How much are you allocated in cash?

[JEast]

As a FFH and BRK board member, maybe I am drinking the cool-aid too much.  But for all those with 30%+ cash why are you not putting at least half of that into FFH?  FFH is kind of set up as a hedge anyway with the S&P500 and Russell shorts. 

 

Cheers

JEast

[ERICOPOLY]

We are considering a move to London as I believe a combination of weaker pound and peaking real estate market may provide an opportunity to make a good purchase over the next 12-36 months.

 

Having spent 15 years in the Seattle area, I'm enjoying the weather here.  We've had a few days in the 75 degree range in January.  Mostly sunny and in the 60s.

 

Have you ever lived in a dreary climate before?  I hear London and Seattle are similar climates.  Even if somebody gave me a waterfront mansion in Seattle for free, I still wouldn't want to live there again -- well, I'd use it as a summer home only (nice in August/September).

[ERICOPOLY]

I can't think of any reason why this market should decline....typically a sign the market is peaking. Can't wait to be able to pick up AIG at $30 and BAC at $9 again...

 

Last year the Euro was going to collapse and there was to be a daisy chain domino effect on global banking.

 

So now if the "Euro is here to stay" it might mean that BAC and AIG will be spared this year.

 

http://www.bloomberg.com/news/2013-01-24/soros-says-euro-is-here-to-stay-with-two-tense-years-ahead-2-.html

 

Very likely - thus why I would love to buy more at 30 and 9 again, versus 25 and 7.

 

I get from $7 to $9 over twelve months just from the passage of time.  A year of earnings power burning through the fog of legal settlements and LAS expenses.  And one year closer to getting to the end of the tunnel (the end with light at it).  This time last year people were still sweating over the Fannie Mae putbacks.

 

Then the collapse of the Euro being taken off the table has got to be worth something.

 

[Labrador]

60%

[Parsad]

We are considering a move to London as I believe a combination of weaker pound and peaking real estate market may provide an opportunity to make a good purchase over the next 12-36 months.

 

Having spent 15 years in the Seattle area, I'm if somebody gave me a waterfront mansion in Seattle for free, I still wouldn't want to live there again -- well, I'd use it as a summer home only (nice in August/September).

 

I don't find Seattle or Vancouver dreary.  I like the four seasons...and you get that here, and I would suppose in London as well.  The rain keeps the streets spotless, the grass and trees green, and plenty of snow on the local ski hills during winter.  You haughty, toty California guys don't know what you are missing...even though you lived here for 15 years!  ;D  Cheers!

[ERICOPOLY]

We are considering a move to London as I believe a combination of weaker pound and peaking real estate market may provide an opportunity to make a good purchase over the next 12-36 months.

 

Having spent 15 years in the Seattle area, I'm if somebody gave me a waterfront mansion in Seattle for free, I still wouldn't want to live there again -- well, I'd use it as a summer home only (nice in August/September).

 

I don't find Seattle or Vancouver dreary.  I like the four seasons...and you get that here, and I would suppose in London as well.  The rain keeps the streets spotless, the grass and trees green, and plenty of snow on the local ski hills during winter.  You haughty, toty California guys don't know what you are missing...even though you lived here for 15 years!  ;D  Cheers!

 

I joke that Seattle doesn't have four seasons either.

 

They have:

Spring Fall and Winter

[Parsad]

We are considering a move to London as I believe a combination of weaker pound and peaking real estate market may provide an opportunity to make a good purchase over the next 12-36 months.

 

Having spent 15 years in the Seattle area, I'm if somebody gave me a waterfront mansion in Seattle for free, I still wouldn't want to live there again -- well, I'd use it as a summer home only (nice in August/September).

 

I don't find Seattle or Vancouver dreary.  I like the four seasons...and you get that here, and I would suppose in London as well.  The rain keeps the streets spotless, the grass and trees green, and plenty of snow on the local ski hills during winter.  You haughty, toty California guys don't know what you are missing...even though you lived here for 15 years!  ;D  Cheers!

 

I joke that Seattle doesn't have four seasons either.

 

They have:

Spring Fall and Winter

 

Hey c'mon...July and August are pretty close to what most people would call summer...but that's about it.  Cheers!

