original mungerville

The exercise program is good. You are eating some good foods. The animal protein has helped you build up your muscles and strength, but should not be necessary to maintain that strength now that you have it if you continue to exercise. Keep up the good work. :) LC, Your eating looks pretty good to me. I don't think, however, that is the optimal amount of protein to gain significant muscle mass / bulk up. But 180 grams per day should do it. This is basically impossible on a normal diet (I can do about 120 grams max on normal food - and that isn't easy) - so you need some protein powder to get you there. Take in a lot of that just before, during, and mainly after a work-out (maybe 50 grams around the workout) and then take the rest some other time during the day. Buy the cleanest stuff possible - usually low calorie to protein ratio, and low sugar. Also just eat like a pig up to 30 minutes after a workout, this is when you can drink a lot of milk, whatever and your body will tend to send that to your muscles rather than to fat. Basically if you are trying to bulk up, a lot of milk right after the workout could be a good idea. If you take in 180 grams per day, and do 2-3 sets of 3-5 repetitions of weight where you bring it down over 5 seconds, and ensure you are using weight which effectively maxes you out after the 3rd or 4th repetition. And also only lift once a week for each set of muscles (your muscles need time to rest so they can grow). I think you'll bulk up pretty fast. There is some good stuff in the Four Hour Body (by Ferris) on this. That book is probably worth skimming - there is a chapter on how to bulk up. Looks like you are already lifting heavy, but Ferris makes the point it 1) has to be really heavy, 2) the muscles need time to rest, and 3) you need a shit load of protein (around 170-210 grams depending on your weight) and also a good amount of calories per day (I forget, but its quite a bit).

I totally agree. The food we eat these days will kill you. There is so much corn-based sugar in it, if you take a bit of everything in moderation, its not moderate. For me the best way to start was to 1) nail breakfast and 2) don't drink your calories (other than the odd beer and wine of course). Nailing breakfast to me is lots of protein (say at least 3 eggs, as protein calories make you feel more full), then lentils/beans potentially, and a veggie. Bread and cereal are junk food basically - and that's what most people eat and feed their kids. If I want junk, I'll do it right with some Lindt chocolate. 1) and 2) should get you maybe 40% of the way there and its pretty easy. You are at home, you can eat breakfast the way you want to no matter what the day brings.

Just curious, why do you want to avoid gluten? It's not bad for you unless you have Celiac disease. It's important to note that Coca Cola and other sodas sold in the U.S. don't contain the table sugar we're all familiar with. It contains high fructose corn syrup, which is far worse for you. If you want to drink healthier Coke, then buy the Mexican bottled one, which contains real sugar. Sugar and carbs are of course an important part of a healthy diet so it's not necessary to cut down too much. Btw I'm a vegetarian too. There is not much evidence that table sugar is any better than corn syrup based sugar. Table sugar is part fructose/part glucose. The data around this whole issue is pretty sketchy, like most dietary research. The problem is more to do with the pervasiveness of sugar(s) in processed foods these days. The total amount of glucose/fructose consumed has skyrocketed from any earlier times. Exactly. Try not to eat any of that shit on a regular basis and indulge once a week. Once you stop eating sugar/glucose/fructose and processed foods including bread, pasta, etc. you actually start tasting the natural sweetness of vegetables. Also, for those who stopped drinking pop and are congratulating themselves, I hope you also stopped drinking fruit juice because that shit is just as bad for you - same amount of sugar. Instead drink water and eat whole fruit.

With Europe now truly printing money, I think a deflation scare might be averted for the next 2 years… Instead, we will probably witness a meaningful increase in European stock prices… Later, when also the ECB largesse has run its course, with high asset prices on both sides of the Atlantic, and debt levels probably still very high, deflationary forces will be back in full swing… then, watch out! ;) Gio Yes, I agree - watch out in a couple of years. High asset prices everywhere and central banks out of ammo (other than a huge bazooka: major inflation or new global currency regime). Not so sure European stock prices will rise - a better bet would be the DAX given half (or maybe less?) of exports are outside of Europe I believe.

