benhacker

I have a non-related question. Several posters speak in the plural ("We") when talking. Dazel, Sharper, and a few others. Why is this? Dazel, I don't remember you always doing this... why the change? I'm just curious, not critical. I just don't get it... Ben

Interesting move... I wouldn't have guessed they would pay so much... but this may have something to do with it; similar to the Northbridge purchase: http://finance.yahoo.com/q/bc?s=GBPUSD=X&t=2y&l=on&z=m&q=l&c= Cheers, Ben

I'm comfortable enough to risk 2% of my portfolio in the preferred/debt. I'm a bit disappointed as a citizen, but I do believe that Goldman is a special breed. I think the whole non-transparency of some of the dealer markets they profit from (OTC bonds, derivatives, etc) are destined to be broken soon because their moat their is not needed by society and they have no 'right' to it... but it's there now so they can cash checks until the rules are changed. Personally, I find their business perfect IF lobbying and political donations / kickbacks could be controlled. I agree that incentives are hard to manage, but I don't find their large payouts to be nearly as crazy as some arrangement at other less prominent companies. That's my take at least. Others may feel differently... not my favorite holding, but I'll hold my nose and cash some checks. Ben

Cardboard, congrats on being able to look at the facts. I almost pulled the trigger on GS during the downturn after looking at it but was more comfortable by a lot with WFC. The fact is that this company is well run, and for all the conspiracy theories and whatever, the people I've met who worked here were sharp and focused. Their frachise is intact, their service is generally needed, and for all that it frustrates me, I think they have competitive advantages as well. After the market has moved up a bit, there were still some good opportunities in some junior bonds/preferreds which I purchased for a 40% discount to face and a current yield of 10+%. It's a small position, but I'm fine with that. Goldman is a survivor... both GS and JPM are great companies and I think they get tarred with a common brush too often. I'd bet that most folks haven't looked through GS's financials like you and I have... interesting company. Before the downturn GS spelled clearly out in it's 10-k how it prepared for a crisis, how they had emergency liquidity, etc. The fact that they were prepared and ready to exploit the competition should be seen as a sign of strength. The government ties I'm sure have some unseemly aspects, but at least the company is competant... I can at least believe there is a reason why their alums are so powerful. They were simply smarter and harder working. Ben

Whether or not you can value gold directly or not may not be relevant. But I'm *pretty* sure you can value gold in various ways wrt to other precious metals. At least with respect to silver, I think gold is ridiculously overpriced. No they are not the same, but they are similar enough they should serve roughly the same function. A relative value trade as it were. I am indirectly (very slightly) long silver as of today. I'm not a metals guy, but everything in my bone tells me that Gold has seen it's run up to today because of what is happening today... anyone buying here is likely not buying what they think they are. Whether gold is insurance, an investment, etc, the price you pay matters. Buyer beware if you are new to this. I'm no expert, but gold is *hot* with the retail suckers I know right now. Maybe it goes to $2000, but I wouldn't bet on it. Ben

This is NLY the legendary (in some circles) Mortgage REIT. You make it sound like a common blog... they are a public company that also manages mortage assets. Just wanted to clarify. Ben

Grenville, what insider at any company doesn't have material inside info? The key is that you can't trade based on it. It's a complicated topic, but you seem to be implying that not insder could ever trade their shares.... Ben

In local lenders in the Vancouver market that are doing anything particularly stupid that we should be looking at for potential short ideas? There has to be an opportunity here, and there is zero media coverage of this. Ben

I don't think anyone took the "opportunity". Any RUT index fund or fund with such a mandate would be FORCED to sell that day (assuming the rebalancing). The price dropped as the bid to absorb that much selling activity is likely lower than the Thursday's close for obvious reasons. No idea who was trading the block trade or even if it was a single party on either side... unlikely unless ORH got a call from an IBank that was being paid to offload a big stake from Vanguard/BGI/Fidelity at a discount. We'll never know unless it was ORH; anything is possible. Ben