[ERICOPOLY]

We are considering a move to London as I believe a combination of weaker pound and peaking real estate market may provide an opportunity to make a good purchase over the next 12-36 months.

 

Having spent 15 years in the Seattle area, I'm if somebody gave me a waterfront mansion in Seattle for free, I still wouldn't want to live there again -- well, I'd use it as a summer home only (nice in August/September).

 

I don't find Seattle or Vancouver dreary.  I like the four seasons...and you get that here, and I would suppose in London as well.  The rain keeps the streets spotless, the grass and trees green, and plenty of snow on the local ski hills during winter.  You haughty, toty California guys don't know what you are missing...even though you lived here for 15 years!  ;D  Cheers!

 

I joke that Seattle doesn't have four seasons either.

 

They have:

Spring Fall and Winter

 

Hey c'mon...July and August are pretty close to what most people would call summer...but that's about it.  Cheers!

 

But July is preceeded by a month affectionately termed "June-uary".  The end of that month is what I officially celebrated as the last day of winter.

 

 

[bargainman]

28.5% FFH

48.5% Owner-operators

13% Short positions

6.5% Gold

3.5% Silver

 

All equity, no use of leverage. And I expect to receive a 10% fcf from my operating businesses through this year.

 

Actually, not much changed from last year. I clearly don’t understand all the small nuances of the markets, so I guess I will have to wait for some “big change”. When that happens (and it will happen, as it always does), I think I will have the wherewithal to take advantage of it.

 

giofranchi

 

“As time goes on I get more and more convinced that the right method in investment is to put fairly large sums into enterprises which one thinks one knows something about and in the management of which one thoroughly believes. It is a mistake to think that one limits one’s risk by spreading too much between enterprises about which one knows little and has no reason for special confidence.” - John Maynard Keynes

 

Just curious, would you mind breaking down your "48.5% Owner-operators" a bit?

 

[onyx1]

I am surprised to read the levels of cash in some accounts at 40%, 60% or higher.

 

110% net long.    Even with the indexes approaching all-time highs, I don't see market value of my holdings reflecting a worrisome level of speculative enthusiasm.  When I do, I will happily sell.  The fed is forcing the markets into equities and that won't change any time soon.

 

For context, I don't manage third party money so if I am wrong I won't have the discomfort of explaining a large drawdown to LPs.

 

Montecito is definitely expensive but you should spoil yourself with a nice home after your score on BAC. It will be a legacy asset that will last forever.

 

By all means live comfortably but don't make the mistake I made in buying a big trophy home, they are way overrated!  Yes, there was some satisfaction in announcing to the community that "I have arrived!" and having guests ohh and ahh at the the size of the kitchen and property, but that wears off fast.  What you are left with is more space that you need and lots of money gone every year to maintain the place.  10% of the cost of the home is a good rule of thumb.  Taxes and utilities are high enough, but the repairs were the worst!  Whenever any plumber, electrician, HVAC, landscaper or painter gave an estimate, I could can see the joy in their eyes as they pull out their "special rate" sheet just for me.  :o   

 

Big home are like boats.  The happiest day of your life is when you buy it, the second happiest day is the day you sell!

 

[enoch01]

0% cash.  But I am a very small fish managing just my money.  I go to cash when I run out of ideas.  I think selling BAC at 12 reflects some price anchoring.  If it had sat for the past 2 years at 12 I sort of think we'd all be pounding the table about how cheap it is.  It is still below TBV and far below book.  Moynihan is clearing the deck of past issues.  ML is doing very well.  They have that huge, very low cost deposit base sitting there, smiling at us.  Blah blah blah.

 

Thank you moore for the idea about brokerage firms, that's worth thinking about.

[ERICOPOLY]

By all means live comfortably but don't make the mistake I made in buying a big trophy home, they are way overrated!  Yes, there was some satisfaction in announcing to the community that "I have arrived!" and having guests ohh and ahh at the the size of the kitchen and property, but that wears off fast.  What you are left with is more space that you need and lots of money gone every year to maintain the place.  10% of the cost of the home is a good rule of thumb.  Taxes and utilities are high enough, but the repairs were the worst!  Whenever any plumber, electrician, HVAC, landscaper or painter gave an estimate, I could can see the joy in their eyes as they pull out their "special rate" sheet just for me.  :o   

 

Big home are like boats.  The happiest day of your life is when you buy it, the second happiest day is the day you sell!

