Prince Alwaleed and the fight with Forbes richest people data

[ERICOPOLY]

I believe I could get there just at 10% annualized returns from here.  Of course, by then a billion likely won't be such an exclusive club and Forbes might be talking only about the people who are in the $100 billion club.

 

EDIT:  Two of my grandparents lived beyond 90.  Besides, maybe I'll live to 150 -- they'll be able to grow new organs for me by the time I'm hitting 90.

[sswan11]

Re Prince Alwaheed.  Does he pay taxes?  I think not.  Thus a favorable headwind for his returns.

[Parsad]

And this one is cumulative:

 

By the way, someone should be doing a case study on Eric.  That's arguably, the greatest investment results over a 10-year period I've seen.  Eric, you should come to our dinner in Toronto and speak!  Cheers!

[Kiltacular]

Boardwalk empire is a terrific show (done by the same guy who did Sopranos) -- just a great show.

 

The guy who plays Rothstein is a superb actor as is the rest of the cast.

 

There was a quote from Rothstein in the show that I wrote down (you can also find it online).

 

Since EC has added it as his picture, I thought I'd post the quote as it is apropos (sorry if it is a repeat -- someone else probably caught it already):

 

"I've made my living, Mr. Thompson, in large part as a gambler. Some days I make twenty bets, some days I make none. There are weeks, sometimes months, in fact, when I don't make any bet at all because there is simply no play. So I wait, plan, marshal my resources, and when I finally see an opportunity and there is a bet to make... I bet it all."

[locatevalue]

And this one is cumulative:

 

By the way, someone should be doing a case study on Eric.  That's arguably, the greatest investment results over a 10-year period I've seen.  Eric, you should come to our dinner in Toronto and speak!  Cheers!

 

Agreed, We can all certainly learn. Eric i would really like to understand your thinking process during those ORH special situtation as you said it changed your account by 50%,I saw bits and peices from past few years but nothing very detailed, I guess you used lot of levered calls.Hopefully its a good mental model incase we run into similar situations!

[bufffett_munger]

Gotta give the man some credit.  Those are insane returns.

[premfan]

its amazing we are talking about these numbers and this issue

 

lets not stop until more members of this board can start contemplating these numbers ... that includes me :)

 

hy

 

 

It is only possible because of this board, but anyways here's what Fidelity is telling me for the RothIRA -- they have, as of the end of January, been tracking my performance for exactly 10 years:

 

Wow Eric great work! When valuing the companies was tangible book value the main metric you used to know that its undervalued?

[Liberty]

Gotta give the man some credit.  Those are insane returns.

 

+28,107.42

 

:P

[Palantir]

When you start a fund, hire me....

[hyten1]

premfan,

 

i don't want to speak for eric

 

but i don't think its about valuation, many stock went up 2, 3 or 4 times, or are undervalue by 50% or more.

 

 

at the end of the day whatever the stock you think is undervalue its about taking advantage of the opportunity, having conviction with your analysis/idea and go big when the opportuntiy is right

 

just my humble opinion

 

hy

[wknecht]

Gotta give the man some credit.  Those are insane returns.

 

+28,107.42

 

:P

To the efficient market folks, that's like, a million sigmas.

[Parsad]

When you start a fund, hire me....

 

We told Eric to start a fund years ago.  He doesn't want to. 

 

Once he hits a billion, he's going to put all of his money in T-bills and sell paintings on the side of the road for ten bucks each as a starving artist!  ;D  That's his dream!  Cheers!

[hyten1]

just a thought

 

i think so much time/article/books are spent which stock to pick (its important very important don't give me wrong)

 

but not enough time is spend on what you do after you found that stock after you done your analysis (at least its true for me, i usually just by the stock)

 

eric is a clear example of the difference btw someone who have conviction went all in vs some one else (like myself) who didn't but both thought BAC are undervalue.

[ERICOPOLY]

Just go back to the old days before FFH delisted from NYSE.

 

You could buy LEAPS on FFH.  Right before the short selling ban in 2008 I was losing money for the year thus far as FFH drifted down with the market panic, but I knew FFH was making money under the covers because of the great information on this board.  Then posters on the board starting commenting about AIG's soaring CDS value and the general gains made in the CDS portfolio, the bond gains etc...

