TwoCitiesCapital

Two sides are engaged in a war. One side fights to remove a threat from the lives of a free people. The other side fights to instate a caliphate, a global theocracy that subjugates the individual and exists to violate the most basic rights of man- including the execution of homosexuals and apostates. If you are blaming the deaths of innocents on the free side, it's time to question some basic moral assumptions about war. I'm glad that in another era, Americans had the moral backbone and sense of righteousness to put an end to the other barbaric regimes which threatened western freedom. Now we face enemies so certain in their own righteousness that they are willing to blow themselves up. Yet when an enemy combatant risks a non-profit hospital by seeking treatment, our intellectuals blame us for the consequences. If the author of this article was an actual ally of peace, his attitude would be like other freedom fighters in the past. He would cheer for our victory so the threat of Islamic terror would finally be annihilated. Instead, he questions OUR moral standing to weaken our resolve (could it get any weaker anyway?). It's clear to me what side this man is on. Put an end to barbaric regimes? Who the hell do you think placed and funded people like Saddam Hussein, Osama bin Laden, Gaddafi, and Assad in power?!?! Our enemies our of our own making and are funded with our own money and using weapons that we gave them. This is most clear in the recent defection of many American-armed, American-trained Syrian rebels to ISIS. There should be no cheering for ignorant foreign policy that alienates generation after generation given them more and more reason to hate us and fueling the extremist ideology. We've been at war with "terror" for nearly two decades and guess what?!? We're losing. Terrorist attacks are a significantly more frequent occurrence. Extremists control more area, resources, and command more people than they did before. Our allies are our enemies and our enemies are our allies depending on which country we're in. Do you know how insanely f*cked up that is?!?! We're fighting a war against an undefined enemy (was Iraq, then Afghanistan, they Syria, now ISIS) killing tens of thousands of innocent civilians to correct errors that we made in the past 20 years - but terrorism is still INCREASING in occurrence. I don't think it's so crazy to see if maybe, just maybe, we're part of that problem. There's probably a handful of people out there who truly hate freedom - the rest just hate us because we stripped them of their sovereignty, their resources, their opportunity, and then we killed their parents just because we could. It's amazing to me that anyone still thinks that blowing trillions of dollars ensuring the next generation hates us even more is good foreign policy, but I must not be a true 'Merican or a Freedom Fighter from the good ole days because I give a damn about the loss of innocent lives.

When the "free country acting to protect its citizens" is operating flying killer robot drones to terrorize women and children of a land half a world away, you gotta stop and ask yourself -- "are we the bad guys?". "Are we the Death Star?" "Are we the ultimate terrorists?" Recent media stories have covered how the U.S. voluntarily bombed a Doctors Without Borders facility and tried to cover it up. Further, we are responsible for more innocent civilian deaths in Yemen than is al-Quada and other terrorist groups. We killed thousands of innocent civilians in the invasion of Iraq - significantly more than died in the Twin Towers which we used to justify the war. We've long been the terrorists in the region by accepting the fact that we accidentally drone bombed a wedding as collateral damage or by being willing to bomb hospitals run by non-profits to get at a single individual inside. We lost this war the moment we lost any sense of moral obligation to the innocent in the area and partnered with countries like Saudi Arabia and Turkey...

