Chungst's Comments RSS Syndication from SeekingAlpha.com http://seekingalpha.comuser/123203/comments http://seekingalpha.com/article/80539-a-low-risk-cracker-barrel-cbrl-group-options-play?source=feed#comment-182920 182920
You already contradicted yourself based on your comments here and your comments on MicroStrategy Inc. (source: seekingalpha.com/artic...)

You do these trades every day because you use leverage. Someone who doesn't want to use leverage, i.e. using cash collateralized puts, must provide more capital.

Third, take the challenge and perform the trade WITHOUT leverage.

The facts speak for themselves.]]> Tue, 10 Jun 2008 20:32:47 -0400
You already contradicted yourself based on your comments here and your comments on MicroStrategy Inc. (source: seekingalpha.com/artic...)

You do these trades every day because you use leverage. Someone who doesn't want to use leverage, i.e. using cash collateralized puts, must provide more capital.

Third, take the challenge and perform the trade WITHOUT leverage.

The facts speak for themselves.]]> http://seekingalpha.com/article/80669-the-long-case-for-thinkorswim-group?source=feed#comment-182415 182415
That gets to my point. TOS will be like a hamster or rat on a treadmill. TOS boasts great trading statistics because Investools had been pushing Iron Condors, i.e. four-legged option trades (i.e. 4 commissions) as opposed to plain vanilla calls or puts. [As a side note, one company called Condor Options -- another seekingalpha contributor -- claims one could "generate consistent 10% monthly returns with just 10 minutes a week" (www.condoroptions.com/)] This brings up the key point that individual investors are drawn to the high monthly returns (be it 4% or 10% a month) without an eye to risks involved, taxes, commissions, or other frictional costs.

Here's my next point -- based on my observations of numerous posts of Investools subscribers over the 9 months -- it was clear Investools got these new subscribers to trade options and these people clearly didn't know what they were doing. Eventually they will wise up and stop trading options since it the frictional costs were not adequately accounted for. That means for TOS to continue its current projectory of trading stats, it has to find new option customers to make up for those that will quit trading options.

My main assertion is TOS' current positive operating trends have certain assumptions that needs to be vetted out via proper due diligence. As a result, David Makula's piece clearly shows he has begun to understand the Investools demographics.]]> Tue, 10 Jun 2008 09:30:22 -0400
That gets to my point. TOS will be like a hamster or rat on a treadmill. TOS boasts great trading statistics because Investools had been pushing Iron Condors, i.e. four-legged option trades (i.e. 4 commissions) as opposed to plain vanilla calls or puts. [As a side note, one company called Condor Options -- another seekingalpha contributor -- claims one could "generate consistent 10% monthly returns with just 10 minutes a week" (www.condoroptions.com/)] This brings up the key point that individual investors are drawn to the high monthly returns (be it 4% or 10% a month) without an eye to risks involved, taxes, commissions, or other frictional costs.

Here's my next point -- based on my observations of numerous posts of Investools subscribers over the 9 months -- it was clear Investools got these new subscribers to trade options and these people clearly didn't know what they were doing. Eventually they will wise up and stop trading options since it the frictional costs were not adequately accounted for. That means for TOS to continue its current projectory of trading stats, it has to find new option customers to make up for those that will quit trading options.

My main assertion is TOS' current positive operating trends have certain assumptions that needs to be vetted out via proper due diligence. As a result, David Makula's piece clearly shows he has begun to understand the Investools demographics.]]> http://seekingalpha.com/article/80539-a-low-risk-cracker-barrel-cbrl-group-options-play?source=feed#comment-182306 182306
I challenge Mr. Price to open a new brokerage account with about $20,000 (to help cover commissions) and try to execute these trades without a margin account and without using leverage (i.e. cash collateralizing the options).

It is simple deception to claim cash on cash returns when failing to disclosed the amount of leverage being used.]]> Tue, 10 Jun 2008 07:12:57 -0400
I challenge Mr. Price to open a new brokerage account with about $20,000 (to help cover commissions) and try to execute these trades without a margin account and without using leverage (i.e. cash collateralizing the options).

It is simple deception to claim cash on cash returns when failing to disclosed the amount of leverage being used.]]> http://seekingalpha.com/article/80539-a-low-risk-cracker-barrel-cbrl-group-options-play?source=feed#comment-182062 182062
Since Mr. Price claims I am "clueless," then he MUST know the intrinsic value because he has an idea as to the worst case scenario.

]]> Mon, 09 Jun 2008 16:38:40 -0400
Since Mr. Price claims I am "clueless," then he MUST know the intrinsic value because he has an idea as to the worst case scenario.

