moore_capital54
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Posts posted by moore_capital54
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Moore Capital,
What are you talking about?
"Original Mungerville, I believe you are mistaken, with regards to your understand of what brought about those gains.
Those gains, as you mention were in fact company making for fairfax, and thus far have delivered better nominal results than vanilla value investing picks, however you fail to recognize that all those positions had one very clear common denominator. They were asymmetric investments with very little capital require upfront for a potentially very large payout."
If you call - $5 billion plus in US treasuries (many long US treasuries and could be far more than 5 billion as its not worth going to check the exact amount) and $1 billion plus in hedges on the S&P on the way down with the $1 billion plus hedges taken off - "asymmetric investments with very little capital required upfront for a potentially very large payout", give me some of the stuff you are smoking.
The only hedge investment on the list I provided that is asymmetric requiring very little capital upfront is the first: the CDS protection purchased which paid out in the $2 billion range on an average investment around $300M plus or minus 100M. #2, #3, and #4 in no way can be characterised in the way you did. This is plainly obvious.
LOL exactly so you are saying that buying the safest security in the world with 5 Billion dollars where there is literally no risk of capital loss and then have that security go up 30% when you expected maybe 2-3% because of the federal reserve creating money to purchase that security not another example of asymmetric risk reward?
The asymmetry has to do with permanent loss of capital as well.
Santyana, yes indeed Prem was lucky, both the CDS and the Treasury position delivered returns that prem could have never imagined, had he imagined those returns he would have deployed even more in the CDS position for example.
The same thing happened to friedberg this year, hes up nearly 40% because he was long Bunds, US Treasuries and owned CDS's on European Sovereigns, and he will be the first to tell you hes lucky they have done what they have done.
Original Mungerville, all I am saying is this: Inferring from the examples you provided, that Prem is a macro investor is in my humble opinion a misunderstanding of what in fact happened which is that Prem was just being safe with his capital and taking some punts which turned out to be 20 baggers because the federal reserve bailed out AIG with newly printed money and paid out counterparties whole.
Burry on the other hand did in fact let his Macro view supersede his value investing principles and bet the farm on this idea. Whether or not that will continue to work for him time will tell, but if you boil down the principles of value investing, Macro should not play a role, only valuations and multiples, in a way when multiples expand too much, too quick, that is most probably a result of a macro risk in the making, but as value investors we should not take any views on the macro at all.
I will end with a Buffett quote:
The most common cause of low prices is pessimism – sometimes pervasive, sometimes specific to a company or industry. We want to do business in such an environment, not because we like pessimism but because we like the prices it produces. It is optimism that is the enemy of the rational buyer.
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Original Mungerville, I believe you are mistaken, with regards to your understand of what brought about those gains.
Those gains, as you mention were in fact company making for fairfax, and thus far have delivered better nominal results than vanilla value investing picks, however you fail to recognize that all those positions had one very clear common denominator. They were asymmetric investments with very little capital require upfront for a potentially very large payout.
Looking back after some of them have played out and assuming that this was all "Macro Trading" is in my view a misunderstanding of what actually occurred.
Mr. Watsa was able to deploy very little capital to initially protect his portfolio, as it happens a one in a one hundred year storm came about and those little hedges or asymmetric bets proved incredibly fruitful. But it had more to do with the otherside being reckless AIG than Watsa nailing a macro thesis.
Going forward, there are very little such asymmetric opportunities when it comes to derivatives, hence Ackman with his HKD bet, trying to actually use rhetoric to influence a government peg. Only such black swan events will deliver the asymmetric returns we witnessed that came about from the 2008/2009 forced deleveraging.
Again my position is this. As a responsible value investor, Watsa, noticing that things were getting expensive as a straight forward value investor, put on some really attractive asymmetric bets that absolutely rocked. But there is no lesson to be learned here, for non-professional investors without ISDA's, because you all cannot trade in credit derivatives. An analog in your case would have been to simply scale down positions and buy some out of the money puts circa 2006/2007 if you felt we were in a bubble valuation equity market.
