Cardboard

That is what I was thinking Otsog, but we talked about the situation offline and in his take-over case, the share for share exchange portion does not appear to be a tax free exchange per the Management Information Circular, but considered a disposition. So the full package (cash and new shares) is the proceed. Cardboard

Hey Gambler! And California may get much "hotter" as your military keeps getting cut and your country weakened by a love all/socialist administration as North Korea remains free to develop long range missiles and nukes under the protection and blessing of China. Cardboard

Too high profit margins (pre-tax) are typically taken care of by competition among enterprises who are attracted by them for deployment of their own capital. Just like at Apple where they are forced to invest more to develop new products and/or by competitors selling similar devices at lower prices reducing Apple sales growth. What Buffett described in the 1999 Fortune article that would be related to income inequality was the share of corporate profits after-tax vs GDP. Not high profit margins pre-tax. I just think that we need to be careful about what margins we are talking about. Also need to realize that countries are competing for capital and jobs so if you simply tax more to reduce that share, one will offer lower corporate tax rates attracting enterprises at home. It is a fine balance. Education, currencies, interest rates, taxes, regulations, cost of living, even climate all matter. Whoever believes that they can predict accurately the direction of the economy is a fool considering the inter-relationships between all these factors and many more that I have not listed. One thing that I am absolutely sure of however is that there is no free lunch with anything. Many people fail to realize this and think that governments are different. Maybe because they are large and tough to understand, but at the end of the day, it is an entity competing with other entities (countries) for the development of their GDP and citizens. QE, unending deficits and unaffordable entitlements are not free as some on this board seem to imply. There will be consequences as some countries who are more competitive, let the law of free markets prevail and make more sacrifices should come out on top over time. Cardboard

Interest rates always climb through a bull market and for many rate hikes the market keeps going up since the economy is also doing better along with companies earnings. It is at the end where interest rates are too high or applying too much braking power on the economy and where the equation of equity risk/earnings yield vs bond yields turns out of whack and then a bear starts. It has not happened this time around because of the Fed keeping rates at zero and doing permanent QE which IMO are both big errors and unnecessary (they were positive, but are now negative longer term): 1- Kills savers, retirees and people looking for a short to medium term decent return or like small business owners holding onto cash before making large investments. It forces these people to spend or more likely to chase risky investments instead of GIC's. 2- Institutions, pension funds and fund managers are also forced to chase. 3- This chasing creates as large or larger of a cost to the "poor" than the savings realized from low interest rates since the cost of major goods that they are buying: cars and houses, become largely inflated. Same effect on their daily commodities since it puts pressure on the dollar. On top of that, banks have significantly tightened lending standards, so housing even if cheaper is not even available to many of them. I predict that the Bernanke and Greenspan era's will go down in history as the most manipulated and mismanaged period for interest rates and money supply leading to many bubbles and great pain for the majority of citizens, especially the poor. Refusing to apply the brakes and preventing any short term pain to occur led to much bigger trouble down the road and will continue. The pain is now being moved to the government and eventually it will blow up too. QE has now been in place long enough that it is an addiction for market participants. It is just pushing up the value of investments (along with housing) with very little impact on the real economy. It is helping me and investors, but not Jack who is working on salary with a sub-college degree or the vast majority of people. So right now, we have none of the original signals given by interest rates telling us where we stand in the business cycle. I would tend to agree with Marks that we are in the mid-innings based on GDP growth rate and inflation readings. So IMO, rates will go up at some point and maybe sooner than we think, but they won't go up by 4 or 5% overnight. The 10 year yield is already moving up and the market and economy can take it so far. On the other hand, it would be fair to expect them to go up quicker than a normal cycle since they have been kept artificially low for so long. I still think that there should be plenty of time to adjust based on that factor alone. By then, I suspect that very few stocks will have the value potential that we see in many today. Cardboard

