Parsad

It's no different than Buffett/Berkowitz/Tilson/(insert name of your favorite money manager here) publicly disclosing the investment theses of their holdings, be it in short form (media interviews) or in some details (presentations in investing conferences or the oft-leaked letters) either. I don't know. I think it's different when you have the word analyst in your name and you offer to write reports for other people for money. Everyone knows where the money manager stands. An analyst, not entirely unlike a journalist, is regarded as having an objective view on a subject with some sort of arms-length relationship to his/her report and compensation. The line has become too blurred between analyst, journalist, newsletter writer, etc. Cheers!

You're joking right? How long do you think a case like that, involving cross border dealings would take to complete? How much money? He's exposed 5 frauds in the last year, and let the market worry about it. Not at all. This is the way the rest of world works does it not? We have a legal system for a reason, correct? Also, going to law school does not make you an attorney. I didn't say he should run the case himself. Prem's not an attorney is he? How about Patrick Byrne? Block could have filed a class-action suit in the U.S. and Canada, as the company is also sold to shareholders in both countries and listed in Canada. The money he spent on accountants, researchers, travel, administrative costs, etc, would have been more than enough to cover the costs of filing the suit, filing a complaint with the SEC, and then running the case until discovery and trial. He would be paid on contingency and any future settlement. He chose to put out an analyst report and short the company instead. His choice but I think it's unethical...and no different than a long analyst putting out a report and buying stock or call options. Cheers!

PS. Does it not concern anyone that Block serves his own interests by driving down the share price? Do you not think that may effect his credibility and objectivity? I would suggest that the incentive for Block to see the stock go down, was even greater than Gwynn's incentive to see Fairfax's stock go down. People say that Block has to make a living, and he's being honest about his position, but he is an attorney is he not? He could actually pursue fraud in court and represent investors through class-actions, ultimately receiving his compensation through contingencies. Would that not achieve the same end result? Would that not represent a more ethical way to uncover the fraud by going through the legal system and actually possibly returning capital to those same shareholders who have been defrauded? Presently, his behavior strikes me as someone who yells fire in a theatre, and as everyone flees, he goes in and steals the money and credit cards left in jackets and purses on the seats. Whether there is a fire remains to be seen, or was it all just smoke blown up people's asses? Incidentally, Sino-Forest has done little to shed light on the situation either. Somebody should have given them a playbook on how to deal with such a crisis! Cheers!

One more thing: I think analysts, both long and short, should have to disclose the exact position they have in any company they are covering or reporting on, including holdings within their immediate family and any arms-length relationships they should appropriately disclose. I also think investment banks or institutions that take stock, warrants or equity in any company they are financing, should be required to file ALL purchase and sales in those businesses...or they should be vested for 3 years. I think there is a ton of unethical behavior in the financing of junior cap/small cap stocks by small to mid-sized investment banks. Those institutions shuffle off the stock in these companies to their retail clients, whether they are appropriate or not for their portfolio, and then sell off their stakes as the price rises...leaving the retail investor holding the bag in crappy companies. Cheers!

I can see an issue with disclosure on a general basis, but many of those that short are quite clear about their intentions and their positions. So do you have a problem if someone says I am short ABC stock in X amount and I think the company is crap, here are my reasons? Historically we've seen the treatment that people like Einhorn, etc. get when short and it is quite clear what they are doing. No, they should be filing any substantial position on EDGAR, just like longs have to. That way it is legally binding and there is recourse for securities regulators. Just like you can see which longs have a substantial position in any one company, I think shorts should be required to do the same. If this was done, then I have no problem with shorts. Cheers!