 

That sounds about right.  Besides, when it's 65 degrees outside average in December/January, why would you want to sit indoors? 

 

That's the difference -- in Seattle when it was raining and 40 degrees, I didn't want to spend my day sitting outside with a book.  Same size house here as compared to there, but I got serious cabin fever there.

 

[alwaysinvert]

I am quite enjoying the 'cool' days of aussie summer. Dreary weather according to the locals but at +20C I won't ever complain. Approaching 20% cash fast fwiw

[goldfinger]

120% long mostly common and warrants and options in BAC and AIG. I manage money for family so I have FFH in their accounts too as a placeholder for cash.

I just cannot justify selling these financials way below liquidation and book value when their recovery has barely started. To me it is complete non-sense. Moreover there are so many catalysts and tail winds behind those companies. Regulation on AIG is going to be clarified very soon and results of stress tests is coming early march for BAC. So why even speculating on if I can get them a little cheaper soon or not?

Thanks to the board for so much updated information on situations like these; it is invaluable.

;)

 

[Rabbitisrich]

I'm under 3% cash before taxes, and not including funds set aside for 2012 taxes. I feel great about my portfolio operating results, but the recent Barron's cover is distressing.

[stylized_fact]

a little less than 10% currently, but that's because we're amid a healthy round of special situations (NXY, AXLL, and DGTC).  Normally closer to 30%.

[Olmsted]

20% cash but only because I am going to be between jobs for 6 months and buying a house at the same time.  I have made 'macro calls' in the past and it has always been a mistake.  So I won't any more.  I will own stuff if it is cheap.  Right now I see BAC and AIG at substantial discounts to book and normal-cycle earnings.  I see community banks cheap with a consolidation kicker.  I see auto companies trading at single-digit PEs at what is probably the early innings of the replacement cycle.  I see housing rebound derivatives that do not yet price in the revenue growth I think is coming.

[moore_capital54]

I am surprised to read the levels of cash in some accounts at 40%, 60% or higher.

 

110% net long.    Even with the indexes approaching all-time highs, I don't see market value of my holdings reflecting a worrisome level of speculative enthusiasm.  When I do, I will happily sell.  The fed is forcing the markets into equities and that won't change any time soon.

 

For context, I don't manage third party money so if I am wrong I won't have the discomfort of explaining a large drawdown to LPs.

 

Montecito is definitely expensive but you should spoil yourself with a nice home after your score on BAC. It will be a legacy asset that will last forever.

 

By all means live comfortably but don't make the mistake I made in buying a big trophy home, they are way overrated!  Yes, there was some satisfaction in announcing to the community that "I have arrived!" and having guests ohh and ahh at the the size of the kitchen and property, but that wears off fast.  What you are left with is more space that you need and lots of money gone every year to maintain the place.  10% of the cost of the home is a good rule of thumb.  Taxes and utilities are high enough, but the repairs were the worst!  Whenever any plumber, electrician, HVAC, landscaper or painter gave an estimate, I could can see the joy in their eyes as they pull out their "special rate" sheet just for me.  :o   

 

Big home are like boats.  The happiest day of your life is when you buy it, the second happiest day is the day you sell!

 

I don't follow at all. First off I have never in my life heard of carrying expenses for a luxury property being anywhere near 10% a year. On a 5-10 million dollar property you are looking at $100-150k all in at the worst case reflecting 1-2% which you will easily make back with appreciation over time and which would have to be spend anyways as you have to live somewhere. Moreover I don't think people should be buying multi million dollar homes that are still worrying about utility bills or repairs... When reaching a certain point in life where there is significant liquidity I find luxury real estate to provide a good balance of inflation protection as well as have a grounding effect believe it or not. It reminds you every day in my case of what only a small portion of my net worth looks like in tangible form. This is important as often when moving around the kind of numbers we deal with we tend to forget that.

 

The only argument against owning a large luxury property for someone with significant multi million liquidity would be in a rising interest rate environment and if they are under 40 and still focused on building their wealth. Recently I have had some debates abotu this with my friends and we have all agreed that the day of a fellow with $50 million net worth living in a $500k house are over. It simply doesn't exist anymore.

