Uccmal

But BV is inflated. They've got some big time latent reserve deficiencies, IMO. That is the problem of analyzing AIG particularly the long tail life policies. You have too look at every subs reserving. Now, if Berkowitz stabilizes their balance sheet and forces them to reserve properly then they may look like Geico one day. The biggest problem is that under reserving can be hidden from the cash flow for awhile. I dont see the stock price rebounding in any hurry so there is lots of time to wait and see. It could be Berkowitz's Sears or Salomon Bros.

Hi netnet, I was thinking that using Berkshires annual book value growth, or stock price, for that matter will make a difference versus using the average bv or stock price. The volatility will actually work against you with the 2 and 20 system when it is calculated annually versus using the average growth number of 21%. To verify this I would need to plug in brks book value and set up a year end 2 and 20 spreadsheet and do a side by side analysis. A. A more interesting comparison might be the average hedge fund results, versus the average mutual fund results over a 15 year period, versus the S&P 500.

No, But I pulled the book value from a Reuters spreadsheet, and from an S&P spreadsheet. Book value accounts for the debt. So, the conversion of shares should make little difference to BV/share assuming the US doesn't profit too handsomely. It is an intriguing proposition but the analysis is cumbersome to say the least.

If you went through it year by year using book value then you would may find that the 2 and 20% would eat even greater into the outcome. My rationale for this is that the 2 and 20% take a greater haul on your good years. Then there is the actual down years where you still pay 2% of AUM, but your losses are not 20% repaid. Then there is trading taxes which Buffett has shielded Berkshire holders from. Does this make sense mathematically or am I out to lunch? Any mathematicians out there. We need is Marilyn Vos Savant when we need her?

nice discussion. it seems like we need a more comprehensive anonymous financial status poll to cover all these different opinion. Age, ROR, After-tax income, # of child, expense, networth... we are too analytical. No sheeet... I suppose the best measure of investing besides results is: Are you having fun doing it? To that I would answer and unequivocal yes, even though there are of course times of drudgery. Much more fun than my higher paying day jobs have ever been.

There is a really interesting Life/PC insurer that appears to be improving its lot: p/b = 0.23 p/cf = 2.2 Market Cap = 26 billion Partly owned by a long term shareholder interested in reducing its position at a profit. I dont have the time to analyze it. Owned by a couple of renowned value investors.

For those janitors and busboys, we all started as janitors or busboys at some point. If you re reading stufff like on this board you won t be a janitor or busboy for long. Indeed, I have done many lower end jobs earlier on - It all helps with the investing skill believe if or not... Window washer, roofer, janitor, busboy, gas jockey (We serve), construction, hazardous waste clean up, tree pruner, labourer at a transfer station. Never worked in finance, accounting, taxes, or investing.

That would be nice - I want to see the share count go lower. More likely Prem is raising cash for possible opportunities over the next few months, especially if there is a major sell-off! cheers Zorro Not to be overly difficult but why should we care about the share count. It barely trades now. As long as they keep a rock solid balance sheet there is not chance of any short attack again. I would really prefer that they use the proceeds to grow all the subs they have purchased or started in the last 3 years, and keep up with the value investing. Far more lucrative than buying back stock at or above book. I certainly dont want to see any large acquisitions. The only reason Zenith was acceptable is because FFH knew it inside-out. I live in fear of another TIG and I am thinking that the FFH people do as well. Much better to do it the way they are now - expand organically and control underwriting from the get go.

Pulp prices have stayed firm at 990 into this week so far. I am trying hard to make myself wait a few weeks before buying any more stock in this company. It is back to being in my 4 largest holdings below FFH.

ragnar, None that I have ever seen. I have learned from board members and through trial and error. I go by the following premise: 1) Common stock must represent a value first. That is, I would buy the common but I can get leverage through Leaps. 2) Leaps must be available and have some liquidity and not be obviously overpriced. - to that end I wont buy Leaps in Canada any longer. 3) Options formulas are useless because you need to guess key inputs. If I have to use a formula that requires me to guess key inputs them I have not done the job in Number 1. As said above I buy only Leaps >= 1.5 years left. Sell no puts, calls, or anything else. I buy Put Leaps on occasion as insurance but have moved more toward selling stock and holding cash. Recent option purchases: wfc, bac warrants - Super Leaps.

A_hamilton, My guess: 1) There is a demand for the product. FFH is just getting the money while its cheap. 2) No idea - probably keeping it simple. Issuing Series of preferreds is a common practice in Canada where the dividends are tax advantaged over interest for the buyer of the debt.

I still owe Sanj alot of lunches for going out that day.....

Eric, To be clear... When we were buying those calls FFH did not look anything like a sure thing. I'd have to check but I am pretty sure the calls went into a loss position right away. Mine were all Leaps. To this day I have short term calls only once or twice and the result has been a wipeout. June 2006 was when I first bought - FFH started to look as though it would survive by this point. Then came the lawsuit, and then the restatement. It was exciting but not alot of fun. My observation is that most people would not invest in these at the time because FFH looked like too much of a wipeout. Exact same thing happened in March of 2009. And the exact same thing was happening on this board this summer when blue chips had reached generational lows.

