TwoCitiesCapital

At a prior time, it traded at a premium to NAV and would've been disingenuous to charge on share price NAV is a far better metric than share price to charge the fees on because it is firmly in the control of the management where the share price isn't. We just happen to be in a period where the discount to NAV results in a favorable arrangement for Fairfax - but they didn't create that arrangement intentionally nor do anything to "deserve" the discount IMO That's just simply not true. It traded at a sizable premium to NAV for much of its public company life which is why I didn't own it until post-Covid. It's always been associated with Fairfax - even when it had the premium. The discount is simply a measure of sentiment - it can change tomorrow or next year without Fairfax having to do much of anything other than continuing to deliver performance.

If he's successful w/ the Teledyne example, in 10-years time it would take a boatload of money to buy out the remaining holders so I'm probably still ok with that. But agreed - invest in Fairfax subs/investments at your own risk. Their only allegiance is to their own shareholders and not those of their publicly traded associated entities.

You may not, but plenty of people do. Numerous instances over the years of fixed income CEFs trading at premiums to NAV despite having a significantly higher fee structure and cost of leverage than Fairfax has. I wouldn't pay a ton for access to leveraged bond management, but if the leverage is lower-cost than I can receive and higher quality (less callable) than I can receive then it's certainly worth something - especially in the hands of capable management who use it to generate reasonably good net returns.

I'm not a tax professional - But was my understanding PFIC designation is unimportant for those who hold in IRAs/Roth IRAs.

That's my perspective as well It's not just about the share price - it's about the liquidity management risk and financing costs that come along with it - that only make sense over cash repurchases if 1) you have confidence the stock will exceed the financing costs AND 2) short-term downdrafts in share price are easily covered with existing liquidity. A major catastrophe has very large potential to upset both and is, by definition, unknowable which is why I'm ok with them reducing it and leaving cash on the table. But it's not a table pounding conviction I have - just wouldn't blame them or be upset if they did.

I tend to agree it will steepen, but think it'll be the more traditional type with short term rates falling. The US fiscal position is totally untenable, and yet still better than much of the developed world who are NOT the reserve currency with forced buyers of USD and treasuries. It'd be hard for me to imagine a spiral of long term treasuries without first seeing spirals in Europe, Japan, China, etc.

They would have more cash on hand upfront, but WAY less visibility into future cash needs and liquidity and would paying ~6% for the financing costs (Labor + spread). The cash share repurchases require a finite amount of cash upfront and no future uncertainty to cash flows/needs or paying 6-7% for financing

I would prefer if they didn't add to it. They have the liquidity for additional share repurchases without having to take the leverage/liquidity costs of additional TRS. I wouldn't be upset if it were reduced or unchanged.

I believe Research Affiliates/Rob Arnott do this with their fundamental indices They rank companies on a few metrics like revenues, cash flows, book value, and dividend yields and come up with a composite ranking for each company. And then basically reweight the entire index to own larger portions of companies that have a higher composite score and lower weights to companies with lower composite scores.

Yes, I agree with your definitions and the strategies at the high level. My initial comment was in response to the criticism of Ray suggesting you could separate alphas and betas - at which point I brought up "portable alpha" as an example of that being done exactly - taking equity beta and doing a fixed income overlay for alpha a la PSLDX. You could frame portable alpha multiple ways, and probably come up with a number of examples inside of the Pure Alpha Fund - but as a simple example - Imagine you have taken a simple version of their All Weather approach - 25% of your portfolio in gold/TIPS for high inflation/low growth, 25% in energy and commodities for high inflation/high growth, 25% in long bonds for low growth/deflation, and 25% in equities for high growth/low inflation We can debate the weights, and the eventual addition of leverage and other asset classes, but this is All Weather at its simplest. Instead of doing all of that with outright equities, commodities, and bonds - you can do it all with derivatives. 25% in Gold Futures 25% in oil/base metal futures 25% in S&P 500 TRS And 25% long treasury futures Now you're cash outlay isn't 100%. It's 10-20% for the initial margin. You can set aside another 10-20% in short duration/liquid treasuries to cover daily margin movement and collateral. And you can take the other 60-70% of the cash and drop it the Pure Alpha Fund where they're making uncorrelated, relative value bets that perform differently than your 4 betas. That's portable alpha - straight beta exposure in All Weather and the excess cash buys an alpha overlay

I've seen some charts that do this, but I don't think any actual index would. Just people adjusting index data to remove those names. Your best bet would be the equal-weight index which reduces their portfolio weight from 25-30% of the index down to ~1.4% which is functionally removing most of their impact.

