Uccmal

I believe that is my exact point. I see very little risk in losing long term money in US megafinancials right now. The 'market' sees enormous risk in JPM, AIG, BAC. Same as when we were buying FFH in 2004-2005, and US large caps in spring of 2009. Many 'investors' get immobilized by fear, and that is why value investing is a "get it or dont get it proposition". This goes to circle of competence. I am not advocating outright stupidity, but value investors need to accept uncertainty in their investments, always. If you want certainty, stay in cash, or pay down your house. WEB is very good at determining what uncertainties he can live with, and those he cant. When he says a company is within his CoC he means he can make a reasonable guess as to its future cash flows, barring the unforeseen.

Look, there are multiple ways for BAC to address theoretical shortfalls at holdco - issue bonds - they are a regular issuer of tranches ranging from a few hundred million to over a billion - issue bonds at sub levels - sell some of CWs MBS tranches - sell assets at holdco - I recall them selling something in the hundreds of millions last week. - sell assets at subs - delay payment of lawsuits through endless appeals and delaying tactics - so far they haven't really done this with management preferring to Clean up rather than delay. As Brian gets them closer to Tier 1 I expect they will do more of this. My favourite: Arrange a switcheroo with Fairfax - with IRS approval of course - FFH loans them the money but not really

Moore, well said... But as you know, value investing is a "get it or dont get it proposition". Us financial megacaps are at mutli-generational lows in a recovery environment.

Does anyone find these sort of lawsuits more than a little strange. A little like Samsung suing Apple or vice a versa, and being Apples biggest supplier at the same time. No doubt AIG and BAC have all sorts of daily business transactions, and meanwhile one is suing the other. And to top it off, when BAC wins this case AIG suffers, and they likely have many of their shareholders in common., such as mean and PlanM. A bit like suing myself, or taxing myself a certain percentage of my profits.

Ragu, Your flogging a dead horse. Reviewed and closed by all parties concerned, except apparently the wingnut contingent. and, even if it wasn't - What difference would it make now? A bunch of restatements and adjustments to NOLs, a small fine, and an agreement "to not do it again". Just sayin.

When Snowball came out I was surprised by the amount of risk Buffett took prior to the 80s and 90s. He did not get rich by avoiding risk. He got rich by taking calculated risks. Dempster, Sanborn Map, Amex salad oil, Berkshire, Geico (twice), Wesco, Wells Fargo (1990s), Washington Post - during an advertising collapse, Salomon Bros, Buffalo News - everyone of these had risk associated with them at the time - sometimes potentially fatal risk such as Geico, and Buffalo News. Even in the 2008 collapse he went against the grain and propped up GE and Goldman Sachs - both were extremely risky at the time.

This is awesome. As housing and employment improves I'll bet we see alot more of this at all US banks.

Here is a real easy one. I have posted it a few times on the board. If I had the cash available today I would add to my position in Canfor Pulp. This is not FBK, ABH, or MERC. It is a vastly profitable enterprise, pulp prices are rising, and power projects are being completed, and they pay all excess cash to shareholders. If I had the cash I would reinitiate a postion in parent company Canfor. CFP gets continuous cash from cfx and are leveraged to the improving housing market. The other one right now is SSW, just increased their dividend, with the intention of increasing it more. The only reason for the focus on megacaps is that they are insanely cheap, and you can leverage in a very liquid options market. I also agree with Parsad. He and I and others swung at BAC at 5 or below even. Jpm at 33, AIG around 30. There is always uncertainty. These companies are insanely cheap even now, every one of them. They are under immense pressure and focus to fix everything and they will succeed. On this board people will be discussing buying $30 Bac at 7 or below one day.

I hope when you work out balance sheet cash you are subtracting recievables from payables. My last look, months ago, showed that payables were double receivables. You could treat this as float earning 0.5% I suppose, but is definitely not cash. This is especially true in the service industry Dell is moving toward, where you need to make your payrolls at the same time as you receive your revenue, or even earlier.

I dont see where they have a choice. If they dont proceed with it they wont have any customers.

I am so deep with US financial options that I think I am going to start making use of puts with the assumption that I will ultimately be losing the money and taking a tax loss on it. I regret not hedging my gains from late March with puts on the KBW index, but hindsight is 20/20. Of course there is no sense hedging now, since much of the worst has hit at least in the financials. If things go to hell such as they have been I can then sell the puts at a gain, which I can live with.

I would base it on the cash return to me, as the owner. In no particular order: Exxon or Chevron or RDShell Walmart Tim Hortons Hershey or Mars - private I know but it is a thought experiment Cadbury - wo Kraft Coke or Pepsi Philip Morris - dont like the product Basically, energy, candy, Coffee, and cheap goods. There is a reason these companies are never cheap.

