arbitragr

Maybe there's a miscalculation in valuation. JNJ isn't the cheapest stock around. And with MSFT, maybe you're not pricing in MSFT's problems with long term growth. It's a bit like DELL really.

I haven't posted in a long time. But I just had to come on here and post because of the values we're seeing out there. Now is the time to build up some positions. Really depends on what sort of an 'investor' you are. Are you a orthodox Buffett/Graham investor? Well, you can ignore the macro and things look pretty interesting. Or are you a new age investor, who takes into account some of the macro and maybe some technicals? There's a constant battle between global macro and fundamentalists, and at a certain point in time, one outweighs the other. Right now, the fundamentals look attractive so much so that I think now is worth building up positions. I like to wait for when the fundamentals and technicals line up. But just like in July earlier this year, and also at other times (i.e. March 09) ... it is always darkest before dawn. "Be greedy when the world is fearful" ... that line of thought has always worked for me time and time again. Of course there are long term issues surrounding some of the well developed economies in the west, and this may mean that current 'investments' may turn into a trade to avoid long term realities. Howard Marks' recent memo: "Markets are safer when fear balances greed, and when worry about losing money balances worry about missing opportunity. We don’t like it when fear rears its head and stocks drop, but certainly that creates a healthier environment in which to be a holder, and one which should offer better buying opportunities. Over the first part of this year it was easy to say prices had gotten ahead of fundamentals; all things being equal, that now seems less true. The current positives for investors include moderate valuations, rising corporate earnings and the likelihood we’re already in a recovery. On the other hand, I continue to feel consumers are too traumatized to resume spending strongly, and I see unpleasant and rarely contemplated long-term possibilities including those discussed above. In particular, conservatism, austerity and increased savings are good for economic units individually but bad for a stagnant overall economy. Bottom line: anyone who invests today in a pro-risk fashion out of belief in the recovery must be confident he’ll be agile enough to take profits before the long-term realities set in." Hope this helps add clarity of thought.

Is this gambling or what ...

Looking back on this post it's amazing to see how long things take to play out. Just goes to show that when you theoreticize some idea based upon logical assumptions, even though it happens in your mind in an instant ... the market can take months and even years to play out. From this post in Feb it took almost 3 months to play out. My hedges are off now unfortunately. :'( At least I was on the right track.

Although I follow the board, I know nothing about Biglari/Steak n Shake ... as I don't follow it. Anyone know what actually happened? is it just an issue of integrity?? Saw the stock price ... it's tanked recently ... or was that b/c of greece??

This is the single biggest misunderstanding about the entire sad episode. The structure was never guaranteed to crash. It was not engineered to fail. The game was far from fixed. You will be surprised how fixed the game is. I have worked for a broker/top 10 investment bank in the past, and market makers regularly take advantage of their clients b/c they have more information. Example: if you have a stop loss on your position, it's registered on the system. with a bit of searching and maybe some technology, your broker will hunt for these stop losses, and especially if its a small volume position, will clear out all the stop losses with their own capital, and then buy it back and on sell that in a rising market or to buyers ('ask' side of the book) who are willing to pay a higher price. They can do this b/c they can see all the orders on the system, and see the market depth of volume. this i found especially happened in the forex markets where the markets are unregulated without a central exchange. Brokers and market makers are talking to each other every day in the forex markets. Market makers have all the power in unregulated markets. Another example is in a highly volatile market, brokers/market makers will increase the spread you pay just as you are about to put a trade in, especially if you have a limit order registered on the system. My feeling is that b/c the CDS and CDO markets were unregulated the same sorts of advantages and behavior occured in those markets to/from the market makers. If you think the game isn't fixed, then you are either inexperienced or naive. Market makers, especially ones that have smart, greedy and energetic people working for them (i.e. Goldman Sachs) always win ... or always try and fix the markets in their favor. The markets are not a casino, however the behaviour is similar to how the house always tries to fix the game in their favor with activity + insight. You think that GS with their position in the market place, wouldn't have been able to see Paulson's positions? and his thesis/reporting materials? Fabrice Tourre was well aware of the fact that there was a housing bubble in place as early as 2005/06 (it's a long read but NYT reporter Gretchen Morgenson was in the loop way before everyone else: http://www.nytimes.com/2009/12/24/business/24trading.html)

Difference between this example, and what Paulson/GS did was that Paulson actually had meetings with ACA (Vanguard in your example), and gave the impression that he was going to go long, not short. And then ACA (Vanguard) had meetings with Mr. Tourre and he mislead them saying that Paulson was going to go long. Tourre and GS had a motive to mislead on two counts; 1) for the fee and 2) to offload risk onto ACA, ABN and IKB. Then ACA (Vanguard) got other investors in the vehicle (ETF) - ABN and IKB - also on the marketing / selling of the premise that Paulson was going long.

Paulson & Co and other hedge funds shorted RBS and other UK banks during the credit crunch. Guess he took advantage of them twice, 2nd time around I bet he was thinking about what incompetence for RBS to acquire ABN with all the toxic assets they held on their books. Goes to show you shouldn't trust your broker for anything, research, trade ideas ... especially if they're on the other side.

Lot's of supply right now. I think Anadarko, or one of them, have been producing gas at very efficient rates, lowering cost and pumping more supply onto the market, leaving higher cost operators at a disadvantage, especially when it comes to technology (shale gas?? off the top of my head as i write this, don't have much time ... )

Usually for the annual meeting it's full as heck. I know that was the case about 2 years ago when Iwent. There's no point in trying unless you want to wait a couple of hours on the day, when WEB arrives with his pals and eats.

