Prince Alwaleed and the fight with Forbes richest people data

[hyten1]

Rabbitisrich

 

good point, i was actually just thinking of options/warrants when i am talking about leverage. i would never use margin or have more on the hook than i actually have.

 

options/warrants allows you to leverage without recourse

 

hy

[Cardboard]

Hi Ericopoly,

 

Glad that you made money on the Odyssey Re takeover! I will never forget that day: September 4, 2009. My net worth went up something like 35% the following Monday and then more as the bid got increased a few weeks after. You did 50%, so even better.

 

Now, one thing that I wanted to point out is that no one else other than yourself deserve the credit for having made such a gain. We are presented a ton of ideas on this board, in the news and elsewhere all the time and our job as investors is to pick which ones make sense to each of us. I am not even sure if I thought about the ORH potential buyout myself or if someone else put the light in my head. I recall studying it quite a bit afterwards and reporting my findings to this board.

 

Now, for those of you who are now thrilled about the idea of going all in, leverage and options, please be very careful. Eric could confirm, but all his big ideas had something very specific and were not just cheap stocks:

 

1- Fairfax in 2006. He bought a ton of calls along with Dengyu which were also cheaper than normal due to puts being in very high demand. Parity rule thing. The stock was down a lot and subject to a very large short attack while they were really out of trouble since the 2002-2003 debacle. There was also major fear of a repeat of 2004-2005 hurricanes. Once it got apparent that 2006 would turn into a very light storm year, the shorts had to cover.

 

2- Fairfax in 2008. Major CDS gains that were not reflected in the stock. No one could find a winner that year, so when it became obvious that one company was the opposite of the market there was only one way to go.

 

3- Odyssey Re in 2009. The stock was cheap and Fairfax had just borrowed $1 billion for no apparent purpose while they had bought out their only other public subsidiary just months earlier. There was also one bizarre SEC filing that did not include some shares that could be traced back to TIG Insurance (if I recall right). It just smelled the buyout while there was no reaction at all in the stock or options and the stock was at that point a better buy than Fairfax.

 

4- Bank of America in late 2011. This bank was trading like it was going broke or a la 2008-2009 while there was no run on the bank, no major financial hole to be noticed in the financials and the economy was still in recovery mode despite trouble in Europe. Keep in mind that he did not buy or lever up at $10 a share, but closer to $5. That is when blood was running in the streets and everyone was dumping that bank and not all others, for no real fundamental reason. We were getting close to year end and there was likely a lot of window dressing going on as well at the funds. That bank is sitting at every corner in the U.S., so if the world goes broke (which was really the fear at the time), might as well own one of the largest institutions in a business that will never go out of style.

 

In summary, you may want to try this only with companies that you know really well, in which you have great confidence, are cheap and when there is a very special event occurring in the near term putting large pressure on the share price: out of whack relationship between supply and demand for the shares.

 

Cardboard

[ERICOPOLY]

 

Now, for those of you who are now thrilled about the idea of going all in, leverage and options, please be very careful. Eric could confirm, but all his big ideas had something very specific and were not just cheap stocks:

 

 

That was a good summary of the specific situations Cardboard.  And I think you are right, it was that TIG insurance filing which is where they tipped their hand (but I got that tidbit from you, and you put together the thesis to the board).  That was the bit of insider information that wasn't insider information.  And ORH was beautiful because being 100% long was nothing to worry about.  I remember Mungerville (now Original_Mungerville) being long 100% or more in ORH all throughout the crisis and hedging against the index making money both ways.  What a stallion!  ORH was cheaper and better than FFH so swapping from FFH to ORH in speculation of a buyout was hardly risky whatsoever!  It had that subsidiary discount from being the 20% minority interest that FFH didn't already control.