Valuebo

Well gratz. Always nice to have a short that works out directly. Wouldn't want a twitter short move against me! I have increased my index puts exposure today, plain and simple.

While utility functions are important, studies have shown that the average person is incredibly sensitive to loss aversion, even with coin flips for $1 each for 20 rounds.

Ah yes, loved those. You can find a compilation of equally interesting charts, maps, etc. here: http://www.reddit.com/r/dataisbeautiful/top/?sort=top&t=all

That's good news. :) Pabrai and others have plenty of popularity now with value investors all over the place. Good move. By going the public route they will have cheap access to permanent market capital as investors fight over their piece of stock.

Yes, it remains a hedge. If I win I practically lose nothing. If the market keeps rising, I win a few percent less. A lot of bearish commentators from different angles (macro, value, technical,..) have been turning. Fear was much higher a year ago.

Bought last week and today (a little): GNCMA OTM puts on SPY, CRM, FB and AMZN (basically to protect long portfolio) 10% short on SPY as hedge I had already written off the puts as insurance but seems like I could get some use out of them in the end. I'm still 100% long too so market direction shouldn't matter much to me.

I used to be able to read everything. Nowadays it's hard to keep up with the SHLD thread alone...

Doesn't seem like a lot will change in reality? It's not like Sanjeev was giving out his exact trades and positions in the last few years? Or am I mistaken? Sanjeev, have you ever considered appointing a member as a moderator? Maybe one with restricted rights or actions that you have to approve before it gets executed? I'm sure you would find suited candidates. If not, why? Know that I would jump on board with you in a heartbeat if I had that extra $100K laying around. I understand expenses and added workload just don't make it worth it (yet?) to get $25K investments in your Offshore fund. Is there any place where we can get extra information on your funds? Or can I shoot you guys an e-mail for more info? TIA.

Why? Is it bad voodoo?

I bought more GNCMA at $11.08 a few days ago. Still incredibly cheap.

Thanks for the effort Ross812! It sure is getting hard to pick 5.. The Force is strong with this one... Not to mention the effect it has on small caps.. I'm not invested in Intralot but look at what's happening there. It's perfectly understandable but I wonder how much other buyers here adequately understand each thesis if they buy a few hours after a thesis has been posted. I guess that's the downside of a growing forum. If I'm not mistaken the forum grew membership by 10% since early/mid 2013. At least Sanjeev is getting his costs back this way! He wouldn't be wrong to ask for a small annual fee either IMO. :)

And then I run the risk of getting slaughtered if the etf runs up a lot? That is exactly what I want to avoid? On the other hand I just collect premiums and losses from the etf I bought if it drops a lot, the exact outcome I predict over time compared to other sectors and regions. Also, I would probably lose more return from option pricing spreads and more transaction costs. That doesnt seem like a hedge but a timing bet on the movement of the market, all in al for a low risk adjusted return.

I have thought about shorting ETF's and indexes some more over the weekend. Found FDN and PNQI, two not actively managed ETF's focused on internet companies. http://etfdb.com/etf/FDN?domain=etfdatabase&display_ice=&sym=FDN&studies=Volume;&cancelstudy=&a=M#holdings http://etfdb.com/etf/PNQI#holdings I have yet to look up the borrowing rates but expense ratio is ok at 0.60%. You can look at their holdings and other facts in the above links. Through those ETF's you would get specific focus on (what most believe to be) very expensive stocks such as AMZN, NFLX, FB, CRM, LNKD, ... but you also have to take GOOG, YHOO, EBAY,.. etc with you for the ride. FDN has 41 holdings while PNQI has 84 which I both consider safe enough in terms of diversification. Any 5%+ position that quadruples from this point (say Amazon valued at $700B+...) would at worst have a 1-2% negative impact on a 5% portfolio short position. I am thinking about this idea as a possible pair trade with selected value stocks but I might be a few quarters (or even years) early. What do you guys think? Here is a more recent fact sheet for FDN: http://www.ftportfolios.com/Common/ContentFileLoader.aspx?ContentGUID=3ee53ac7-d847-4709-8b5d-6e9459ef4e0e Mind the historical returns... Checking the temperature with a smallish position now and jumping in with a big splash once the market overheats (a double/triple in NAV?) might not be such a bad idea. Comments or better alternatives would be very appreciated.

Maybe I would dare to take a minimal short position in TWTR if it was valued at say $100B but what effect would that have on my portfolio anyway? If it halves I get a 50% on what could be a 1% position at best. Meanwhile it also costs me money to borrow and a lot of extra uncertainty added. Who knows how long those nutty valuations remain and what they do to monetize more of that valuation... It just doesn't make much sense for me to short individual companies. On the other hand, going short an index and using margin to go long undervalued stocks can move against you (twice...) just as hard. For those interested, I found some answers related to my beginner questions here: http://ibkb.interactivebrokers.com/article/232

If I'm not mistaken you can't buy equities with the proceeds from going short? But I assume it's perfectly possible to go short and go long additionally on margin (of course within the limits of your margin requirements). And where can you find the interest cost for shorting a particular stock or ETF? I ask this because today I have been thinking about the possibility to short one index (max 10% of portfolio) and maybe going partly long others through ETF's. Say short the SPY ETF and long 50% of my short position on Russian/Chinese ETF's. I have some put positions on the S&P500 and some individual companies but those are just a form of insurance and I would never short a specific company. I could easily take the performance drag on a 10% short position on the S&P500, even if the market doubled from here in a short time frame. Can't really say the same from 10 1% short positions. What do others with shorting experience think?

