TwoCitiesCapital

Doubled my SPY short today. Also sold FCAU 11/20/15 PUTS @12 for $0.60. Sold BBRY 11/20/15 PUTS @ $7 for $0.67. sold WFM 11/20/15 CALLS @ 35 for $0.45 Sold ACI 11/20/15 PUTS @ 2 for $0.30 Last set of puts worked out pretty well. Sold 10/16 puts @ 4 for $1.00 when it was at $6+. Incredible that the stock can fall 50% and you still make 25% in a month by selling puts. Bankruptcy is a real risk here but selling puts is more attractive to outright equity exposure which is what my passive P/B strategy would have me doing. I think the puts are a better option for exposure at this point until the bankruptcy/debt swap issues are worked out and then I'll probably roll the exposure into equity.

Why are we limiting the discussion to school shootings? Do mass shootings not occur at other places like malls, military bases, and movie theaters? If you look at the deaths from mass shootings, it's approached nearly 1000 in just the last 10 years. Obviously not anything compared to cars, but still significantly higher than you're "300 over the last 30 years" claim. Also, I'm not going to argue more can't be done for car safety. We've done that and we're doing that. We've mandated speed limits, seat belts, air bags, anti-lock breaks, etc. etc. etc. We have law enforcement regularly watching for infractions and penalizing unsafe operators. And for all of that, we're getting diminishing returns. The single most effective safety measure in cars has been seat-belts. Every additional add on has been additive, but marginally so. Maybe self-driving cars will change that - it remains to be seen. There is little comparable restriction/regulation in the gun world. They run a criminal background check, they make you wait a few days to purchase, and some states require a joke of a safety course. That's it. Nothing that requires/ensures compliance of safe storage and use, no regular audits of gun owners and their safety standards of storage and use, no regular understanding of who else within the household may have access to those weapons and whether or not that is to be a cause of concern, no regular law enforcement who are able to view/enforce safety standards and improper use, etc. etc.etc. Nobody is arguing that guns are dangerous than cars. To say that we shouldn't even consider some options to make them safer because they're not the #1 killer is stupid. If that's the argument, we shouldn't focus on any safety measures at all except in how to prevent heart disease... If we believe the data of the article, looking at the past number of deaths/shootings isn't going to give you a good understanding of the problem because the problem will supposedly amplify with more shootings occurring each year. I haven't looked at the data, but if more shootings occur with each shooting that occurs, you have a problem that will grow at an exponential rate and not linearly. 1000 deaths over the last 10 years could easily turn into 200-300 deaths per year real quick. I'd rather we deal with it when it's only a few hundred a year than wait til it gets to 30,000 a year to declare that it's become an issue.

I agree that a lot of funds aren't great investments. I was just so surprised out how poorly the "Goldfarb 10" performed. I'm assuming a lot of value managers (hedge funds included) haven't done all that well. I'm not saying it would change the thesis any, but it may also help to realize that we've been in a market that has treated value stocks poorly for the last several years. Value as a whole (defined as low P/Es and low P/Bs) has underperformed the market for the last 3-4 years. I think you have to give the cycle more time to complete to see the full result. The end result may still be the same though.

Huh? I would think press freedom and free speech advocates would have to reevaluate their views. Its obvious that banning coverage of school shootings would enormously reduce their frequency. Next we will talk about removing some words from the dictionary as it gives ideas. Suddenly the year will reset to 1984. Yea. I think suppression of the press has far more dangerous implications to it than suppression of firearms. That being said, I'm currently pro- both freedom of speech and private gun ownership but something does need to be done to help reduce the frequency of, and the potential damage of, mass shootings. I don't know what the solution is, but this article suggests that they'll only get more frequent. Anyways, I don't really want to start, or participate in, a political debate. More just concerned about what this means for humanity as a whole if it were true. What it means? It means that every once in awhile some nutjob is going to kill a lot of people, with guns, bombs, vehicles, knives, or one at a time with their bare hands or a length of rope. Human violence against other humans is going down and that has been the trend for centuries, but we will never rid ourselves of mass murderers nor serial killers completely. I for one don't want to live in a society that has been turned into nerf-ville like the UK is trying to do (banning all pointy objects), nor a society that tries to limit speech, information, or the press. Freedom is what makes life worth living, otherwise you'd be much safer locking yourself and your children in a padded room and never coming out. Yes, because any safety regulation imposed on firearms would be enslaving mankind in the city of "nerf-ville." Just like the masses adopting seat-belts has done... /sarcasm I generally agree with your political stances - I'm a libertarian that forces myself to be more moderate because I'm generally to cynical of others to trust that we could actually live in the society that I think should exist. That being said, we'll never be "free" as a society because societies need rules to operate. Idiots will always exist. Those looking to take advantage of others will always exist. Those with differing standards of decency will always exist. Rules equalize that and allow people to live together by standardizing the expectations of safety/behavior/etc. So how many rules/laws should we have? The fewer, the better. Rules should be put in place when a non-systematic solution does not work effectively. Where you draw that line will be different from person to person, but we're getting to the point as a society where I'd say the majority of Americans would agree that the frequency of mass-public shootings is getting out of hand. Paired with the inability of local law enforcement to be able to identify would-be shooters because they are becoming increasingly "normal" members of society, you have a breakdown where non-systematic solutions appear to be failing. So laws should be considered at the State and/or Federal level. Those laws should have a high barrier to entry in that there should be reasonable evidence to conclude that passing and enforcing the law will have a direct positive affect on the problem with limited negative consequences on other, unrelated matters. If it can pass the smell test, then make the law. To me that seems like a reasonable, high-functioning society. Maybe that is nerf-ville with a lack of freedom and no reason to live to you. The difference in our views is exactly why we need laws as a society.

