ERICOPOLY

I forget... in 2008 when they dropped their equity hedges, did the gains on the hedges exceed the market drop of their equity portfolio? Or was it mostly a wash? I'm remembering it as mostly a wash. Once again Original_Mungerville with his huge equity hedges! Congrats. I'm limping today, down about 2% at the moment versus the 3.9% that the S&P500 is down. I'm getting better at this luck thing though -- this is the first market drop in a while where my loss doesn't exceed the market. It's cold comfort. Too many out-of-the-money puts that don't help much in the beginning. EDIT: Okay, just a few minutes later the market is down 4.35% and now I'm registering a slight gain for the day (due to a volatility spike). This is a bizarre day.

I had bought it in early December near $3 -- about 2% of net worth position. That was going to be my great speculation stock for the year because if oil prices had rebounded in 6 months or so as some people thought entirely possible, then it might have been a nice booster. But the stock kept dropping and it went a bit below $1.50 in late January -- then on the first rally back up I sold it around $2.25 in February. It then kept going up and for a while I felt stupid because it nearly went back all the way to my purchase price (of course that was eating at me). But I never bought back in again after it then started dropping again. It was purchased in the first place as a small speculative position. Even so, small or not, once it was losing money I just wasn't interested anymore and was happy to part with it -- so typical! Hah. About as shrewd as Forrest Gump.

I sold this thing after a 25% loss, and now it's fallen another 2/3 since then. It's a reverse multi-bagger (well, not really), given that I got more than 3x the current price. Uhhgg... what an experience for my first oil stock of any significance. I'm not particularly game to try again either.

No matter the industry, I don't see how intrinsic value could ever exceed the discounted value of all future distributable earnings in addition to the present liquidation value. You can only squeeze so much juice from a lemon.

It's up to you to pay whatever multiple you want... However my take on this is that intrinsic value is (I think) the present hypothetical liquidation value plus a discounted future stream of earnings. That seems to be all the money you can ever derive from the business unless I'm forgetting something. So the size of the investment portfolio contributes to the future income stream that you discount, but I don't think you can exaggerate it's value in the hypothetical liquidation component because of the offsetting insurance liabilities. But that's just my method.

I started drinking Miller 64.

I understand the interest rates punishing savers comment. The wealthy are earning low returns on their money and those low returns are a transfer of wealth to help out the people who are struggling to repay their debts. Meanwhile people just gripe the wealthy don't pay enough tax -- well I guess the Occupy Wall Street people don't want to hear that low mortgage interest rates translates to a siphoning of income from the banks' net interest margins. Oh well... sigh.

I'm probably just extrapolating my own views on debt. I felt like I wasn't making any headway on my mortgage back in 2001 when the rate was 8%. I'd make a huge monthly payment and it nearly all was for interest. It was very demoralizing. Today my mortgage payment has a huge savings component and that really cheers me up. I know that a much larger component of the payment is merely a form of savings (the principle). So little of it is interest that I just don't feel that bad about all this mortgage debt. So it bothers me far less -- it's very morale boosting to think that all these Americans now have this disciplined "savings plan". Better than a similar sized payment with a lower savings component, IMO.

Except getting hit with a hammer never felt this good. Record margins and solid employment. Perhaps it's like that ball busting fetish -- looks painful but people seem to like it.

It's definitely a good thing. It points that the demand picture is improving, and pretty much all the other indicators prove that the picture is slowly improving. On the other hand some improvement from a low level doesn't mean that demand is good. The economic indicators also show that the US economy is still suffering from demand deficiency. So basically demand is still bad, better then it was before, and slowly improving, but there's still a ways to go. If the demand base is still low (yet improving) then there is room to grow. That's ideally what you want because current CPI and profits and employment are tied to the piss poor existing demand, right? So that leaves a lot to look forward to. It would be worse if demand were peaking with no possible improvement potential -- at that point worldwide pressures could more easily drag us back. Better to have momentum that is strengthening.

So to the question of why they are paying down debt -- are they merely using their interest payment savings? Or what?

I think you need to go back to 1980 to find household debt service levels this low. It's not the total amount of debt that matters. It's how much money they have at their disposal after making the payment. Instead of focusing on how much principle needs to be paid, why not instead obsess upon how little interest needs to be paid? Most of the US household debt is fixed rate, not floating. Debt overhang or interest payment underhang? They cancel out and put no net undue stress on the households. Take your pick as to why, but knowing this helps me absorb the improving retail sales without raised eyebrows.

