Parsad

They've overpaid by $3B! They'll get their money back, but better returns could have been had elsewhere. Cheers!

Southern California home prices were up year over year: http://www.bloomberg.com/apps/news?pid=20601087&sid=av2pFDXS7_YY&pos=4 I would argue that California home prices were up due to demand in a low-interest environment and tax credits being offered, as well as banks holding onto inventory to allow the market to stabilize. Is this sustainable going forward? S&P still cheap based on cash flows: http://www.bloomberg.com/apps/news?pid=20601087&sid=anDIJIkZOUt4&pos=7 Expected, as the economy stabilized, interest rates to refinance are lower, and companies have streamlined their businesses. With higher regulatory requirements and taxation, will this trickle down to earnings? Will consumption start to increase? Cheers!

Vito Maida, who runs Patient Capital, had an interview in the Financial Post which was printed Saturday: http://www.financialpost.com/opinion/story.html?id=0c4200d8-ee15-4aac-ad38-e7ca1449ec72 Maida, who left Trimark ten years ago to start Patient Capital, has not had a negative year since inception. He currently sees that large-cap U.S. equities are reasonable, while remaining very cautious about the markets and economy. He does not expect a V-shaped recovery. His October letter can be found here as well: http://www.patientcapital.com/newsletters/newsletter-2009-09.pdf Again, I could not agree more with his sentiment. Cheers!

There are a couple of small private precious metal dealers in Vancouver that I used...one is Vancouver Bullion & Currency Exchange and the other is J & M Fine Jewellry, Bullion. Cheers!

As far as pawn shops buying gold, start worrying about a gold bubble when they are selling it! Money Mart is a check cashing financial institution in Canada, not a pawn shop. They cash all sorts of checks, but their bread & butter is payroll checks. They also issue Mastercard cash cards, etc. So, they've just entered the scrap gold business completely out of the blue. I'm not sure if all their locations now accept scrap gold, but it's really bizarre that they've entered the business. I bought troy ounces of gold about five-six years ago at the bottom that I kept in my safety deposit box. Over the last couple of years I've sold them off with, the last block I sold last month. I didn't buy it to hedge my portfolio or anything. I just started buying them when all the reserve banks went off the gold standard and gold companies were hedging that the price would go lower. Now, I'm completely on the opposite side of the bet. I don't short, but I would say that the short bet on gold is a far better choice than the long position on gold today. Cheers!

Hoisington's 4th Q Letter is terrific and a must read for investors. I continue to agree that deflation is a far bigger threat than inflation. With the price of gold these days, and the number of value managers buying gold for their portfolios, and commercials I see on television, I think any investment in gold is a poor speculative bet. I just saw an ad today for Money Mart, where they are now buying scrap gold...not just cashing checks anymore...but actually buying gold from the general public. Nuts! Cheers! http://www.hoisingtonmgt.com/pdf/HIM2009Q4NP.pdf

This is interesting that you pointed out. I see huge cash balance as true manifestation or sign that you are absolute value investor. You are putting your cash on work only when investments presented a compelling opportunity and you are able to archieve margin of safety. If this is true, you are not charlatan who is playing on market just to keep up with the crowd. Well I agree with this sentiment, since it is exactly what we do. We have more cash in our funds today than at any time since inception. By your definition, we would qualify as a "true value investor". I just don't think that definition actually exists or is applicable, since all investors should be looking for values. Whether you are successful at it or not is another matter entirely. Cheers!

