woodstove

Hi Collegeinvestor... about how Charlie Munger thinks ... this may help. http://boards.fool.com/Message.asp?mid=12539934 The author "ctm" may or may not be the "real" Charlie Munger. And in any case, the author was talking about how Warren Buffett thinks, not how Charlie Munger thinks. Nonetheless, a print of this particular post is the #1 paper in my stockpicking ideas folder. Who cares who actually wrote it, if the idea has merit?

Thank you! A lot of careful work went into that report, quite clearly. Looks like a good read, and some new info vs previous coverage.

Yes, I'll second the recommendation of the Strathcona, but they were full, when I phoned them a while back. I got a pretty good deal via hotwire.com, which turned out to be the Sutton Place. No idea what sort of room they are renting at a deep discount but Sutton is a good hotel in general I think - never stayed there before. The hotwire.com discount is pretty decent compared to nominal list price. Requested a hotel in downtown area and took the cheapest that was >= 4-stars. Non-refundable and one has to commit to buying blind.

50/50, cash + commodities. Expect near term cash being safest, longer term commodities being safest. Cannot predict when might see the transition, and suggested alternatives are so general, hands-off / locked-in, so go 50/50. Not same as real life of course. There, can target particular commodities, go for good cash/commodity managers by choosing appropriate companies as intermediaries to hold cash/commodity.

Inflation coverage, I agree. Another motivation might have been to put an end to the concept that Berkshire's deep pockets could be looked to, for rescues, and might in the political context be hard to refuse. Buying Burlington, with some share issuance to make up the capital requirement, says he is all tapped out - even if not actually, it provides content for popular media articles. The share split, widening shareholder group and getting included in index, is good risk protection for popular dislike of exploitative financial firms. Berkshire is looking like upwards of 1 pct of US GDP, I'll guess. And finally, Burlington is a great purchase, just like Mid-American. If rates are low, debt finance in public market. If rates are high, ie Berk-utilities are seen as risky (because all in the industry are seen as risky, for instance), then self-finance, getting great returns into insurance subs, and being able to monitor or control risk so there is not really as much risk as market is pricing into corporate bonds. Nice balance.

Give it another 100 years, and the common language of India (and much of rest of world) might be an amalgam called "filmi". Indian storytelling is outstanding, 2500+ years, tremendous wealth of stories/ideas --- and now technology allows distribution.

Naive view ... if credit is shrinking X pct/yr then holding cash is return X pct/yr in terms of advantage of liquidity? Despite that, I'm almost fully into equities, holding very little cash. Looking for inflation protection, mostly. My largest position nowadays is Imperial Oil. Shift in shareholder demographics is happening, because they are investing formerly free cash flow into increasing future production - Kearl project, most. The concept of equity bond applies - increases to capital employed should produce beneficial future returns, is my opinion. Don't have to see the earnings paid out via dividends or share repurchases, if company has better use of them. Basically, cannot figure out the economy in macro sense, so pass the job to people who manage good businesses of various types on a full time basis - Imperial's team, Fairfax's team, Berkshire's team - each bunch of people in their respective competencies. Holding excess cash via company should be as good as holding it in my account.

Investors should do their own ratings - Prem mentioned that in recently posted interview. No need to wait for ratings agencies to make a decision re relative appeal of alternatives.

One characteristic of outperformers is they do things differently from others in their "line of work". Quite all right to trust someone to manage some funds, who has a mix of participations / activities. Best to evaluate for the positives that a person brings, not ask them to be like rest of the crowd. Just like companies. Risk that GAAP / MBA-think can get in the way of understanding strengths / value.

I believe that those debenture volume numbers are dollar value at par, ie approx 51,000,000 would be entire issue changing hands, so Jan 27th volume was only 2 pct traded.

Cdn term is "Deed of Gift", I believe. Broker should be able to provide form for it.

ps to Myth ... I just bought Joseph Stiglitz' new book Freefall and am currently enjoying reading it. Not very far into the book, but I like his thinking. eg, role of mortgage industry should be to de-risk home purchase.

