Parsad

Good article on Spain. Crisis = opportunity...be it here or abroad! Cheers! http://www.reuters.com/article/2012/05/17/us-spain-economy-idUSBRE84G0CK20120517?feedType=RSS&feedName=topNews&rpc=71

Article on how gold demand is down around 5% across the board this year. Cheers! http://www.cnbc.com/id/47456044

Yes Tom, I do agree. Especially if one pool of capital is permanent personal capital, and the other (in our case) is non-permanent, redeemable capital. You are willing to withstand a considerable amount of volatility, whereas I cannot guarantee that the constitution of our partners is as high on a collective basis. Thus I have to view the world through best case scenario and worst case scenario on a daily basis, and weigh that against the risk premium provided to us on investment opportunities. Cheers! Sanjeev, I think what you are doing as a manager of funds that don't have a lockup is wise. It reminds me of what Frank Martin of Martin Capital management has done very successfully to manage capital through the cycle and produce superior returns for his clients. My hat is off to you, and that opinion will not change regardless of the direction of the market in the next few months. :) Thanks Twa! Incidentally, we're pleased that both of our funds have now pulled ahead of their respective indices. It took a while to make amends with the Canadian Fund, but we are now well ahead of both comparative indices (S&P500 Cdn & TSX60). Our goal has always been, and always will be to provide above average returns with no permanent loss of capital, while giving our partners access to their money. We can sleep well at night, along with our partners, and I can't say that about many managers. Cheers!

Yes Tom, I do agree. Especially if one pool of capital is permanent personal capital, and the other (in our case) is non-permanent, redeemable capital. You are willing to withstand a considerable amount of volatility, whereas I cannot guarantee that the constitution of our partners is as high on a collective basis. Thus I have to view the world through best case scenario and worst case scenario on a daily basis, and weigh that against the risk premium provided to us on investment opportunities. Cheers!

By the way, I would recommend that you guys take a look at slide 35 from Fairfax's AGM presentation. http://www.fairfax.ca/Theme/Fairfax/files/2012%20AGM%20Slide%20Presentation_v001_f4dd72.pdf That's kind of related to the stuff we had been watching leading up to our decision to become cautious again. That unemployment rate in Europe is not at a bottom and Europe's economy overall is contracting. Not like 2009, but it is contracting. http://epp.eurostat.ec.europa.eu/tgm/table.do?tab=table&plugin=1&language=en&pcode=tsieb020 And unfortunately, the structure of the EU and the debt to GDP ratios of many sovereign nations, would make it difficult for them to stimulate their way out of this without any resulting dislocation. The U.S. is not in the same situation...they have more levers they can still pull, and they can inflate their way out of this as unsavory as that may seem. But any significant economic upheaval in Europe is going to affect everyone else to some degree. Cheers!

Thanks for the tips Moore...I will reexamine my allocation! ;D At the same time, do you think you might be less objective because my sentiment is a bit different than last year, whereas yours has remained the same? We try and stay away from forming any sort of permanent bias, other than we buy cheap and sell dear. When were we buying last year? Take a look at the chart below: http://finance.yahoo.com/echarts?s=%5EGSPC+Interactive#symbol=^gspc;range=1y;compare=;indicator=volume;charttype=area;crosshair=on;ohlcvalues=0;logscale=off;source=undefined; When were we selling and I was warning about being defensive? Take a look at the same chart. Not hard to do the math! We aren't timing the market...we are quantifying risk and reward. We thought the world could handle Greece last year, that's why we were buying. But as the year has progressed, we think that the world would have a difficult time with Spain. We're not saying sell everything. We're saying that things could get cheaper again based on both fundamentals and difficulties deleveraging Europe. I haven't sold a single share of BAC or WFC. I haven't sold a single warrant in BAC. We still own them and we aren't selling because we think those banks are cheap and we like management. But we did sell other things that aren't as cheap and we did build up cash because things were getting more expensive. We do everything we can to protect the portfolio and cash gives us tremendous flexibility when valuations aren't quite to our liking. We're not holding cash for the long-term...only until we find more things that give us an adequate risk premium...and we think that premium will arrive via difficulties in Europe. We'll let everyone else overpay. Cheers!

