Rabbitisrich

Are you guys seriously implying that it's okay to be unoriginal when you are investing in secondary markets?

One would think that China would be glad for American inflationary policies despite the short term hit to their exporters. The inflation differential is eroding their currency advantage, in real terms, anyway so why encourage a disinflationary trend?

I used to criticize Tilson for the seeming obnoxiousness of his public appearances, but I've since become more educated about the money management business. Performance doesn't exist in a bubble; he also must keep his capital stable in the face of market volatility. Tilson's public appearances serve to manage expectations and to communicate T2's logic to current and future capital sources. I bet that the money managers on this board can appreciate the value of a Tilson type.

I sold KMX at $29, so I am a bit biased against current shareholders, but the current price accounts for the wonderful strengths of the company. Simpson might simply be clearing out the less obviously undervalued stocks.

Shilling was an early prognosticator of doom as shown in this link: http://www.safehaven.com/article/6329/the-coming-collapse-in-housing I'm assuming that the page hasn't been adjusted retroactively. I think he also has old client letters floating around, if anyone cares to find them.

The reported value is notional. Hopefully Tilson will go into the pricing and term on the next call.

The media plays up commodity price movements, but they are unreliable indicators of inflation. If the general economies don't also adopt those inflation expectations, with the accompanying investment and consumption that seems to be the goal of QE2, then we get another 2008 experience in the commodity markets. It's true that we get real trouble if the fast growing countries decouple their growth rates from the U.S. and cost-push us to stagflation, but that doesn't seem to be a near term scenario. The Richmond Fed president gave a speech today in which he reviewed monetary actions in response to the 1960-61 recession. He noted that, rather than adhere to a rigid unemployment target, the Fed should be ready to react when the economy shows signs of moving under its own momentum. ???... If the Fed is trying to coerce the public into building vision boards with expectations based upon artificially low interest rates, then how easy will it be to distinguish between natural momentum and the monetary push? Lockhart referenced some of the issues that made monetary looseness so sticky in the 60s and the 70s, but he didn't address how exactly the current Fed would act differently.

Shorting definitely seems to require some trading skill, or an ability to catalyze price action. Tariq, have you read "Fooling Some of the People"? Einhorn's early thesis on ALD heavily focused upon misrepresentative accounting. Meanwhile, the company nurtured an equity investor group that prioritized dividends without adjusting return requirements as the source of those dividends switched from operating income to realized capital gains to debt/equity issuances. The lesson I learned is that companies have tools to combat a reputation war, which can buy them time to restore fundamentals.

Any thoughts on the NBSK volume drop? Almost 10,000 tons below '08 and '07 levels.

UCP, you are almost certainly right on your view of technological obsolescence, but you are overstating Amazon's ability and desire to become Itunes. Kindle already allows for .mobi and there are solid conversion tools for .epub. Kindle's conversion service for supported formats is free, and although somewhat clunky due to the need to email documents, it works fine. The hardware argument should dissuade people who don't want a book substitute now, but the Kindle doesn't overly constrain customer choice.

I have the Kindle and it is absolutely wonderful for linear, page by page reading. However, the lack of a scroll feature, or any smooth method of jumping back and forth in a text, makes reading annual reports difficult. Also, data sets will frequently appear in a jumbled mess and instead of page numbers, you have "locations", which is a bit annoying when trying to skip to a specific topic. As a book reader, however, the Kindle is pretty far ahead of the pack.

I think you guys are expecting a bit too much when it comes to fair value. Rates are low, the market is soft, and alot of major insurance companies are trading at below book. Who is going to pay 2x BV, would you? If I possessed CNA's balance sheet and familiarity with the management and business, then I would purchase at 2x book. The assets are fixed income heavy, despite an apparent surplus of capital, and you get paid $100M+ pre-tax to manage $500M of float. Even at a $2B price tag you could earn fair returns on a large amount of money. In any case, the point isn't relevant to the issue of a fair offer. The sale of a company is only one method of unlocking assets. SUR could institute buybacks (until the bid at less than $20), pay dividends, or adjust the portfolio composition. Unless CNA and management know something about future losses, $22 per share is a cheapo offer, and the market seems to anticipate a higher bid.

Harry, don't tell me you are happy with the bid. Unless management anticipates the effects of hidden liabilities, there is no reason for such a low price. For an insurance company with the historical results of SUR, unless there are huge, looming costs, the price should be at least 2X book value.

As most people have said, practical experience is the best teacher. But I think that the threadstarter mentioned his mixed results over a 10 year period. In that case, the CFA program is a fairly inexpensive guide through major financial topics, and it will help to highlight areas that may warrant further study. The major problem with the program is that it takes a pretty long time; at best, you will have to wait one and a half years to finish, but more likely it will take three or more. In addition, the course material covers a wide range of topics, and frequently dwells in minutae. The CFAI even began to bundle the course books with the testing fee because so many students bypassed the books in favor of Kaplan or Stalla materials. It may be a frustrating exercise if you do not have an immediate practical goal, i.e. promotions or raises, to push you through a convoluted yet non-technical explanation of the Black-Litterman model. If you can find a program that covers the basics of financial theory and economics, I would recommend those. Books such as You Can be a Stock Market Genius and Fooling Some of the People provide good examples of market analysis and corporate analysis, respectively.

