benhacker

Hmm... PIK bonds trading at $0.70 on the dollar doesn't seem to imply that to me... certainly stressed, but i'll bet they roll forward. I do wish the EF and Texas Comp bonds were trading like bankruptcy was imminent... I'd be game. Ben

Fidelity's algorithm most certainly measure inflows and outflows correctly and takes them into account. Many people are fools and don't adjust for this and thus think they are better than they are, but Fidelity's personal rate of return or annual equivalent are good from what I"ve seen. I always tell people who want to invest is that the first step is to learn enough math to figure out what IRR is, what simple interest is, and how inflows and outflows affect calculations... if you can't do that, you'll never know how to measure if you are any good or not. Ben

I know this has been on topic before... very good overview and summary: http://runningofthebulls.typepad.com/toros_running_of_the_bull/2010/03/the-canadian-housing-bubble.html Ben

Sanj, I think there is some confusion. He did market a fund for a while that was CDS focused... however, he also sidecar'd his main fund to insure the swaps wouldn't be liquidated (much to the anger of some investors). He specifically locked up his investors because he knew they were trying to pull out. He saved them from themselves. Specifically, I think he certainly could have been wrong, but he called the catalyst ahead of time and he turned out to be very right. I don't think he ever set up a dedicated fund for this though, the reference to the CDS portfolio that you sometimes see was just the sidecar. Ben

Yeah, I'm scratching my head about that MCF PR. What the heck? Strange. Ben

Beware of these mortgage REITs... run when people 'value' them based on P/E. Trades above book... understand how it is they make so much money, and what skill is involved. I'm long ACAS (edit: which owns a stake in AGNC), but am generally highly skeptical of all mREITs that aren't trading well below book, or named Annaly. Ben

Count me as one who was buying BRK in the past 3-4 months. I only nibbled around the lows in March because other things seemed better, but in Q4 '09, I have to admit to getting pretty excited. I made BRK a 10% position as was debating doubling that, but decided against it. No one needed to write about BRK because it was obvious, not because we weren't buyers/owners. that's my take at least. Ben

Sorry, but there is a bit of revisionist history in there about NEW century going down. Maybe Einhorn was involved, but the shock that took them down was a raft of early payment defaults which lead to them being forced to buyback their mortgages that were sold with money they of course didn't have. It wasn't an accounting restatement. I've long thought that Einhorn used NEW for some nefarious thing though... his position and silence after the fact don't gel with me... but maybe he's just afraid of getting sued... Ben

A few things to note: 1) My experience says that over time the execution improvements with IBKR will nearly make up for the commissions... they are phenomenal at execution... many times and fill better than I should. 2) Regarding costs, if you short, they are the only game in town for the retail land. 3) Transparency... despite getting better pricing other places, at least you know what you are getting with IBKR, direct and open fee structure is key for me in the financial industry... too many ways to get screwed. Ben

Thanks for posting, it's nice to see the thesis put forward clearly and from a non-investment perspective. Ben

I think the MER is your friend when you are shorting... you are shorting management fees, not paying them. Good luck with the hedge, it is indeed scary out there. Ben

Viking, the answer is YES. WRB is a fantastic company, so is MKL. I did some work on HCC which seemed to be excellent as well, but the insider ownership was a turn off to me (especially in this sector). Lots of solid players trading for near or below book. Lots of marginal players trading for much less. I don't know PRE well... We'll see how it shakes out, it will be interesting. Ben

Matt, Love the few pieces of analysis I've seen by you, you seem level headed and sharp. With that said, I've got to jab you for this comment (all in fun) because it made me giggle. :) I for one would love to see an analysis on MAAL... I"m interested. Ben

On TM vs. TYIDY, I think the stub is no longer free, so I think those saying so haven't run the numbers recently... maybe my math is wrong, but the stub is at a high from recent past. Ben

JEast, You need to understand the definition of non-recourse I think. http://en.wikipedia.org/wiki/Nonrecourse_debt Non-recourse does not mean that there is no collateral backing, it means that there is ONLY collateral backing it (not your person, or corporate umbrella, etc).

