Rabbitisrich

The tables listed on page 7 appear to be policy year developments: Liabilities assumed under retroactive reinsurance contracts are treated as occurrences in the year the contract was entered into, as opposed to when the underlying losses actually occurred, which is prior to the contract date. Vinod1, what are the major advantages of analyzing accident year developments? Do you study those tables independently, or do you check it against policy year and calendar year triangles?

It's really an incredible story and one that will be difficult to defend. The report makes clear that the technical propriety of the sale treatment does not affect the impropriety of non-disclosure. In a fair world, Ernst and Young would face severe penalties, far in excess of what they earned from Lehman since 2001, for their aid. Also interesting is the fact that no American law firm would sign off on the transactions, so Lehman simply used a British legal team to sign off for Lehman's London division. From what I have read, and I'm no accountant, no amount to careful reading would have allowed a Lehman investor to pick up on the 105 and 108 transactions. It's just a part of Lehman's downfall, but it speaks to the character of management.

I might have misunderstood your question but Berkshire lists their IBNR and unpaid losses by accident year in the footnotes of the 10-K. Look at note 14, Unpaid Losses and Loss Adjustment Expenses. Is that what you are looking for?

http://www.nytimes.com/2010/03/15/us/15water.html?ref=business On Capitol Hill, the plight of Mr. Hawkins and other utility managers has become a hot topic. In the last year, federal lawmakers have allocated more than $10 billion for water infrastructure programs, one of the largest such commitments in history. But Mr. Hawkins and others say that even those outlays are almost insignificant compared with the problems they are supposed to fix. An E.P.A. study last year estimated that $335 billion would be needed simply to maintain the nation’s tap water systems in coming decades. In states like New York, officials estimate that $36 billion is needed in the next 20 years just for municipal wastewater systems.

Thanks for bringing this site to the board. I'm sorry that I don't have any insight, but you should also make note of the loan terms found here: http://www.sbffunding.net/underwritingguidelines Hedging might be difficult with three year minimum loan term and fixed interest rates. It could be that only the least volatile, non-dividend paying stocks are getting anywhere close to that LTV. Perhaps SBF sells the stock upon receipt, hedges their exposure, and invests the remainder. They could keep rolling over calls, relying upon the LTV spread and proceeds from investment to cover time value and unexpected volatility.

Paul Kedrosky just wrote an article about the importance of perspective and timeline in the Julian Simon and Paul Ehrlich bet: http://paul.kedrosky.com/archives/2010/02/re-litigating_t.html It's a healthy reminder for commodity speculators.

Yeah, good point. However, Reed's smartly retained the right to offer shares in lieu of cash if they can't find a proper financing solution. It's interesting that there hasn't been an explicit mention of synergy benefits, given that Jones shareholders might not necessarily feel that the game is up for them. Reed's isn't a cash flow monster; they must envision some way to reduce the distribution and promotion expenses. From Reed's prospectus supplement filed on 02/22/10 (original prospectus dated 10/06/09): We believe that the Company currently has the necessary working capital to support existing operations through 2010; however, we foresee an additional requirement for capital needed to fund our seasonality, product launches and other growth plans. Our primary capital source will be cash flow from operations, as we gain profitability in 2010. During October 2009, we raised net proceeds of approximately $563,000 from an offering of our shares. In November 2009, we entered into an agreement to replace our revolving line of credit, which more fully values our assets for collateral and enables increased borrowing for working capital purposes. We recently completed a rights offering to our existing shareholders followed by a reoffering to the public of our Series B Convertible Preferred Stock that provided additional working capital to the Company of approximately $1,068,420..

But they also had $9 million in throughput liabilities, shrinking inventories, and a gross profit that barely covered G & A, and their credit line expired in late 2008. I don't think that this failure reflects incompetence on the part of management. They must have seen the writing on the wall for glass and sugar prices. It's simply a product that required a fortress balance sheet to make it through 3-5 lean years. At this point, valuing Reed's purchase probably requires more of a visionary approach than a traditional Marty Whitman style valuation. Was Jones simply a product of excess cash and sparce fear, or does it have a strong cachet?

Interesting company. I should have noticed this thread at the start of the weekend. Is George Armoyan permanently withdrawing from his managerial duties? Does anyone have insight into Normandie and company?

It's a classic letter. I'm sure many managers will save a copy of these lessons. I liked 12. Be sure that you are well compensated for illiquidity – especially illiquidity without control – because it can create particularly high opportunity costs.

I looked at this company late last year and my notes have a byline: Moral Hazard, Inc. It seems as though the managers are taking a nice fee for allowing investors to risk their money on a yield curve carry trade. I'm curious to know how they will adjust the business model in the event of rate increases. Otherwise, it looks like a game of repo hot potato.

