moore_capital54

Precisely Eric. If anything the risk-free rates should be significant higher due to the fact that every nation runs a fiat based currency. And the date is not 100 years ago but rather 1971. That is the most important date to look at. Post 1971 and Pre 1971 when trying to understand these things. The crux of the matter is that since 1971, as influenced by the majority of the electorate, the politicians have been increasingly relying on the fiat money system to subsidize their lack of fiscal discipline (blaming both dems and R's here) each time PUNISHING the saver for the debtor. It has done nothing but created a long cycle in hard asset appreciation and significantly increased the real value of commodities - the essential ingredients that allow an industrial society to flourish. Did technology help soften these effects along the way? Of course it did, the most important of which was the ubiquity of the internet imho. But we have now reached the end of this experiment with all nations employing a fiat standard, all nations employing ZIRP, and all nations employing a significant transfer payment program as a percentage of global GDP. It doesn't feel like socialism yet because there was in fact a major deflationary event that is still in its final innings (since 2008 lehman). One of you posted a wealth video the other day. The primary reason for the asymmetric distribution is that savers have been marginalized leaving only those with large bases of capital (as a percentage of nominal GDP) to flourish and creating a situation where even respectable savers, prudent savers, find their way back to the lower quartiles when taking into account taxes, inflation, and distribution to heirs over time (splitting of the nest-egg). A risk-free rate of return has been one of the cornerstones of trust in the economy since the late 1600's. It has allowed for terms such as retirement and leisure to be introduced into what our view of capitalism should be.Unfortunately for savers today unless you have 8 figures you will be hard pressed to generate a risk-free rate of return which could cover your outlays. We talked about this before. I know many investors with $2-5mm that are reaching into their principal for the first time in their lives. This is a de-facto wealth redistribution. I am not sure how it will end but I have always chosen the contrarian route when making long-term investments. Right now the most contrarian route of all is to pile up unencumbered cash. Keyword: "Unencumbered". A lot of people have liquidity (cash) today but it is not absolute liqudity. They have taken on more debt in their business or have bought a more expensive house with a mortgage reflecting artificially depressed i-rates. Same goes for corporations, even Buffett's cash situation isn't what it used to be when viewing it through the prism of future encumbrances. I will use 2013 as the year to pile up unencumbered cash which I will use to purchase short duration fixed income assets (less than 90 days). They could start by throwing out property taxes once you reach the age of 65 or something (or better, entirely on your primary residence). It's like you can't even buy a house as security that you'll always have somewhere to live. Maybe somebody has a fantasy that once they own a home, they will be secure. Well, that's only until you refuse/can't pay your perpetual "lease" (oh, I mean property tax) and they come with their guns and take you from your home. It's nice that in California tax payments on property can't rise more than 2% a year, but in other parts of the country how do you save up risk-free money to pay a property tax that could rise at 7% annually where you might live to 110 unexpectedly? One more thing I forgot to mention which coincidentally answers Hytem question. It's funny to see how everyone forgets what a risk-free rate is. Risk free rates simply, are the rate at which the savers are WILLING to lend out their most precarious of capital (the capital the view as forming the bottom of the pyramid). Historically that rate WAS NOT decided by the central banks but rather the SAVERS. Commercial Banks would grow deposits when their risk free rates (CD's in US GIC's in Canada) were attractive and shrink their deposits when that rate was insufficient. How far we have come where savers have no patience and purchase CD's regardless of their yield. It is this shift in phsycology that has helped/allowed the Keynesian doctrine to flourish. But it is not so simple either because the Central banks now purchase government securities outright and account for such a large part of that market which produces a gain for previous owners "Softening" the pain of purchasing low yielding risk-free instruments. It has become a sort of cycle of madness. The reason the risk-free rate was always 3-5% was because that was historically the rate at which savers were willing to pile in their savings. That has historically been the magic number that provided almost every level of net worth with sufficient return to cover expenses (avoiding the need to dig into principal). It also ensured that the riskier capital was plowed into higher risk but on he margin productive/necessary ventures which led to growth. Today's saver plows money into low yielding rates cause he thinks he has to and then takes a punt on high risk (non productive) securities because he believes he can sell before the music stops.

