moore_capital54

I like Dan Loeb a lot, there is a vehicle called Third Point Offshore Investors (TPOU LN) and its essentially a closed end feeder fund that feeds into the Third Point Offshore Fund, capitalized @ $451mm. I have owned it for a while and am very happy with the results. Another guy I like is Bradley Meier, he is only 42, owns about 34% of Universal Insurance Holdings (UVE), Wharton Grad, has done a great job of consolidating the Florida Homeowners Insurance market, and has generated some amazing cash flows. He has yet to really invest the float in an aggressive manner but I am not sure if he is waiting or if it is just not part of his investment strategy. Another "Interesting" one is PineTree Capital (PNP CN) which is owned/run by Sheldon Inwentash.. While Sheldon doesn't have the best reputation on Bay Street he has created some tremendous value over the years and manages a $700mm portfolio of juniors with no debt. If you want leverage to the resource sector PineTree could be perfect. Another interesting one is OverStock.com (OSTK) The insider group owns about 33% and @ 224mm its priced for insolvency in my opinion, I mean how can anyone rationalize Zynga/Groupon and all these Chinese BS IPO's (Taomee,Qihu/Yoku) which all btw use the metric of "Prices to Sales" LOL, and then OSTK which has $1B in sales is worth only $224mm

Personally, I love the new theme Parsad!

History doesn't always repeat itself but sometimes it rhymes - Mark Twain. You are not going to find a carbon copy of buffet, you guys are looking with the wrong set of goggles. The next buffet will apply similar principles and will be at the helm of a public company but may be doing things different or may be in a totally different industry than insurance.

Twacow that is a totally arbitrary statement, how the heck do you know that the industry is "coming off a huge ten year period of awesome profits" There is no evidence to suggest that the next 10 years cannot be better for the oil producers than the last. It all depends on the market for crude which is pretty darn good right now.

One more thing I must opine on given that ties into the other thread. I think it is incorrect to measure the Shiller research in any period other than POST 1971, when global financial assets became denominated in fiat money. Since 1971, human beings have had the ability to increase the base money at will, and so I don't think its plausible in a fiat money regime to hold your breath for 1920-1930 style trailing 10 year multiples. That being said, under that basis your data still appears to indicate that a fall to around 10x trailing 10 year net income is more than possible. It would be interesting to see a similar graph for the Japanese indices as our central bankers are now following the path of the japanese in terms of their monetary theories.

I stand corrected on the trailing 10 year avg multiple. That is a good link too thank you. I still think this is an incredible buying opportunity though, most of the companies I am buying are not trading at 19x ten year avg. BP For example is trading at 8.5x TRAILING 10 year avg net income.

Goldfinger nice to see im not the only one that reads Adam Hamilton.. he is awesome! Twacow, I don't have the figure on the 10 year trailing avg PE Ratio, but it would surprise me if it is in fact 23 for the SP?

S&P 500 is trading at 9.97x next year earnings, and this is before QE3, which is going flood those leading companies with even more profitability. If the market declines another 20% those leading businesses will be trading, on average at 7-8x next years net income. In Europe the average forward multiple is currently between 7-8x net income, any further decline will mean ~5x Based on this graph: http://en.wikipedia.org/wiki/File:Price-Earnings_Ratios_as_a_Predictor_of_Twenty-Year_Returns_(Shiller_Data).png This is an incredible buy opportunity.

Here is a list of companies that are all reputable and are either explorers or developers of proven precious metals deposits: http://precioussummit.com/participating-companies/ For institutional investors on this board that are interested, I can get you invited to the conference in Vail which is going to be very good. Not all these companies are a sure thing, some have yet to reach the point where they have an independendt NPV. Others like NovaGold and Gabriel have 2 of the largest undeveloped gold mines in the world, and are just waiting to get permitted. Management is taking as long as possible due to their views on the gold market. In Novagold's case their partner is Barrick the $50 B largest producer of gold in the world. Tahoe Resources is developing what may be the world's largest undeveloped silver deposit at 300mm+ ounces of silver!! There are many interesting companies, and all trade at a fraction of the commodity spot price, when valuing based on the formula: Market Cap - Cash + Debt (EV/ Proven Ounces)