John Morgan, CEO of Winmark Corporation (who many of you are familiar with), bought Buffett's childhood home. It's in the hands of a terrific value investor and he plans on putting it to good use! Cheers! http://www.bizjournals.com/twincities/news/2011/07/19/mn-ceo-buys-warren-buffetts-house.html?ana=yfcpc

As someone who doesn't short and doesn't plan on investing in any Chinese companies any time soon, I do find it odd that so many on this board are so vehemently anti-shorts. So long as people make their investments in an appropriate way, why so troubled? No one seems to care when people are long and come out and tout their stocks, but when short and they tout that, it seems to be viewed as a very bad thing. People seem to forget about the goose and the gander. Just my 1 cent. I do have a problem with it. I've had a problem with it for the last eight years. And that isn't because of someone shorting stocks in and of itself. But because disclosure rules for those with short positions, still aren't the same as those with long positions. They've talked about it...they plan on implementing it...but it still isn't the same yet. Once they do I won't have a problem. After that I'll move on to derivates traders and how their disclosure rules aren't adequate. But until then, hell yeah shorts are on my scope! The rules should be equitable, and no one should be given any special privilege in hiding their incentives or motives. Cheers!

I totally agree. I just don't like the way he approached this whole thing, and I'm suspect of how covert he keeps his operations. This strikes me more as Barry Minkow's "Fraud Investigative Unit", then say Bob Woodward and the Washington Post. Cheers!

From the comfort of living in N. America it is easy to romanticize India from afar. Or China for that matter! Every decade, North American's go through how good things are elsewhere. First it was Hong Kong, then the Japanese, then Europe, after that China...now India. Yet all these countries went through their boom and bust...China and India the exceptions. Although China is getting close and at some point India will also. The system here works. People are panicking about the debt ceiling debate, but the system of checks and balances is actually working. I can't stand the Tea Party idiots, but they are actually forcing the Democrats and moderate conservatives to really look at getting the country's fiscal house in order. But the Tea Partiers may be dumb enough to take it too far, and that is my only concern. I think at the end of the day, the majority of them will come to their senses and we will have a compromise. But it will be compromise that would not have occurred if you only had one party controlling both houses. America has its problems, but it also has the ability to overcome them. Some people were complaining about the bailouts, but the Americans in two years have done what Japan couldn't do in ten years. Wash 'em, hang 'em out to dry, and then start all over. Look at Europe...they still haven't strengthened their financial institutions. The worst banks in America are stronger than the best banks in Europe. Other countries love to save face, but they don't want to get down and dirty. Fortunately, or unfortunately, America loves to get dirty and they don't get embarrassed easily. You screw up and then you go fix it. Cheers!

CNBC has an article on Block that also isn't very flattering. Sounds like a frat boy turned attorney turned short seller. Apparently, he's figured out he should now go long on some ideas, since he could make a heck of a lot more. http://www.cnbc.com/id/43765929 On another issue, has anyone actually visited Block's father's company website - WAB Capital? http://www.growthequities.com/wab_faqs.html#002 Not sure how they do anything different than the various investor relations firms, large and small, that push a company to institutional clients and investment banks. In lieu, they usually get a cash fee and and equity stake through shares, warrants or options. The stock goes up as the investment bank pushes the company on their retail client base, and the IR firm and investment bank liquidate their stake as the price rises. Hey, I guess they provide a much needed service! Cheers!

A theoretical portfolio with 100$ each in each of 30 stock has returned $3095, so the short position has a loss of $95 excluding commissions & other fees. If the assets are with a fund manager, depending on how they receive their management fees (incentive, fixed or both), then there would also be that expense. Unfortunately, I'm in agreement with Buffett & Munger on this subject. Why would you want to have a basket of 30 positions plus? Diversification or deworsification? Much easier to find things to go long on and just buy a few...the upside is significantly more as well! Cheers!

