Mephistopheles
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Posts posted by Mephistopheles
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15 hours ago, aws said:
Possibly the Scott Fetzer deal. Here's a bit of a write-up about that which gave us a nice Charlie one-liner:
He told a story about how First Boston (now Credit Suisse) tried to gin up interest in the mid-1980s for Scott Fetzer, a hodgepodge of small businesses based in Cleveland. It called on 30 firms to help make a sale, but failed to find a buyer.
Mr. Buffett then called Scott Fetzer’s chief executive himself and negotiated the deal face to face. Just as they were about to sign the deal, a banker for First Boston said that the bank was still entitled to a $2 million fee. The banker asked Mr. Buffett’s partner, Charlie Munger, whether he’d like to read the firm’s analysis of Scott Fetzer. Mr. Munger replied, “I’ll pay $2 million not to read it.”
lol! where is this from?
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On 4/3/2021 at 1:01 PM, wabuffo said:
I like to sell at the money puts for stocks I like. In this case, the premium was too juicy to resist, and puts me into the stock at my buy price if I am put the shares
I think one has to be very careful with this strategy. A closer look indicates that selling naked puts is almost always a bad strategy.
1) if one is selling puts at a strike price above one's estimate of IV, then one is not getting adequately compensated in terms of premium for the risk being taken. IOW - one is selling insurance way too cheaply.
2) if the strike price of the naked put is at or below your estimate of IV, then you are better off buying the underlying stock. Why bother with the naked puts in this case?
There could be times where selling puts makes sense - but usually because someone like Buffett is accumulating the underlying stock. He has done this in the past when he believes he is buying a stock trading below IV and wants to lock in the price for continued accumulation beyond the immediate term of his buying (eg, KO in 1993-94 and BNSF in 2009-10).
wabuffo
I think selling puts can be beneficial in a situation where the IV is crazy high. Here you may not really care to own the stock but you can still make good money. For instance on Viacom last week I sold a few short term puts ATM $45 strike that expired last week and on. The one that expired last week I kept almost all of the premium as profit.
The other one, expires on 4/23, I sold on 3/29 when the stock was $46, and today it closed below $43 yet I am still in the black. Most of the profit is from the IV collapse and some of it in the time value factor. (Though tomorrow I will probably be in the red).
But, here's a stock which I think is ok to own at $45 but I am not thrilled about it. I am betting not on valuation, rather against volatility.
Hoping to sell some $40s tomorrow depending on IV as CS and Nomura unwind.
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winjitsu, ANP, Pelagic, thank you all for your generous responses. I have decided to pass as this is definitely in the way too hard pile for me. But I appreciate the thought processes laid out here and it'll help me look at another opportunity if I ever get it. I had to look up what an MVP was. Do they have one? No clue. And I don't know any angel investor either. The founders do have experience in starting businesses but not specifically in this industry.
And ultimately, I do agree it's bizarre they are asking for a relatively small minimum amount from people in the U.S. (less than $50k commitment). As ANP pointed out, given the mania and the amount of money floating around, why would they need to ask for small sums from low net worth individuals?
Let's see what happens. Watch this become the next Tesla :P.
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Family friend from India who is a financial advisor sent me a presentation for a EV company. I know nothing of the culture, climate, environment there. Further, I've never put money in a startups before. The company plans on launching a product latter half of this year and thus is gathering funding for manufacturing. Plan is to launch an EV Motorcycle. Its the biggest two wheeler market in the world, but EV motorbike sales in the country are close to zero now, therefore it is somewhat intriguing.
That said, a company that doesn't sell products yet is nearly impossible to assess. How would you approach? Study the founder? Look for share alignment? Try to make sure it's not a fraud?
Obviously the industry is in a bit of a mania right now which I am taking into account. Likely will not invest, nonetheless I want to take this as a chance to learn about investing in the country. -
Called Charlie Munger's office once and he picked up the phone. We spent nearly an hour talking and he listened to me like what I had to share with him was the most important thing in the world. Lots of questions, lots of curiosity. He understood very complex things rather quickly.
I wrote a letter to Warren Buffett and he shared with me about his terrible Texas Holdem Poker skills in his letter back to me.
At one annual meeting - I met Bill Gates at a bar. I asked him if he was into sports and he goes "no but my friend owns the Mariners" (there was a Mariners / Twins game in the background). Then I asked him if he owned an iPod. He goes, "no I have a Zune"" LOL!
Those are awesome stories.
What was Bill Gates drinking?
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I know the color of my bedroom carpet and Alice schroeder's hair. I must suck as an investor :(
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Don't they have plenty of cash to buy back as much as possible without moving the price AND buy VZ and CVX?