Home ownership encourages household formation and stimulates economic growth. Manufacturing growth only creates new jobs to a certain extent, because productivity growth is increased via technology. On the other hand, when home ownership is increased, it stimulates building activity creating more jobs for tradespeople and builders, financiers and home lenders, home furnishings etc. A secondary effect of this maybe that as household formation increases it increases the rate at which births occur b/c families have a stable environment with which to raise children, and so population growth is increased too further stimulating economic growth. Although some could say that this government intervention into the housing market is part in parcel of why we had a bubble in the first place, since Fannie/Freddie were pushing for home ownership rates about 70%. Lax lending standards ensued especially as banks were just underwriting so they could onsell to Fannie/Freddie. Thus republicans/libertarians have some argument when they say that the current regime is to excessive in terms of regulation, since it was government intervention in the housing/credit markets whilst at the same time lax oversight of that intervention under Bush that created the problems in the first place. The government tries to help, but sometimes in the long term it actually hurts Joe The Plumber.

You forgot about commodities. :)

Bonds are not where you want to be right now. Especially long term bonds.

Thanks Matt. I heard his current edition why highly tongue in cheek. Love his masterful grasp on history and depth of knowledge on the fixed income side nonetheless.

I haven't read up on the implications of the 'proposed' new tax. But we've touched upon Bermuda reinsurers previously. Have a look at that Buffett buys munich re thread.

Unfortunately the thesis is already priced in by now ... looking at the moves on Good Friday (I don't think the Fed would raise above 1% any time soon). There's still opportunity, however the risk is higher ... or in traditional value investor parlance ... the margin of saftey is smaller.

There are options on everything these days. In any event, watch the big moves on Monday for the securities and instruments that didn't get to make a big run up on the recent economic data released on Good Friday.

Guess nobody finds my posts interesting ... Oh well ... don't say I didn't try. :D ;)

Looks like that Chile quake is having an impact after all. Just when you thought you had something so right ... bam ... out of the blue comes mother nature. March 19 (Reuters) - The massive earthquake that rocked Chile recently caused an estimated $30 billion in damages to the relatively stable Latin American nation's infrastructure, homes and industry. The 8.8-magnitude earthquake might cost the insurance industry up to $7 billion in damage claims, the world's top two reinsurers Munich Re and Swiss Re said on March 10. [iD:nLDE6290ON] Global insurers, also hit by February's European wind storm Xynthia, have since come out with their initial loss estimates from both the catastrophes. Below are the loss estimates by some U.S.-based reinsurers: Company RIC Loss Est from Loss est from Chile, in $ mln Xynthia, in $ mln PartnerRe Ltd 220-320 40-70 Everest Re Group Ltd 225 25 Validus Holdings Ltd 170-270 20-30 XL Capital Ltd 140-205 20-25 Platinum Underwriters Holdings Ltd 85* NA Montpelier Re Holdings Ltd 75-100 10*** ACE Ltd 75** NA Endurance Specialty Holdings Ltd 65** NA Transatlantic Holdings Inc 60-90* NA Axis Capital Holdings Ltd 60-125 10-20 Allied World Assurance Co Holdings 55-75 2 Flagstone Reinsurance Holdings Ltd 50 3-6 Max Capital Group Ltd 10-20** NA * Indicates combined losses from all catastrophes ** Indicates combined losses from both mentioned catastrophes *** Indicates combined losses from Xynthia and the Australian hailstorms will be lower than reported figure -- RenaissanceRe Holdings Ltd said impact of the events on its financial results will be significant and could be material, but did not provide specific numbers -- These numbers are preliminary and may change with higher claims and rise in actual damages

hahaha ... was about to post but you but me too it: http://www.youtube.com/watch?v=NmcxIokfOiE http://www.youtube.com/watch?v=NmcxIokfOiE :D :D

Author of that article is wrong about Australia. Doesn't matter what happens to China, they still are going to want to build the infrastructure they need. And that takes resources. There's only 2 main places they can get it; Australia or Brazil. If China doesn't take all the resources, India is waiting in line. Same with all the other emerging markets.

Would you buy a car that accelerates by itself??

Although this is not a company based idea, it's still an idea with high probability and conviction. Thesis: The Fed will start to raise rates sometime this year or early 2011. How you can take advantage of this: shorting long term bonds. Ways to do this; the following instruments will allow you to short long term Treasury bonds: - IEF --> iShares Barclays 7-10 Year Treasury - TLT --> iShares Barclays 20+ Year Treas Bond - TLH -->iShares Barclays 10-20 Year Treasury Bd - 10 year bond futures: http://www.cmegroup.com/trading/interest-rates/us-treasury/10-year-us-treasury-note_contract_specifications.html ("ZN" for IB) Watch the unemployment numbers. Bill Gross stated most recently that the yield curve will start to steepen as unemployment decreases.

Shoplifting ... meh ... not that much of an issue when you're young. It might be if he did it repeatedly. But selling your sister's bike ... now that's bad ... especially if the bike was all girly and pink, and his motive was to make money off it. :D

Because the book is huge. And I don't have all the time in the world to wade through it right now. Might do so in future. But if someone who knows, and can point it out, then I won't have to do all that digging. :)