NY Times article on high frequency traders. Cheers! http://www.nytimes.com/2011/07/18/business/fast-traders-under-attack-defend-work.html?_r=1&ref=business

I totally agree! That's why I said his conduct was fishy to begin with. If you are going to play in the big leagues, and you are going to take pot-shots at people's livelihood, including the accumulated investments of private shareholders, then you better be willing to take the flak if you think you are right. No one takes kindly to being spit upon, and if you are profiting from someone's downfall, there are always repercussions. Plenty of journalists take the same risks, and they don't take to this hiding under a rock behavior. Take a look at David Baines, who is an investigative journalist for the Vancouver Sun for the last 20+ years, and he focuses on uncovering fraud here in Vancouver. Numerous death threats that you can no longer even count, and he's uncovering fraud after fraud. Yet, he never goes into hiding. He just goes about his work doing the honorable thing, and he's never taken a payday from uncovering such fraud. Cheers!

Not a particularly flattering portrait...both the picture and the article! Cheers! http://www.theglobeandmail.com/report-on-business/managing/the-lunch/carson-block-the-man-who-felled-a-forestry-giant/article2099190/

Sanjeev, Any ideas about his position in MannKind? He spoke about it at the dinner I believe when someone asked him a question on it. He said that it was cheap, but primarily a bet on the CEO, who poured millions and millions of his own money into the business and the insulin inhaler. Hasn't worked out the way he wanted it to at that point, but he was still optimistic. Can anyone else remember what he said exactly? Cheers!

Sanjeev, Why did Francis leave Fairfax? When Fairfax was trying to simplify their business because of all the criticism around the complexity of the company, one of the things that someone was critical about was that Francis was a vice-president at Fairfax while running the Chou Funds, and Fairfax was an investor in the Chou Funds as well. Even though Francis was not receiving compensation for working at Fairfax, they decided it was better to make sure there was no way anyone could be critical of the relationship. So Francis gave up his position there and runs only the Chou Funds. Fairfax remains an investor in the Chou Funds, so they are arms length. That doesn't mean Francis has no influence on the investment process at Fairfax. I'm sure they talk about investments all the time with him, and mutually desireable ideas come along all the time...for example Abitibi debt, Level 3 debt, etc. If they also ever needed him for anything, I'm sure it would take no prodding at all for him to assist them anyway he could. That should alleviate concerns for those that believe the hierarchy at HW is getting a little long in the tooth! ;D As one of the largest individual investors in Fairfax (and he's got all of his shares he bought at $3), I would love to see Francis on the board one day if there ever was an opening. He's smart as a whip, a brilliant investor, understands insurance, and his ethics and humility are unparalleled. Cheers!

OK, that makes more sense. I take back my initial comment if the quote was taken out of context. You know the smartest thing to do would have been for the writer to fact-check the article with Mohnish before printing. Especially, when you are quoting someone in an article and then you are critical of their comments. You see this all the time with Buffett or whoever else. A very specific quote is taken out of context, or perhaps Buffett hasn't clarified the response appropriately. Example: Buffett - "I don't understand technology" comment from years ago. How many people reamed him for it, including Jim Cramer in that famous challenge where he listed ten stocks that would outperform Berkshire Hathaway. Over the next five years that portfolio was down 95%! It was never that Buffett didn't understand technology, but only that the outcome of technology companies were harder to determine and that would directly affect any calculation of intrinsic value. Cheers!

I would re-read his comments. He was stating that the primary benefit of a net-net is that it provides down-side protection. His example was one of which the net-net was trading at a discount of 10% to cash, and perhaps 80% of intrinsic value ($100M in cash and recurring income valued at $15M - trading at $90M total). If you liquidate that, you get a 25% return. The same thing if the cash was at $110M and the market cap was $90M. The bang for the buck is not worth it to him. He looks for companies that go up 2-3 fold plus over a few years. I personally look for those 20-50% returns over shorter time frames with that downside protection, but he looks for multiple-baggers over several years. He isn't going to find that in the stuff I'm looking for...thus the volatility in his fund as well. Again, he's trying to explain this to the person who asked the question. Incidentally, before you ask, he isn't saying he wouldn't buy net-nets. Only that the return on them be commensurate with what he is aiming for. For example, he bought Fairfax at 50% of book, but it was a business that could also generate a signficant stream of income over time. He's bought other net-nets as well. His point was that a net-net in and of itself, does not mean he would be a buyer. Cheers!

