ERICOPOLY

They were worried about it going much much lower than 800. No they were completely unhedged at 800. I forget where, but it was somewhere in the 800 range that they dropped ALL of their equity hedges. And yes, they made all those "1in100 year storm" comments, and "very few survived the great depression" comments a long time beforehand. Then the market rallies 25% and they go completely hedged again? It's not like 20% is a terrifying amount of market swing. That kind of decline can happen in any market. And then if it happens, it's only a 7% loss to them due to their 50% exposure and the tax thing. I mean, come on, I eat 7% losses for breakfast! (happens at least a couple of times a year).

I would like to qualify my statements by saying that HWIC are much better investors than me, and I make more mistakes than they do. However they're out there in the public and I'm not, so they get the analysis :D

Forgot to mention the role of taxes. The hit to book value would have been only 7% at 30% tax rate. Imagine... All this fuss over 7%. Giofranci estimates of growth put that at just under 6 months of earnings.

So if you consider that they dropped their hedges at 800 in 2008, and then put them back on at 1060, were they merely stressing out over a 20% drop back down to 800? That's only a 10% hit to their book value. In saving themselves from that 10% hit, they've suffered an even large hit looking at where they would be today verses where they actually are today.

I find that not making 25% gain due to fear is numerically identical to losing 25% due to crash. With Fairfax at 50% of book value equities weighting, this 25% loss is one arising from 50% decline in the markets. Going back to 1060 on the S&P500 when they first put on the full hedge, you're talking about 530 on the S&P500. Way lower than where they dropped their hedges in 2008, and quite a bit lower than the 2009 absolute bottom of 666. You find yourself in the present with a given degree of capital that came from the past years of compounding. Did you make mistakes that you are unaware of (errors of omission), that cost you 50% of your capital? Or are you only counting losses that you are aware of, where it is obvious (errors of commission).

Well, GreenlightRe, with Mr. Einhorn managing a value long, short investment program, had a positive investment return in Q2 2013, while practically every bonds portfolio suffered losses due to increased rates. giofranchi Are there any quarters where Mr. Einhorn's strategy underperforms bonds? I'm sure it's not such a slam dunk that one quarter of data suggests.

The cost of leverage in BAC warrants will keep falling as well, as the stock rises. These are the risks of buying 6 or 8 years of leverage prepaid when you expect a large rise in the stock. You know about the effects of skewness on option pricing. So... if you expect the stock to shoot up then you need to protect yourself by shortening the duration of your option contracts.

"If Watsa is right and equity markets begin to unwind, these big unrealized losses will quickly turn into big-time gains. " The thing missing is that the equity portfolio will have losses to match those "big-time gains". There won't be any "big-time gains" until the markets rebound after they've dropped the hedges. I know,... it's technically only a wash, but they protect their company equity base in a sever market crash, while other insurers will be less fortunate. From another perspective,... shareholders are not receiving the returns on the equity portfolio, but are effectively receiving the delta between HWIC's returns and the overall market which can be of course very volatile over the short term. As of June 30, 2013, they have a cushion of over 29% or $7.5 billion in cash and short-term investments to take advantage of market opportunities. I thought you still own some FFH, that you bought some months ago with your portfolio margin. I sold FFH when I bought MBI. I haven't bought it back yet. I feel like they could buy bonds instead of investing in equities via delta hedging. Maybe it has to do with the difficulty of getting into and out of their positions.

"If Watsa is right and equity markets begin to unwind, these big unrealized losses will quickly turn into big-time gains. " The thing missing is that the equity portfolio will have losses to match those "big-time gains". There won't be any "big-time gains" until the markets rebound after they've dropped the hedges.

LOL! Should have picked "NOEMISHN" or "0TO60N4". I'm sure the boardmembers will have other suggestions. Cheers! WATTBOY was another that I figured somebody would get riled up over. Same with TSLMIST.

The plate "WATTSA" is available in California. I am presently mulling over a list of plates on the California DMV website. I decided WATTPWR might get me murdered and thrown into a ditch, so nixed that idea. Purchased "NOFILLR" a moment ago. There we go, that's not going to offend anyone. Reference to "All Killer, No Filler". Very fitting plate for such a bad a** car.

It's a high percentage of the put cost, but I'm expecting to lose the entire dollar amount invested in the puts anyhow. Same as I expect to lose all of the interest I pay on a home mortgage or student loan. So once you figure that you're going to lose it anyhow, losing a bit more doesn't seem to out of phase with the strategy. thanks - Are you using IB? If so, are you using unbundled or the "normal" pricing - just wondering if one works out cheaper than the other for large volume trades (although if I read their site correctly then large volume here would be 10s of millions of options traded). C. Yes I am using IB. I never looked into the different pricing models -- just using whatever the default is. Maybe I should see what "unbundled" is.

