bargainman

The problem of course is, you don't know if they will earn it until after the fact. With Buffett's structure he didn't get it unless he earned it, since he got 0 unless he hit a hurdle. With a 2/20, especially the 2 part, it means they get it whether they earn it or not, and that's unknowable until later. I'm not saying Sprott isn't likely to earn it given their past, but it's still pretty high. Studies have been done on mutual funds showing that performance has an inverse correlation with fees in the long run, ie the lower the fees the higher the likely performance, Vanguard harps on this constantly. Anyway I think I'll spend some more time investigating them. Sprott Resource definitely looks like a very interesting set up focused on commodities which should be a good inflation hedge and good counter part to any equity focused portfolio. Gold, farmland, uranium, what's not to like? Swizzled wrote a piece on them a while ago too. Thanks

Woops sorry, missed the part about you looking at fedreserve already. Here's an interesting article on the top 1%: http://sociology.ucsc.edu/whorulesamerica/power/wealth.html Figure 1 is interesting wrt the top 1% Also here are a few graphs. http://www.businessinsider.com/15-charts-about-wealth-and-inequality-in-america-2010-4#the-gap-between-the-top-1-and-everyone-else-hasnt-been-this-bad-since-the-roaring-twenties-1 Tough to find what the actual $ cut off is though.. Lots of percentages talk... Would like to hear if you found out anything interesting... This pdf has some information on $ http://www.levyinstitute.org/pubs/wp_589.pdf see page 46. table 4 Looks like 2007 top 1% mean is 18.5 million, top 4% is 3.6 million net worth. Bargainman

As far as hedge or private equity funds go, their fees appear normal. I thought the problem with Biglari was that he changed the rules midstream - not sure how your comparison is valid. Care to clarify? As to hedge fund type fees, I do not quite get why there is such appears to be such dislike/disgust (it's just my impression; I might be mistaken) on this board for such performance-linked fee structures. WEB used it before and many managers that are spoken of highly here (Klarman, Chou, McElvaine, etc) charge performance fees. As long as they provide fair value in return, what is the problem? If I could go back in time and invest $100K with George Soros when he launched the Quantum Fund, why wouldn't I? Well Buffet didn't charge a 2% fee on net assets. He charged 0 below a certain hurdle rate, same as Pabrai and Sanjeev. Then he only charged 25% (I think) if he beat that hurdle rate. I actually have less of a problem with the incentive fee than I do with the 2%/year on nav fee. I mean that's a 2%/year headwind, regardless of yearly performance, and I'm not sure that's something that can easily be overcome by holding commodities like gold etc. Do you think it's a headwind that's reasonable enough? Especially for commodities? Personally I had less of an issue with Biglari than others on this board, but I never thought of him as the second coming of Buffett, I always figured he was out to get rich any way he could, and the incentive program while generous, doesn't make me feel cheated. The fact that he doesn't get an incentive regardless of performance (other than base salary) is the thing that made me say that Sprott's arrangement is worse. Ie.. BH book value grows by 0%, Biglari gets no payout. Sprott resource nav grows by 0%, Sprott gets 2% of assets, shrinking investable assets... Say for whatever reason NAV goes down, they still get 2% of nav.. I guess Biglari's incentive program in a corporate structure still resembles the Buffett Partnership, while the Sprott resource one resembles the new 2/20 hedge fund structure even though it's a company not a hedge fund. Oh, and the "he changed the rules midstream" thing doesn't bug me either since he originally said one thing when he was taking over the company, and then things changed, he rolled Western and his hedge fund into the company which was an entirely different situation. Anyway I don't want to get into a big long BH discussion, but I just want to point out that 2/20 on a public company structure with commodities strikes me as high... higher than BH But maybe I'm missing something?

Here's another few interesting articles: This one picks out some information from the reserve http://www.bargaineering.com/articles/average-net-worth-of-an-american-family.html article about the gap between rich and poor getting wider http://money.cnn.com/2010/12/23/pf/rich_wealth_gap/index.htm?source=cnn_bin&hpt=Sbin PDF version of Fed reserve information, I think it's the same as the other link but not 100% sure: http://www.federalreserve.gov/pubs/bulletin/2009/pdf/scf09.pdf Here is some of the info highlighted in the first article: Across all groups, the 2007 median net worth was $120,300 and the mean was $556,300 (guys like Bill Gates and Warren Buffett really mess things up). Here are a few of the more interesting ones (2007 median data, 2007 dollars): Current work status of head: Working for someone else: $350,100 Self-employed: $1,961,300 Retired: $543,100 Other not working: $124,100 Race or ethnicity of respondent: White non-Hispanic: $692,200 Nonwhite or Hispanic: $228,500 Housing status: Owner: $778,200 Renter or other: $70,600

Yeah good idea, how about I include that link ;-) http://www.federalreserve.gov/pubs/bulletin/2009/articles/scf/default.htm#t4