]]> http://seekingalpha.com/article/80539-a-low-risk-cracker-barrel-cbrl-group-options-play?source=feed#comment-182059 182059
The original post stated: "That's a $10,440 gain or 52.4% cash-on-cash if CBRL finishes above $30 on expiration day next January" without disclosing the use of leverage. This is not how one would calculate return under GIPS.

Mr. Price himself admitted to his own mistake in his earlier piece on Microstrategy when he wrote:

"You do need a 'margin type' account and paid-up marginable equity to do these trades. You do not need to lay out any cash other than your net purchase price less the option premimums received. "

"If you make $635 on the expired option in your example by writing a put against stock you are already holding it is, indeed, a return on a negative cost of capital.

If you want to calculate the return on your theoretical margin requirement of 20% of your net committment of $6315 then the return on that would be $655/$1263 or 51.86% for the eight months until expiration [assuming the shares stay above $70]."

source: seekingalpha.com/artic...

Clearly, Mr. Price is trying to fool people again. If he agreed to the use of margin to put on the options trades, then he agreed cash on cash returns was misleading. He can't have it both ways (personally, he is the one who is cluesless regarding his hypocrisy).

]]> Mon, 09 Jun 2008 16:34:09 -0400
The original post stated: "That's a $10,440 gain or 52.4% cash-on-cash if CBRL finishes above $30 on expiration day next January" without disclosing the use of leverage. This is not how one would calculate return under GIPS.

Mr. Price himself admitted to his own mistake in his earlier piece on Microstrategy when he wrote:

"You do need a 'margin type' account and paid-up marginable equity to do these trades. You do not need to lay out any cash other than your net purchase price less the option premimums received. "

"If you make $635 on the expired option in your example by writing a put against stock you are already holding it is, indeed, a return on a negative cost of capital.

If you want to calculate the return on your theoretical margin requirement of 20% of your net committment of $6315 then the return on that would be $655/$1263 or 51.86% for the eight months until expiration [assuming the shares stay above $70]."

source: seekingalpha.com/artic...

Clearly, Mr. Price is trying to fool people again. If he agreed to the use of margin to put on the options trades, then he agreed cash on cash returns was misleading. He can't have it both ways (personally, he is the one who is cluesless regarding his hypocrisy).

]]> http://seekingalpha.com/article/80539-a-low-risk-cracker-barrel-cbrl-group-options-play?source=feed#comment-181834 181834
Also, the writer doesn't have a clue to the intrinsic value of CBRL and then makes this dubious claim the worst case of "is that you'll end up owning 2000 shares of a fine stock at a price below the lows of 5 of the past 6 years." That is clearly not the worst case scenario.

If you read his other articles involving options, it's practically the same format -- long a stock, sell a covered call and sell a put.]]> Mon, 09 Jun 2008 10:14:28 -0400
Also, the writer doesn't have a clue to the intrinsic value of CBRL and then makes this dubious claim the worst case of "is that you'll end up owning 2000 shares of a fine stock at a price below the lows of 5 of the past 6 years." That is clearly not the worst case scenario.

If you read his other articles involving options, it's practically the same format -- long a stock, sell a covered call and sell a put.]]> http://seekingalpha.com/article/80337-making-sense-of-david-einhorn-vs-lehman-brothers?source=feed#comment-180155 180155
Give us A BREAK!!!

Mr. Einhorn has been short LEH for quite some time (a number of months now!) and that has been BAKED into the stock price. LEH's stock declined quickly for a host of reasons, many of which will never be explained. Mr. Einhorn's comments may be a catalyst for said decline, but LEH's decline was due to the entire market forces at work and not solely due to an existing (limited) position in Mr. Einhorn's $6 billion hedge fund.

The current high volatility in LEH options reflect both GREED and FEAR in LEH stock.]]> Fri, 06 Jun 2008 06:32:34 -0400
Give us A BREAK!!!

Mr. Einhorn has been short LEH for quite some time (a number of months now!) and that has been BAKED into the stock price. LEH's stock declined quickly for a host of reasons, many of which will never be explained. Mr. Einhorn's comments may be a catalyst for said decline, but LEH's decline was due to the entire market forces at work and not solely due to an existing (limited) position in Mr. Einhorn's $6 billion hedge fund.

The current high volatility in LEH options reflect both GREED and FEAR in LEH stock.]]> http://seekingalpha.com/article/79918-gm-calls-the-top-for-oil?source=feed#comment-179122 179122
That is completely nonsense. I, like so many people, want to buy a hybrid but are not willing to pay a huge premium for the hybrid technology. As a result, I will wait until the hyrbrid technology's premium declines to a level where it becomes a no-brainer to pay for the extra cost.