About 70%. Had a lousy last quarter but can't complain. 2014 should be much harder... Yes! Of course! But I think a goal helps you to keep things in perspective, and I find that to know what you are trying to build is very useful. By the way, I started my company with 25.000,00 Euros in capital at the end of 2004. Today its equity is worth 1.672.000,00 Euros… You calculate the compound rate! ;D ;D ;D Gio Well obviously comparing that CAGR wouldn't be really fair given that you invested time in building the company that had it's value (and much above that €25.000) over the years. What did you do with your personal earnings? But aside from all that... it is a very impressive track record and evidence that hard work does pay off, congratz! Also nice results given your portfolio Gio but I would be wary about being happy with certain results when the market has a 30%+ bull run. Say that LT market returns are 8%, then maybe you should divide your returns by a certain factor as well to compensate for the increased market risk. Or do you think you are more than properly hedged against such outcomes?

So, any 2014 predictions in yet? ;) http://www.bloomberg.com/news/2013-12-23/bull-calls-united-in-europe-as-strategists-see-12-gain-in-2014.html Auwch! That is of course for Europe but still worrisome. I've bought some puts as portfolio insurance lately and at this speed I'll likely restock and increase my put position somewhere in the next 4-8 months.

Nope, great remarks!

Happy holidays! I wish you all the very best for 2014!

Hehe awesome Gio. Let me guess who you brought with you... ;) I went to Paris as well for 4 days a month ago. Missed a few extra eyes to see it all! What else did you visit and what did you like best? As a side note; I'm going to Thailand for 4 weeks in a month. If anyone has some tips, let me know!

IMO: Because consumption doesn't create more wealth for consumers whereas production normally does create more wealth for the producers? The increase in wealth for producers is high enough to offset any reasonable inflation. Deflation however delays (or sometimes completely removes) average consumption and investment just enough to have that disruptive effect. You're just not going to come up with the same economic growth numbers, not ever. You need a force that pushes people into eventual consumption (but that also isn't too great to shun producers away from production). That's my view (with terrible English language skills which makes it hard to explain it properly, sorry. ;)).

Plummeting lately. Should have looked in that shorting, although it probably wouldn't be too late. Btw, isn't one of the problems with bitcoin that it is deflationary by nature? Currency deflation lowers consumption with that currency as people start to simply hoard it instead of spending it. It thus defeats the very reason of it's existence, being a medium of exchange. Are other crypto currencies set up the same way with limited supply? Thanks. Selling shovels I see :) Are you doing pretty well with this? Not especially. I've done it once and the guy approached me (because I'm an long time member of the Bitcoin forums and 'seemed intelligent'). It kind of fun and easy to do as all I'm basically doing is explaining my own setup (which is secure), why it works and talking him through setting it up in the same way (he's also asking general Bitcoin questions to understand it better). The guy is very satisfied :) Absolutely agree. It's sort of sickening to be honest. The combined computing power of bitcoin is more than 256 times that of the largest 500 supercomputers combined. It's things like this that remind me why we don't have flying cars. We'd rather foam at the mouth when an iPad is released with 128GB than actually make anything useful. I'm going to be blunt, that's absolute bullshit. It's not wasteful it's for securing the network. What do you think the sum of financial institutions complete with ATMs cost? What do you think the computer networks of VISA and AMEX costs? What do you think the entire network of WU costs? Let me tell you Bitcoin's approach is not only cheaper it's also real security instead of the false security the other institutions offer (a bank can transfer funds from your account without your consent). The computing power needs to go up a bit further to make it completely financially unviable to attack it even for superpowers (USA/China). Not tha i's possible to profitable attack it today, but at a huge loss it's still feasible. The computer networks of AMEX, VISA, ATMs, ... protect a much bigger and economically far more important system than what bitcoin is offering and likely ever will. So I don't see how that comparison is reasonable?

Haven't read any of the others comments but I'd say: Give him anything from the classics. If he's really interested he'll read it and look for more no matter what good book/paper/letter to shareholders you gave him. It's true what they say about value investing, you either get it right away or you never do. I've given up trying to convert "investing" friends and others into value investors. Generally the invested time is a waste and for those that it is not, a single recommendation and brief explanation is enough anyway.

Hate to break it to the guy but he's still gambling and will likely never quit. Obviously completely addicted to the thrill. A stroke of "bad luck" and he'll have close to zero in a matter of weeks.

Very relatable! Most simply don't understand that taking a mortgage can be a serious risk and that by doing so, you make enormous assumptions about the future, market determined value of your real estate. So you often get young people lending money on 25-30 years, which gives great leverage to their personal net worth and paying a considerable sum of interest, hoping they will somehow be better of in the end, like their parents before them. But of course even those that don't need to take out a mortgage take on tremendous risks as well. For some reason basic math and rationality fails when it comes to owning a home or RE as an investment. Some sort of risk aversion since the end of the dot-com bubble has made the average Joe even more attached to very tangible things like pure cash on savings accounts or real estate, further boosting an already long bull market in real estate. Most retail investors that you see today in more "untangible" investments like stocks are people that simply haven't lost (much) in the previous busts. Well that is the perception out there. Somehow "owning" a house for 10% with incredible leverage is perceived as less risky than owning productive assets at a reasonable valuation. It's possible that the ultimate fall will be slow and unnoticeable. Maybe 20-40 years of - on average - flat or slowly rising prices that, once you take inflation into account, simply kill the net worth of many who own aggressively now. Thanks for the presentation btw!