I've been buying below $3300 and was a buyer on Friday and Tuesday. The stock is cheap... the split is a catalyst, maybe nothing happens, or maybe it starts in motion a revaluation process. Either way, BRK is cheap. People buying today for the split (or because Buffett said the stock was cheap, or because he said that the Swiss Re deal was $50B worth of premium, etc) may or may not be stupid for the reason they are buying, but the bottom line for me is that the stock is cheap. I own another stock that announced a 11:10 split a few months back. We all talked about how stupid the split was and how management wasn't fooling anyone... and then the stock split... and the price didn't move. The fact is that splits are nothing economic, but maybe, they can be a catalyst for cheap stocks. I'm not saying they are, but in the case of BRK, all I know is it is cheap. If the stock is at $3250, or $65... I'll buy some. but I wouldn't be the least bit surprised to see it at $80 in a week. Markets are crazy. Ben

Gentle suggestion that we leave these kinds of discussions to other more appropriate places.... if for no other reason than you guys are clogging my RSS feed with non-investment posts. ;-) As someone said... opinions are not often swayed on these topics, which itself may be a sign of the difficulty of some of these issues. Ben

I think that there are a few ways you can read Eddie's actions: 1) His buybacks were simply a repayment of excess to shareholders... price is set by shareholders, so he just accepted it and bought it back. Value be damned. 2) His view was that even at the top ( and I should say at that time), his view of value was $160+ / share Now certainly you can argue that he was wrong about $160, or that the value deteriorated (some may view that as "wrong"), or you may say that value is still well above and time will prove him a genius. You can also say that he was / is acting silly. My personal view is that he felt value was near or above $160, and I personally believe that value was destroyed during this downturn in a small way. However, I do not feel that $160 is an outrageous price today. To have shrunk share count, reduce debt, and perform how Sears had all at the same time is pretty good in my view. Many people seem to compare SHLD to other retailers who spend massive amounts on growth capex. We can argue that both decisions were poor uses of capital, but I prefer Eddie's strategy (if you can call it strategy). Ben - long (mostly debt)

You have me confused with someone else. ValueCarl, please accept my sincere apologies. No offense intended. Ben Hacker

Yeah, brain fart on not adding the latest. So $75m in new 7%, '15, $1.80 conversion notes, would add an effective (beneficial ownership) of ~42m shares... so up to ~286m. Ok. Your question was unclear, at least to me. There are over 1000 people on this message board, so we don't all necessarily respond to any random request, especially if we are confused, or don't know the answer, or if the questioner isn't making sense. I'm not sure what you are referring to as "quickly". Am I misreading something in this, or is this just a follow on issue of Converts @ $75m. I'm not sure what you are implying about NOL's; There are rules about NOL's being voided on change of ownership, but I think that is at least a 20% stake by an investor, not 5 or 10%. I may be wrong though. To me this looks like LVLT took the opportunity to float new debt at a reduced rate. FFH did take down a big chunk again, but (presumably because they helped bring a solid backing to the issue) they are getting preferential treatment and may choose to flip their notes quickly. Just my quick scan, Ben