As for diesel, I would like to buy a diesel car and Mercedes has a product that can be sold in all 50 states. Unfortunately, while gas (87 octane) goes for $4.30 a gallon, diesel costs $5.00 a gallon and that alone will make the diesel engine uneconomical use to -- not to mention not all gas stations sell diesel. As for hydrogen (or natural gas) technology, there aren't enough refueling stations to allow to me to use a hydrogen car on extended trips.

Right now, the current refueling infrastructure in the US makes it compelling to buy a traditional gas-powered car, especially if you buy a used car. The costs of hybrid technology has reached the level, where it will displace a traditional gas-only vehicle.

Also, as I stated earlier, GM was willing in 2003 (almost 5 years ago) to selling hybrid vehicles so long as consumers were willing to step up to the plate and pay the premium. Obviously consumers didn't step up until recently. ]]> Wed, 04 Jun 2008 11:06:17 -0400
That is completely nonsense. I, like so many people, want to buy a hybrid but are not willing to pay a huge premium for the hybrid technology. As a result, I will wait until the hyrbrid technology's premium declines to a level where it becomes a no-brainer to pay for the extra cost.

As for diesel, I would like to buy a diesel car and Mercedes has a product that can be sold in all 50 states. Unfortunately, while gas (87 octane) goes for $4.30 a gallon, diesel costs $5.00 a gallon and that alone will make the diesel engine uneconomical use to -- not to mention not all gas stations sell diesel. As for hydrogen (or natural gas) technology, there aren't enough refueling stations to allow to me to use a hydrogen car on extended trips.

Right now, the current refueling infrastructure in the US makes it compelling to buy a traditional gas-powered car, especially if you buy a used car. The costs of hybrid technology has reached the level, where it will displace a traditional gas-only vehicle.

Also, as I stated earlier, GM was willing in 2003 (almost 5 years ago) to selling hybrid vehicles so long as consumers were willing to step up to the plate and pay the premium. Obviously consumers didn't step up until recently. ]]> http://seekingalpha.com/article/79918-gm-calls-the-top-for-oil?source=feed#comment-178801 178801 Tue, 03 Jun 2008 18:50:24 -0400 http://seekingalpha.com/article/79918-gm-calls-the-top-for-oil?source=feed#comment-178756 178756 www.usnews.com/usnews/...)

Here are the key words: "The world's largest automaker last month said it would put 1 million hybrid vehicles on the road by 2008, many of them the biggest trucks and SUVs in its fleet. That's if demand materializes." I still remember that speech. GM is huge on mild hybrid, i.e. stop and go technology. GM is also betting a huge amount on hydrogen / fuel cell technology. GM entered into the largest fuel cell project in 2003/2004 timeframe with Dow Chemical (source: www.dow.com/commitment...)

So the answer to your question: "When was the last time a US auto manufacturer got ANYTHING right?"

The get many things right -- the problem with any company is to forecast demand and when you have an industry that is capital intensive, highly unionized, selling expensive durable goods, facing huge amounts of regulation, it's not possible for a company to roll out new products on a dime. If consumers wanted mild hybrids back in 2003, GM would have built them.
]]> Tue, 03 Jun 2008 16:54:04 -0400 www.usnews.com/usnews/...)

Here are the key words: "The world's largest automaker last month said it would put 1 million hybrid vehicles on the road by 2008, many of them the biggest trucks and SUVs in its fleet. That's if demand materializes." I still remember that speech. GM is huge on mild hybrid, i.e. stop and go technology. GM is also betting a huge amount on hydrogen / fuel cell technology. GM entered into the largest fuel cell project in 2003/2004 timeframe with Dow Chemical (source: www.dow.com/commitment...)

So the answer to your question: "When was the last time a US auto manufacturer got ANYTHING right?"

The get many things right -- the problem with any company is to forecast demand and when you have an industry that is capital intensive, highly unionized, selling expensive durable goods, facing huge amounts of regulation, it's not possible for a company to roll out new products on a dime. If consumers wanted mild hybrids back in 2003, GM would have built them.
]]> http://seekingalpha.com/article/79182-why-watching-bankruptcies-can-help-stock-performance?source=feed#comment-176958 176958
My comments was about average "solo" driver (the guy that lives in the truck) limited to 10 hours a day. I understand trucking firms also use teams -- but the majority of long hual-trucks are driven by an individual driver.