The only think that I don't like about Sprott Resource is their hedge fund fee arrangement with Sprott Asset management.. It's sounds worse than Biglari's.. "In consideration for providing these services, the Company agreed to pay SCL an annual services fee equal to 2% of the net asset value (as defined in the MSA) of the Company calculated and payable at the end of each calendar quarter based on the average quarter-end net asset value of the Company and an annual incentive fee equal to 20% of: (a) the pre-tax profits of the Company for the year minus (b) the average month-end net asset value of the Company for the year multiplied by the percentage return of the Canadian 30-Year Generic Bond Index. On December 1, 2007, SCL assigned the MSA to SCLP, the successor to SCL, as part of an internal reorganization involving SAM and its subsidiaries. No amount has been included in the above commitments schedule for fees payable under this agreement."

This is a bit dated, but a lot of very interesting information. Check out the diff between whites and non-whites, and the mean and median, and the 90-100 percentile. There are a few very rich people...

Timely article about Canada's immigration policy tightening up: http://www.startribune.com/business/112208859.html?elr=KArksLckD8EQDUoaEyqyP4O:DW3ckUiD3aPc:_Yyc:aUvDEhiaE3miUsZ

Chou's been mentioned every so often. I just looked at the Chou America's site. There are few links to articles like: http://chouamerica.com/pdf/leader.PDF "His primary occupation is as a senior executive with Fairfax Financial Holdings Ltd. in Toronto and runs his funds, which began as an investment club, more-or-less on the side." And http://www.canadianbusiness.com/my_money/investing/mutual_funds/article.jsp?content=20060228_111027_964 "He has only a grade 12 education and used to labor as a Bell Canada repairman. He has never worked for a big bank or a mutual fund company." So how does a guy go from being a Bell Canada repairman, to getting a senior executive position at Fairfax, and running one of Canada's most successful mutual funds? Does anyone know the details of that jump? did he just show his investment club returns to Watsa and get offered a job? I'm really curious.. His MF in the US is still very small.. http://chouamerica.com/pdf/Chou.Equity.SOI.093010[1].pdf net assets of 582K? It doesn't have a ticker yet, not sure if I can get it in any of my broker accounts, plus fees are pretty high due to its small size. But I'll definitely keep an eye on it..

He stripped it of the faux nouveau riche fixtures. He's still a good guy. Oh sure, his 14,500-square-foot mansion for $14 million 'stripped' house :-)

Speaking of retirement if you have time you should pick up a copy of the book "the 4 hour workweek". The guy comes of as rather full of himself but it's a brilliant book. He basically talks about taking mini retirements throughout life, outsourcing parts of your life to cheaper places, taking time to do things where you push your self and learn. He's also got a blog which is interesting reading. I don't remember the details but there was some guy who asked his friend in the rat race what his dream vacation/getaway mini retirement that he was saving and toiling for would be. He said he'd like to go to Thailand and check out the beaches and hang out for a few months. Well it's dirt cheap over there, you can live a very luxurious lifestyle for not a lot of green. Basically his 'dream vacation' would have cost a couple of grand. I guess it comes down to applying value investing to other areas of life :-) Price is what you pay, value is what you get. You can probably retire quite comfortably off in some other part of the world if you have 200K in investments and can earn 10% a year...

I think Berkowitz and Miller are completely different. Berkowitz is continuously focused on the downside. I mean he has like 2/3 in equities, and the rest in cash and bonds? He does special deals like GGP, and ACF. Miller loved taking risks. I remember the interview with Bruce about his manager of the decade award. He basically said 'yeah that's nice, but it doesn't matter if I don't perform going forward so whatever". He basically took it in stride as if it barely mattered. Bill Miller's foray into the financials after the first shoe dropped also showed me the clear difference between the two. Miller's reasoning if I remember it, was basically that 'yeah this happens and it's a buying opportunity, and I bought into financials the last time this happened and made a bundle' (at least that's the gist of what I remember reading, contrarian but not focused on the downside). Bruce stayed the heck away, way away until everything cleared out. Or mostly cleared out. Anyway, the only thing that makes me uncomfortable about the article is the lavishness of his house, but I guess if you manage 10+ billion you can afford luxuries like that, and hey not everyone can be like Buffet :-) Oh and of course the 10+ billion and his statement that he things 25 billion is a good size for the fund.. Doubt he'll be able to outperform much with that but who knows? The other thing I liked was his daily speed walk and workouts with a personal trainer. Just finished the book "Brain Rules" and the whole "exercise is scientifically proven to improve executive function" kind of struck a cord with that article. :-)

This was interesting nugget.. "In addition to realizing gains in equities, I also transacted a number of exchange-traded derivative contracts that paid off consistently throughout the year. The higher the volatility of the market, the more attractive we deem this category. We find that these opportunities, inter alia, surface in times of adversity." Perhaps Big is selling options premium on volatile value stocks? I remember Mohnish recently talked about doing this, saying he attained 50% returns in his personal account...

