frog03

Thanks for the book recommendation. Free Capital is indeed a very nice book. Several of the folks there have not only outstanding results but also outstanding approches to investing.

Interestingly though, the one who got the call is not Monish but Weschler... Nobody knew him while Monish is quite known in the value investing community. And his returns are quite better... >>> No, Weschler returns appear much better and this on top of a larger (at least currently) capital base. Plus Mohnish has had his share of serious losses on various issues, something that more than likely would bother Buffett.

Not specific to BAC. Specific to all very levered financial institutions. The leverage in Europe, in regional governements in the US, in regular citizens create so many black swan potentials. Now, BAC also has lawsuit issues but this is the icing on the cake. So far Berkowitz has been definitely wrong on the financials lately. Maybe time will prove him right but he has definitely been very early...

Look at the leverage (total debt/GNP) in the system in the early 90s and now. How can you say it is not different? Wishful thinking?

I think it is easy to take Berkowitz at face value. He knows financials, has had very good call in the area in the past, and the situation looks similar. Problem is nobody really knows what the real book value is at banks, the financial system is very stressed, so this time it is different. Look at the record of Sprott vs. Berkowitz the last dozen years or so. Sprott has outperformed Berkowitz much more than Berkowitz has outperformed the market. Sprott is short financials, Berkowitz is long. On the basis of the track record, I'd go with Sprott...

Well, it sure is not the 16 richest people in France. Mostly CEOs of large businesses, some of which are definitely not very wealthy though they are definitely well off.

I think the financials are in the too hard pile at this point. The incestuous relationships between broke governments and broke financial institutions. Berkowitz is certainly very smart but he probably felt to realize how stressed the system was/is before making his commitments to the financial sector this time around. Now, I have said this here before but compare the performance of Sprott and Berkowitz and there is no comparison over the last decade +...

Bruce is having a really bad year so far. Too early to call his performance mean-reverting but his value added since 1997 must be like 6 points vs the S&P 500 total return (he seriously underperformed in his managed accounts the couple years opening his mutual fund). Now good old Eric Sprott who is also taken a beating this year has outperformed the TSX by about 13 points in his mutual fund.

Arnold has beaten the market and the market beats most pros and amateurs. This being said, he is definitely not in the superstar league. There are many pros that do 5 points over the market over a long-period and there is even a decent (in absolute terms, not as a percentage) that do 10 points or more.

Nothing wrong with your idea of a comparison between the two then, do it properly on a per share basis and accounting for dividends... Microsoft has a declining share count, BRK one that is rising Microsoft has paid dividends, BRK has not ************** Another interesting comparison is MSFT vs Berkshire Berkshire had an equity of 58 billion in 2001 and now it has 163 billion. EPS went from 1.86/share to 5.2/share from 2002-2010 MSFT on the other hand went from a book value of 4.48 to 5.53 in the same period. EPS went up from 94 cents to $2.10 cents in the same period. Which is a better business and which has compounded better?

Well, did you know there were tons of net nets in the thirties???

Interestingly, Ian Gordon (LongWave group) has argued that we are in the 'winter' phase of the Kondratieff cycle. He expects much of the debt at all levels not to be repaid, serious economic contraction, and general decline in most prices (except gold/silver). Defletation actually happened in the early 30s in the US His advide: gold bullion gold junior miners (leverage to gold) shorting selective stock indices

10 years of 20% compounding = 10x your money! ************** Your math is different from my math... 1,2^10 is nowhere near 10.

What does it tell us that the Euro is not taking a hit? That the situation is not much better elsewhere. Let us look at the US. Total federal revenue, about 2 trillion a year. Total debt about 14 trillion. By the time you add the off balance sheet stuff and discount it you have probably something like 30 trillion. So 30 trillion debt and 2 trillion total revenue, the debt is 15 times the total revenue. Is the US bankrupt or what?

thanks. I knew about his web site but was interested in his actual strategy/positions in recent years.

Does anybody follow Tom Stanley (of resolute hall of fame) and knows what themes/stocks he is currently investing into? thanks

Over 14 years, the performance is the same as the market and volatility is not low... So it is not what have you done for me lately. This guy is just (after fees) no better than the market. Canada has a wealth of great managers, and Tim is just not one of them.

Well, Ajit does not know about BRK's dividend in 1967?

Still Lancashire, right? Are you at all concerned about the bonds they are holding? Thx

I tend to agree with the prior post about Berkowitz not sounding very convincing. In addition to St Joe, I thought his case on financials was a bit on the weak side. Leverage, no mention. Margin of safety limited to tangible book value (what does this mean when these companies are leveraged 10-1 officially and probably much more so in reality). I understand Bruce wants to communicate with his shareholders but his (over)exposure in the media and in the financial field seem too much to me. A good short?

Wondering if anyone had any intelligent comments that could enlighten my thinking. I just read this from Sprott http://www.gurufocus.com/news.php?id=120425 I take anything from him and Embry with a grain of salt because they are after all selling their product. I can't ignore the fact that they were into this gold idea almost a decade ago. I don't know if they were lucky or smart. What I can't get my head around is why not oil instead of gold or silver to protect against all of this loose monetary policy. Oil is essential, demand is growing, supply is flattening to declining. Seems like an easy choice over something where the value is determined basically by the popular mood and not supply and demand. Thanks for any thoughts. **************** I believe that Sprott and Embry are not only emphasizing inflation as a potential problem. They view gold/silver as an insurance against potentially disastrous financial outcomes. The financial system, whether it be banks/financial institutions, national or regional governments, derivatives, consumers in several large countries is way too leveraged and the time of reckoning has been postponed but is still likely.

Munich Re. would seem to be a decent fit for somebody/something with tons of cash. Currently trades at about 1.1x equity and historical ROE is in the low teens. For the smaller investor, aside from the speculation that Buffett may want the whole thing, it does not look super attractive. Franck, what is your valuation analysis?

As of 2008, (page 118 stock market superstars book), the Sprott Managed Accounts have an annualized return since 1982 of almost 25 percent a year. So he performed badly in 2008, fine in 2009, great in 2010. So the 25% figure should not have gone down much, probably by a just a couple points. Then again, some folks here will find issues with this performance :) It is like value investing, some folks get it, some just don't...

I think you guys are missing the point. Sprott record goes back 30 years and has been outstanding for 30 years, so saying like he has riden the commodity bull market, the energy market, the gold market the last x years therefore his outperformance is suspect does not make any sense to me. He has usually been invested in the right sectors (gold, uranium, coal, ...) at the right times and has made some mistakes too like not being defensive enought in 2008. He does not walk on water and neither does Buffett or Watsa but his track record is really in the same league.

The funds don't seem to be highly comparable. Sprott Canadian Equity always held a commodities bias at 40%+ of assets, and it is a Canadian small/midcap fund. It seems to embrace a higher risk profile. ************* Yes and no. The longer the comparison period, the more relevant a comparison becomes. But I am not necessarily comparing one fund directly to another. I am comparing the results of the managers in beating their relevant index. And on this basis, Sprott has done 14 points and Berkowitz about 7. This being said, Berkowitz is less volatile. But I'd rather take a lumpy 14 points than a smooth 7 points (Buffett pun intended).