ERICOPOLY

I wonder what effect the changed economic climate is having on the immigration rate.

Bronco, He's a great guy, however he is slinging mud at me and all other share lenders. It's rude.

I reverse engineered your support of legal short selling. It's like saying air travel is okay, but selling jet fuel is unethical because some bad people use jet fuel for nefarious reasons. We could picket against the production of jet fuel, or we could go after the terrorists instead. Byrne has stated that he doesn't mind people legally shorting OSTK. He can't have people legally shorting it without people lending the shares out in the first place. Yet your argument is that nobody should be lending OSTK shares because somebody might do something illegal with them. So you go farther than Byrne -- he implicitly supports lending of OSTK (how else can we have legal shorting?).

Here you go: http://antisocialmedia.net/media/reverseconverts-primer.pdf

My memory might be incorrect, but Sanjeev didn't you object to the short selling ban? I think you reasoned that legal short selling is okay -- but my point to you is that one can't have legal short selling without a LENDER of shares. You implicitly said that LENDING is okay when you said that legal short selling is okay.

The funny thing is that I held them in a margin account before I lent them out. We all know what brokerages do with shares in a margin account: they lend them out! So by these standards of ethics one cannot have a margin account.

Naked shorts are by definition NOT the people borrowing my shares. I lowered the borrowing cost for the LEGAL shorts. That's perfectly clear and you have to admit it. So why are you now calling the legal shorts unethical? I don't understand the connection you are making -- I helped people short LEGALLY. The naked shorts were not at the other end of my transaction. The only way I facilitated them was when I bought call options -- the "options market maker exemption". I find it confusing that you have no problem with buying the call options which actually does bear some connection to knowingly facilitating naked shorting (doing business with the market maker who you understand to be crooked in renting out his exemption)... but instead you have a problem with lending shares out to the honest shorts. I remember you bought OSTK calls, did you not? Why do you do business at a marketplace that you know is engaged in rotten behavior, but throw stones at people who lend shares? Personally, I've bought calls too. Try to see what I'm getting at here... I have no interest in saying that you are unethical, I just want you to understand that it's unfair to accuse honest share lenders of ethical breaches. Watsa, Byrne, Buffett -- those guys have no problem at all with legal shorts. And legal shorts only get their shares from... lenders like me.

Lending your shares is participating in the game fair and square. I lent mine out... for a time until it was smarter to pull them back in, sell them, and buy calls. No breach of ethics here. From what I understand some people were motivated to go the naked shorting route in order to get around the high borrowing costs... lending them shares helps bring the rate down, thus less need to naked short. One could argue that buying options on Fairfax was unethical, because it facilitated the market maker exemption game that they were running. You can't take an honest business practice and say it's unethical just because somebody else (who is unethical) is going to play unethical games.

No, my margin requriements for SSW have not changed -- Interactive Brokers.

I didn't realize this about SSW dividends until just a moment ago: Take a look at 2008 for example. They paid out $1.90 in total per share. Only $0.29 of that was taxable as a dividend -- the rest as a return of capital (not taxable as a dividend). http://ir.seaspancorp.com/distributions.cfm For U.S. federal income tax purposes, every distribution made by a corporation is made out of earnings and profits to the extent thereof and from the most recently accumulated earnings and profits. Distributions received by Seaspan's common shareholders should be first treated as taxable dividend to the extent of Seaspan's current and accumulated earnings and profits that are allocated to the common shares. To the extent the Distribution exceeds Seaspan's current and accumulated earnings and profits that are allocated to the common shares, but does not exceed the common shareholders' tax basis in Seaspan's stock, it should be treated as a non-taxable return of capital. To the extent the Distribution exceeds the common shareholders' tax basis in Seaspan's stock, it should generally be treated as capital gains. Sorry, but this does not apply to Canadians.

They might be using the dividend vs buybacks because they don't want people to get the wrong impression if insiders are selling. Look at MSFT -- Ballmer files to sell 10% of his shares and the news networks are abuzz. But that's just unloading the increased ownership due to recent buybacks. He's just bringing his ownership level back down to where it was. Had they paid that cash (instead of buybacks) out as a dividend, there would be no confusion.

He stripped it of the faux nouveau riche fixtures. He's still a good guy.