And now that Watsa generated such outsized returns as you mention yourself which were basically company makers, it is completely understandable that he wants to protect the downside more than worry about being aggressive, given that he knows what I just said, he got very lucky with the returns those derivatives provided, and he can take his time now before jumping back in with both feet, as far as he is concerned he has a pretty big lead in the race so he can shift down some gears and let the fog clear up.
Everyone is in a different situation...
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I agree, the latest short interest shows 239,000,000 shares short, the highest since march 2009.
Even today we see BAC uncorrelated to C and others. I believe that one more quarter of positive economic results will confirm that no significant dilution should be coming.
Funny that Facebook is being valued at 2x BAC, with less than $1B in EBITDA and I even doubt that will be sustainable for FB.
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Obviously, S&P has leaked information for the second time having done the same to preferred clients a few days before the US downgrade. I hope the SEC goes after these guys...
Anyone who was watching BAC or GS intraday saw the activity, it was obvious.
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one of the many classic video's i saw in the last few days.
The typical american consumer is like the typical smoker. They try to quit or cutback when they're running low on funds or the price of tobacco goes up.
In the end, though, Great Recession or not, they cannot stop themselves from buying anything and everything. And, if it's on "sale" they'll buy it -- even if they haven't made a waffle in their entire lives. Looking at me like, you know, "Stupid...I can always sell it on EBAY."
The best thing about this otherwise tragic addiction is that I (we) (even they) can set up our affairs so that we can, at least, profit from this addiction and we aren't even considered dealers.
That's the only way I can cope with it...knowing that these profligate addicts will be bitching at the prudent among them 2 score years from now that we need to kick in a bit more to fund their retirement (so they can continue to feed the final years of the addiction).
I enjoyed this post.
The thing we all need to remember about money is that it doesn't disappear it merely transfers around with the most productive and prudent citizens retaining the lions share and turning it into capital for investment purposes.
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My take is the guy is down a ton on BAC like most of us, and did this as an attempt to move the stock price, thinking that most will not respond to the tender and in the end no harm done.
Unfortunately, if the SEC gets involved and proves that he has no financial wherewithal to support the tender he will be f8cked. There are legal precedents for this, a few examples come to mind. Ive seen it all lol
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This guy is a small time real estate developer (heir) in South Africa, I doubt he has $300 million let alone $3B. Their real estate portfolio is worth no more than $100mm based on my analysis (very quick), and that does not include any debt.
Not happy with this development, and worst I am worried the SEC turns this into a mess now if they investigate him for stock manipulation.
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Mark, to Answer your question, here is this weeks Adam Hamilton who just so happens to have covered in this weeks essay the topic.
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I am not inherently bullish by any means but I have a good grasp of market behaviour.
I think it is instructive for me at least to review the comments of Buffett, Baruch, Livermore, and others from time to time. When there is blood in the streets etc, etc, etc.
I too have been creamed this year - guessing about 30% drop right now and headed for my first down year in about 8. Nearly all my losses are related to Leaps at the moment so they can rebound quickly.
I get tired by the constant macro investment topics on the board to the extent I dont much read them anymore. It seems people are looking for the perfect value investment. Well, they dont exist. To paraphrase Francis Chou: sometimes we go into some real stinky places to find our investments.
Francis has a significant position in BAC which he has held for 1.5 years via warrants. Do you think he fully understands BACs derivatives, EU exposures, etc. Unless he is psychic I truly doubt it. For one thing, not all info is available to the public. When your value investing one needs to accept that there are a certain amount of things we dont know and will never know. What we know about BAC is that it has a huge cash generating franchise, one of the two or three top investment banks in the world, a lot of measurable legal and mortgage liability, and is interlinked throughout the world with derivatives and CDs. Not an ideal situation, I will agree. But that is the nature of value investing.
It is also insanely cheap. The same applies to a lesser degree to Jpm, and wfc.
Best buy generates nearly 1 b per year in FREE cash flow. Yet its stock has been pummeled. The perception is that their stores are too big, their earnings aren't sustainable, there is a depression coming, blah,blah,blah. The stock is dirt cheap and cash is still pouring in.
