ERICOPOLY

Just go back to the old days before FFH delisted from NYSE. You could buy LEAPS on FFH. Right before the short selling ban in 2008 I was losing money for the year thus far as FFH drifted down with the market panic, but I knew FFH was making money under the covers because of the great information on this board. Then posters on the board starting commenting about AIG's soaring CDS value and the general gains made in the CDS portfolio, the bond gains etc... I reasoned that if the gains were booked, stock would go up. I reasoned that if the gains would reverse (market rally), then the stock would go up. So I went 2:1 notional leverage using the deep-in-the-money calls. Things like the $120 strike LEAPS when the stock was at $220 range. Then out of the blue a short selling ban was announced, FFH was on that list, and Fairfax issued a press release about large realized gains on sale of AIG CDS. The stock went from $220 to over $300 in a couple of trading sessions. Then it went all the way to like $340 or something and along this way I booked my gains. Then I added the leverage again in early 2009 when it was back below $240. Repeat. Then Cardboard handed us the ORH buyout on a silver platter. Bam! This was a bit like betting on the fixing of the World Series which is from the Rothstein playbook.

I believe I could get there just at 10% annualized returns from here. Of course, by then a billion likely won't be such an exclusive club and Forbes might be talking only about the people who are in the $100 billion club. EDIT: Two of my grandparents lived beyond 90. Besides, maybe I'll live to 150 -- they'll be able to grow new organs for me by the time I'm hitting 90.

I had never heard of the guy until PlanMaestro mentioned him. Haven't yet seen any boardwalk empire.

Has anyone figured out who is in my profile picture?

2007 -- FFH gains 2008 -- FFH gains (a lot of them because I was levered in the calls the day of the short selling ban) 2009 -- FFH gains, WFC gains (some), and ORH gains (account went up 50% the day of the buyout offer -- thanks to Cardboard) 2010 -- FUR gains, C gains, not sure I remember what else 2011 -- lost 35% in RothIRA 2012 -- Up 300% from BAC (it doesn't show in the numbers given because it excludes January 2012 which was epic month)

And this one is cumulative: Cumulative.tiff

It is only possible because of this board, but anyways here's what Fidelity is telling me for the RothIRA -- they have, as of the end of January, been tracking my performance for exactly 10 years: ROTHPERF.tiff

I already have more than 50% of it in a RothIRA -- for the next 20 years it can't be moved anywhere without getting hit with tax. After that, I'm not sure why I'd move it anyway (unless tax laws change). I can set up trusts as beneficiaries of the RothIRA, but as long as they don't yet have the assets there would be no need to file with the SEC. It would be epic to get into those kinds of numbers in a RothIRA. No drag from taxation and completely under the radar (Forbes won't find out).

Hopefully it's only if you directly own 100m worth of stock. In other words, maybe if you own 50m of mutual funds and 50m of stocks, then no filing is necessary? Otherwise it seems like this is an invasion of privacy -- how do you keep your wealth secret from your children if you are filing with the SEC? http://www.sec.gov/divisions/investment/13ffaq.htm ''...but a natural person who exercises investment discretion over his or her own account is not an institutional investment manager" Nice. Thanks.

Hopefully it's only if you directly own 100m worth of stock. In other words, maybe if you own 50m of mutual funds and 50m of stocks, then no filing is necessary? Otherwise it seems like this is an invasion of privacy -- how do you keep your wealth secret from your children if you are filing with the SEC?

At least Mr Confident at the ECRI can now be said to be wrong: http://finance.yahoo.com/blogs/daily-ticker/ecri-lakshman-achuthan-no-m-not-wrong-still-145239368.html

I would own a large allocation in Fairfax if I couldn't own BAC. I do have 25% in AIG warrants at the moment -- that's the only non-BAC thing I own. So if BAC were taken away I'd probably put 50% in FFH and buy more AIG warrants (to a 50% allocation). Eric, I am trying to get up to speed on Fairfax. The fact that you say that means a lot. Could you let me know why feel so strongly about Fairfax? I have read the Fairfax board. Obviously the lack of uw profits doesn't bother b/c you like mgmt, ability to allocate capital, etc. I don't feel strongly that Fairfax is going to explode to the upside. I feel strongly that if I venture out on my own, my net worth is likely to explode to the downside. So choosing Fairfax is really a signal that I don't trust my ability very much. I view it as a hedge fund of sorts. They do a good job over time and unless something really easy to understand like BAC comes along, I'm pretty much better off to be with them (or another manager. This is why I bought the minimums in each Berkowitz fund. I know very little and will eventually need to park the money somewhere -- quite likely at a time when there is nothing simple enough for me to figure out. Interesting. I actually can't buy BAC or AIG due to them being restricted securities at my wife's employer. And I don't think I know enough to do a good job of picking other companies. So I've entrusted most of our net worth to Watsa, Berkowitz, and Chou. Good to know Eric shares this thinking. The advantage though of knowing so little about business is that when something simple enough to understand comes along, it's a really good one!

I would own a large allocation in Fairfax if I couldn't own BAC. I do have 25% in AIG warrants at the moment -- that's the only non-BAC thing I own. So if BAC were taken away I'd probably put 50% in FFH and buy more AIG warrants (to a 50% allocation). Eric, I am trying to get up to speed on Fairfax. The fact that you say that means a lot. Could you let me know why feel so strongly about Fairfax? I have read the Fairfax board. Obviously the lack of uw profits doesn't bother b/c you like mgmt, ability to allocate capital, etc. I don't feel strongly that Fairfax is going to explode to the upside. I feel strongly that if I venture out on my own, my net worth is likely to explode to the downside. So choosing Fairfax is really a signal that I don't trust my ability very much. I view it as a hedge fund of sorts. They do a good job over time and unless something really easy to understand like BAC comes along, I'm pretty much better off to be with them (or another manager. This is why I bought the minimums in each Berkowitz fund. I know very little and will eventually need to park the money somewhere -- quite likely at a time when there is nothing simple enough for me to figure out.