[ERICOPOLY]

I am surprised to read the levels of cash in some accounts at 40%, 60% or higher.

 

110% net long.    Even with the indexes approaching all-time highs, I don't see market value of my holdings reflecting a worrisome level of speculative enthusiasm.  When I do, I will happily sell.  The fed is forcing the markets into equities and that won't change any time soon.

 

For context, I don't manage third party money so if I am wrong I won't have the discomfort of explaining a large drawdown to LPs.

 

Montecito is definitely expensive but you should spoil yourself with a nice home after your score on BAC. It will be a legacy asset that will last forever.

 

By all means live comfortably but don't make the mistake I made in buying a big trophy home, they are way overrated!  Yes, there was some satisfaction in announcing to the community that "I have arrived!" and having guests ohh and ahh at the the size of the kitchen and property, but that wears off fast.  What you are left with is more space that you need and lots of money gone every year to maintain the place.  10% of the cost of the home is a good rule of thumb.  Taxes and utilities are high enough, but the repairs were the worst!  Whenever any plumber, electrician, HVAC, landscaper or painter gave an estimate, I could can see the joy in their eyes as they pull out their "special rate" sheet just for me.  :o   

 

Big home are like boats.  The happiest day of your life is when you buy it, the second happiest day is the day you sell!

 

I don't follow at all. First off I have never in my life heard of carrying expenses for a luxury property being anywhere near 10% a year. On a 5-10 million dollar property you are looking at $100-150k all in at the worst case reflecting 1-2% which you will easily make back with appreciation over time and which would have to be spend anyways as you have to live somewhere. Moreover I don't think people should be buying multi million dollar homes that are still worrying about utility bills or repairs... When reaching a certain point in life where there is significant liquidity I find luxury real estate to provide a good balance of inflation protection as well as have a grounding effect believe it or not. It reminds you every day in my case of what only a small portion of my net worth looks like in tangible form. This is important as often when moving around the kind of numbers we deal with we tend to forget that.

 

The only argument against owning a large luxury property for someone with significant multi million liquidity would be in a rising interest rate environment and if they are under 40 and still focused on building their wealth. Recently I have had some debates abotu this with my friends and we have all agreed that the day of a fellow with $50 million net worth living in a $500k house are over. It simply doesn't exist anymore.

 

The number I've been given by a local realtor is 5% a year -- and by that number he was including the opportunity costs of having the money in relatively low risk investments.

 

But anyways, I agree that the space is unnecessary.  I rent a 1 acre property, and I like that size.  More interior living space probably wouldn't make much difference.  We're sort of quiet though and don't entertain large numbers of guests.  2,300 sqft is on the small size -- I could go up to 4,000 but beyond that I think we wouldn't really use it.

[giofranchi]

28.5% FFH

48.5% Owner-operators

13% Short positions

6.5% Gold

3.5% Silver

 

All equity, no use of leverage. And I expect to receive a 10% fcf from my operating businesses through this year.

 

Actually, not much changed from last year. I clearly don’t understand all the small nuances of the markets, so I guess I will have to wait for some “big change”. When that happens (and it will happen, as it always does), I think I will have the wherewithal to take advantage of it.

 

giofranchi

 

“As time goes on I get more and more convinced that the right method in investment is to put fairly large sums into enterprises which one thinks one knows something about and in the management of which one thoroughly believes. It is a mistake to think that one limits one’s risk by spreading too much between enterprises about which one knows little and has no reason for special confidence.” - John Maynard Keynes

 

Just curious, would you mind breaking down your "48.5% Owner-operators" a bit?

 

Yes, of course, no problem!

9.5% Oaktree Capital

6% Lancashire Holdings

6% Brookfield Asset Management

6% Liberty Media

5.5% Third Point Offshore

5.5% GreenlightRe

4.5% Markel Corp.

4.5% Biglari Holdings

1% Dish Network

 

giofranchi

 

“As time goes on I get more and more convinced that the right method in investment is to put fairly large sums into enterprises which one thinks one knows something about and in the management of which one thoroughly believes. It is a mistake to think that one limits one’s risk by spreading too much between enterprises about which one knows little and has no reason for special confidence.” - John Maynard Keynes

 

[original mungerville]

I've been fully invested yet also fully hedged for 2 to 3 years now - a very expensive position (although in 2008 my portfolio was up 70% rather than being down 40%) - but I have done so to avoid making a macro bet as I view being long only as taking a macro bet.