My 2 cents for whatever it is worth... I have no doubt that we are approaching a correction. Every time that I make money with such returns and so easily, it is a clear sign that the music is about to stop. Here I am not talking about making money via take-overs or one time events, but by my stocks pretty much all going up in sync with the market. My emotions right now are so different than during a bear market or correction when I do feel so dumb and stupid by always buying at the apparently wrong time and with my stocks all tumbling down. The Watsa letter is also a somber reminder that my fun may be about to end. However, I am not sure at all that what is coming could not be simply a minor 5 to 10% correction vs the apocalyptic scenario that Watsa seems to have in mind. Bears have good points while bulls do also and I see no major excesses in the stock market other than your typical tech stock of the day. The income market on the other hand is quite different and I agree with Druckenmiller when he talks about people taking crazy risks like buying Zambian bonds at 5%. I will likely trim some of the fat in my portfolio and eliminate leverage (minor debt, some calls) over coming weeks which will reduce risk and give me dry powder, but I am very reluctant to sell stocks where I still see a large gap with their true intrinsic value. Makes no sense to me. Keeping their size in check percentage wise relative to my portfolio does however. With May approaching and the market being high with very low volatility, things could get nasty any instant. However, despite people's fascination with the Dow at a record high and the S&P approaching, it would not surprise me to see a correction soon followed by a march higher to something like 1,700 or 1,800 in the S&P by year end. I still see a wall of worry regarding these indices and their highs and I have a feeling that we will need to build true excesses before a major correction or bear arrives. Cardboard

For the portion paid in cash it will be your sale proceeds for x many shares and then you can count your gain or loss on these shares for 2012. For the portion paid in stock for the rest of your shares, it is just a swap. Normally, it does not count as a sale especially if they are two Canadian companies. Your original cost basis for said shares will still be the same and the year you sell, you will calculate your gain or loss on them. I would read the prospectus or management information circular on Sedar or documents you may have received by mail under the heading: "Tax consequence for Canadian holder". They should talk about the breakdown of what you are receiving per your original shares and if the share exchange is tax free. I have seen occurences of having to file a special tax election to obtain this treatment when it was a foreign company acquiring a Canadian company. Cardboard

Hi Ericopoly, Glad that you made money on the Odyssey Re takeover! I will never forget that day: September 4, 2009. My net worth went up something like 35% the following Monday and then more as the bid got increased a few weeks after. You did 50%, so even better. Now, one thing that I wanted to point out is that no one else other than yourself deserve the credit for having made such a gain. We are presented a ton of ideas on this board, in the news and elsewhere all the time and our job as investors is to pick which ones make sense to each of us. I am not even sure if I thought about the ORH potential buyout myself or if someone else put the light in my head. I recall studying it quite a bit afterwards and reporting my findings to this board. Now, for those of you who are now thrilled about the idea of going all in, leverage and options, please be very careful. Eric could confirm, but all his big ideas had something very specific and were not just cheap stocks: 1- Fairfax in 2006. He bought a ton of calls along with Dengyu which were also cheaper than normal due to puts being in very high demand. Parity rule thing. The stock was down a lot and subject to a very large short attack while they were really out of trouble since the 2002-2003 debacle. There was also major fear of a repeat of 2004-2005 hurricanes. Once it got apparent that 2006 would turn into a very light storm year, the shorts had to cover. 2- Fairfax in 2008. Major CDS gains that were not reflected in the stock. No one could find a winner that year, so when it became obvious that one company was the opposite of the market there was only one way to go. 3- Odyssey Re in 2009. The stock was cheap and Fairfax had just borrowed $1 billion for no apparent purpose while they had bought out their only other public subsidiary just months earlier. There was also one bizarre SEC filing that did not include some shares that could be traced back to TIG Insurance (if I recall right). It just smelled the buyout while there was no reaction at all in the stock or options and the stock was at that point a better buy than Fairfax. 4- Bank of America in late 2011. This bank was trading like it was going broke or a la 2008-2009 while there was no run on the bank, no major financial hole to be noticed in the financials and the economy was still in recovery mode despite trouble in Europe. Keep in mind that he did not buy or lever up at $10 a share, but closer to $5. That is when blood was running in the streets and everyone was dumping that bank and not all others, for no real fundamental reason. We were getting close to year end and there was likely a lot of window dressing going on as well at the funds. That bank is sitting at every corner in the U.S., so if the world goes broke (which was really the fear at the time), might as well own one of the largest institutions in a business that will never go out of style. In summary, you may want to try this only with companies that you know really well, in which you have great confidence, are cheap and when there is a very special event occurring in the near term putting large pressure on the share price: out of whack relationship between supply and demand for the shares. Cardboard