Margin of Safety... my comment was just that Fairfax clearly views this "bet" as low risk because they value the physical buildings/plant/etc... they are senior creditors, so this isn't not a theoretical level of protection. Don't know where you are getting the 320m share count #. I think you are confused, or maybe I am. See the attached spreadsheet I created to summarize Fairfax's history in LVLT... 139m shares of common owned, ~224m shares FULLY diluted (assuming the exercise of both $100m converts... each out of the money right now). These #'s are not additive, it's 224m total. Fairfax's total IRR from inception on LVLT is +14% valuing both converts at 15-20% premiums to par (market values) and the common at $1.50 / share. I think their reason for staying the course is that they have made a ton of money here despite most people thinking they are idiots. It is not a macro call... it is that I understand how Option ARMs work, and those who put together the Credit Suisse mortgage chart do not (or more appropriately, those who continue to parrot the chart after times have changed, do not). Option ARMs recast in very specific circumstances (the vast majority now held by WFC at least), that is when we reach 10 years from issuance (ramped in 2004 hard), OR when the amortized value reaches 125% of ORIGINAL LOAN VALUE. Given where short rates are, it is a near certainty at this point that 10 years will be the trigger, not the 125%. Certainly O ARMs aren't a great thing, but there will be NO (near zero) recasts of WFC's portfolio in 2011 or 2012. This is somewhat a macro call as the short rates need to stay around 1-2% for this to be right... but either way 2011 isn't happening. You have found the right place. I'd stop the weird jokes about "fools at fairfax" and silly comments about investments being bad when you haven't done the math... I'd also stop the weird "this could be a huge homerun" kind of comments... I have to say your entire line of discussion here has been totally confusing to me. Apologize if you're not a native English speaker, but I struggled to find your meaning or if you were joking on nearly every post. You came across poorly. Just trying to help you fit it... perhaps in your next discussion, bring some actual data instead of just random and confusing discussion and you'll get along better here. We are all here to learn. Sorry for the weird welcome, you looked like you may need a few suggestions. Cheers, Ben PS - Board, I didn't spend too much time on the LVLT spreadsheet attached, but I think I'm good here. If anyone has some memory of what I may have missed, shoot (and note there are two tabs, one calcing the IRR, and one with the links to SEC docs of both LVLT and FFH). I show that FFH doubled their money on their first trip through the common and they are underwater (average cost) now by about 30% on common. Debt coupons + appreciation make this thing a 6-7% IRR deal without the first double on the common.... with that added, IRR is 14.5% all in. These guys are phenomenal...

LVLT has always been one of those investments I've never really gotten. The thesis has seemed to be that Jim Crowe is smart, so if you can buy his PP&E expenditures at a discount, then you have an MOS. Secondarily (or prmiarily, depending) the growth / inelastic demand "at some price point" argument lingers as a carrot in the future. Too hard pile for me... That said, ValueCarl, you are coming off like a JackA$$ on this thread (to me). You may not care, and that is fine. There are plenty of us who are very able to take critcism of our ideas, even the cherished FFH. But reading through your posts, it appears you are just trolling for an agrument. If you have a pre-disposed notion about "us" I suggest you drop it, and the forum will be much more valuable to you and us (though far from perfect of course). I'd be interested if you (or anyone else) has actually calculated a rough IRR for FFH's level 3 investments... I haven't before, but I would guess that they are >0%... although not great in absolute terms. Much of what you are saying on this thread is an argument that LVLT has in fact been a poor use of capital, but there is no quantification of this fact. Many will say "it's so obvious..." but in this business I've seen a few too many people assume obvious things that were wrong... so any data you have chronicling the LVLT bond/stock flows over time would be great. Obvoius things I see people assume that are false: 1) Stock returns are corrleated to Real GDP growth over short/long timeframes (at the country level) 2) Option ARM resets will mushroom in 2010 Maybe it happens that FFH's LVLT coupons have paid for their bath in the common... I don't know, but maybe I'll take a shot at calculating it if you don't have the data. And welcome aboard. This community can be a little quirky, but if you're not out for a fight, I think it can be very valuable. Cheers, Ben

I just did this with my RIA broker and they immediately lowered my commissions 15-25%. I still am not as low as I could go, but as I get bigger, I'm sure there is more room for improvement. Definately always pays to send a note. State your case rationally, and mention IBKR's fee structure. :)

I have lots of anecdotal evidence that State Farm is off the charts in terms of premium raises. Multiple stories of 20-30% increases. My brother just canceled his two car + house policy with SF after 10+ years... when the agent asked why, he said "COST" and the agent didn't even say anything... just took it like they'd been hearing that for the last several months. I don't know the specifics, but they must have really lost a bundle in their investments or something, because while I see some hardening, I don't see anybody as crazy as them. I know their structure is different, so maybe they are just being more honest about where they need to write business and most other firms are hiding it and trying to make it up with a few low accident years. Shah, you reading, I know you're not in this space, but would like your thoughts. Ben

Alex, last I checked, $50k was $50k. It don't matter how many *shares* it is.