again mate you are WAY OFF. The value of ALL The gold held by GLD is about $66 Billion, under your logic the Bernie Madoff fraud should have caused epic damage to the $200 Trillion dollar global economy. The market is too small mate, ask people you know if they own any GLD or GOLD Bullion, and if they do ask them the next two questions: 1) Do you own it with leverage? 2) What percentage of your networth does gold currently represent. You will find that I am right. Either they don't own it, and if they do they own it with excess cash they don't need and it represents an irrelevant portion of their net worth. It won't change ANYONE's life if gold goes to 200 tomorrow, Also according to Bloomberg data around 60% of GLD is owned by institutions, I am hard pressed to think the retail investor even owns 10% of it. A bubble by definition should cause significant pain when it pops. The only people who need gold to be lower are the Central Bankers as this is causing a mass exodus from their experiment. Think of it like the Matrix.

Ubon2wron, I am sorry to hear that but it sounds like you did not really even attempt to learn the industry. I have been investing in Juniors for over a decade and have generated outstanding returns for my investors and I, with the goal of achieving exposure to our underlying commodities. There are about 3,000 companies listed on the Canadian Exchanges (TSX and TSX.V), of owhich about 1,700 engage in mineral exploration development or production. Of those 1,700 there are three categories. Exploration - They have a geologic anomaly if at all and hope to develop it further to the point where it is an economic ore body. Developers - They have passed the stage of delineation and have a 43-101 or CIM/JORC Standard Independent Resource Estimate or are at the Prefeasability Stage with an Independent NPV. Producers - They are in the business of moving tons and generating a delta between their cost vs the price they get for the sale of their target commodity. There are about 1,300 Exploration Companies, of those about 70% are either frauds or complete BS Companies. Those are the ones you probably got involved with. We track around 400 legitimate exploration companies that are honest in their exploration practices and are truly trying to define an anomaly with potential. There are about 300 developers, and those are the ones we watch very closely and understand them. Of those you need to decide if you are comfortable owning an interest in a development project in Africa or if you wanna stay close to home. I personally stick to US/Canada and Latin America. The developers provide the best opportunity for risk/reward, as you already know there is an economic ore body and are now attempting to extrapolate what the potential NPV will be. There are tons of variables, an ore body can grow mineralization can extend at depth or along strike, there are permitting and environmental issues that may have to be looked at. There could be metallurgical issues or issues with grade, and then you need to actually raise the capital to build the mine. Here are some examples of some companies that have gone through this cycle. 1) Osisko Mining - 6 years ago, the company acquired a deposit named Malarctic. It had a historical resource estimate from the 1980's of around 200,000 ounces of gold. The CEO reinterpereted the deposit from being a high grade underground operation to a low grade bulk tonnage operation based on what he felt was going to be a rising gold price environment. They began to drill largely spaced holes and encountered additional mineralization. Over the ensuing two years the deposit grew from 200,000 ounces to around 14 million becoming one of the largest in the world. The company completed their feasibility study and raised around $1B in equity and debt. In April of this year the entered production, and are now producing around 40-50k ounces per month. The NPV of the project is about 7-8 Billion dollars today. 6 years ago, shares of Osisko traded at under $.10 and now they trade at $14 2) Richfield Ventures - Didn't get as far as Osisko but drilled some incredible holes within about 6 months the stock ran 900% before the company was acquired by Newgold for around $500mm. You could have tracked each drill hole and understood that what they encountered was rare. There are many opportunities in the junior market, I can go on and on and on. Our largest position right now, is a company that is developing a deposit which last stood at 3.0mm~ ounces and since then the company has drilled 7 stepout holes roughly 300 metres from the original resource envelope and each hole encountered identical mineralization retaining grade continuity and a suite of sulphide minerals, indicating that in fact the ore body is quite larger. The market is currently valuing the company at around $25 per ounce of gold in the ground, while I can already tell the ore body when they publish the next resource estimate may grow by 50-60%. This is akin to buying AAPL at a multiple of 10, having AAPL increase its quarterly earnings while the share price remains the same providing you with a lower multiple. I suggest you dig into the business. The single best source of information for newbies is this: It's the weekend. If you have time, I suggest you watch ALL the videos on Ore Deposits in sequence: http://www.gril.net/education You will understand how incredible the opportunities are in the junior space. The only downside is that they can be very illiquid at times.