Thanks for the clarification Sanjeev. So a personal holding corporation or a trust would be required to file a 13F if it reached a total U.S. holdings limit ($100 million?). That explains why have seen some "individuals" filing these things even if they were not holding 5% of any one company or being fund managers. Now regarding trusts, a RRSP in Canada is considered a trust, so does it have to file a 13F in the U.S. if one holds the limit of U.S. stocks within? I don't know about Roth IRA Ericopoly, but if they are considered trusts then you may still need to file if this applies. I find amazing that we are starting to talk about this kind of stuff on the board! The life of the board is relatively short while some have accumulated truly nice sums over this short time span and now have all the tools to continue compounding for a very long time and build a fortune. Hopefully, this will be used in part to build a better world instead of just lavish consumption. Cardboard

http://www.sec.gov/Archives/edgar/data/315090/000119312513060393/d481780d13fnt.txt If you read the 13 HR from Berkshire Hathaway under #4, it should include what Buffett holds privately. The 13 HR is really a disclosure of who controls what and has authority to vote the shares. However, it won't include debt, muni's and cash that Buffett may hold. Again, maybe that I am wrong, but that is how I interpret the SEC filing requirement. Cardboard

Ericopoly, Once you have reached some large number in stocks holdings, I believe it is 100 millions in the U.S., then you have to file with the SEC or just like the 13 HR that we keep looking at from fund managers. Unless I have misunderstood the law, then it makes Forbes job pretty easy. Cardboard

Sanjeev, What is your technique to buy stocks? If you could provide roughly how much AUM you have now would also help. Personally, I tend to buy a full position in one or two days when I like the price and that liquidity is plenty or like at SD. It is often painful to see the drop that usually comes afterwards, but like flipping a coin, it may go up as well and I will have to pay more or never getting my fill. Cardboard

I don't know why Icahn still attracts so much attention and respect. Remember the Clorox bid? Did he have the financial means to get that done? There are tons of these other "bids" that he put out there over time. Then his tone on CNBC and pretty much harrassing the poor reporter after begging to come talking on his show during the Ackman interview. I sure hope that Ackman will win over this guy. Anyway, this seems to be creating pressure on JCP this morning since Ackman is the main supporter and with some panicking could create a nice entry point. Cardboard

Wow! Could not see that one coming. There was a lot of rumours about Chubb, but Heinz? A near monopoly in ketchup IMO! Rarely buy anything else if ever. It is not cheap however at 20 times earnings and slow growth, but very stable. Compared to treasuries and his current cost of capital that still adds value. Cardboard