Precisely Eric. If anything the risk-free rates should be significant higher due to the fact that every nation runs a fiat based currency. And the date is not 100 years ago but rather 1971. That is the most important date to look at. Post 1971 and Pre 1971 when trying to understand these things. The crux of the matter is that since 1971, as influenced by the majority of the electorate, the politicians have been increasingly relying on the fiat money system to subsidize their lack of fiscal discipline (blaming both dems and R's here) each time PUNISHING the saver for the debtor. It has done nothing but created a long cycle in hard asset appreciation and significantly increased the real value of commodities - the essential ingredients that allow an industrial society to flourish. Did technology help soften these effects along the way? Of course it did, the most important of which was the ubiquity of the internet imho. But we have now reached the end of this experiment with all nations employing a fiat standard, all nations employing ZIRP, and all nations employing a significant transfer payment program as a percentage of global GDP. It doesn't feel like socialism yet because there was in fact a major deflationary event that is still in its final innings (since 2008 lehman). One of you posted a wealth video the other day. The primary reason for the asymmetric distribution is that savers have been marginalized leaving only those with large bases of capital (as a percentage of nominal GDP) to flourish and creating a situation where even respectable savers, prudent savers, find their way back to the lower quartiles when taking into account taxes, inflation, and distribution to heirs over time (splitting of the nest-egg). A risk-free rate of return has been one of the cornerstones of trust in the economy since the late 1600's. It has allowed for terms such as retirement and leisure to be introduced into what our view of capitalism should be.Unfortunately for savers today unless you have 8 figures you will be hard pressed to generate a risk-free rate of return which could cover your outlays. We talked about this before. I know many investors with $2-5mm that are reaching into their principal for the first time in their lives. This is a de-facto wealth redistribution. I am not sure how it will end but I have always chosen the contrarian route when making long-term investments. Right now the most contrarian route of all is to pile up unencumbered cash. Keyword: "Unencumbered". A lot of people have liquidity (cash) today but it is not absolute liqudity. They have taken on more debt in their business or have bought a more expensive house with a mortgage reflecting artificially depressed i-rates. Same goes for corporations, even Buffett's cash situation isn't what it used to be when viewing it through the prism of future encumbrances. I will use 2013 as the year to pile up unencumbered cash which I will use to purchase short duration fixed income assets (less than 90 days).

We are in OPAP (as a matter of fact I started the thread) and it hasn't worked out all that great. Not familiar with the other names but will study them this weekend. We like MCP Debt here and the LEAPS, but we know the asset very well. MCP - net out the cash ($500mm) and you are sitting on an EV which reflects about 50% of the value of Mountain Pass. We like the unsecured debt here (Trading at 70-90 cents on dollar) and the LEAPS. The reasoning behind the move is primarily an SEC investigation into accounting improprieties. We think the CEO will be given the boot and everyone will forget about this. A unique opportunity to buy the only rare earth producer (vertically integrated market leader) outside of China. Rare earth's will have their day again. Even if they don't MCP Will produce 150-200mm in EBITDA once the mine ramps up.

How did you manage to buy BAC shares back around "10.30s" ? Did you get puts assigned? Sorry that was supposed to be 11.30's. Also as to Palantir - without savers capital will not flow to the productive areas of the economy If you punish this generation of savers as you have done you will end up breeding a new generation that has no savings at all afterall they can just accumulate debt and buy things they can't afford (the government/central banks will bail them out) Savers should ALWAYS be the priority.

I sold out of 70% of our BAC position between 11-12.30 and then bought back some when it went down at around 10.30s the position is now about 35% of its original size so were still there but MUCH smaller and with a large crystalized gain to boot. AIG we own some of the warrants but have been selling.

We are in OPAP (as a matter of fact I started the thread) and it hasn't worked out all that great. Not familiar with the other names but will study them this weekend. We like MCP Debt here and the LEAPS, but we know the asset very well.

Interest rates have been artificially low since 2008.. That's 5 years lol. The deflation buys are long gone buddy - if you are buying today you are buying with the herd. Hopefully you pick the right companies that can thrive in a normalized environment. You must realize this is an unprecedented macro environment - one which is manipulated to its core. A 14x PE on the DOW might seem "ok" and it really is just "ok" but you better be sure those companies can grow top-line or have liquidity to retire shares in a normalized i-rate environment. Because that 14x can just as easily turn into 18-20x while Corp bond rates will all of a sudden compete for capital again (3-5% Triple AAA rates which were historically below average). My advice is simply to keep a lot of cash on the sidelines.

