Parsad

Tim McElvaine sent me a photograph today with the caption..."Stumbled across these hooligans!" Apparently, a mess of our boardmembers were at the Daily Journal Meeting today and Tim was nice enough to snap a photo of the brood. Thanks Tim! Cheers! [Click on photo to enlarge]

That would be quite under Prem's goal. What is the relationship between Fairfax and Hamblin Watsa? How are investment decisions made? They will average close to 15% annualized over time...I'm talking 10-20-30 years. You have 3.5-1 asset to equity ratio. They've historically averaged close to 5% on the overall portfolio. After operating expenses and viewing their underwriting long-term (since they generally over-reserve and release surpluses), they can get the 15% ROE. The relationship between Fairfax and Hamblin Watsa is that HW is the investment manager for all of the capital. You have six heads plus input from the analysts. The six heads are allocated small pieces of the pie and the analysts are given even smaller pieces. For large investments, there has to be consensus by the six heads. Prem has final say, but it is primarily a collective, team effort. Cheers!

There hasn't been a period of time in my last 16 years of investing, where I sweated even one night about the market leaving me behind and not being able to deploy capital. Cash has never burned a hole in my pocket. Cheers!

The reason I get worried is because you see stuff like this. http://finance.yahoo.com/news/sucker-alert-insider-selling-surges-181720960.html;_ylt=Asw147XxuPTbQNTJF_qHtMKiuYdG;_ylu=X3oDMTQ4YmQwdHRoBG1pdANDTkJDIFRvcCBTdG9yaWVzBHBrZwNiNDk2OGEzNi1iOWZlLTM3YmQtYmYxYS05MTZjNTEwZjQwM2UEcG9zAzIEc2VjA01lZGlhQkxpc3RNaXhlZExQQ0FUZW1wBHZlcgM3NmE1NjE1MC02ZmMwLTExZTItYmVlYi02YzJiMWNmYmZlZDk-;_ylg=X3oDMTFpNzk0NjhtBGludGwDdXMEbGFuZwNlbi11cwRwc3RhaWQDBHBzdGNhdANob21lBHB0A3NlY3Rpb25z;_ylv=3 As I mentioned about a month ago...the dumb money is just really starting to flow. I don't think there is any imminent collapse, but when it comes in a few months...year...two years...it's going to be a painful one because you don't have any other catalysts left to push asset prices back up again. May be stagnant for a period. Interest rates are at historic lows; deleveraging on the sovereign level is at the very early stages; debt capacity of sovereigns is not high without pushing up rates on their own bonds; pension plans/institutions/endowments have all suffered low returns for a decade...all the buttons have been pushed. There isn't enough money corporations, hedge funds and private equity firms to bolster another significant downturn without Fed involvement, and the Fed just can't afford to get involved if things turn down. Just not enough premium for some of the risks out there. Pick and choose your battles people! Cheers!

Double entendre? Well, we are getting fuc....! ;D Cheers!

I'm getting quite worried and antsy about this market now. Too much hubris and too much money flowing into everything. Is this 1937? More capital has flowed into stocks last month since February 2000. Manager letters I read...most are batting very high percentages on their ideas...Tilson says he was right on 7 of 8 ideas since he took over the funds. ;D Enjoy the next few months, as I'm concerned about what happens when all this lubrication starts to disappear. Cheers!

They probably couldn't get the votes for the dual class structure. What happens if those that are exhausted of this company decide that they don't want to throw any more money at it, and don't subscribe to their full alottment? I wonder who is going to oversubscribe on all of those warrants, which will probably be available at a discount to book. Maybe he should just take this thing private like Dell! ;D Cheers! I saw this and thought the same thing... That said, everything has a price in which it is cheap. Serious question: would you (or anyone else here) buy BH at a discount to tangible book? Say, $200/share? I would get tempted, though, would like to see it cheaper. I sold all my stock after the employment agreement, and have since discounted further since the licensing of his name... That was wholly ridiculous. I wonder who would be interested in essentially buying 9% of the company at this price. Yes, definitely...I love that burger chain! Also, it would be cheaper to run a proxy against him. ;D Perhaps, that is what is happening and it's why we are seeing some of these things come into play...licensing, cancellation of the dual-class, rights offering. Maybe there is a disgruntled shareholder out there who has had enough. Cheers!