UCCMAL this was a fantastic post..I concur with everything you said.
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If you look at what did the best in the last Depression (1930s), it was gov't bonds or even better gold-backed bonds. There was a competitive devaluation after the sterling crisis (1931) and the US dollar devaluation in 1933. So given these were hedges in the last depression, they maybe again.
Packer
Actually Packer the best performing security par excellence in the great depression was Homestake Mining.
Have any of you guys ever even done any actual research on performance of individual equities from 1929-1940, or do you all just look at the DOW as a representative.. sounds like the latter.
Investment
Vehicle Investment
Date Amount Investment
Value @ Dec. 1935
DJIA Oct - 1929 $10,000 $3,600
DJUA Oct - 1929 $10,000 $2,100
Homestake Mining Oct - 1929 $10,000 $62,000
Note: For simplification cash dividends not taken into account
http://www.gold-eagle.com/editorials_98/djiave.gif
In those 6 years where the dow lost 80%, Homestake gained 520%.
http://www.gold-eagle.com/editorials_98/hmstkmng.gif
There is always a bull market somewhere...
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Cardboard here is a freebie we have been working on. I am currently vetoing the idea for this trade but its my partners idea and qualifies as a "hedge" as I believe you are looking for, and as far as hedges are concerned its damn good.
The crux of the thesis revolves around M&A Arbitrage. As you know there is a list of companies that are in between M&A Activity , those companies will trade at or near their buyout price. Generally in a very good market, the buyouts will come to fruition smoothly or better yet a second suitor will emerge and a bidding war will ensue.
Well, in depressions or even bad recessions, such as the one we witnessed in 2008-2009, 1 out of 3 of these deals breaks. As financing is not there or a multitide of reasons. The risk reward is very asymmetric.
You find a group of companies that are trading at a very small spread to their announced buyout (we have already done this) and you short them. IF you are wrong you only lose the spread which is generally 1-2%, but if you are right they will drop like stones, most likely 50-60% as they did in 2008-2009.
The risk reward is asymmetric, and it is a damn good hedge.
I have not put the trade on because I don't think we are entering a depression, but there is a freebie for you guys!
I decided to provide our list as I am in a good mood today :) Enjoy!
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Well Moore, as a fiduciary for your clients money, I am a little disappointed by your answer. Your defense seems to be that if things go to hell that anyway you did as well as Einhorn, Buffett and others. It may work for your situation and I can appreciate that you are following your mandate, but if you have a chance to do something then it would also be to your advantage.
Basically, I am in the same situation as you are currently except that I don't manage OPM. I am fully invested and I have a small short position which may not make much of a difference if things go really nasty. I see value out there and trust me I have bought it. However, I do stress test my companies and wonder what would happen if different events occur. I can tell you for certain that some will not survive a depression.
So what I have been searching for is an hedge with asymmetric payout. To date I have not found that instrument. The other thing that I am moving towards is income. My portfolio has allowed me to live comfortably by being able to sell winners once in a while. This year has been tough and disappointing with many deals not occuring. So being forced to sell your cheap stocks to live is unfortunate. I would imagine that it would be similar for you if you face redemptions.
In essence, I don't care about volatility. However, I do care very much about permanent losses due to companies going bankrupt or facing events that will dramatically lower their value for real. A really bad economy can do that, but I have no way to predict it.
So here are the solutions that I have been thinking of:
1- Increase income: dividend paying companies, corporate bonds with something special
2- Increase the quality: eliminate cyclical and companies having a fair bit of leverage
3- Shorting: have to be very selective. A problem is that you are speculating as to when to cover. No bell will ring, no value will be more right than another unless you are lucky and it hits your target before rebounding.
4- Some asymmetric hedge?
5- Reduce my expectations: I have always invested mostly in smaller cos since my goal was to find companies with very high upside or very large deviation from intrinsic value. If you are wrong on 1 or 2, it is fine since the rest will more than make up, but if you lose 10 because of a calamity, you are back to square one.
In essence, I would appreciate if you could share how you approach risk in your portfolio. That is what my original post was about. A BP would have a much better chance to survive IMO than say BAC which would survive, but not likely its current shareholders.
