Parsad

Don't use too much leverage and invest in the right businesses/managements - other than that, I'd ignore the odds of small events with big consequences, there isn't much else you can do about it. Some people hedge/insurance but I don't think that's very useful because over time, the bias is towards recovery so the insurance is wasted, you can get "pseudo-insurance" by just not buying more than you can chew. Well that works most of the time, but anyone who stuck to just that last year got burned. We did well because we weren't afraid to hold cash, but the rest of the industry is trained to always stay fully invested. Even if you chose the right companies and didn't use leverage during the 30's, you still got a severe taste of volatility. My opinion is that investors should stick to what they know. Wait for fat pitches, buy good businesses at a margin of safety, and don't be afraid to hold cash until you find something. That theory doesn't change in good markets, bad markets, deflationary markets, inflationary markets, etc. You don't buy gold, you don't use exotic hedges and you do only what you understand...but macro still has an intangible effect. Sometimes more and sometimes less, but it has an impact on your future discounted cash flows. Cheers!

Question: Why does everyone use the past or statistics to try to predict the future? Is there any reason to believe that data has any information about current macroeconomic events? History doesn't necessarily repeat, but it often does rhyme. There was no reason the tech bubble could not continue well past 5,000 on the Nasdaq in March of 2000, but history tells us that such valuations were historically a tipping point for such a correction. Statistics tell us nothing about what will happen today, but it gives us a pause for concern regarding the current deleveraging based on the few corollaries we have to compare. Another example could be: How often does one actually spill their coffee on themselves while driving? Not often. But history tells us that it does happen from time to time, and the consequences are not enjoyable. The question is, if the odds of such an event are small, how do you protect yourself from that rare possibility of such devastating effect? As Buffett says, a long string of successes can be wiped out by one simple error in judgement. Cheers!

Mortgage delinquencies have dropped in sub-prime mortgages, but the number has risen dramatically in prime mortgages which make up the bulk of outstanding mortgaged properties. Cheers! http://money.cnn.com/2009/08/20/real_estate/Mortgage_delinquenciies_keep_rising/?postversion=2009082017

As I mentioned in a previous post regarding my disbelief around Usain Bolt's feats, some blogger has done a terrific job mapping the progression of the 100m mark. Thanks David for sending it! As you can see, Bolt's mark is quite the outlier over the last 100 years. I would suspect that many of the marks set in the last 15-20 years were done with some sort of enhancement, as the numbers were dropping so fast that we should be running sub-eight seconds by the end of the next decade! Cheers! http://scienceblogs.com/startswithabang/2009/08/the_math_of_the_fastest_human.php?utm_source=nytwidget

I think that coming out of any recession, people always feel like things will never be as good or spending won't be back. The truth is that we won't know how good of a recovery we'll have without hindsight. That's true, but we haven't had a correction in real estate prices like we've seen since the Depression. When you have non real-estate asset bubbles (equities, commodities, bonds, etc), the deleveraging has a wealth effect but not nearly as dramatic as a shift in real estate valuations. For some reason, a depreciated value of a home has a different psychological effect than a diminished IRA account. We saw this to a lesser degree in the early 80's, but the correction this time in prices is nearly double. People changed after that period. Many weren't the same as they lost what they had spent the last couple of decades building. And this time the extent of the damage is significantly worse outside of the United States, excluding parts of Asia and South America. Things will get better, but there is no easy way to get there...not using stimuli, unique financing arrangements, interest rate movements or regulatory augmentation. Those things will shorten the time needed to deleverage, but they won't eliminate it. Cheers!

I think we are in the limbo area. You've got managers who are all in, but if you look at CNBC, they are telling you how to prepare for the coming correction. You don't get the correction until the consensus is decidedly on the same page. It may go on longer before people come back to reality...that this isn't going to be a quick recovery. While the worst is over, there is miles (years) to go before we clean out the books and restore the balance sheets. The psychology of spending has changed. People just can't do it right now, because there continue to be corporate restructurings and increases in efficiencies. Business will get better, but it won't be robust. Cheers!