Huh? I would think press freedom and free speech advocates would have to reevaluate their views. Its obvious that banning coverage of school shootings would enormously reduce their frequency. Next we will talk about removing some words from the dictionary as it gives ideas. Suddenly the year will reset to 1984. Yea. I think suppression of the press has far more dangerous implications to it than suppression of firearms. That being said, I'm currently pro- both freedom of speech and private gun ownership but something does need to be done to help reduce the frequency of, and the potential damage of, mass shootings. I don't know what the solution is, but this article suggests that they'll only get more frequent. Anyways, I don't really want to start, or participate in, a political debate. More just concerned about what this means for humanity as a whole if it were true.

The implications of this are truly frightening. As a gun-rights supporter, I'd have totally re-evaluate my views if there was more data supporting that this was the way things actually worked. Simply raising safety standards, record keeping, and customer screening wouldn't solve the problem. Then again, it doesn't necessarily seem that banning hand guns would either since some of these guys are actually building some pretty sophisticated explosives too...

Inflation came in at -0.1pc in September.....oh the humanity. This thread is like CNBC when the market goes down. The world is ending because gas prices fell. I know what you mean - it does make me laugh that this thread lights up whenever the market falls 5%. But I do think that the world today looks like it needs more or less continual QE in order not to fall into deflation, which is interesting and worrying. I think that's the crux of the deflation camps thesis. A lot of people seem to write off deflation as a stupid concern because we haven't had prolonged deflation in the Western world in decades, but I look at policy makers doing trillions in quantitative easing and trillions in deficits and still see deflationary prints and it makes me think that policy makers don't have anywhere near the control that most people thought they had in controlling the economy. It's not so much that -0.1% is significant in and of itself - it's that we're getting -0.1% despite policy makers doing everything in their power to get to 2-2.5% and we're still getting deflation in return....

All QE is, is bond buying. That's it. In theory it could be inflationary, if banks were to use their increased reserves (cash) to make more loans. BUT they are not doing that. Anyways the constraint banks face is NOT reserves. Banks are constrained by regulations like Basel which require them to hold a certain amount of equity. The amount of equity they hold is determined by the risk-weights applied to bank assets. Government bonds have a zero risk weight. Right now banks are in fact cutting back on many activities due to stiffer regulation. So you aren't getting any inflation from an increased credit supply. The real effect of QE is not inflation of good/services....its asset inflation. And the most over inflated asset is treasury bonds. The effect of regulation is very interesting here! Banks are being incentivized to hold more government debt. But market-making has in fact been discouraged. So the liquidity for treasury bond is reduced. Its an asset many institutional investors own but its they will have a lot of trouble exiting the trade. The greatest havoc will be in the treasury market. Sir, I have no idea what you are talking about but you make no sense. How exactly is QE about holding government bonds if QE takes them off your hands? He's talking about QE & the new banking regulations. Together. You have to view what he's saying in that light. QE did purchase a lot of Treasuries and mortgages. Right now, it's mainly focused on mortgages but will still affect the Treasury markets because investments in rates are relative. Nobody buys a mortgage yielding less than a Treasury, so the lower mortgage rates go, the lower Treasury rates go. Are mortgage rates lower today? Yes. Is that a direct result of QE? Who knows. One thing I know for certain is that during periods of actual bond purchases, rates were flat to up. They only went down after the subsequent announcement that each round would be ending. So to me, it seems like what drove rates down was the fear of QE being over, not the actual purchases themselves, but we'll never really know. It may be the most liquid market in the world, but it's a lot less liquid than it used to be. You can't say it's the most liquid market in the world and then suddenly just stop thinking because what impacts liquidity is two main factors: the depth of the market and the size of the position you need to sell/buy. Treasuries may be the most liquid market in the world, but they also happen to be a market where massive block sizes are purchased and having a less liquid market than a few years ago affects that. Especially when you consider that the Federal Reserve was buying 50% of all new issuances, you don't think that squeezes some people out from buying and then eventually selling (because of fewer buyers regularly participating?) Banks aren't allowed to hold nearly the amount of inventory to facilitate trading that they used to given the restrictions on proprietary trading. With smaller inventories, you get less market making and less liquid markets. This doesn't really apply to their lending operations though. Banks are just hesitant to lend.