Cardboard
Cardboard, the way I have always approached risk mitigation is through capital allocation. If you looked at my portfolio it would be very similar to Mr. Kahns, whos 13F I recently uploaded or Pabrai's. It is a concentrated portfolio of not more than 20 names, and each name, as you mentioned has different risk profiles.
I can look through my holdings and say just as you just did that some may or may not survive a depression, but that is conjecture. How do I know if a depression is truly coming, and if it is how do I know what the ultimate reality will be in such depression. To say BP survives and BAC doesn't is conjecture, how do you know that? How do you know oil doesn't drop to 40$ on a depression but banks get flooded with deposits, in which case BAC survives and BP goes to hell.
All I am trying to accomplish with my posts, is to provide a consistent tone from an investor that is following the principles of graham & dodd. In a few years some of you will look back and realize that while many emotions were thrown around, there were a core group of investors on this board that maintained their confidence and kept following the principles we are all supposedly adhering to.
Regarding your "disappointment", I think you need to realize that investors allocate risk capital to hedge fund, and our job is to see through the forest and look for returns while focusing, as you say on prevention of permanent losses of capital. I do not feel that any of my positions will deliver such losses. The difference is that you may change your mind due to the moods of Mr. Market while I retain conviction.
It has only been 3-4 months of this BS. Last year at this time markets were truly roaring, and that is the name of this game. Its all very reflexive. Today there is an overwhelmingly amount of negative data, and tomorrow there could be just the opposite.
Take a look at my post history, you will see that I get very active when the market is down, because I find myself able to contribute more given the incremental increase in non-sense on the board. In October when things were roaring I had nothing to contribute and most of the posters that delivered this nonsense were gone as well.
I am just trying to provide balance, I don't need anyone to think I am right or wrong, and I definitely don't need anymore AUM. This is not an attempt at self marketing, just an attempt to provide in real time, my thoughts and actions in a market that most feel is "unprecedented". Almost every time I dug into the person behind the computer screen I found that the nervous posters were either new to the game, or had very little invested in the market. And that corroborates with what I have seen my whole life.
You guys think Buffett sits there and contemplates whether the world is going to end every day.. nope not a chance, he spends his time looking for opportunities.
And for a value investing board, some of you come off as real sissies, as I see an obvious increase in threads relating to Shorts, and Hedging Strategies when stocks are at 52 week lows, instead of seeing threads relating to incredible bargains, of which there are SO MANY right now.
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Two Words: Sell Side
Pay enough fees and you can get anything done.
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FYI here is the Kahn Brothers recent 13F (November 9th)
http://sec.gov/Archives/edgar/data/1039565/000103956511000009/qtr13f3rd11.txt
As you can see they have nearly $500mm invested in equities, out of total capital under management of $675mm, I assume the rest is in fixed income.
But if Mr. Kahn who is 106 an has been investing since 1929, saw something so unprecedented, would he be 70% weighted in equities?
Very nice to see he owns BAC , C, and BP, some of our favorites.
Price is what you pay, value is what you get, and macro is a game for traders not investors. ;D
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It's only a matter of time before those posting on this thread will be accused of yelling "Fire" in a crowded room by Moore, but for those interested....
http://pragcap.com/now-there-are-truly-no-safe-havens-in-european-bond-markets
Obviously it's very easy to say when the market is down (I wouldn't be surprised at all to see us back over 12,000 on the Dow with one simple utterance from Dr. Bernanke), but this is without a doubt a HIDEOUS environment. And the complete lack of attention investors are paying to the issues staring them in the face is truly staggering. The current situation is not dissimilar to the 12 to 18 months leading up to Lehman where the market almost entirely ignored all signs pointing to a credit crisis. The market is currently banking on governments coming to the rescue, which I find horrifically dangerous considering how many times Germany and the ECB have stated they will not print money, and the bond market's obvious rejection of all European debt. Like I said on the "What a Lovely Frickin Day....to be Reducing Risk" thread, a France downgrade is not going to be pretty, and as an article said yesterday, France is not at all trading like a AAA credit (the absurdity of it even being AAA is beyond the scope of this discussion).
