txlaw

My take is that these value guys starting gold funds are not really talking about their true motive for setting up these funds. That is, they say they are long gold, but I think they're really trying to capitalize on a frenzy for gold, where everyone and their mom is saying that gold should be a part of one's asset allocation strategy. I am also very nervous about gold, although I've bought a little just to see how it performs. Nothing like putting some capital at risk to get you to pay close attention to how the investment works. I believe Soros has actually said that he thinks gold is in a bubble and that he's going to ride it up.

Sprott, Paulson, and Einhorn have now created gold funds for their investors where they have supposedly taken long bets on the price of gold. Of course, if gold merely stays at the same price, they still collect fees on these funds since they are managing them. It seems to me that this is a win-win situation for the fund manager. The fund manager can stabilize and increase AUM by saying, "Look, we've got our investors covered for inflation/currency devaluation by creating these gold funds and having positions in these funds." Thus, these guys get more juicy fees coming into their asset management holding companies. Any appreciation in gold is gravy for them. So here's my question: is there a way for us retail investors to become a gold croupier? Or are there any other publicly traded companies that take advantage of the fear out there as croupiers? I believe brokers who derive a lot of their profits from market making should see increased revenues due to the increased amount of fear in the market. Is that correct? Any other ideas?

David Rosenberg on deflation -- http://www.zerohedge.com/article/rosenberg-pig-farmers-placing-short-bets-now-we-retest-sp-900 Krugman on potential lost decade -- http://www.nytimes.com/2010/05/21/opinion/21krugman.html?src=me&ref=general Mohammed El-Erian says both Europe and the US face deflationary risks. Wilbur Ross sees stagflation in Europe. We all know what Richard Koo thinks. Choose your investments wisely!

I'm buying. As Seth Klarman has pointed out, you have to take advantage of Mr. Market and average down in times of distress. That's why cash is so important to have on hand, especially when the market is priced for perfection.

http://www.scribd.com/doc/31651852/Seth-Klarman-Notes-170510-CFA-Institute These notes are excellent. If you read this board, David, thanks so much.

I have been very attuned to macro since I suffered some heavy losses owning companies that weren't able to survive the credit crunch. These were pre-value investing positions that I held until they went under. That made me realize that Berkowitz's "kill the company" test is very important, and that test must involve assessing the macro situation. To ignore macro factors is to ignore reality. Rather than hedging per se, I find myself moving into more high quality stocks that will survive dire macroeconomic outcomes, a la Jeremy Grantham, and holding more cash. Some of the stocks I own are also "growth stocks" a la Phil Fisher, although I'm really using a mix of Phil Fisher and Buffett in picking these types of companies. I also bought a little bit of gold as an experiment to see how it will perform in case of a panic or sustained downturn.

Thanks for providing those details, jjsto. That would make sense about their being pissed off at Elzstain for pledging his IFIS stock for a loan. I don't understand why he would do that. Definitely seems imprudent. I actually think it's a good idea for Elzstain to be readying a platform to purchase U.S. CRE. Seth Klarman's recent comments about looking into undervalued, non top-tier CRE seems to drive home the point that there will be opportunity in that market in the near future. Do you have any thoughts on the political/regulatory risk for CRESY's operations? It sounds like you might be familiar with the country risks.

Thanks for posting the LUK annual meeting notes. Yeah, Elzstain definitely does like "leverage." Makes Biglari seem like an amateur! That's one reason why I haven't even tried to figure out CRESY. Elzstain owns a controlling but nonmajority interest in an asset management business, which owns 100% of another shell company, which I think is IFIS. For some reason, wealthy people in Argentina like to form shell companies in Uruguay or Paraguay (or maybe Nicaragua), I think maybe to avoid taxes. IFIS owns a controlling but nonmajority stake in CRESY I think. CRESY owns a controlling stake in IRSA. IRSA owns a controlling stake in APSA. There are a bunch of joint ventures that all these subsidiaries are involved in too, I think. And to top it off, there's convertible debt and warrants in these subsidiaries that Elzstain owns. So, basically, Elzstain controls a ton of real estate in Argentina while only having really put up a small amount of capital for that privilege. I'm assuming that's what C&S were talking about when they meant leverage. Or were they actually talking about debt?

