Parsad

It's not back-patting, but trying to recognize the psychological aspect that gets manifested in market behavior. Cheers!

Ericopoly called the bottom yesterday. Looks like he was right. Cheers!

From what I've read, it's pretty clear that Buffett has shorted before. I am not sure where this notion comes from that he's never shorted before. I don't believe anyone said that Buffett has never shorted. Just that he doesn't recommend it to anyone, as liabilities are unlimited, while the upside is limited. We don't short, but we had Spyder puts and we had puts on CRM before the market drop. But we will make a heck of alot more on the long-side we bought after the drop, and not from those puts before the drop. Cheers!

What do you mean by 85% right Sanjeev? There's legitimate risk in Bank of America. Just like there was in Fairfax. Now is it manageable, and can they do it? I think Moynihan is a good guy and is trying to clean it up. They've got robust cash flows and their book of business has improved from three years ago. They've got assets they can sell to raise capital, rather than go to the public markets. But is it enough if things get tough, lawsuits multiply and trusts have to be set up to settle these things? That's the 15%. Prem's 15% was cured by Cundill, Markel and Southeastern, along with Hamblin-Watsa's investment prowess, the insurance executives working their butts off, and the amazing Dennis Gibbs running off business as if he was doing casual laps at the local YMCA pool. Does Moynihan have the team? Does he have the network? Does he have a bit of luck? I'm betting that he does, but I did it through the warrants only. Cheers!

Comments on Bloomberg by Ken Rogoff. Cheers! http://www.bloomberg.com/news/2011-08-09/rogoff-says-fed-likely-to-embark-on-qe3-act-decisively-to-aid-recovery.html

He's definitely right on financials. I think he's 85% right on BAC. And yes, it's not his fault that people pull their money, but unfortunately it comes with the territory when you run a mutual fund or a fund with no lockup. Cheers!

Ophi, I'm guessing it wasn't you! ;D Cheers!

We were prepared. We were about 40% cash from February on. We put about 15% of that to work in the 2nd quarter when financials and tech started to get very choppy. Now we're fully invested after today. I know that the stuff we own will do better than any other asset class over the next couple of years, so there is no need to worry. I've been doing the analysis for the last six months looking for stuff. Now we just had to buy at the prices we were comfortable with. I've also learned that there are certain things out of my control...primarily how short or how long a correction can last. All I can do is be rational, stay liquid until prices are better, put the money to work when the opportunity arrives, and then sit tight. We are the largest investor in our U.S. fund now, so I am eating my own cooking with all of our partners. Cheers!

It was a Haver Analytics slide from a Gluskin-Sheff presentation. I read all sorts of things, and it was just one slide that stood out. Cheers!

Thanks to Shai for the link! The article discusses someone making a $1B futures bet which has paid off 10-1 after the downgrade? Prem tell me that was you! ;D Cheers! http://www.dailymail.co.uk/news/article-2023809/Did-George-Soros-win-10-1-return-S-Ps-US-credit-rating-downgrade.html

Sure, sure this analysis is un-scientific, but I thought I would share it. I believe we are getting close to the bottom, simply by the number of people reading this board. We've had a steady increase in readership over the last two weeks as the markets became more volatile. With a huge surge on Friday, and then another 35% surge today. It was the single largest number of readers we've had since the board started. The readership today was more than four times what an average day would be and the number reading the board at any one time was double the average. Cheers!

When I say makes you humble, I don't mean it so much in a personality type of way...that Berkowitz's head was getting too big or anything like that. What I mean is that when you start to get a little too confident, you make a few little mistakes that you normally wouldn't. - You miss a few things in the analysis. - You trust your gut too much, and not your head enough...sometimes the other way around too! - You think that you can always handle something bigger than the last time. - You accept that the improbable is exactly that and will probably not happen. But guess what? Life is stranger than fiction, and the most improbable event is sometimes a 100% certainty over 20, 30, 40, 50 years. How long did it take for the gold bugs to be right again...30 years? How long do you think before many of them get too confident and fall on their own sword? Probably not 30 years! It's human nature to relish in our own achievements. It's what makes us challenge ourselves, but it often can bite us in the butt! Cheers!

regarding the wish list, i would be really interested in FFH however, FFH has hardly blinked while everyone else is crumbling, you reckon we can get FFH below $350 before this drama is over? Perhaps, but they are better hedged than anyone else. I think there is enough notoriety around Prem and Fairfax now, where you would get people stepping in to buy. The people selling right now are the ones that need liquidity or are trying to buy something else, so they need to sell solid investments like Fairfax that aren't going to move too much. Once that pressure subsides, the stock will probably rebound a bit, since Fairfax has probably been putting some money to work. It will be interesting to see if Prem gets involved in some liquidity deals right now, kind of like they did in 2008/2009. They got rates as good or better than Buffett and Berkshire back then, and they are very, very liquid with everyone piling into treasuries. Cheers!

