bargainman

Here are a few alternatives to also consider. Closed Ended Funds: http://www.smartmoney.com/investing/stocks/Pipeline-to-Profits-17281/ FEN FMO KYN TYG

Ok.. let's back up a wee bit here... What caused this in the first place? Banks, securitization, CDOs, CDS, mortgage brokers with misaligned incentives, and the rating agencies. People like Wamu CEO, CountryWide CEO and others who basically decided that Ponzi lending was a viable business plan. Ie it was better for them to lend loans to people with lousy credit and have them default years later, since the bank could then repossess the house and then sell it at a profit. Also let's go way back up and examine the reason loans in some states are non recourse to begin with, dating back to 1860. Look here: http://www.thebigmoney.com/articles/money-trail/2009/10/08/go-ahead-walk-away?page=0,1 In particular, these three paragraphs: "The history of the recent mortgage boom is one of bankers racing to outdo one another in lending more money on the basis of ever-flimsier collateral. This is not a new phenomenon. It is a speculative mania, as has appeared in real estate time and again, and one reason for the restrictions on banks collecting the full face value of busted mortgages is to make it less common. These restrictions on banks are not some newfangled innovation. California's one-action rule, for instance, dates back to 1860, a period during which ranchers bid up the price of land, thanks to easy backing from lenders who encouraged speculation in the hope of quick returns. Even the term walkaway is by no means new—it appears in this nearly 50-year-old (and lecture-free) story from Time, which cautions bankers that if they keep making careless mortgages they'll have to deal with debtors who abandon them. That old news story has things exactly right. It's banks, not home buyers, that are in the better position to judge the real estate market and how much their collateral is really worth. The bank approves the assessment and decides how much equity a home buyer will be required to put up. All the mechanics of mortgages are designed to let a lender avoid the situation in which it is owed more on a house than it is worth. The limits on banks' ability to collect on badly underwritten mortgages places the responsibility for judging the sanity of real estate loans in the hands of lenders. Clearly in the last few years all these mechanisms failed utterly. They failed, not because of morally bankrupt borrowers who go back on their “promises,” but because bankers decided to count on a perpetually rising real estate market to absolve them of the necessity of responsible lending. Far from misusing the lending laws, borrowers who use the rights the law gives them to walk away from mortgages merely place the risks of insane lending where the law intends them to lie. What they do is not dishonest; on the contrary, a key reason we give borrowers the ability to do that is to keep bankers honest and responsible." Here's the article from Time that they reference: http://www.time.com/time/magazine/article/0,9171,827500,00.html Now I'm not saying there weren't irresponsible buyers. Of course there were, and there were also immoral speculators flipping property, and taking advantage of the irresponsible banks. But by and large people were trying to buy a house "before it got too far out of range". If banks and wall street firms with teams of Ph.Ds from MIT and Chief risk officers couldn't determine that they shouldn't be lending on the basis of ever higher real estate prices, with ever lower downpayments, because the ponzi scheme was going to pop, what chance did the normal Jane and Joe off the street have? There is no way people who are not real estate experts could cause a speculative mania without the banks. People just don't have hundreds of thousands of dollars laying around to bid up the prices of housing. Banks provided the easy irresponsible leveraged lending via ponzi lending. Without that there would have been no bubble at all. Now banks are paying for it, except that they are being bailed out by uncle sam, whereas ordinary people are not! To make things worse banks are refusing to modify loans even in pretty dire situations. For some reason they'd rather have people default on their homes, so that's what people are doing. That's really their only option since banks aren't modifying payments.

I agree with pretty much everything you wrote Cardboard!

They are bidding $.05 according to yahoo.. which is 1% on the strike price for a year.. Also count commissions on the sale of $5 and I'm not sure you have much left. Now the $10 puts sell for .25 which is 2.5%.. That looks a bit better to me.

Ummm.. what does this mean? Will the FFH I hold in my US account be force sold leaving me with a big tax bill?

Interesting link: http://www.valueinvestigator.com/datavalue/elf_.pdf What is the equivalent to a 13F? I didn't find a doc in the sedar site with the investment portfolio, (but I didn't look at all of them). Where is this disclosed?