That's fine, but I urge you to watch the entire 1 hour Druckenmiller interview. As he says himself hed be somewhat long into this himself but waiting and watching every morning for the inevitable reversal. This cannot go on forever (artificially low interest rates + global currency debasement + ad infinitum growth in transfer payments). Some managers/investors are happy to play the game but we made so much money in 2012 we can afford to wait for the fat pitches. I sincerely look forward to under-performing the indices this year (as of now only +2% ytd)

This will either be the first bull market in my 30+ year career I am missing out on, or the frothiest market built on weak fundamentals. Either way I am glad being only 10% long and have no problem waiting as long as a year or two for the fat pitches. Show me one name that isn't incredibly overvalued in a normalized interest rate environment. Essentially everyone invested heavily or deploying capital in this market is making a political/macro bet on interest rates. That they will stay at near zero or possibly turn negative (nominal negative IE: fed will begin to charge for cash yet another keynsian possibility on the horizon). You compare this market to 2007, I think it's worst. Do you all remember those homes in vegas we were buying? Well they are all 100% rented out and have appreciated by nearly 80% since then. Why? Because everyone is buying 2-3 homes as an investment in vegas and that is because banks have started to lend to investors purchasing home portfolios in vegas. The economics are not nearly as attractive as they were when we entered the game (15-30% cash on cash) now guys are doing deals for a 7-12% levered return... Usually it would have taken 3-5 years for the cycle to progress from trough to peak but in this cycle somehow we have gone from trough to peak in less than 8 months. The velocity of money is clearly increasing and all this fed paper floating around is in fact finding its way into the real economy albeit in the most unproductive and unsustainable ways. Had the US government been delevering while all this was occurring I would be more tempered however all we see is continued levering by the government, by unfunded liabilities, and now by consumers and investors again. We have put up our vegas portfolio for sale - hoping to sell it to Blackstone or one of these other firms entering the game late in the hopes of IPOing their product as a reit (yes this is the new trend buying single family homes and then taking them public). It appears to me that every investment decision out there is predicated on the flawed assumption that rates will stay this low forever. I won't be as foolish. Still open to individual value plays but I can't seem to find any fat pitches. Would love to hear if any of you have come across any.

Hope you all took some nice profits. As I said two weeks ago, we have never been so under invested and look forward to redeploying that capital at better valuations.

This isn't a real move. I have no problem with stocks rising in fact I enjoy and expect them to over time but I don't believe a move when it is this sharp in any direction. When the direction is up to the tune of 7%, while gasoline rises 8% and the fed is printing $100b~ a month it definitely does not bode well. As I write this I am on the phone with my japanese trader at Nomura and we are going through chart after chart of japanese stocks that have gone up 50-100% over the last 3 months. You guys know I don't like ZH but recently he coined a good term which was "food stamps for the rich" That's exactly what this feels like. That's why our net exposure is so low.

By all means live comfortably but don't make the mistake I made in buying a big trophy home, they are way overrated! Yes, there was some satisfaction in announcing to the community that "I have arrived!" and having guests ohh and ahh at the the size of the kitchen and property, but that wears off fast. What you are left with is more space that you need and lots of money gone every year to maintain the place. 10% of the cost of the home is a good rule of thumb. Taxes and utilities are high enough, but the repairs were the worst! Whenever any plumber, electrician, HVAC, landscaper or painter gave an estimate, I could can see the joy in their eyes as they pull out their "special rate" sheet just for me. :o Big home are like boats. The happiest day of your life is when you buy it, the second happiest day is the day you sell! I don't follow at all. First off I have never in my life heard of carrying expenses for a luxury property being anywhere near 10% a year. On a 5-10 million dollar property you are looking at $100-150k all in at the worst case reflecting 1-2% which you will easily make back with appreciation over time and which would have to be spend anyways as you have to live somewhere. Moreover I don't think people should be buying multi million dollar homes that are still worrying about utility bills or repairs... When reaching a certain point in life where there is significant liquidity I find luxury real estate to provide a good balance of inflation protection as well as have a grounding effect believe it or not. It reminds you every day in my case of what only a small portion of my net worth looks like in tangible form. This is important as often when moving around the kind of numbers we deal with we tend to forget that. The only argument against owning a large luxury property for someone with significant multi million liquidity would be in a rising interest rate environment and if they are under 40 and still focused on building their wealth. Recently I have had some debates abotu this with my friends and we have all agreed that the day of a fellow with $50 million net worth living in a $500k house are over. It simply doesn't exist anymore.

In Montecito it's impressive just to be able to buy a 2,000 sqft "Mansion". I need to scrape together nearly $2.5m just to buy the house I'm renting, which is 2,300 sqft. Keep in mind that this is post-collapse pricing :-[ Montecito is definitely expensive but you should spoil yourself with a nice home after your score on BAC. It will be a legacy asset that will last forever. The Canadian market is softening but not in the ultra-high end I still do not see a slow down there. We are considering a move to London as I believe a combination of weaker pound and peaking real estate market may provide an opportunity to make a good purchase over the next 12-36 months.