Well if there's no debt overhang than why are people using gas savings to pay down debt in a low interest rate environment? Also just because retail sales have been strengthening lately doesn't mean that the economy is not still demand constrained. If the economy is not demand constrained then why do you have low inflation in a zero interest rate environment? Why is anyone even mentioning deflation? Is demand falling or flat if sales are rising? Despite paying down debt, no less. They are buying more AND paying down debt. Must be terrible out there. Is that an economic model? It's a question. I'm asking if rising sales indicates poor demand.

Well if there's no debt overhang than why are people using gas savings to pay down debt in a low interest rate environment? Also just because retail sales have been strengthening lately doesn't mean that the economy is not still demand constrained. If the economy is not demand constrained then why do you have low inflation in a zero interest rate environment? Why is anyone even mentioning deflation? Is demand falling or flat if sales are rising? Despite paying down debt, no less. They are buying more AND paying down debt. Must be terrible out there.

The US doesn't have consumer debt overhang in the way that matters -- monthly payments. Lately retail sales have been strengthening which must speak to the lack of demand right???

The US government could stimulate the economy by requiring employers to give paid time off: http://www.forbes.com/sites/tanyamohn/2013/08/13/paid-time-off-forget-about-it-a-report-looks-at-how-the-u-s-compares-to-other-countries/ People spend more money when they are sitting at home bored and need something to entertain them.

Actually, the multiplier from the shale boom might have been rather large. Instead of the oil being purchased from OPEC and other exporters, it was purchased from a new US shale producer. So the money spent on shale oil ricocheted around within the borders of the US instead of being sent overseas. Instead of buying oil from OPEC and losing all of the dollars in the process, you just have your left hand pay your right hand to use the oil that you've got buried in the backyard. No leakage unless the shale oil producers in the US are foreign owned.

And don't forget that 21% of US oil is imported... none of that money made it into the US shale boom: http://cnsnews.com/news/article/barbara-hollingsworth/forecast-2015-imported-oil-will-make-just-21-us-consumption The drop in oil prices on that 21% is pure stimulus.

Compare $160 to what gets spent eating out: The average American family spends $225 a month eating away from home – dinners eaten out, quick snacks grabbed, and coffees ordered and consumed on the run. http://www.thesimpledollar.com/trimming-the-average-budget-eating-out/

I found this a moment ago -- I don't know if it takes more time for gasoline prices to catch up with oil prices or not: Implied spot prices for some major gasoline markets in November and December are already trading at around $1.25 a gallon, according to Tom Kloza, global head of energy analysis at Oil Price Information Service. http://www.cnbc.com/2015/08/11/6-reasons-gas-prices-could-fall-below-2-a-gallon.html

Yes but 7 years ago it was 2008 and can we talk about the headwinds of what transpired during those years of epic collapse if we're going to talk about the tailwinds from shale? It's not 2008 anymore and things are not collapsing. And there is no more shale tailwind. Where does that leave us?

The commoditized companies -- those are the ones who moved their manufacturing to China a long time ago, because they couldn't protect their margins. Chinese manufacturing has been so cheap for so long that we've been through this cycle already. So are there any of them left here in the US to get hurt by this? What I'm looking for here are companies that will be firing their US workers -- if we already went through that phase, then the US workers will not be hurt by this devaluation. Therefore they keep their jobs and their pay, buy cheaper (deflated) commoditized Chinese goods from Walmart, and have extra disposable income left over to spend (stimulative). That's what the Chinese want, right? They want the overseas consumer to have extra money to buy more things from China. But the US consumer will also spend more in restaurants. Or on whatever. Also, if finished goods from China are cheaper, we buy more of them -- doesn't that provide any support for the pricing of the raw materials inputs that go into those goods?

What are the implications for the price of imported Chinese beer?

I thought US manufacturers (the domestic ones) were the ones making those widgets in Chinese factories. Is Apple going to pass along the IPhone manufacturing savings to US consumers or will they just report fatter margins?

Using this 2013 data... https://www.quandl.com/collections/economics/exports-as-share-of-gdp-by-country 13.49% of US GDP is exports vs 30.08% of Canada's GDP is exports