Ubon2wron did you read my post at all? Don't you understand that if you fix gold to a currency that means the currency is redeemable in gold? And there are tens of trillions of dollars worth of financial assets denominated in USD. If you decide to fix the USD to gold, and allow it to be redeemable in gold (A Gold Standard) you need to make sure you have enough gold to redeem at the least your base money or your broad money. If you have a ratio that doesn't do that than it isn't a gold standard and nobody is going to care about your currency. Does that make sense?

Seshnath I don't even know how to answer you man. With respect, your post appears to be a smorgasbord of words and sentences that don't disprove anything I said. 1) You are comparing Gold to Tulips which are plants which are renewable and infinite as long as the sun is shining? 2) Your math is way off, actually you prove how well gold works as a store of value.. Let me explain: In 1920, the USD was 1/20th an ounce of gold. 1 Troy Ounce = 31.1 Grams. You say a bag of rice which costs $10 USD Today, cost 4gms per gold in the 1940's. I don't know if that's true or not, but for arguments sake let me disprove your point. Money was tied to gold back then in a ratio of 1/20 so each dollar represented 1.55 grams of gold. The 4 grams you speak of are comparable to $2.58 Equivalent dollars at the time (1940s) (4/1.55). It is plausible that something in 1930-40 cost $2.58 which today cost $10 USD. There are a lot of other goods and services that cost less on a real basis due to advances in trade and human ingenuity and have nothing to do with the monetary base. Your example is far from disproving gold's strength as a store of value, if anything you should cede to the lessons of your ancestors who witnessed periods of hyperinflation and currency erosion. Something I am dead sure you have yet to experience in your lifetime, or else you wouldn't be saying things like: "If someone believes 2008 was a financial collapse, I would ask them to really go a check-in at a sanitarium. Just look at the GDP numbers to begin with. All we have now is a media day-in-day-out crying about a percent of percent change in GDP and decide we have financial collapse. In fact, the real economy is doing well" These are not the words of someone who has any significant exposure to equity markets over the last say 3-4 years.... And then your final point on Central Banks lacks the depth that I would expect after spending quite a bit of time explaining the mechanics of central banking. Its too short and shallow to just say whimsically: "The Central Banks who kept the interest rates low back then under lax regulatory environment are to blame, IMHO" It's not that simple my friend... really give it some more thought.

Parsad, you and I both agree that there is no more important principle to investing than that of Graham & Dodd, that is no the point I was making and I really am saddened by the fact that I have spent countless hours presenting facts, reasoning and loads of data which supported my point and you are still comparing my views on gold to those of internet stocks and housing bubbles. This leads me to believe that in the end if Buffet says jump most value investors say "how high" without questioning whether he is self interested or the logic behind it. Buffet never once discussed the fallacies of the fiat money system in public while many of his cohorts and followers have, quite vocally. Joe Steinberg, Michael Burry and Seth Klarman for example all invest in gold and believe it is the only true money, and that fiat currencies always end up worthless over time. Burry and Klarman own significant stakes in gold juniors and producers. The list of gentleman you presented have all skinned the cat in many different ways and have added a personal touch to the principles of value investing. Nobody did it by reading and applying one for one the lessons learnt in the chapters of those two great books. And one more even more important note, is that in life it is important to sometimes lead by example and talk from experience. As the wise Confucius says: I hear and I forget, I see and I remember, I do , and I understand. Your last reasoning of just listing some value investors you don't even know personally (with the exception of Francis Chou and Prem) does not win me over. Win me with facts, and logic.

We bought more BAC today @ 6.95...