Yes, yes, this is not speak a "real value investor" would utter, and as soon as the market is back over 12,000 all those taking action to reduce risk will be chided for not having a large enough.....
The problem with your posts is that you keep circling back to your macro predictions, but in the end you don't really make any predictions you just demonstrate that instead of seeking value in any environment, which is what you are really supposed to be doing, if you think France is next to go down, why aren't you deploying capital in that manner? Why don't you short the CAC 40 at a 8X Traling Multiple after its down 23% this year?
It is no secret that you are very intelligent, but it is also no secret that you have not been investing for long, and to you this environment is "unprecedented" as you called it. It's not really about growing "b***s" its about growing some grey hair.
You enjoy the banter about Macro because it serves as an emotional outlet, most probably due to the frustration from not fully understanding what you should be doing in this environment.
Now, there are dozens and even hundreds of outlets on the internet where many intelligent investors like yourself spend countless hours debating the macro and various conjecture about p/e ratios not being low enough and what your returns would have been in 1929...
But if you visit the Kahn Brothers homepage: http://www.kahnbrothers.com/
And read a little bit about how they describe value investing, and this guy was essentially taught the art by Ben Graham, you will see he wouldn't spend two seconds thinking the way you are. What you are doing is not a new form of value investing, it is a different method all together.
You and Munger (Board Member) may have better returns than myself over the next decade because you two were right about this macro situation and I kept buying equities I felt were super cheap. But my results will mimic those of the ones I set out to mimic, such as Buffett who are actually practicing the art of value investing. Maybe you young whippersnappers have recognized something we have all missed, but my experience and intuition tell me that is not the case. Moreoever, I am following the path I set out to follow, you have introduced new dimensions into a pretty straight forward investment strategy where the single most important factors are focus, and retaining that focus with an important dose of contrarianism when the rest of the world is exhibiting major fear.
You guys are doing something different, when you are interested in buying shares you utilize the value investing principles as you perceive them. But when you get nervous about macro you try timing the market and hate everything. Personally, I think the months/years will prove that you were wasting a lot of precious time being intellectually emotional. You are no different than the people I speak to that think we are heading into a civil war and we better stock up on guns and canned food (my cab driver).
We have a short book, right now its probably 8% of AUM, so its almost insignificant, we are short PSN CN which is trading at a ridiculous valuation because investors think they are going to be the only fracking liquid supplier forever, in a business with no barriers to entry.
Dan Loeb, who is up 1.5% YTD and sees a lot of the same things you see is short many things as well, while still being long some interesting securities, but he goes to work every day and seeks value, and spends not more than a few paragraphs every 90 days simply communicating the environment as he sees it to his limited partners. But day in day out, hes looking for value and has found it per his portfolio.
My advice is that if you are so bearish take a position, because once you get used to being 70% cash, you will never be comfortable deploying it unless you get market confirmation, and if you are waiting for market confirmation you might as well find a different career, because your returns will forever trail your benchmarks.
We were up 8% going into June 30, Down 17% as of Sep 30, Up 3% as of Oct 30, and now down 16% as of yesterday. The volatility has absolutely sucked, and I won't tell you that it hasn't taken a toll. I am much more engaged than I generally am and watch the portfolio hourly as opposed to daily. But my returns are similar to Ackmans, similar to Pabrai's, similar to Einhorns. We are all smart investors , its not as though we all dumbed down, we are doing what we need to be doing. We have continued to buy the securities we like, and I have no doubt that the ones I have bought will outperform even in an environment where the indices trend sideways.
From what I understand you are investing in a totally different manner, most probably what 50% cash? I can't imagine doing that, I am way too greedy, and see enough value now using the same yardsticks I have used for two decades, why would I wait for things to decline more?
Also, the large cap name you mentioned to me is basically cash to me because it has barely declined in this environment, and so it shows me nothing as to your skills of recognizing value in an environment where indices have declined by 30% in 90 days, and in europe 40% in 90 days.
Surely there is one investment cheap enough out there to warrant your analysis of even capital? At this stage of the cycle there should be 10...
