bargainman

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

Speaking of electric cars you should watch the move "Who killed the electric car?" http://www.sonyclassics.com/whokilledtheelectriccar Very interesting movie (although obviously a bit biased). Basically there was a huge surge of electric cars, then all of a sudden they were pulled off the road and crushed, literally. GM never allowed people to own them, only lease them, and never promoted them to a high degree. Then California pulled their no emission vehicle standards because one of the top guys was involved in hydrogen fuel cells (which by the way is supposed to be a complete pipe dream). Oil companies spent money advertising to create FUD about electric cars, and the rest is history. Many many people/companies/industries have a huge interest in seeing the electric car NOT hit the road. Now it'll be interesting to see BYD and maybe others which do have an interest in having electric cars hit the road. Plus back then people hadn't yet suffered the latest peak oil scare, so the public wasn't as interested.

Ask your broker to request that the options be listed. Sometimes the market maker will add options on request.

Yup that's it. This has actually been going on for quite some time. SHLD is very difficult to short. That's why you can't arbitrage this. I asked a guy who used to be a market maker about it a while ago when I noticed the discrepancy (this was back in April 2009) and he said that that was the case. "the reason the reversal (buy call, sell put, sell stock) is trading so high is that the stock is very hard to borrow…" I looked at other stocks that had a high short ratio at the time and noticed that some of them did not have as much of a discrepancy. He said that it "Will all be based on how hard the stock is to borrow and the probability of getting called in on the short stock." So basically if you're willing to be long the stock and take the downside this is a pretty nice 'inefficiency' to take advantage of.

Yes. The last one was awesome. Small crowd and great speakers last year. They follow SNS, FFH and others. Mostly deep value, smaller cap. This year the speaker line up is different but it still sounds like a really good group.

Can someone walk me through the tender offer mechanics. I have some shares of ORH. I've been told that i would have to tell my broker that I want to tender my shares to FFH if I want to sell them. Now what happens if I don't tender them? Will FFH still end up buying them out? Presumably there will be some people who just have ORH and just aren't aware of the Tender offer or too lazy/busy to tell their brokers to do it. What happens to those shares? Thanks.

I'm really curious about Level 3. I've seen them mentioned on the board from time to time. although I can't seem to find many posts on the board now that I'm searching. What is the thesis on these guys? Looks like Longleaf and FFH are two major holders, and looks like they went from 100+ to a buck, but I don't know much else. Has anyone posted a more thorough investing thesis/valuation on them that I'm not seeing via search? Thanks!

The question I have, after reading more than half way through "Fooled By Randomness", is: Is Buffet's method for demonstrating the non-randomness really valid? In the book Taleb talks about survivorship bias, and how many times people aren't looking at the full sample set. In the article Buffet specifically only picked 7 *successful* managers. He never talks about all the managers that went through Graham's class and used his methods that were unsuccessful. If they were unsuccessful they never would have made it in the business and would have just dropped out. So that leaves me wondering. The first time I read Buffet's article I agreed with everything he said But this time I'm not so sure. According to Taleb you can't just look at the successful people and draw this conclusion. I mean there are a *lot* of Value funds out there. How many of them actually outperform? is it statistically more than other index and growth funds? Makes me wonder... Thoughts? Has anyone else out there read Taleb's book?

Here's a dumb exercise: just see what the top of the market cap is going to be 20 years from now. Say we take Exxon, which is about 300 billion in market cap. Say they grow at a rate of 5% a year. They'll end up being about 800 billion. If they grow at 10% they'll be 2,018 billion (2 trillion). So if BRK is about 150 billion today which is about 1/2 of Exxon, it's not unreasonable to think that they'll end up at 1 trillion in 20 years right? (very broadly speaking with hands waving all over the place :-) ) Still that's between a 5 and 10 bagger from today. Which isn't bad but won't make you rich. Now FFH has a market cap of 6 billion.. Say they are able to grow at 15% for the next 20 years. That would make them a 98 billion market cap company. Seeing that the higher end of the market cap range might be from 800 and up, that's not too unreasonable. That would be more than a 10 bagger, closer to a 20 bagger. Not bad again.. Now say we take SNS. MCD is about 59 billion, at 5% for 20 years it will be 156 billion. If SNS at 336 million market cap today grows at 15% for 20 years we're talking 5.4 billion, so again more than a 10 bagger closer to a 20 bagger. With a lot of room to grow still since that would be no where near the size of MCD even today. If Sardar pulls a 20% a year for 20 years a la Buffet and Peter Lynch SNS will be a 12.8 billion company. Again, not out of the realm of possibility even compared to MCD's valuation today... Speaking of FAIRX, he has about 9-10 billion in assets today. I'm not sure how much more he can take and keep beating the averages. I think that the largest mutual funds that are actively managed like Fid Magellan and Fid Contrafund are around 50 billion so that's at max a 5 bagger. Say Contrafund goes from 50 billion and grows say 7% a year, that would put it at a 200 billion fund. So if FAIRX got up to that it'd be at most a 20 bagger.. Of course at the way FAIRX keeps gathering assets I'm not sure they get to grow that fast from actual appreciation.. Anyway, like I said, lots of handwaving, but I like testing the boundaries of possibility.. Like back when we had the tech bubble and we had CSCO and MSFT trading way beyond those boundaries...

Say you were going to retire in 20 years. What 5-20 stocks/funds would you buy and hold/trade around during that time? Just curious what people here thing. A few reasonably obvious choices are: FFH, BRK, LUK, MKL, SNS. I've heard people say Bidvest too. Funds FAIRX, TAVFX.. any others? 20 years is a pretty long time for compounding to work it's magic.