Thanks Shalab. I probably spend more than I expected, but my money has a bit more than doubled (after taxes and expenses) these past 3 years. My vacation time was limited when I had a full time job, so now we're taking more vacations -- that's led to the higher expenses. We're doing it now before our oldest is in school.

This is interesting: While he may not employ a full-time team of analysts, Berkowitz often hires experts to challenge his ideas. When researching defense stocks a few years ago, he hired a retired two-star general and a retired admiral to advise him. More recently he's used a Washington lobbyist to help him track changes in financial-reform legislation.

I worry about inflation a lot. I worry about this and that. So for me I just want the bridge to be 2x or 3x strong. A higher beginning income is margin of safety against unexpected disruptions. I used to think about this in terms of going to the moon. You need enough velocity to escape all these gravitational forces that might suck you back down to ground level. My three year anniversary of independence is coming up in January. Three years is a long time in the labor market -- my skills are getting out of date, my resume dusty... This has to work or it's really going to suck.

My definition of a speculative investment is one that you make where you only generate satisfying gains if you include price swings in your favor... AKA "The Greater Fool" method of investing. In a different video, Schilling argued that he'd make 40% from zero coupons even though the imputed yield is pathetic -- he justified this by saying "people don't buy the S&P500 for the yield". So in other words I'd call him a speculator -- he only generates a satisfying return based on The Greater Fool... and admits the return he gets otherwise is unsatisfactory.

Gary Schilling argues that the increase in the Fed reserves did not create money and that he is still positioning for deflation. Holds Treasuries expecting yields to go much lower. He says that net delevering has occured -- the private sector debt reduction as percentage of GDP has more than offset the increase in the government debt. So he argues we're closer to being deleveraged than before... even taking government debt into account. http://finance.yahoo.com/tech-ticker/inflation-vs.-deflation-peter-schiff-and-gary-shilling-discuss-debate-and-argue-535689.html

It's a starting point for discussion. If you need $5,000,000 to generate $150,000 from no brainer AAA stocks with international income diversification and reasonable inflation protection (perhaps reasonable hope of real income gains), then that is the upper bound of what you need.

I generally agree with what Broxburnboy said. It really boils down to how much income you need. I think if you are happy living off of $150,000 and you want a AAA rated income with some inflation protection then you'd probably sleep well with stocks like KO, KFT and JNJ. But due to the yields you'll need somewhere in the ballpark of $5,000,000 if you are 100% invested. If working people can live on $150,000 without huge piles of cash sitting around then why can't you? If the market dips 30% it doesn't really matter -- did KO/JNJ/KFT ever cut their dividend in 2008/2009? Just watch the income -- stop watching the net worth. If your stocks are down 30% during a depression but your dividend payers raise your dividend by 5% then why should you feel stressed out? Just watch the income. For some of you, your talents can generate an income of equivalent risk with far less invested... or so you believe anyhow (maybe it's true, maybe it's luck). I have young children so the idea of being idle really doesn't apply. It's idle empty-nesters who have issues with the lack of routine. You have the time to start new hobbies. I've been thinking of applying for a license with the ATF -- distilling my own alcohol sounds like a fun thing to try. Maybe it will become a business, maybe it will just be holiday gifts to friends. Doesn't matter, no pressure. You forget about black swan events in a person's life. What happens if a person decides that they really can't stand being around their wife with your all the new found free time? What if you mess up with your distilling and blow up your house and are severely burned, resulting in health expenses? What if you have a heart attack and need a bunch of money for surgery? One would care about market value of an investment then. Granted, I agree with your point, but, being the contrarian that I am, I just had to throw that out there... :) But seriously, why wouldn't a person still manage their investments a bit more actively (especially if they are members of this board)? It doesn't take a rocket scientist to find cheap securities. One more word about work... Make sure you aren't subordinate -- this National Geographic documentary on stress is very interesting: http://movies.netflix.com/Movie/National-Geographic-Stress-Portrait-of-a-Killer/70107420?strackid=7e9a1a85e29aac3a_0_srl&strkid=947337335_0_0&trkid=222336#height1601 According to this video: Unless you are in the alpha male role at work, work stress will decrease your health and feeling of well being. The stress of being in a subordinate role will lead to a build up of plaques in the arteries and a deterioration of your immune system. So you might want to adjust your life expectancy upwards if you retire young from a stressful job you hated. There is no question in my mind that I made the right choice for me.