Yes of course Rran Jan I use the Intelligent Investor and Security Analysis but it is not the ONLY thing fueling my investment methodology. About gold mining companies, I don't think you understood, I don't buy PRODUCING mining companies, I buy non-producing developers that aren't profitable and have yet to produce any cash at all. They are developing proven gold deposits and essentially function as leveraged call options on gold, with no expiration date. What I look for is an ore body or hydrocarbon reservoir that has been defined based on drilling and carries an independent estimate of mineral content or NPV.

tooskinneejs it is exactly what I said, I don't buy gold at spot price (I have bought some bullion personally over the last few years) but instead buy shares of companies developing proven gold deposits in safe geopolitical jurisdictions. In this way I buy the gold in the ground at a large discount to it's current spot price. Does that register? rranjan - I have provided in this thread several times the fundamentals of gold (Supply/Demand Numbers), and that supports my wanting exposure to it and believing it is not in a bubble. The Value investor in me chooses to buy gold at a discount by accepting the "risk" of time whereby it may take several years for the companies I own to develop their gold deposits, but the risk-adjusted IRR, in my opinion, supersedes that of buying Bullion @ 1859. Tooskineejs - I never once tried to compute the value of gold.. You guys all did!! By saying so definitively that it was in a bubble you have all made the decision to compute the price of something. Any commodity/natural resource investor will tell you, there is never a definitive intrinsic value of a commodity or natural resource, rather a "range" or a "trend". Things go up, things go down, but the big money is made on the trends. The key to commodity/natural resource investing is understanding the underlying fundamentals of your target commodity/natural resource. For finite commodities/natural resources the most important fundamentals are Supply/Demand. For Gold, the supply/demand figures are extremely bullish and have been for the last decade. This was on a pure economics 101 basis (Mine supply declining,discoveries declining even though exploration budgets rising, and vanilla demand increasing due to population growth, IE: middle class buying jewellery). BUT THEN - We get this 2008 financial collapse, and people start thinking.. "hmm Is this the nail in the coffin of the Fiat System? How can I truly get my assets OUTSIDE of the financial system in a liquid fashion. With every single financial asset I have access to I have a counterparty, whether it is a central bank or a Triple A institution, what can I own that is nobody else's liability, with no counterparty risk and with deep liquidity" And all of a sudden, Gold starts a new phase whereby it is back in vogue as a financial asset. AND ON THAT BASIS IT IS COMPLETELY UNDER-OWNED. As I write this the world's financial assets are worth $160 Trillion while gold represents just 0.6%. Historically gold formed the monetary base. Does that sound good or bad for the fundamentals? Those are the fundamentals of gold the way I see them right now. And even still I am choosing to participate through the Juniors. ubuy2wron - Your comment relating to Fort Knox is not accurate and lacks logic. The US official gold holdings only amount to $450B while the financial assets implicitly backed by the US Government exceed $20 Trillion (CONSERVATIVELY) I am not even going to count Medicare/Medicaid, and future commitments, nor will I count equity markets and other financial assets denominated in US Dollars that we all view in our bank and brokerage accounts as immediately cashable. There would be immediate pressure to convert dollars into gold to test the system before it was found to be credible and if the ratio was not such which would support the asset values floated in USD than the gold hoard would be gone in a few days bankrupting the US of its gold. You can't just wake up after forty years and arbitrarily decide that the gold you have equates to all your liabilities. The ratio would have to be just right to support current economic activity and asset values. If we use the reserve multiplier of 8 used by banks to create broad money, I would say a fair guess (and this is a totally unscientific way of doing it) is to efficiently count all financial assets floated in USD, and eliminate double counted assets or liabilities that would zero out assets, and then divided that figure by 8. That could work. I don't know what the figure is but it would certainly require a much higher gold price to work.

Good Piece from the FT Today for those that actually want to learn about this and keep an "open mind" http://www.ft.com/intl/cms/s/0/7cf047b8-c70c-11e0-a9ef-00144feabdc0.html?ftcamp=rss#axzz1VVdUlWtN

I think the problem is that a lot of value investors just read a copy of Security Analysis and/or Intelligent Investor and base every single investment decision through that prism. I have yet to hear one solid argument as to why gold is in a bubble other than rhetoric relating to booms and busts or historical quotations. The last response defended the original assertion of the author and then said "even if gold goes to 3-5k" so assuming that logic is correct and gold runs to 3-5k per USD and then settles at say 2,500 or 1,900, that means all this bubble talk today was pointless. There are absolutely no analogies to the real estate bubble. The commercials you all see on TV are for the RETAIL INVESTORS TO SELL THEIR GOLD, not to buy homes and second homes with borrowed money. The gold gets sold to cash for gold stores that in turn sell the gold (all on an unlevered basis) to smelters that smelt it down to .999 fine and sell it on to mints where it is molded into Good Delivery bars and becomes part of the supply. On the Demand side, the retail investor is the smallest segment of the gold market, representing less than 100 tonnes per annum. Instead of just throwing around rhetoric that gold is in a bubble month in month out, true value investors should be seeking opportunitites. There are so many right now! Seth Klarman has ramped up his gold equity research team and they are deploying some serious capital there (over $1b). His favorite way is to gain leverage to the gold price by buying it in the ground. He has so far taken stakes in Gabriel Resources (GBU) which is developing the Rosia Montana development in Romania and other positions which I know but cannot disclose. The gold developers represent asymmetric exposure to the price of gold as you can buy through them, the gold in the ground at a fraction of its spot price. In some cases I am buying Canadian juniors hand over fist at $10-30 per ounce in the ground.