+1 I would avoid the typical fast food job as I don't you get much in the way of autonomy or real skills, but I've never worked at one before so maybe I'm just biased. When I was in highschool and college I worked several jobs and received great experience and learning from most, but I was also wired to be drawn off the beaten path and make my own way. Some of the jobs I had looking back were the following: 1) Construction - Learned the satisfaction of building something with my hands and going to bed physically exhausted every day. Also learned that I probably wouldn't want to do it for a lifetime, but it was good pay for a teenager. 2) Sales - I sold concessions at the local coliseum for sports games, concerts, shows, etc. Was paid solely on commission and it was all under the table, in cash, every night. Learned how to get attention of patrons, hustle, and sell more than any of the others in the arena. I also learned how to discriminate against opportunities that would be a waste of my time as I could choose which events to show up for. I made really good money for only working 5-10 hours per week. 3) Waiter - Probably the most typical job I held, but you learn similar form of learning to sell and hustle. You learn to upsell patrons, provide a good service, and earn to earn your tips, double-check orders that go out, dealing with stress, dealing with rude people, etc. 4) Flipping laptops - My aunt worked for a company that often had sales deals to clear inventory of old laptops of certain builds. Friends and family could by these things for 50 - 70% off. I'd regularly buy a few new laptops and flip to classmates for a profit. This obviously taught me how to assess and get comfortable buying and holding inventory with the intent of selling for a profit, determing how much money to risk at any one time, how to sell the laptops, etc. It also taught me the value of capital - flipping 1 laptop was the equivalent of 10-15 hours of labor at other jobs I could have, but that I didn't have to work anywhere near 10-15 hours to sell one. The value of the capital I used to buy those laptops was astronomical given the other opportunities available to me at the time. Unfortunately, I don't have any real advice on getting the job for your son, other than to recommend that he stay away from the typical, boring, no skill jobs people his age get (like fast food) and look for something more atypical, more physical, and maybe less certain in pay. I feel that the experience from those opportunities teaches you more and gives you a better skill set and a higher level of confidence in yourself, but I may just be incredibly biased here because it worked for me.

He probably meant ADV.to Alderon Iron Ore which Altius owns a lot of. I don't think he did mean ADV given that the thread has largely been about Altius and Alderon's development of the Kami mine was only a portion of the original thesis. Altius has underperformed over the past few years, but anyone who has been following the stock would tell you that there has been a fundamental transformation from a company with 3 million in revenues and $200M in cash to a company that pulls in $30M a year and has been putting that money to work investing in new assets while the commodity bear market rages on. It seems odd to call that a permanent loss of capital just because the stock is down from its highs while its industry is in a recession.

Bought more PDER at $164.90 Sold 10% of my position in SBRCY at $7.03 Rolled it into SAN at $4.74

CPI in the U.S. fell to 1.0% from 1.4% in January. http://www.ft.com/fastft/2016/03/18/german-producer-prices-drop-3-in-february/ German producer prices drop 3% in February on top of a 2.4% annualized drop in January.

I'm coming to this same conclusion... The more I think about how broken and messed up the system is, and what possible solutions are, I always wind back up at the voter. We get the politicians we deserve collectively as a society. Want change? Find a way to change the voters and the change in politicians will follow naturally. I have yet to come up with a fool proof plan to get citizens to be motivated to vote, informed on their choices, logical in their assessment, all while demanding that their politicians adhere to a higher standard of ethics and integrity.

Sold another 10% today at $8.45. I sold my first 10% @ 8.95 today as well. Nice! You were more patient than I. I sold each of the group or purchases at a 33-35% gain - was afraid if I got too greedy it'd just turn right back around and we'd be back at $6-$7. Have been funneling the proceeds back into PDER which hasn't seemed to participate anywhere near as much in the rally...

;D I'm gonna buy more..... lol

Sold another 10% today at $8.45.

He is. Not sure if you're serious...but if so, that is such an illogical argument. Illogical if you want the system "to work" whatever that means to you, but not illogical at all if you're goal is the crumbling of the system. The more hatred and disgust politics engenders the less people will look to it to solve problems. The best outcome possible is for people to think of politics as a nasty process that is irrelevant to their lives and to dismiss it completely. I tend to disagree.... I mean, just look at Hillary. Even the majority of Democrats describe her as being untrustworthy, but would vote for her anyways. Congress has abysmal approval ratings, but people keep getting re-elected. Most millenials tend to hold beliefs that would align them as closer center/Libertarian, but will only vote Republican or Democrat because doing otherwise is a "waste of a vote". The majority of people will look to the current system to solve their problems no matter how much they dislike the current system and its participants.