 

Everything economically has held together thus far - it seems with the Euro holding together now and the US and Japan printing money, I tend agree with Uccmal that we could still have a big move up this year as well (its funny that even at this point, despite the big run-up in stocks over the past few years, I am actually still quite concerned about my hedged position rather than being sure the market will decline this year due to its very high valuation).

 

Relative to GDP, which is a more conservative measure than using Case-Shiller PE10, the market's high valuation is in the top 4 of the past 110 years - the other highest valuations being: 2000/01, 2007, and 1929. Countering this, bonds seem unattractive as does cash. There is no way, in my view, that interest rates will rise until the market forces them up. So I am expecting a disorderly adjustment to the macro imbalances at some point in the future - but who knows when.

 

I still hold a very large out-of-the-money long position in silver, I like Berkshire relative to the market and think that position could be leveraged to a multiple of the portfolio when it was closer to the buyback floor price. But nothing too exciting right now in terms of great opportunities. (I have liquidated my call options on RIMM and OSTK recently; I was precluded from buying BAC options but had I not been, I would have invested heavily there alongside of other board members. Its amazing the opportunities the market provides just looking at RIMM, OSTK and BAC.)

 

 

 

 

 

 

 

 

[txitxo]

~20% in FFH (but shrinking a bit because of the recent drop in the $)

~40% in Bestinver International (which is 90% invested in European stocks)

~40% in a basket of 30 European stocks selected with mechanical screens (and which have gone up by 7% in January).

 

  No cash, no leverage, no hedging (if you exclude FFH). 

 

As I have mentioned, my timing indicator warns of a crash in the US soon. In addition, the Shiller P/E in the US is 23. To go back to their 2009 bottom, US stocks would have to drop by 55%. To get to a secular, Shiller P/E~8, floor, they would have to drop by 65%. 

 

The Eurostoxx50 is still 40% below its 2007 peak. The European Shiller P/E is around 14. A ~30% drop would already get EU stocks to a 2009-like bottom, and even that wasn't reached in 2011, when the sky was falling on our heads. A 40% drop would put EU stocks at a bear-ending, secular bottom.

 

  It seems obvious that, statistically speaking, the downside is much smaller for the eurozone than for the US markets. It seems to me that inflation will start earlier in the US than in the EU (at least while the tee-fest people are in charge). 

 

  I mostly invest in small caps, but my screens are also throwing out large caps, like Exor, Endesa, Aurubis, Freenet, Portucel, OMV, Ahold, Voestalpine, Total. Experienced stock pickers like the ones in the board should have no trouble finding interesting stocks in the Eurozone.

 

 

[onyx1]

I am surprised to read the levels of cash in some accounts at 40%, 60% or higher.

 

110% net long.    Even with the indexes approaching all-time highs, I don't see market value of my holdings reflecting a worrisome level of speculative enthusiasm.  When I do, I will happily sell.  The fed is forcing the markets into equities and that won't change any time soon.

 

For context, I don't manage third party money so if I am wrong I won't have the discomfort of explaining a large drawdown to LPs.

 

Montecito is definitely expensive but you should spoil yourself with a nice home after your score on BAC. It will be a legacy asset that will last forever.

 

By all means live comfortably but don't make the mistake I made in buying a big trophy home, they are way overrated!  Yes, there was some satisfaction in announcing to the community that "I have arrived!" and having guests ohh and ahh at the the size of the kitchen and property, but that wears off fast.  What you are left with is more space that you need and lots of money gone every year to maintain the place.  10% of the cost of the home is a good rule of thumb.  Taxes and utilities are high enough, but the repairs were the worst!  Whenever any plumber, electrician, HVAC, landscaper or painter gave an estimate, I could can see the joy in their eyes as they pull out their "special rate" sheet just for me.  :o   

 

Big home are like boats.  The happiest day of your life is when you buy it, the second happiest day is the day you sell!

