oec2000

Good timing. I chickened out and sold all of mine at 25.40. Did not think people would be crazy enough to bid it any higher. Still don't get why people paid over 26 to take the risk of a highly probable 4% absolute (i.e. not annualised) loss just for the prospect of getting an 8% annual yield. Another nail in the coffin of Efficient Markets, I guess.

Why do they always schedule these things on the shortest most depressing day of the year. I hope they schedule the next extinction event after that for summer holidays, or around early June, so we can have some time off. Well, the Mayans lived in the Southern Hemisphere so they got it right scheduling it for their summer. ;D oec, I think you are confusing the Mayans with the Incas. Must be the extra gravitational pull from the asteroids :D Oops! Hope my investing skills are better than my history or geography - otherwise, I'm in deep s....

Why do they always schedule these things on the shortest most depressing day of the year. I hope they schedule the next extinction event after that for summer holidays, or around early June, so we can have some time off. Well, the Mayans lived in the Southern Hemisphere so they got it right scheduling it for their summer. ;D

Biaggio, thanks for the tip. Is this the thread? http://cornerofberkshireandfairfax.ca/forum/index.php?topic=2321.0

Simply being the largest greenhouse producer doesn't sound like much of a moat. They still have to compete with traditional producers, don't they? Besides, their size is not that large that it could deter someone from building a larger operation than theirs. Also, their debt seems high for such an uncertain business. My Great Lakes/Niagara Falls comment was obviously not a serious one. To me, the quote showed his primary interest was in agri land - access to water is just a qualifier (to ensure productivuty of the farmlands). Unless he is trying to hide his true intent, if his real target was water, there is no need for him to specify agri lands - any land should do.

If so, he would have bought the Great lakes and Niagara Falls. ;D He was quoted quite specifically as saying that his interest was in agricultural farmland. If his interest was in water, he could have bought any land with water. The agri story seems compelling (growing population with rising incomes, declining arable land per capita, dwindling water supplies) but seems a difficult one for value investors to play because of the commodity component. I've mentioned it before on other threads but SCP is, imo, a lower risk way to participate in this story. Their strategy of leasing farmland from First Nations bands gives them access without the capital costs and risks.

Did farmland prices go up because of the credit bubble or the commodities boom? Not saying I know but it seems there could be a fundamental reason for the rise. Shouldn't we be discussing the ROI on farmland investment based on some assumption of commodity prices to evaluate whether prices are ina bubble or not? OP did not mention it but Burry also spoke about buying gold. His track record is perhaps too short to judge but from Michael Lewis' account, Burry appears to be a pretty smart investor.

Biaggio, what about my 2+20 for the recommendation? ;D Glad that someone was able to profit. I'm holding on to SCP. Not stupid cheap anymore, just cheap. Mgmt's approach to risk and reward makes a lot of sense to me. Imo, it's a good way to get exposure to the resource space. I share your idea of using SII to get SCP exposure too. It's one reason I have been buying SII. (And, you get SCP upside without the downside.) It's true that at 10% of AUM, it's only fair value and I'm hoping Sprott detractors will give us a chance to buy cheaper but I think your 2% AUM target is too conservative given that normalised earnings should be in the range of 1.5% of AUM. Imo, price would only get to 2% if there was a major problem with the business in which case we might not want to buy at any price. I'm prepared to pay fair value because there is huge upside optionality in their earnings - the risk/reward is asymmetric imo. It's like holding an option on their performance coming back. Meanwhile, shareholders have some downside protection in the permanent client capital that they have in SCP and other similar funds which have been growing as a proportion of their AUM. These funds also have higher margins because they pay no trailer fees. It's not just Eric Sprott whose interests are closely aligned to shareholders. Senior mgmt have significant stakes in the company and their funds and for many I believe these stakes represent a high proportion of their net worth. (e.g. Kevin Bamborough's only investments are his holdings in SCP and SII.)

I thought this was interesting: http://www.cnbc.com/id/15840232/?video=1581847013&play=1

From the thread on "Other interests" it seems that we do have quite a diverse group of members in terms of age, career and financial position. With a big enough and diverse sample, individual situations should not unduly skew the data imo. True, we may not be representative of the entire population but I think even the better off adjust their spending to changes in economic sentiment. It is not the best or most scientific poll but it should provide more useful info than the original poll question the answer to which may depend on which day of the week you are asked the question.

Instead of this imprecise poll, maybe we could do a survey of our spending in 2010 vs 2009, 2008 and 2007? We can provide results in index form using 2007 expenses as 100. Apart from providing more precise and less subjective results, it should give us a better sense of what's happening to consumer expenditures. Might be useful to have separate polls for US and Canada too. Will someone with better technological skills than me volunteer to do this? I'll start with my numbers from 2007 through to 2010: 100, 100, 120, 130. Canada.

