Rabbitisrich

Did Gross purchase at a discount to NAV? The fund has a large exposure to short and intermediate term callable issues. Perhaps he made a bet on large triggers due to refinancings rather than a duration/yield/spread bet.

There will be a new verse on "How to Rob".

The funds don't seem to be highly comparable. Sprott Canadian Equity always held a commodities bias at 40%+ of assets, and it is a Canadian small/midcap fund. It seems to embrace a higher risk profile.

Why would it hurt their BV? I tough their bond portfolio is not marked to market unless categorized as held for trading. BeerBaron Most of the bonds are held as available for sale, so they flow through the comprehensive income statement.

Andrew Gelman recently provided a list of recommended readings: http://thebrowser.com/interviews/andrew-gelman-on-statistics

Awesome Johnson. I love the fact that they even provide exams!

Can you run through your estimates of cash and EBIT? My estimate isn't intended to be precise: I took the last 10-Q and netted $13.4B cash and short-term investments against $4.9B debt. For EBIT, I simply applied 4X to $1B, for a valuation of <5X operating income net cash before the Compellent acquisition. I use the entirety of the cash position because I'm looking at it as part of a going concern and assuming the stability of the negative cash conversion at 36 days.

Right, in fact Michael Dell takes a lot of crap for being so late to the cloud and data organization party but he suffered through the 1994 experience and doesn't want to be caught in a liquidity trap again. I am not long being a tech neophyte, but Dell has a very clean, underleveraged balance sheet with plenty of room to ramp up spending where appropriate.

If you include the cash hoard before the Compellent acquisition, Dell is trading at < 5x operating income.

http://www.youtube.com/watch?v=jllJ-HeErjU

I don't think that the examples provided in the essay demonstrated discipline. Especially in the Cap Cities deal, Buffett underestimated the importance of Tom Murphy's participation. That is a mistake because he misunderstood the dynamics of the bet; likewise, he probably isn't biting his lip over missing out on the Netflix run.

Those issues would have been pertinent in 2002, but Biglari now has a decade of experience under his belt. You can see his thinking process laid out in a few of his very public activist investments. What additional information does his academic career provide? Richard Feynman eventually stopped responding to prospective employers of his former students saying, "You have now employed him longer than he had been my student!" Rranjan cuts to the heart of the disappointment with Biglari. From his use of key phrases, the new acronym of the business, the web page design, and the structure of the annual letters, it's pretty clear that Biglari invited comparisons to a certain billionaire. I'm still not convinced that he is a sly manipulator as opposed to a young businessman with a clumsy public message. His public bidding style strikes me as a somewhat clumsy. Perhaps he is still locked in hedge fund mode and simply underestimates the importance of a good business reputation.

But at least you played, and there is a huge jump between high school and collegiate wrestling. I can better understand why Schroeder focused on Buffett's psychological vulnerabilities. She might have heard stories in the same vein as Osberg's and been fascinated that such a man became a business titan.

Vancouver is probably in the midst of the most self-aware bubble I've ever seen. I know Vancouverites, and recent home purchasers, who cheerfully acknowledge that they over paid for their homes. One family spent $1100 per square foot for a fairly modest home in pleasant neighborhood. You pay megabucks just to live in a clean location!

The investments are held as available for sale. FCF, Owner's Earnings, and similar income statement derived going concern valuations are appropriate for BH because the restaurant operations comprise most of the value.

I'm not familiar with the application of portable alpha, but the concept is simply to hedge out the volatility associated with a benchmark, so that your asset or portfolio return can be attributed to your selection skill. In the case of Fairfax, they seem to be long specific stocks while hedged against broad market indices, so I don't think that they are using a portable alpha strategy. My guess is that portable alpha is more like being long Citigroup while shorting the BKX.

True, but in the case of MSFT, there was only short-term confusion during a period when the company was in strong financial shape. You might even say that the dips transfered ownership to people with more confidence in the underlying business. Steady dividends may attract a shareholder base which judges a company on the consistency and growth trend of its dividend. If we get too many owners who underestimate the earnings volatility of a healthy insurance company, we may be forced into a trade-off between intelligent dividend cuts and necessary stock sales.

Yeah, fully agree; plus I don't like the increasing regularity of the dividend, which tends to attract dumb money to the table.

SNS alone might be somewhat undervalued at current prices. Biglari surprised me with his operating skills (I sold SNS at $10), and he seems to have rationalized the upfront costs of expansion. Customer are paying less per ticket, but NRA surveys and customer traffic figures from major chains seem to show that we are approaching a bottom in the casual dining space. On the other hand, there are plenty of cheap companies in this space if you think that the macro picture is improving. Regarding Biglari's potential returns, think about all the tax drags before shareholder returns. You get the operating income tax, followed by realized taxes from investment activities, and then the dividend tax on accumulated passed through funds. Meanwhile Biglari gets his 25% cut on returns above 6% even though that 6% represents a return before management fees and dividend tax. The tax inefficiencies pretty much force Biglari to find a leveraged business like insurance to achieve required returns.

At the end of 2009, the percentage of commercial bank assets (according to FDIC call reports, which covers bank holding entities) in reserve accounts stood at 5% from 1/4% before the crisis. On the other hand, the Fed issues a quarterly survey of senior loan officers that shows flat to declining loan demand, particularly at small banks and in commercial and industrial loans. This link shows the distribution of loan officer responses from the October survey: http://www.federalreserve.gov/boarddocs/snloansurvey/201011/table1.htm

Is that specific to your location or loan size? In November, I could obtain a 15 year fixed rate from Wells at 4.3% APR on a ~$400K loan, which also covered closing costs. This is in Pasadena, CA, where home prices have been less volatile than the greater Los Angeles area. Also, you may have been hurt by the composition of your assets. If you maintain a large checking account balance for 6 months, your application is more likely to push through.

I wonder about that phenomenon of simply updating write-ups. I read an AGM transcript with a respected value fund which owned DELL, and their thesis was straight out of 2003, i.e. negative working cap., low cost advantage, etc... It also irritates me when respected managers with great long-term records say that they review their thesis when the stock price plummets. Isn't that activity more rewarding before the damn drop?

Unfortunately, FBAK shareholders don't sell stupidly. It's one of those super consistent businesses with a steady shareholder base; great once you get in, but tough to find an entry.

Thanks, Watsa, for the Ayn Rand Lexicon. I am interested in reading more of her philosophy. Can you recommend her more technical writings? I am having trouble with the ambiguous usages of "rational man", "conceptual consciousness", etc... Reading through some of the quotes, it seems that she implies the need for a mediating authority: "He has to plan his life long-range, make his own choices, and deal with other men by voluntary agreement (and he has to be able to rely on their observance of the agreements they entered)." This quote implies limitations in the ability to own the proceeds of your work: "If you exist only because society permits you to exist—you have no right to your own life. A permission can be revoked at any time. If, before undertaking some action, you must obtain the permission of society—you are not free, whether such permission is granted to you or not. Only a slave acts on permission. A permission is not a right." It's something to consider when it comes to the allocation of survival resources such as clean water medicine. For the Randians, does Rand confront the notion that societies form rules, codified and otherwise, to mitigate the endless processing that would occur if participants had to cost-benefit model all interactions?

Just poking fun at the notion of secondary market participants demanding originality.