not looking forward to sitting in my house doing nothing. The kind of retirement that I look forward to is the kind that I think I can do something positive.  So one task is to find something that I think I can really contribute.

     

    In terms of how confident that I can be of my finance, given a few bad years.  Honestly, I don't know. 

     

    I started picking stocks in a small scale in 2000.  I was doing it in small scale till 2005.  I started to do it in bigger scale following the move back to Taiwan in 2006. 

     

    It turns out that the results are quite "lumpy." 2009 was a good year and I got 50+%.  2008, I lost about 10%.  2007, I only got about 5%.  The geomertical mean is about 16-17% for 2006 to 2010. However, as the result are so diverging, count on the geometrical mean as the performance expectation appears to be quite dangerous.

     

    I undersstand that investing full time vs. part time "should" improve performance but I am not sure what assumption should I make on the difference.

     

    I can only live life once so I got to make it count.

  6. Couple of things to keep in mind:

     

    - Your nest-egg just gives you choices. You still have to decide what you want to do, & your choice today will be very different from your choice 10 yrs from now.

    - You don’t choose in a vacuum. It’s you & your spouse/significant others, & both sets of parents, & they all have to be comfortable with your choice. They have to live with you, & your consequences.

    - You retired, not your spouse/significant other. You do the long vacations on your own, because your spouse/significant other cannot, & it may well not be what they signed up for.

    - For most couples, the expectation is that they will retire within a few years of each other, and generally sometime after the kids have left home. No kids/teens underfoot, menopause & the mid-life crises are done, etc.  Materially change this, & you may well be getting old by yourself.

    - Like it or not you will be judged. You retired early because you could, but most societies will just see someone who pissed away their opportunities when they were at the top of their game. You can change your game (do something you’re passionate about), but you can’t leave the court.

    - Work is not just the money, it’s the people you work with, the mental stimulation that goes with it, & the routine of 9-5. Independent wealth just lets you work for only part of the year, & bluntly tell off the occasional a**hole, but work is still a desirable thing.   

    - Just as money is the servant, so is the job. Bhutan’s (Himalayan Alps) ‘Gross National Happiness’ measure is not as dumb as it sounds!

     

    SD

     

    Sharper, thanks for a very well thought out input, as you always do.

     

    Indeed, as I became more financially secured, I have become more willing to express my view at work. Knowing that I have a second set of skills do help.

     

    I am lucky in that when I came back to Taiwan, I was asked to set up an engineering department in a major company.  Over the past years, I essentially staffed it with the top ranked students from the best local graduate schools and have coached them more or less the way I want.  If I quit, I know that I will not have the opportunities to work with as talented a group of people.

     

    As you said that I can change the game but can't leave the court. That is really an excellent piece of advice.

     

    I think what I should do is to figure out what game I want to play if I quit my current job. Beyond investing in my spare time,

     

    do I try managing money for people? (Munger did not  like it, though?)

    do I register in a seminary to study theology and become a missionary worker?

    do I join a non-profit organization to work on a cause that I am passionate about?

     

    Again, thank you for your excellent piece of advice.

  7. I stopped working for other people when I had enough assets that I could afford to live a chosen lifestyle on less than 2% annually of my net worth.   The lifestyle part of the decision is as important as the net worth goal since it is levered 50:1.  If you require a modest lifestyle, the ultimate luxury of unlimited free time may not be all that far away!

      Thanks for giving me this very nice piece of advice.  My wife and I actually have been thinking about this for sometime and there are several aspects of it make me undecided. 

     

      One aspect is, of course, will we have enough assets?  We live in Taiwan, where the living cost is somewhat lower than the States, so this part is much easier.

     

      However, what makes her uneasy is to have me being a fulltime "home maker."  Here the society values "corporate titles" very much.  When I told my wife I think I should eventually quit my job and manage our investment full time, my wife actually wanted me to form a small company, a small investment partnership, so that I can: 1) keep the "going-to-work everyday" routine and have a job title and 2) keep relatives from thinking I am lazy to retire when I am 45.

     

        I wonder whether other members who work for oneself full time have to fight this stereotype or not. What will you suggest me do? 

  8. All of you guys that are retired and have both parents at home, can you and your spouse/kids stand each other 24x7 a day? I suspect you can but many can't. Recently, we had Lou Simpson starting his own fund so he doesnt drive his wife crazy. Just some thoughts and ideas would be helpful on this topic.

     

    Thanks for bringing up this excellent point.  Actually, a friend of mine used to work for the CPU company on the west coast.  That company had (may still has?) this policy of giving a person 2 months sabbatical after working there 6 years.  Anyway, the first one was ok.  But the seond one drove his wife nuts.  His wife asked him to "stop following me around...."  :)

  9. They also understand my current job is 'managing our investments' which has lead to a number of questions and discussions. My wife and I are both very involved in many not for profit organizations (sport/school) coaching, organizing etc so we are quite busy with the kids.

    ......

    Would like to thank many board memebers to share on this topic.  I have a question that I would like to ask:

    At what point, should one quit the "corporate" job and just "manage one's (one's family's) investment?"

     

    What criterion should we use to decide on this?