That's why I said US stock portfolio ;) Ah, sorry Max! Cheers!

Yeah, I've got to ask Mohnish about this the next time I see him. I think he realized that the smaller position sizes just weren't going to cut it. If he's gone back to the old model, I'm happy to see it, because I think a little more concentrated is better. More volatile, but he's going to get the outsized returns long-term. Although you are wrong about the 60%. It's more concentrated than before, but that total excludes his holdings in Fairfax, the Japanese basket of net-nets, and all of his cash. He's got over $550M in assets, so it's more like close to 40% actually. Cheers!

That's also partly the reason we do keep more cash than virtually all other fund managers to begin with. We have no lockup and we have a fiduciary responsibility to protect our investor's capital. We like cash...there is nothing wrong with cash. We don't hold it for years, but we hold it for periods where we think the market is ignoring fundamentals or obvious macroeconomic risks. Stocks were fair value a month ago, and they are only modestly cheaper. There is one stock that we are averaging into right now, but most are not cheap enough yet to risk capital and ignore risks. We like what we own and we have significant gains in some. Things just aren't cheap enough right now if we plan on providing outsized returns relative to the index long-term. Cheers!

Not yet! You can find the occasional thing that is getting beaten up now, but people are still really only worried about Greece. Once Greece exits, it opens the door to everyone else. In the long-run, the Euro will be better for it, because they would get rid of the reckless and lazy countries. But we aren't anywhere near that yet. The other thing you guys may have noticed, is that gold is finally getting killed when people are concerned about Europe, rather than them running to it. I think Prem's call on commodities peaking last year was correct. Sometime in the next year we are going to see a mini-version of 2008/2009, and then you should jump in with both feet! Just no substantial bullets left! Europe has to now work itself through the process of deleveraging, and that will be uncomfortable. Not as bad as 2008, but it will be uncomfortable for most investors. Cheers! I thought your 50% cash level was mainly due to averaging out as your positions went up and it's not based on market level or Europe issue. It was partly that and partly concern about what we were seeing. The more the risk/reward ratio gets skewed, the more cash we are comfortable with. I'm not particularly concerned about the U.S. and I think long-term investors in the U.S. will do better than most other regions. But in the short-term there is going to be some opportunity to get better long-term returns...better than last year, and not as good as 2008/2009. I'm finally at the point where I would consider looking at Europe as well now. We've never gone outside of North America, but distressed environments breed good investments, and I'm finally slowly looking. Probably a whole lot won't happen, but it's finally piqued my interest. Cheers!

I think it has a good chance, but remember I said it would trade there barring a severe economic slump. Eventually it will hit tbv and book, and I think as earnings continue to come out through the year and they settle more cases, it will move up. Alot of pressure has suddenly been put on JPM now...presently, BAC is now the second most-hated bank rather than the first. Although that will probably go back to normal after JPM gets these investment losses and investigations behind them. Remember, if there is any slump, U.S. banks are in far superior shape to last time. It's like night and day this time around. The more unloved they get, the better investment they become. Cheers!

Not yet! You can find the occasional thing that is getting beaten up now, but people are still really only worried about Greece. Once Greece exits, it opens the door to everyone else. In the long-run, the Euro will be better for it, because they would get rid of the reckless and lazy countries. But we aren't anywhere near that yet. The other thing you guys may have noticed, is that gold is finally getting killed when people are concerned about Europe, rather than them running to it. I think Prem's call on commodities peaking last year was correct. Sometime in the next year we are going to see a mini-version of 2008/2009, and then you should jump in with both feet! Just no substantial bullets left! Europe has to now work itself through the process of deleveraging, and that will be uncomfortable. Not as bad as 2008, but it will be uncomfortable for most investors. Cheers!

