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ShahKhezri

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Everything posted by ShahKhezri

  1. I'm not the expert on politics and I don't claim to be. With that said, I spent a month in Shiraz and Tehran two months ago (March 16th to April 16th) for the first time in 18 years. The situation overall is bad, my father makes an annual trip for 3-4 months, yoy according to him there was 30-40% inflation. The younger generations (representing close to 60-70% of the overall population) is in a really sad state. I think it helps to actually read some of the history here, revolutions are not out of the realm in Iran and old people die (eventually), so at some point the likelihood of a major change is in order. And yes, they are overtly materialistic, which is why I probably wouldn't import a wife. However, my US citizenship (increasing intrinsic value every year) is my hedge on my approaching 25-sunspot. I don't think Persians are as capitalistic as they are made out to be, most are full of it and can BS really well. I remember telling people over there about the Madoff situation and they weren't shocked, because most regard every religious leader and successful businessman within the country as a Madoff-type. For example, there was a story about a guy who sold the right for 300 units for an apartment, but really he had sold 1500, so 5 people for everyone of those units. Currently, in Shiraz there is a "World Trade Center" being built, there is one already in Tehran. The one in Shiraz has been in progress for 3 or 4 years. Funny thing is, apparently some group came in originally with the idea, took out a massive loan, worked on it for a year, and since then hasn't made any progress, apparently he funneled the loan...many more story's like...
  2. It's about time we start the 7 fat years. Really, I can't imagine another industry other than Insurance and Banking that has pricing power in 2009 and for sure 2010. Through FFH we'll get CR benefit and through our largest holdings (USB and WFC) we'll get the increase in NIM benefit. My underwriter friends who I still keep close contact say "3 to 5% increase is the new flat quote." This isn't coming from a $100MM premium a year type of company, but the new DOW addition. If you have the #1 largest pure insurance company passing that kind of language, well then my 2010 hard market predictions from last year solidify my 90% position in FFH. Also, while the stability in earning power provided by the muni portfolio allow for a sigh of relief, I think the benefit to the combined ratio will make all the Crum concerns meaningless. The Markel guys in their annual meeting pretty much explained the Terra Nova situation as a company that did north of $1B in premiums with a high CR (i.e. unprofitable) and now doing $600MM with 3 consecutive years of underwriting profit. Understanding retention within a book of business (tails, frequency, severity, etc.) and ridding of unprofitable premium at a insurance company can take a while for the ship to turn. If the numbers from the last two quarters are correct, you have to believe that's what C&F is going through. Northbridge has gained intrinsic value as well, from what I know, the business was so bad (see truck tonnage) that some players have exited. I'm also positive, like some of the others that we've sold a portion of the WFC holdings, only because of FIFO.
  3. ShahKhezri

    Parsad

    SP, What's interesting is in the last Wynn transcript, Steve Wynn states that he had breakfast with Buffett and Munger the Sunday after the annual meeting. I would have never thought of that threesome doing breakfast.
  4. CB, I'm right there with you.
  5. It's debatebale whether Insurance products have a moat or not (I think some do because some are sticky and retention is high), but yeah Partner, you are thinking exatly what I'm thinking. From a pure business standpoint, this can't hurt, it can only help.