Eduardo Elsztain is an incredibly smart real estate investor. I mentioned him in a post about FUR when I was noting that very smart investors were getting ready to take advantage of a buyers market in U.S. commercial real estate. If you're looking into CRESY, IRSA, Hersha Hospitality, or Alto Palermo, you need to look into Elsztain as well. There is a very good interview conducted by Price Waterhouse Coopers that will give you a sense of what he and CRESY are all about. That Motley Fool article did not mention that IRSA also controls Alto Palermo, a company that owns a bunch of high end Argentinian malls and that has its own credit card program. Those malls are supposed to be pretty damn awesome (think GGP or Simon properties), according to some Argentinians I've spoken to. I actually bought some in the midst of the financial crisis because it was trading below tangible book, but I got spooked because of the illiquidity of APSA. My loss. Of note is the long term goal of CRESY's ag segment, which is to capitalize on the change in diets that is occurring in emerging markets. The profitability of these operations are directly affected by export taxes, which are a very controversial issue in Argentina. Farmers were up in arms about those export taxes. That's what C&S were directly referring to. The government is a major risk factor to consider. The big trade union, which employs like 40% of the population, is very powerful and apparently has a major hand in crafting policy. In general, the government is very corrupt and has turned over a lot in the past. The Argentinians are also not very trustworthy credits. I do not own any of these companies at this time, but I will eventually get around to looking into CRESY. Just like I'll get around to looking into LUK.

Reestablished a position in Hanfeng Evergreen (TSE: HF) and bought some GOOG under $500. Also did something I've never done before -- bought some PHYS (gold) when the market jumped on the Europe bailout. Considering establishing positions in WRB and VOD.

Oh, that's right. I forgot about that stipulation attached to the promissory note deal. You're right on the money there. Paying down the retirement liabilities is a great idea. I was thinking along those same lines. I like the SSW model of finding business before committing. By the way, should I be doing some homework into SSW at current prices?

I thought it was very interesting to hear them say that they have a 10% hurdle rate for the money invested back into the business. But I'm a little wary about adding even more planes to their fleet. It might be better for them to just use excess cash to pay down debt and buy back some shares.

The annual meeting presentation was filed with the SEC yesterday: http://www.sec.gov/Archives/edgar/data/894081/000119312510117146/dex991.htm The conference call is also available for webcast on ATSG's website.

Hilarious. http://www.bloomberg.com/apps/news?pid=20601039&sid=ahpjLamDmkzI

Richard Koo on Greece: http://www.zerohedge.com/article/richard-koo-greece-was-subprime-borrower Paul McCulley on Shadow Banking System: http://www.zerohedge.com/article/pimcos-mcculley-discusses-ticking-3-trillion-shadow-banking-time-bomb-defends-fed-head-regul Both found via zerohedge.

Yes. I have used Etrade to buy FRFHF in odd lots. You can actually trade on the TSX with Etrade, but you can't buy FFH in odd lots (based on when I last tried). Txlaw, I have an Etrade accounts but my FFH stock is in an IRA account and they tell me I can't buy stocks on the Toronto exchange in that account. That doesn't make sense to me. The IRS does not place such a restriction on IRA investments. Any insight other than Etrade not giving me the straight scoop? I've also called them before about trading on the TSX in my Roth IRA. They told me that they didn't have that capability but that they were considering adding it. Whatever. I have no idea why it's not possible.

Yes. I have used Etrade to buy FRFHF in odd lots. You can actually trade on the TSX with Etrade, but you can't buy FFH in odd lots (based on when I last tried).

I don't have full access. I've never applied for a full member spot. But I'll probably try to take a look at KSP over the next week or two if I have time.

Well, last I checked there were also odd lot issues for me with Etrade. I'm not looking to buy 100 shares of FFH anytime soon. Wish I were, though.

Gotta love WRB. Don't own any, but it appears to be a very high quality company. Just imagine what they could do if they got a real investment team in there.

Yeah, definitely. I was tempted to sell a little bit after the huge run up, but after our discussion, I realized that would be stupid. Thanks for that. :) Will have to check out KSP. Looks interesting.

I just buy FRFHF rather than buying FFH on the TSX through Etrade.

Yes, I bought some health care-related stocks. My portfolio consists of financials, lease cos, health care, and SFK. I'm quite happy with it. Gonna keep a substantial amount of cash on hand though.

I laughed out loud when I saw that article this morning.

Yeah, that's cause the people on this board are smart.