 

I don't follow at all. First off I have never in my life heard of carrying expenses for a luxury property being anywhere near 10% a year. On a 5-10 million dollar property you are looking at $100-150k all in at the worst case reflecting 1-2% which you will easily make back with appreciation over time and which would have to be spend anyways as you have to live somewhere. Moreover I don't think people should be buying multi million dollar homes that are still worrying about utility bills or repairs... When reaching a certain point in life where there is significant liquidity I find luxury real estate to provide a good balance of inflation protection as well as have a grounding effect believe it or not. It reminds you every day in my case of what only a small portion of my net worth looks like in tangible form. This is important as often when moving around the kind of numbers we deal with we tend to forget that.

 

The only argument against owning a large luxury property for someone with significant multi million liquidity would be in a rising interest rate environment and if they are under 40 and still focused on building their wealth. Recently I have had some debates abotu this with my friends and we have all agreed that the day of a fellow with $50 million net worth living in a $500k house are over. It simply doesn't exist anymore.

 

That worst case seems low.  Of course mileage will vary, but where I live $100-$150k will barely (if at all) cover annual property taxes on a $5-10mm home.  Average property taxes in my bedroom community outside NYC are 1.8%, and I don't expect taxes to fall anytime soon.  The home, fixtures, furniture are depreciating assets, so a 25-year straight line gets to 4% annually.  Add water, electric, gas, plus the pool needs to be heated and cleaned, the landscaping maintained (this expense can be breathtaking!), gutters cleaned, and other contingencies, add another 1-1.5%.  Minimum opportunity cost of UST Bond yield adds 3% (assume a higher rate if you believe you can compound above govt bonds).  All in, and I arrive at a 10% rule of thumb, add or subtract some for your local conditions.

 

This is realistic and conservative framework I would recommend to anyone contemplating a large home purchase.  If one is prepared to live with an annual "cost" for years into the future, then you can live in luxury and continue to enjoy your wealth without stress.  And by prepared I don't simply mean ability to pay.  In my case it wasn't a question of what I could afford.  Rather, it was  partly due to my sensibilities being offended from paying for something I didn't need, and mostly the fact that the "cost" was in direct conflict with my wealth compounding goal of a nine digit portfolio. 

 

FWIW, my wife thinks I am too conservative and would completely agree with your last two sentences.  Hahaha! 

[Packer16]

I think taxes can make a big difference.  As Onyx stated the NY taxes are the highest in the nation.  I like in Rochester and the taxes are similar here.  One effect here is the high taxes keep the RE values down.  If folks were not paying these taxes they could afford to pay more $ for the homes.  I think how you grew up makes a difference to.  If you grew up in the middle class you most likely have a do-it-yourself approach to life.  With such an approach getting a property with more than 3000 to 4000 sq. ft. is alot to keep up with other priorities.  I feel that way myself.  We felt uncomfortable having someone else coming and cleaning our house but finally are doing it and I still cut my own grass.

 

Packer

[Uccmal]

Hi original mungerville, good to see your still around.  What hedges do you use?

 

 

txitxo, The shiller Cape numbers appear to be out of synch at this point in time.  If you pull a chart of the largest market cap companies in the S&P 500 you find that most are in the range of 9-15 PE.  There are exceptions such as Goog, and Pg, but nothing is too far out of line. 

 

To get the ratios you quote someone has to be making low profits.  I contend that the smaller companies in the index have not become as pofitable as they will be in the near future.  ie. Shit flows downhill. 

 

I also think the starting point on the shiller PE 10 yr. ratio, and its midpoint are skewing results enough to make it irrelevant. 

 

It could also be that the Internationalization of many companies is making the shiller PE irrelevant as well. 

 

I guess my final point on statistics is that they can be produced for any situation for any side of an equation. 

 

My own markers are telling me what fine trader mentions above.  I dont see any major obstacles on the horizon right now.  This is starkly different from the summer of 2007 through summer 2008 when I posted on this board's predecessor something to the effect that "waiting for the collapse is getting interminable".  In 1999/2000 I sat waiting for the Nasdaq collapse (one day in 1999 MSFTs stock trading was greater than all of the TSX). 

 

There's obvious hurdles ahead but no major bubbles that need deflating that will cause greater than about a 20% correction.  In the meantime, there are awesome individual deals to be had. 

 

IMHO.