I take it this means you had it delivered? Was it everything you hoped? Any negatives? Driving down the 101, one female driver pulled alongside us to say "that is a very sexy car" (we were moving at 5 MPH in accident-induced traffic just north of Salinas). I've never in my life had that happen before. So off to a good start! It is very quick. Glad I bought all of the options. Great sound package.

I took these guys for a ride in my new car. Snapped this photo as they were walking away from the vehicle: http://rotq.files.wordpress.com/2010/09/spies-like-us-movie-image-1.jpg Say no more.

It's a high percentage of the put cost, but I'm expecting to lose the entire dollar amount invested in the puts anyhow. Same as I expect to lose all of the interest I pay on a home mortgage or student loan. So once you figure that you're going to lose it anyhow, losing a bit more doesn't seem to out of phase with the strategy.

I sold them for the tax losses in my taxable account. Everything else had fallen a bit at the time. BAC was getting back down near $12. I bought a few extra BAC calls in my RothIRA to offset the SHLD on a notional basis, so that if everything else rallied back up again I wouldn't be completely out of luck while I wait for the 30 day wash sale period to expire. Just lucky it worked out that SHLD didn't rebound with the rest of the market, and BAC did rally 20%. So I sold the BAC calls and bought the SHLD again. Just lucky I guess.

This is the 31st incremental day on the calendar after I sold. No wash sale. I have a muddy view on SHLD, not a concise one.

I sold my entire position on June 24th and bought it back today. Same price! Great tax loss.

I just bought a new all-in-one desktop for my home office, and I have to say Windows 8 is just a God-awful user interface. Really a complete piece of rubbish from a user standpoint. I don't understand how they could make such a clunky, ugly, difficult-to-use operating system like this. +1

:'( Yes, you seem to be correct as they say the same thing here: http://www.ehow.com/list_7566793_tax-questions-margin-buying.html Well, that's too bad as it seemed a reasonably good way to go :'( I suppose though if one were to buy the municipal bonds first with 100% of the cash, then use margin to buy stocks... well then the margin wasn't for the muni bonds, now was it? ;)

I'm a 3/4 mile walk to the Pacific Ocean. Quite a bit more expensive than solar panels, but very effective.

We use a variable speed on our pool. For proper circulation to run salt chlorine generator, skimmers etc. It consumes 400-450 watts and runs 24-7. (regular pool pump uses 1,000 -1,500 watts) The math shows a payback of 2.75 seasons (that s a 5 month season in Ontario) of use. Then the pump is free amd the savings are profit. The free options you get with these is pump will last a lot longer at lower operating speeds, savings/profits increase as rates increase and they have some good built in safety features. They re a no brainer. Currently I have a single speed pump that draws 1,400 watts. It has been running 8 hours a day over the past year and we have crystal clear water. I recently (last week) cut it to 4 hours a day, just to see what would happen. Thus far, the water is still clear and this is the peak season for pool temperature. The only catch is that we need to circulate water through the solar heating system or else it just sits there idle and doesn't heat the pool. It's not a no brainer for us because of the following math: 12am-6am: 9 cents per kWh 10am-6pm: 47 cents per kWh all other times: 27 cents per kWh So... a quarter of the time the energy is 9 cents cost. Then for a third of the day, the cost quintuples! And the rest of the time it triples. So a variable speed pump that runs 24/7 at reduced power might not be as cheap as you would otherwise believe. Except for us it might still make sense due to the solar hot water system.