Thanks for the breakeven maths. Don't forget, though, that these are saleable securities. We need a deflation scare, in which people are prepared to pay silly money to buy protection off Watsa, more than we need deflation. China's currency is pegged to the US dollar, which has been rising. This results in a rising Yuan versus other Asian currencies. If China decides to loosen the peg or outright devalue we could see some serious deflation.....thoughts? cheers Zorro Yes. And I would say the Yen being so weak puts pressure on all other exporting Asian countries to also devalue. So this combined with the problems in China, and as you say the link to the $US, could be a strong combination which leads the Chinese to devalue as well in order to maintain competitiveness. The strong $US is importing deflation into the US while the weak Euro and Yen export deflation / import inflation. So, on the assumption deflation eventually takes hold globally (ie I am talking before the central bankers really inflate / move us to a new currency regime which I see a few years out, say 2018-2020), the strong dollar creates a lag, all else being equal, in terms of Europe's deflation (ie. makes Europe's deflation less than it otherwise would be for the time being) and expedites deflationary forces in the US. The adjustment in the currencies makes Watsa's call option likely to get near to the strike price a little farther out in time than otherwise would be the case. But I think fears of global deflation could certainly increase into this year end / 2016. Volatility should increase in currencies/bonds and this should help with the pricing of the CPI calls as was alluded to by the previous poster.

I have learnt - the hard way - that it usually takes some time, as Uccmal was saying, for things to play out. When bad news first hit Fairfax in early 2000s that was not the time to buy, same with banks in 2008 in my view, same with gold about 2 years ago, it takes time to reach the point of maximum pessimism - usually, but not always. You take a blow, then another, then another, then you figure this must be it. THEN what happens, is 5 more blows and years later when you are out of capital and nobody who cared about the area wants to even talk about the thing going back up any time soon, THAT is usually the time to go big - and the bets can have very little risk at those points because asymmetry develops. Who the hell knows? Not me, that's for sure, and certainly not in relation to oil. But because I don't know, I would look for asymmetrical bets - there should be some out there in oil at some point. Heads you win, tails you don't lose (even if oil drops further from here). But maybe that is taking it too far. So Paul Tudor Jones says heads I make $5, tails I lose $1. If he can't get 5:1, he doesn't bet. Its gotta scream value. Wait till it screams at you (and maybe the more work you do, the clearer that screaming voice gets). And in any case, if it doesn't scream, you can't go big, and if you can't go big, you can't make a lot of money. So its not a huge loss even if it ultimately goes up without you invested in it. But we all know this as well I guess - I'm done boring you guys, heading to bed.

Sure, if I roll the dice and hit it and make billions I'd be happy as well but that in no way makes it a good bet. To bet big on banks in 2008, you had to bet that essentially the entire US financial system would be bailed out in relatively short-order and the common shares would not be totally wiped out. If you were sure of that, you could place a big bet. If you were not so sure, maybe you wait for the bail out, and place the bet once attractive asymmetrical risk-reward instruments were available - ie the warrants. Or, like Buffett, you buy more senior preferreds with warrants attached - so you are protected beyond what the common offered you. Value investors are NOT the ones who are supposed to be buying on bad news. That is what contrarian investors are supposed to do. It can work well IF, on that bad news, the stock falls far below the intrinsic value of the company. The job of the value investor is to make that determination and not just go around buying on bad news. Anyway, you and we all know that already.

Nobody will disagree with you there. Its not possible to disagree because its obvious. Indeed, if you bought some of them in 2008, you would have hit a home run for whatever portion of your portfolio you put into them. Nobody can disagree with that statement. But that statement is of little use to this discussion - which is my point.

Also, its not like its just oil. Last time I checked all metals (except gold) were down over the past year or so. European bond rates are negative, US 10-year below 1.7%, Euro and Yen down a lot, Canadian dollar tanked. There are a lot of markets pointing to something.