  6. Personally, I think all of these "little moves" are brilliant. For example, the most recent Brick transaction was underwritten by GPM Securities (another one of those little moves late last year). From a pure business perspective and FFH shareholder, this is exactly what you want. Regarding, Canwest, I haven't done a valuation on it, but from my point of view it's very strategic just from a media perspective. FFH is considered a financial and having come from the 2008 experience of "shoot first, ask second" mentality fueled by fear mongering ala theory of reflexivity having a media outlet on our side continues to disseminate a positive outflow of information for FFH. This in turn allows us to make more "fair and friendly" transactions. . Now, make no mistake, I'm not judging Canwest purely on future goodwill for FFH because they have also made an investment in Gannett...so they must see some value. Also, BAM and Onex want in on this deal (Canwest) as well, so we're not the only village idiot. Thus far, the only humbling investments have been ABH and media. I place the media investments as a wash based on the positive feedback loop (10%-12% preferred) and good reputation. ABH is still in the 5-6th inning imo. These investments of course cost money...but the future earnings power of FFH with these small investments as a whole can be tremendous. Crum made a $100 M dividend to FFH at the end of the quarter, available cash for new investment/reinvestment is not a huge concern. We also have upwards of 200M tax-free coming from our Municipal bond portfolio. Next you have the steady dividend portion of the equity portfolio (PFE, JNJ, KFT) and using rough estimates that's almost 40M. I think what's happening at Crum is really interesting, after having yoy decline in premiums of 20%, you look at the first quarter premiums and that's down around 11%, now granted it's listed under "insurance and reinsurance operations"; however I would not be surprised if a large % was at Crum. The disappointment in insurance operations I've read on this board is a little over the top at times. With the declines in yoy premiums, I believe Prem and Co. are right sizing Crum for sub-90 CR. Barring a major natural disaster, I'll put a wager out there that Crum will have a couple of fat years going forward. I wish they broke out retention within the insurance operations, because if in fact they are right sizing Crum, this will take some time to show up, but when it does, some will try to delete their negative posts on FFH insurance operations. I could be wrong about that, but that's part of my analysis. Last year, my projection was that by 2010 we would have around 20% of the investment portfolio in equities. I'm about 90% invested in FFH, part of that has to do with my confidence in future earnings power, the other with investment restrictions placed on me by my current employer. Holding FFH simplifies crap that I don't have time to conduct thoughtful analysis like sizing muni's, corporate bonds, active investment portfolio, etc. and holding 90% FFH allows me to do everything that I want/can't in one single investment, it's efficient for me.
  7. As long as neither has a STD why discriminate? just go for the threesome.
  8. I don't know who was selling at 8, I do know there where other forces. At some point last week JPM and WFC were around 25% of the XLF or the financial complex. SKF is the 2X Inverse ETF of the Financials, and there are other ETFs that trade on the inverse, are levered and need financial exposure (on the short side). As some names started to represent a larger portion of the financials, these ETF's needed to increase shorts on the remaining complex. At least that's my theory. Coincidentally, last week I put in a test order to short SKF, there were no shares available, but every other financial I test-ordered, there were shares available. Last week was crazy. There are other forces at work now, Pandit's timely "memo", Ken Lewis timely "Op-ed" http://online.wsj.com/article/SB123655575807665985.html. There are probably more explanations.
  9. Pof, Yes, I am changing careers, it came at a very opportune time when I was interviewing (Oct. 2008). I was an underwriter at Travelers and now I will be working at Mr. Buffett's favorite bank (and now FFH's). Now regarding the industry: -I don't know exactly what the solution is to this AIG fiasco, but I think they need to spin off all the operating units (keep the hedge fund side under gov. control) because AIG PnC under gov. control (the cripple Buffett was referring to in his annual letter is undoubtedly AIG) will turn the whole industry in a disaster. Most CC's that I've read for the 4th quarter all refer to a competitor out there cutting prices 10-20%. Truth is, we need AIG PnC without gov. guarantees on a stand-alone basis for a healthy PnC atmosphere. -Based on my count, three company's recorded increase in book value for 2008: FFH, TRV, and HCC. I would highly encourage people interested on details to read the HCC cc. Their management is top notch and they have interesting policies aligned with shareholder interests (for example: only buyback shares below book value). Now TRV is the largest pure PnC company in the United States by market cap, it's a good bet that sometime in the near future TRV will be added to the DOW. To answer your question Oldye posed in a previous thread, TRV manages their investment portfolio very conservatively. Jay Fishman, ironically was the right hand man for Sandy Weil, his left hand man was of course Jamie Dimon. -In previous posts on MSN I was very hesitant to claim "2009 hard market" because the numbers just don't make any sense. For example, take the largest