Precisely, I don't see any bargains and am beginning to worry that the tailwinds you speak of will become headwinds when interest rates normalize. At this point its all about interest rates for me. I am being a value investor with interest rates and choosing to keep my capital as liquid as can be given I have already generated out-sized returns that would suffice for even 2-3 years. We buy/short stocks almost every week and will continue to do so but there are no clear bargains currently as far as I am concerned. I am looking to Mr. Market of interest rates and seeing valuations (rates) that are bubbly and investors allocating long-term capital at these valuations.

My dear friend Cardboard maybe I need to reiterate that my fund was up nearly 60% in 2012 and over 3% FY2013 already. Between my various fees and my aggressive allocation my net worth increased by nearly 80%. To compare last year to this year is a comparison of apples to oranges. I am not sure where you stood but you may have missed the run up I know people like myself and ericpoly did not miss. BAC @ 12 might seem like a bargain to you but I liked it much more at 6 and 7 same with RIMM and same with about 5-6 other names I pounded the table on for almost 2 years on this message board. You have to know when to sell too. I did not sell due to Macro reasons I sold because we made an incredible amount of money as our thesis played out and can now afford to sit back and wait for a fat pitch. As for my house I am excited to hear about your new house Eric once you sell some of those warrants ;)

We actually like brokerage firms more than banks in a rising interest rate environment. A company like E*Trade or Ameritrade will earn much more than they do today. I think that when it comes to commercial banks its not as simple as assuming that with higher rates their spread will increase. I believe that it will be more difficult for a commercial bank to retain record profitability with its cost of capital up materially. Compare that to E*Trade which will all of a sudden have about $30B in deposits it can earn 1-2% on..

We have the highest allocation of cash since the late 1990s at 60%. As of today our market exposure is about 5% net long and we may soon be 5-10% net short. Remember, an improvement in economic conditions guarantees higher rates, which is something nobody is factoring in at the moment. Higher rates in risk-free assets will in turn lead to a re-balancing of risk and with that more attractive risk-free investment opportunities for those with cash. We waited a long time for this and as many of you know we were nearly 100% long going into this rally and had one of our best years in 2012 (which allowed me to take the final 4 months off and travel with my family). We have sold 70% of our BAC position, all of our RIMM/SODA etc and all the other volatile names. Believe it or not I actually like FFH CN here for the first time in a while. As always I am bullish on the Canadian tsx v resource names which got hammered. In my view their valuations can rise even in a declining gold price environment which may be the case should rates rise. The number one thing investors should now be focusing on is whether their portfolio is positioned for a rising interest rate environment. It may be 1-2 years away but now is the time to make those bets and re-balance your risk. Note I am not making any single name predictions because I can't seem to find deep value ideas (other than FFH CN which seems to be a no brainer for an easy 25-50% in 2 years or less). The reason I believe I cannot find interesting deep value ideas is that this move in the markets was very correlated with the exception of small caps some of which may still offer some good upside. Make no mistake about it, rising interests will put pressure on margins reversing any trend in multiple expansion we have been seeing. On the central banking side I believe we are witnessing a classic liquidity bubble scenario and that real inflation is rising at exactly the same pace of nominal growth. Effectively, we are making no progress other than the fact that we are using more jelly beans to transact providing a false wealth effect. Equities were in fact depressed and investors like the ones on this board took advantage of that and increased our real net worths. That is my rant. I know some of you have PM'd me. Unfortunately I can no longer post from my office as I have implemented new compliance procedures after all the BS that has plagued the HF community. I will continue to post from home sporadically. I do lurk and read the board but just can't post as much as I used to. Cheers!

The most obvious thing that will happen with BH is shares of CBRL will decline by 30-50% forcing a margin call. I don't know why none of you have pointed that out.. He is knee deep in shares of CBRL at a very high valuation only because his ego wouldn't allow him to move on and let go. At this stage he cannot sell his shares without inducing panic as the market has bid up shares of CBRL to levels that reflect his involvement. Biglari wants to take over CBRL but the guys on the other side are putting up a very good fight. Time does not work in his favor because if CBRL has a few bad quarters and the share price declines he will be margin called.

