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NormR

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Posts posted by NormR

    Fairfax Stock this week

    in Fairfax Financial

    Posted

    I think Sanjeev has made some very good points on this thread.

     

    There is the potential for a bit of positively-biased group think when it comes to FFH on this board.  Heck, it was (in a former incarnation) one of the few bullish sources during the bear raids.

     

    Now that some of the big problems appear to have been solved, what sort of multiple should FFH go for?  It's obviously an interesting question.  How low will it go should pessimism return?  What's the upside?

     

     

    Fairfax Results

    in Fairfax Financial

    Posted

    Berkshire was down for 5 years in the 70's and Buffett and Munger were under investigation by SEC for almost two years...no one ever talks about it. The same will happen with Fairfax and Prem Watsa...

     

    $100,000/share in no time.  ;D

     

    Ah, for a return to 3x book.  Drool.  ;)

    magic formula investing

    in General Discussion

    Posted

    Happy Summer!

     

    I'm on the road at the moment and I'm only connected via a very slow dial up.  So I'll be rather brief.

     

    Especially since some years there's only 1 or 2 stocks the screen filters for.

     

    That's the big problem with the method.  It's hard to put even a moderately diversified portfolio together based on only a few stocks.  Also, the volatility of a 'few'-stock portfolio will likely be higher than most regular investors can handle.

     

    I'll also echo big P's comment that screens really should just be the starting point for further research.

     

    Cheers!

     

    Jean-Marie Eveillard's view on the crisis - Buy Gold?

    in General Discussion

    Posted

    Although I'm not that keen on gold, one can make the case for it as a hedge.  Rigorous rebalancing is usually suggested with a relatively small overall allocation.  Say 5% to 10%. 

     

    http://www.efficientfrontier.com/ef/996/rebal.htm

     

    PRECIOUS METALS STOCKS -- A SPECIAL CASE

     

    The portfolio characteristics of precious metals equity are unique; very low long term return, very high return variance, and near zero correlation with most other asset classes. One of the primary rationales for this behavior is that most of the risk of this asset class is nonsystematic because of its low correlation with other assets -- in other words, it can be diversified away. The above discussion provides another perspective on this paradox. Examination of the theoretical rebalancing formula shows that the addition of a small amount of a high variance zero correlating asset to a portfolio with a much lower variance increases its apparent return by approximately one half of its variance. In other words, since the variance of a typical portfolio of precious metals stocks is about 0.1, its apparent return (IRR) in a rebalanced portfolio will be about 5% higher than its long term stand alone return. This is precisely what is observed by the investor who periodically rebalances the precious metals component of their portfolio as a fixed proportion; a large fraction of the IRR of this component comes from rebalancing per se. Thus, not only is the systematic risk of precioius metals stocks much lower than its stand alone risk, but its rebalanced portfolio return is much higher than its observed stand alone long term return.

     

     

    Partnership - Money Management

    in General Discussion

    Posted

    A word of warning to those looking to start out in Ontario.  The regulations are due to change at the end of September.  IIRC, the changes are likely to pinch small operators.  Higher capital requirements, etc.  See http://www.osc.gov.on.ca/HotTopics/RegReq/ht_regreq_index.jsp.

     

    Now, don't bug James, but he's run a small OM fund with minimal expenses for a long time (Malachite Aggressive Preferred Fund).  As of the last audited statements, total net assets were $253k and expenses were $1640.  He runs are rather tight ship. 

     

    I'll also point out that the fund business is about asset gathering.  To be successful, it's helpful to be a good salesman.  The asset gathering part is likely to take more time and effort than expected.

    Can I seed the GP in a partnership with cash from my IRA?

    in General Discussion

    Posted

    First, securities commission registration.  For this, you need to have certain qualifications that the commission deems appropriate for managing other people's money professionally.  I think the CFA designation would be sufficient, for example.

     

    These days to get an IC license, in Ontario, a CFA is good for the educational requirement plus 5 years working for another asset manager.  The last item is the big problem for most.  But exceptions can be granted.

     

    More importantly, the rules are due to change this Sept. and some of the new rules aren't friendly to new operations.  >:(

    US Federal Debt

    in General Discussion

    Posted

    You can add in the occasional asset/license sales by Govt but that is usually not a significant factor for US.

     

    I hear they'll provide vendor financing to anyone willing to take California off their hands.  ;)

    Mark Sellers Article-

    in General Discussion

    Posted

    Here is an older piece done by Mark Sellers, that I thought other members might enjoy.... if you have not already seen it before elsewhere. Is quite relevant for what we have seen lately and why it is very difficult to be a 'true' value investor... got to be a little messed up!

     

    http://www.manualofideas.com/files/sellers.pdf

     

    Re: Sellers' piece, there is another/additional possibility.  You might not only be born with 'it' but 'it' might change over time.  That is, you might have to be lucky enough to have your innate investing style fit with the times you live in.  If not, returns may be less than optimal.

    Derek Foster

    in General Discussion

    Posted

    Ha, of course he has, he is Canadian.  Be successful in Canada and the majority will attempt to bring you down for some reason.

     

    One lesson I have learned the hard way:

    "if you want to be successful - how ever you deem that to be - you must first not care what other people think, for there are people who will envy pure happiness itself and make you feel guilty for it"

     

    i.e. dont care what other people think, especially when you are doing better then them.

     

    I've sort of had a similar reaction.  Mind you, its also rather unlikely that most people can retire at 35 by following a simple high dividend yield strategy.  So, he might be an effective book salesman but the strategy doesn't really live up to his hype.  (This is coming from a fellow who also happens to be a fan of dividend strategies.)  Recommending the option stuff to joe and jane investor verges on being reckless.  IMHO, both leverage and options should be left to the more daring and/or experienced investor.  Mind you, both leverage and options can make an enterprising investor rich in short order. 

    Derek Foster

    in General Discussion

    Posted

    He discloses the Philip Morris trade in the first book.

     

    Fair enough, I was given his first book but I've yet to make it all the way through.  (I was distracted by other more technical books.)  So far, there's not much there for more seasoned investors but the writing style is clean and straightforward.  He does love his '!' a bit too much.  :)

     

    I didn't know he self published the book Norm.  Thanks for the correction.  In his second book he comments on his book revenues causing him to have to pay tax.

     

    If everyone did what he did, or course, no one could do it.  His family takes advantage of the various social assistant things available to Canadians who can prove they are poor to the tax man (also disclosed).

     

    I suspect your last point is what gets people going.  But he's hardly as bad as the other fellow who suggested living off of welfare/OAS etc.  (I'm forgetting the author at the moment.)  IIRC, Derek just takes the government perks given to him (baby bonus type stuff) and aims to get his income via Canadian dividends which are taxed lightly for low income folks.  (The book income knocks that around a bit.)  I remember running across a survey that indicated that 50% of people admit to cheating on their taxes.  So, it's hard to take anyone to task for legitimate tax planning.

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