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Sold some more GME 5 and 5.5 Puts
Nice, what dates?
I sold some Nov $4.50 and July $3 last week. And then some July $.50 for $.05 which I think is a steal. What are your thoughts on valuation? Unless it goes bankrupt I think those $.50 ones are easy money and a 10% return on notional in 6 months.
Was also doing this last week. Got .10 for the July $1 strikes.
Nice. I want to put on bear put spreads but the IV and the premium differentials between various strikes is still really high. Can't figure out how to make big money on this, other than the small amounts made with these abovementioned trades.
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Sold some more GME 5 and 5.5 Puts
Nice, what dates?
I sold some Nov $4.50 and July $3 last week. And then some July $.50 for $.05 which I think is a steal. What are your thoughts on valuation? Unless it goes bankrupt I think those $.50 ones are easy money and a 10% return on notional in 6 months.
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I am so angry about all of this. Can someone explain why if two parties want to make a trade it should not be allowed? I don't get it. I don't get the gamma squeeze thing either. Like the market makers took the risk to take the other side of the transaction by selling calls, did they not? So then they had to go buy stock to hedge but again, is that not part of the risk???
Bear Stearns...Lehman Bros. It's not that two parties are making a trade. If the parties are large enough or have enough fire power, they could take down a major financial institution...and then dominoes fall.
Now when I say two parties, I'm not referring solely to the WSB crowd, but even rogue hedge funds, private equity funds or any other fund of size. If parties are acting together, they should be filing their positions together...such as proxies, 13D's, etc.
Personally, I'm pleased that hedge funds got a taste of their own medicine, especially anything involving Cohen, but the system has to have disclosure, transparency and rules to create a fair playing field. Cheers!
I guess what I meant to say was. Say 2 parties: a retail investor at TD Ameritrade and an Hedge fund client at Goldman make a trade. The retail buys $10,000 notional value of calls from the Hedge fund. So now the fund has a $10 k liability which may be naked or hedged against the stock. At this point, why are either of the brokers involved or have any risk? Doesn't the risk belong to the investor on either side? Granted, assuming the brokers require decent margin requirements of their clients. But why does trading need to be restricted at this point? Why can't the brokers just ensure that the margin requirements are aggressive enough? I noticed a bunch of them raised the margin req to 100% for these stocks. At that point, what is the risk to the system?
Now the step I never appreciated was that there is a market maker in between all of this. They sell you the option to make the market and then find a party to take the other side. In order to lower their risk, they buy stock. So the way I understood the gamma squeeze was that a whole bunch of retail piled on buying calls that the market makers sold way too much risk that they couldn't sufficiently offset just because 1) there aren't enough shares available and 2) the float is so thin that the stock needed to hedge just shot up 50%. Because the position only gets bigger as it works against you, the Market Maker's liability kept growing which contributed further to the squeeze.
Is this a good description of the risk to the MM?
But again,, even in that case, why can't the MM just stop selling calls? Or why can't they just limit the amount of risk they take?
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Buffett "bailed out" Goldman and BAC during a controversial era as well. He won't let a good opportunity pass here.
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I am so angry about all of this. Can someone explain why if two parties want to make a trade it should not be allowed? I don't get it. I don't get the gamma squeeze thing either. Like the market makers took the risk to take the other side of the transaction by selling calls, did they not? So then they had to go buy stock to hedge but again, is that not part of the risk???
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I think the political route is dead. Mnuchin/Trump, for all their incentives, and big donors being pref holders, were not able to privatize the companies in 4 years. To me it means there are so many internal road blocks that even the Sec of Treasury was unable to pull it off. Now we have a President and new team that have stated that they are in no rush to privatize. These are the same people who implemented the NWS in the first place. I give it zero odds for them to make any deal.
So now all we have is the Courts and it's above my pay grade to analyze that.
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https://www.dailymail.co.uk/news/article-9148933/Cuomo-allows-indoor-dining-state-apart-NYC.html
Cuomo opens up indoor dining all over NY again, except NYC, even though NYC has the second lowest positive rate in the entire state. His reason is NYC is too densely populated. What a POS.
He destroyed a majority of restaurants and bars in NYC but the job isn't finished until he kills 100% of them.
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Moderator, please move this thread to the "Politics" section.
You may not have intended that to be funny but it made me snort ;)
I did intend it
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Moderator, please move this thread to the "Politics" section.
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Each spin is memory less and your odds are 48.60% on the next spin, but the odds of red or black coming up consecutively is 0.4860 x 0.4860 x 0.4860....! Cheers!
Each spin is 48.6% black or 48.6% red, no matter what the preceding spins were.
