Parsad

That's what I first thought! It's not on Berkshire's own site yet. Holy smokes...this is a shocker! Cheers!

Warren wants to reach more people. CNBC has a larger viewership than Bloomberg. Specifically, CNBC has a larger viewership in lay people than Bloomberg, for sure. Well then why doesn't he just show up on "American Idol"! ;D Or perhaps, he could take over Charlie Sheen's role on "Two and a Half Men"...he could play Jake's business savvy grandfather. Cheers!

3 Reasons for Selling 1) The investment has reached its intrinsic value. 2) You have found a better investment opportunity. 3) Your original reason / thesis for the investment is no longer true or valid. Hi Bronco, Mohnish's three reasons for selling above are correct with our standpoint regarding selling. I would add two more though: 4) When the behavior of management creates ethical conflicts or are not in the best interest of all shareholders 5) When the position has increased to such a size, where the risk to the portfolio becomes significant if an extraordinary one-time event occurs I think some managers pay attention to "4", but many ignore "5" simply because there is a bias on retaining the holding and not incurring capital gains. You should never fall in love with your stocks, regardless of who is running it...Buffett, Prem, Steve Jobs...doesn't matter. That fifth reason is what makes the difference between the good managers and the great stewards of investor capital. In regards to "4", that is very important to us, because while we don't place any tangible value on the manager during the calculation of intrinsic value, we do put weight on it when we invest. Two very good examples in our case are when we invested in Steak'n Shake and Chanticleer Holdings. We sold Steak'n Shake due to Sardar's recent behavior, even though the company and stock were doing great. We retained our holdings (although we did make a mistake by selling some to realize tax losses) in Chanticleer, even as the company was struggling and having a tough time closing acquisitions, because we knew Mike Pruitt was going to also take a hit and not simply do anything to solely benefit himself. That is huge in our eyes, and it will play a significant role in who we stick by and who we don't support. But ultimately, the price relative to intrinsic value is the biggest reason to buy, hold or sell. Nothing else is close! Cheers!

My fund's administrator had charged incentive fee off of new partners in my fund even though the fund was below its high watermark but I reversed it because that's the right thing to do, IMHO. There are only a handful guys who do it so be careful of how high watermarks are applied. That's totally correct Pilaniman! Especially during 2008 and 2009, a number of well-known value funds were doing that. I think that's totally wrong. Like Mohnish, we collected no fees whatsoever until all of our partners were made whole. So all income, including income generated from new capital that came into the fund in 2008 and 2009, was all reallocated to the partners. None of it was paid out as incentive fees until all of our partners had reached their high watermark, plus their 6% annualized return. It was only at that point that we started to get paid again. I think all funds should operate like this! Cheers!

I don't watch CNBC, but I do watch Bloomberg. They do a much better job, and are significantly more diligent about what they report. I still can't understand why Buffett shows up on CNBC. Cheers!

Anyone know of another fund company that waives fees on mature funds? Generally, most investment funds that operate without any set annual management fee and operate solely on a hurdle and high watermark...such as the Pabrai Funds, etc. Anyone who invested in the Pabrai Funds had Mohnish working for them for free over the last couple of years, since he had to regain the high watermark for his partners. We did the same in our Canadian fund. There are a number of other managers in the U.S. who operate the same way, and they too would not take any sort of fee. Francis is one of the very few...you can count them on one hand...that have made any sort of adjustment to their set management fee. Cheers!

I think it's primarily because Europe was actually in worse shape than the U.S., with less capacity to handle the eventual fallout. While many people don't like the bailouts and other stimulus packages in the U.S., the government did what they needed to do quickly with little debate...they did not need to seek out state or municipal approval. In Europe, it has been more of a struggle to come to any consensus effort, and then on top of that, there is no real regulatory body that can just step in and provide unilateral oversight to all of the institutions and governments. Thus, U.S. stocks rebounded quickly, whereas Europe is still mired in one bailout after another, with long-winded debate over what to do. Francis' fund is just stuck in there as well. He'll do better than the index, but I think Europe's problems are still completely systemic. This is going to be a very big problem I believe, but no one wants to hear the bad news...they just keep floating along like there will be no issues. I have a hard time believing the Euro will survive long-term. Cheers!

Thanks very much! Another terrific article on Bruce Berkowitz. Cheers!