For those interested in all sorts of businesses, I thought this expansive Bloomberg article on Macau and Stanley Ho would be interesting. I don't gamble, but I certainly enjoy the economic aspects of the business, without coming to any specific allusion on whether it is moral or not. I'm always fascinated by how different people approach the same business, and this story does a pretty good job of discussing Ho, as well as other casino magnates in the U.S. and Asia. Cheers! http://www.bloomberg.com/apps/news?pid=20601109&sid=atoSngbDQRzI

GEICO is adding more money and jobs to their business in Western New York. A market they were completely out of several years ago. Cheers! http://www.tradingmarkets.com/.site/news/Stock%20News/2487776/

As I mentioned in an earlier post a couple of weeks ago, one of our partners when renewing his commercial leases had to offer across the board 20% reductions in rent to his leasees. Everyone he knew also had to do the same. In the article below, it seems as though commercial real estate prices have fallen 27% year over year, and 36% from their peak. Unlike residential real estate, I suspect the correction in commerical prices has not stabilized and will be significantly greater from the peak. Cheers! http://www.bloomberg.com/apps/news?pid=20601087&sid=aQ9I9q6Z0DaM

No sorry guys, I actually forgot all about it. I don't particularly get concerned about those things, as this company has always taken care of things. But they read the board and like to keep up with shareholder concerns, so I'm pretty sure they addressed it after some of your posts. Believe it or not, Fairfax actually runs without any input from me...really, it's true! ;D That Prem guy and all his staff actually do get around to getting some things done, instead of me cracking the whip time and again. Cheers!

SEC put out a warning on the use of leveraged ETF's. Cheers! http://www.cnbc.com/id/32463851

Excellent article from FastCompany on the three Buffett children and their foundations funded by $1B donations from their father. Cheers! http://www.fastcompany.com/magazine/138/daddy-givebucks.html?page=0%2C0

Hi Cardboard, I didn't mean to imply anything with the junior mining comment. Just that refilings are very common, and occur with some frequency from small-caps to large-caps. Most companies naturally prefer not to have refilings, but mistakes do happen from time to time, and a refiling is necessary. The controls Fairfax put in place were primarily to do with accounting controls...intercompany transfers, etc. I don't believe the controls were particularly directed at things like a simple 13-F filing. Cheers!

Cardboard, we work with junior mining companies at Quantum, and you wouldn't believe how many times things are refiled...including stuff that the auditors have signed off on. It looks like a simple mistake in accounting. I don't know what the reasons are for the debt issued, and it still may have something to do with ORH, but the 13-F filing seems to just have been an oversight. They filed the corrected 13-F after noticing the problem from all the different shareholders inquiring about it. Cheers!

Looks like you guys caught Fairfax's eye with your discussion on the 13-F filing and missing ORH holdings. They've refiled the correct 13-F. Cheers! http://www.sec.gov/Archives/edgar/data/915191/000095012309035828/o56681e13fvhrza.txt

Yes, Eric is correct. I'm not saying that Simons is a fraud. Just that those numbers are juiced from something. It's just not on proprietary trading snatching a penny here or a penny there by finding mispriced trades. Like Bolt...who ran a 9.58...I really have a hard time believing he's doing that completely unenhanced. When five Jamaican runners all test positive, it becomes more and more difficult to believe that this guy is doing it all on his God-given gifts. Simons is notorious for keeping a lid on exactly how they make money. He sued two former employees who left the firm because they breached their non-compete clause. Leverage, derivatives, I don't know...but the risk/reward ratio there is skewed and I'm cautious in touting his results. There are lies, damn lies and then there's statistics. Numbers don't always tell the whole story. Cheers!

Can you expand on this statement? No need to expand. The feeling is the same I had when I saw Usain Bolt run a 9.58 today and pull up near the finish. Cheers!