Companies like FDX and UPS (or WMT) are separate from the tradition trucking companies. I think you will agree my comments are geared toward the trucking pure plays.

Also, my general comments are about the trucking industry as opposed to specific trucking companies. I can make a general comment that trucking pay is poor, but anyone who works in the industry knows how much WMT or UPS will pay (yes, a truck driver can make over 6 figures annually at UPS!).

Lastly, as for my 21st century comment, just recall the average class 8 truck is using an engine technology developed in the 19th century. Separately, the cost of diesel costs over $5 a gallon in some parts of the US -- what will happen when diesel reaches $6 or $8 a gallon? My point is the trucking (like the airline) industry was built on cheap fuel. If you do the math of an average truck going 150,000 miles a year at 6 mpg, it will require 25,000 gallons (ignoring idling, etc). When diesel was under $3 a gallon, the system was still profitable, but at $5 a gallon, the system is breaking. In the 21th century, the price of diesel will not be as cheap as what we had in the 20th century.

Cheers.]]> Fri, 30 May 2008 15:46:28 -0400
My comments was about average "solo" driver (the guy that lives in the truck) limited to 10 hours a day. I understand trucking firms also use teams -- but the majority of long hual-trucks are driven by an individual driver.

Companies like FDX and UPS (or WMT) are separate from the tradition trucking companies. I think you will agree my comments are geared toward the trucking pure plays.

Also, my general comments are about the trucking industry as opposed to specific trucking companies. I can make a general comment that trucking pay is poor, but anyone who works in the industry knows how much WMT or UPS will pay (yes, a truck driver can make over 6 figures annually at UPS!).

Lastly, as for my 21st century comment, just recall the average class 8 truck is using an engine technology developed in the 19th century. Separately, the cost of diesel costs over $5 a gallon in some parts of the US -- what will happen when diesel reaches $6 or $8 a gallon? My point is the trucking (like the airline) industry was built on cheap fuel. If you do the math of an average truck going 150,000 miles a year at 6 mpg, it will require 25,000 gallons (ignoring idling, etc). When diesel was under $3 a gallon, the system was still profitable, but at $5 a gallon, the system is breaking. In the 21th century, the price of diesel will not be as cheap as what we had in the 20th century.

Cheers.]]> http://seekingalpha.com/article/79182-why-watching-bankruptcies-can-help-stock-performance?source=feed#comment-176491 176491 Fri, 30 May 2008 02:35:02 -0400 http://seekingalpha.com/article/79182-why-watching-bankruptcies-can-help-stock-performance?source=feed#comment-176490 176490
A few points to consider:

I covered the railroads as a buy-side high grade analyst for 2+ years a few years back and all I hear on the conference calls were how the big 4 railroads (UNP, BNSI, NSC, and CSX) were taking business from trucking companies. A railroad may run at 30 mph but it can run almost 24 hours a day in theory, far more than an average truck driver that is limited to 10 hours of drive time on crowded highways. I specifically recall UNP telling listeners how if the product got on its system, it could deliver across the US from the west coast to the east coast in as little as 3 days, maybe 2 days. Think about it for a second, a truck (which is an expensive piece of capital) with a solo driver can't be driven, on average, 14 hours of every day -- which is a waste of capacity (airlines typically fly 8 to 10 hours a day as well). Trucks just can't compete with these types of economics. Look at Warren Buffett and his acquisitions in railroads of late.

Companies like WMT cherry pick the best drivers (i.e. great safety records over a number of years) and paid them accordingly. It is not an internal fleet per se, it is when the internal fleet is an integral part of operations that is important. Not all internal fleets are the same.

IMHO, the biggest problem with the trucking industry is the employees. The high turnover, low pay considering the standard doesn't allow for overtime at 1.5x pay like most normal jobs, poor working conditions, living in a cramp box for long-hual drivers, etc. Compare that to WMT's internal fleet of highly paid drivers that are also highly motivated to do a good job. It's so obvious why the trucking companies are having a hard time succeeding -- the industry needs to get modernized into the 21th.

Again, don't take my word for it -- listen to Buffett who historically liked trucking firms to railroad companies and now switched his mindset once he saw how efficient railroad companies were moving products across the US.