Um.. China's currency is pegged to the dollar so how is the devaluing dollar going to affect cheap stuff from China?

You can opt out of their quotes charge (at least you can in the US). In that case they have a $10/ month minimum in general. That said their commissions are so cheap that it usually doesn't matter. If you want free quotes and are a less frequent trader you can also try thinkorswim.ca, although it looks like their commissions are higher in Canada than the US. $1.50 per contract with $7.50 minimum per trade (spreads - each leg represents a trade). IB also has free, yes free, assignment and exercise which rocks.

Yes I was kidding. That's why I put a ;-). Goodness, it's ok to joke around once in a while, even on such a serious topic as value investing!

T-Bone? Hmm isn't Warren Buffet's bridge handle T-Bone? Is that you Warren? ;-)

Just saw a national geographic issue about gold. Apparently all the gold ever mined up is just enough to fill 2 olympic sized pools! 50 percent of that mined in the last 50 years it said. They also had a distribution graph which showed that the *vast* majority was used for jewelry. I can't seem to find that graph online. Does anyone have a source that shows Gold use? The other uses were ETFs, hoarding, electronics plus some others, but those were much less.

I think this entire discussion is highly over blown. On the list of 'things that are wrong with corporate America and governance in general', splitting shares is pretty far down the list of things I'd be concerned with. (assuming I believed there was something wrong with doing so, which I'm not convinced that I do. If I remember correctly Buffet started selling B shares when BRK was pretty overvalued no? So he was essentially selling BRK shares at a very high price. I seem to remember that from Alice's book. I mean really it should be up to management to take advantage of the market as they see fit. Smart management should buy back shares when the price is cheap, and sell shares, raising equity when the price is high. I remember back during the height of the Internet boom I read something about Amazon raising cash via debt! At the height of the boom when their shares were floating above the clouds they went for debt instead of issuing shares! Amazing.

To me, a small retail investor, after the share price gets too high it makes things more difficult for 2 reasons. First for BRK-B pre split at 2-4K a share it's tough to 'average in/average down' etc. Second for any stock over $50 it's tougher to trade options on. I like selling puts to acquire and selling calls to sell and lower my cost basis. But options are in 100 share contracts. So once the stock hits $50 you're up to 5K per shot so to speak. To me that makes it more difficult. So honestly I personally, as a retail investor, think it's a bit problematic to have a high share price. I would actually think that institutional investors would have an easier time with the high share price, since if you're throwing around several million $, there's little difference... Not sure if that's really the case or not...

Is there an easy way to get this for any company? I was thinking I could potentially seek out the CIK and the name, but was wondering if there was a way to just go from ticker symbol to this holdings screen? Thanks.

Can you give me the info on how you calculated CNA's book value? I was looking here at their latest 10Q: http://sec.gov/Archives/edgar/data/21175/000095012309056086/c54348e10vq.htm and they say: Total CNAF stockholders’ equity: 10,769 Noncontrolling interests: 486 Total equity: 11,255 10,769/269 shares outstanding = $40 11,255/269 shares outstanding = $41.8 So where are you getting $35? Also what is the Noncontrolling interests item? Do you know? Thanks

The thing I wonder about is "What exactly is broken?" Obviously companies and funds still need the ratings. Today the problem is that the ratings, if I remember correctly, are paid for by the funds that are being rated. That's a terrible conflict of interest. But those companies/funds buying funds still need ratings. One idea I heard thrown around was that the companies who are buying should pay Moodys and others for the ratings. That would remove the conflict of interest. So if Moodys can change the payer, maybe the business still works?

Are you all kidding me? This is one group of the most dedicated value investors I know of. And yet there are messages bemoaning the mood swings or lack of mood swings of mister market? Suck it up guys and gals! The intrinsic value of FFH just went up, while the price quote didn't. That means we have yet another arbitrage opportunity. We should be celebrating that we can still get FFH at below book, and that FFH just 'went on discount at the mall', not bemoaning that Mr Market hasn't recognized the boost in book value. Come on! You are all one of my sources of inspiration and encouragement, don't be getting into Mr Market's moodiness! :-)

Ben, I was also sort of dismissing Roubini as a broken clock economist. I had recently read "Fooled by Randomness" where Taleb is borderline spiteful towards economists and the 'sound bites' they produce. His point was that they are just commentators not traders, so really what they get paid for is sounding good and maybe being right, but not making money. And there is a big difference between being right and making money, and also between sounding smart and making money. But I digress. The thing that sort of flipped it for me was that I read Taleb say that Roubini was one of the only economists he thought did a good job. That's about as high a compliment as I could imagine him receiving so it gave me pause...