Thanks for sharing. -Zenith has a vanilla investment portfolio, Fairfax intends to have Hamblin-Watsa take over and try to boost performance -Crum & Forster may be able to sell products through Zenith’s network of brokers and agents. Sounds good.

I don't have a position in Denny's but I am long DineEquity. It is not an easy space. DIN just released their latest earnings and showed continued same store sale declines at Applebees and IHOPs despite pretty easy comparisons. In the case of IHOPS the decline is accelerating. The National Restaurant Association Index suggests that these trends are continuing into 2010, http://www.restaurant.org/pressroom/pressrelease/?ID=1895. It's difficult to see how an activist investor can do much about guest counts. The major QSRs competing with Denny's and IHOPs have done a decent job of cutting expenses and controlling capex, and the people who do come in tend to spend slightly more, but they've all increased their value propositions to limited effect. EDIT: I meant 'casual dining' competition, not 'QSR'.

How did you calculate the 30 million figure. Per the Employment Situation Summary for January '10, there were 25.6 million unemployed, under-employed, and marginal workers. Those are not seasonally adjusted figures.

It's also amazing to glance at a five year chart of Fairfax and to realize that you didn't have to bite the bullet and purchase in the '04-'06 period to make a lot of money. In every year since then, the market offered Fairfax at steep discounts for at least a couple of months.

Oldye, I think we talked about this company before and I mentioned that I could never get comfortable with the capex requirements and working capital exposure. Do you have any insight into NBSK demand, specifically? It seems like a product that will likely decline in importance in mature markets, but perhaps the richer, emerging markets still have a long runway for glossy print.

Eqecat seems to be the only widely disseminated forecast so far. Here's the link to their news release: http://www.eqecat.com/catWatchREV/secureSite/report.cfm?id=220 Fortunately, the death tolls don't seem to be heading into a Haiti or Indian Ocean type event.

I confess that I don't understand the value of reintegrating bottling operations. I remember being confused by the Pepsi transaction as well. Nooyi offered almost $8 billion for the bottlers, but then she said that she only expected $300 million in cost reductions. She also noted something about being more flexible with their ability to introduce new products. In other words, there is probably some friction between bottlers and syrup makers that I am not savvy on, but which apparently justifies these lofty prices.

Pabraiiiiiiiiii!!!!!!! You can treat a worthless security as a sale for tax purposes. http://www.irs.gov/publications/p17/ch14.html

More trouble with munis: http://www.bloomberg.com/apps/news?pid=20601109&sid=aOWMcHKwqyEc&pos=11 Ambac Financial Group Inc., the second biggest bond insurer, faces as much as $1.2 billion in claims if a judge in Nevada allows Las Vegas Monorail Co., which runs a train connecting the city’s casinos, to reorganize in Chapter 11 bankruptcy. The City Council of Pennsylvania’s state capital shelved a plan to sell taxpayer-owned assets to meet payments on $288 million of debt used for an incinerator funded in part with bonds insured by a unit of Bermuda-based Assured Guaranty Ltd. Harrisburg is weighing a possible bankruptcy filing.

Omagh, I can understand why some viewed the article as overly critical. Where is the wisdom in looking at quarter over quarter investment results to measure the progress of an insurance company? It's perfectly fine for the WSJ or some other news publication--they have to report something--but Morningstar also serves an analytical function. They are training the reader to think unintelligently about a company.

Anyone has an insight into the nitty-gritty of how the Fairfax combined ratio is different from other insurers? When I look into some other companies, it seems some state they use earned premium instead of net earned premium as the denominator? Am I mistaken ??? Example: and Cheers In the case of Markel and Fairfax, I believe that their CR's are comparable. Earned premium, as stated by Markel, is net of premiums assumed and ceded. I haven't seen too much flexibility in the earned premium denominator, but some insurance companies calculate the expense ratio differently.

Where did you get the supplement, it's not on SEDAR or their web site... BeerBaron It's also on the 6-K: http://www.sec.gov/Archives/edgar/data/915191/000091519110000013/newsrelease-18feb10.htm 4th paragraph This is still a wise acquisition especially considering that Zenith only places 3% of their portfolio in equities, with the remainder earning less than 3% after-tax. Zenith management fits the FFH culture, and a $1 in this direction will likely go further than a $1 buyback.

Knock on wood.

I would rate this above the ORH and NB purchases. Californian worker's compensation is tricky business and not everyone has the right network of underwriters, sales associates, and fraud investigators to do the job. Plus, Hamblin Watsa will make the investment portfolio more valuable, as opposed to ORH and NB, where the historical investment results were already in the price. I feel great about paying as much as $352 for Fairfax.