premium slice of a policy (GL- General Liability), the exposure it is rated and priced at is Gross Receipts or a budget, and if the consumer is suffering (business and personal) you can't pass a premium increase. I have a friend that writes one of the same lines as a Northbridge sub (long-haul), and there is no way he can price higher. With that said, the process for a hard market is in the cards, let's just use Property and a GL for a business, now like I stated, you can't price higher, but you can hold price and write better business. For property, say you had a 1K deductible, to keep that deductible for this year premium would increase, but you can sell it at a flat rate now with a 2.5K deductible. For GL, you can reduce limits from 2M to 1M to keep flat premium. I personally did a lot of that most recently. Increasing property deductible from 1K to 2.5K and decreasing limit on GL from 2M to 1M is better business and certainly affects the loss ratio, this dramatically changes the risk characteristics and profile of your book of business. You don't go straight from soft to hard in this industry, too many irresponsible competitors. -On the Agency side, just like most businesses, the 80/20 rule is true. So say Jim & John agency managed 500 accounts, 400 was written with one insurance company, and the other 100 were written with several different insurance company's. I think the times have changed because the 400 used to be written by AIG. Another interesting aspect of this transition is that say policy count at a certain company was 80-90% (which is true for most), the new premiums that insurance company's will write will be sticky. Benefiting the survivors! One caveat is that AIG PnC needs to be spun off, confidence in the whole industry will be bolstered. Agency's are spreading risk and going away from the 80/20 rule and spreading more business around to more insurers. -Regarding WTM, I think you have to make some serious considerations. They have made a large investment in Esurance and the question to ask here is do you think there could be 3 successful players in this sector with Progressive and Geico? I just have a hard time grasping that. I think Geico's moat increases every day and Buffett has stated his plans: we will advertise to death. I'm not sure I want Geico as a competitor and Progressive is not too shabby. This had to be one of the reasons Buffett sold off his WTM stake, and the money he received from the divestment probably went straight to Geico advertising. One more thing, I have no idea what the heck they were doing with One Beacon, last year I kinda went off about it on my blog but for the sake of discussion, when WTM still owned 70-80% of One Beacon (I don't know what the % is now) but they issued a special one time $2 dividend for no reason, I never understood why? One Beacon actually has some nice niches, my unit competed directly with one of their units, their limits were always higher and were really aggressive. My boss who hired me left to One Beacon (so there is some sentiment). Also, I could never understand why they spun off One Beacon in the first place and when they issued the $2 dividend, it really jacked up the capital structure, plus it was taxed to WTM anyways. Put simply, I'd rather own FFH at .9 Book than WTM at even .5 Book. I don't think the discount is sufficient for an apples to apples comparison. They should have took the day off and played golf than divesting and dividends. I also think arguments on the CR for FFH are somewhat crazy, but I'll comment on that in the proper thread.
  10. Viking, That's interesting, your thoughts on the remaining 30% ORH. More recently, I've contemplated the thought of ORH being FFH's version of Wesco. However, I positive there will be 20% of ORH left by the end of year (only around 5 million shares more, almost half of the 9.5M repurchased last year). Now that ORH < book, it becomes easier to proceed (5X normalized 3-year earnings). The last 20% will cost around 750M (rough estimate). FFH reinsurance is going to be a really nifty operation (Pol Re, Group Re, Odyssey, Advent).
  11. OEC, I heard about most of the events through word of mouth, most people are extremely generous. Tilson's meeting was at the Hilton, but I think the best route is to just see who else is going to the meeting and exchange contact info. I'll send some questions your way, thank you very much. Cheapguy, I would contact investor relations of Markel to see if they have plans, a couple of us went to Gorats on Sunday, I ran into Sham Gad (who now writes for TheStreet.com) and he told me about the Markel meeting. Hope that helps. The weekend is overwhelming and I'm sure you will enjoy it.
  12. I also highly recommend going, the meeting is great; however there are several events held around the meeting that are just as enjoyable. Last year Markel did a presentation on Sunday, Tilson had an event, a couple of friends went to Shai's presentation. Plus, you get to meet with like-minded investors and talk about your ideas. I remember last year I met a couple of other fellow investors from different backgrounds (tech, energy, and insurance) and we spent a considerable amount of time talking about different ideas. The Berkshire meeting is good just to see Munger make his "I don't have anything to add" comments that draws laughs, the video at the beginning, and Buffett. Great experience overall! I won't be attending this year, I was planning on attending the FFH meeting, however my father planned a family trip that I had very little control of, we are coming back on the 16th of April. Hopefully someone can ask a couple of questions I have regarding the insurance operation. I may do the SHLD meeting.