Kumar and Myth ... you are right, mark-to-business-plan accounting was intended to convey the good side of mark to model. Any organization which makes things or provides services, is badly managed if they evaluate activities and opportunities solely on the basis of how it affects their balance sheet. "Solely" is a key word in that statement, one clearly has to have some awareness of balance sheet considerations. For instance, a year or so past, GE announced some sort of retention plan for middle management during anticipated downturn. Or maybe it was a commitment to continue management development programmes. I'm not a follower of GE so don't recall the details. However, middle management is a genuine asset of the company, which does not show up very clearly on the balance sheet. Imperial Oil, whom I do follow a bit, proceeded with their Kearl River oil sands project based on their own estimates of oil prices and future demand. Those numbers are not the same as balance sheet values of reserves which US GAAP used to require be based on only 31-Dec closing prices, and in a slight concession to reality of the oil business, now I believe may use an average of last quarter prices. Imperial has a business plan which leads them to keep a second set of books, hopefully closer to reality of their industry and its economic relationships, for making operational decisions. Sometimes the business value of an enterprise makes its way onto the balance sheet of its acquirer or disposer, in terms of cash price paid/gotten. GE does a fair amount of buying and selling of business units, I believe, so one might argue that some of the business value shows up on the balance sheet. Though there will be historical anomalies - light bulb business maybe overvalued, medical diagnostics maybe under. See's Candy is the classic Berkshire-zone example of how balance sheet does not represent business value. Would we propose that See's make its decisions on balance sheet considerations? I think they probably make decisions on the basis of long term return for projected expenditure. Buffett has reportedly told some managers to go ahead with such-and-such if it will produce meaningful profits over a ten year period. Ben Graham refers in Security Analysis to holding real estate investments until the depressed market returns to normal. That is not unlike mark to model. It is ok if one is using an intellectually honest model.

Hi Kumar... Those are good questions. Here from my limited understanding of Koo's ideas is a partial answer. 1) You refer to GE not acknowledging they have a balance sheet problem. That is correct behaviour for them, or any other enterprise which is long term viable but needs to repair their balance sheet. Emphasizing the negative can cause collapse of confidence - ratings decline, financing costs rise etc. If company is able to earn its way out of trouble, it should do so. So actually I have some affinity with mark-to-business-plan accounting. It is routinely done in energy industry for instance. Prospective investor needs to evaluate quality of business plans, personnel who will implement, etc. 2) How to determine that balance sheet recession is over? Koo addresses that in pp 39-51 of his book. Several metrics can provide information: a) Companies have stopped paying down debt. pg 40 chart - credit extended to companies by banks (seasonally adjusted currency measure, and pct of GDP). b) Businesses have cleaned up their balance sheets. pg 41 chart - leverage at companies, Japan vs US. c) Corporate fundraising trends contain signs of real economic recovery. pg 48 chart - proportion of listed companies paying down debt. d) Companies are now accumulating financial assets. pg 49 chart - increase/decrease in net financiall assets at nonfinancial corporations. The above is very partial understanding - Koo followers could no doubt provide other and better answers.

Nice to have that update on Richard Koo's views. He was mentioned about a year ago, on either this board or Chuck's angels, and I read his book and listened to audio of CSIS lecture of fall-2008. Very good analysis - he combines realistic view of businessperson's behaviour with macro economic perspective. Two things I would add to supplement Mr Koo's advice: 1) Spending (hence borrowing) can be stimulated without direct govt expenditure. For example, in Canada there was a home renovation tax credit of $1350 off taxes for home renovation spending, ie 15 pct return via tax system of spending up to $10k, after first $1k per household. Worked very well at getting ordinary folks employed, encouraging homeowners to open purse strings a bit, and cost govt only 15 pct of GDP increase produced. (Well, maybe 30 pct, considering some home improvements would have happened anyway without stimulus. But certainly less than 100 pct if had to be direct govt expenditure, and less than 50 pct which is nominal govt percentage of economic activity - so a net gainer to stimulate private sector.) Another way for govt to stimulate economy, without much direct spending, is by regulation and standards setting. Eg, must buy new types of TVs, or have to replace old deteriorating underground gasoline storage tanks if want to stay in gas station business, etc. Argument is often heard that regulations should be delated because of slow economy, but in fact, that is actually very good time to create more work on secondary aspects of having good quality of life. Primary is being looked after of necessity, and secondary stuff is being deferred eg entertainment, dining out, so govt can regulate some of the secondary back into action. Would be interesting to hear Mr Koo's take on such matters. He might feel private sector being encouraged to spend would delay repair of balance sheets. 2) Other item I differ from Mr Koo is re comment he made in fall-2008 CSIS presentation, that most effective govt spending would be what does not improve productive capacity. eg, war spending is best, because destroys capacity (physical and human capital) instead of increasing it. My take is opposite - better to improve productive capacity, but maybe capital investments that take long time to return net positive benefits flow. Eg, education, health care of younger folks, pollution reduction. Wish he would comment on that matter as well. Thanks for posting the Koo interview.

Insurance on share certificates - Wells Fargo is advising to insure for 2 pct of value. So, nominal $4000 per old B share, 2 pct would be $80 of insurance purchased. Should not be too costly. I assume the 2 pct is lost-certificate deductable which individual investor would incur. However, it seems to me from other stuff read in past years, that individual is liable for 5 pct of value. So not clear on that. Anyway, planning to follow the advisory and insure for 2 pct. Years ago, when I went to post office to send certificates, they had a special procedure called "money packet". Special tracking of custody within the postal system. Don't know if that is still in place. And was Canadian post office, sending to US address. Anyway, ask. An acquaintance routinely mailed precious gemstones thru US postal service, in past years! It is pretty secure.