So much of what you are looking at is program trading. Gates, Ballmer, Allen and other MSFT insiders sell shares continuously as part of diversification programs. I am thinking that insiders at Dell, and many of the other stock rewards companies have the same programs. So what your charts are really telling you is that there was a dearth of insider buying for a couple of weeks. This could mean that many insiders already got cheap shares between May and August and are feeling a little tapped out. The only thing I could draw from those charts is that LTd Brand is in trouble. As per Peter Lynch "insiders sell for many reasons but they only buy for one reason - they 'think' the stock is cheap". The operative word is "think". I bought a company once where the president was buying stock up to the day before a total bankruptsy (????). Not all insiders are smart just like not all stock buy backs are good ideas. Insiders at Potash Corp. were buying two summers ago when the stock was $200. It hasn't been near that value since so alot of the insiders are underwater, hence the dire need to be taken over. So, I figure the data set is meaningless.

Thanks FFH Watcher/Finetrader for your comments. Paying off the debentures before January 1st makes no sense. I dont see them getting better than a 7% interest rate anywhere else. I haven't been able to find the specifics of the SGF loan or the GE credit line fater at least 15 sedar filings (this is where a website would be helpful - I guess I am spoiled). Probably my preferred options are that they pay down the GE revolver first, buy back the debentures in the new year at face plus accrued, set up a system to keep 30 M on hand to see them through the next market downturn, and then start paying dividends with the extra cash. Paying the debentures and clearing the line of credit may save them up to 2.5 M per quarter in interest payments. Having a sustainable dividend would push the stock price up to book value or perhaps even beyond, which is of course what I am betting on. The thought of them buying another mill at the top of the cycle terrifies me. I am hoping this management is less "ambitious'.

SD/triedandt, You'll need to enlighten me a little here. I have trouble interpreting legalese and cryptic. a)Is it your implication that the company will announce within the next few weeks that they are going to redeem the debentures for the face value? If that is the case it seem a reasonable course of action. b)The debentures were issued at 1000 and trade at 100. Was there some sort of change along the way? What am I missing?

From my records: wfc jan 2011 - 22.50 calls on March 31st, 2009 - 3.50 -stock was $16.00. I paid 4.11 some time in February 2009. Sold these in on May 5th when the stock was at $23.00. Sold some wfc jan 2011 - 20.00 calls on March 6th at 1.40. bought at about 3.50 average - not your stellar trade but context is everything. I bought SPY calls at the absolute bottom of the market on March 8th with the proceeds on the thinking that the S&P would outlast WFC if push cam to shove.

triedtested, I agree that buying in the Debentures and solidfying the balance sheet through reducing the debt are desirable. To a point. However, this is a company that operates in a deep cyclical industry. Buying back shares is meaningless if they end up having to issue more at some date to solidify the balance sheet again. Having a regular dividend would go much further to restoring my confidence in management and raising the share price IMO. Then I can decide to re-invest or move the money to greener pastures. I am really not a fan of share buy backs unless they are done by companies who have the skill to do it right. I would say that is definitely the minority of companies. SD, I dont think management is particularly good. They have communicated nothing to help the shareholders get a feel for the business and their plans, if any. In addition, as per FFHwatcher... the web site is not complete. This does not bode well. IF they aren't planning on doing anything with it, they should just have a note and a referral link to Sedar. As well, they allowed FFH to take them to the cleaners on the offering. I am still perplexed as to how they took a company trading 50% higher, more at one point, and managed to bring down the stock price so effectively. All that being said I bought 10000 shares today at 0.98. I am hoping someone will eventually recognize and remedy this situation. Any simple calculations should show that book value is growing by the day.

I still hold some CFx.un. I have about a third of what I held a year ago still left. It is trading at 2x book, with 20% yield. The yield is not likely sustainable although the longer they rake in the cash presumably the better their balance sheet will get. I also like that Jim Pattison is in the picture on this one as a major shareholder of CFP. Now obviously the yield is going to take a hit in the new year under a new tax regime. I am thinking the market has this priced in to the stock at this point. RE: fbk: This is a very disturbing situation. Management appear to be just caretakers at best, so far. I would like to see the major shareholders get aggressive and toss them out. By now they should have started paying a small dividend as a goodwill measure. I just dont get it. If they drove the stock up to Book value they could issue a small number of shares to preserve their capital position.