I generally agree with what Broxburnboy said. It really boils down to how much income you need. I think if you are happy living off of $150,000 and you want a AAA rated income with some inflation protection then you'd probably sleep well with stocks like KO, KFT and JNJ. But due to the yields you'll need somewhere in the ballpark of $5,000,000 if you are 100% invested. If working people can live on $150,000 without huge piles of cash sitting around then why can't you? If the market dips 30% it doesn't really matter -- did KO/JNJ/KFT ever cut their dividend in 2008/2009? Just watch the income -- stop watching the net worth. If your stocks are down 30% during a depression but your dividend payers raise your dividend by 5% then why should you feel stressed out? Just watch the income. For some of you, your talents can generate an income of equivalent risk with far less invested... or so you believe anyhow (maybe it's true, maybe it's luck). I have young children so the idea of being idle really doesn't apply. It's idle empty-nesters who have issues with the lack of routine. You have the time to start new hobbies. I've been thinking of applying for a license with the ATF -- distilling my own alcohol sounds like a fun thing to try. Maybe it will become a business, maybe it will just be holiday gifts to friends. Doesn't matter, no pressure.

A quote from my grandmother: Money doesn't make you happy, but you can be miserable in comfort.

Silver right now (gold is 48x silver) is the most expensive it's been since 1984 (measured relative to gold). What is the appropriate relative valuation? What ratio of gold vs silver? 20x? 30x? 40x? 50x? 60x? 70x? 80x? I think all those ratios have held at one point or another since 1970. I would argue that since 20x only lasted for a year (until gold was free to trade as dollar got unpegged) that it is an outlier caused by artificial forces.

Yes that is easier to warm up to. There is an interesting set of data here: http://www.taxfreegold.co.uk/goldsilverratioshistoric1970onward.html I'm not sure how high the squeeze would go though -- I would expect some "mean reversion" arbitrage to take hold if silver gets too high (they'd sell it and buy gold). Since 1985 gold has never traded for less than 50x silver. At 50x today's price of silver, you get the present price of gold. (although this is a data set of 25 years, it's hardly a candidate for a "since the beginning of time" statement on silver/gold ratios. But I like it due to the fact that it mirrors the period of time when it's industrial demand has exploded -- we didn't need silver for many of it's current industrial uses back in 1500). I don't know whether or not Sprott did this basic comparison because he doesn't mention it.

Okay, you've convinced me. I have been watching the price this year and it has basically confirmed what other solid currencies are saying (like the AUD). My dithering hasn't cost me anything yet -- my gains of 25% (roughly) this year basically track these other currencies. I need something to keep that door open to Australia (I need to be able to afford to live there).

The current Fed does still have a price inflation mandate. They have said (and I think they intend to) they will undo QE once price inflation starts to move. So here the gold market believes them when they say QE3 may be necessary (to support asset prices), but the gold market does not believe them when the Fed claims that it is only a temporary thing. So gold prices adjust as if this is a permanent increase to the monetary base. It may or may not be. Some people say that by the time price inflation starts to move it will be too late -- but Volcker did it. If gold (and commodities) are merely reaction to the increase in the monetary base, then it stands to reason that they will fall immediately in reaction to a decrease in the monetary base. Should the day come where we have rising prices all over the place and people are out on the street, won't there be political will to unwind QE and thus crush gold and commodities? Wouldn't that be the politically easy approach? I'm running a devil's advocate argument here -- when the place is in tatters why won't people DEMAND the Fed just go to their keyboard and sell the Treasuries, thus reversing QE2 (and QE3 and QE4 etc). One could say that it would just put us right back into the deflationary spiral, but the longer we wait then the less leverage (the ongoing delevering). Actually so far QE2 has sent interest rates up -- not accomplishing what Bernanke said it was intended for. But it is making banking more profitable again, as this improves the net interest margin. The more profitable it is for banking, the faster the delevering can continue (a debt default or a foreclosure is a delevering event). Banks with a wide NIM can process the chargeoffs faster than a bank with a deteriorating NIM. I don't sleep well at night with all this experimentation going on, but there is the possibility of a black swan for gold (these guys are all wholly convinced that there is no risk of QE being unwound).