I think it is legit. For B shares held in certificate form. I got such a letter also. Bit of a nuisance, but probably wise to exchange for new certificates. The other way would be, I suppose, to deliver old certificates to brokerage to be placed in account. But then have to risk having them loaned out etc. If purpose of holding shares in certificate form is to have some assets outside the brokerage industry, then would be re-incurring agency risk.

Thank you ... good for myself, and have printed a couple of copies for next generation too! I like using Philip Fisher's chapter on what to buy, as a checklist. But the one you posted picks up additional considerations.

CEF.A and ZCL - though I haven't checked recently for possible policy changes.

Thanks for the link to bretonwoodsii.org website. I've long had an interest in Ben Graham's commodity based currency ideas. Nice to see there is discussion in a contemporary context. Some good reading indeed.

Thank you - good reading. Para 4 under Precision Steel, "not very successful" probably should read "now very successful".

In early 2008, I transferred my RSP from a full-service broker to TD Waterhouse. The transfer authorization specified "All in kind (as is)" not "All assets but mixed in cash and as is (in kind)". On the form, the latter choice allowed specific assets to be listed with a choice of in-kind, in-cash, sharews/unit, or dollars. As I was moving the entire account, as-is, that was not relevant to my situation. I did not hold any mutual funds, which might be a complicating factor. I think an accompanying letter specifying that you do NOT wish the Chou funds to be liquidated might be useful if you have a real concern re how the transfer will be handled. Would be evidence of intent if they should screw up - they would have to eat the re-acquisition cost in such an event. But it sounds like you've already gone ahead with the paperwork, yes? The transfer was seamless. Everything showed up in the new TDW account 17 days after the request was made. There was some followup re a bit of unit trust income received at the old account - both cash dividend and a dividend paid in additional units. That was resolved by contacting the old broker (with whom I still had/have a relationship for other accounts) about 3 months later, when the dust had settled, and getting the leftovers transferred - there was no additional transfer fee for that charged by the old broker. And it was tricky, because the units received as a dividend were continuing to receive distributions. Full service really is good service, for all their high trading fees. Re TDW service: I've been happy with them. I like the low cost of trading. They have an option to set up an additional trading password, which must be entered on trades (and is entered no-where else, eg upon inquiries), which I like - other online brokerages eg RBC do not provide that feature. TDW's service has been down sometimes, but RBC has its outages too, at different times. TDW's statement is not the easiest to read but all the info is present. TDW's 9.99/trade commission rate is determined once a month, based upon the account balances about a week earlier. You can request that it be activated earlier, by contacting their representative, but it may not expedite the matter. Rather, after you have made a trade, telephone their rep and request that your commission be adjusted to 9.99 for that specific trade. I did that before closing on the day of the trade, and it worked fine. TDW's information for securities research is scanty, nothing like a full service brokerage (BMO-Nesbitt Burns), but there are a few bits that might be useful and are different from other sources available to me. I generally don't use TDW for info gathering however. I have never received any impression that TDW might be front-running my trades. I looked into debentures trading with TDW, but have found a full service brokerage much better for that - limit orders easily handled, for example. Perhaps there are ways around that, which I have not seen because I've not fully investigated all the features available thru TDW. TDW does not put many ads on your screen, which I appreciate. I figure that as a customer, I deserve fast functionality, not being forced to watch as a captive audience. I use a specific-IP firewall between my trading desktop computer and the internet, and allow traffic only with IP addresses which appear genuinely relevant to account purposes. TDW looks generally moderate, but still one may wish to eliminate Google keystroke tracking and such, and make your own decisions re Globe and Mail info. I prefer to get non-account info via a separate computer, not to risk compromise of the trading desktop. RBC is more aggressive with ads, and also utilizes a service (which I block) to monitor how long the viewer spends on screens. However, I've never experienced an erroneous transaction or an account compromise with either service.

Buy into a business that makes something the rest of the world wants. You will get world currency and can spend it in local economy.

Great post Dazel. Yes, I think you have nailed the rationale. The NYSE listing cost quite a lot in the past, driving down the share price when Fairfax needed to raise capital, and having a TSX listing only should avoid a fair amount of that risk. Only one regulator to convince to keep an eye out for attempts to game the price. I also belileve the company will continue to report in USD, and pay dividends accordingly. I would like to see dividend be predictable, something like 4 pct of book perhaps, or even 2 pct, but just establish a policy and don't tweak it. Probably quarterly dividend too would be preferrable.

So are there parts of Kingsway that would be worth buying, given that one might have to assume part of short-tail book of business? Or is it better to simply out-compete them by quoting to their former customers, ie organic growth into the marketplace being abandonned? I have no perspective on Kingsway, except that I looked at them carefully a long time ago and decided to invest elsewhere - thereby avoiding some distress and risk but also missing out on some potential for trading on stock price volatility. So I don't know what are Kingsway's moving parts nowadays, which are worthwhile business operations with good staff and organization, or even if there are poor operations with decent customer lists to be converted.