Pretty sure the period in question was either before this, or a lot longer of a time frame. Eastman Kodak was one of their first large clients. Can't recall if it was the 80s or 90s in which they were landed. Not sure if the returns you quote either. They've definitely been lowe than the S&P. But 1.5% per annum sounds a bit on the lower end from what I know returns were when I was through 2014 And what they were last year. Would've had to really shit the bed in 2016-2021 to have brought that down to 1.5%, but maybe they did I mean, the last 15-years contain the period following the GFC and the biggest bear market for long duration fixed income in history. And even after underperforming by 15% per annum for the last 3-years running has managed to maintain a 2-3% alpha to the index over that time....seems pretty durable to me unless it you expect that we'll repeat the losses seen in fixed income over the last 3-years again. Which would require rates north of 10% at the long end to achieve. I mean, it crushed it for 15-years. Only stopped when interest rates returned from zero to their highest point of that 15-year period and maintained sizable outperformance to the index. Also, 15-years is the length of the mutual fund. The separate accounts that did this for pensions started in the 80s. 40-50 plus years of this strategy working and and not even zero rates, and then the return to normalization, or mutual fund fees could kill it. And now we're back to long-end rates being the highest they've been over that periods resetting the advantage. I'm gonna guess it'll outperforming sizable going forward and build on that 2-3% alpha. Perhaps you don't like equating volatility and risk, but when leveraged or exposed to inflows/outflows it does matter. And for ~50 years the strategy has been working if you're systematically applying it. Just another way to skin a cat if you ask me and Ray was one of the people to popularize it's use.

Sure - would probably just do ZROZ or a long-duration corporate fund in my tax deferred accounts - was just curious how the tax treatment for munis worked. Some day I'll have taxable savings to trade with, but at the moment most of that taxable savings goes to BTC and my mortgage.

Is it though? The same guy said Ray outperformed all the other managers in their pension. Hard to really say too much about that without knowing who the other managers were, but it seems like it worked. The idea of an overlay, or "portable alpha" in Bridgewater parlance, is well accepted in the industry. Other shops do this too - it's not just a Bridgewater concept. PIMCO has one of the best, if not THE best, performing equity mutual fund (StocksPlus Long Duration fund). The strategy is simply buying TRS on the S&P 500 and investing the collateral in actively managed bonds to outperform the funding rates. I.e. you have equity beta and the "portable alpha" came from the fixed income management return above the cost of funding rates + the spread to the bank. You can do this with any asset class that has swaps/futures. And it works - even at what appears to be the bottom of the worst 3-year returns for long-duration fixed income, PSLDX has beaten the S&P 500 by ~2.7% per annum, net of fees, over the last 15-years despite interest rates being near 0% for most of that time. How much more do you think it works starting off at 5-7% rates for the long duration portfolio?

Aren't the capital gains on munis taxed at cap-gains rate though? So any gains outside of the amortized cost basis would be subject to tax in the event of falling rates? Not that this is different for any other type of investment, just trying to figure out what is, verse, isn't taxable in munis since I typically only play in tax-free/tax deferred accounts and don't really consider them.

Average rents aren't much lower elsewhere. I lived there from 2011 - 2018. Had apartments in Jersey City, Spanish Harlem, and Yorkville while I was there - long before those places got popular with the general population for being cheaper. I have friends who live out in Brooklyn and Journal Square - I'm well aware of the costs outside of Manhattan and lived outside of "desirable" areas myself basically the entire time I was up there. As I said, to accomplish living there on $20/hr, you're going to be an hour or two out of the city, and you're going to be sharing cramped spaces, and not really going out. I know it - I lived it. Didn't have a full-time job for the first 4 months that I moved there. Was working part-time/over-time hours and sharing a one bedroom apartment by sleeping on a friend's couch. Basically made enough to pay "rent" for the couch, pay for one night out a week if I took advantage of happy hour specials, and then groceries. No savings, no car note, no insurance, nothing extra to support anyone else, etc. Just me at 21 hustling to make it work. And it did once I landed a salaried role at Bridgewater. But I know what it is to live on those wages up there and it's not a lifestyle that is sustainable or that you can realistically do long-term.