In line with our expectations, the second quarter marked another quarter of positive demand for gold from the official sector. Net purchases of 69.4 tonnes demonstrated that central banks continued to turn to gold to diversify their reserve assets. 2,500 tonnes is produced annually. 2,200 tonnes is consumed by the jewellery industry rain or shine. 200 tonnes is consumed by the semiconductor industry rain or shine. 150 tonnes is consumed by the dentistry industry rain or shine. That's 2,550 tonnes. And now we have Central Banks buying an additional 280 tonnes per year, after selling 20,000 tonnes between 1971 to 1999 LOL I made no mention of retail or institutional or investment demand. Sure sounds like a bubble to me!

I don't follow? It is a matter of fact that demand for gold is up substantially and that there has been a "fundamental shift" http://www.gold.org/investment/research/regular_reports/gold_demand_trends/ Central Banks are now buying gold with fiat money they can either print or "earn" through easy trade with their lazy western counterparts. It is a matter of fact that up until 1971 gold backed the US Dollar which was the world's reserve currency, hence the world's currencies were somehow backed by gold. Where do you get this "it's different this time" notion. There has been a fundamental shift in central bank attitudes towards gold, they are now net buyers exchanging their paper money for it. Also your response didn't acknowledge any of the flawed logic in your dinosaur argument.

One More thing, I never once said I believe in investing in gold. All I am arguing is that gold is definitely NOT in a bubble. Gold is an alternative form of money that is experiencing a fundamental shift in demand as an alternative to fiat money 40 years after the experiment started which attempted to do exactly what some of you guys here have been attempting: discount gold's unique traits as the once and forever form of money, the only asset that is nobody else's liability to repay. That experiment has ended TERRIBLY: It has allowed our politicians to run up the largest deficits in our nations history. It has made us lazier free market participants relying on imports and a serviced based economy. It has turned money into something that is no longer cherished and let go of as quickly as it is earned leading the lowest savings rate in our nations history, the highest consumption rate, and insane volatility in financial markets that are so intertwined to the point that if someone sneezes in Beijing CSCO and WMT can lose 1-2% in value in a day. It has has made debt and credit so ubiquitous that it is almost mandatory in order to live comfortably (for an average citizen).

Tooskineejs I am sorry mate but in my humble opinion your latest response has really shot your theory in the foot. A Dinosaur Bone is essentially a fossil, by grinding up your precious dinosaur bones you are basically losing any recognizable traits and essentially ending with a bag with dust made up of a dog's breakfast of abundant minerals... LOL There would be no difference between your bag of dust and any other bag of rock dust on planet earth. Here is a lesson on how Fossils are formed: http://www.enchantedlearning.com/subjects/dinosaurs/dinofossils/Fossilhow.html We can go on and on about this and you can keep trying to find alternative mediums of exchange, your ancestors did the same thing for thousands of years, in the end you will realize that the closest thing to perfect is gold. Relating to the comments about Buffet purchasing other fiat currencies as a "bet" against the dollar, there is a very good quote I heard from Tom Kaplan noy too long ago: "All Fiat Currencies are Toilet Paper, but occasianlly some are double ply" It's like choosing the tallest midget. Relating to the comment about how "Rational" the gold move is, all you have to do is invert the logic. There is exactly the same amount of gold in the world today as there was 40 years ago, the reason gold has made that move is because in the last 40 years on a global basis, central banks have increased the supply of their fiat currencies. The price of gold is the best gauge we have for the pace of erosion of fiat money. G-D knows even the CPI is manipulated, and M1/M2/M3 do not represent financial assets which most of us view as immediately "cashable".

