enoch01

Same announcement as years past: http://www.fairfax.ca/news.htm

Fantastic news. Many thanks to the quick-witted and nimble-minded board members. E

Is there a bubble forming in options trading? http://online.wsj.com/article/SB125202073403184971.html#mod=todays_us_nonsub_money_and_investing The 57-year-old chief financial officer of her husband's pain-management clinic in Pensacola, Fla., trades options for herself and other family members. Surely there must be a way to profit by inverting this, but I don't know what it is. However I have to believe that a lot of people who think they know what they are doing but don't will blow up some time down the road. I don't think I have any competitive advantage trading options, so I avoid it. More from the article: The number of investors attending Schwab's options-trading seminars "has grown dramatically this year," says Randy Frederick, Schwab's director of trading and derivatives. He has hosted seminars in more than 40 cities this year. So what's the other side of an everyone-can-make-money-trading-options coin? E

What's the best way, by which I mean least amount of trading friction, of buying gold? ETF's, miners, purchasing a few coins myself and putting them under my bed? I never thought I'd be asking this question, but have been growing more concerned about debt monetization and money-printing recently. Thanks in advance, and feel free to try and talk me out of it, too. I'm not convinced this is a good idea, just interested in options and learning.

Don't forget that LUK has employed decent leverage to generate their returns. Follow through your puck analogy - what leverage level do you think they will employ going forward?

I think it's overvalued, and recently sold out of the rest of my position. Now that I've done so the stock will of course double :) They have potentially a few billion of NOL's available if and when they start earning money in the future. Overall, operations have been treading water for the past couple of years. They wrote down quite a bit of the NOL value last year. Personally I don't know how to value these, and have essentially neglected them when looking at the company. Their investment in the Fortescue note is carried at a smaller valuation on their balance sheet than is the same liability on the Fortescue balance sheet. Going from memory I believe the difference is about $1.5 billion. So adding in something for the NOL's and a less conservative value on Fortescue you could add perhaps $2 to $3 billion dollars in shareholders equity, very roughly. Still, cash-constrained as they are, it's difficult for me to see the margin of safety here. LUK is always on my watchlist, the management is wonderful, and I will be intrigued if I see some insider buying again. E

http://news.moneycentral.msn.com/provider/providerarticle.aspx?feed=OBR&data-ipsquote-timestamp=20090624&id=10062364 Last September, Goldman agreed to sell Berkshire $5 billion of preferred stock carrying a 10 percent annual dividend, and warrants to buy $5 billion of common stock at $115 per share. "We'll make a lot of money off Goldman," Buffett said. It was at that point that I decided to up my Berkshire stake.

BRKB 14% WTM 7% FFH 5% LUK 2.5% Y 2.5% WEST 2% OTHER 4% CASH 63% (recently sold some positions) Looking for good jockeys at good prices.

Did anyone else notice this, towards the end of the article (emphasis mine)? "We say we have a Gaussian distribution, and you have the market switching from a low-volume regime to a high-volume. P21. P22. You have your igon value." He has quite an accent I guess! ;D

On the contrary. I would say the application of value principles today is going to make some people very rich in the years to come. Seth Klarman was saying a couple of years ago that it was a tough time to be a value investor. Cumming and Steinberg would lament at annual meetings that private equity firms were sucking up potential purchases because they were willing to pay more (with borrowed money, of course). Berkshire was drowning in cash because Buffett couldn't find deals. Faifax was buying insurance on the financial system that turned out to be what I'll call generationally cheap. In my reading of history (certainly not in my experience - I'm too young), there have been few times better than today to be a value investor. Well, maybe not today, perhaps early March. Volatility and a long-term perspective are the friend of the value investor. For example, when the price of a company like Leucadia drops 80%, then more than doubles, all in the span of about a year, to me that indicates a fruitful environment. E

Margin of Safety - Klarman (long and insightful) The Little Book that Beats the Market - Greenblatt (short and insightful) The Black Swan - Taleb (good thinking about risk)

LUK said they were going to look for opportunities to buy back their debt. I don't know if they've actually done it yet.

If either GM or Chrysler get restructured, then who knows how competitive Ford will be at that point. It seems to me you have to make A LOT of assumptions to make any investment case here. I think it was the Charlie Rose interview Buffett gave after his donation to the Gates fund where he said he had no idea how to value GM, particularly because of future liabilities. My guess is that the same would go for Ford today. I also tend to think he sees many other choices right now that represent lower hurdles over which he has to jump. E

When I was younger, I'd have a tendency to rush through tests in school for no other reason other than to see how quickly I could finish. More often than not I would get the test back and there would be some really, really dumb mistake on it - and it obviously cost me on my grade. Finally when I got to college, it dawned on me that I should take all of the allotted time to go through the test, and review all answers, before turning in my test. Unsurprisingly, my results improved. My biggest mistake in investing has been not adopting this philosophy of waiting until I am ready, waiting until I've reviewed my answers sufficiently and develop a trust in them, before taking action. Plus, unlike a high school math test, with investing you have the benefit of never being timed! When I first became aware of the idea of buying a security for less than intrinsic value, it was very appealing. But what I needed to learn was the patience to develop an understanding of intrinsic value for a security, and then to recheck my evaluation. Still working on it...

How does the Kelly criterion help determine this? I thought it helped you place the appropriate wager given the varying odds among bets of a certain sample size. It doesn't help you determine the sample size, does it? Or were you referring to the fact that diversification reduces the impact of incorrectly estimating the payoff of a single bet? Appreciate your comments, and all others as well. E

...all changed in late 2008, when Pabrai saw that "good investment ideas were plentiful." In reaction, he adjusted his long-held "10x10" approach. "One needs to be a learning machine and be willing to give up some of our best loved ideas when the evidence suggests they are flawed. Going forward, to temper volatility, Pabrai Funds will endeavor to size positions at 2%, 5% or 10% of assets. Pabrai's comments in his recent letter to shareholders noting "loads of deep value" in "metals, commodities, mining and natural resource companies. If I understand him correctly, he's saying that because the number of ideas has increased, he's therefore going to run a more diversified fund. Why wouldn't you still purchase your 10 best ideas, and simply enjoy the greater future returns because they are that much cheaper? How does the increase in number of good investment ideas warrant more diversification? I suspect that he's trying to explain away poor performance with a non sequitur.

What motivated him to sell part of his business to Western? I look forward to the interview. Thanks for your efforts in setting up this board! E