So what was the justification for making this a taxable event instead of just giving ORH shareholders FFH stock? FFH sold more shares to raise capital for the transaction no? I could understand it if they didn't raise money through issuing shares, but this seemed like a bad decision for shareholders of ORH from a taxation standpoint no? (I remember this being partially discussed before but can't remember what was concluded)

I'm personally happy about the split. This way options trading will become available to the little guy (selling puts to acquire for example). Also since there are A shares won't there be a built in kind of arbitrage that will keep the B shares from getting too volatile? (I don't think you can exchange Bs for As, but still the arbitrage is implicit in the value of the shares no?)

Sanjeev, I believe what you said. I just want documentation if there is any. Do you or anyone else know of any?

Yes and no. This is the same argument used by those who advocated the destruction of pension plans in favor of consumer directed 401ks and the like. "let the consumer decide". All good until a year like 2008 where all the baby boomer's 401ks get wiped out. Also it's been proven time and again through behavioral finance studies that consumers and people in general are not rational. I mean that's the whole assumption of value investing. Maybe I'm taking what you wrote and misinterpreting it, but basically it sounds like it would discourage preventative care and encourage people to wait till they had a really costly illness. It would also discourage collective bargaining. A large organized company is a lot better at bargaining than a consumer. A good friend of mine who is American once explained this to me: "The thing about the US is that people here have an inherent distrust of government. It's in the blood and in the history of the country. I mean we still celebrate overthrowing the British". To me that is a very interesting point. Some people in the US are so distrustful of government it's truly amazing. Honestly I don't know where I fall in that camp. After living through the last election and seeing all the government shenanigans and posturing during the credit crisis, I can't say I blame them. On the other hand the insurance industry is clearly broken. So shouldn't we distrust large industry as much as we do government? Remember Eisenhower's warnings about the Military Industrial complex? (originally he actually wrote it about the "Military Industrial Congressional complex" but he valued his relationship with Congress too much). It seems to me like large companies control government more and more these days. Especially militarily contractors, but also health insurance. Anyway, sorry for rambling, but my point is that at some stage shouldn't we start trusting our own government? I mean our government is supposed to be our advocate. Industry is supposed to make profit and is selfish by design. But our government is supposed to be on our side no? If it's not then how is private insurance on the people's side? It seems to me that the incentive system is really really broken right now.

I'm curious, I remember reading things here and there about Buffet and Watsa. Watsa attending all the BRK meetings back before they were popular, and Buffet mentioning FFH at the annual meeting one year. But I was looking for 'documentation' of sorts. Does anyone have any links that document Watsa and Buffet's interactions at all? Surely Buffet knows who Watsa is, but has he ever publicly mentioned him? Just curious.. Thanks.

What I don't understand is this. People argue against having government run healthcare because they say it will be too expensive, that government is inefficient, and that capitalistic competitive private insurance works better cause capitalism rules. But on the other hand these same people argue that having a large government insurance presence will bankrupt the private insurance companies because then the private insurance companies won't be able to compete. To me these seem like totally contradictory statements. If private insurance competition is the best most efficient way to go, then they are the cheapest, they will lower costs, and then having the big inefficient government compete against them shouldn't matter one iota, since government is supposedly inefficient and the private insurers will be able to compete against big inefficient costly government. I don't see how someone can rationally argue both statements above, and yet many are doing just that... Any thoughts?

Well for something like $60 you can see this other value investing conference online.. Going on right now. They'll also have archives for watching the session later. Their stocks include Biglari, FFH and BAM. Someone else posted this earlier. I was there at the last one 2 years ago and it was quite good. http://www.completegrowth.com/index.php?option=com_content&view=article&id=98&catid=97&Itemid=22