Looked up the pricing on some inflation caps and floors over the quarter. Chose 5 different floors with a handful of different brokers. Most of the floors are up about 60-70% in value over the quarter. Assuming Fairfax has similar contracts (their's have more duration, so probably did a little better?), and that the deflation swaps are priced similarly, we will probably see about $150-200M from those. That's roughly inline with my prior estimates that were ballparking the returns, so I think i'll stick with my $400-450M quarter. Wouldn't be surprised to see them hit $500M though if the insurance and bonds did slightly better than expected.

Woot!

This is how I feel. Also, as someone who lives in NYC, it seems that everyone I work with also has an MBA or is planning on going to B-school to get one. Now, most of these individuals did go to top programs so it may end better for them than for most, but generally I am hesitant to do the same thing that everyone else is doing. Maybe an MBA made sense 10 years ago. I question whether or not it will every approach the value of the cost of class as well as the opportunity cost of foregone wages. Then again, when I express these doubts to co-workers, I'm told that it's worth the "experience"....sounds like fuzzy math to me. I imagine it will work out for many. I also imagine it won't workout for many. I don't know which group I'd be in, so I think I'll likely find something else to do with my time and money.

Increasing my OUTR position before earnings. Added about 20% to my position at $59.15.

Stop posting your deflationistic propaganda. You can't possibly imagine that deflation is a real threat can you? I mean, the Fed would never let it happen! After the energy dip rolls off and all of the companies/states we've been dependent on for minuscule growth roll over on a YoY basis, the U.S. economy and inflation will come roaring back to life.

This quote makes no sense unless if he means a book/price ratio of 1.28 and not a price/book ratio of 1.28. On a related note, I was unfortunate enough to notice the absolute and relative cheapness a year ago and moved heavily in. I've been adding into the decline, but now am much more cautious given my concerns over the global economy and the already heavy weighting in my portfolio. No doubt good value though - if you weren't early like me, it's definitely worth considering adding here for long-term holds. Emerging markets have better demographics and generally better debt profiles than does the developed world so there's better long-term growth prospects. Also, in a world with 0% rates, EM is one of the few spots where you can still get extremely high real yields.

No. People want him to fry bigger fish. Not hot wings!

Prem better cover his derivatives now!!!!!

Buffett cuts take in MunichRE from 12% to 9.7% http://www.ft.com/intl/cms/s/0/972a759a-66ae-11e5-a57f-21b88f7d973f.html

You cannot say it failed to work. You don't know how much worse deflation would be in the absence of it. Therefore, how do you know? For example, would be perhaps be a roaring success if you achieved 1% deflation instead of an otherwise 4% number. And the same argument would apply to you - you can't say that it worked because you don't know what inflation/deflation would have been without it. We could have ended in the exact same place. But I do think it's clear that the results have not been what was targeted by any of the policy makers that implemented it, which is a better gauge of failure than people who claim it was a success have.

Deflation in Germany again http://www.bloomberg.com/news/articles/2015-09-29/german-inflation-turns-negative-for-first-time-since-january Oversupply of housing in North Dakota will lead to lower rents/sales prices in the area. Will this happen in other shale states? This could be the first creep of deflation into housing in U.S. CPI. http://www.bloomberg.com/news/articles/2015-09-29/man-camp-exodus-spurs-real-estate-crisis-across-u-s-shale-towns