Sure, if I roll the dice and hit it and make billions I'd be happy as well but that in no way makes it a good bet. To bet big on banks in 2008, you had to bet that essentially the entire US financial system would be bailed out in relatively short-order and the common shares would not be totally wiped out. If you were sure of that, you could place a big bet. If you were not so sure, maybe you wait for the bail out, and place the bet once attractive asymmetrical risk-reward instruments were available - ie the warrants. Or, like Buffett, you buy more senior preferreds with warrants attached - so you are protected beyond what the common offered you.

Gundlach from Doubleline said something like the oil boom produced ALL the jobs since the recession. I have not double checked that for accuracy though.

So I think if you look out very very long-term like Buffett, a great stock will do better than gold. Just like a great stock will do better than ANY currency over 30, 50 or 100 years. I am not sure, however, that in the next 5-7 years or so the average US equity - already at fairly high valuations - will outperform gold (a store of value which tends to keep its real value unlike a currency that is printed). A great company at a great price will outperform gold even over the next 5-7 years - there is no question. What I am saying is that your neutral position should no longer be 100% cash (if indeed that was your neutral position say 5-10 years ago), it should now be less than 90% cash and more than 10% precious metals - as a hedge against monetary debasement.

Viking, its good you are thinking about currencies because there is a big risk they continue to be a huge force in the coming 6-18 months. If other Buffett followers want to stick their heads in the sand and "ignore the macro", they may very well get a lot of surprises in the following year or two.

This is my take (to a significant degree influenced by Ray Dalio's views): Given interest rates are being manipulated by central banks across the curve in most countries - and basically at zero across the curve except in North America, the global adjustment at this point will be the currencies - and we are seeing that already play out. Over the past 12.5 months, the $US has been strong relative to almost all currencies - and North American yields could further the adjustment by decreasing this year. Once this yield reduction and the run in the $US ends (where that dollar run may have imported deflationary/recessionary forces into the US) - and say we hit a recession in the US in the next year or two (yes, recessions do happen in the US even with Fed around), and this is likely to happen when financial assets (eg, stocks, corporate bonds, etc) are at very high levels - there is no ammo left at that point for the Fed (in terms of lowering interest rates anywhere on the curve), and deflation or stagflation may set in across developed countries. This will be the first time in 40 years when the Fed can't lower rates in a recession. At that point, there is no adjustment globally (interest rates can't adjust, currencies in a circular spiral going down the drain). 1. If stagflation sets in, given current central bank policies, gold will do very well. 2. If instead deflation sets in, our God-like central bankers will jointly print so much money we might as well just call it a new monetary system. If this happens, gold will also do very well. Now this is counter-intuitive as deflation is usually bad for gold. With these global policy-makers in place, I think deflation portends significantly more monetary debasement which is, albeit counter-intuitively, positive for gold. We see this already over the past 12.5 months. Gold has risen in value against all main global currencies (its done better than even the $US). 3. If by some miracle the US pulls itself out of this upcoming recession (say one that starts in 1 to 3 years) while financial assets are falling - along with pulling the entire developed world along to higher growth - at a time the entire developed world is also over-indebted, well gold will not do as well. (I am not betting on this). I think the best store of value is gold (I prefer silver and precious metal miners as they have more upside potential). If you want to take more risk, then equities, real-estate, etc. But if you want to be more conservative at this point, and go to some "cash" because you see equities as highly valued, I suggest that - given the constant debasement of the currencies - having at least 10% of that cash in precious metals related investments makes a lot of sense. (I personally have much more than this percentage but I would not advocate that for other people's portfolios) Its crazy not to have 10% of cash in precious metals. If the choice is $US or gold, I'll take gold hands down (at least in terms of my cash equivalents). My view is that gold has been suppressed for some time now and that is ending or near the end. As it starts to move up, it may really accelerate. At the same time the supposed omnipotence of our God-like central bankers will decline dramatically. The point I make in #2 above - that deflation portends significantly more monetary debasement and thus is positive (not negative) for gold - is the critical one. If you agree with that, then gold makes a lot of sense right here. If you don't, then probably not as much.

