ericd1

I recently read an article about long/short ETF pair trades. While it sounds interesting, it appears to be more of a market neutral (low volatility) strategy. Any thoughts, or ideas about this strategy in the current market environment?

I've thinking about how to help my heirs prudently manage their inheritance. I would like them to have a trustworthy point of contact that can help them with their financial questions and portfolio management. We're not talking mega bucks here, but an amount that if managed properly could help them throughout their lifetime. Because I've been a self-directed investor for 40 years I'm probably not aware of many possible options. Appreciate your comments...

Cardboard, Tis only my opinion, but regarding Walmart's lackluster U.S. revenue growth. It appears to me that shoppers are trading up to other stores (Target, JCP, etc.) now that the economy has stabilized.

Nodnub...Try this link... http://online.wsj.com/mdc/public/page/2_3024-Preferreds.html?mod=topnav_2_3000

If you have a subscription to the WSJ online - Current yields are provided under market data

Small Cap, I'm still holding a basket of financial PFD's...I sold some off when their yield dropped below 7.0% and re-invested the proceeds in higher yielding issues. I've also been successful in some limited PFD dividend harvesting. You are correct the big gains are over, but my basket is still yielding over 9%, which suggests to me there is potential for 20% to 30% additional gains. Collecting +9% while waiting is ok with me and if an issue heads south my current gains provide a decent margin of safety. Of the 35+ PFD positions in the basket three very small positions went south for the winter and didn't come back! The following are definitely not risk free, but they are yielding > 10% and might be an opportunity. Felcor Lodging - FCH-C (not paying, but cumulative) First Ind Realty - FR-J ISTAR Financial - SFI-D North Star Reality - NRF-A Phoenix Cos - PFX RAIT Financial Trust - RAS- C Strategic Hotel & Resorts - BEE-C I hold long positions in the above and would appreciate any comments on them

FFH and LUK did well with ACF... :D I picked the wrong one for the buyout - Sure didn't see it coming even with some press about GM wanting to re-acquire GMAC. Wake up Eric, but owning FFH and LUK didn't hurt. However, I hold a position in Nicholas Financial (NICK) a small cap $100M, high risk auto finance company. They reported strong 1Q profit, up 58%, but I think they are still under-valued. Limited analyst coverage (Jefferies - I wonder why). Perhaps because of FFH & LUK's experience they might be interested in another auto finance company? Is anyone tracking NICK, any thoughts? I've considering making this a larger position...

Ericopoly, et all...Interesting discussion regarding reinvesting the core positions' FCF into new and different opportunities. It seems to beg a question I've not given much thought to...I'll use sports cars and station wagons for my analogies... With the goal of maximizing wealth over a life-time...What do you think would be the "best strategy" to "assure" long-term success? Should an investor start by building a core portfolio of "under-valued" station wagons paying dividends and re-invest the dividends and new cash in perceived higher return "under-valued" sport cars, or Should he start with a portfolio of "under-valued" sports cars and "upgrade" to new sports cars when they crash, or become station wagons, or Some other combination? I believe Buffett started with sport cars, upgrading to new sports cars until investment size became a factor and he had to buy station wagons...But regardless, he knows how to pick great cars. Looking back over my 40+ years of investing, I may have driven too many sports cars and not enough station wagons.

I've been following AMED for several years. They have grown rapidly, primarily through acquisitions. Home healthcare stocks have become the poster children for funding health care reform. Medicare proposed a 4.75% reduction in reimbursements ~$900M for 2011. The Senate and SEC are investigating AMED and Almost Family for alleged Medicare billing fraud. As I understand it, the reviews stem from a WSJ article that may not have considered all the facts--Check out the shareholder letter from AMED on their website. http://www.amedisys.com/pdf/Letter_to_Shareholders.pdf I don't know if there's any fraud involved, but the review could take a long time. I thought about jumping in, but after a second look I thought there were too many unknowns.

Thanks for your comments. I'm semi-retired and have 50% in cash/fixed income, so I sleep well at night. Myth, many thanks for sharing your thoughts and the Centaur Capital presentation. Based on the presentation, I have an ultra-concentrated, super-sized 20 stock portfolio. Fairfax is my only super-sized position at 40% and with the next 9 I have 75% in the top 10. The balance is made up of 20 more positions, where several are in a basket idea, so there are actually about 10 more positions. Thanks again - good information!

I'd appreciate some ideas on portfolio construction for an equity portfolio. Let's assume the cash/bonds/stock allocation has been determined. Now, how do you structure your portfolio? How many positions? How do you weight them? Do you consider sector, or industry diversification in your process? Other considerations? Thanks in advance / Eric

I never played "Buffett" before, but here's how I would look at the 15 year option napkin-analysis. I would ask someone to figure the 15-year rolling returns for the index in question for the last 50 to 100 years. Knowing that would provide a "rough estimate" of the percentage of times the index ended below it's starting point after 15 years. Actually I know the number is very low so I'll just use 95% and that's my level of confidence I won't pay out anything. Next average the 5% rolling 15 year losses...actually don't bother, I'll say 10%...That's my estimate of downside risk. Then calculate the estimated return for investing the premium for 15 years (using BRK's last 15 year book value returns) I'll use 15%. So I have 95%(+) confidence of a zero payout, and earning $813M, or a 5% potential of losing 10% on the option or $100M. What's the worst case? Estimated worst case would be the total loss of the $100M premium (not very likely) and lowest historic 15 year index loss payout $500M (let's say a 50% decline after 15 years - damn black swan!) = net loss of $600M (pretax, which provides a margin of safety ~ BRK's tax rate). Appears the option risk is actually lower than making a 15 year stock purchase! Note - I couldn't find rolling 15 year returns, but rolling 10 year losses (total return) 1900-2008 only occurred in 1914, 1921, 1932, 1938, 1974 and 1977. My guess is rolling 15 year losses are fewer...

