Parsad

Perhaps "milking" wasn't the right word. Let's try leveraging the notoriety. I agree the hero worship goes a bit far, but at the same time, she's done an awfully good job (if you can call it that) of tearing Buffett down in the media. How many times are we going to hear her say "Warren's needs" or "bathtub mentality" when she discusses him. The way she speaks of him, as if he is some sort of needy child. Does anyone here really believe that? The man runs a frickin' empire, with hordes of managers that will do anything to please him. Is he really the basketcase that Schroeder portrays? Please. We all have issues and events in our lives that have affected us in some manner. Why would he be any different? I would just hope she focuses more on the actual events at Berkshire and with Buffett, rather than presuming to be his psychoanalyst. Cheers!

Former NY Post scumbag Roddy Boyd wrote an article for Slate.com about Patrick Byrne. http://www.thebigmoney.com/articles/judgments/2010/01/19/americas-nastiest-ceo?page=0,0 It's interesting how at the end of the article, Boyd holds up Herb Greenberg as a beacon of journalistic integrity. I remember talking to Herb Greenberg at the very first New York VIC, where he and Chanos had just finished lambasting Fairfax and Prem. When I cornered Greenberg in the hall upstairs and asked a few questions about his research methods, his answers were mind-blowing. I asked him if he had read Fairfax's annual reports when doing his research. His response was no. I asked how he came up with his conclusions. He said he had two very reliable and knowledgeable sources. I said, how can he come to any conclusions without reading the financials. He said, he just doesn't have enough time, and that his sources had done the work. Interesting, a journalist writing negative stories about an insurance company that can't even read financial statements. He was perspiring profusely, not unlike condensation on a shower door...dribbles of sweat beading down his forehead. Agitated, he excused himself and went on to talk to other people. So unfortunately, I would ponder a reasonable guess that neither Boyd, Eavis nor Bethany McLean can read financial statements as well. That much of their articles are probably written based on material from their numerous and "reliable" sources. For those that remember Eavis' articles, virtually all reeked of the same stench as the smears that John Hempton and John Gwynn were passing along to various people. That diligent journalist Fabrice Taylor, who ran "Frank" magazine into the ground in less than year, used to write the same identical crap in his VOX column in the Globe & Mail. Who are all these journalists that Boyd refers to as the "reporters who have done the epic and heavy lifting in holding American businesses accountable?" All the ones I've seen don't even do any research, and rely mostly on sources. What heavy lifting have they done? You can still find all my arguments with Greenberg online...the best one is when I asked him why he wasn't covering New Century during the beginning of the real estate bust in very early 2007? http://blogs.marketwatch.com/greenberg/2007/02/novastar_delinq/ Was it because David Einhorn was on the board of directors? It was the largest mortgage bankruptcy at the time, and Greenberg had not written one iota on the subject. Heavy lifting...yeah right! Cheers!

Not surprisingly, Alice Schroeder has a website now. I really liked the last two-thirds of her book, but she is really milking this thing...speaking engagements, a multitude of interviews, articles and probably a couple of other books in the work. No more analyst work for her! Cheers! http://www.aliceschroeder.com/blog/buffett-orchestrates-kraft-cadbury-deal

You are going to make lots of money on the Cadbury deal? So who is the real winner! ;D Cheers!

Due to low capital ratios, China is slowing down lending at some major Chinese financial institutions. Cheers! http://www.bloomberg.com/apps/news?pid=20601087&sid=asj.kLMqwSvE&pos=2

Parsad, I respect writing and your opinion and I love this website. I disagree on the CBY price. Time will certainly tell (he he he) but I think Kraft did well and I think CBY will benefit from KFT's involvement. I have owned CBY for 10 years, buying at a little below $24 and again when it briefly dropped below $20. As I recall CBY dropped below $20 in the 2000 era (around then but I can't really remember) because investors were selling everything they owned to buy tech, including the braces off their children's teeth! Hi Dealraker, The deal will work out fine for both parties, but Cadbury certainly got the better end of it. I would not have paid that much, regardless of any sort of synergy the two CEO's think they will generate. Cadbury earns about $800M annually...KFT paid almost 25 times earnings, and it's actually even worse because they used alot of undervalued KFT stock. Cheers!

The housing market is oversupplied by 860,000 units: Hi Eric, That number is the current oversupply from the 10-year average, but does not include homes that are 60-90 days delinquent. If you look further down that same link you provided, or the one below, you'll see on the last slide exactly what the shadow inventory looks like. Multiply the number by about 4-5M, not 860K. It's still doable, but the current administration is going to get alot of flack for trying...that's if they even have enough Senate seats to actually pass any future legislation! Everyone who owns U.S. debt won't be pleased as well. Cheers! http://ftalphaville.ft.com/blog/2009/12/17/115581/us-shadow-housing-inventory-at-1-7m-corelogic-says/

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!