Parsad

Can someone explain what Ackman was trying to say about how swapping $1 of debt to equity creates $2 of capital - that one went right over me. Assume a bank has $10B in assets and $1B in equity. Bondholders have $2B. Convert $1B of debt to equity...now you have $1B in debt and $2B in equity. Asset to equity leverage drops from 10-1 to 5-1. The bank can actually lend twice as much now through leverage while maintaining substantially better capital ratios. Cheers!

Bloomberg article discussing some Bill Gates comments, and other issues surrounding succession at Berkshire. Cheers! http://www.bloomberg.com/apps/news?pid=20601103&sid=aIiCTmPGE0BY&refer=us

Any boardmembers here going to Omaha this weekend? Please respond to this thread if you are. I'll try and organize something quickly for you guys, and then you can all agree to meet somewhere. I have some suggestions, but I'll provide them once we see how many respond. Cheers!

Is there any parties with lots of free food and drinks from noon in Omaha on May 1? Nice Buffettgroupie! Ya mooch! ;D Sanjeev, hey just wondering if there is enough members of the "corner" headed to Omaha to have a cocktail hour on friday or sat night?? Hi Scotty! There probably is, but I'm not going this year, so you guys will have to organize something. What I'll do is start a thread here under the Berkshire page entitled "Boardmembers going to Omaha". We'll see how many respond as you've only got a couple of days before everyone heads over there. Cheers!

Morningstar has a bunch of commentary and videos ahead of the Berkshire AGM. Cheers! http://news.morningstar.com/articlenet/article.aspx?id=288879

Gee Jack, I'm glad your quite open-minded about all of this! What I completely and utterly agree with Ackman is that SOME of the banks need to be recapitalized by issuing equity for debt. This does two things: One, it aligns the bondholder interests with the progress of the bank. Why should bondholders get a free ride from taxpayers? Equity shareholders have been or will be ultimately wiped out...either by more preferreds issued to the government for capital injections, or equity issues in the open market if they can raise capital. Two, banks are no longer on the hook for massive interest payments or possible calls on their loans. Why would depositers put their money with a financial institution if it is still in difficulty and the government has to constantly pour more capital in? This also reduces the amount of leverage the banks are exposed to. Ideally banks should be only in the lending and deposit taking business. Esoteric products and mortgages is not what banks need to be involved with. They should be simple, slightly leveraged businesses, where over time they make decent returns on lending and deposit spreads. The balance sheet should not be obfuscated with off-balance sheet items. I'm not sure Ackman said anything entirely different than that. Cheers!

The SEC is currently investigating 150 hedge funds. Cheers! http://www.cnbc.com/id/30439325

Well I think the FDIC is now attempting to do that. Sheila Bair is looking for authority to systematically shut down the "too big to fail" institutions when they are in trouble. Basically seeking to create a good bank/bad bank, where one side will continue to operate, while the other side with toxic or troubled assets is wound down. Shareholders and debt holders would be on the hook for all costs. Cheers! http://www.bloomberg.com/apps/news?pid=20601087&sid=aeH.c5sqMplw&refer=home

Yeah, I saw that interview on the weekend. As I've said before, I don't like Ackman's publicity stunts, but he is a very smart guy. Terrific speaker and his ideas on the banks are actually ones I completely agree with. Cheers!

Article in Smartmoney with Irving Kahn, Walter Schloss and Seth Glickenhaus. Cheers! http://www.smartmoney.com/Investing/Stocks/Stock-Pros-Who-Survived-the-Depression/?page=all

Article from the Omaha World-Herald about the AGM this coming weekend. Cheers! http://www.omaha.com/index.php?u_page=1208&u_sid=10617765

You can get the direct clip here: http://watch.bnn.ca/best-of-bnn/best-of-bnn-april-13---17/#clip161568 You also had shots of Kilroy, Daphne & Calonego in there, as well as Sam Chan who works for Fairfax. It is quite amusing how cordial Andrew Bell was to Prem. I remember the shots Bell has taken at Buffett in the past, and I'm sure he's taken shots at Fairfax at some point as well. Cheers!

They've updated the Deepcapture site. A bit fresher and up to date. Cheers! http://www.deepcapture.com/

Well, the good thing Mungerville is that you will have plenty of more chances to come to Toronto. We have it each year, so anyone who wants to come can. The more the merrier! Although, next year I have to arrange to get a portable mic somehow, because even though we have a semi-private room, there is still plenty of noise and the people in the back can barely hear anything the guests say. Especially Francis who speaks quite softly! Cheers!

I believe it had to do with mark-to-market accounting changes in GAAP. The orange bar would have been where the decrease in surplus would have been before mark-to-market. With the change in GAAP, the decrease in surplus is considerably more as assets will be marked down. I believe that was what was implied. Cheers!

They've released the details of the cases below. The infected seem to end in the names Sender, Greenberg, Antar, Eavis, Cramer, Rocker & Contogouris. How bizarre! ;D Cheers! http://www.cnn.com/2009/HEALTH/04/23/swine.flu/index.html

Well, the stupidity of some of those questions becomes glaringly obvious once the reader realizes who the source is...Jeff Mathews? C'mon! On the other hand, there are a couple that are interesting: #1, #6 & #9. Number ten is probably the most assinine thing Mathews could ask, and about on par for him. Cheers!

Interesting article on Bill Ackman. He's a smart guy, but I don't like the way he necessarily does things. Anyway, the article is a good read. Cheers! http://www.portfolio.com/executives/2009/04/22/Hedge-Fund-Manager-Bill-Ackman

Good point John! Cheers!

I think the mistake was to be adamant about choosing ONLY 10 stocks and allocating 10% each. When you are dealing with wide array of companies with various risks and rewards, how can you justify allocating almost exactly 10% of your capital in each? Ah Kumar, I see what you are saying. You mean putting exactly 10% in one idea regardless of the quality of the idea. You don't have an issue with the concentration itself. Cheers!

You can! Come to the Fairfax AGM one of these days, and you'll be able to say hello. Better yet, you'll be able to listen to him speak, and meet all the terrific managers who work for Fairfax. Cheers!

Also, his 10x10 approach was a mistake. He is changing. An investor has to do what he's comfortable with, but I don't think that was the problem. In fact, I think it's probably a mistake to now switch to a less concentrated portfolio, since such dramatic losses have already happened. Now going forward, he has to find 20-30 positions, each will have less of an impact and he has to focus on far more businesses. It's less efficient than what he was doing. I think the real problem was the correlated risk of various businesses that could be impacted by a severe economic downturn and the leverage utilized by a couple. Normally, without hedging or shorting, he probably would have fallen on par with the markets. Because of some of the indirect, but correlated risk from businesses like DFC, CCRT, PNCL, HNR and SHLD, he suffered worse than the markets. If he stuck to his strategy, going forward the gains would be commensurate with the losses over time. Cheers!

No, Berkowitz was down 30% in 2008. Prem not only side-stepped, but made a huge profit. My friend Peter Lindmark of Lindmark Capital also crushed the market in 2008. Cheers!

Waterloo Record article on Prem. Cheers! http://news.therecord.com/Business/article/523889

Thanks Joey! Good stuff. Cheers!