That is only a measure of duration/interest rate risk and it also assumes a parallel shift in rates. There are other risks associated with bonds that would also affect final value - things like spreads, curve duration, etc. Ultimately, Fairfax lost something around $660M in Q2 despite the fact that 10-year interest rates only rose 40 bps. Clearly there was some spread widening since Fairfax's portfolio is in large part Muni's and corporates (like the $500M in Blackberry convertibles). Corporate spreads have widened to the highest level in years. We've reversed about half of the rate rise though spreads have continued to widen. I don't think we'll see a full reversal of the $660M in bond losses this quarter, though we'll see a good chunk of it come back. Maybe $200-300M. A reshuffling of Brit's investment portfolio after Q2 could affect these numbers some, but I'm assuming everything is the same as it was as of 6/30/2015. I'd like to think we'd see a good bit come back from equity hedges; however, their equity holdings in Greece and in Blackberry, two large portions of the equity portfolio, haven't done very well this quarter so I think that will probably negate much of the benefit this quarter. The deflation swaps have probably seen a good run. 5 year breakevens in the U.S. are at the lowest they've been in six years (i.e. 2009). Forward looking inflation expectations aren't good so it's possible we've caught a bid for the deflation swaps and inflation floors. Even another doubling like we saw in Q1 (unlikely) that would add another $250M to the quarter. So 400-450M pre-insurance assuming the equity hedges benefit was negated by the performance of the equity portfolio. Maybe another $150 in insurance earnings depending on exposure to the port explosion in China and any other disaster I'm forgetting. I don't know anything about individual shorts - I know Dazel keeps mentioning them, and I know they had individual shorts/TRS back in 2008, but I haven't heard anything about that in their current positioning and without knowing the sizing, the names, of if they're even doing it, I'm hesitant to make assumptions about what companies they may have been short and how much that would have earned them. I see $600M as the best case scenario for this quarter across everything. Reality will probably put it closer to $400-450M. Still not a bad quarter, but I don't think it will be the blowout we're waiting for. That may have to wait until Q4.

Doubled my SPY short today. Also sold FCAU 11/20/15 PUTS @12 for $0.60. Now I've got around a 4-5% outright short, another 7% or so in cash, 10% or so in Fairfax, and have selectively sold calls against positions to generate yield as prices fall. Will continue to add to the short position if my various cash-covered puts are exercised. Sold BBRY 11/20/15 PUTS @ $7 for $0.67. Continuing to pair increase in short exposure with short-term cash secured puts. May short more SPY if we get back above 200 level. Sold more SPY short as it looks like certain puts that I've sold in in prior months will likely be executed on come 10/16. Will reduce if prices revert but want to hedge proactively instead of re-actively. Something tells me sentiment is changing and that U.S. stocks might begin their mean reversion here. Also, sold WFM 11/20/15 CALLS @ 35 for $0.45

Doubled my SPY short today. Also sold FCAU 11/20/15 PUTS @12 for $0.60. Now I've got around a 4-5% outright short, another 7% or so in cash, 10% or so in Fairfax, and have selectively sold calls against positions to generate yield as prices fall. Will continue to add to the short position if my various cash-covered puts are exercised. Sold BBRY 11/20/15 PUTS @ $7 for $0.67. Continuing to pair increase in short exposure with short-term cash secured puts. May short more SPY if we get back above 200 level.

I am not familiar with Stanley Druckenmiller… Is he as good as Tepper seems to be at market timing? Cheers, Gio Druckenmiller is quite good at what he does, mixture of a very good trader and investor. Some resources good at market timing? http://www.colorado.edu/economics/courses/econ2020/4111/articles/soros-fund.html it's one example. His time as a fund manager far exceeds this one period and the results generally speak for themselves.

Japan announced that inflation was negative for August. Stripping out fresh foods, core inflation was was also negative at -0.1% - the first negative print in core inflation since the beginning of the current QE program started in 2013. Abe-nomics isn't working just like none of the other QE programs in Japan ever worked. Sure, someone will probably have the excuse that China's weakening yuan is wreaking havoc on Japan's export economy. I'd just add that there always seems to be some good excuse for why any individual QE program doesn't work, but I've yet to hear a good excuse that explains why they have all collectively failed without a single instance of success in stimulating "normalized" growth and inflation. We're not there in Japan after nearly 10 rounds of QE. We're not there in the U.S. after 4 rounds of QE. We're not there in Europe during the first round of QE. Hey, I know what we need! MORE QE!!!!

I am not familiar with Stanley Druckenmiller… Is he as good as Tepper seems to be at market timing? Cheers, Gio He was the guy who generated a lot of ideas for Soros' fund back when Soros was killing it. Also managed his own fund that did pretty well. You should look into him. With the amount of leverage he used, I would imagine he'd have to be a somewhat decent market timer to not get killed.