I'm a pretty long time lurker and a new poster here. I post on Stocktwits a lot... I'm surprised by all of the negativity on this board. The ball is just starting to roll and there is all of this weird complaining when management is executing on all of its plans just as promised. The rapidly improving housing market is actually making them achieve many of their goals ahead of schedule. For instance, I'm quite sure that the company is limited in the amount of buybacks it can do per quarter. Probably, they are required to demonstrate good quarterly earnings before they are allowed to initiate the repurchase. Complaining that they only bought back $1 billion of stock so far isn't a fair criticism. They are limited by the Fed in what they can do. Remember, the Fed was very upset with banks which continued to repurchase shares even as the financial crisis deepened. There is also the argument that now that the stock is trading above TBV, it is not going to deliver the kinds of returns it did in the past. This is a board for discussion of BAC-WT. Even if the stock is up 3x from the $5 bottom, BAC-WT is up less than 3x from its bottom. However, if the common doubles, going to $30 over the next few years, BAC-WT will triple from here. So I don't see the logic there. Also, the risk of holding BAC-WT and common shares is so so so much less than it was when the stock was at $5, I think the risk-reward now is actually much better. Similar reward for FAR less risk. Of course there is still substantial risk, but the company was able to resolve most of its outstanding large legal issues. It's also been able to meet capital requirements (this is the biggest issue of all). The housing market has recovered substantially allowing the company to resolve many of its legacy issues already and hastening the complete resolution of those issues. They have been paying down substantial amounts of long-term debt and have begun repurchasing common and preferred shares. Compare this situation to when the stock was trading at $5, and you're living in a different world. Even if we only have a 2x rise in BAC-WT in the next two years instead of a 2.5x rise we've seen so far, the risk is so much lower, it's a better investment today than it was then. As far as the "ball rolling" already, this party hasn't even started yet. If the company can earn $.50/share, that could be enough to send it to $30 if financials get truly hot. Certainly $25/share is a real possibility. If the company is earning $.32/share now, and you can't foresee $.50 sometime in 2014 with an improving economy, then you shouldn't be investing in financials ever because you must not believe that running a bank isn't a potentially profitable business. One thing has been lost in all of this is the fact that the Merrill-Lynch acquisition was actually a good one. That acquisition makes the company more valuable, in many ways, than it was pre-crisis. So, a few years from now, if the economy does reasonably well, and all of the legacy issues are truly past the company, I don't see why it can't be trading well above $30. As far as near-term considerations go, once the stock pierces $15 there really isn't much stopping it from going to $20. A few analysts are bullish the stock but their price targets are still low and they are few and far between. Once they start pumping up 2014 earnings estimates, the trip to $20 could be a very short one. If the $8.5 billion settlement is approved, we could see a jump to $17/$18 overnight. In sum, I think this is one of the best times to own the stock/warrants/options. Risk is lower and the potential for outstanding gains are still there. If you can find a better investment, more power to you, but all I see so far with BAC is a management team executing its plan quarter after quarter. They obviously think the stock is going to $30+. They are running the company so that it will reach that organically based on its deposit base and current business. It's a conservative strategy but they know that a conservative strategy will deliver huge returns to shareholders. Anyway, that's my take. I want to thank you all again for the informative posts in the past. I think this board has veered away from that a bit. The latest earnings conference call was unreal, the management team was almost giddy with excitement about how well things are going. The housing market is doing better-than-expected. That is the real issue that needs to be followed closely on this board, not nonsense articles by "Tyler Durden". For the housing market, I recommend calculatedriskblog.com There needs to be a way for board members to register with their local pub. Then you could click the "buy this guy a drink" button next to his post. And if you can figure out how to implement that, you can make it a link for all message boards and you can earn a commission on every drink sold.

Thanks for the idea. The problem with my idea of running the pool pump only at night is that I have a solar heating system for the pool. It sits on the roof of the guest house. So we still need to run the pool pump during the sunshine hours to take advantage of this otherwise free heating system. Unfortunately that's when the energy costs 47 cents per kWh. I think a pool pump capable of circulating that water shouldn't need to draw more than a few hundred watts (it only needs to run at low speed). My Roadtrek RV van has a 700 watt Tripp Lite inverter/charger that detects when AC "shore power" is present (when you plug it into the grid). At that time it switches from battery to grid power automatically, and it charges the batteries as well. Then when you unplug the van from the grid, it automatically switches back to battery power. So I figure all I need is one of those inverter/chargers from Tripp Lite, and a bank of deep-cycle batteries just large enough to run the needs of a low-power pool pump. Then I plug the pool pump directly into the inverter. So this doesn't need to be a huge bank of batteries -- just enough to run a low speed pump that will circulate the water through the solar hot water pool heating system. And then I plug the inverter/charger into the grid -- then at the plug I put something in between that acts as a switch to disconnect the power between 6am and 12am. Thus, it only gets grid power between 12am and 6am. Those timer switches are inexpensive -- I think we have something like that for automating Christmas lights. This should be pretty cheap and easy to do.

Well, perhaps when I need to replace my Tesla battery pack in 10 years I can keep the old one for scheme of charging it between midnight and 6 am at 9 cents per kWh, and then running the house on it the rest of the day. Yes, you can fully charge the tesla 85 kWh battery in 5 hours using their High Powered Wall Charger which is capable of charging at 80 AMPS.