TwoCitiesCapital

You're the one that brought up a single data point, not me. You're also the one that calls your system TA, which generally implies a high (if not 100%) level of mechanism. I don't understand why your system works or why it should work. If you have had sustainable success with your system, good for you. But a value investing forum is not the place to be gloating about a result of a system that is, from a value investor's perspective, indistinguishable from guesswork. Oh really? When did I say "this is a single data point"? I thought you are smarter than putting words into my mouth to make your arguments look strong. I came to this thread with the genuine intention to help, but look at the hostility you gave back in return. I am putting you on my ignore list, so no need to respond to this post anymore. muscleman your call from 2019 was epic. no one can deny that. going forward please contribute additional calls with any color on your TA work for FnF and don't look back. There's a good chance your return in that capacity would be appreciated by most or all here. No one? you sure? It wasn't 'epic', it was just him supposedly selling on short term bullishness. Doing so has been smart with FnF, I'll give him that if he actually did, but if you really believe his 'chart' instructed him, you should know it doesn't work that way. No chartist works on stocks/preferreds which trade 10k/day. His chart is absurd. He's basically claiming he called the pandemic. Correct, I would note too that he didn't tell us to buy last week which is a strike against also ;D I get it, some people like his input as an attempt of forecasting. That's fine but for a while I didn't get it. But after going to a strip club I realized I didn't mind watching the fat girls dance too, so now I get it. Even if it doesn't add value it didn't cost you anything if you were going to the strip club/message board anyway. Its usefulness wouldn't be worth going in the back for lack of better comparison. To be fair, it's not as if he called that the stock would go down. He called the top of an idiosyncratic investment, which topped several months before the top in the overall market. Luck or skill? I can't say, but he certainly did more than what you're implying.

Neat idea and hardly(to my knowledge) a crowded institutional idea either. How do look at structuring this in a cost effective manner? I gave it a quick glance and put it on the "take a look at" reminder list for later. But briefly, couldn't you construct a cheaper expression with an outright short and some calls to hedge? Or is this a "big expected downside so go really far out of the money" situation? I just buy long out of the money puts. Very interesting - what dates you buying on the puts? Mostly I buy longer dated stuff--Jan 2021. I have some shorter dates on this name too, but mostly I'm in Jan 2021 $100s/$120s The spreads on those puts is something to behold. Bid and ask are 2x apart (order of magnitude). Try to get a fill in between--if you have a good broker like Fidelity or IBKR they help too. Or just pay the ask--most of these options are hung based on market makers running delta hedge books, not by a bookie setting the line. I honestly think these options, among others right now, is stealing--buying insurance on a house that's already engulfed in flames. I've been having some success just by being patient with limit orders. Have been selling small pieces of my positions above the ask and repurchasing them a few hours later for the bid. There's been a handful of times where the re-buys haven't filled and I've needed to wait a day or two, but that's the risk you take to collect the spread.

IMO - the oil bust alone was probably enough to result in a U.S. recession even if we ignored all of the damage and uncertainty surrounding the virus. The stimulus has been unprecedented which is a positive, but the global economy was slowing down in Q4 which already had me concerned. Now we have an oil bust and the COVID shut-down on top of that. There will be oil bankruptcies, there will be commercial real estate bankruptcies, travel and leisure bankruptcies, and local small business bankruptcies primarily in food. These are jobs that are going away that wont be coming back immediately. That means defaulted mortgages, credit cards, personal/corporate loans, etc. This is going to be just like every other recession in that regard with impacts being felt long-past the bottom of the stock market. This is why I don't believe it will be a V-shaped recovery. And God help the S&P 500 if the Democrats get elected and push for raising the corporate tax rate back to where it was at given that the tax cut didn't seem to do ANYTHING to buffer cash balances and employment when it was needed. They'll have a helluvalot more support for it after trillions in bailouts for corporations....