Hey Bargainman, Did I ever complain about higher tax rates in my post? What I care about is runaway deficits and debts to spend on unsustainable programs. Programs that even if you taxed your 1% to 100%, there would not be enough to support them. Even if you confiscated them all, it would help for a while, then these programs would still end up in default down the road the way they are managed. It is not just a Democrats problem, it is also the one of the Republicans. Bush did not really run a tight ship during his presidency! Like Obama, and you will never hear that from the ultra leftists (my own screwed expression for extreme left), is that he inherited too a mess or the pop of the largest stock market bubble in history. So fearing a depression, he went for guns and butter like the old Johnson which led to the housing bubble which was most certainly already started under Clinton. House prices were pretty high down there even as early as 1998 and people were already hungry for McMansions. What I am against is mostly everything that is run by a government. Especially in the hands of a populist and divider or one looking for an enemy to blame to implement popular policies. Dictators always rise this way unless they do a coup. Leaving aside dictators, even a democratically elected government is prone to corruption and mismanagement of public finances. As Charlie Munger says, incentives are everything. Unions are equally bad and always looking to protect the underperforming, the ones who are likely not in the right job or simply don't have the right attitude and work ethic. Meritocracy is how you create a better world, one that seeks to always do better and create equal opportunities for all. There is no racism, gender issue or faith involved in meritocracy. Hand outs on the other hand lead to special treatment, one group being favored over another, people who never leave the cradle. It leads to subpar productivity and an eventual terminal decline in that society since other societies seeing the opportunity raise their productivity above it. What I am describing is happening right in front of your eyes in Europe. It has happened in Venezuela. Obama is implementing some of that to the U.S. and once the trend is started it becomes near impossible to undo it due to this populist mantra. I don't know if we will ever see another "small government" elected president in the U.S. I am afraid of the long term consequences. As an anecdote, my dad just went for a coronary intervention in Florida. He could not believe how efficient they were relative to the same procedure he had in Canada. So go ahead, try to copy our system down there and get to a slower service and longer line ups, more medical malpractice with essentially no way to sue and a medicine that stagnates in the past instead of having the newest equipments and techniques. By the way, have you seen where there is corruption in the medical system in the States? It is always where the government is handing out money to the hospital and practitioners for their services and where there is not enough arm's length dealing. Another anecdote, who paid for my dad's intervention? My mom's benefits plan. Where does it come from? A very generous plan earned through employment in the public service. Now, these plans also exist in the private sector, but they are likely more tightly managed since again there is an incentive to keep them in check with what can be afforded and competitive with the rest of employers. Could they afford to be in Florida at their age paying a private insurer? Not certain. Of course, my mom would likely have received a higher salary had she not received these benefits and could have stashed away more money to pay for it, but this kind of hand out lead in my opinion to less personal responsibility or to make your own plan for the future. There is an ingrained belief in our society that people are not wise enough to save for their retirement, to create their own benefit plan. I believe it is making people slaves to a system while they are more than intelligent enough to figure this out on their own and with the help of education and others to create for themselves a better future and gain more pride in the process. What is mind boggling to me is that people here understand fully what I am describing within the private enterprise or how they manage their own house. They like capitalism and profit from it investing everyday. Why is it then that they firmly believe that the government will do a better job than themselves running so many other aspects of their lives? With no incentives and checks and balances? Some will say that I have no heart and that not everyone could fit under a meritocratic system. Indeed, I care very much for the ones truly in need and who due to their own circumstances could not make it through life like most of us. What I think that the government should do is to keep caring for these people who are ill, handicapped, etc. and even increase their care, but that the number of them should be minimal. I am not ok for people to stay on unemployment and welfare for long periods because it is easier and working for example at McDonald's would not earn them as much as staying home. I see so many sitting at home during the winter time collecting a cheque because their main job is seasonal. Someone else who is hard working and who will likely never collect a dime of unemployment pays for that. That is unfair. Likewise for so many welfare recipients who basically are parasites to society and to the ones who could use more of it. Subsidies of all kinds to encourage certain sectors. I could go on and on. Cardboard

This is what happens with socialism and a president who favors populist decisions over time in a competitive world. Too bad that so many in the U.S. don't get the message either. IMO, one of the best ads during the election was from Thomas Peterffy founder of Interactive Brokers and paid by his own pockets (I wonder how many of the many ultra leftists on this board closed their account after seeing the ad?). He was basically saying that under a socialist regime, that the rich would get poorer, but that the poor would also get poorer. How true has this been in Venezuela! I know many educated expatriates from this country. Some very smart people of the middle class who now can't really go back home since they would be totally unable to replicate their current standard of living. If democracy is about electing the most likeable guy or gal, then democracy is doomed to fail. Especially, if the electorate is highly uninterested in the issues at hand and only thinking about their own good. Also, when you hire someone or choose a CEO, you look for the most competent person, the one who will give you the most bang for your buck. With politics, in most instances, it is up side down. I could not believe the First Lady saying at the Democrats convention that Barack was so poor when he met her, that she could see outside through the car... Since when being poor is a top criteria to be elected president of the United States or the most complex enterprise ever invented? What about competency for the job? IMO, Hillary Clinton would get much more boxes ticked on job readiness checklist. Cardboard