If you have an issue with the rude flippant statements, take it up with the appropriate poster. It has nothing to do with me. Please point out where my comments have been rude or flippant. In your own words, "I am exploring the limitations of a finite supply of money." Is it not acceptable to respond to this comment by giving examples of how the supply of non-fiat money need not be finite?

Please reread my post. I did not suggest that Prem was right or that I even agree with his view. I was merely questioning your premise that he put in the hedges primarily because of their leverage. Their balance sheet is much less leveraged today vs. a year ago and their equities exposure is much lower. The need to hedge is not as strong as before yet they are almost fully hedged compared to being unhedged a year ago. They have a much bigger exposure to bonds than to equities and are therefore very vulnerable to inflation (claims costs) and higher interest rates (bonds). If they were primarily concerned with leverage, the more logical risk to hedge would be inflation. Contrary to what you suggest, he has a lot to lose if he is wrong about inflation. Why is he not hedged for inflation? Some posters have suggested that the deflation insurance is a hedge for their real assets. Their equities are already hedged; apart from that they don't have much real assets. Bonds do well in deflation - they don't have to be hedged for that outcome. I'm simply making a deduction from the facts as to Prem's mindset.

"The only things that are certain in life are death and taxes" is all I can say. I have plenty of scars to prove it. :)

I have previously made a suggestion to move to a different venue because of the problems with J Badali. My preference would be for (2). Except for the cost, it has the most advantages. Can the cost problem be solved by allowing people two options - attend with or without dinner? With a hotel, we could also have round tables (much better for exchange of ideas) and if the speakers would agree to spread themselves out to different tables, the event would be more productive for attendees. My sense is that the marginal cost of the hotel option (+$30?) is more than the additional benefit we would get. It's like the case of buying a good business at a fair price vs. buying a lousy business at a cheap price. Why don't you do a poll (of those who intend to attend only) to see how many would be deterred by the cost? (Poll maintains anonymity presumably.). If the numbers are small, we could let them attend without dinner or, as others have suggested, let them be subsidised by others paying a few dollars more each.

Let's look at this more closely. As at Q1 2009, FFH had $4.1b in stocks (at cost), $4.5b in s/holders equity, and $18.5b in long term liabilities (incl insurance reserves). As at Q2 2010, FFH had $3.2b in stocks, $8.3b in equity, and $20.5b in long term liabilities. They had no equity hedges in Q1 2009, and 93% equity hedge Q2 2010 even though their balance sheet leverage to stocks have dropped significantly. They are more exposed to an adverse move in bonds yet they are not hedged for a rise in interest rates. The data would suggest that the hedging decision is not driven by leverage per se but more by a concern of a drop in stocks. The deflation insurance purchase gives further clues as to Prem's mindset. Although, it has been explained as protection for the insurance business, I don't quite understand why because their business seems more vulnerable to inflation and higher interest rates than deflation and lower rates. In any case, the fact that they bought deflation rather than inflation insurance is a very good clue as to what his macro views are. Munger, while there is definitely some validity in your views, what is difficult to accept is the certainty with which you seem to hold your views. Have you considered the impact on your portfolio if you are wrong? Have you looked at your past track record of macro calls - do you have a 100% success rate? Rick_v, you seem to be saying that we should ignore macro and decide purely based on stock valuation. It's a perfectly sound concept but what I don't get is why your exposure to equities is so low. (From thread on negative news.) Care to share your thoughts?

You may have missed the point that Broxburnboy and I were trying to make because of your focus on the scalability of gold. Both of us have made it clear that it is not important that gold is the standard. It's just important that it be something whose supply cannot be easily manipulated or manufactured. I've mentioned SDRs (which is not even a real thing) as a possibility. The key is to have a standard to which money supply has to be tied - this is to prevent debasement by "lazy" govts trying to find an easy way to dispose of their debt. The supply of the standard does not have to be fixed - it can be allowed to grow at a pace consistent with the growth in world population for example. Two of the most successful economies in the world - Singapore and Hong Kong - do not have central banks in the sense of the Fed. They only have currency boards whose primary role is to ensure the soundness of their currencies (which I believe are fully backed by foreign reserves). They can't willy nilly print money like the Fed can. This was why the speculators who so succesfully forced many Asian central banks to devalue their currencies were not able to do the same with the HK$. It's true that having fixed standards can cause economic pain by tying up the hands of govts. However, it is preferable, imo, to allowing govts to kick the can down the road for the next generation to deal with.

People are not always rational but surely the posters here are all as rational as WEB. :) Extreme (or at leasy high inflation) is what worries people about current Fed policies which it can pursue only because of a fiat money system so it is relevant to this discussion. You've got it backwards. Fiat money IS the new system that replaced the gold standard. Gold has been accepted as currency for hundreds if not thousands of years. Fiat money, on the other hand, is only decades old. The same people who say they don't hold gold because they don't understand it fail to see that they happily "invest" in USD and other currencies without understanding them. I agree that it is tough to put a value on gold but the same should be said of USD. One thing is clear though - gold has over time held its value much much better than the USD and the GBP (which was effectively the "USD" 100 years ago).

