netnet

What's the tough question you have in mind?

Indeed he did. Munger talks about this--that Lee married the only girl in the class smarter than he! The tribute was quite nice.

Unless, it's your own hedge fund ;) It depends whether the book value or the stock price is more volatile--and whether there are any so called high water provisions along with the 2 and 20. On a straight 2 and 20 with no high water, the investors get creamed.

So the search string is buyout, arbitrage, spinoffs? Netnet

Biaggio--thanks for the posting. I have attached the interview as a pdf for ease of use. Re: what to buy to insulate yourself against dollar depreciation. Twacowfca has good points about insurers. Also, assets denominated in strong currencies or that get payments that rise with inflation. It is interesting to note that one of the best investments in dollar terms in the 60's to 80's was German Bonds! Buffett's discussion in the AR's during the 80's also points the way-- asset light companies that have a toll like function--Washington Post for example. You just need to take that framework and update to the times.

That was a great trade. Now here is a question, even with hindsight. What have been a reasonable amount of one's portfolio to put in the trade. Given that the position could have gone to zero. Personally, I would think it would be 0.5 to a 1% position, maybe 2%. I just can't see putting more than that in options. Thoughts?

Agreed. Agreed. It's a mystery to me as well. Although I don't think it will happen, but should the Tea Party run the Republican Party and they win the White House and the Congress in '12, we will be in for interesting times. You won't see Russia from your doorstep, but you may see disaster from your roof!

No on the contrary. You cited D'souza per se as a reputable, serious scholar, etc.. I am merely giving you his work. Ad hominem attacks by definition bring up irrelevant issues. If you tell me he is credible because of his wise opinions and I show you he has some crack pot ideas then this is hardly irrelevant. It's hardly emotional, as you put it, to cite an author's views, particularly if it shows his general methodology. Remember you have to read in context. Thus, you read, for example Mein Kampf a certain way because Hitler wrote it. So too you read Freud, in the light of both his other writings and Vienna of the time. Now on to his argument. D'souza has created (as he has in the past) interesting stories via speculation and selective quoting, (again Dinesh is a brilliant polemicist), so from Media Matters:

Don't know about global warming, D'souza is also an intelligent designer as well. (From your tone I suspect you doubt those are his views, well just read him. Now, all of this is not to say he is not a really smart guy, he just happens to believe in a lot of hogwash as most ideologues on the left and right do.

He is precisely a cocktail party type. I grew up in D.C. and those psuedo intellectual members of the chattering class are a dime a dozen. I will leave you with some of his better comments: When he was at Dartmouth he outed some closeted gays Later he claimed that American Bishops were being unknowingly being manipulated by leftists and they were being snookered into not supporting wars and and militarism. He has claimed that slaves in America were treated well because they were property. That Abu Ghraib was the fault of liberalism That liberals were responsible for 9/11 and on and on... I'm not making this up. He is one of those Munger talks about being blinded by ideology.

Do you know why the market is so skeptical about the transaction? It's trading at a 22% discount to the offer price. By the way, Sanjeev, your patience with people like Rick_V is way beyond my capabilities.

If there is insider selling from multiple players, I don't buy. Insider buying is always nice, but is not an infallible signal--Ken Lay's purchases at Enron come to mind. If the company checks out on other dimensions, then insider buys is a nice confirmation.

Well we clearly disagree here. China quite regularly penalizes capital and capitalists, yet we, running dog fools, to quote from another era, are willing to give capital and even our IP (intellectual property) to open plants there. Go figure. Near as I can tell you are forgetting the little matter of externalities, i.e. cost that accrue to the country and labor force. Again, why should these be subsidized. One can make a theoretical argument for subsidizing opening a plant (as opposed to the Chinese method of force) but to subsidize a closing???? I'm more concerned about people than capital frankly. Taking out a dollar bill and shooting it kind of pales in comparison to taking Tibetans or even a capitalist who has made a minor transgression and shooting them, that would be China not Chicago! Don't get me wrong I love to make money but I'm not going to go to the barricades and shout liberty and capital. (If I were the shouting type.)

Where is written that anyone has the "divine right" to write off costs? It is not a human right! The tax code is a political expression for good or ill, and I for one see no reason why a company should be able to expense that which is deemed to be a detriment to the country. By analogy, cigarettes are taxed relatively heavily in North America. So too (tax) Depreciation schedules vary. Is my writing off a plant and equipment a right. I think not. There is another argument about how the tax code distorts markets in unplanned ways, which is certainly true, but not your argument. Your political perspective is that domestic tax payers should subsidize plant closing. (Yeah and it creates jobs, just not in the U.S.) Okay, this is fine to believe, but that does not mean that to oppose this is per se business unfriendly, any more than say having any tax is unfriendly. Taxes are the price you pay for civilization. To echo Munger, why the hell should the US be helping China grow and supplant us? They seem to be able to do this quite nicely all by themselves!

Remember Parsad, to paraphrase Munger, the incentives are often there for CEO's to be too greedy. So it takes a special CEO not to indulge. Perhaps the fault was in expecting Sadar not to succumb and be that special CEO. But the point remains for me why did I not anticipate/see the behavior coming? Or should I expect greedy bastards everywhere?

The problem with an inflated salary is that he is stealing from his partners. And if he does it once, what is going to stop him from going back into the till for seconds? And yes his returns are good, but he is lopping off shareholder returns to augment his.