Ya, me. But it won't go to $800. There are sovereign buyers at about $1200. So it looks like you won't be doing it after all.

original mungerville, I did a little analysis on hedging, it seems to me that buying puts is very expensive and the payoff does not seem all that attractive. I would love to hear your opinion on a short half page analysis that I am attaching below. Basically, you need to put nearly 16% of your portfolio into put options to be able to hedge your portfolio completely against a 40% loss. That means we can invest only 84% into stocks. I might be missing something and any feedback would be most welcome. Thank you! Vinod Vinod, I am sure your analysis is reasonable. Just to be clear, I am advocating the following: 1. My neutral position is no longer 100% cash, its something like 90% cash (or less) and 10% (or more) precious metals. This is because of the global monetary debasement and its irrespective of whether we get deflation or inflation coming. Its just about the debasement. 2. I advocate being at least partially hedged after a 5 to 6 year run. The alternative is reduce value picks and move to cash. But if you are a really good value investor, then some hedging allows you to benefit from your Alpha without incurring market risk. 3. I advocate asymmetrical hedges. They are more expensive, but they can't kill you like symmetric ones which go the wrong way. After all, with money printing, the stock market's potential return is very very high - so you can get killed on a symmetric hedge. Asymmetrically hedging your entire portfolio is extremely expensive - I agree. And it would not permit you to invest the entire portfolio unless you use some margin for the hedge. 4. After over ten years at this, I have come to the conclusion that diversifying your hedge is intelligent. So buy some puts, but also be fearful when others are greedy (and the reverse) by moving to cash (and vice-versa), and also consider using long govt bonds as a third and less expensive option. (But in this environment with bond yields already so low I am less inclined). The point is don't put all your hedging eggs in one basket, and don't necessarily hedge 100% of your portfolio. So, for example, after a 6 year bull market, maybe instead of hedging 100% of your portfolio, something like the following: Neglecting my point #1 above for simplicity: A) 25% cash, 75% value picks (ie discard your worst 25% of ideas to get from 100% down to 75%), hedge with puts say 35% of your entire portfolio. So net you would be long equities 40% and effectively be 60% cash. B) IF we were in a more normal environment for govt bonds, you could instead invest the 25% cash in long govt bonds which earns a better yield and is roughly the equivalent of say an extra 15 % hedge on your equities (at least according to Ray Dalio of Bridgewater - and I am talking in very rough terms), so effectively you would then be 25% unhedged equities (instead of 40%) and effectively 75% cash. In reality, you would have 25% long bonds, 75% equities and 35% of notional covered by puts you bought on margin. C) You might want to split A) and B) if you do not feel comfortable relying on the inverse correlation between the long-bond and equities. I would either do A) or C). The idea is to diversify the hedge. D) Also, if a major holding is a large cap, you could consider buying the LEAPs instead of the common. Its more costly, but they act as a floor on what you can lose. So if you are really really scared of the environment and 25% to 40% long equities is still too long, you might consider a bit of this (should you have this type of security in your portfolio). Diversify the hedge into 3 or 4 strategies (all of them asymmetric) so you can't get killed by things working against you for some time and also the cost won't kill you because you limit your maximum notional your puts reference to 35% of your entire portfolio's notional Now, having said all the above - given the monetary debasement going on, cash is probably going to ultimately be trash. So how does one stay conservative (ie how does one not be forced to hold equities as central banks debase and force everyone into equities?) as equity valuations go sky-high - at a time that cash is likely to be debased? I think its really important for everyone to hold at least 10% of their portfolio in physical precious metals. I am not going to get into how that should fit into a hedged value portfolio in this thread, but basically with A through D above, and combining that with #1, each person can figure it out for themselves.

Also, I should mention my main play is precious metals. Counter-intuitively, I think if we get deflation, central banks will print a shit load which will cause gold to soar. As such, I think the gold price will anticipate a massive reflation (should deflation set in) and so despite there being deflation - gold will rise.

In my view, there are quite a few things wrong with the above statement. Firstly, why is your thesis that there are "other" sources of gold not reported and this gold is "sold to manage the price down". I would really like to know what these "sources" are - in your view, and then I will share with you my view.