Cheers!
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I'd like to say that I think that these anecdotal pieces of evidence you put here are perhaps only confirming your bias that things are "still looking good". I also think unconsciously you might be trying to seek out these positives and perhaps ignoring the obvious negatives. It's a much more tame and non-insane version of Ben Graham(?) posting things that affirm his investments in LVLT.
For every arbitrary article that you post showing a (I would say positive, but I don't think 1.8% growth really qualifies)... I can find an equally disturbing piece of news.. such as the most recent German bond auction results and the widening CDS spreads on all the banks...
I'm only stating this because usually there is a lot of tugging and pulling on the board here which makes this my #1 source for commentary, but over the last few months, its started to move towards groupthink (or maybe I'm just jaded by the BAC thread)... and the ones that generally do hold countering views ... umm... perhaps don't state their opinions in the most....reasonable/sane/logical/nonabrasive way.
I am actually of the view that Sanjeev and others that post positive economic data points are merely providing a balanced view compared to the overwhelming amount of negative data we see from the moment we rise and until the moment we go to sleep.
Relating to BAC, if you don't see BAC is an obvious value play, you are either new to the game, or are part of the group of investors that feel post lehman it is impossible to value a financial stock. Some well respected members belong to that group such as Yachtman and a few intelligent posters on this board, such as Munger.
But to think that this board is exhibiting herd mentality by being long BAC is ridiculous, because using the same valuation metrics, and intuition you would have done extremely well as a value investor over the last 20 years, the circumstances that have led us to be long BAC are similar circumstances that in the past have produced fantastic results. Having Buffet confirm the thesis even in a preferred format, only validates that this is the right position or at the least the right set of circumstances...
I am more worried about the younger generation of value investors I have seen on this board, that think they can genuinely time the market and subscribe to the ZerhoHedge and Cullen Roche school of thought that the world is going to shit. I suggest you all look at the track records of those leaning often on the short-side, once you look at the world glass half empty it will affect you in every way, and you will lose the most important skill as an investor, and that is the skill of identifying scenarios where being right will reward you with a lollapalooza result, and you can only get there by maintaing the stamina during times like these to imagine how the world will look if just a sliver of the market participants begin to weigh the "half full" scenario.
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Anybody have any details on this IPIC Tender, seems like these guys are either a hoax or have seriously gone out of their way to protect their privacy...
A PE Firm comes to mind, or maybe a Sovereign Wealth Fund... Surprised nobody has picked up on this.
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BAC is 8% of our portfolio...
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I am signing off for the day but just wanted to thank everyone for the participation. It appears that so far, 80% of this board has long exposure to BAC and believes Mr. Market is wrong.
Has this board ever been wrong collectively since its inception?
I have only been following for the last 2 years and have been a member for the last few months, my take is that for the most part the board has been a very good indicator of value.
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Well said Parsad! Even if you are right about WFC and JPM that will bode well for BAC as investors will finally "get it".
Funny that BAC's market cap is now a little more than half of AAPL's cash hoard (nearly $80B).
Can Canada go the way of Greece?
in General Discussion
Posted
What a ridiculous piece of garbage... Canada debt to gdp is 84% vs Greece (120%) a strong and vibrant private sector,one of the world's largest sovereign landmasses endowed with one of the world's largest hydrocarbon reservoirs (conventional and unconventional) and a population which has room to double or even triple in the next 50 years. A disciplined and prudent central banking regime, a culture which places emphasis on humility and hard work, thrift, and investment. Canada like China does not sell itself cheap as well, like the US has done. But if push came to shove and Canada needed to raise a few trillion, I assure you it could be done in 30 days or less. I can't think of any country with the kind of natural assets that Canada has on a per capita basis, the Malarctic mine, Red Lake, KSM, Voiseys Bay Nickel, The Oil Sands, the shales in Alberta, it goes on and on and on, and you have to keep in mind Canada has 1/10th the population of the US, on a per capita basis, no nation in the world is endowed with such resource wealth.
The writer appears to be greek, I wonder if that has anything to do with his point of view.