The problem wasn't just the overvaluation, it was the whole structure of the market; classifying crap as triple A, creating derivatives on these to compound the risk, nobody holding on to what they underwrote, so standards went down a lot because everybody just dumped the risk on someone else, high leverage everywhere making everything more brittle, implicit government support, socially acepted liar's loans, etc This! Also, I question the notion that it could've continued for a few more years. Burry did the research to know when the rates reset on the loans - he knew when the pressure would be applied and knew to wait for it to be applied instead of giving up even as valuations moved against him.

http://www.bloomberg.com/news/articles/2016-03-15/wholesale-prices-in-u-s-decreased-in-february-on-fuel-food Wholesale prices in the U.S. fell in February. CPI also expected to be negative when released later this week.

This is an important point - thank you for making it. Just mentioning some scary (or bullish) outcomes without attaching odds is a very bad practice, whether intentional or not. Investors often become enamored with the magnitude of certain outcomes, but forget that odds are all important in investing. Well said. It always strikes me when looking back at historical stock charts for the S&P, Dow, etc. that periods with 'big losses' often times had losses of 20-30%, and often they were erased by gains shortly after. Clearly, anything can happen, but the odds are usually that prices stay relatively stable. I get the exact opposite impression - I notice a handful of periods of flat to negative returns for a span longer than a decade and ask myself it that is an acceptable outcome and if there is any way to get out of the way of it before it happens. So far, there have been pretty reliable indicators that would have let investors know to get out in the past...

I just finished reading Fooling Some People All of the Time about Einhorn's saga with Allied Capital. I was quite surprised to see the total disregard from the SEC, SBA, USDA, and DoJ in regards to that matter. They literally ignored his warnings/evidence for the better part of a decade and then when the whole thing blew up, they didn't want to move forward to collect damages because of the embarrassment it would cause federal agencies. Lastly, it seems like a lot of laws/rules were changed to bar Einhorn from following up in court himself. This was a case where the gov't was the victim of fraud and they still did everything in their power to let it happen/continue and the losses ballooned just so the gov't could attempt to save face. Will the outcome be any better when the gov't is the one perpetrating the theft? I definitely have a renewed appreciation for how hard it will be to win against the gov't in court....

Over those 25 years (using year-end dates not peak), your annualized return was 7%! Do you have the dataset for this? I find this quite useful http://dqydj.net/sp-500-return-calculator/ Vinod Using Vinod's website, the returns from Sept 1929 (the peak) to Sep 1954 were 5.8% with dividends reinvested - though, the majority of that return comes in the late 40s and early 50s as nominal compounded returns including reinvested dividend were actually negative through 1944. It was only the 10 year equity bull market that averaged 16% per year from 1944-1954 that saved your compounded returns over the full 25 year period. Prem's point isn't that you should've stayed out of the market for the full 25 years as much as it was that most people don't really have a 15 year time horizon to break even on a nominal basis (and even longer on an inflation adjusted basis). Especially an insurance company that is required to use it's investment portfolio as capital to support insurance operations. The drop in capital also means a drop in underwriting volumes/profits - a double whammy to the bottom line. Prem's concern is the 90% drop and the subsequent 15-20 years to get back to even and all of the lost opportunity cost not just from investment portfolio losses but also from reduced insurance underwriting. If he can avoid just half of that 50% loss, it makes a massive difference over the following 15-20 year period. To the detractors credit - it has only cost shareholders money for the last 6 years and the opportunity cost has been large just about anyway you measure it. To Prem's credit, just about everything he was concerned about is currently happening, but equity markets have shrugged it off to date. Maybe we'll continue to climb the wall of worry and Prem will eventually throw in the towel. Or maybe Prem will continue being right until equity markets can no longer ignore his warnings and those losses reverse. Only time will tell.

I'm curious how you get your EM exposure. Individual companies? ETFs? If ETFs, which ones? All kinds of ways - individual name equities that trade ADRs or pink sheets, companies with large EM exposure (like SAN for instance), and mutual funds through my 401K.

will be interesting to see how this plays out over the next 5 years

Poor Cheddar Bob...