Dinosaur bones!! You've got to be kidding me?? Can Dinosaur bones be connected to increase ones holdings? Can they be divided to engage in commerce? (I guess with a saw?) Are dinosaur bones evenly distributed in the earth's crust at crustal abundance of .0011 parts per million? How many dinosaur bones would it take to warrant a unit of trade? And how would we ascribe value to say the skull of a T-Rex vs. a spine of a stegosaurus. Look at all the list of different dinosaurs how will human beings decide what is worth more or less? http://en.wikipedia.org/wiki/List_of_dinosaurs On the other hand a piece of gold mined in Mongolia can be melted with a piece of gold mined in Canada... That is an attribute of a medium of exchange. I am not a gold bug but am finding myself defending its historical attributes only due to my spending more than 5 minutes reading about it's history and the history of the world's currencies while most value investors just assume that gold is worthless and has no intrinsic value because someone else said so. Investing is not analogous to physics, where one just needs to read the latest trade publication and be up to speed on the logic. There are some obvious fallacies in the current system that any person with time can spot. I urge you all to just take some time and read about it. The logic prevails. Eric, another good point and I have no problem voicing my thoughts on the potential downfalls of a gold-standard system, if you feel that way about supporters of the gold-backed monetary system it may be due to the fact that most are already familiar and are certain that a fiat money system exacerbates any potential "negatives" of a gold standard system. To answer your question: In a time of war two things can happen. The first is that the Central Bank accepting the gold can keep it separate from the nations Broad Money, it does not necessarily have to include the gold being held as part of the domestic currency reserves. If however the foreign nation is in fact converting its gold to US Dollars, and then chooses to redeem them at a later date, that would undoubtedly cause a boom followed by a bust. But over-time with gold being finite, this could not happen too many times and each time it would happen the US would end up with more of the foreign nations gold making it an expensive process for the other nation. Let me explain: To convert their gold to US Dollars, if that is the path they choose, they would have to either engage in trade, or pay some type of a fee to the US Central Bank, in gold. Moreover, if they converted most of their gold into US Dollars, then trade in their country would most likely occur in US Dollars, making it very difficult for them to wean off the currency. Remember, in a gold standard system, the government doesn't own the money, the citizens have a claim to the money. So a government can only decide to shift "All it's gold" if it is in fact the treasury gold that is not gold being used to support the circulation of the currency. I am not discounting that during such times the broad money would increase, but this could be controlled with interest rate policies, and in the end the nation would only benefit as after the cycle ended it would indeed own more gold per capita on a permanent basis. The pain experienced by any bust in the US would be child's play compared to the pain being experienced by the foreign nation having to convert and redeem their national gold hoard due to internal issues. In other words, in these scenarios, the country accepting the gold would come out of it richer, and deservedly so for encouraging an economic system with confidence and a stable currency. Who do you think is better off? A US Citizen from 1920-1934, or a German Citizen from that same period having to live through the hyperinflation of the Weimar Republic? In regards to loan and underwriting standards. I think as a matter of fact the world today is a lot more addicted to debt than it has ever been at any point in history. The gold standard system just as it instilled discipline on a fiscal level also instilled more discipline on a personal level. That is why I said that any depletion of gold on the base money level would cause "loans to be called" and the system would revert back to its normal pace. I didn't just say that to sound ambiguous or shallow, in a gold standard system loans are generally assumed by the speculative class or by a class of borrowers who have yet to demonstrate an ability to accumulate excess capital in the market and those loans come from the capitalist class that has demonstrated their ability to accumulate surplus capital, hence lend it out. In this environment, loans are not mandatory as they are today to conduct everything from payroll financing, account receivable financing to server financing. Today the system is ridiculous, where the savers are punished and don't get to decide at what rates their money is lent out. It all ties in together quite poetically, I may say.

Last post from me on this, well said OEC. In my humble opinion, Fractional Reserve Banking/Central Banks and interest rate targeting are ENOUGH policies for a free market capitalism economy. When times are bad you can reduce rates, and once in a blue moon engage in some type of a fiscal stimulus (during wartime for example). The issue is really that politics has dictated monetary policy.