I think the CDS in isolation is a speculation to you and me but in the context of FFH's total portfolio it was a value investment to them. The degree of speculation is dependent upon the price paid. The price FFH paid made the speculation at a different price more of an investment. I think Graham points this out in the Intelligent Investor that the price paid is what makes a security an investment or a speculation. In essence, FFH was purchasing for very little money long-term put options on bonds of firms they knew had questionable underwriting policies. They knew that these firms were going to blow up the primary risk was when and by purchasing long-term puts from sellers who were motivated they mitigated some of their risk. Since this was in their circle of competence to them it appeared more like an investment but to others it may appear a speculation because it is outside our circle of competence. Nope, the CDS was a speculative bet...pure and simple. It was a smart bet, because the swaps were priced cheaply, but there was a definite time arbitrage involved and that makes it speculative. Ironically, their investments in Canwest and Torstar were deep-discount, margin of safety investments...what most "value investors" would call "Ben Graham investments"...yet there remains the likely possibility of full impairment of capital. Every investment we make is a speculation to a certain degree. What Graham tries to point out is that we want the odds in our favor on every bet...increasing our long-term batting average on these investments. Whether it is Prem, Buffett, Graham or Seth Klarman...they are handicapping...we are all handicapping with our investments. Cheers!

When you read carefully their recent annual report, it comes clear that it’s not written by true value investor; rather some kind of top down macro speculator with ever changing strategy. I'm not defending Tilson, since I'm by no means a fan, but what exactly does this statement mean? I always hear investors saying this, but what exactly are they trying to say. Was Prem's CDS bet not a macro bet or speculation? Was Buffett's derivatives investments in the S&P500 not a speculation? What about Seth Klarman's cash position for the better part of a decade? These are all bets on an expected outcome...there is no intrinsic value input involved! There is no such thing as a "true value investor"...since the whole idea of investing is to find something of value and watch it appreciate...then sell it and find something else of value. How you find them and how you conduct yourself is a personal choice, and there are varied risks to all of them. So I think the whole Bill Miller isn't a true value investor, or Pabrai, or Tilson, or whoever, is a silly juxtaposition many investors like to apply. The endgame for all investors is to make money. Cheers!

I'm only going by his mutual fund performance as linked to above, but that to me shows that he had no divinity what was coming in 2008/2009. Don't get me wrong, I'm not saying he's a bad investor. But I sure as hell wouldn't be writing a book about a crash that I didn't see coming! I think quite a few people actually saw it coming. Problem is that there is an institutional imperative that permeates the investment industry...you have to be fully invested at all times to beat the market long-term, otherwise you will miss the best days. When an investment manager holds cash, they are criticized for that, so most managers hold very little cash. Hedges have frictional costs...so you benefit heavily if you are correct, or you suffer death by inches if you are incorrect over a long period of time. Think about how long Fairfax had to be wrong about the coming correction, until they were proven right. If the bubble had persisted for two-three more years, they would have lost the whole CDS investment and they would have looked very stupid, instead of brilliant. Unfortunately, it's alot of the other managers who looked stupid in 2008, as most could not predict exactly when the world was going to come to an end...not easy to do! Even Francis suffered in 2008, and he knows how Hamblin-Watsa thinks better than anyone. He was just too late getting approval to use credit default swaps in his funds, so he suffered like everyone else. It's very easy to be critical of managers in hindsight. I doubt too many people on this board would have survived intact if they did not hold Fairfax or subscribe to Prem's views. As far as the book is concerned, it's kind of moot. These days, who isn't writing a book? It's absolutely insane in the publishing world. I see young managers who haven't got the sense to run a fund writing books on how to invest! Crazy! You've got all these journalists who missed the bubble writing about what happened for millions of dollars. Like they've got a clue...Joe Nocera comes to mind! If I ever write a book, somebody please shoot me. Cheers!

Anyone know what his returns are like? One of you say his returns are good since inception, another says that it tanked during 2009 The mutual funds tanked in 2008, but they've done very well in 2009. The Dividend Fund run by Zeke Ashton has done better than the Focus Fund run by Whitney since inception. T2 Fund, the hedge fund, has done very well from inception...handily beating the S&P500 TR by a considerable margin...it operates as a hedge fund and shorts often, thus it did quite well during the turmoil in 2007 and 2008. Cheers!