     

    I have been wondering about this question and would appreciate any insight on this question.

  10. Would like to thank PlanMaestro for bringing up CPD.

    Bought at $4.75 in December and sold yesterday at $5.15.  Not bad for a 8% return in a couple months.

     

    Glad you won this one zippy. I was on the sidelines, is it already a done deal?

    Not sure it is a done deal or not as I am not sure any major shareholders may sue or not.

    However, I am glad to get the money back and move on. I think I am saved by the price that I paid more than anything.

  11.  

    Happy New Year Zippy =)

     

    Yeah, bugging wives is the leading cause of bubble apartment buying, haha.  The adjusted rate mortgages are interesting, once this rate goes up there will be a great deal of suffering among mortgage holders. It will be really interesting to see what happens going forward.

     

    Do you have real estate shops opening up left and right in Hsinchu? In Taipei they are popping up like mushrooms. There are 5 real estate shops, five minutes away from my door.

     

    Happy Chinese New Year!

     

    I live in a newly built area and indeed there are more than 5 real estate shops within 5 minutes of walking distance.  I even regulary receive junk mail from them asking me to sell my apartment, which was just built about 18 months ago.

     

    The adjustable mortgage is going to be a big problem once te interest rate starts to go up for many people.  I tried to get a fixed-rate mortgage when I bought my apartment but was told that no sane bank will make such kind of loan. So clearly all banks here a betting that the rate will go up.

     

    It does pose a delimma to me on whether to pay off the mortgage, though.

  12. This is all really nutty stuff. Taiwan has an obvious real estate bubble as well.  Lots modern apartments are being built up but are incredibly empty. It's even more maddening because the country has a birth rate of less than one child per woman. Who, demographically, is going to be living there in the future?

     

    For example, I am currently in my girlfriend's sister's house in the Taichung countryside for Chinese New Year. The building is 10 years old, in the middle no where, and rice fields are on three sides of the housing community. They bought the house a year ago for 4,000,000NT they could have rent out the building for 120,000NT Which gives you a price to rent ratio of 33.3 . Of course the rent doesn't deduct any future repairs or loss of income due to inoccupancy. The kicker is, this place is on the cheap side compared to Taipei!

     

    In general, housing prices in Taiwan appear to be really nuts.

    My wife and I moved back to Hsinchu, Taiwan from Dallas TX about 5 years ago.  When we started our house hunting, I noticed that the typical price to rent ratio is in the 30s, also.

     

    I then found out several friends at work actually own multiple apartment units and are renting them out.  I asked them how they feel about this very high (at least to me) price to rent ratio. They told me the property tax rate is very low, the adjustable mortgage rate is also very low (currentlt at ~2%.) The svaing's account is paying less than 0.5%.  They just don't know where to invest their excess cash.

     

    I fear that this is not going to end well.  On the other hand, I ended up buying an apartment as my wife kept bugging me about it.  She is tired of moving all the time.

     

    The apartment price has gone up 10-15% since we bought it but I just keep telling myself to treat this as an "lifestyle" decision instead of a "finaicial decision."

  13. Is Lou Simpson going to invest his own money in this along with his clients?

     

    If he is going to invest a meaninful sum of his own money, I would find it hard to say that he can not "lose." 

     

    Conversely, if I am his client, should I really expect him to manage my money without being compensated?  He is probably charging less than the market going rate for someone with his track record.

  14. moral of the story: consider the risk of a majority-controlled public company in realizing value.

     

    I think the punch line - not much of a fan of moralizing with investments - is that investing is always risky and a large margin of safety has to be demanded. For example, you can also get hit by management doing stupid transactions when control is diluted (ie: Kraft).

     

    I actually have a 15% profit since Sept 2009 but I was expecting something much better than that. 5% premium, close to the a 52w lows and well below the 52w high they will probably have to improve their offer ... merger arbitrage anyone?

     

    Hmmm.  If the deal goes through, you get a minor upside.  If it takes 6 months to close, probably a 10% annualized return?  If the deal fails to go through and your valuation is correct, you get even better results.

     

    I think it is a quite interesting situation.

     

    There is a similar situation in BCIS.OB where the majority owner ended up increasing the bid.

     

    It would depend on whether the outside directors, I think. 

  15. If your friend does not mind a closed end mutual fund, source capital (SOR) may also be a good choice.

     

    It used to trade at a premium, but has been trading at a discount to NAV for the past couple years. One essentially will be getting a 10+% discount.

  16. Just to be entirely clear -- from the peak in September 1939 to the trough in April 1942, the market was down 40%.  Wonder what many individual stocks did during that period?  Of course we know the answer -- they got slaughtered far worse than 40%.

    From the above, you must also mean that many other stocks did lose less than 40% and did better? 

  17. I have a membership.  It's good for people with smaller portfolios and the discussion is decent.  It's cheap so I'd say it's definitely worth it.  But if you already have a separate gmail account with google alerts with good automatic search strings updated daily, you might find most ideas redundant.  

     

    How do you set up an automatic search string?  :-[   TIA

     

    cheers

    Zorro

    When you do the search on Google News, on the search results, it will put a link for you to set up automatic email alert.

     

     

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