~Buy when there's blood in the streets~ Coca-cola Hellenic Bottling Company SA (CCH) held steady during the last couple of weeks Hellenic Telecommunications Org SA (OTE) dropped from ~$6.50 to ~$5.50, but was back up to ~$6.00 today National Bank of Greece SA (NBG) is down from ~$4.50 to ~$2.50, but back to ~$3.00 today Is NBG a double to $6.00 in three years?

Yes, Fidelity

With taxes on dividends likely to go thru the roof next year, I'm not sure investors will want BRK to pay a dividend!

I'm certainly not an attorney, but I have trouble understanding how a new law can be applied to contracts initiated prior to the change in the law...Doesn't the proposal "interfere with obligations under contracts" ? Retroactive Law A statute that treats with facts or occurrences something that took place before the statute was enacted. While unusual, a retroactive law is only unconstitutional if it impairs vested rights, interferes with obligations under contracts (such as creating new obligations or attaching new disabilities), has the effect of an ex post facto law or bill of attainder, or is prohibited by the United States Constitution. Certain decisions granting new rights to criminal defendants under constitutional law have been given full retroactive effect. While others have been held to be effective only from the time of enactment forward.

I'm looking for methods to assess, or measure an investor's risk profile, or their appetite for investment risk-taking. Does anyone know of a good tool (survey, form, etc) to help an investor make appropriate portfolio allocations (cash, fixed income, equities) for the level of risk they are willing to take. Or, are there any 'rules of thumb', like '6 mos income in cash, age in bonds, balance in equities, etc' that could be applied as a general guideline. Thanks in advance...

Interesting article in Forbes April 26 issue about "They're Clipping Your Dividends" on page 10 In January 2011 the current personal U.S. Federal 15% tax rate on dividends will expire, subjecting them to 'ordinary income' tax rates. At the same time the max rate jumps from 35% to 39.6%. Again in 2011 there's a limit on deductions that amounts to adding 1.2% to each marginal rate. Then in 2013 a surtax on investment income tacks on 3.8% So today's 15% rate jumps to 44.6% in 2013. WOW! The article suggests selling high-yield securities because they will soon come under selling pressure and then use some single stock futures to buy them back...I think investors looking to benefit from high-yield securities will need to hold them in tax-favored accounts and not in taxable accounts. Any possibility of Congress extending the 15% rate? Appreciate your comments...

I didn't find any Chinese real estate operations companies, but I found two real estate agency/brokers with ADRs. E-House Holdings Ltd (EJ) has a network of 3,500 sales agents in 28+ cities EJ is trading for $20 with estimated earnings of $1.10 this year and $1.40 next Ej has been profitable since '04. $0.62 in '07, $0.48 in '08 and $1.25 last year on sales of $80M. IFM Investments LTD (CTC) is a Century 21 franchisor operating in 34 cities with 4.7M property listings CTC is trading for $7 with estimated earning of $0.65 this year and $1.00 next CTC lost money in '06, '07 & '08 -$.015, -$0.69 & -$1.25 respectively. They made $0.46 last year ('09) as sales more than doubled to $95M. I don't see either as a bargain, or significantly overvalued...

I've been following UVE for several years and have thought about buying their stock several times, but haven't pulled the trigger. The are diversifying their business beyond Florida and writing homeowner policies in North & South Carolina and Hawaii. They have an application in for doing business in GA and exploring options in Texas. The diversification should help reduce potentially huge hurricane losses in FL. The company pays out a lot of their profits, making the yield close to 10% over the last 12 months. I don't see management as capital allocators, so a purchase would have to be on the merits of a small, but growing insurance business. What do yo think?

Eric, Congratulations -- Those are awesome returns! Looks like you could retire too, but I imagine you're having way too much fun! I wouldn't say it was luck...but it took a strong conviction to load up like you did! LOL--You can't get those kinds of returns being diversified! My Fidelity numbers for the last 12 months almost hit triple digits, but longer periods are in the mid teens... Way to go!

Uccmal, I don't do much with options, but I'm with you on GE. I bought some in-the-money Jan '11's leaps last March and some '12's last month. The '11's have worked out very well and I can't complain about the '12's. I've been looking for similar opportunities!

Hussman Strategic Growth has a $1,000 min and I think John Hussman is one of the better fund managers. It's at least worth a look.

The Ivy Portfolio by Faber and Richardson offers an interesting approach to active style management using ETF's. You might want to pick up a copy. You don't invest in any one manager, but rather in the top performing equity styles, or asset classes. I've used a similar strategy for over 11 years using actively managed funds, which can outperform index funds, or ETF's tracking indices and have outperformed the market by 7.8% annually. Not record breaking, but I'm satisfied.

I'm waiting to see Apple's iSlate, or whatever they call it. It may, or may not have Kindle-like features, but my guess it will and a lot more stuff.