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merkhet

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Posts posted by merkhet

    Japan (again)

    in General Discussion

    Posted

    By 2004, prime "A" property in Tokyo's financial districts had slumped to less than 1 percent of its peak, and Tokyo's residential homes were less than a tenth of their peak, but still managed to be listed as the most expensive in the world until being surpassed in the late 2000s by Moscow and other cities.

     

    If I remember correctly, at one point Japan's real estate (Japan is the size of California) was worth about 4x all the land in the United States...

    Buy a house and get a visa

    in General Discussion

    Posted

    I love this idea -- I think the knock-on effects of soaking up inventory will be very helpful in supporting our slow recovery.

     

    Folks who think that things would be better by now if we let the banks and other TBTF institutions fail...

     

    ... even if all the real estate came to the market at once, and we bottomed very quickly... even assuming that we had better employment than we did today... exactly how would housing recover if we had massive bank failures across the board?  Who would be lending them money for the other 80%?

    What a lovely frickin day....to be reducing risk!!

    in General Discussion

    Posted

    Good reference, tombgrt.  I'd combine that with the following:

     

    Question 8. How did magic formula stocks do in the market crash of 2008? Are there any red flags you would look for in eliminating MF stocks from consideration? For example, what if a company's earnings appear highly unstable?

     

    [Greenblatt:] Great question, also. Magic Formula stocks, in general, fell almost as much as the market in 2008. Their rebound, however, was much stronger than the S&P 500 in 2009. I think the best way to look at this strategy, as in all stock market investing, is over the long term, though. This method seems to work because on average we are trying to buy above average quality companies at below average prices. What the market does with these stocks in the interim can be almost anything and in a difficult year like 2008, the best assumption to make is that they will not offer more short term protection than the popular market averages. Over longer periods, this method makes sense and seems to outperform the market averages by a significant margin. We have found that eliminating stocks with certain specific characteristics is problematic. The Magic Formula method in aggregate systematically buys companies where the short term outlook is usually uncertain or negative relative to the recent past. These are precisely the stocks that investors systematically avoid, which is where I believe the potential excess in returns could come from. So, eliminating companies from the strategy where the negative attributes are already well known is not likely to help your results. However, as my father always says, "have an open mind but not a hole in your head," so if you discover anything great, please feel free to email me.

     

    Now, I'm sure some might respond to this by asking -- how did this work during the Great Depression (dunno if there's enough data there) or Japan in the last twenty years (probably enough data, but not sure if anyone has worked on this).  I have no idea, but I'd be interested to find out...

     

    What's interesting is that every investing discipline, to some extent, operates on faith.  For value investors, we subscribe (on faith and limited experiential observation) that "in the short run, the market is a voting machine but in the long run, the market is a weighing machine."

     

    I think the two sides that are arguing at this point can effectively be reconciled purely by saying, "there's a lot of risk out there (true) and it wouldn't hurt to increase your margin of safety requirements (also true)."

     

    Additionally, I think people are confusing investment style vs. business style. 

     

    Investing in a 50 cent dollar now and having it drop to a 25 cent dollar in a year before becoming a full dollar three years down the road is not terribly worrisome when considering investment risk -- so long as the business is chugging along fine.

     

    The business risk of redemptions and investors freaking out, however, is a different story -- and reasonable people can differ as to how and whether to dampen volatility to assuage the psychology of their investors (or themselves).

    What a lovely frickin day....to be reducing risk!!

    in General Discussion

    Posted

    Am I the only one who doesn't understand this argument?

     

    Is there risk in the market? Sure, there almost always is...

     

    Are some companies trading for 2x - 3X normalized earnings? Well, actually, yes...

     

    Is there a possibility those companies may trade for 1x - 1.5x earnings? Sure, there almost always is...

     

    Does it matter if your cheap company becomes cheaper? Not from an investment standpoint, but possibly from a business risk standpoint if you run money (redemption possibility) -- so long as there's no reflexivity in your companies.

     

    Does anyone really think that a well-selected group ofindividually undervalued securities won't work out over the next five to seven years?  I really doubt it, but I guess people could differ.

    Fernandez Leaves Fairholme!

    in General Discussion

    Posted

    I think Warren has previous said that he prefers a committee of one (the guy looking back at him in the mirror).

     

    At some point, he was asked about putting 40% of his funds into AXP, and he said something to the effect of "can you imagine trying to get a committee to agree to that?"

    Fernandez Leaves Fairholme!

    in General Discussion

    Posted

    I seem to recall a Fortune article indicating that Charlie was brought on because of his restructuring expertise.  Perhaps there's just not a lot of restructuring stuff left for him to work on...

     

    In any case, I think Fairholme has always been a one-man show... would be interesting to hear the official reasoning though.

    As BAC stock continues to fall, interesting perspective

    in General Discussion

    Posted

    I wouldn't be surprised to see zh hedge fold up shop next year. or at least dissapear into insignificance. the doom and gloomers will be looking for work after it is examined just how wrongly they advised investors in 2011.

     

    Not going to happen.  He gets 17M page views a month...that's about $30K a month in ad revenue if he wants it.  They'll just find other topics to cover.  There's always something to write about.  Cheers!

     

    ZH gets some interesting news every now and then, but they definitely have a bias towards doom and gloom. I can't remember where I saw this, but there was a joke going around a few months ago with a fake headline from ZH -- "ZeroHedge once again disappointed that meteorite fails to annihilate Earth." or something like that.

    Buffett made $62,855,038 last year

    in Berkshire Hathaway

    Posted

     

     

    Now people are being forced to save because they are deleveraging.  Bottom-line:  we need to incentivize saving and investments. The best way to do this is to eliminate taxes on savings and capital gains.

     

     

    Person A has a debt on his boat and another on his sportscar.  He has no liquid assets to invest.