Cheers.]]> Fri, 30 May 2008 02:31:43 -0400
A few points to consider:

I covered the railroads as a buy-side high grade analyst for 2+ years a few years back and all I hear on the conference calls were how the big 4 railroads (UNP, BNSI, NSC, and CSX) were taking business from trucking companies. A railroad may run at 30 mph but it can run almost 24 hours a day in theory, far more than an average truck driver that is limited to 10 hours of drive time on crowded highways. I specifically recall UNP telling listeners how if the product got on its system, it could deliver across the US from the west coast to the east coast in as little as 3 days, maybe 2 days. Think about it for a second, a truck (which is an expensive piece of capital) with a solo driver can't be driven, on average, 14 hours of every day -- which is a waste of capacity (airlines typically fly 8 to 10 hours a day as well). Trucks just can't compete with these types of economics. Look at Warren Buffett and his acquisitions in railroads of late.

Companies like WMT cherry pick the best drivers (i.e. great safety records over a number of years) and paid them accordingly. It is not an internal fleet per se, it is when the internal fleet is an integral part of operations that is important. Not all internal fleets are the same.

IMHO, the biggest problem with the trucking industry is the employees. The high turnover, low pay considering the standard doesn't allow for overtime at 1.5x pay like most normal jobs, poor working conditions, living in a cramp box for long-hual drivers, etc. Compare that to WMT's internal fleet of highly paid drivers that are also highly motivated to do a good job. It's so obvious why the trucking companies are having a hard time succeeding -- the industry needs to get modernized into the 21th.

Again, don't take my word for it -- listen to Buffett who historically liked trucking firms to railroad companies and now switched his mindset once he saw how efficient railroad companies were moving products across the US.

Cheers.]]> http://seekingalpha.com/article/78947-a-corporate-bond-strategy-worth-considering?source=feed#comment-175736 175736
Having worked in the industry for a long time, it was obvious for me to spot the sale's pitch (which were highlighted in bold per the writer):

"the tightening of corporate bond spreads has about run its course and is exhorting investors to buy protection against spread widening."

The spiel is if you want to continue to outperform your benchmark, talk to us about this trade (i.e. buy protection) because our shop knows exactly the right trade for your shop.

"(as far as "buying protection", that would be done in the CDS market, and this piece is certainly not targeting anyone involved there.)"

If jswede had worked in the industry, then jswede would know any buy-side shop can buy protection from the dealer -- which is what the dealer wants in the first place. The dealer has a huge informational advantage in his favor.

Cheers.]]> Thu, 29 May 2008 02:11:18 -0400
Having worked in the industry for a long time, it was obvious for me to spot the sale's pitch (which were highlighted in bold per the writer):

"the tightening of corporate bond spreads has about run its course and is exhorting investors to buy protection against spread widening."

The spiel is if you want to continue to outperform your benchmark, talk to us about this trade (i.e. buy protection) because our shop knows exactly the right trade for your shop.

"(as far as "buying protection", that would be done in the CDS market, and this piece is certainly not targeting anyone involved there.)"

If jswede had worked in the industry, then jswede would know any buy-side shop can buy protection from the dealer -- which is what the dealer wants in the first place. The dealer has a huge informational advantage in his favor.

Cheers.]]> http://seekingalpha.com/article/79182-why-watching-bankruptcies-can-help-stock-performance?source=feed#comment-175734 175734
By the way, I forecasted AHI (Allied Holdings, Inc) going into bankruptcy a year before the company filed -- it was obvious AHI was on life support by it's bankers. AHI was the largest independent car/SUV hauler in the country. AHI's bankruptcy didn't materially change the car/SUV hauling industry -- it has crappy economics. Buyers of new cars/SUV's have to pay about $700 for shipping costs, which means there is a general limit on how much the hualers can charge.

Remember, my contention is: it's the industry (dynamics), silly."

Cheers. ]]> Thu, 29 May 2008 02:01:21 -0400
By the way, I forecasted AHI (Allied Holdings, Inc) going into bankruptcy a year before the company filed -- it was obvious AHI was on life support by it's bankers. AHI was the largest independent car/SUV hauler in the country. AHI's bankruptcy didn't materially change the car/SUV hauling industry -- it has crappy economics. Buyers of new cars/SUV's have to pay about $700 for shipping costs, which means there is a general limit on how much the hualers can charge.

Remember, my contention is: it's the industry (dynamics), silly."

Cheers. ]]> http://seekingalpha.com/article/79182-why-watching-bankruptcies-can-help-stock-performance?source=feed#comment-175508 175508
That is a fallacy. There is a difference between a broken company business model and a broken industry business model.

Remember the typewriter industry? When a marginal players went, it was a matter of time before the rest went. Do you still remember "Smith Corona"?

The trucking companies need more than just pricing power to fix the industry. There are a lot of structural problems with the trucking industy besides pricing.

Cheers.]]> Wed, 28 May 2008 16:45:28 -0400
That is a fallacy. There is a difference between a broken company business model and a broken industry business model.