  13. Smazz, There are a couple of other threads about some insurance company's out there, once my two weeks notice is effective this Thursday, I hope to shed some light.
  14. That was some letter. Out of all the figures out there and other than his long-term record, the investing public knows very little about him. I think some of that personality is coming out. SHLD results aren't all that bad, I imagine as the leases are non-renewed for the unprofitable locations, things will change. FCF was pretty good, continues to shrink the share base. Servicelive is an interesting idea, so is MyGopher. Berkowitz says all he has to do is "buyback and the game is over" and with 505M left, I can imagine another 10M shares will be retired 2009. (what are the shorts thinking here?) And he does understand what he's doing In fact, if you scan all the areas of the market and read the earnings reports and CC's, the only sector with relatively good results has been the Auto Parts retailers (AZO, ORLY, AAP), most are within 10% of their respective 52-week highs. About a year ago, the average age of vehicles on the road was 7 years I believe, with the problems in Detroit and Credit availabilty, the number I've heard thrown around is 9 years. Sears Auto service, AN, and AZO do it yourself model, lets just assume for our sake this is within his circle of competence.
  15. George Soros is brilliantly smart, probably too smart for his own good. However, he is a media whore. If he was soooo right about all this gloom and doom, why did he lose somewhere in the 200M range with Lehman??? The more gloomy you are these days, the more media time you are getting. If you took a poll of CNBC watchers on who they would trust more with their money Roubini or Buffett, I wouldn't be surprised to see Buffett lose. You've got to accentuate the positive Eliminate the negative Latch on to the affirmative Don't mess with Mister In-Between You've got to spread joy up to the maximum Bring gloom down to the minimum Have faith or pandemonium Liable to walk upon the scene "Accentuate the Positive" Bing Cosby
  16. I think some people are just missing the point here. You can't talk about asset losses without the implications of depoit growth, it's not one or the other, they are joined at the hip. If you take the concept of "money flowing to where it is treated best" on a banking level, do you honestly believe other bank-like institutions are going to be able to offer CD's like the Houston outfit that just blew up? Banks are going to be doing a lot more of what they were created to do. Now surprisingly, the only CC out there with the most sensible answer to what exactly is going to happen in the intermediate future was from BB&T, here is a great excerpt: Nancy Bush - NAB Research, LLC Yes, my follow-up question is this. And I realized it's probably a little early to be looking to the other side of the thing we're going through right now. But when you're looking at the developments in your credit portfolios, I'm sure you're sort of going through a mental – okay, could we have done this better, what could we have done differently. What are the implications here for the future, particularly as it comes to financing residential real estate development, etcetera? Kelly King Well, I think that's the key question to me that everybody ought to be asking. The way I frame that is, what does the economic engine look like going forward? Here's an interesting thing Nancy, to me, and you may not agree with this. But I think it's rational. I mentioned earlier this 20-plus year period of disintermediation as huge amounts of assets left the banking balance sheet and went into the capital markets. That's gone for a long time; it may be back one day. I think it's gone for a long time. We also, by the way, saw it on the liability side. We saw huge amounts of traditional deposits, CD type deposits leave our system, go into mutual funds and very sadly, nothing wrong with mutual funds; we manufacture them. But very sadly, particularly senior citizens say, well, I would never put my money at risk and put it in the stock market. I'm putting it in mutual funds, and never even understand what they are doing. So now they've lost a lot of their money they were counting on to live on. You are seeing that money come back in the CDs, albeit at lower rates. So we're getting more deposit inflow at lower rates. We're getting more loan inflow at higher rates. Spreads are improving, they will continue to improve. So I think going forward, even with lower aggregate economic activity, which I believe will be the case, good banks will have very good balance sheet growth and very good spreads resulting in very good margins. Now, I don't think any of us ought to be sitting here thinking about going back to the 90s and looking for 15% to 20% growth rates. I