Personally, I would not fuck around too much trying too hard to figure out individual stocks. Most mines are outside the US so there is a triple whammy here: 1. Oil down 50% and oil/energy makes up 30% of a mine's cost structure; 2. Gold is up now in the past 12.5 months even relative to the US dollar and the US dollar is up relative to currencies of countries where gold is produced (therefore the price of gold in those countries' currencies is up by double digits; 3. Miners' stock prices relative to gold are at all time lows. I would just buy GDX or Sprott's Gold miner ETF or call options on GDX at this point. Then, once you have had the time to figure out individual companies, you can sell your initial position and convert it into those. For me, I just bought call options on GDX and SLV (the latter which I intend to convert to physical at some point because if gold continues to rise here, there should be a default on the COMEX at some point and contracts will be cash settled). There is a shortage of physical precious metals in North America.

Which is really ironic for a value investing board. Some miners trading for less than cash, mines closing, extreme negative sentiment. I'm not interested in miners, that's firmly in my too hard pile, but I have owned gold in the past. I'm waiting for ~$800/oz to own it again. It'll never get to $800/oz as there is clear sovereign buying at around $1200. Mainly China buying as much as possible.

I am about the same as Al's. A little less on mortgage, insurance; cars and utilities; more on travel, 3 kids instead of 2. Kids are 9, 11, 12 - university is getting funded currently ahead of time. Its like having a second mortgage! But its Canada, not the US - where university costs are clearly in a bubble.

what do you mean by it's the best performing currency but still flat? Well the $US was the best performing of the major currencies and gold declined only slightly relative to the $US in 2014. So together they are the best performing currencies for 2014 (even though, priced in $US, gold had a lackluster year). If you held Canadian dollars instead of gold, you lost. If you held Yen instead of gold, you lost. If you held Euros instead of gold, you lost in 2014.

I am buying gold miners for the asymmetry but also silver bullion - again because its price should move more than gold's. I view them both as perpetual call options on gold to protect against currency debasement which, I believe, will accelerate over the next 2-3 years.

1) Every one of them? Are you talking more about the juniors rather than the mid cap and seniors? 2) The mismanagement you note for the industry is precisely the one big reason they are trading at all time lows. However, in the last couple years the Barricks of the world were forced by investors to get their shit together from a shareholder return / capital deployment perspective because investors had enough (your sentiment). So the ship has started to right somewhat just recently with the seniors already. This gives me a little more comfort. 3) I am not investing because I like gold miners, I just think this is a good entry point and they will serve as a great asymmetric hedge against currency debasement over the next couple years. Its more of a currency play, where I can get asymmetry (ie a perpetual call option on gold), and a good entry price (gold is having trouble breaching below $1200 'cause looks like China mops up everything below $1200 - so I see that pretty stable now, but I am no expert; miners' stock price was at a low relative to gold; and oil just tanked) I like GDX - for the reasons you cited - rather the GDXJ as GDXJ is full of juniors. But, to a large degree, the price is a reflection of that mismanagement.

1. Last year Gold essentially tied the $US as the best performing currency globally as it was flat in $US terms - at around $1200 per ounce... Meanwhile gold miners tanked into November 2014, probably to one of their lowest levels relative to the gold price ever. 2. While the miners are up some from the low in November, Oil dropped almost 50% in the past months with a big part of that coming in December/early this year. 3. Apparently, energy (I am told mainly Oil) makes up 1/3rd (33%) of the cost base of gold miners which is huge. If one assumes the following: a) profit margins are a hefty 20% (ie high - which for the purposes of this back-of-the-envelope is conservative); b) energy costs drop not 50% but say 30% for the miners; You would get margins expanding from 20% to an additional 30% X 33% = 10%. This is a 50% increase in earnings as long as gold stays above, as it has lately, at at least $1200 going forward. Gold could of course drop, or it could rise. But it seems to me the valuation of gold miners (at least in the short-term) could rise in the coming quarters if oil remains low. Now oil could rise say next year and reverse this 50% increase in earnings. In any case, if you want an asymmetric hedge against global monetary debasement, there are probably worst ideas out there than buying gold miners at this time. I just kept it simple and bought LEAP calls on GDX (an index of gold miners).