In the interests of improving myself and my decision making, I was trying to figure out why and how Biglari fooled me and by extension us. (I also had the opposite problem in that I was suspicious of Watsa, unjustifiably so.) So I have the following reasons for being fooled: 1) I wanted to find a young Buffett, which is not in and of itself a bad thing, but you often think you find what you want or at least twist reality so that you think you have found it. 2) A bit of group think, which is not a critique of this board, as a thinking adult (hopefully) I have to assess for myself whether a stock or the CEO of a company is the "real deal". 3) I must admit I never actually met him. (Of course, I've never met Buffett either, unless you count going to meetings.) 4) Track record was too short, i.e. not enough evidence. I guess the fundamental upshot is the lack of evidence, #4, is the real reason, although all the other reason contributed, group think certainly did play a role. Other than his over weaning greed and megalomania, he still might be a decent jockey, but Buffett he ain't.

Pardon the ignorance of non-Canadian, but I don't know anything about the business career of Paul Desmarais and a quick search and his Wikipedia article were not very informative. Apparently someone on the board, Hugh, was quite interested. What is a thumb nail version of his career? Obviously he is extremely well connected, but that is no reason to read a biography of the guy.

One of the reasons I started this thread was to get more ideas about where to look. Thanks BenHacker for the FDIC SEC mismatch. I smacked my head on reading that because I have actually gone through FDIC filings, so I should have thought about the mismatch. On generating ideas--where do people find the best arbitrage and liquidations. I do a periodic news search, with liquidation, spinoff as the search term; this is a bit tedious,which is okay, but it is not particularly efficient. Sorry, but to paraphrase Taleb, saying there is no black swan does not mean no such exists. In this case the "swan" is compounding small amounts of money, and small amount is a crucial part of the point. It is unlikely and hard to compound at that rate but not impossible. Apparently we have our own Ericopoly as evidence. Furthermore, the point was that above a certain amount say 10m, most agree that it goes from improbable to well nigh impossible.

There is no doubt that it is hard. Munger has a particularly apt quote about this, something to the effect that you can't get there with smooth, uncalloused hands. You have to work really, really hard. But then he says (rightly) that about any well done endeavor! One interesting question what kinds of returns would a young Buffett or Munger get today? Or are the claims of 50% just a kind of hindsight bias plus the 70 years of experience? We do have Greenblatt, as an example, who seemed to get those kinds of returns. I didn't know Carnegie was an investor, I'll have to pick up a biography. Thanks for that. That's why I use the Magic Formula as my hurdle rate. (Unfortunately, if the S&P is stagnant for another decade, 10% better than the S&P is good, but 10% per year isn't great! But it is better not to be greedy)

Buffett has famously said that he and other great investors can and would make 50% per year on small sums, i.e. on 1 million or so. (See article/blog quoted below) Buffett, of course, says that his (and other great investors') returns would drop off significantly with greater sums--say 100 million. His point is that your universe of stocks and things to do varies inversely with the size of your portfolio. Now personally, I use the Magic Formula returns as my hurdle rate--generally the Magic formula beats the S&P by 10 to 15 points per year. (And I assume that realistically Buffett really means that he or other "super investors" would beat the S&P by 30 to 40 points per year.) but an 30% to 40% hurdle, well let's just say I'm not there yet!! So now my question is, for those of you willing to divulge, in what obscure corners of the markets are you looking to get outsized returns? As The thread on Tronox indicates, bankruptcy plays are one area. Thoughts? Netnet Here is the first part of the blog found at: http://valuevista.blogspot.com/2007/06/warren-buffett-50-returns.html Warren Buffett -- 50% Returns Much attention has surrounded reports that Warren Buffett said he could generate 50% returms on small sums of money. Typically, three immediate questions arise: Did he really say that? Did he really mean it? And, how would he (or me or my favorite money manager) do it? Looking at the record of his comments, it's pretty clear that he said it (and repeated it) and he really means it. Buffett seems to have got the set this ball rolling in 1999. At that year's BRK shareholder meeting, he was aked: Shareholder: Recently, at Wharton, Mr. Buffett, you talked about the problems of compounding large sums of money. You were quoted in the local paper as saying that you're confident that if you were working with a small sum closer to $1 million, you could compounded at a 50% rate. For those of us not saddled with a $100 million problem, could you talk about what types of investments you'd be looking at and where in today's market, you think significant inefficiencies exist? Buffett: I may have been very slightly misquoted, but I certainly said something to that effect. I talked about how I polled this group of 60 or so people I get together with every couple of years as to what rate they think they can compound money at if they were investing small sums: $100,000, $1million, $100 million, $1 billion, etc. And I pointed out how the return expectations of the members of this group go very rapidly down the slope. But it's true. I could name half a dozen people that I think can compound $1 million at 50% per year -- at least they'd have that return expectation -- if they needed it. They'd have to give that $1 million their full attention. But they couldn't compound $100 million or $1 billion at anything remotely like that rate.

Although you indicate that you were not paying close attention to the covered call discussion. Can you elaborate on his strategy. You seem to say that he wrote them 1 month out and then bought 30 before expiration! So that can't be it. thanks for the notes! Netnet

Rogers is many things; a one trick pony he is not. He made his money w/Soros in the Quantum fund way back when. I believe he was up 40x in 10 years.

What time of year is this held? Does Charlie actually speak? I've looked at their site, but the investor relation sections simply links to the SEC filings. Thanks! I was wondering that myself, whether or not Charlie talked at length during that meeting.

Here is another excellent article from Mauboussin. (For those of you who do not know him, he is the "thought leader" at Legg Mason.) This article is a continuation of one of the themes of his book Think Twice, separating luck and skill. http://www.lmcm.com/pdf/UntanglingSkillandLuck.pdf