benhacker

This is often stated, but never backed up. There was a Level 3 thread several months back which I shared (among a garbage ridden thread) LVLT's total IRR on their Level 3 involvement of >14%. I just reran the numbers real quick, and I get a ~7% IRR with the stock at $0.90. I do not know Fairfax's thesis, I have never heard an intelligent thesis on why to own LVLT equity from this board or anywhere else. I do however struggle when people think something is bad when it is not actually bad. As with most equity investors, we tend to ignore the big money that FFH has made on LVLT bonds. I do not believe that you can focus on just the LVLT common investment by FFH and claim that is was a failure, I believe you have to have a view of the whole capital structure that they invested in. When the underlying assumption you use to generate a "lesson" (in this case the assumption being that LVLT did not profit from and or made a mistake in investing in LVLT) is wrong, I think you have to ask yourself whether the lessons you think you are learning are the right ones. No offense intended to you Stahleyp. Ben

I'll make a more off-the-beaten path recommendation to go over to "Liquid Lounge" board on Motley Fool and sort posts by author and read everything ever written by HowardRoark. I'll 2nd reading the Berkshire letters as well. Ben

I just reread the threads I was involved in during Jan - Nov '09 on this board last night to remind myself of what I said and implied and where I was right or wrong. This very idea is a light topic I'm covering in a letter I'm writing now. It's so important for people to track their thoughts and beliefs because our minds have a way of rewriting history to make us seem smarter or more insightful... we forget the dumb stuff we say and remember only the good stuff. Predicting the future is hard, but interpreting the past isn't a cup of tea either. Ben

Bingo... this is what human history tells us. Upheaval after upheaval. Small things culminate and come to head eventually almost exactly because the cause and effect feedback loop is too long for the human mind to appreciate. Timing is really hard though. Ben

The 50% topic is always interesting. At $100,000, I beleive, at $1m, it would be hard, but I've seen enough to think it could be done. Here are some areas where I think you could get the kind of annualized returns *and* you could probably find enough ideas to occupy $1m in capital (maybe) 1) Workouts / Liquidations - there are tons of liquidations out there, not my area of expertise, but I know some who hunt this space. The highlight for me was watching someone make ~100% in two days on a liquidation situation where the ex-dividend dates were confused. This was not a normal situation, and it required threatening legal action against an iBank and calling FINRA, but it happened and I watched it in real time (don't ask the stock or more details as I don't want to share) although *I* didn't make the money. :( This particular trade was good for on the order of ~$50k though.... and making 6-10% in a month or two is possible in many workouts, but you have to keep finding more to occupy a real portfolio. Not my area of expertise, but I've seen it done. 2) FDIC / SEC disclosure mismatch - There are situations where FDIC bank reports get released before holdco SEC filings... creating a window of opportunity for enterprising investors. 3) Reverse mergers, going private - This was mentioned above. Lots of ways to make 5+% in a few names in maybe a month but only on "tiny" dollar amounts.... this was ripe right about SarbOx but is still around today. 4) Others I'm sure. I think a better way to talk about the 50% commetn is to ask yourself is Buffett's skill worth $500k in the small cap world for a year of work? I think yes... sounds better as $500k than 505.

Instead of citing Bloomberg or Morningstar, let's just go to the source for these kinds of things guys. From the proxy this year (does not show any selling in the last few months). http://www.sec.gov/Archives/edgar/data/72971/000119312510059552/ddef14a.htm Note the 5.5m options he holds as well. Is his salary too high? Yes. Is his ownership lower than I'd like? Yes. Does he own zero stock? No. Read the proxy guys. Ben

On this topic, I feel kind of like Sanj is speaking what I would say if I would have written something. Both on the Sprott, and the general macro theme we have been discussing. As a fellow money manager I know says, "just make money". The differences of opinion are less important than our real portfolio actions and there are many ways to skin a cat. Although he's 40+% cash... so... ;-) Don't dwell too much here, focus on a margin of safety with an eye to history, and a penchant to believe the unthinkable can happen... but after that, buy cheap stocks. That's my take at least. Ben

I'm with Dealraker, USB is a fantastic bank... right up there with Wells... no doubt in my mind. Ben

Ok, that makes sense. Yeah, stocks haven't gone anywhere for 12 years. Well, on aggregate, big cap mostly, stocks haven't. I still think it wasn't a bad 10 years to be a stock picker. Ben

Yeah. I agree Eric, even with CDS spreads widening, I can't imagine book value made much, if any progress this quarter. Ben

JEast, Clearly your wrote something you didn't intend. Reread your quote again: Since 97, the 90 TBill has outperformed the S&P... yes. But it has not done so each and every quarter of that time period. That, should be obvious to everyone. There are several quarters in the middle that were >10% returns for the S&P, which obviously, the T-Bill could not have beaten. Just wanted to clarify. Ben

hahah... I don't think so JEast... think about the implications of that. :) Ben

I think you may be confusing '08 and '09... BS was long gone by the market bottom unless I'm forgetting something.