Thinks stocks and bonds are near full valuation. Concerned with China, but found opportunity in Japan. Excellent discussion regarding investing in debt securities. Always a good read! Cheers!

Regarding the focus on how the house might not appreciate if interest rates go up. It seems like this argument ignores the cash flow benefits from the fixed imputed rent that will accrue to the homeowner "when" market rents soar from all this predicted inflation. I would suggest you all view housing a bit differently. For our U.S. boardmembers, tell me if your homeowner's insurance has decreased in the last couple of years, including the replacement cost for your home? I would imagine not, and if it has, I would imagine your insurance premiums have dropped less than 10-15% at best. Many of the homes that are for sale in the United States at distressed prices, are actually selling for far less than the cost to actually rebuild the same home at today's prices for materials and labor. Remember, that those labor costs, and some of the materials cost has fallen as well, yet the price to rebuild many of those homes is dramatically higher than the market price. It would be the equivalent of a net-net! If I lived in the United States, I would seriously consider starting a residential property investment partnership. But unfortunately because I live in Canada, the cost, convenience and time required to do so from here is not feasible, as there would be considerable on-site due diligence and travel required. But for you U.S.-based managers...you could do quite well paying distressed prices on residential real estate right now. Cheers!

All the equities were always being marked to market and all changes were reflected in quarterly comprehensive income and, of course, book value on pg. 1. Berkshire isn't a trader using mark to market accounting and it shouldn't have to pass unrealized losses through the income statement if there hasn't been a material permanent impairment (like AIB) just like it doesn't pass unrealized gains through (besides rare exceptions like the Gillette-P&G merger and the BNI write up). If KO goes up 2 Billion dollars in a quarter and USB declines 500 million, running -500m through the income statement doesn't communicate anything useful to investors. You're absolutely correct! The only problem is that everyone else has to do so under GAAP. How do you allow Berkshire to value their Level 1 assets one way, while other insurers value it another way? It creates a bit of a quandry, regardless of how incorrect mark-to-market may be in certain circumstances. Cheers!

We are not in a Ron Popeil economy - set it and forget it. We are closer to a Vancouver Canuck economy - on thin ice. Well, any combination of losses and wins (2 wins for us, 1 loss for you or 1 win for us, 2 losses for you, etc) and the hunt for the "President's Trophy" is over. Really just about impossible now for Detroit and Washington. Philly has a slim chance, but that window is closing rapidly. After that, Vancouver makes its run and eventual win of the Stanley Cup...this is the year of the Sanj, ok! Cheers!

I think if you are buying real estate for the long-term, you will do perfectly fine right now. It won't be smooth, but there are alot of bargains. As we said in our annual letter this year that went out to our partners recently: A very interesting dichotomy within the investment world presently, is how investors are treating two very different asset classes. You have many people hoarding gold and other precious metals, now that they are at decade highs, yet very few people are buying real estate which is at decade lows…even multiple decade lows in some municipalities! You can literally buy a mid-level executive home in a nice area of Detroit for less than a new BMW 3-series. Condos that a couple of years ago were selling for several hundred thousand dollars in Las Vegas and Scottsdale, are now selling at one quarter or less of those prices and real estate agents still can’t get rid of them. Ah, the mind of the investor! As long as you aren't overly leveraged and you can handle more economic stress, you will be rewarded if you are patient with residential real estate in good markets throughout the U.S. Just make sure you buy cheap, are significantly net positive from the rent, and have cash on hand for expenses, repairs, property taxes, etc. Cheers!

I agree that the ads are probably not needed, but at the same time, Byrne doesn't do anything conventional. Plus, if it's space that would just remain blank, and you are getting millions of page views a month, that revenue certainly could support alot of other initiatives, including Deepcapture.com! ;D Cheers!

Overstock has launched their vacation deals today. They offer several deals each day, sort of like Group-on or other social buying sites. Some of the deals are really cheap. Cheers! http://vacations.overstock.com/overstockvacations/List

I think both solar and nuclear are the future. Although not nuclear in the form we know now. Bill Gates' travelling wave reactors could be a real game changer if they work. Bigger than anything else, and probably provides the best long-term cost/risk benefit. Cheers! http://www.forbes.com/2010/03/24/nuclear-power-innovation-technology-ecotech-bill-gates.html

Whether philosophically correct or not from an accounting standpoint, they are not following GAAP on those positions. I agree with Berkshire that those are not permanent impairments, but unfortunately those items should be written down under mark-to-market accounting, and then the realized gain incurred when they do eventually rise. Mark-to-market may not be perfect, but after everything that has happened, it's better than the alternative that was used before. No one controls risk better than Berkshire, but you also don't want to create two sets of rules, where other less diligent institutions use the same argument and deceive regulators. At least Berkshire said they would revisit the impairments on a quarterly basis and adjust accordingly. Cheers!