Unfortunately, Morgan Keegan and Exis got off on the racketeering charges, but they still face trial on damages in September. Cheers! http://www.bloomberg.com/news/2012-05-15/morgan-keegan-wins-dismissal-of-fairfax-racketeer-claims.html?cmpid=yhoo

Tom, it's to create recurring income. If you are living on 1&20 or 2&20, or even only incentive fees, then you may have established too much overhead in the good years, and need that stability during bad years...or it could just be they are screwing with people! ;D Cheers!

Hi Shane, Dalal Street is just the general partner for the Pabrai Funds. It looks like that filing has shown up before the normal 13-F filing under Mohnish's name has shown up. He's heavy into financials! Cheers!

I have no problem with anyone criticizing Francis' investments and neither would he. What I'm saying is the smarmy, smart-ass comments is what I can do without. Hester's initial comments were fine. It was the whole "great Francis Chou" stuff. The board is called the "Corner of Berkshire & Fairfax" for a reason. I don't care if you don't agree with something regarding Buffett, Watsa, et al, but do me the courtesy of being respectful to them, as it is my board and my time spent running it. Some of you may say Francis doesn't belong in the same category, but he's solely responsible for why our dinner is the way it is now. As a human being, he may be on par with them already! Cheers!

Well there's one enormous difference that you may or may not have noticed. Francis is a very good friend of mine, as well as to many others on this board, whereas the turds you mentioned I have no knowledge of whatsoever...except the one time I cornered Herb Greenberg at the very first Value Investing Congress. He, along with Jim Chanos, had just called Fairfax and Prem frauds in front of 400 hedge fund managers. When I asked Herb if he actually read the Fairfax annual reports or filings, he said that he had not, but had two very trusted sources who had done their research! So, if you believe turds like that are on the same level as Francis, by all means say what you want about him...but you better as hell do it on another board. If you haven't noticed, I own this board and moderate it. If you don't like it, you are more than welcome to go back to your blog! I hear one more sarcastic comment about Francis, and I have no problem banning anyone's ass...censorship be damned!

I think any banker arguing against the Volcker rule is just defending their book. There should be a clear separation between banks and trading. This just goes to prove it...that no matter how much a CEO knows, they don't know everything, and there is a real need for a barrier to risk that could take down a leveraged institution and others around it. Cheers!

Love his quote about Madoff! Cheers! http://www.cnbc.com/id/47376043

Like the United States, they are rich enough to keep themselves on the rails for a pretty long-time. If they can fix the problems while staying on the rails, then it is not a problem. Europe cannot do that...their nations and their banks are pretty leveraged, and they aren't rich enough or eager enough to work together. Some will go and some will stay, and then things will be fine...but in between it will be volatile and alot of work. Cheers!

I don't think you'll see that sort of contraction in the United States, but you will see flat to zero growth. This is very much a repeat of 1937, but in Europe! They are headed for a severe recession...depression in some regions already...and that level of contraction may happen over there. That will mean continued low interest policy here and slower growth. Let's just hope nothing significant happens in China or Japan. Cheers!

Not sure what the sarcasm is for Hester. He laid out all of the pros and cons, including the fact that the financials may be fraudulent in the annual report. He said that he is taking a basket approach because of the risk. Like others have said here before, it's so easy to be critical when you hide behind anonymity. At least I can give Carson Block that much credit, because he put his name out there, but alot of other people, and maybe I'm pointing you out and maybe I'm not, are a hell of a lot braver when they have nothing to stand behind other than a message board username. Cheers!

It all depends on your needs and level of comfort. There is no one specific answer that fits everyone. Cheers!

Business casual is fine in my opinion. Cheers!

One of our boardmembers had a couple of memorable pictures with Warren last weekend! Cheers! Alan_With_Warren_2012.pdf