Typically, on a certian date, indices change their companies around (companies are removed, others added). On the ATSG post, you saw that the shares rallied 20+% as they were ADDED to the Russ2k index (on Friday). Modern indices are based on 'float' models, not strictly on market cap. So ORH has a weighting in the index that is equivalent to the market value of the NON-Fairfax (+ other 5%+managment) shares outstanding. The implication if this SELLING pressure was because of the Russell rebalance is that the recalculation of ORH float has been REDUCED due to the massive buybacks over the past year. For a normal company, the rebalancing would be trivial, but in the case of ORH, they retired 12% (IIRC) of their shares in the past year, which decreased their float by 30% or so. This is a large reduction in the effective weighting of a market/float weighted index. So on Friday, with all the additions and subtractions, there were also rebalancing and that is what caused some funds to sell. Basically, ORH on Thursday was 0.4% of the RUT index, and on Friday it was 0.3% (or so). This caused selling pressure. The above is my best explanation of the theorhetical issue. I have not looked into the Russell 2k rebalancing policy or verified anything said above... just giving a float index tutorial. ;-) Ben - Long ORH

http://finance.yahoo.com/news/SFK-Pulp-obtains-temporary-cnw-2263943578.html?x=0&.v=1 SFK Pulp announces that following this morning's announcement of an interest coverage ratio breach, it has since obtained from its lenders a two-week temporary waiver while negotiating a permanent amendment to its credit agreement. SFK Pulp is reasonably confident to reach a satisfactory agreement with its lenders within this time frame Interesting day. Too bad I bought at $0.30 instead of today at $0.20... doh... Ben

He's made many other quotes like this over the years but they don't seem to get a lot of publicity. Good quote though. The question is... did his attitude actually lower his long run returns? I would wager not. Ben

If you can't learn something until you "live it" I don't think a 50 year old had any advantage over a 25 year old in this cycle. In fact, I would argue that they had a tougher time given that they had 30 years of brainwashing by liquidity and calm markets whereas a 25 year old didn't have such a smooth ride. If you don't learn from history in the text books, you won't learn from it in real life. Ben - Biased as I'm 28.

Well, the PEG ratio has nothing to do with the long run, so your criticism may be valid. The is pretty meaningless and is just a snapshot in time. You need to analyze the business and financials enough to understand what 'normal' and what the growth may look like over several years. Walmart has low margins so if they have some roadmap to increase margins to a steady state level above those of today, they may experience faster earnings growth. I agree that fast sales growth is not in the cards. sales != earnings.

I'm not sure if anyone here can help, but I can't figure it out after thinking on it for a bit, so I wanted to put thie out there. In ORH's 10-Q --> $1.6B in stocks, $4.2B in bonds (roughly) [http://www.sec.gov/Archives/edgar/data/1137048/000090956709000396/o55115e10vq.htm#103] In ORH's Q1 NAIC Filing --> $2.6B in bonds, $2.4B in stocks (roughly, page 2) [see attached] I've never done much with these insurance filings before, I usually just peruse the investments detail. I can imagine how the insurance categorization of bond and stock or cash may vary, but the difference seems to be crazy here. I figured I must be reading something wrong... Could it be that convertibles are listed as stocks in one filing on bonds in another? Could they have $1B in converts at the ORH level (I don't think so, but I haven't spreadsheeted it out...). Is there some discrepency due to the fact that this filing is for Odyssey Re America as opposed to Odyssey Re Holdings and there is some crazy holdco/sub relationship / netting that I don't get? Thoughts? Thanks in advance, Ben

