jay21

I don't get how you can be bearish on bonds, but agree with Prem's actions. It appears to me he has a long duration portfolio. I would think this portfolio would serve as an adequate deflation hedge, which is why i am more critical about Prem's hedges than most. He has taken a deflation position, he has not hedged for a deflation scenario imo. I don't know FFH as well as others so if any of my facts are wrong, please let me know.

I have the opportunity to begin a family investing partnership and was wondering what advice the board could give me. I am primarily concerned with the operational tasks I would need to worry about. How do I handle redemptions and additional subscriptions? Would I have to transfer funds from my family's brokerage account to the "partnership's" brokerage account? If a family member wants me to invest money in their retirement accounts, how could I do that? How difficult would filing taxes be for both myself and my family members? Any information or reading suggestions would be greatly appreciated. Also, I would like to hear any general advice. I am sure there are some cautionary tales regarding managing family money that I could learn from. Also, any suggestions on fee structures and alignment of incentives would be appreciated. Thanks!

Good article on Kansas City Southern in Barrons today: http://online.barrons.com/article/SB50001424052748704382404578565481704373550.html?mod=BOL_twm_fs#articleTabs%3Darticle Rails still have plenty of years of growth ahead, imo.

Here's the thread: http://www.cornerofberkshireandfairfax.ca/forum/investment-ideas/mdlz-mondelez/msg112645/#msg112645

S&P on 3/28 - 1569 S&P today - 1592 10 year yield on 3/28 - 1.825 10 year yield today - 2.51 Bond movements have been much more severe this quarter. So it is not surprising to me.

OP, from my limited knowledge of high yield, I would say there aren't many good corporates out there (maybe some loans in the B range so you get IR protection). Some structured credit may be attractive, but you have to pick your spots. Some mezz RMBS might be attractive, some CLO equity, and some Euros as spreads are higher but have been narrowing since late 2011. Contractual cash flows are much different than equity cash flows.

I believe that Klarman called this a "future value investing classic." Did anyone read Lewis' book on the left tackle position in the NFL? Was that any good?

I wonder if these guys were involved in this: http://www.reuters.com/article/2013/06/08/us-unipol-berkshire-idUSBRE95705L20130608

I never really could read more than one book at once, so here are the books I read recently (most from March to now) A Farewell to Arms For whom the bell tolls Snowball Maltese Falcon The Little Book of Talent Titan (Rockefeller) Devil in the White City Lolita Moonwalking with Einstein Talent is Overrated The Postman Always Rings Twice House of Morgan I am in the middle of Predictably Irrational (good so far) and expect to be done with it fairly shortly. Also, I am trying to read about Fiat a lot.

I believe the goal of every investor is to try to obtain the highest risk adjusted returns. It is usually easy to identify a practitioner's returns by looking at their track record. However, this does not take into account the risk taken to achieve those returns. We often say what risk is not (It is not: Beta, volatility, etc.), but how do we assert what risk is? How can we measure it? How objective are we when reviewing past investments and their associated risks? Does your perception of the risk change now that you know the outcome (if anyone has an example of an investment that worked out, but their perception of the risk increased after the fact, I would love to hear about it)?

BAC 17% (warrants and common) BRK 10% MKL 8% LUK 5% NICK 4% GLRE 2% MDLZ 2% Cash 52% I have a large cash balance because my savings rate is very high relative to my net worth and it has effectively added >3% to my portfolio a month. Also, I between 20-50% of that cash I think of as an emergency fund for personal expenses so maybe that shouldn't count. I am currently thinking of reworking my portfolio to look more like this: BRK 20% MKL 20% BAC 20% (warrants and common) LUK 10% FIAT 5% Cash 25%

That's a very good reply Parsad. The only thing I would add is it is not the auditor's job to search for fraud. You can have an auditor do a great job and give a clean audit opinion, but this does not provide any assurance that there is no fraud. I do think that the risk for fraud in a fund with a clean audit opinion from a reputable auditor that has low turnover, is concentrated, and invests in all equities would be low.

No, but the alternatives are not very competitive at the current g-fee. (pages 5,6,7,8,…) http://www.cornerofberkshireandfairfax.ca/forum/general-discussion/millstein's-plan-for-fannie-and-freddie/msg77844/#msg77844 http://www.dsnews.com/articles/barclays-non-agency-rmbs-market-to-make-small-comeback-2013-05-22 http://www.housingwire.com/fastnews/2013/05/21/g-fee-hikes-will-lead-private-label-market-comeback-barclays "On the securitization option, the economics of nonagency securitization are much closer than Fannie Mae and Freddie Mac securitizations today than they were two years ago. "In fact, for the cleanest collateral, nonagency execution could be slightly better than government-sponsored enterprises." As a result, even for moderately high quality loans — forming the bulk of GSE issuance — private-label execution is likely to be within 10 to 15 basis points of GSE execution. " I'll try to track done the more detailed analysis I saw earlier in the year tomorrow.