The odds of red 4x in a row is .486 x .486 x .486 x .486.
The odds of red 3x in a row and then getting black is also .486 x .486 x .486 x .486.
Thus, after the 3rd spin, it's equally likely you will get black or red. The odds of RRRB in that order are exactly the same as the odds of RRRR.
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In this 5/21/20 Fireside Chat video, Pabrai discusses being banned from playing Blackjack at a Vegas casino. He says that it did not involve card counting but it was a winning strategy and that he made around $100k.
I am very familiar with card counting but am surprised to hear there is another system? Anyone know what he could be talking about?
Starts around 15 minutes
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FYI, The $125 billion Apple stake is now 25% of Berkshire's Market cap. This doesn't account for the fact that Apple is likely overvalued. I really hope he's started selling.
Assuming it's fairly valued though, you are paying $375 billion for the rest of Berkshire.
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Also, with the criticism for Buffett not doing anything during the March lulls. I got to thinking ... neither of the Ws made meaningful buys either? Or has this already been addressed?
Buffett himself might wait for clearer signals. But it would be easier for the Ws to make purchases? Do you think they share same wait and see approach? Is it institutionalized, in which case, is there enough contrarian/independent thinking?
Doesn't answer your question, but I am really curious to see what the latest share count is per 10-Q. So far we have seen that Buffett bought back $5 billion of stock Q2, the most ever (I think), and now we are seeing huge purchases of BAC. Perhaps Buffett's outlook has changed, and he bought back at an even faster pace in July.
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1) Buffett turns 90 later this month. What happens when the greatest capital allocator in human history is gone?
Honestly, I think Buffett's successor will have a difficult time of it unless (a) the company can be broken up and/or (b) a dividend can be put in place. Berkshire has become so large and unwieldy that I struggle to see it outperforming the S&P 500 with a mere mortal making the capital allocation decisions. It needs to be cut down to a more reasonable size.
2) Berkshire's AAPL position is now valued at over $100 billion. How is everyone thinking about this position in the context of valuing Berkshire?
1) I think the successor will be more than one person, meaning, one CEO but several people doing capital allocation. I can imagine Ajit doing all the capital allocation in the insurance industry including acquisitions, and Greg doing the same within the energy space. BH Energy will have a lot of opportunities in capex going forward. Aside from that, I think Buffett himself is a mere mortal has had some prominent misses in the last 20 years. So I think a combo of Ajit/Greg/Todd/Ted will make for excellent capital allocaters, not any worse than Buffett in my humble opinion. I think buybacks will be ramped up significantly, which they already have. I think most people prefer buybacks at below or fair value, and I think that will happen instead of dividends.
2) Unsure about Apple
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How does todays move in Apple change how you view Berkshires current valuation? This is easily one of Buffett's biggest homerun's of all time. If I think how Apple ($100B) position balances out the Rails, Uts, and Insurance businesses; it is extremely complementary. Few investors understand the consumer as well as WEB - and this highlights it. 5G roll-out, A.I., new product cycle and the whole Apple ecosystem.
"Berkshire shares are down today as its (deferred tax) liabilities swelled by more than $1 billion overnight due to the massive increase in the value of its Apple position."
:P ;D
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It's too bad that if we push out the capital gains tax liability into the infinite future (representing a scenario in which Berkshire adopts a strict policy of never realizing capital gains), the size of the capital gains tax liability gets infinitely large, which I think negates the time value of pushing it out into the infinite future... right?
But until the cap gains is realized, the deferred tax liability serves as an interest free loan that continues to be invested in the particular security, which otherwise would not be available to invest if the gain is realized. This of course only makes sense if the particular security itself is worth holding for that period of time.
Here's my question. Why not just borrow against a stock, and hedge with puts that are priced appropriately in order to avoid realizing gains? Buffett can pull an Ericopoly.
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Have you tried Interactive Brokers? They are the only brokerage I've used who will let you do pretty much whatever trade you want inside an IRA. Cash covered options spreads are calculated correctly. Cash used to cover the call is designated "maintenance margin" and is subtracted from cash available to trade.
I have not, but I likely will be in the future. Merrill is so easy since I bank with BofA, and everything is free. Of course I am not counting what I am losing with worse execution and more restrictions.
Bill Gates - Jeffrey Epstein
in Berkshire Hathaway
Posted
I know Gates is a nerd, but he's the richest man on earth. Why is it so hard for him to get women who are not subordinates at MSFT?
Why did Bezos have an affair with that woman who's now his girlfriend? She's got all that plastic surgery on her lips.
Seriously if you're the richest man in the world, have some better taste and class. If Bezos/Gates had affairs with supermodels, that would be a bit more understandable and forgivable.