His partner is a good guy...Glenn Tongue. I don't think Whitney's a bad guy, just very good at marketing himself...perhaps too much, and it rubs people (me included) the wrong way. Some of his past support for guys like Chanos, Herb Greenberg and Sam Antar also is a discredit to sane and ethical behavior, but I just notch that up to poor judgement of character. The fact that he appears on CNBC more than Buffett doesn't help either. The T2 Partner results are quite good though since inception. Cheers!

Surprisingly, I'm actually on the same side as Chanos on the China issue. I'm still not convinced that the Chinese bank's real estate and business loans are solid. That the Chinese economy has thrived on Western consumption, and without that we will see the Chinese economy brought down to a normal scale of growth, rather than the supernova that it's been for the last decade. They will be #2...hell they may even become #1 eventually...but I think it is going to take longer than many investors believe it will. Then again, I'm the same guy who thought rap was a fad twenty years ago, so you probably shouldn't listen to me! ;D Cheers!

Hi Zero, There is a lot of money that is supporting the current stabilization. The question is: Can the economy stand on it's own two feet once the support is removed? I don't think so...not for the next couple of years. A new equilibrium has to be reached and that won't happen as long as you have the government propping things up. Unfortunately, they are damned if they do and damned if they don't. They've chosen the former, but that means equilibrium is just delayed. If they chose the latter, then you will have a precipitous retrenching that may make things worse longer term, as one domino would create greater pain for the next domino having to retrench even further. Cheers!

Interesting tidbits by Mark Mitchell on Steve Cohen, Kingsford Capital, Herb Greenberg, etc. Cheers! http://www.deepcapture.com/new-evidence-raises-serious-questions-about-kingsford-capitals-donation-to-the-columbia-journalism-review/

According to a New York Observer article, the "Sith Lords" are Michael Milken and Steve Cohen. Barry Ritzholtz sounds like most of the turd blossoms that are intertwined in all of this. Cheers! http://www.observer.com/2010/media/shooting-naked-messengers

The SEC is seeking a ban to unsupervised access to exchanges. I guess naked short selling still doesn't exist according to the brilliant minds that excoriated Patrick Byrne over the last few years. Cheers! http://www.bloomberg.com/apps/news?pid=20601087&sid=aimlCbzLU9OY&pos=5

Hi Bronco: 1) BRK is a very mature company, Fairfax is mid-stage and Steak'n Shake is still a baby. Based on size, the prospects for Steak'n Shake are best. Based on valuation, all three are relatively close to fair value based on the risk of the businesses they run...BRK and FFH's business is the most volatile, based on the risks they assume. Steak'n Shake's burger business, if well managed, is a cash-cow with less volatility, but Biglari could easily add more risk by entering the insurance business. All three have terrific balance sheets, ethical management and good potential, none are dirt cheap. I'm not adding to any at the moment. 2) Who knows. I think Fairfax and Steak'n Shake will continue to do very well. Berkshire's size is really a problem now. Buffett's age and who is going to replace him is another issue on the investment side. They may be as good as Buffett, but they have to be as ethical and honest. The collection of businesses there are the best we'll ever see. What we won't see is a CEO who can command the respect of the managers like he does. 3) Oh, we've had a bunch...Fairfax, Overstock (both debt & equity), Steak'n Shake, Wells Fargo, Odyssey Re, Clear Channel (debt), Boston Pizza Income Trust, Keg Income Trust. The best based on what we paid relative to book and the eventual return...that would be Fairfax and Steak'n Shake...both up over 300% from the lows we bought at. Actual investment based on the dollars invested, be it options or equity...Steak'n Shake options (up over 1200%) and Overstock options (they were up over 800% one year). 4) That's easy. We bought options of RDN, PMI and MTG in the U.S. fund, and equity of all three in the Canadian fund in 2008. We thought they would lose 50% of their equity, but didn't expect 70-80%. It didn't hurt the U.S. fund much, but it did impact the Canadian fund early on. We learned our lesson well on that one! 5) Can't talk about that. Cheers!