Remember the typewriter industry? When a marginal players went, it was a matter of time before the rest went. Do you still remember "Smith Corona"?

The trucking companies need more than just pricing power to fix the industry. There are a lot of structural problems with the trucking industy besides pricing.

Cheers.]]> http://seekingalpha.com/article/78947-a-corporate-bond-strategy-worth-considering?source=feed#comment-174412 174412
Lots of people get taken by this spiel all the time.

]]> Tue, 27 May 2008 09:23:57 -0400
Lots of people get taken by this spiel all the time.

]]> http://seekingalpha.com/article/78827-wesco-financial-smaller-isn-t-necessarily-better?source=feed#comment-174406 174406
Cheers.]]> Tue, 27 May 2008 09:18:51 -0400
Cheers.]]> http://seekingalpha.com/article/78329-more-peeks-inside-portfolios-berkowitz-pabrai-bob-rodriguez?source=feed#comment-171375 171375
For Pabrai to piggyback off another investor calls into question his role as a PM. I know a lot of value investor-PMs (for example, just read some of the posts on Vestopia.com) look at what other value investor-PMs are doing, but such behavior is simply not acceptable because I could do the same piggy-backing myself without having to pay the huge investment management fees.

Only time will tell if Pabrai has past his zenith similiar to Bill Miller of Legg Mason. The secret of Buffett's success is his "master mind" (a Napoleon Hill concept) relationship with Munger. Pabrai should find his "Munger."]]> Wed, 21 May 2008 19:44:15 -0400
For Pabrai to piggyback off another investor calls into question his role as a PM. I know a lot of value investor-PMs (for example, just read some of the posts on Vestopia.com) look at what other value investor-PMs are doing, but such behavior is simply not acceptable because I could do the same piggy-backing myself without having to pay the huge investment management fees.

Only time will tell if Pabrai has past his zenith similiar to Bill Miller of Legg Mason. The secret of Buffett's success is his "master mind" (a Napoleon Hill concept) relationship with Munger. Pabrai should find his "Munger."]]> http://seekingalpha.com/article/77427-microstrategy-an-enterprising-small-cap?source=feed#comment-171336 171336
Again, you keep putting words in my mouth or deliberating twist my words. I never stated that you short a stock.

You did originally write in your piece, that you want to buy a stock -- not short a stock. Please GET YOUR FACTS CORRECT!!

Cheers.]]> Wed, 21 May 2008 18:22:34 -0400
Again, you keep putting words in my mouth or deliberating twist my words. I never stated that you short a stock.

You did originally write in your piece, that you want to buy a stock -- not short a stock. Please GET YOUR FACTS CORRECT!!

Cheers.]]> http://seekingalpha.com/article/77848-ennis-inc-business-is-business?source=feed#comment-170654 170654
As you know, there are no options on EBF.

Cheers]]> Tue, 20 May 2008 14:47:25 -0400
As you know, there are no options on EBF.

Cheers]]> http://seekingalpha.com/article/77756-doug-kass-s-killer-shorts-barron-s?source=feed#comment-170327 170327
Buffett's investment style has drifted and will continue to drift. So long as Buffett believes he can create value, he will retain the funds at Berkshire -- otherwise, he will dividend out the cash so shareholders themselves.

The most important point that paulmars misses is that Buffett continues to create vast billions in value OVER TIME despite the continues changes in the market place and increasing competition (especially from the so called smart investors like hedge funds). Berkshire CONTINUES to be the go-to place for financial deals that needs to get done. Buffett has paraphrased Grahm's wisdom: "Though the stock market functions as a voting machine in the short run, it acts as a weighing machine in the long run." Simply stated, Buffett's long term track record has never been equaled. Due to Berkshire's size, their performance will not match previous results, but it will still be better off than having the individual shareholders receive dividends and invest for themselves, respectively.

Cheers.

PS paulmars, do let us know when you made $62 billion from your investments.]]> Tue, 20 May 2008 01:52:42 -0400
Buffett's investment style has drifted and will continue to drift. So long as Buffett believes he can create value, he will retain the funds at Berkshire -- otherwise, he will dividend out the cash so shareholders themselves.

The most important point that paulmars misses is that Buffett continues to create vast billions in value OVER TIME despite the continues changes in the market place and increasing competition (especially from the so called smart investors like hedge funds). Berkshire CONTINUES to be the go-to place for financial deals that needs to get done. Buffett has paraphrased Grahm's wisdom: "Though the stock market functions as a voting machine in the short run, it acts as a weighing machine in the long run." Simply stated, Buffett's long term track record has never been equaled. Due to Berkshire's size, their performance will not match previous results, but it will still be better off than having the individual shareholders receive dividends and invest for themselves, respectively.