 

I reasoned that if the gains were booked, stock would go up.  I reasoned that if the gains would reverse (market rally), then the stock would go up.

 

So I went 2:1 notional leverage using the deep-in-the-money calls.  Things like the $120 strike LEAPS when the stock was at $220 range.  Then out of the blue a short selling ban was announced, FFH was on that list, and Fairfax issued a press release about large realized gains on sale of AIG CDS.  The stock went from $220 to over $300 in a couple of trading sessions.  Then it went all the way to like $340 or something and along this way I booked my gains.  Then I added the leverage again in early 2009 when it was back below $240.  Repeat.

 

Then Cardboard handed us the ORH buyout on a silver platter.  Bam!

 

This was a bit like betting on the fixing of the World Series which is from the Rothstein playbook.

 

 

[stahleyp]

eric, have you made any changes to your BAC position since you expect it to drop after the stress test numbers are released?

 

 

[Parsad]

just a thought

 

i think so much time/article/books are spent which stock to pick (its important very important don't give me wrong)

 

but not enough time is spend on what you do after you found that stock after you done your analysis

 

eric is a clear example of the difference btw someone who have conviction went all in vs some one else (like myself) who didn't but both thought BAC are undervalue.

 

That's true.  But I think Eric is probably 1 in 100,000,000.  The only guys that come close to those returns are startups that take off in a short period of time or daytraders who shot the lights out on a couple of stocks.  It's not even likely that Buffett, in his best ten year span in his personal account, was doing what Eric did over the last ten years. 

 

And if you ask Eric, I'm sure there were plenty of restless nights when he was thinking, "Have I fu*ked my family over by putting all of our nest egg into one idea?"  But he made the bet and his temperament allowed him to get through it.  Amazing story, and I'm just proud he did it on my message board.  It's a story I'll tell for ages!  Alnesh, Andrew and I were talking about it again this morning!  Cheers! 

[ERICOPOLY]

eric, have you made any changes to your BAC position since you expect it to drop after the stress test numbers are released?

 

I bought some $10 strike 2015 puts for a moral victory if the stock drops.  Otherwise, no.  The puts are actually not meant to be traded... they're just to hedge below $10 given that they were fairly inexpensive  and I plan to offset their cost if the stock rallies (I'll write some covered calls).

 

My new thinking is $14 by Christmas 2013 and something higher the next year.  Just guesswork.

 

 

 

[stahleyp]

thanks for the insight! :)

[ERICOPOLY]

just a thought

 

i think so much time/article/books are spent which stock to pick (its important very important don't give me wrong)

 

but not enough time is spend on what you do after you found that stock after you done your analysis

 

eric is a clear example of the difference btw someone who have conviction went all in vs some one else (like myself) who didn't but both thought BAC are undervalue.

 

That's true.  But I think Eric is probably 1 in 100,000,000.  The only guys that come close to those returns are startups that take off in a short period of time or daytraders who shot the lights out on a couple of stocks.  It's not even likely that Buffett, in his best ten year span in his personal account, was doing what Eric did over the last ten years. 

 

And if you ask Eric, I'm sure there were plenty of restless nights when he was thinking, "Have I fu*ked my family over by putting all of our nest egg into one idea?"  But he made the bet and his temperament allowed him to get through it.  Amazing story, and I'm just proud he did it on my message board.  It's a story I'll tell for ages!  Alnesh, Andrew and I were talking about it again this morning!  Cheers!

 

The thing is, I probably benefit from being on 3rd base myself.  My father is not a big gambler like me and I estimate he has a couple of million in liquid assets and a 2.5m house (that he paid 50k for).  Well, I don't rely on him to pay my bills or anything, but even if I get completely wiped out I will still likely inherit enough money to purchase at least a condo or something for a comfortable post-65 retirement.  Then my wife's mother is in a similar financial condition, is in her 80s, and I figure our share of her money when she passes would cover college for my kids.

