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beerbaron

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Posts posted by beerbaron

    2011 results

    in General Discussion

    Posted

    For those of you that use IRR how do you normalize the market return for your IRR?  Lets say you have a big inflow at the bottom of the market and your IRR is greater than your simple rate of return how do you develop a market benchmark for your IRR to account for the inflow at the bottom of the market?

     

    Packer

     

    It's a pain to do and I have stopped doing this 2 years ago. What you could do is use IRR and then do a simple return calculation taking into account all the cash influx happened at the beginning of the year. Then, take it somewhere in the middle for your return.

     

    Large cash influx influencing IRR will solve itself over time... it's a lot harder to transfer 100k then 1k so as your portfolio grows.

     

    Beerbaron

    Apple's Tim Cook gets 1mn share "retention" award

    in General Discussion

    Posted

    I'm sorry but there is no excuse for paying somebody $400mn+ as a retention award.

     

    Not sure if Tim Cook deserves $400mm. But saying that "there's no excuse" is wrong, IMO. There are definitely cases where $400mm+ would be justified, and maybe this is one of them.

     

    I'm not an Apple shareholder, but if I had been over the last few years, I would not look twice if the board had given Steve Jobs $2bb+ as a bonus. Would have been well worth it. So, it may be the case that Tim Cook doesn't deserve $400mm but there definitely exist good "excuses" for doing so.

     

    Actually the board did give Jobs a stocks options worth about 10B$ at today's stock price at the beginning of the 2000s. He later forfeited them for a lump sum... a great visionary but not a great capital allocator ;)

     

    BeerBaron

    Taxation dilemma

    in General Discussion

    Posted

    I think that you are a bit overzealous on this.

     

    (a) frequency of transactions - a history of extensive buying and selling of securities or of a quick turnover of properties,

    Not likely to happen if you are a value investor

     

    © knowledge of securities markets - the taxpayer has some knowledge of or experience in the securities markets

    If you don't have a CFA or a real diploma it's practically unprovable that you know much about securities.

     

    (d) security transactions form a part of a taxpayer's ordinary business,

    Define ordinary... is 1 hour a day a business or a hobby? How can anyone prove that you spend more then 1 hour a day on reading 10-k?

     

    (e) time spent - a substantial part of the taxpayer's time is spent studying the securities markets and investigating potential purchases

    Again. Unprovable.

     

    My point is that it would be impossible for the CRA to prosecute you. You could have compounded your money at 15% per year by pure luck. After all, that's what the random walk theory is all about right...

     

    BeerBaron

    Ready to Try On Mr. Buffett's Shoes (WSJ)

    in Berkshire Hathaway

    Posted

    Humm, did Mr. Weschler start to stockpick for BRK already? In BRK last 13-F they had a good amount of DTV...

     

    During the third quarter, which ended Sept. 30, the size of Mr. Weschler's publicly traded stock portfolio shrank from about $2 billion to $1.2 billion. That was partly because he unwound some positions but also reflected losses in some of his major holdings, including DirecTV, the satellite-television company, and DaVita Inc., a health-care company.

     

    BeerBaron

    2011 results

    in General Discussion

    Posted

    Just finished calculating.

     

    4% IRR for 2011.

    Not bad considering the TSX total return was -9% and S&P500 was +2%.

     

    It could have been much worse considering I was 100% invested when Europe crisis happened.

     

    BeerBaron

    SHLD anyone?

    in General Discussion

    Posted

    My options strategy gives you 1.59x leverage without increasing your downside.  Reinvest all of the proceeds from writing the put into purchase of the call.

     

    Same downside.

     

    1.59x upside.

     

    I will admit to not considering options strategies because I am simply out of my depth there.  I've spent little time thinking about these things because they seem overly complicated and I fear the unknown.  But, if you'll indulge me a little learning exercise, I'll see if I can't sort out the math on your suggestion just to see where it takes me.

     

    Let's say i have $8,000 in capital to invest in SHLD.  I can buy 174 shares at $46

     

    or

     

    Keep $8,000 in cash, sell 2 of the jan 2013 $45 puts for $2,870, and buy 2 of the jan 2013 $45 calls for $1,790.  This leaves me with $9,080 in cash and my two sets of options.

    *************

     

    If SHLD goes to $40 by expiration  I lose $1,043 on the common (-13%)

     

    or

     

    my puts get exercised at $45 costing me $9,000 and my calls expire worthless, netting me $80 in cash and $8,000 in new SHLD common, or total assets of $8,080, a gain of $80 (+1%)

    *************

     

    If SHLD goes to $70 by expiration I gain $4,174 on the common (+52.2%)

     

    or

     

    my puts never get exercised and my calls are now worth something like $5,000 ($25 x 200).  With my cash of $9,080 I have total assets of $14,080, a gain of $6,080 (+76%)

     

    Is that the general gist of the math?  It ignores commissions and assumes you can execute at the prevailing quotes, but I think that is it.

     

    Is there some shortcut way to identify when the options trade looks to be clearly better than using the common, or is it just a matter of doing simple scenario math like this each time you consider a trade?

     

    Thanks in advance if you are kind enough to assist in my education.

     

    Your example is not what Eric talked about.

     

    Scenario 1: You buy 100 Shares of SHLD at 48$

     

    Invested Amount: 4800$

    Loss if stock goes to 28$: 2000$

    Gain if stock goes to 68$: 2000$

     

    Scenario 2: You sell 1 put contract and buy 1.58 call, both with 45$ strike

    Invested Amount: 1420$ (call purchase) - 1420$ (put selling)= 0$

    Loss if stock goes to 28$: (45-28)*100= 1700$

    Gain if stock goes to 68$: (68-45)*158= 3634$

     

    I believe it's called a synthetic long position.

     

    BTW, anybody knows why it's always SHLD that seems to have these weird options pricing. I remember WatsaIsRadiant posting something similar in 2009.

     

    BeerBaron

     

    Gold Standard Causes Depressions

    in General Discussion

    Posted

    Peter, go easy on the guy he made an honest assumption. He just forgot to mention it was an assumption.

     

    On the subject of Buffett shorting stocks. I have not found any statement ever mentionning him shorting anything. Francis Zhou in one of it's interview mentions Buffet made a short in the 50's and almost lost it's shirt, but I could never find the concrete data about it.

     

    BeerBaron

    How to teach kids about money

    in General Discussion

    Posted

    I remember when I was about 8th years old. We went camping and there were some arcades there, so as any young kid did I asked for some money from my parents. My dad gave me two bucks and 30 minutes later the whole amount was gone, so I went back for more money. Then my dad offered the following deal:

     

    He would give me 2$ right away and, if the next day I could show him I still had at least 1$ then he would give me another dollar to play with. If I could not show him I still had a dollar then he would not give me money anymore for the rest of the vacations.

     

    I believe it had a powerfull effect on me as to teach me not to spend all my money at one time and also shown me the power of compounding.

     

    BeerBaron

    Death of equities?

    in General Discussion

    Posted

    How is holding 40% of your portfolio in FFH, which is inversely correlated with the market per your comment above, any different than holding a 40% short position in the SPY or perhaps a 40% position in the TLT? Not saying it's a bad thing - IMO, that's a very smart portfolio construction, but it's just a bit deceiving saying you're fully invested with a 40% position that is virtually a cash-equivalent.

     

    FFH is NOT cash. There is significantly more risk owning FFH then owning Cash. the stock is uncorrelated to the general market but it does not mean it is cash equivalent.

     

    What if the guys had Utilities in it's portfolio, should he account for those a virtually cash?

     

    BeerBaron

     

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