Not even enough to pay the average monthly rent in Manhattan after 40 hours a week Of course, nothing stopping you from living an hour or two out, but you're still paying transportation/food/taxes/etc. which are unaccounted for. Only way to make this work is to share a 1-2 bedroom apartment with several other people, live way out in the outer Burroughs or further, and out in overtime hours. Sure - it's doable - but not a particularly attractive existence.

It does kind of make you wonder why though. BlackBerry had plenty of cash at quarter end to retire all the bonds plus receivables incoming..

/\/\ this You'd have to take enough of a haircut on the balance/economics to incentivize them to want to commit to an MTM loss through the income statement as opposed to hiding the loss in HTM on the balance sheet

"From ‘1 CCPS for 2.324 equity shares’ to ‘2.324 CCPS for each equity share’" So conversion ratio went from 1 : 2.324 2.324 : 1 anyone know if this was simply a typo/administrative mistake on filing documents and will be a non-issue? or did they literally 5x their conversion ratio?

I watched the whole thing - which is why I can point out the inconsistencies of his implying that Ray is just an attention seeking marketing genius out of one side of his mouth while then implying everyone who works at the firm, and the systematic trading in place, are all just a cover-up/smokescreen for it all actually just being Ray. Those are at odds with one another (and what I saw from my experience there). Like I said, I wouldn't be surprised if there was a kernel of truth in everything he wrote. I also wouldn't be surprised if it was exaggerated like much of what I witnessed the media do while I was there. I'm guessing the journalist is trying to make a name for himself and was happy to go after a whale like Ray to do it. Like I said, I'm still gonna read the book. I love a good drama and the dirt on billionaires. But I also know that the picture I've seen painted from the summaries/reviews I've seen so far don't align with what I witnessed the 4-years I was there. But I was a happy employee so perhaps my perspective differed from those who were discontent. Of the three institutional money managers I've worked for, Bridgewater was by far the best from an employees perspective

Just about everyone. You have a pension or a 401k or an IRA? The losses in stocks in bonds over the last 2-years - especially if the need to inflation adjust those returns is evident from anyone nearing, or in, retirement. You are in the market for a loan? You definitely feel the higher interest rates. Maybe the tighter credit standards as well as banks are balance sheet constrained because of their losses on bonds and lower liquidity. You buy insurance? You're feeling it as insurers wiped out a huge portion of good portion of their equity capital by owning low yielding securities so have to write fewer policies, with less coverage, for more premium. Inflation plays a roll here too. You want to move? Too bad. It'll cost you 50% more for 2/3 the house you're currently in. The effects of rates/inflation of the last 2-years is everywhere.

I mean, it didn't cause hyperinflation, but it did cause trillions of very real losses in fixed income markets ( and probably commercial real estate). Remains to be seen if anything else gets added to the tally. More has been lost in US bonds in 2021-2023 than was lost globally from 2008/2009 debacle....

So, full disclosure: I worked for, and with, Bridgewater from 2011 - 2014. I've never met Ray, or Bob, but did meet Greg once. I met Eileen Murray on one or two occasions as well. I was NOT regularly involved in the meetings where investment decisions were made and did not work regularly with any of the executive committee or investment teams outside of my limited capacity. All of that being said, there were definitely peculiarities to how Bridgewater did some things. Some were good. Some I disagreed with. Almost ALL were exaggerated by the media from what I could tell during my time there. I'll still probably buy and read the book just out of curiosity. I could believe some of the stories I've seen in the media from the book might be true - or be embellished based on a kernel of truth. But to paint Ray out to be an attention-seeking dude with no investment talent and just masterful at lying/deceiving clients is a hard swallow ... especially given their performance in certain off years like 2008 and again in 2022. Are all the employees they hire, and pay 6-7 figures to, just a smokescreen to cover Ray's strategies? If he's such an attention seeker, why do that instead of accepting credit for the trades? How do they seem to regularly do well in the big down years for the market like the tech bubble, the real estate bubble, and years like 2022 when they were up 30+% at one point while the market was down (ended the year at +7-8% IIRC). Has anyone considered that perhaps it's this journalist seeking attention and making a name for himself by intentionally going after a whale like Ray?