Cheers.

PS paulmars, do let us know when you made $62 billion from your investments.]]> http://seekingalpha.com/article/77756-doug-kass-s-killer-shorts-barron-s?source=feed#comment-170136 170136
I don't understand why Mr. Kass didn't have a problem when had an investment style drift before (that led to billions of dollars in wealth creation), but now raises an issue. Me thinks Mr. Kass doth protest too much.]]> Mon, 19 May 2008 14:46:08 -0400
I don't understand why Mr. Kass didn't have a problem when had an investment style drift before (that led to billions of dollars in wealth creation), but now raises an issue. Me thinks Mr. Kass doth protest too much.]]> http://seekingalpha.com/article/77427-microstrategy-an-enterprising-small-cap?source=feed#comment-170055 170055
It has been brought to my attention that I overlooked this comment. Mr. Price writes that this type of trading "works" -- however, he doesn't say if it works 50% of the time or 80% or 20% of the time. What I have commented on earlier is that the strategy is not tax efficient and that Mr. Price engaged in this type of trade without fully knowing the risks as well as the correct returns (since he was incorrectly using cash on cash returns).

Unbeknownst to Mr. Price, he was engaging for 30 years in a "trade" without knowing the true risk reward trade-off. The sad part is that there were red flags or warning signs that the trade was too good to be true. The general rule in investing is that if you take risks, then you must be fully compensated for the risks involved.

Cheers.
]]> Mon, 19 May 2008 12:15:36 -0400
It has been brought to my attention that I overlooked this comment. Mr. Price writes that this type of trading "works" -- however, he doesn't say if it works 50% of the time or 80% or 20% of the time. What I have commented on earlier is that the strategy is not tax efficient and that Mr. Price engaged in this type of trade without fully knowing the risks as well as the correct returns (since he was incorrectly using cash on cash returns).

Unbeknownst to Mr. Price, he was engaging for 30 years in a "trade" without knowing the true risk reward trade-off. The sad part is that there were red flags or warning signs that the trade was too good to be true. The general rule in investing is that if you take risks, then you must be fully compensated for the risks involved.

Cheers.
]]> http://seekingalpha.com/article/77798-leading-hedge-funds-best-ideas-and-consensus-picks?source=feed#comment-170048 170048
That makes sense due to time lag of the filing coupled with the fact that cream (over time) rises to the top -- the biggest exposures ought to be the ones that has "legs" to run (Mastercard is a good example). In contrast, gunslingers are typically the types that place huge bets at the outset as opposed to building up a position over time.

Cheers]]> Mon, 19 May 2008 12:07:08 -0400
That makes sense due to time lag of the filing coupled with the fact that cream (over time) rises to the top -- the biggest exposures ought to be the ones that has "legs" to run (Mastercard is a good example). In contrast, gunslingers are typically the types that place huge bets at the outset as opposed to building up a position over time.

Cheers]]> http://seekingalpha.com/article/77601-do-momentum-strategies-still-work?source=feed#comment-169750 169750 Sun, 18 May 2008 16:00:06 -0400 http://seekingalpha.com/article/77427-microstrategy-an-enterprising-small-cap?source=feed#comment-169402 169402
Second, it's clear you don't understand GIPS and that's why you mistakenly used levered "cash on cash" returns.

Third, a naked put means I don't own the stock. I chose the naked put since one of your legs in your trade was a naked put (it was part of the straddle).

Fourth, negative cost of capital doesn't make sense. There is a simple proof -- capital costs have opportunity costs associated with them. If you understand GIPS or used cash collateralized options, then you know why.

Fifth, the MSTR options do have wide bid-ask spread (and this negatively impacts those option writers that use market orders). These wide bid-ask spreads are also issue when you close out the option when seeking long-term capital gains treatment.

If my naked put trade has a higher return at "51.86%" (not necessarily agreeing with your number) AND it has lower risks (not to mention lower commission costs and facing only one bid-ask spread, other things being equal), then why would anyone do the three-legged trade and use so much capital in the first place??

Based on your responses to date, it's clear you didn't realize the risks involved and that you don't have a good grasps of return calculations -- the original cash on cash return number was very misleading (i.e. due to leverage, etc).

Cheers.]]> Sat, 17 May 2008 15:40:04 -0400
Second, it's clear you don't understand GIPS and that's why you mistakenly used levered "cash on cash" returns.