This reminds me too much of the whole Jerry Yang incident witht the Yahoo/Microsoft deal. Yang looks stupid now as Google and Bing are eating up their market share. Cadbury's board is silly in not working with this deal and Kraft would be silly to pay up. Cheers!

That's a natural progression I would imagine...surprised that it is being adapted so quickly...India truly is changing. Should help increase their footprint even more. Cheers!

I actually dont think that is that bad. Most large companies have "art" and other interior design features that would cost just as much. If you put an antique map on the wall, then you don't have to put a painting. Further, the art/painting isn't "necessary" shareholder spending, but for a company that size that can benefit from having a corporate headquarters that isn't just walls and paint. A better looking atmosphere will increase employee attitudes and not turn of clients/outsiders when they come for meetings. Plus, they will probably be used for 50+ years. $12 million/50 years $240k/year, which is a rounding error to a company with 647 shares outstanding. In addition, CHK probably didn't get a bad deal; I know their CEO had huge financial problems (I think he margined his stock & was forced to sell during crisis). He was probably in a position where he had to sell. Sorry Watsa, I have to disagree with you here. Other than Fairfax's foyer area and the boardroom, there really isn't much to look at in their office, yet employee moral is terrific and clients want to deal with Fairfax. Even the foyer and boardroom don't have any real significant art or anything, other than a bust of Sir John Templeton and framed historical checks and share issues by Fairfax. Pretty plain jane for a company with $30B in assets and an $8B market cap. I think employee moral is best when employees are given respect, treated as equals and have a working environment where they feel productive and needed. Fancy offices and lobbies are as fleeting as that $1500 Louis Vuitton suitcase or a Rolex watch. I remember going on a tour of the CN Tower a few years back, and the tourguide was telling us how the Royal Bank building's windows looked gold colored, because there were real flecks of gold included in the production process of the window glass. I nearly vomitted thinking about that and exactly how ostentatious that is. You are correct that for many people, an artifice building or guilded lobby provide some comfort, because they feel that their money is more secure for some reason...thus the fancy buildings most banks and insurance companies built over the last 120 years in North America. But that probably attracts the wrong type of shareholder, employee or customer into the office. Cheers!

Hi Shalab, It was partly U.S. purchasers, but the bulk was coming from other parts of Canada (in particular Alberta & Saskatchewan), as well as quite a few European and Asian buyers. At one point back then, it took 70% of the average household income to service the average home in Vancouver...mortgage, interest, property taxes, maintenance. That number has not changed much in the last two-three years. I thought we were in a bubble three years ago and I still think we're in one now, but alot of people disagree or come up with reasons why it isn't...net migration into the city, desireability, lack of inventory, lack of land or qualified sites near the city, waterfront land is built out, etc. People always have an answer why something isn't in a bubble, until the pin prick hits and then suddenly everyone saw it coming. Right now, no one sees anything coming. Incidentally, there was a fairly recent penthouse sale in our downtown area for $15M for 6000 sq feet on the 43rd floor of a new building...and that isn't raising any eyebrows! There's a house in a very nice area not far from where I live in one of Vancouver's suburbs. A very nice house on about 1.5 acres of land...they are asking $19M! The house was built for $6M a little over ten years ago! That area while being quite nice, isn't even close to Vancouver's nicest areas. I can only imagine some of the listing prices those homes would fetch. Cheers!

Bloomberg article on the use of checklists by Mohnish and Atul Gawande's book. Cheers! http://www.bloomberg.com/apps/news?pid=20601088&sid=a88b_yggIXDc

For those that have read "The Snowball", Buffett's experience as a director at Coke was most unpleasant. Fortunately, this time he's not a director and can freely say what's on his mind. Cheers!

At least they're only paying 7%! Cheers!