Most of us here that have owned Fairfax shares for many years and remember the naked short attacks in past years, have noticed how public perception of naked short-selling has changed from those days. Deepcapture has a nice little article showing where we were and where we are now in the battle against manipulation of market prices by naked short-selling. Cheers! http://www.deepcapture.com/the-pendulum-swings/

For those that have not read the Deepcapture's expose "The Story of Dendreon", there really are some dirty bits about some well known characters in the financial industry. Some of the connections between various firms is actually quite mind-boggling. In Chapter 12, we find out about various connections including convicted felon Sam Antar, Herb Greenberg and Roddy Boyd. Anyone who has been on this board or its predecessor are quite familiar with Greenberg and Boyd. Their names are up there with Peter Eavis, Fabrice Taylor, John Gwynn and Jim Chanos. Boyd's father actually runs a large hedge fund with close connections to Milken. http://www.deepcapture.com/michael-milken-60000-deaths-and-the-story-of-dendreon-chapter-12-of-15/ In Chapter 13, we find out that Renaissance Technologies current CFO was formerly the CFO for Steve Cohen's SAC Capital. Many on here know that my thoughts on Renaissance's results from their proprietary trading suffer from a case of severe disbelief. I had no idea that James Rowen had any relationship with SAC Capital. http://www.deepcapture.com/michael-milken-60000-deaths-and-the-story-of-dendreon-chapter-13-of-15/ Chapters 14 & 15 finish up the story and the final outcome of what happened. Cheers! http://www.deepcapture.com/michael-milken-60000-deaths-and-the-story-of-dendreon-chapter-14-of-15/ http://www.deepcapture.com/michael-milken-60000-deaths-and-the-story-of-dendreon-chapter-15-of-15/

Hi Folks, After Zorro mentioned doing so in a previous post, I gave the idea of a separate board for Steak'n Shake some thought. While it is a bit premature relative to the track records at Berkshire and Fairfax, with the amount of boardmembers now participating through Biglari vehicles...The Lion Fund, Western Sizzlin and Steak'n Shake...I felt that it may be appropriate to have a separate board. The other reason why I think it is appropriate to give Sardar a board, is that many of us have always wished we could have watched Buffett, Watsa, Lampert, Steinberg & Cummings, etc when they were in the early stages of development of their holding company vehicles. This is one of the few examples in the last few years, where boardmembers from the MSN BRK Board and the Corner of Berkshire & Fairfax Board, have witnessed each little step as they've progressed. We've actually been privy to a terrific case study in corporate activism, capital allocation, structuring of transactions, leadership, turnaround procedures, financing, franchising and expansion of operations. I believe a separate board will allow boardmembers to scrutinize and understand the successes and failures at Steak'n Shake as they begin their acquisitive expansion period. Sardar has always been very supportive of our message boards, from the very first interview he did years ago, to the kindness he shows to boardmembers at various meetings. We are fortunate to be in a position to watch and learn from his progress. Cheers!

The next shoe to drop in 2010, along with Alt-A and Opt-A refinancings. Surprisingly, Blodget keeps it simple and straight forward. Thanks for the article Alan. Cheers! http://www.businessinsider.com/henry-blodget-commercial-real-estate-loans-going-bad-at-frightening-rate-2009-8

Berkshire released their quarterly holdings today: http://www.sec.gov/Archives/edgar/data/1067983/000095012309035453/v53429ae13fvhr.txt Article on some of the changes: http://finance.yahoo.com/news/Berkshire-reports-Becton-rb-2560083979.html?x=0&.v=2 Cheers!

Francis' 13-F for the 2nd Q is out. Cheers! http://www.sec.gov/Archives/edgar/data/1389403/000095012309035094/d68838e13fvhr.txt

Mohnish's 13-F for the 2nd Q is out. Cheers! http://www.sec.gov/Archives/edgar/data/1173334/000095012309035327/c53107e13fvhr.txt

The one thing I was always amazed by when Peter Cundill managed money was that he had only one down year in over twenty years. Cheers!