Cwericb, if I'm reading you correctly aren't you basically saying that you can only determine a gold price peak, and presumably trough, by observing the global indicators Mark jr. referenced? In other words, you aren't pegging gold prices to dollar prices with quantitative relationship, but rather with a qualitative one? Gold prices are worth more than the current value because we still have global indicators occuring, and they will be worth less when some set of opposite indicators occur. If the above interpretation is correct, then how do you relate the timing of gold price movements to global events?

Thanks for the Newegg referral. I have been overpaying :'(.

Nodnub and Cwericb, where are you getting these laptops for under $300? Any durability issues to consider? I used to be a fan of Apple laptops, but after two breakdowns on two machines, I'm calling quits. Like Cadillacs, they are wonderful until everything falls apart.

That still doesn't answer the question of how to benchmark gold pricing to some "fair value". I recently attended a lecture where the speaker claimed that gold would retain value in the event of a broad global currency devaluation. Why would people agree to this principle that gold should be able to purchase %X more of Y over Z period? And how would we know that a 1.5(%X) move is irrational? It seems like the only mechanism to realize overvaluation is when the sellers find that they can't move product, which puts valuation in the circular position of being realized by people who are guessing about people who are guessing, and so on...

The Einks are not expensive if you have a large backlog of books. Purchase 20-30 books at discounts to retail of $5-$10 and you will quickly recoup your purchase.

I wonder what happened there. Seems strange to have had such a change of heart. Yeah, I have no idea either, but the whole announcement of Li Lu was handled rather indelicately. Lu's public debut conspicuously lacked Buffett's support, and his track record didn't appear in public records. The BYD purchase dominated what little information could be found, which gave the appearance, perhaps unfairly, of a one-hit wonder. My guess, based on possibly trivial information mind you, is that Buffett did not want a scaled up version of the BYD bettor. He may have required that Lu limit his bets to the type of situations described in his Columbia University lecture.

Citi is working through their credit issues and they have plenty of dry powder for foreign lending operations, but I'm not yet comfortable enough with Pandit and co. to entrust them with the execution risk of expanding in emerging markets. Now that they have shed the asset management and brokerage segment, are they going to aggressively improve their deposit franchise, or will they focus upon ROA targets, as they did in '05-'06, leading into the recession. Ironically, much of Citi's recent revenue growth comes from North American operations, and more specifically from loans to other financial institutions. It just seems like they are in a transitional state with respect to foreign markets where they aren't expanding their lending activities, deposit base, or cross selling, despite sufficient capital. Normally banks trade around 20%-30% of deposits, so a lot of fear is embedded in the price. I'm just worried about things like the fact that only North American deposits really grew during the scary parts of '08-'09, and that overseas Citi just doesn't seem to have a deep relationship with depositors. Something like Citi is a pretty good candidate for a LEAPS play.

I agree with you on this - Bank of America scares me, quite frankly. Just to preface my comments, these are concerns, I have no idea whether they're valid or not, but they worry me enough to keep me from investing. I think there are other banks out there that are a heck of a lot safer, with (possibly) marginally less potential performance. With regard to Wells having a high interest rate margin, part of this stems from just how aggresively they are actually making loans, almost every penny they have on deposit is lent out. Now, this is all well and good during boom times, but when the business environment is poor and there are bad loans everywhere, then you've got to be absolutely sure that the loans you're making won't default. Given that Wells' NPA's are still rising - I have serious concerns here. While net interest rate margin is important, I think that the level of loans to deposits as to be looked at in tandem with this. In my opinion, sometimes it's best to be safe, rather than sorry. If you can't find suitable credit risks, then it's best to simply take the hit to the net interest rate margin and invest in lower yielding investment securities. Secondly, you talk about Wells returning to normalized earnings. When will we see this happening, months, years, will they ever? I have no idea, but I think it's silly for anyone to take a stab at guessing. With that said though, instead of investing now for the turnaround, why not look at other banks out there that are doing better ROA and ROE than what Wells are doing? Who said the war ended? ;D There's still a heck of a lot of bad loans out there and more deleveraging to come. WFC still has a large commercial mortgage portfolio and they will probably have a bit more trouble with some of Golden West's loans despite aggressive purchase write-downs. But when you can borrow at 0.5% you are equipped with a pretty remarkable deposit franchise, which helps to explain the loan to deposit ratio. Compare that to Citi which has an ~80% loan to deposit ratio but pays almost 2x on deposits and has 13% of deposits in non-interest accounts versus 22% for WFC. Everything you read about a bank has to be viewed in relation to the deposit franchise. Regarding normalized earnings, sometimes the best purchases are made at high trailing P/Es. You either believe in a business model or you don't. Anything else is simply overweighting data points in an arbitrary time period.

Chou Associates purchased most of its position in 2007 at ~$11, so this investment has been a very modest winner.

Same. Days like today I get to watch my unfilled orders run away. You have to be like the character from the Dos Equis commercials, "Stay greedy, my friends".

Thanks for the link.