Rabbitisrich

Hmmm... I'm not sure.

USA Today published an article yesterday noting that important technical floors were breached or in danger of being breached. I also took the CFA exam last Saturday and most people I spoke with seemed to have an opinion on the causes and the future of the near term market volatility. Is it really that hard for people to say, "I'm not sure"?

No problem, I'm near sighted with slight astigmatism and dry eyes, so computer reading isn't normally a wonderful experience. An attachment for your monitor to reduce the glare and the blue light might help a lot, and you might find that wearing light sunglasses helps as well!

Regarding CNA, if you like the company at the current price you are surely betting on Motamed, rather than the Loews. Reserve developments have been positive the last couple of years and they pulled capacity back in the '07-'10 pricing environment. But I would feel more comfortable with the company if their assets more closely resembled Chubb's. In 2008, they liquidated much of their treasuries in favor of a large increase in their corporate portfolio. Time will tell if they were truly opportunistic or simply chasing yield; either way, given the evidence of major discretion on the investing side and the absence of a great record on the insurance side, it's probably a good idea to demand a big turnaround discount in addition to the normal soft market, hurricane season insurance discount.

Try reducing the brightness and contrast of your screen.

Ackman's idea is interesting but how would it be implemented? If you tie payments to bond performance, then how will the performance be measured? After all, ratings change according to changes in the business or in the capitalization, and those factors change simply due to time. If a manager sells his most profitable unit at a low price days after recieving a AAA, then it seems unacceptable to restrict payments to the rater. Also, if the company is paying the rater, but it can also retain payments if their own default risk increases, then that seems to create a perverse incentive to default on payments. In addition, Ackman's plan seems to bring the rating company's role a bit too close to that of a bond manager. Let's say Ackman's plan becomes the status quo... if the market overly weighted ratings under the current system, how blindly will it use ratings when the raters are accepting credit risk? We could actually see an increase in moral hazard! My personal belief is that current discussion about ratings focuses too much on the raters, whom are simply the logical results of the current system. I don't see a solution that doesn't focus upon the why and the how of rating consumers.

Keep in mind that a lot of people on this board have a full position in Fairfax. I wouldn't fear to hold a large position, which in fact I do, with my 'preserve my capital' money, but $380 is not where I would place my 'don't tell your neighbors' money.

It also shows Buffett's political instincts in maintaining relationships with people who may or may not be personally insufferable.

All that being said, the website looks like a worthwhile read.

I sold my lots that I purchased between $345-$352 to be ready for potential volatility. It's still a fairly small chunk of my Fairfax stake, so it'll be pretty painful if the negative scenarios occur.

Yeah, it's a bit speculative at this point. The market reacted similarly to Nutrisystem 30% ago. It's hard to imagine that Jones will be able to maintain their brand strength with this move. The canned version didn't take off at Target, and they lost a lot of their exposure to yuppies and Birkenstock-wearing Jack Johnson fans when their DTR partners cancelled orders. Advertising spend is still almost 50% less than last year's, and last year was 23% less than the prior year. Also, the press release didn't specify how much time Walmart will provide for this experiment. I have a bit of nostalgia for the Jones brand from my college days, but it seems like they are shedding their old tight pants and ironic t-shirt wearing customers.

http://www.noaanews.noaa.gov/stories2010/20100527_hurricaneoutlook.html Uh oh.

Opihiman, I don't really follow your example. The two put premiums result in different losses for the same return. Take the example to its logical extreme: You wait until the third day to sell the put and the underlying falls to near zero. You would then require a premium in which your ultimate loss will be much smaller than it would have been in the prior days. The premium received changes your risk profile. The example is meaningless if you are using a hindsight bias, since in that case you are presuming losses before the case. I don't think the OP intended to sell options with no consideration of the underlying. In fact, he explicitly states that the opportunity cost is the purchase of the underlying.

The OPs usage is appropriate if you consider that a margin of safety aims to reduce your odds of loss in the face of uncertainty. Wouldn't you agree that a higher put premium relative to strike price increases your margin of safety given no change in the risk of the underlying? The boardmembers are reacting to your tone more than you statements, which are otherwise fair. OP is clearly new to investing and to options, so a less aggressive response would have been more helpful.

Packer16, did you come to a conclusion regarding the treatment of FCF for companies with a high debt load? I take a simple approach based upon management's intentions. If management intends to reduce debt: 1. If debt above WACC--or my estimate of required return--then treat as an investment with no adjustment to FCF (I use owner's earnings). 2. If debt below WACC, then deduct the principal reduction from FCF. If management is ambiguous or does not intend to reduce debt: 1. Add a risk premium to required return. 2. Pray. The first situation tends to overstate the value since I don't make an adjustment to required return while the company is paying down the debt. The second method will increasingly undervalue the company assuming that asset growth outpaces debt. I'd be interested if you find a better method.

I enjoyed the article and the odd turns of mind of the author. Cui bono speculations tend towards specious arguments, but the author's point about the relationship between global risk premium and trade deficits is well taken.

Are you reducing principal for debt in which the costs exceed the WACC? In that case you might consider the principal reduction as an investment, in which case you wouldn't make an adjustment to FCF. If the debt cost is below WACC, then you are making a principal reduction for balance sheet or contract purposes, i.e. you are forced to make the payments. In that case, you should reduce the FCF by the principal payments since those monies are not unencumbered.

http://www.businessweek.com/ap/financialnews/D9FRG5H80.htm It looks like the Redneck Riviera will open for business tomorrow.

If I had to sit through a abstinence lecture in high school, I'd rather hear from someone with experience than someone who married his/her first erotic partner.

Thanks for the reply.

The Dash proxy seemed to suffer from a lack of focus. He criticised, fairly in my view, failures on the part of management, but in such a broad way that the only practical solution would have been to replace management. Shareholders didn't have much of a specific platform to judge so the proxy became a battle of reputations.

To the contrary, it shows 4 bids, the most recent dated May 10th at $750. The minimum bid increment is $100. That gives a minimum next bid of $850. The auction is open for another 14 days. In most long time period open auctions like this, the bid price prior to the final minutes is of no consequence whatsoever relative to predicting the hammer price. This is a signed first edition, donated by Seth himself, so I presume it is in reasonable condition. I doubt that this auction will close for less than $1000. Thanks for the correction, though I note that half of those bids come from a username that matches the charity.

Twacowfca, is this relationship conditional? Do you have an expectation of when the correlation breaks down? From the chart you provided, a ~15% change in the monetary base resulted in a ~24% change in the S&P, which doesn't seem to be sustainable.

There is an ongoing auction for a signed copy of Margin of Safety that has not received a single bid. It is currently set at a minimum $850. Those $1000 quotes might simply be asks or maybe they were settled prices before pirated copies emerged. http://www.charitybuzz.com/auctions/Prize4Life/catalog_items/207125

Just last night, I posted a Seth Klarman quote that is probably appropriate, "Choose your remorse." A certain percentage of my portfolio is very sensitive to the economy; they will do fine at ~0-1% real GDP growth, but they will trip over an inflection point if there is another major macro shock. However, I've right-sized my portfolio to compensate for that quality. I think the extreme conditions Klarman fears may occur, but I would rather add to my companies with powerhouse balance sheets and macro resistant business models than try to directly hedge a scenario. Unlike a pro money manager, I can adjust my return expectations and focus instead on purchasing at levels that promise some positive real return.