I think you give bankers too much credit. They are not that smart. :)

That's agrees with what I wrote above. The first paragraph you wrote though didn't agree -- I was asking probing questions and you mistook them for a position -- easy enough misunderstanding as questions can sometimes be rhetorical -- I figure that's where you got on the wrong track. Get you now. The other reason I took it as your position was because you did not address Broxburnboy's question as to what was the point you were trying to make. I think I've adressed the scarcity issue extensively - it is not an insurmountable problem. So, leaving this aside, which of the two evils do you come out on? To me, it is obvious that some standard is better than no standard. I'm no gold bug but I think Ron Paul makes sense sometimes (more so than some of those in positions of power or influence) and I think it is beneficial for some of these issues to be brought into the public debate. As you said, many people are "comfortably" unaware of the problems with fiat money.

So, you are saying that you prefer something that makes you feel good even though you know it is not good for you? That's not value-like behaviour. If you speak to Vancouverites who were not lucky enough to buy a house 10 years ago, you will hear many unhappy comments even from those whose wages are higher today because they feel they have been left behind. Of course, this is an extreme example but it would probably be indicative of how people would feel if inflation significantly outpaced wages. This is not a trivial risk, imo. People are not worried about inflation because we have had 30 years of relatively modest inflation. I believe people felt very differently when they were experiencing the high inflation of the 1970s. Think back to when oil prices went to $150 in 2008 - do you think people were happy with $4 gas prices because their wages were rising? We were fortunate that those prices were not sustained for long. If I am not mistaken, the 1970s was something like that except that price increases were more sustained and broadbased and not just limited to a few commodities. Some debtors may have benefited from the inflation but it was a tough period with high interest rates, depressed asset prices and a stagnating economy. I can't think of many people who want to go back to those times. Are we today looking through rearview mirrors to the benign inflation environment of the past 30 years and blissfully thinking that the Fed might not make policy errors that could result in rampant inflation? (Possibly like how so many thought the Greenspan put was a thing of such beauty - until it was not!) You agreed with Ericopoly on how inflation benefits fixed rate borrowers. This is not a free lunch. Other members of society pay for it - savers, pensioners, pension funds, even our favourite P&C companies! And, we all know what happens to an economy that incentivizes borrowing and penalizes saving. It is not exactly what we need more of right now contrary to what Obama, Congress and Bernanke may be telling you. I understand and agree with the arguments for the necessity of having some inflation (because of the downward stickiness of some prices). Having a gold (or some other) standard does not preclude inflation and the system worked well for many years. The question is not simply whether a gold standard is a good/bad system. The system has its flaws which is why it was dropped. The question is whether the gold standard is a better system than the fiat money system that we have now that imposes no discipline on central bankers. The same thing could perhaps be said about the gold standard as Winston Churchill said of democracy - it is the worst form of government, except for all the other forms that have been tried. The gold scarcity argument does not hold water. It's a straw man used to justify the fiat money system.

There is some confusion over Prem's stake because it is held through a holding company which is owned 51% by Prem and 49% by FFH. The holding co owns about 1.5-1.6m shares. Prem's economic interest is therefore approx 800K shares.

I would imagine very comfortable - given that people seem to be very comfortable right now with no gold in the vault (some central banks (UK, Canada) have very little gold left.

If you read Ericopoly's original post, he compares the stock of gold to money supply to argue that there is not enough gold to support current world GDP. The more appropriate comparison should be gold vs. currency notes in circulation. His suggestion that if each of us only had $960 of currency (in his example, gold coins), we could only spend $960 is incorrect because it does not take into consideration credit creation and the velocity of money. Most people do not carry around close to $960 cash in their wallet all the time. So, if we can manage with only $200 (or whatever amount it is we keep in our wallets), surely $200 worth of gold coins would be more than enough. The argument that gold is too scarce is not a good one. In any case, Broxburnboy is not necessarily advocating that gold should be the only currency. He is simply saying that it is better than fiat money because its supply is not subject to the whims of politicians and central bankers. As to your point about wage inflation, I believe that that the lower income groups in US have had virtually no increase in real wages in the past 2 decades (I'm not sure what the precise period is). Do you think they feel better because their nominal wages have gone up during this time? The bigger danger is if govt policies result in runaway inflation - real wages would likely fall in that scenario.. Gold has the disadvantage of supply being totally dependent on our ability to find it but it protects us from debasement. Fiat money has the advantage of flexibility to grow with the economy but it is subject to abuse by politicians. The question is which of these two is the lesser evil.

Another way to look at it. Your statement could, in effect, be used to argue that gold should be valued much higher. If gold were valued at $10,000, then we would have a cash supply of $10,000 per person. This demonstrates the fallacy of measuring value using a fiat currency.