Bought more $50 par preferred @ $7.50 today

What is horrible for Prem, if he claims to be a value investor, is that he failed to pick up high quality value in 2010 and instead hedged a cheap market; and then turned on a dime when Trump was elected and decided that the economy was going to take off, but felt quality was too expensive and chose to express that view by investing in cyclical value which crapped out the minute a cloud appeared. It is a staggeringly poor series of decisions. :-) now he has a chance to buy Berkshire at 1.05 BV or so Ha! Sadly he doesn't even have that. He can't add to equities and there's very little he can realistically sell to redeploy cash, because his stock picks are either 1) very undervalued, 2) illiquid, 3) sponsored by Fairfax, or all three. They will have to be very smart to make hay in this crisis, and I think their opportunity is in the bond market, not the equity market. +1 Good things opportunities will be abundant in both

I believe that is how it is structured yeah It was my understanding from reading an article regarding BofA's mortgages that there are two types; 1) Bank owned 2) Investor owned/packaged into MBS For bank owned mortgages, they can restructure the mortgage to extend the maturity by 2-3 months and basically tack those payments on at the end of the mortgage. For packed mortgages/MBS where banks are just acting as mortgage servicer, they can defer payment up to 3 months, but then a lump sum is due to cover the principal/interest missed during those 3 months. Obviously this is less flexible and less helpful than the first. The vast bulk of conforming mortgages are packaged and resold as MBS w/ banks acting as mortgage servicer.

I'm in favor of infrastructure improvements yes. Regardless of the impact on the economy and jobs, America needs some form of vast infrastructure improvement. This one of the things Trump ran on and it still hasn't happened yet. We're absolutely going to need to see higher taxes though to fund it though

Excellent resources. The severe and critical cases rising on an exponential scale has to be concerning though - no? 15k cases and rising logarithmically. Now up to 24k cases after a single day. And now 27k cases, though that appears to be tapering the logarithmic growth assuming this is accurate data

https://aatishb.com/covidtrends/ A nice chart to have a reference. It does show that Japan is an anomaly relative to ALL other countries in terms of the break out - but also doesn't appear to be out of the woods yet as growth rate is still exponential despite some effectiveness at slowing it in the beginning. (Anything along the diagonal line, or the same slope of that line, is exponential growth as it's not anchored to time). Also shows that Italy and Spain have been making slight progress in getting off the exponential growth train which is good. The rest of us have work to do.

Excellent resources. The severe and critical cases rising on an exponential scale has to be concerning though - no? 15k cases and rising logarithmically. Now up to 24k cases after a single day.

If you assume zero SP500 earnings this year, 163 earnings 2021, 5% earnings growth for 9 years, 15 terminal PE in 10 years, and discount rate (return to investor) 10%, SP500 fair value would be ~2400. IMO these are not unreasonable assumptions, so expecting SP500 drop much below 2400 is not very probable. It could in a panic, but it would be quite a good buy there. Of course, you are welcome to change the assumptions above. If you want 15% return on SP500 with the rest of assumptions above, then fair value drops quite a bit to ~1680. I think 163 in 2021 is incredibly optimistic. And as such, so is the 5% growth on 163 compounded after that. I guess that's what makes a market though.

Excellent resources. The severe and critical cases rising on an exponential scale has to be concerning though - no? 15k cases and rising logarithmically.

Bought more puts. Sold another 3% or so of my longs. The data says I'm right to still be concerned and that this gets worse before it gets better. The stock market says "f*ck the recession and the accelerating pandemic - we'll trade at average multiples of trailing earnings that are guaranteed to drop dramatically" One of us will be right but it certainly sucks to be me right now.

FYI, still nowhere near (as in less than 10%) to cancer deaths. or cardio vascular deaths for that matter. Yup - thank goodness neither of those are communicable. Also would add that the deaths from either will remain roughly static barring large scale behavioral change. So no change in behavior = no change in deaths. Coronovirus deaths will likely increase until deaths are 1-2 million w/o large scale behavioral change (i.e social distancing) . No change in behavior = dramatic increase in deaths.

New York State hospitals had a 40% increase in hospitalizations over night. 100 new deaths since yesterday morning. Just another flu. Nothing to see here.