Thanks Deng. I've thought a lot about the concentration topic as well. Essentially, as time goes by, we should all be getting wealthier as the economy increases efficiency, and productivity etc. However, the growth is driven by a tiny minority, and that is what is hard to figure out. Obviously, meritocracy is key to encourage and reward the highest performers, but how to distribute the spoils. I suppose this is the never ending socialism vs. capitalism debate, but when the ratio is 3:1 the discussion is simpler than when it is 1,000,000:1. I struggled with the idea of becoming a *true* engineer when I was in school for this reason. I achieve a EE major, Biz minor, was cum laude, and probably in the top 10% of my University (just an average school; no Ivy League here... ;-) ). But I could tell that a few of my friends who were the genius curve wreckers were clearly 100 times more productive than I was, so I never could motivate myself to do exactly what they were doing (what's the point?). I don't view my response as unnatural, but given the implications it scares me. We can't just have 2% of society do the work, pay the taxes, generate the productivity. Deomocracy or the Republic would cease to function. No answers, just musings. From an investing perspecitve, finding those companies who truly deliver true societal value is the key takeaway from this I think. There are very few though. Ben

FFHWatcher, We can agree or disagree on what you are saying, but having a broken link on your page is not good in this day and age... as for with link or without, I don't care if they have a website or not. Insurance filings give all the detail you want anyway... I just thought it was a simple issue to fix. Ben

Deng (welcome back), I agree whole heartedly and I know many of those people you mention... and quite frankly, given the fact that many of us do *this* for a living, we may be those people as well. I touched on this topic in my annual letter (sorry for the self link, my first and likely last). http://www.remickcapital.com/files/LetterQ42008.pdf (bottom of page 3) I think Grantham also touched on the concept of 'real wealth' in his letter back around that time. I have a lot of hope and faith in American ingenuity, but I also get concered when people learn the wrong lessons. "The Chinese are taking our jobs" when in reality people should wonder why we aren't competitve. We need to work harder and be smarter, and change our value structure a bit. It won't happen until we are really up against the wall, but it will happen. Those are my thoughts though. I like to say to people, "you don't get wealthy by trading stocks or houses back and forth between your neighbor". You actually have to do something real...

Sanj (or someone else who has a relationship with someone at Fairfax), I don't know how long it has been like this, but I think many months. The Fairfax website has links to the subsidiary companies. There is a link to HWIC (http://www.hwic.ca/) which is underconstruction... last time I checked this was a long time ago and it was the same. I would poke the webmaster but I can't find any emails on the site. Not a big issue, but it seems odd for such a massive company to have broken links on their webpage for extended periods of time... saving on costs I guess. :) Thanks in advance if you can help here (I don't mean to abuse anyone's relationships, but I thought the suggestion was worthy). Ben

Mungerville, you say a lot of great stuff... but truer words have rarely been uttered. ;-) I'm going to order the shirt!

I think you have to decouple the stock market from the economy. Whether stocks are cheap or not has very little to do with the economy. We can all say that IF XYZ happens, then OF COURSE stocks will go down... and we may (or may not) be right. Prem is focusing on the strongest players (generally) right now because these companies will increase their value FASTER during bad times. Whether the market agrees is not of consequence (in my opinion). I don't say this to sounds like a true value believer or anything stupid (I'm pragmatic if nothing else), but the fear of what stupid people will *maybe* sell great stocks for, is a different fear than that of your stocks value getting demolished in a big recession. I don't know if my above rambling explains Prem's thoughts, but it's how I think... ;-) Ben

Good to have you back Dazel! Agree... and agree. :) Ben

Cool Sanj, didn't mean to say you are doing it wrong, just providing input. Do what it takes to break even. :P Ben

Hey Arbitragr, I read "fat pitch" as an implication you bought at those prices (which I know you didn't). If you are using the term "fat pitch" on a company you have extensively researched but did not buy at "fat pitch" prices, that seems more than odd to me. Seems like you need a disclaimer like "shouldn't have missed it" or something. Confused, Ben

I'm cool with the top and bottom ads, but the ones that are inline with the bottom of the post area are a bit invasive to me. Ben