 

So maybe that's bratty to talk like this, but it's honest at least.  I could afford to take on risks that people without relatively rich parents cannot.

 

Which is why I picked on Prince Alwaleed -- I know the perceived family backing can mean a lot to performance.

 

[CONeal]

just a thought

 

i think so much time/article/books are spent which stock to pick (its important very important don't give me wrong)

 

but not enough time is spend on what you do after you found that stock after you done your analysis

 

eric is a clear example of the difference btw someone who have conviction went all in vs some one else (like myself) who didn't but both thought BAC are undervalue.

 

That's true.  But I think Eric is probably 1 in 100,000,000.  The only guys that come close to those returns are startups that take off in a short period of time or daytraders who shot the lights out on a couple of stocks.  It's not even likely that Buffett, in his best ten year span in his personal account, was doing what Eric did over the last ten years. 

 

And if you ask Eric, I'm sure there were plenty of restless nights when he was thinking, "Have I fu*ked my family over by putting all of our nest egg into one idea?"  But he made the bet and his temperament allowed him to get through it.  Amazing story, and I'm just proud he did it on my message board.  It's a story I'll tell for ages!  Alnesh, Andrew and I were talking about it again this morning!  Cheers!

 

The thing is, I probably benefit from being on 3rd base myself.  My father is not a big gambler like me and I estimate he has a couple of million in liquid assets and a 2.5m house (that he paid 50k for).  Well, I don't rely on him to pay my bills or anything, but even if I get completely wiped out I will still likely inherit enough money to purchase at least a condo or something for a comfortable post-65 retirement.  Then my wife's mother is in a similar financial condition, is in her 80s, and I figure our share of her money when she passes would cover college for my kids.

 

So maybe that's bratty to talk like this, but it's honest at least.  I could afford to take on risks that people without relatively rich parents cannot.

 

Which is why I picked on Prince Alwaleed -- I know the perceived family backing can mean a lot to performance.

 

Thanks for pointing this out.  My questions is did this line of thinking ever factor into your investments.  Like with FFH or whatever your investment was to get you to the first million or two?

 

[ERICOPOLY]

just a thought

 

i think so much time/article/books are spent which stock to pick (its important very important don't give me wrong)

 

but not enough time is spend on what you do after you found that stock after you done your analysis

 

eric is a clear example of the difference btw someone who have conviction went all in vs some one else (like myself) who didn't but both thought BAC are undervalue.

 

That's true.  But I think Eric is probably 1 in 100,000,000.  The only guys that come close to those returns are startups that take off in a short period of time or daytraders who shot the lights out on a couple of stocks.  It's not even likely that Buffett, in his best ten year span in his personal account, was doing what Eric did over the last ten years. 

 

And if you ask Eric, I'm sure there were plenty of restless nights when he was thinking, "Have I fu*ked my family over by putting all of our nest egg into one idea?"  But he made the bet and his temperament allowed him to get through it.  Amazing story, and I'm just proud he did it on my message board.  It's a story I'll tell for ages!  Alnesh, Andrew and I were talking about it again this morning!  Cheers!

 

The thing is, I probably benefit from being on 3rd base myself.  My father is not a big gambler like me and I estimate he has a couple of million in liquid assets and a 2.5m house (that he paid 50k for).  Well, I don't rely on him to pay my bills or anything, but even if I get completely wiped out I will still likely inherit enough money to purchase at least a condo or something for a comfortable post-65 retirement.  Then my wife's mother is in a similar financial condition, is in her 80s, and I figure our share of her money when she passes would cover college for my kids.

 

So maybe that's bratty to talk like this, but it's honest at least.  I could afford to take on risks that people without relatively rich parents cannot.

 

Which is why I picked on Prince Alwaleed -- I know the perceived family backing can mean a lot to performance.

 

Thanks for pointing this out.  My questions is did this line of thinking ever factor into your investments.  Like with FFH or whatever your investment was to get you to the first million or two?

 

I left college with $5,000 to my name (no debt).

 

The thing that really got me determined to "make it all back" was when my Microsoft employee stock options peaked at $500k at age 27 and then crashed to $80k (where I sold them) in 2001.