Hi Yudeng! Glad to see you back! Interesting and a smart post as asual. Do you remember this expression being used on CNBC not that long ago: "Risk ON, Risk OFF trade"? In other words, this was all about investing long term or in equities vs short term or in cash. Now what you are describing seems to be an extension of the Risk ON trade where individuals are now willing to make even longer term bets. Fear is gone and can also be seen in the volatility numbers. I was trying to point this out regarding Amazon, but the answers that I am now getting are much more based on faith in Mr. Bezos and the future that he may create vs looking at current fundamentals. One even mentioned that he would buy on a pull-back. I honestly seriously doubt that a value investor would buy Amazon on any market correction since other major bargains would have emerged with ton of value right in front of you and no need to envision profits appearing in 10 years from now. I have never seen Amazon being named in 2008-2009 on this forum as a great buy when obviously they had 5 years of large growth in front of them. So sentiment appears ultra frothy and I would not be surprised to see a major correction now that we are approaching all time highs for the third time. It may be needed to finally end this secular bear market. Cardboard

Hi Moore, I hope that you won't dislike me going forward because of these comments. It is just what I consider honest feedback related mainly to some of the fairly harsh comments that you made last year to some guys who would not buy BAC for example, due to macro fears such as a Euro collapse which sounded quite plausible. It could still happen by the way. Regarding last year, I was up 99% (just shy of the magic number) on a 7 digits portfolio, so times have been good. I also bought my initial stake in BAC last december in the mid $5's. However, despite this and the market being euphoric and only looking at positives currently, I still find big bargains out there. At least enough to fill a diversified portfolio. While I have a decent size short position on what I consider very overvalued names with so so fundamentals, my current cash position is quite light. It will increase a bit in February with one and hopefully two deals getting done, but nowhere near your level. If you had said 20 or 30% cash, I would not have mentioned a word, but 60% certainly sound like a major market call. Despite the market advance, it still does not feel like 1999 or 2007. Many things are now turning positive such as housing and autos which are major forces, but I agree that other things could derail all that. I just find it hard to predict with any certainty. Anyway, you have a fiduciary duty to your investors and it looks like that you are delivering big time to them so great job. However, if there are bargains that you like and that you pass on them because of a strong opinion on macro or because 2012 was such a great year then I am concerned. Cardboard

Really surprised Moore that you went to 60% cash based on a macro call: interest rates direction and their effect. As you probably know, 1994 showed some pretty steep declines in bonds and long term treasuries while the S&P still went up 1.3%. I find it also surprising since just over a year ago you kind of implied that anyone moving heavily to cash in his or her portfolio was most likely an amateur managing a few thousand dollars. You sounded very convinced that one should always stay invested if opportunities are found despite macro. Is BAC not a deal under $12 and under tangible book, not even book? If you still like precious metals, there must be tons of bargains in that field. No? Cardboard

Well, I am glad that they shot him. The plan you are talking about would have costed millions to the American people, lasted for years and made him a star. Then waiving the death penalty? It is not like we are dealing with Hirohito here. The way they did it and to spread his ashes in the Indian Ocean was the best way to make him "vanish" from the mind of millions. Cardboard