Either almost every major govt and world health organization is blowing this way out of proportion for the first time in history - or you misunderstand the risks associated with the disease. Which do you think is more likely? clearly the former I dunno. Even w/ social distancing measures in place, NYC is running short on ventilators and making make-shift hospitals and morgues while Atlanta just announced they're out of ICU beds. Sounds just like another flu to me

Ferrari at 40x P/FCF and Kinsale Capital (Insurance company at 6x BV) Not my original idea, but it just looks pricey. Ferrari factory is also shut down for at least 2 weeks. Also million $ collector cars may be less important when folks are short on cash. Probably not for the 8k or so folks who buy the cars a year. Ferrari did just fine in 2008 and they'll probably do just fine now. We can debate whether 40x is the right multiple (I'll bnot defend it), but I have zero concerns about the business.

Either almost every major govt and world health organization is blowing this way out of proportion for the first time in history - or you misunderstand the risks associated with the disease. Which do you think is more likely?

Yup - we might not have to shut down the whole economy next time - though I imagine school closures and etc might still happen. That being said, a large portion of the population is elderly and or immunocompromised. Even if it's just those people who stay home, you still have a massive reduction in economic activity.

That's part of my reason for not seeing a V shaped recovery. Social distancing works in that it helps to keep from overwhelming the healthcare system - it will also prevent herd immunity which means this comes back fall/winter barring a vaccine. Each wave will be less impactful than the one before - but will still be impactful until a vaccine comes out or until we reach herd immunity. Even barring bankruptcies and the slow rsmo up of the travel industry and etc, this will weigh in future growth and economic activity. The other stuff just exacerbates it. We're not going back to 2019 economic activity, earnings, or multiples in the next 2-3 years IMO.

I hope you guys are taking advantage of this volatility Was able to sell some long-dated calls on Santander today for $2.25 and immediately buy them back for $1.50. Just being patient with limit orders outside of the bid/ask

As of close today Barclays HY OAS - 11 Barclays Corporate (Agg IG corporates) OAS - 3.73 Barclays MBS OAS - 0.86 Muni Index YTW - 3.52

The reported P/E ratio was highest in 2009 after the market bottomed. It went to 123x in May 2009. https://money.stackexchange.com/questions/73827/why-was-sp-500-pe-ratio-so-high-on-may-2009 Yup, and nowhere near that extreme to think the P/E has lost its meaning this time around. Of course if we get a one-off hit to earnings that popped us to 123x, is ignore it. But a normal 30% decline in earnings that occurs in most recessions doesn't tend to pop P/Es to 120+ where they become meaningless and irrelevant - and the loss in earnings isn't immediately coming back which means we can't simply write off 20x because it'll be 15x in 2021.

In the economy or in stocks? If the economy, why not? The political response is interesting. I think the UK (for once) is leading the world on the fiscal response to this thing. If the US does not get this right the impact at ground level *could* look like the GD. But only briefly. Eventually the pressure on pols will be huge. In either. The U.S. govt can't save everyone. There will be bankruptcies and lasting employment damage from this even with Fed and Treasury support and even if the virus disappeared and everything went back to normal by the end of this month. In all reality, the social distancing works to prevent hospital overload now, but if we don't get a vaccine in the next six months you'll see this hit again in the fall and another subsequent drop off in activity since we don't yet have heard immunity. Even w/o govt restrictions, there will be people who voluntarily social distance because of concern about parents, or elderly colleagues, or themselves. Each wave of the virus will likely be less and less impactful, but will still be impactful with long-term damage until heard immunity or a vaccine. No V shaped recovery. Also, fun fact, if earnings just dropped the traditional 30% they typically do in recessions than we're still @ 22x 2020 earnings and probably a steeply elevated multiple on 2021 earnings as well. This has further to go.

If Watsa is changing his investments based on what naysayers say then he is not a very good investor. While I was a fan of the deflation hedges and total return swaps, I'd just add that we've not going down far enough for Watsa's call to drop them to have been a mistake. Had he held them, the stock would've gotten crushed in 2019 and it's liquidity issues even worse at this point in time (though that could change quickly). What it would've done was ensure Fairfax's stock was never near $500+ to fall so hard to begin with. At this point, still seems as if Fairfax was better off dropping then when they did and keeping to more conservative investments while monetizing others.