This is a business that makes you very humble, very quickly. It's why Prem keeps a level head and never let's it get too big...or maybe his family and employees remind him since they went through hell with him! ;D Plus some shareholders did too! Cheers!

For the record I think it's over. Maybe a little more I think. But we are getting close. I'd be curious to know how much the collective redemption are to date over the past week. Sanjeev said the buybacks will begin in earnest and I agree. A company buying back shares helps stem the bleeding, and they have tons of cash to throw at it and the cash continues to pour in the door. Doesn't matter if your little distressed company can't buy back shares -- if MSFT buys back some shares, it gives a value manager some liquidity with which to pick up some severely pummeled stocks on the cheap. The rate of cash inflow to the fund managers just needs to meet the redemption flow. Collectively, how long will it take for the weak hands to be swamped by the cash rich corporate buyers? Then there are reinvested dividends of course. By 2013 (long before then) the supply/demand imbalance should be rectified and those calls appear attractive. We had a couple of slides in our AGM presentation this year, and one of them pointed to margin borrowing. It wasn't anything like before the credit crisis, but it was significantly elevated in the last year. If you combine increased margin borrowing with very low levels of cash in investment funds, you get a quick, cutthroat type of correction at some point, where people feel they need to be liquid. So I would say the correction is probably going to be about 20% from the peak in April on the S&P500 of 1363. At that point, the margin requirements would have decreased significantly, some liquidity would have been achieved and redemptions would have diminished a bit. Considering the position of most financial institutions in the U.S., and corporations in general, I think some stability in market prices will appear at that point when you compare equities to every other asset class. But this is just conjecture...psychology manifests itself in the weirdest ways when it comes to the stock market. One other little comment...at some point, and I have no friggin' idea when...could be next year or two years from now, but you are going to see some people who bought gold get really, really hurt. Cheers!

Krugman and "he whose name we shall not take" believe it was John Paulson getting a margin call today that created many of the ripples. Or maybe a combo of Paulson and Berkowitz. Thanks to Keith for sending me the link, as I would never go to Hempton's blog. Cheers! http://krugman.blogs.nytimes.com/2011/08/08/was-that-mr-margin-on-the-line/?partner=bloomberg http://brontecapital.blogspot.com/2011/08/who-has-got-margin-call.html?utm_source=feedburner&utm_medium=feed&utm_campaign=Feed%3A+BronteCapital+%28Bronte+Capital%29

Wells would be smart to take Merrill. Depending on what happens over the next period, if BAC does have to raise capital and can't sell a depressed stake in China Construction, their ownership of Merrill could go. Cheers!

Probably not pretty. And of course as soon as he's sold and filled the requests, the stock market will move up 800 points. Cheers!

Article discussing the possibility of Buffett making a preferred investment as he did with Goldman and GE. Cheers! http://www.thestreet.com/_yahoo/story/11213991/1/can-buffett-save-bank-of-america.html?cm_ven=YAHOO&cm_cat=FREE&cm_ite=NA

I was at a picnic Saturday night at my "old money" mother-in-law's "country club" just quietly gasping at the 40-50 year old heirs of old fortunes nervously chattering about the debt downgrade and the markets etc... This morning I just figure these people are all getting out and the mutual funds just have to sell to meet redemptions. The fund managers want to buy, not sell, but what can they do? Cash levels in funds are at record lows. So once the last marginal retail investor has panicked, guess whas' gunna' happin? Yup, same thing. I was at a wedding Saturday night, and everyone was asking me about the downgrade and the markets. They all sounded really nervous. I don't think my rational explanation of how markets worked calmed anyone. The types of questions I was getting were "My broker told me that Royal Bank is going to do well next year...will it?" I said to myself..."Oh boy, this is going to be tough to explain." Cheers!

Tom, Fairfax had more firepower ready than any other company I know, so they are probably buying many of the things you want to buy. For example, I'm sure they are adding to their stake in DELL. And their treasuries must have hit a home-run today, so they are almost definitely moving some of that cash to equities. Hold the Fairfax and don't worry about buying Dell! Cheers!

Eric, either you are going to continue to really enjoy retirement, or you may be coming out of retirement! ;D I'm betting on the former. Cheers!

I'm doing a bit of buying with the small amount of cash I have available, but it doesn't look like many large value investors are stepping in yet. They are. It's the non-value guys that paid up who are selling. We'll know who was buying and selling when the 13-F's come out later on. Cheers!

Maybe, maybe not. But it can only go to zero, and we're hell of a lot closer to that than it's 52 week high. ;D Cheers!

They aren't going bankrupt anytime soon. They've got assets they can sell to raise cash. They've got a ton of cash as it is right now...so they can continue funding their business. But these types of situations can create a lack of confidence, and if you have enough people pulling deposits over time...if there is sustained downward pressure on the stock...then it is possible over the longer term. You know as soon as the hedgies hear the word "bankruptcy", they pile in with the shorts. So that downward pressure over a period of time can push a company to the brink if they have no other source left for financing. Berkowitz is going to get killed like he did in 2008, and then rebound over time. Cheers!