What happened to the old moderate Moore? Must be election time I suppose. #taxes #hyperinflation #worldisgoingtoend #dontmesswithmystuff I am as moderate as they come but when there is no opportunity to change the status quo I focus on making money and keep my head down. When we are 26 days from an election I focus on the issue at hand with great passion. I weigh the last four years and as myself whether I like the direction we are heading. I don't. This is not the same as all those "other times" parsad as you have an uneducated electorate that relies on the state and doesn't grasp the simple concept of debt vs deficits. I for one thought Stewart was a smart lad until that gaffe. Does anybody understand that since Obama has been office we have been adding $4B a day to our cumulative debt load?

Please don't tell me you are as stupid as Jon Stewart and think that balancing the budget equates to extinguishing the debt lol I don't think that's very fair--he did screw it up on the debate, but there is no way he actually thinks that. I think he just had an issue in the heat of the moment. Are you kidding me? Jon Stewart proved to the world just how stupid some of these talking heads are. He could not grasp the difference and was so pro Obama he refused to even listen as O'reilly tried to explain the difference. We live in very very dangerous times. The times are no more dangerous than past crises. Every decade we go through a period of peril and despair, and then the immediate gasp of relief as things bottom and economies eventually turnaround. Every 30 years, the depth of the event looks unmanageable. Every 50 years, it looks like the worst thing that ever happened. I think most people who were around during the time of Pearl Harbor thought it was the worst thing that could have ever happened. Well guess what...70 years later 9/11 came along, and everyone then thought it was the worst thing. Right now, the world is at the depths of a long economic crisis, and eventually we will all come up for air. This too shall pass! Cheers! Parsad I don't think you understood me. What I meant by my comment was that we live in very very dangerous times when a large part of the electorate, specifically the younger generation think that people like Jon Stewart are so brilliant and then they demonstrate that they are just actors. If Stewart doesn't get the severity of our debts I can assure you his viewers have no clue.

Please don't tell me you are as stupid as Jon Stewart and think that balancing the budget equates to extinguishing the debt lol I don't think that's very fair--he did screw it up on the debate, but there is no way he actually thinks that. I think he just had an issue in the heat of the moment. Are you kidding me? Jon Stewart proved to the world just how stupid some of these talking heads are. He could not grasp the difference and was so pro Obama he refused to even listen as O'reilly tried to explain the difference. We live in very very dangerous times.

Please don't tell me you are as stupid as Jon Stewart and think that balancing the budget equates to extinguishing the debt lol

Hehe.. anybody that had any experience reading 43-101's not only knew Barkerville was a scam but shorted the stock (As we did). Just as in every business and every area of life, one has to study and learn how to analyze a 43-101. To say they are all manipulated and or scummy is a weak generalization. The purpose of a 43-101 resource estimate is to methodically document a resource envelope. The investor then has to take that information and arrive at various DCF estimates based on their analysis. Everyone knew BGM was a fraud and that was why the BCSC rejected that report immediately. The biggest hurdle for a value investor dabbling in juniors should be that the ultimate arbiter of value and price is not the fundamentals as they relate to cash flows because there are none. Instead these things should be viewed as highly levered options on the respective commodity. An investor should look for exposure in their target commodity and then try to find a situation where they are getting a lot of that commodity in the ground at a large enough discount to the spot price which results in very high option value.

Do you really think gas in california hit near $6 because of a refinery outage? Or because gas has been subsidized and money has been cheapened to the point where both he productive and unproductive classes are able to consume fuel at prices that reflect the commodity being a right and not a privilege. Commodities should be produced at the margin but when money loses it's value commodities become inelastic. What happened in California simply highlights that within a very short period of time ( because the consumption patterns for certain commodities do not reflect the productive levels of society) there could be rapid and sustainable nominal increases in the prices of commodities that have little to do with the cost @ the margin theory. The other thing you have to understand is that investments are not being made right now in Copper/Zinc/Agri/Iron Ore that will support the nominal fiat denominated demand in say 5-10 years. And these kinds of metals require 5-10 year lead times. So this is yet another catalyst in what we project will be hyperinflation. It can all reverse if the deficit and debt levels return to sustainable levels reflecting the productivity of society as measured by the tax receipts.

Read my post history we have been positioning for this since Lehman. If anything we will be liquidating into the craziness. Thanks. Have read your past posts. You re looking to raise cash if we have a "melt up"? Yes will look to raise cash into any cycle where commodities begin to rise abnormally because the next step will be monetary responsibility. This has always been the way of the world. I recommend the David Einhorn Jelly Donut essay to understand the dynamics of easy money.