    Person B is a billionaire and has no debts.

     

    How does eliminating capital gains tax help person A pay down his debts?  I can see how it helps person B, but person A?

     

    Person A already has a large incentive to pay down his debts -- the interest rate on his loans is much higher than interest rates available elsewhere.  Why does changing the capital gains rate have much to do with anything related to deleveraging?

     

     

    Why do most people keep forgetting that Warren's plan was to bring the passive income of the ultra-rich (50,000 people) to 30%-ish rates?  Warren's not dead wrong on taxing passive income since it has little to no effect on those 50,000 people's consumption...

     

    The actual plan being touted by the administration is a different plan than the one Warren initially envisioned...

    The Next Big Worry - China!

    in General Discussion

    Posted

     

    I could not agree more with this. 95% of my money is in 2 stocks(used to be 4 this year). Despite this financial crisis, it has done well this year. Of course portfolio managers do not have the luxury to own so few stocks and that fact makes me feel better when I have so little money to run :)

     

     

    More people should run a concentrated fund -- if I remember correctly, Bruce Berkowitz at one time in the 90s held only two stocks --> Berkshire and Fireman's Fund.  (I don't remember if he was running money for others at the time though...)

    SHLD JAN 2011 $5 Put

    in General Discussion

    Posted

     

     

    Owns >100 million sq ft of real estate-  Is this right?

     

    Brands + >100 million sq ft of real estate all for a EV of ~ $10 billion.

     

     

    Owned land is a little under 100 million sqft.  I haven't updated my spreadsheet on that in a couple years though, so it may have dropped a bit more recently.  The value of the real estate is tricky though.  Owning 100 million sqft and having leases of various lengths and terms for another 200 million has significant value.  Is it more than $10 billion?  Maybe.  But, the trick is how and when you monetize it. 

     

     

    biaggio and zarley, where did you guys find the breakdown for ownership vs. long-term leases for SHLD?  I took a quick look at the annual report, but I must have missed it...

    Koo on S&P downgrade

    in General Discussion

    Posted

     

    Perhaps I'm confused (it wouldn't be the first time!) but I could have sworn that Mr. Koo blames the Bank of Japan for slamming on the brakes of liquidity too early for the continuing deflation over there.  :-\

     

     

    I don't think so -- I think that was pretty much everyone else.  Richard Koo is in the camp that blames Japan for fiscal consolidation too soon -- twice.

    What do you use to track your portfolio and watchlist?

    in General Discussion

    Posted

    Portfolio is set up using Google Spreadsheets importing Yahoo Finance quotes. (only because I have no idea how to get warrant quotes on Google Finance.)

     

    Watchlist is set up using Google Finance.

     

    I jump between Google and Yahoo to check out stocks.

     

    they use the + sign. for example. aig is aig+. wfc is wfc+. bofa has two. bac+a bac+b. Hope you get the idea.

     

    If I put in aig+ Google finance is not able to recognize the symbol. Am I doing something wrong?

     

    Thanks

     

    Vinod

     

    Vinod, it doesn't seem to work through the Google Finance website, but if you're using the =GoogleFinance() function in Google Spreadsheet, it works fine.

     

    Thanks peter_burke_ceo -- the =GoogleFinance() function is so much faster and more reliable than =importData() using Yahoo Finance.

    RIP Steve Jobs

    in General Discussion

    Posted

    He was one of my greatest heroes, and I'll miss him greatly.

     

    http://news.stanford.edu/news/2005/june15/jobs-061505.html

     

    Your time is limited, so don't waste it living someone else's life. Don't be trapped by dogma — which is living with the results of other people's thinking. Don't let the noise of others' opinions drown out your own inner voice. And most important, have the courage to follow your heart and intuition. They somehow already know what you truly want to become. Everything else is secondary.

    Japan (again)

    in General Discussion

    Posted

    I think Jamie might have a good amount of insight into the stage we're in for debt cleansing given his access to JP Morgan Chase data.

     

    However, I'm wondering whether post-debt cleansing, we might have what Richard Koo labels "debt rejection syndrome."  People are more reluctant to borrow given their experience with debt.

     

    So then, we'll recover a bit better than we're currently doing, but not quite near where we're used to since it's not being fueled by imprudent levels of debt -- but then again, people are habitual creatures....

    What a Lovely Frickin' Day!

    in General Discussion

    Posted

     

    I think some people were busy doing research and buying, while some were simply "sighing" after looking at their portfolio value, and some may have started to give up.  It will probably get busier on here after the markets close.  Cheers!

     

     

    For me, it's the former.  I've been shifting some stuff around in my portfolio.  Still about 30% cash, but I've shifted some of the makeup of my other 70% towards more undervalued issues.

    Interview With Prem Watsa - Gurufocus

    in Fairfax Financial

    Posted

     

     

    Interesting comment from him about the Japanese Life companies.  7/10 went bust.  Thinking of AIG in particular, and maybe MFC, and certainly others I am not aware of.  (I'm bearish on MFC since the rally in bonds and long term rates)

     

     

    UCCMal...I actually don't think AIG as much as LNC/MET/PRU...also how doesn't GWO CN continue to trade at multiples of book when it is just north of the U.S. border and does material amounts of business in the United States and Western Europe...

     

     

    I agree here -- AIG's life insurance runs through SunAmerica.  (There's 2% exposure via Chartis International, but that's negligible, IMO.)  AIG's "revenues" come to about $77 billion and SunAmerica accounts for $15 billion of those --> of which only about 50% comes from life insurance.

     

    I'm guessing what killed the life insurance companies was contracts set with certain yield assumptions that got blown out when yields dropped from 7%-8% to 1%.  I don't believe our yield assumptions were as high for domestic life insurance companies as they were for Japanese life insurance companies...

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