Third, a naked put means I don't own the stock. I chose the naked put since one of your legs in your trade was a naked put (it was part of the straddle).

Fourth, negative cost of capital doesn't make sense. There is a simple proof -- capital costs have opportunity costs associated with them. If you understand GIPS or used cash collateralized options, then you know why.

Fifth, the MSTR options do have wide bid-ask spread (and this negatively impacts those option writers that use market orders). These wide bid-ask spreads are also issue when you close out the option when seeking long-term capital gains treatment.

If my naked put trade has a higher return at "51.86%" (not necessarily agreeing with your number) AND it has lower risks (not to mention lower commission costs and facing only one bid-ask spread, other things being equal), then why would anyone do the three-legged trade and use so much capital in the first place??

Based on your responses to date, it's clear you didn't realize the risks involved and that you don't have a good grasps of return calculations -- the original cash on cash return number was very misleading (i.e. due to leverage, etc).

Cheers.]]> http://seekingalpha.com/article/77427-microstrategy-an-enterprising-small-cap?source=feed#comment-168840 168840
Under Mr. Price's logic, my cash on cash return ought to be infinite since I collected $6.85 and didn't make any cash outlay since I am using margin. In contrast, my actual cash return is not infinite because of two reasons: (a) my portfolio didn't increase by an infinite amount and (b) if I had to cash collateralize my trade, then my cash return would be some other number much less than infinite.

The reason I sold a naked put is that any stock price above $63.15 means I made a profit (before taxes and commissions) which is similar to the economics of Mr. Price's trade.

The key take-aways are: (a) the need to understand what the real returns are and (b) the need to understand the risk side of the trade. The naked put trade has a higher cash on cash return (because it's infinite versus 35.8%) and it has less risk (because of the lower break-even price) since the option also expires in Jan 2009 meaning it is far superior to Mr. Price's 3-legged trade. However, any intelligent investor who understands the two key take-away points knows better.

Cheers.]]> Fri, 16 May 2008 11:44:43 -0400
Under Mr. Price's logic, my cash on cash return ought to be infinite since I collected $6.85 and didn't make any cash outlay since I am using margin. In contrast, my actual cash return is not infinite because of two reasons: (a) my portfolio didn't increase by an infinite amount and (b) if I had to cash collateralize my trade, then my cash return would be some other number much less than infinite.

The reason I sold a naked put is that any stock price above $63.15 means I made a profit (before taxes and commissions) which is similar to the economics of Mr. Price's trade.

The key take-aways are: (a) the need to understand what the real returns are and (b) the need to understand the risk side of the trade. The naked put trade has a higher cash on cash return (because it's infinite versus 35.8%) and it has less risk (because of the lower break-even price) since the option also expires in Jan 2009 meaning it is far superior to Mr. Price's 3-legged trade. However, any intelligent investor who understands the two key take-away points knows better.

Cheers.]]> http://seekingalpha.com/article/77249-options-trader-wednesday-outlook?source=feed#comment-168810 168810
Mr. Davis, you were off by a factor of at least 6 times, almost 7 times in your analysis (difference between 2,060 and 300) -- and you don't consider this a material issue (thank goodness you don't design bridges, help build airplanes, etc). Wow.

That comment speaks volumes about you being a gunslinger.

Cheers.]]> Fri, 16 May 2008 11:21:52 -0400
Mr. Davis, you were off by a factor of at least 6 times, almost 7 times in your analysis (difference between 2,060 and 300) -- and you don't consider this a material issue (thank goodness you don't design bridges, help build airplanes, etc). Wow.

That comment speaks volumes about you being a gunslinger.

Cheers.]]> http://seekingalpha.com/article/77427-microstrategy-an-enterprising-small-cap?source=feed#comment-168794 168794
Second, you still did not address the risk-reward ratio.

Third, if you acknowledge the role of using a margin account, then you must also acknowledge that your cash on cash return is "juiced up" -- i.e. using leverage. The alternative (non-leveraged return) is to use a cash collateral and that would in effect lower the return.

Fourth, if you have been doing these trades for 30 years, all it means is you are comfortable taking this type of risk for 30 years.

Cheers.]]> Fri, 16 May 2008 11:13:05 -0400
Second, you still did not address the risk-reward ratio.

Third, if you acknowledge the role of using a margin account, then you must also acknowledge that your cash on cash return is "juiced up" -- i.e. using leverage. The alternative (non-leveraged return) is to use a cash collateral and that would in effect lower the return.

Fourth, if you have been doing these trades for 30 years, all it means is you are comfortable taking this type of risk for 30 years.

Cheers.]]>