Over the past few years I have travelled across Spain and France. The Inter-country free trade is enormous. On the Atlantic Coast Highway in France and the Interstate across central France, you see the EU plates with virtually every country designation, on large transports. It is the same as the Us where you see state plates from everywhere on the major highways. The Euro is going no where and I suspect, neither is Greece, and definitely not Spain, Italy, or Portugal. Curiously, alot of Spains building boom was driven by buyers from the UK and Germany looking for a nice warm second home. I was in Spain exactly nine years ago, and the locals could no longer afford to buy property. I would suggest that trend is likely reversing right now.

I also think FWIW that the markets have already discounted the EU situation, and are ignoring the positives in other jurisdictions right now. Markets, collectively hate uncertainty. Whether Greece and Spain leave the EU, or get bailed out will be irrelevant to the world at large. It is the uncetainty that drives markets down not the act itself. The US banks are a case in point, and the JPM announcement didn't help clear the cloud.

I wouldn't say I am bullish, but I generally think we are getting over reactive swings to the downside right now. The EU continues to muddle through. I see that Greeks are pulling money from banks in Euros in a big way the last few days. This says to me that they want Euros not drachmas. They have a total of 150 billion of cash sitting in Greek Bank accounts. I am totally invested right now, as usual, with my FFH put still in place. My portfolio is truly bi-polar in nature. Roughly 35-40 % in Us financials including AIG, and some GE, and 35 % in FFH. I dont do well trying to time markets. If I did I would have locked in my BAC gains a few weeks ago and rebought now. I figure that the US and then Europe will inflate their way out of their respective government deficits So I am definitely bearish on bonds. I dont see either FFH or Berkshire slowing down on their non-insurance investing despite their respective hedges (berks being cash).

Or its only a matter of time for the US recovery to intensify enough to spread to EU, and Japan, and bring down debt levels worldwide.

If value investing actually grew in leaps and bounds you would have truly efficient markets. Deals like we are seeing everywhere in finance wouldn't exist. It will never be more than a fringe group. It is more about temperment than numbers. Many large investors were selling JPM yesterday. Did they suddenly realize that trading banks hold complex derivatives on their balance sheet? I hope not. The institutions that sold 15% of JPMs float yesterday are afraid of looking out of step, and losing their jobs. Most people are uncomfortable going left when everyone else is going right.

I managed to buy some JPM common and 2014 - 35 s at the very bottom this morning. I am working on the assumption that Dimon will want to get this behind him as fast as possible, and that risk profiles will be tightened up. Market cap was off > 10 Billion, on a 2 b + loss. It was already at a discount before this hit.

Not a good situation. If they reject the EU programs and exit the Euro currency things will get alot worse, before they get better. They won't be able to import anything with a crashed currency, including food. Their best course of action is to stay in the Euro, and devalue internally, as Ireland has done. Canada, and Germany both went through all this in the 1990s. In Canada, government at all levels cut their expenditures. Once the markets got the message that things were delay with, things began to slowly improve. My entire generation suffered through it (genx) which tends to make us more careful with finances than preceding generations.

I seriously doubt that WEB could raise a fraction of the money he got being Ben Graham's smartest disciple in today's environment. Massively more competition, and people that are as smart as him to compete against, makes today's situation far more difficult. Just ask any portfolio managers who operate on this board. He had the benefit of being in the right situation at the right time in history.

I favor this look: http://www.google.ca/search?q=angus+young+images&hl=en&client=safari&tbo=u&tbm=isch&source=univ&sa=X&ei=uVCqT83HHOaW6AHjlvWsBA&ved=0CFsQsAQ&biw=1024&bih=690

This is something I have given some thought to. However, if you want to live off your investments, then you certainly want to minimize your fixed costs.

Not an investment. A safe store of cash perhaps. An inflation hedge, assuming you have a mortgage. The frictional costs of home ownership are huge. 7-8% fees when you trade. Some of my stocks pay me dividends - my house doesn't - an external real estate investment would. Otherwise it is mostly a money pit. Requires work and money to keep it's value stationary. I honestly would prefer to have the cash available from the house to invest, and just pay rent, but then I am not most people. Most people can't compound their money as well as many of our board members. Canadian's are brainwashed into the belief that home ownership is desirable. I guess it comes from not having a war on your soil in ten generations.

RBS is re-instating dividends on the preferred shares. I bought my "p" shares at $11 averaged. The face value is 25. The yield on my PP is 14%. Hard to beat that over the long haul. http://www.bloomberg.com/news/2012-05-04/rbs-resumes-dividend-payments-as-emergency-government-aid-repaid.html

FFH looks to be dead money for some time to come. If stocks in general go up their hedges become worth less and less. If interest rates stay low, even up to the 2% overnight rate they will only be back where they were 9 months ago on interest and dividends. The large investments are stalled works in progress: Bkir, Rim, Dell, JNJ, etc. I am not a fan of the deflation hypothesis, never have been. The price of oil is preventing deflation to this point, and a recovering US economy will make the opposite more likely. On the other hand it makes an awesome hedge for my derivative rich portfolio. If the market goes for a nasty tumble FFH will do well.