No, unfortunately I saw it too. Always fun to watch Michael Douglas...great actor. Oliver Stone has really lost his touch over the years. After Platoon, Wall Street, Born on the 4th of July & JFK, it's been pretty much all downhill for him since 1993. Cheers!

Parsad, Chou now runs quite a few funds, as someone who has never worked in the industry this might be an incorrect assumption, but do you think he is spread too thin? I have a very hard time balancing work/school/and personal investing, I think running more than a 1-2 funds would be a monumental task. Does he have a team of analysts (If so are they good?), or is he a one-man show? I am very interested in finding an active manager to invest with, I like that he has solid performance and people here have some personal knowledge of him which allows me to feel more comfortable... also because I don't do anything with derivatives it's attractive that he does. No, not at all. It's really dependent on the manager. Francis has been in the industry for a long time, and he's had a very broad base of experiences between his funds and Fairfax. Remember, his circle of competence is probably as wide as Prem's. There are a number of businesses that he probably knows intimately and whenever they fall in a range that he likes, he can just snap them up because of that base of knowledge he has. As far as spread too thin. No, I think he may have been spread too thin when he was managing about $750M with no assistant and answering over 50 calls a day. That's when he hired an administrative assistant! His funds are pretty broad as well, and his universe of investments is pretty wide still. Some people like analysts, some don't. At some point, maybe he'll hire one, but only he'll know when he's comfortable with that decision. I think sometimes investors overanalyze a manager, instead of looking at the manager's motives, ethics, intellectual framework and performance. If they have a vested interest in their own funds, they aren't going to do anything to jeopardize that, and will acknowledge when they are overworked and need to hire assistance. But alot of managers prefer to work alone or with a very limited team...I don't see us hiring any analysts ever. Cheers!

Derivatives and I believe he can go to 25% positions, whereas most mutual funds are limited to 10%. Cheers!

I was wondering if someone could help me understand. So, the expense ratio is 5.22%? Does that mean the annual returns are handicapped at 5.22%? I am just wondering because that seems really high for a mutual fund. The fee is presently high because the fund just launched and the assets under management is very low. As more capital comes in, that expense ratio will decrease until it is closer to any other fund. In the meantime, it looks like Francis is eating a portion of the cost for the early investors. Cheers!

Looks like Minkow will get his five years or less...I guess he lucked out! Apparently, the information circular for the charge lists a "Conspirator A" that Minkow worked with. Could it be the other ex-con that funded Minkow's FDI in the past? Enquiring minds want to know! ;D Cheers! http://www.bloomberg.com/news/2011-03-24/barry-minkow-is-charged-by-u-s-prosecutors-with-conspiracy-in-miami.html

More reserving issues at KFS, as well as other expenses. Cheers! http://finance.yahoo.com/news/KINGSWAY-ANNOUNCES-cnw-1533903973.html?x=0&.v=1

Nice answer Dazel! You are absolutely correct. Hamblin-Watsa would hire Tim in an instant. Peter Cundill did! Although it was after considerable badgering. ;D Incidentally, to tell you what this guy is like. He emailed me today and said that all his critics on this board are correct. I told him he was wrong, as most of you are, and time will prove me correct. 'Nuff said...let's revisit this post in three-five years! By the way, I remember alot of people telling me that Mike Pruitt would never close the Hooters deals at Chanticleer. Guess what? Good people are hard to find...good people with strong moral fibre are even more remote. Cheers!

Francis runs only the Chou Funds now. This was done a few years ago, because Fairfax is a large investor in the Chou Funds and he was a vice-president at the company. He remains one of the largest individual shareholders of Fairfax and has a close personal relationship. He's never sold a share since he bought them at $3. I'm sure on occasion they pick his brain and vice-versa, but Francis' sole occupation is running his funds. Cheers!