Bucerias? We were just in Narayit a month ago! what a beautiful place. The taxi driver on the way back told me that probably half of the population in Bucerias is Canadian. He told me they are thrifty and they don't tip well! Which makes sense seeing as there are value investors living down there! ;-) Not sure if you're Canadian though ;D

I was talking to a guy who was responsible for installing the nat gas Bloom boxes http://www.bloomenergy.com/ An in that case distributed power is actually more efficient. Power from a station many miles away loses a certain amount of energy before it reaches it's destination. Supposedly getting the nat gas directly to the site and converting it there is more efficient than doing it in a power plant. All second hand knowledge so can't corroborate one way or the other...

Speaking of which, has anyone noticed that Apple made the magic formula!? (At least it did over the weekend, haven't checked today...)

Oh I htink I found it... http://www.petrobank.com/wp-content/uploads/2010/04/21951_Petrobank-Notice-Info-Circ-Print-V2.pdf Looks like the CEO owns $200+ million. Several of the execs and directors own hundreds of thousands of shares as well so it looks like they are reasonably well aligned. Haven't dug too deep into the compensation plan to know if it's egregious or shareholder friendly though...

Swizzled, what is their insider ownership? I haven't been able to find it. I searched SEDAR but I'm not sure what document to look at. Thanks, Bargainman

Quick question, as I'm just getting my head around this company. What happened 2-3 years ago? The stock took a dive from $65 way down very fast. Thanks for any info.

Myth, I was a bit confused by "BYD" since that's also the acronym for "Build your dreams" the chinese company. I take it your entire email is referring to BYD-UN.TO, Boyds right? I was looking here: http://www.boydgroup.com/i/pdf/2010-Sept-CorpPres.pdf on the financial summary page they say: EBITDA $3.5 Net earnings of 2.1 million Net earnings per unit of $0.176 Distributable Cash of $2.6 million Distributable Cash Per Unit (diluted) of $0.217 Payout Ratio: 35.1% I guess I'm confused. How is the Distributable cash higher than earnings, and yet the payout ratio only 35%? Have you looked at their financials enough to know the answer to this? There must be some large non cash items bringing down earnings no? The 6 month figures are similar. Even compared to EBITDA you're still taking about the distribution being 70% or so of EBITDA... I like the general idea of a company rolling up a fragmented industry with recurring revenues. It reminds me of the classic in that 'strategy space': SYSCO, and more recently FLO. I haven't bought either of those, but would like to at the right price.

Interesting.. Finally someone is doing something to incentivize strategic defaulters instead of only trying to help the people at the bottom of the default barrel.. Probably not as good as what Bill Gross previously proposed, but interesting ideas... A Wharton finance prof seems to be involved... http://www.time.com/time/specials/packages/article/0,28804,2029497_2030629_2029798,00.html http://knowledge.wharton.upenn.edu/article.cfm?articleid=2595 http://www.inman.com/buyers-sellers/columnists/tomkelly/rebate-staying-current-underwater-mortgage

I do sometimes wonder, with Bill Gates as Director of BRK, why they don't take this sort of action more seriously. Surely Gates gets value investing and allocation of capital to durable businesses after being so close to Buffett.. why not apply this model to MSFT?

meh. Wasn't all that impressed, too touchy feely. Especially when it comes to Apple. He claims that every other company could do or could have done what Apple does; that's baloney. There was a famous decision that Jobs made when he first came back. Jobs said that basically Apple was the only company that built the entire widget any more. Everyone was claiming that was a huge disadvantage but he said that was Apple's key advantage. The rest is history. Since they do the design, the software, the hardware etc, they had a huge advantage over everyone else. No other company did or does that. To claim that Apple succeeded because they focused on "why" vs 'what' or 'how' is a huge simplification and inaccurate. It was more about the fact that they focused on their key advantage and grew it even more, by entering into new markets and by creating an even stronger vertical (opening the Apple stores). The Tivo thing was less than convincing. Tivo didn't fail because it didn't advertise right, it failed because there was no moat. Apple has so far failed in TV. Jobs ironically spoke about why TV is such a tough area to get into recently. On the other hand it was only about 20 minutes, maybe he has something more substantive to back up his claims, it seemed like a lot of hand waving with no evidence to back it up... IMHO.

Take a look at TILDX, read up on Zeke's letters and his presentations at the VICs. They have the added flexibility of selling calls. Kinetics has had pretty good performance but seems to be less known. Also the Primecap Odessey group is a bit less well known but they run some of Vanguard's funds. Just food for thought. Bruce from Fairholme is opening up a new fund too, it will be interesting to watch..

You got some ticker symbols or links I can look up?