don't think that was healthy then. It wouldn't be healthy now and it's not going to happen. But for the first 10 or 15 years of my career, if you could grow loans 6% to 8% deposits in the same kind of category and get good pricing and control your costs, you could make a lot of money. And I believe we are heading into that period. Once we get through this cycle, 12 to 18 months, we are in for 8 to 10 years of really good operating conditions for good spread lending institutions like us. Now, some institutions that had, way over half of their income coming from C businesses, but the kind of C businesses in the capital markets, etcetera, that have evaporated or they had the strategies of buying all their business around the world, those strategies didn't work and they won't work. Our strategy has not changed. And so as the markets slowly improve, the volume will improve. We'll get market share move from this re-intermediation and we specifically will get market share move, for at least two or three years. We have the Wachovia, Wells things. Wells is a good institution, but not as good as us, but they are a good institution and it will take them two or three years to get settled down. We've done enough mergers to know. I mean you just don't do it overnight. Now you have got to be in a bit of [mirror] thing, I mean, and who knows where that's going. But in terms of capital markets business and wealth business, looks to me like a lot of opportunity is out there, not to mention some of our other competitors that certainly have their own challenges. So, I think Nancy, as I look forward and I've tried to be brutally honest with myself about this, I really believe when we get through this, we're going to see some of the best times in basic commercial banking that we've seen in a long time. Nancy Bush - NAB Research, LLC Okay. And get here soon enough. Kelly King Yeah, amen to that. http://seekingalpha.com/article/116009-bb-t-corporation-q4-2008-earnings-call-transcript?page=-1
  17. Travelers book increased YoY. I own Travelers in my 401K.
  18. I agree. I don't think anyone understands or notices when capitulation happens, it's all hindsight. One of those loosely used words that makes the investing public try to sound smarter than they really are to support their decision. Here's what I'm seeing: -Historically investment grade bonds "bottom" before equities. I use LQD as a proxy for that, it made the low back in October. -Equities made their "bottom" in November. -Most commodities have rebounded sharply after their December "bottoms" The bond market offered equity-like returns back in October, and as long as that was the case (because money moves to the best risk-adjusted offered return), it didn't make too much sense for equities to go up. Now, since October, if you look at the chart: http://finance.yahoo.com/q/ta?s=LQD&t=3m&l=on&z=m&q=l&p=&a=&c=%5EGSPC You will see that investment grade bonds have outperformed the S&P by a wide margin the last three months. I personally don't know if corporate debt still offers equity-like returns, but the last three months have been music to my ears as far as equity returns for the long term. What is happening has to be good news, over-leveraged with bad-practices are moving out of business. I don't own Berkshire, but he's investing in the market leaders (HOG, GS, GE, USG, and now Vulcan). When he says "Buy American," he means it! and when the number 2, 3, and 4 in a certain sector are finished, he will have put together a phenomenal collection of assets in the Berkshire trophy case. All in all, you can argue emotions and opinions which are a by-product of supposed "capitulations," but I'm putting my fingers in my ears because what I'm seeing (Investment grade bonds outperforming equities which bottomed in November, and Commodities in December) and what I'm hearing ("I haven't seen capitulation yet so I'm not buying") are not parallel.
  19. CEO was on Bloomberg yesterday and was asked, "So you spent between 2-3% of your market cap on two ads, is it worth it?" Obviously, the CEO defended his position. Whether or not it was the right decision, I guess time will tell. However, something interesting is happening with DIN (Dinequity, owner and operator of IHOP/Applebees. Late last week, there was a bankruptcy filing in southern California by John Gantes, a high profile entrepreneur, and a number of his business entities. News reports indicate that he personally listed assets of less than $3 million and debts of over $350 million. Among his business holdings were over 100 franchised restaurants, including seven Applebee’s. News reports indicated the restaurants closed abruptly. Italics is from Raymond James. Still, something to be concerned about with the franchisee-leasback model going forward.
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