The problem with that is who provides that to those borrowers? It's not going to take very long for creditors to realize that this is just a massive wealth transfer from creditors to debtors which should reduce the number of creditors quite substantially...so maybe the first movers of corporations benefit, but in the long term, I don't think many people will be happy to lend at 0 or sub-zero rates of return.

We need Picasso quoting Eminem here pronto. "Look, if you had one shot, or one opportunity, would you capture it?"

They also seem to assume that just because someone is bearish on the S&P that there is no purchasing going on anywhere else and we're wasting our lives away just discussing this...like this guy below Just as a follow up to your comments, you can be bearish and still be making money by being long other things in the other opportunities that you assume we're missing for some reason. My portfolio was about 15-17% in oil stocks the past two weeks - I made a lot of money across multiple names I added significantly to Altius at $5.60 & and $6.30 - I made a good bit of money I added to FCAU at $5.85 - I made a good bit of money I added to PDER at $150 - I made money I rolled 40% of my 401k into emerging market stocks and 10% into HY debt at 10% yields - I made money The S&P rose a few percentage points - I lost a little money, but still in the green for my total short position. Please excuse me while I continue to discuss the macro and the overall expensiveness of the U.S. while making money on both sides of that trade. Smart guy. I'm about half short and half long oil. I'd like to diversify into aluminum and some other commodities. I'm not good at counter trends but I feel there is some secular floor here. Good luck all. Less smart and more finally catching a break. I've been heavy into commodities and EM for the past two years and have been building the stake the entire time. Now it's pretty much my entire portfolio less a bit of exposure to European financials and a few bond funds in my 401k. My only point was that he was assuming that just since we're bearish on U.S. equities that it must mean we're bearish on everything and not making money/losing money because we're not investing anywhere. I was simply providing evidence of where I've been adding despite have extremely dark views of the forward return for U.S. equities as a whole. Something to keep in mind - as of the end of January (I think) the CAPE for EM was around the 4th percentile while the CAPE for the U.S. was around 96th percentile. That certainly doesn't mean that the U.S. is going to fall flat on its face, but if people aren't selling everything in the U.S. to buy EM, then I don't know what a clearer signal to make that rotation would be. Especially for those of you who aren't expecting a recession/world falling apart.

Long run you get an ease on fiscal balance sheets, which are terrible, at the expense of the currency as money flows to areas where it can actually earn a return. You want to own gold in periods of negative real returns and having negative interest rates is a good way to start getting negative real returns. I'd also say you risk ruining the fabric of the current financial system given that it likely would encourage 1) hoarding cash at 0 return and 2) providing a disincentive for saving at all. You think it's coincidental that politicians are now discussing getting rid of large denomination bills in Europe? Plus, it just doesn't make any reasonable sense that a borrower should be getting paid to borrow while those who provided the money/capital should be getting negative returns. I think that there are a whole host of non-obvious repercussions from turning that on its head and instituting policies that don't make any clear sense outside of the very, very narrow view of the impact that it will have on market confidence this month/year.

They also seem to assume that just because someone is bearish on the S&P that there is no purchasing going on anywhere else and we're wasting our lives away just discussing this...like this guy below Just as a follow up to your comments, you can be bearish and still be making money by being long other things in the other opportunities that you assume we're missing for some reason. My portfolio was about 15-17% in oil stocks the past two weeks - I made a lot of money across multiple names I added significantly to Altius at $5.60 & and $6.30 - I made a good bit of money I added to FCAU at $5.85 - I made a good bit of money I added to PDER at $150 - I made money I rolled 40% of my 401k into emerging market stocks and 10% into HY debt at 10% yields - I made money The S&P rose a few percentage points - I lost a little money, but still in the green for my total short position. Please excuse me while I continue to discuss the macro and the overall expensiveness of the U.S. while making money on both sides of that trade.

http://www.valuewalk.com/2016/03/corporate-profit-margins-trends/ S&P margins have been in decline for the last 12 months. NIPA margins have been in decline for much longer. Can we maintain high equity multiples if profits begin to fall?