They probably couldn't get the votes for the dual class structure. What happens if those that are exhausted of this company decide that they don't want to throw any more money at it, and don't subscribe to their full alottment? I wonder who is going to oversubscribe on all of those warrants, which will probably be available at a discount to book. Maybe he should just take this thing private like Dell! ;D Cheers!

The sole heir to the In & Out restaurant chain will gain 50% control soon. There is talk of her selling, of Buffett's interest in the business, and it seems a plausible scenario where she could escape the limelight and politics of ownership. I think Prem should make a run for it! ;D Cheers! http://www.bloomberg.com/news/2013-02-04/youngest-american-woman-billionaire-found-with-in-n-out.html

Having spent 15 years in the Seattle area, I'm if somebody gave me a waterfront mansion in Seattle for free, I still wouldn't want to live there again -- well, I'd use it as a summer home only (nice in August/September). I don't find Seattle or Vancouver dreary. I like the four seasons...and you get that here, and I would suppose in London as well. The rain keeps the streets spotless, the grass and trees green, and plenty of snow on the local ski hills during winter. You haughty, toty California guys don't know what you are missing...even though you lived here for 15 years! ;D Cheers! I joke that Seattle doesn't have four seasons either. They have: Spring Fall and Winter Hey c'mon...July and August are pretty close to what most people would call summer...but that's about it. Cheers!

Having spent 15 years in the Seattle area, I'm if somebody gave me a waterfront mansion in Seattle for free, I still wouldn't want to live there again -- well, I'd use it as a summer home only (nice in August/September). I don't find Seattle or Vancouver dreary. I like the four seasons...and you get that here, and I would suppose in London as well. The rain keeps the streets spotless, the grass and trees green, and plenty of snow on the local ski hills during winter. You haughty, toty California guys don't know what you are missing...even though you lived here for 15 years! ;D Cheers!

Hi! Have you checked our "Books" board. There's probably a couple of books in there that cover or relate to what you are looking for. Cheers!

Yeah, I wouldn't mind that. As long as it is used. I don't want one job post in there over two years! ;D Cheers!

With all financials, there is some risk as rates rise, because longer term liabilities are usually offset with longer term assets. As rates rise, the value of the longer term, low-rate asset decreases while the liability remains the same...thus Eric's comment about the equity decreasing and a higher ROE. At some point, rates stabilize and the new business at higher rates will be positive for the financial institution...banks, insurance, etc. I don't know enough about AIG's entire book to tell you what would happen, but from everything I've seen of Benmosche, he seems to be relatively risk averse and is a shrewd operator. But if you have very high interest rates or elevated rates over a period of time like the 80's, it can be quite detrimental for insurers. That also happens the other way too as rates drop and yields drop. AIG survived that so I suspect they won't have much difficulty surviving rates moving the other way. Cheers!

Good to hear from you Moore! That explains the infrequent posts now. No worries! We are also building up cash...40% plus now...and we continue to whittle down investments that have gone up considerably. We had sold about a third of our BAC warrants. We still have all the equity and most of the warrants...higher interest rates will actually be beneficial to banks long-term, even though short-term stock volatility may arise. We are in BAC and WFC for the long-term. I expect the annual dividend at BAC to be about 20% of our equity cost within three years. Surprisingly, I remain little concerned with the United States, but continue to worry about Europe and Asia...I don't think the numbers are real. We aren't finding any real bargains right now, and are digging around in the very small-cap and micro-cap area. Cheers!