 

To some people $80k is like some massive nest egg that they would never gamble.  But I grew up in Los Altos Hills and "what the hell is $80k going to buy me?"  So I think I can more easily lose that much money versus other people.

 

 

 

[CONeal]

thanks this helps alot in understanding your run.

[locatevalue]

Just go back to the old days before FFH delisted from NYSE.

 

You could buy LEAPS on FFH.  Right before the short selling ban in 2008 I was losing money for the year thus far as FFH drifted down with the market panic, but I knew FFH was making money under the covers because of the great information on this board.  Then posters on the board starting commenting about AIG's soaring CDS value and the general gains made in the CDS portfolio, the bond gains etc...

 

I reasoned that if the gains were booked, stock would go up.  I reasoned that if the gains would reverse (market rally), then the stock would go up.

 

So I went 2:1 notional leverage using the deep-in-the-money calls.  Things like the $120 strike LEAPS when the stock was at $220 range.  Then out of the blue a short selling ban was announced, FFH was on that list, and Fairfax issued a press release about large realized gains on sale of AIG CDS.  The stock went from $220 to over $300 in a couple of trading sessions.  Then it went all the way to like $340 or something and along this way I booked my gains.  Then I added the leverage again in early 2009 when it was back below $240.  Repeat.

 

Then Cardboard handed us the ORH buyout on a silver platter.  Bam!

 

This was a bit like betting on the fixing of the World Series which is from the Rothstein playbook.

 

Eric, Thanks for these details but can you pls explain further on how you handled this ORH play when you already levered up on FFH 2:1 when this idea came up. The reason i am asking is to fill my gaps. I always invest in 2 or 3 things at a time but when i am at 100% i never use leverage more than 10% of my total portfolio to even on sure shot investments like you mentioned here.I remerber you saying increased your leverage on FFH and used that cash for ORH ..but was not clear to me.

[ERICOPOLY]

Just go back to the old days before FFH delisted from NYSE.

 

You could buy LEAPS on FFH.  Right before the short selling ban in 2008 I was losing money for the year thus far as FFH drifted down with the market panic, but I knew FFH was making money under the covers because of the great information on this board.  Then posters on the board starting commenting about AIG's soaring CDS value and the general gains made in the CDS portfolio, the bond gains etc...

 

I reasoned that if the gains were booked, stock would go up.  I reasoned that if the gains would reverse (market rally), then the stock would go up.

 

So I went 2:1 notional leverage using the deep-in-the-money calls.  Things like the $120 strike LEAPS when the stock was at $220 range.  Then out of the blue a short selling ban was announced, FFH was on that list, and Fairfax issued a press release about large realized gains on sale of AIG CDS.  The stock went from $220 to over $300 in a couple of trading sessions.  Then it went all the way to like $340 or something and along this way I booked my gains.  Then I added the leverage again in early 2009 when it was back below $240.  Repeat.

 

Then Cardboard handed us the ORH buyout on a silver platter.  Bam!

 

This was a bit like betting on the fixing of the World Series which is from the Rothstein playbook.

 

Eric, Thanks for these details but can you pls explain further on how you handled this ORH play when you already levered up on FFH 2:1 when this idea came up. The reason i am asking is to fill my gaps. I always invest in 2 or 3 things at a time but when i am at 100% i never use leverage more than 10% of my total portfolio to even on sure shot investments like you mentioned here.I remerber you saying increased your leverage on FFH and used that cash for ORH ..but was not clear to me.

 

I wasn't in FFH 2:1 when ORH came up.  At that time I had no upside in FFH and only upside was in ORH.  This way I wasn't piling downside upon downside.  I was swapping the upside of FFH for the upside in ORH. 

[Redskin212]

Eric,

 

Congratulations!! your returns are truly spectacular.

 

What really impresses me is the amount of concentration you utilized and the fact that you only swung the bat 3 or 4 times.  That is truly amazing.  For us old timers on the Board we all knew about FFH, ORH, BAC and many others... however few us had the balls to commit significant percentages of our net worth to them when things looked truly depressed. Congrats once again.

 

Redskin