That's not at all what it sounded like he meant in that article, for what it's worth. It sounds like he believes in 17 year cycles. Why else would he have said the next bull market will end in 2033? He's giving an analogy: So we have these perfect symmetry events where 1982 to 1999 the market ran a lot. And from 1999 to 2016 let’s say it does nothing or did nothing. So all we have to do is get to 2016 with a pot of cash and then we climb again until 2033. So when those puts expire, which is way after 2016, my view is that Berkshire will be just fine. They will have no pay out on those. But if you’re concerned you should ask Warren at the annual meeting and maybe he’ll give a better answer. He's saying suppose we have this perfect symmetry of events (there is no such thing as perfect, thus he's using the analogy) and markets ran alot from 1982 to 1999. From 1999 to say 2016 they do nothing. Now you have another bull market for simplicity's sake running to 2033. Berkshire's contracts would have no losses as the bull market would be a few years under way. He was simplifying it for the idiot who asked the question! He's just too polite to say that, whereas...well you know me! ;D Cheers!

I was there when that question was asked. He wasn't saying that markets ran in perfect 17 year runs. All he was saying, in response to the question about the S&P contracts Berkshire insured, was that if markets run flat for the next few years because of the deleveraging process and then a new bull run starts as many people expect, including Munger, then Berkshire would not incur much in losses...if any...as the coverage dates were well out! That's all he was saying there. In regards to the net-net question, again all he was saying is that a net-net with little in the way of recurring income, is of little interest to him. He's not an activist, so he isn't going to buy the net-net and reinvest the excess cash. For someone else, this may be a much more attractive investment, such as Sardar or myself, where I would be happy to get my hands dirty and redistribute the cash. If the cash is redistributed, then that changes the intrinsic value of the investment based on the recurring income. If the cash sits there like an anchor, and does nothing, then that business is of no interest to him. Not sure why this is so difficult to grasp for some. Cheers!

The best way to describe Francis is the way I see him: Clark Kent to the outside world, and Superman when it comes to his depth of knowledge in investing. He has one of the most mild-mannered personalities you will ever meet, and he will never do anything to hurt or insult anyone. But his investment mind is superb and one of the best I know. Everyone at Fairfax holds Francis in very high esteem. I don't think there is anyone who could ever dislike the guy. Incidentally, for all of you folks who enjoy our annual dinner, he's instrumental in getting all those people to show up, along with Prem. I consider both my mentors, as well as Tim and that f'n crazy Pabrai that some have recently jeered! Cheers!

8 European banks out of 90 failed their stress tests. And that was Tier 1 capital being maintained at only 5%...yikes! Cheers! http://finance.yahoo.com/news/8-banks-flunk-European-stress-apf-202243619.html;_ylt=Alcrz2CgFjp04HtTEPIxAOO7YWsA;_ylu=X3oDMTE1ZDR2bmwxBHBvcwM1BHNlYwN0b3BTdG9yaWVzBHNsawM4YmFua3NmbHVua2U-?x=0&sec=topStories&pos=2&asset=&ccode=

No, I was there when it was asked. The question was about internet stocks, and after Warren gave a long-winded answer, he turned to Charlie and he said "When you mix raisins with turds, you still get the turds." We all went crazy in the Civic Auditorium. Although that answer still could be applied to a number of things. Cheers!

What's interesting is that if you look at the little side poll on that page, which asks: "Should lawmakers support Senator Mitch McConnell's proposed "backup plan" if debt negotiations remain deadlocked?" 53% of respondents say "No!" If the general public is split on this issue and actually the majority say "no", then what do you think politicians who are only concerned about their own station in life are going to do? They are playing with fire, and somebody's already poured the gasoline! Cheers!

Very interesting and exciting! Cheers!