Interesting Bloomberg article on Robert Kuok and his empire. Cheers! http://www.bloomberg.com/news/2013-01-31/billionaire-kuok-says-his-empire-can-last-generations-.html

Hi Net-net, The problem is then you start to get too much clutter with different boards. Special situations don't come around that often, so the board would be sparingly used. You also can't track a specific stock and keep a historical record for that stock like we do in the "Investment Ideas" section...whether it is a long-term investment or shorter-term special situation. Cheers!

At this point, I don't think the hedge fund route would provide him any more comfort than running the mutual fund. A 2-year lockup would not have made a whole lot of difference to him, but it probably would have saved some fools from selling out before the rebound. I suspect he is going the permanent capital route, and it very well may be through St. Joe. Cheers! Oh goodness, that would be awful if he turned his back on the mf.... I really hope he doesn't even if people do want to pay him more... But the way he said that did seem worrisome... I don't think it's about being paid more...but the fact that he's susceptible to his investors pulling their money completely out every time the world faces a crisis. We aren't even out of this one yet, and there is every possibility it could get worse...I don't think he wants to put himself at risk again...both within the fund and mentally. Berkowitz has enough money where his entire family, including his children and grandchildren will never have to work. It's not about money. Cheers!

Review the video beginning at 26.30 minutes (and listen to section 28.40 min) "We have a few things we are thinking about. It is possible..." it's interesting he looks away and come back with a little smile. heh In the video, he also says that he had a standard mutual fund but people want to pay him more. I really hope he's not gonna leave the little guy behind and manage hedge funds (around 29:25). :( At this point, I don't think the hedge fund route would provide him any more comfort than running the mutual fund. A 2-year lockup would not have made a whole lot of difference to him, but it probably would have saved some fools from selling out before the rebound. I suspect he is going the permanent capital route, and it very well may be through St. Joe. Cheers!

That's even worse! Your basic costs to keep a room cleaned, linens changed, new plastic cups, fresh little soaps and shampoos, etc will run you a minimum of $15-20/night even with a crappy hotel in a rural area. The margins totally suck and you are still running at only half occupancy. The only way to make this work well is the Patel way! The whole damned family needs to work long hours and not take a real salary.... Since you want to work 2 days per month, you are a far cry from a Patel! (but there's no shame in that either). SJ You would also have to sell your home or rent it out, and move your family into one of the rooms at the hotel. ;D But it works! Cheers!

Can there be an issue with a margin of safety being too wide? No. Margin of safety is just the difference between market price and your estimate of intrinsic value. Whether that difference is ever minimized is up to the management and shareholders. It goes one of three ways: 1) Management makes poor decisions and intrinsic value comes down closer to market price. 2) The price stays stagnant as poor decisions slowly marginalize intrinisic value...stock stays stagnant. 3) Management, either on their own or through activism (shareholder, outside party), make the right decisions and the market eventually values the business closer to intrinsic value...be it through growth or liquidiation. Cheers!

Yes, I think he feels beholden and responsible for the capital he currently manages for existing partners. He'll continue to operate the fund for them. And I think you'll now see more things happening within St. Joe or some vehicle of that nature. Cheers!

Yes, I think this is what is happening. He learned a very tough lesson with the amount of redemptions he had to deal with. I think he may have been at the point where "how do even my long-term investors lose faith in me? Time to reduce that risk." Cheers!

Yup, looks like he is closing for now anyways. Cheers!

The real world investments are fascinating. Ultimately the price is 9x cash flow on this thing for a private illiquid deal. This speaks volumes, especially when I see a stock trading at 3x FCF and someone tells me the price is appropriate because the stock is illiquid. You are so correct! Don't forget leveraged as well. I suspect Premfan is buying cash, but many people would buy this property with a mortgage...generally 3-1 debt to equity. Even if your illiquid stock carries corporate debt, it is highly unlikely the leverage is greater than 1-1 debt to equity...often, you can find illiquid stocks trading at less than cash with no debt..which is what I'm buying right now. But investors, professionals and amateurs alike, stay away from these ideas because of their size and apparent illiquidity. Cheers!