Hadn't realized a thread had evolved on RIM. In keeping with my style I try to buy when I think it is oversold and sell on rises. I am mildly uncomfortable in getting stuck with it for awhile but not severely so. I bought it before the recent earnings release. At the time I felt it was trading cheaply relative to its cash flow, and PE, and its possible growth. Rudimentary assessment at best. It trades at a fraction of the multiple accorded Apple. I think that the market, and analysts, often mis-price RIM due to direct comparisons of what it offers to what Apple or Google offer. The two are not directly comparable (tempted to say comparing Apples to Blackberries). RIM provides two products, the device, and the network. The device is easily duplicable. I dont think the network is. The recent hoopla involving India, and UAE shows this. The RIM service is secure from most security issues, so much so, that many world leaders and CEOs use it. So far the Android or the Iphone dont offer this. If you dissected the statements from JPMorgan they stated that they would test drive I-phones provided the I-phone met security concerns, and the employees provided the phone at their own cost. If you have ever dealt with IT departments at your places of employment you soon realize how stuck in their ways they are. Everything has to be IT approved. To get any non sanctioned software on your systems is next to impossible. For such as fast evolving business change at the IT committee level is glacial, and expensive. It is my thesis that those who use RIM will not change easily. In the interim RIM will sex up their toys for the GP. I draw all this with a caveat. I would never, ever back up the truck on this stock. No how, no way. I just trade in and out. And no, I dont do this with most stocks. 95% of my portfolio is medium/long term focussed.

Think about this for a minute. If one could do this over 10 years one would grow from 100 k to 5.6 M; another 10 years and 332 M. It is not doable. No one has a public record of success picking stocks like this. Even the 70 year old Warren would make misjudgements and mistakes that would reduce his rate back to 30% over a few years. In his 50% there are several assumptions I think he has overlooked: 1) He has the intelligence of hundred companies feeding him daily information to help inform his choices today. Without this back drop he wouldn't have nearly the handle on what the overall economy is doing as he does now. That would handicap his results. 2) He is assuming that the competition is the same as it was in the 1950s - it isn't 3) Many of the things he did to juice his early results are much more difficult in todays climate due to competition, greater regulation etc. The Hayden Ahmanson affair comes to mind where his lawyer pal went around Nebraska offering 100 per share. Today the company would have been required to publicly disclose that they were planning a share buyback and were going private. 4) Greater investor sophistication leads to fewer of the workout type things he did such as Dempster Mill, Sanborn Map. Many fewer companies are allowed to get so cheap that they have more cash and securities on the balance sheet than the market value. I saw one once. 5) The baseline is higher now than the 50s. They were coming off of the great depression remnants. Times were very different. Buffett rode the wave. Had he been born in the 1950s rather than in 1930 we may never have heard of him. I could go on. I just think that it would be much harder to do than even Buffett realized when he made the comment. 30% sustained I will believe because it has been done, but not 50%.

Hi doc75, I appreciate your sentiments re: member's egos etc. But, in two messages Rick_v managed to trash a mode of investing that had been successful for me over and over. He did the same with systems others use. His results apparently are no better than those of anyone else on the board with similar levels of experience. We can sort of do without that behaviour. The moment someone says that something in investing is "black and white" is the moment I lose all respect for them.

Thanks coc/Sanj for your voices of sanity. Never mind defining Alpha? Can you define Buffoon? Ego always blows apart at some time. Does thinking about ideas all day, and talking with people, and reading science and business, and psychology qualify as working 16 hours per day? To get 16% returns as per Zippy's calculations takes some skill but is not that difficult. It falls into the realm of price is what you pay, and value is what you get. If you get FFH at a discount where it has been trading for over a year (until this summer) then you get FFH's returns plus the return to value component which takes you way above their returns. Repeat above with other companies and protect your ass. A.

Link01 - Were just talking past one another. This bet is gravy for Pimco, not the meat and potatoes. They will likely get the fee income and never have to pay out. If there is significant deflation then they will pay out up to 8 b. On the other side of their balance sheet they have a trillion dollars in bonds that will all be worth more, enough to easily pay off the settlement on the deflation bet. FFH has invested 175 M on this bet which is designed to hedge against the possibility of deflation and the effect on their insurance float. It is cheap insurance and tiny compared to the relative size of past bets as compared to the total float at the time (i.e. Nasdaq puts, CDSs, Government Bonds). They have a few billion in equities and private equity investments on the other side of the equation. It is my opinion, regardless of what the Bloomberg columnist says, that neither side is placing a specific bet for or against inflation, or against one another. Both have more invested in a normal recovery rather than a deflation scenario. FFH is purportedly investing in Japanese real estate. Real estate is not a deflationary bet, and is in fact the absolute opposite. Same with the bailout of the Brick, Sandridge, ABH etc.

40% - Majority still in 2011 leaps. I am in the position of having to finally close out the leap position which is proving a little tricky. I have been coverting leaps to pink sheet shares and selling them that way to get a better price. As per your comment rickv... It is hard to beat a 300% gain in 1.7 years - the leaps. I agree with your comment that FFH Common stock is not the best investment for an ambitious value investor. They will be hard pressed to beat 17-18% going forward. There are of course worse investments (most!). FFH now is more like holding a real productive version of cash, rather than a value investment, especially with all the hedging they do. Natural hedges built in.