Turar, to understand, you need to know the difference between a reset, and a recast. Those worrying about loan shocks from option ARM resets really mean "recasts". Oh yeah, and I've discussed here before, the charts floating around the net are mostly wrong despite what Tilson says. The recast problem from neg am loans is very overstated. Not saying all is rosy, but this isn't a problem. Ben

I'm not some high and might value snob... but this? No, they do not. It is the opposite of value investing Misterstockwell, at least that is my view. Selling something because it went down is not value investing. If you're pissed that there used to be lots of rubes to take down your millions of shares easily, and now there isn't, well that sucks but it's hardly a problem with the marekt. The markets aren't as liquid as they appear (I agree wholeheartedly), and that should be obvious to all at this point. Buy great companies and minimize trading is the only way to go.... the bigger you are, the harder it is to move around, that's not the market, or the algobots problem. Ben Come to think of it, the idea of liquidity being abundant in various forms I think is the root of much of our problems.

It's hard for me to throw stones since I don't have some major position in FBK (I acknowledge frustration would be high now), but the emotion on these threads is crazy. Dazel, I'll pick on you: How EXACTLY do you put a floor on an offering? Do you buy Rights very often? This is how it goes guys... a company in need of cash can't be choosy... FFH providing the backstop... you think they would have backstopped at $1.25? I'm sure they chose the price they were willing to effectively sell a huge put at. Management salaries, lack of communication, ok, that's all good. but the comment above is ludicrous... FBK needed money. Beggars can't be choosers. Everyone had the same opportunity to pony up for the the rights, and everyone now has the same opportunity to buy a $0.93. If the gnashing of teeth is any indication, this stock will perform very very well over the next year. Ben - no offense intended Dazel.

Scorpion, It's a quantatative blend of low debt, high/stable ROE, stable Net Margins, and stable revenue growth. You can reverse engineer from here: http://portfolios.morningstar.com/fund/holdings?t=GQLOX&region=USA&culture=en-US Ben

I haven't looked at RR's financials recently, but one thing to note from a business perspective that I'm sure Sadar likes is that they have pretty good returns because they maintain decent mid-range/high prices for a burger-type joint, but they turn tables better than any casual chain I've ever seen. I eat there a fair amount, and I love it because it's easy to get good food and a drink and be out in 25 minutes. When you sit down if you want, you can order within 2 minutes and they do it in a way that doesn't feel pushy. This doesn't matter when it's not crowded, but it's a big deal during peak hours and I'm sure it helps them generate better ROIC and sales / sq foot even during the downturn. I don't like the business segment in general, but RRGB is pretty good I think. Ben

As long as you understand that you are borrowing short term with a variable "covenant", callable loan secured against a volatile asset that has a history of crashes, I'm cool with margin. But mostly, this thread just made me a lot more nervous than I used to be. Ben

I started a small position at $30. I am very uncomfortable with it in general (bad sign) because of the wide outcomes, but I will wait for the well to be plugged in August and see how I feel. I think a permanent loss here is possible (remote though) so I am not making much of a position out of it. Ben

Thanks Biaggio, I understand your perspective better now. I think that it is a reasonable investment to make. I think Prem does (and needs to) value 'optionality' more than you or I. He needs liquidity and thus you both may be getting a bargain. I don't own any FFH bonds, but I've looked at them from time to time. Ben

I'd be surprised too, luckily the notes are at 7.25%. Additionally, we don't know if the notes will issue at a premium to par (which I would expect). All in all, their 7 year notes are bouncing around a YTM of 6.5-7.0% yield now, so paying a 2-3% cut to issue these new 10 years bonds either in terms of higher rates and/or commissions is probably par for the course. I hope the deal closes at a YTM <7.0%... I think they are good for it. Biaggio, The worst thing about modern finance is that people seem to have forgotten to purpose of capital markets. We are not all just trading against each other with winners and losers on each side. We are providing capital to businesses who will hopefully use that money for value creating activity. Giving money to Prem via a loan is not him betting against you. You are physically giving him your capital, and the he is going to try to do well by you with it. The incentives of equity holders and bond holders aren't always aligned, that I agree, but you are hardly betting against Prem by buying the bonds, quite the opposite. Sorry for the mini-rant... Goldman Sachs has turned some aspects and mentalities of our markets into a Casino, but if we convince ourselves that it's 100% of the market, we will make bad decisions and the economy will suffer. Investing is not a zero sum game long term. Ben

A minor point, but I thought I would mention that Odyssey America's latest NAIC filing shows 910k of Toyota Motor shares (cost of $33.8m) listed. Must be foreign shares as the 13F doesn't list them. Just a note for those tracking the investments in detail (Viking... :) ). Ben

No issues with OXPS, pretty good fills most of the time. Ben

I'm getting about 1.05x TBV for a multiple at 3/31. Seems far too cheap by any measure. What else is new though, seriously? ;-) Ben