I don't see why Stevie Wonder could not get a gun to defend himself. Have you ever seen Bloodsport? ;D I did not think that this thread would turn into gun control, but some seem to like the topic. Anyway, IMO, this gun control debate has two parts: 1- Significantly reduce the access to semi-automatic, large magazines weapons or the typical weapons used in mass shootings. 2- Reducing the death rate by guns in the U.S. which comes largely from hand guns during various altercations such as domestic violence and crimes. So addressing Newtown via gun control should be done mainly by reducing the access to military style weapons and IMO, the NRA should not have that much of an issue with it. Although, as I have mentioned previously, we have serious control over these weapons in Quebec and still had many mass shootings with these. Some dismissed that fact, but other incidents have happened worldwide, so it is more than just a statistical outlier. So, it is a step forward, but not an all inclusive solution. Regarding hand guns, they could also be used for mass shootings since many of them are semi-automatic. However, the problem using these for mass shooters is the lack of a large magazine and their imprecision. I don't think that they create either the kind of power trip that these idiots seek when they go on a rampage with a machine gun style weapon. Moreover, if you start preventing the access to regular hand guns, then you get right into the #2 amendment which makes it near impossible to pass into law IMO. So sure, removing the access to hand guns would likely reduce the death rate in the U.S. by a lot. At the same time, I do feel compassion for guys like Ericopoly and rkbabang who carry such weapon to defend themselves against criminals and are unlikely to ever fire it on a human being. It becomes very hard to decide who should have one and who shouldn't. A much broader solution would be to find a solution to make U.S. cities much safer. Reducing the poverty and unemployment rate in the inner cities would certainly reduce crime significantly and would be much more moral than just going after hand guns. Cardboard

And what about the radical distortions of MSNBC? Libel and hate goes on unchecked on that network. While Fox News is hated by the left, they at least try to keep some emotion in check and reporting the news while MSNBC is all about expressing disgust for anyone aligned with the right. Fox News is also the only news network that supports the right while all other heavily gravitate towards the left except maybe CBS. Personally, I don't like at all this kind of reporting. All reporting and journalism should be neutral. In school at some point, they taught me that the editorial was the place to express such thing. Cardboard

"Monday the network will broadcast a continuous photomontage of white people." That is absolutely disgusting! So if someone is politically opposed or says anything contrary to the current party then he is a racist and has to be white. This leftist garbage or using race to discredit the opposition is some of the worst stuff that I have seen in politics. An extremely bad precedent which should be severely condemned. And it does not stop there. Some in the left even called Tim Scott or a recently elected black senator (and the only one), who is a conservative in South Carolina, someone who is not in support of equal rights! Allen West in Florida was also dismissed by the left. In all my years working and managing various people, I have never judged anyone based on their race, faith, gender or any other visible difference. I have always given responsibilities and then judged based on their individual accomplishments. For your information, I have never seen any trend pointing to me that one group was better than any other. Meritocracy has served me well and should be the only tool used to reward and suggest improvement to any individual. I am personally very disappointed by this president and the fact that he is like the last two or creating his own catastrophe down the road along with the Fed which this time around will be a fallout of government bonds and related public finances. Clinton for his part created the Internet bubble which ended up in a crash and Bush, the real estate bubble which also ended up in a crash. My disapproval has nothing to do with race, but mismanagement of public finances and the fact that interest rates and all kinds of asset prices have been manipulated now for over 25 years. This constant desire to avoid any pain at any cost has resulted in much higher costs to the poor to middle class by increasing their cost of goods significantly (housing, car, food, energy, overpriced investments). A few percentage points savings in interest rates simply does not compensate for the large increase in cost in all other facets of life with no offsetting gain in income. What Fox News is doing is one thing, but for the left media to call anyone a racist because he or she differs from current decisions is wrong. To prevent blame or opposition against any individual actions because they are part of a minority is discriminatory. It destroys meritocracy and the right of each individual to perform at their best. Cardboard

With proper incentives these guys will change their tune. http://blogs.reuters.com/unstructuredfinance/2012/12/26/obama-hearts-el-erian/ Cardboard

And... Anne Hathaway certainly looks a lot better than older and bitter Meredith Whitney! :D Cardboard

What happens when you cross into a new year with a short stock position in your portfolio for the CRA? Do you book a gain on the full sale proceeds this fiscal and then "reverse" it based on your actual gain/loss in the next fiscal? Or do you simply book the actual gain/loss when you buy back the stock? Since you don't know your average cost basis until the stock is bought back, you can't calculate your gain or loss. Right now, it would be a mark to market loss for me. I could buy it back now and book the loss this fiscal year although, it is not a very large amount and then I would have to wait 30 days before re-entering the position to avoid a superficial loss. Cardboard