No, Private Label securitizations are competitive with GSE's in some cases already. Also banks retain some mortgages.

I didn't see anything on Fiat, but I thought the pieces I read on GM were well done.

There is a lot of good stuff here including interviews with Greenblatt and Mohnish. Thanks for posting.

I would recommend Harrington's books and also the forum 2plus2 which has a plethora of great posts. I am surprised how many successful poker players are willing to discuss strategy on that site.

The first two things that I thought of that investing and poker have in common are: 1. Bank roll/risk management - I don't have any statistics to prove this but I would say that most people lose a lot in poker because of poor bankroll management. You have to know how to size your bets, what stakes you can afford to play, etc. Usually people have poor bankroll management because they want to get rich quick or are addicted to the thrill of gambling. In investing, you see people trying to swing for homeruns, using leverage, and overextending themselves. If you eliminate these mistakes, you probably won't ever lose big in either. In poker, it's a little easier to determine bet sizing, but it is much harder in investing because your edge is less quantifiable. Some topics may still be applicable such as the Kelly Criterion, but it isn't as obvious to me how to apply bet sizing to investing. Two basic ideas of bet sizing are transferable: 1. Bet big when you have a large edge (bigger than your intuition tells you) 2. Never risk having your net worth go to zero. 2. Being process, rather than result, oriented - Some of the best poker players push every edge they have (meaning a greater than 50% chance of winning). This means that they probably lose a lot of hands (some of which are worth a ton). It can be hard (especially for amateurs) to realize even though they lost the hand, they made a correct decision that on average would result in a profit. Therefore, focusing the process and decision making is what's important. This is directly transferable to investing. You should constantly focus on ensuring that your process and decision making is sound. The results can take awhile to materialize and every tick and price gyration is not meaningful and does not prove if your thesis is correct.

Going by Munger's comments at the AGM: "Our solar installations are in the desert", NV and CA should see big capital spending on solar by Mid American. I expect them to say that this is a 50 year investment similar to the BNSF deal. What I would love to hear is the fundamental cost/unit advantage of solar (&wind) over fossil fuels over time. Similar to the cost/ton-mile advantage of friction with rails vs asphalt. And that's fine, but the ROE on the investments is probably going to be regulated, based upon my limited knowledge of utilities, in the 10-12% range. So I still don't get the high price here.

http://www.reuters.com/article/2013/05/29/nveenergy-berkshire-idUSL3N0EA3SB20130529 I don't know how I feel about this deal. I'll look more into the company to see if there's anything interesting, but buying $330m of earnings for $5.6b seems like a mistake to me. I would think buying $5.6 of BRK shares would be a better use of capital. I am no expert on utilities so if someone has any insight, I would love to hear it!

I am not entirely sure what you mean, but banks hold a lot of AFS securities which are mainly agencies. They use deposits as their main funding source rather than repos which make them much more attractive imo. Question: when should mREITs not trade at BV? I see some of these trading at premiums and am hearing about PE and hedge funds trying to launch some these.

Some CEO shake-ups in the industry: http://finance.yahoo.com/news/endurance-ceo-steps-down-replacement-151227229.html Former Axis CEO became CEO of ENH and bought $30m of stock. I believe he repurchased a good chunk of shares at AXS so at a PB of <.8 ENH may be worth looking at.

I was more discussing the FX programs because I haven't heard that before. It seemed to come off as more manipulative to me than rate cuts (but that's probably because I have seen rate cuts before in history and therefore I accept them). Here's another article from the WSJ that's a little more direct and calling these programs "Currency Wars" http://online.wsj.com/article/SB10001424127887323336104578498850092225808.html?mod=ITP_pageone_1 ( title: Defining Moments in So-Called Currency War ) "Yet some countries are manipulating currencies, depressing them to preserve big export surpluses by selling huge amounts for dollars or euros. China is the biggest perpetrator, but not the only one. Mr. Bergsten and colleague Joseph Gagnon have a list of more than 20—Denmark, Hong Kong, Malaysia, Singapore, Switzerland and others. For these countries, lower exchange rates aren't a byproduct of economic policies crafted to bolster domestic growth, but the primary instrument. They're substituting cheaper exchange rates for other policies that might achieve the same end. They are, Mr. Bergsten shouts, helping themselves by hurting others, the U.S. in particular."

I think they were non-financial reasons for him not selling such as his involvement with management and the board.

Taiwan having similar problems with the changes in FX rates and their central bank is intervening to try to assuage the problems http://online.wsj.com/article/SB10001424127887324767004578488682893945140.html?mod=ITP_moneyandinvesting_1