I would own a large allocation in Fairfax if I couldn't own BAC. I do have 25% in AIG warrants at the moment -- that's the only non-BAC thing I own. So if BAC were taken away I'd probably put 50% in FFH and buy more AIG warrants (to a 50% allocation).

I remember a lot of the cheaper stuff going up during the crash of the Dot Com growth bubble. And that was no small correction. BUD for example, went up a lot. Jae Jun at oldschoolvalue.com has done some work running backtests on various value strategies with stockscreen123. His results are here: http://www.oldschoolvalue.com/stock-screener.php It appears every strategy was severely punished in the 08' crash, with particularly devastating drawdowns on NCAV, netnet working cap portfolios, and net net working cap increasing models. In 2000, He shows drawdowns on most value strategies as well. I'm not sure about 99 though. Of course, this is noly true for a generic basket, not individual stock picks. Stockscreen123 recently moved to Compustat data (which accounts for survivorship bias), which was likely used in Jae's backtest as he recently revamped the screener, so the data is likely correct or close to correct. Greenblatt's reported magic formula results show up 12.8% in the 2000 bust which is very interesting, but was definitely hit fairly hard during the 08' crisis. I suspect the MF would be down if we face another "most assets are priced lower" periods (as opposed to the dot-com bust), but this is just a guess. Cheap, quality stocks seem to perform the best in most periods up or down given a 10 year time frame though, which we all know or wouldn't be members of this forum! While I don't claim any ability to predict the shorter term returns of the market, the Shiller PE does a pretty damn good job in the 5-10 year range. So, even though some stocks are bound to do well during an overall expensive market period, it seems playing the cheap quality game, in cheaper markets might be a decent idea. Particularly for more diversified investors who are less confident in single names... I wish I understood banks better:) As it is though, I am not finding tons of companies that are cheap, and can understand. The 08 crisis wasn't a stock market crash (in my words). It was a global financial crisis. Even money market funds were questioned. It was very different from the Dot Com collapse which was just a revaluation of equities. I remember some very cheap "old economy" stocks -- things at like 4x or 5x PEs even during the height of the stock bubble. So it was a bifurcated market -- that was dirt cheap stuff even in the face of the biggest market valuation bubble in history. That was why the small cap value managers did very well during that period. Anyways, I just wanted to remind that if you can find really cheap stuff it will take care of itself perhaps and waiting out a market crash might not be useful.

I remember a lot of the cheaper stuff going up during the crash of the Dot Com growth bubble. And that was no small correction. BUD for example, went up a lot.

I haven't seen such a filing for Warren Buffett's private holdings.

I may or may not be 4 triples away from being a billionaire. How will Forbes know? Will Fidelity or Interactive Brokers sell me out, or will I have to call the front desk at Forbes and ask to talk with the 400 list guy?

There should be an asterisk next to his name in the Forbes list. * born on 3rd base

I'm guessing Moore (and many others) sold some of his BAC in January/February this year without attempting the constructive sale. I'm pretty sure he paid about $7 for it last summer. What if he wants to buy it back at $8 or $9 after a pullback this summer? He could have deferred some gains for his investors if he had done a constructive sale instead of just selling his shares. I guess that's the typical time that you'd want to employ this -- whenever you sell due to "frothy" market but might later want to get back in to that very stock after the market has blown off some steam.

I believe you got it right. You anticipated a pullback so you hedged. But you only have to pay tax on the $5 gain (the size of the pullback in the stock price) instead of paying tax on $15 of gain. So it's a nifty trick. Prior to this rule coming into effect (under Clinton's second term), there was no requirement to ever close out your hedge. So you could suspend your capital gain into perpetuity (or until you die to get the tax-free step up in basis deal).

Can you direct to any sources on these types of option strategies? I.e. using options to maneuver into/out of a position for an indirect benefit. I.e. avoiding taxable events, selling puts to enter a position, selling calls to exit a position, etc. I don't have any sources. No book or website that I know of. My usage of options comes from knowing that calls give you the right to buy at a certain price, and puts give you the right to sell at a given price. From that knowledge, think strategically.

Back in Aug 2009 I wrote deep-in-the-money FFH calls (to hedge that position while raising cash) and used the proceeds to purchase ORH deep-in-the-money calls on speculation of the buyout. I did it this way to avoid paying capital gains tax on my FFH position. Once the buyout happened, I sold the ORH calls and bought back the FFH calls I'd sold. I paid tax on the ORH sale, but did not also have to pay tax on my FFH position. The "constructive sale" rules changed the holding period of my FFH position for US tax reasons -- it reset the short-term capital gains clock on my FFH position to the date of the hedge activity and restricted me from selling or hedging FFH for the next month (the penalty being a taxable event if I did). Given that value investors often seek to trade into positions of better opportunity (and possibly trade back later on), this is a valuable trick to know about. Important though to read all of the rules on this -- you need to close out that hedge at the latest by the end of the first month of the new year. So really it's utility is limited to short-term purposes.

I like Moore but he needs to admit that Ericopoly was right about the price of gas in California as evidence of hyperinflation (his take) vs. a short-term supply issue (my take). I can't suffer the survivorship bias of gloating with only the predictions that are working out :D

I joined in 2005. It has been life changing. Thanks Sanjeev!