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The biggest issue is defining risk a-priori. It is easy to see the risk of the past but harder to see it in the future. If you are a value investor it is even worse. Is buying a cheap asset with LT non-recourse leverage more risky than an awesome asset at a fair price? I depends upon how the asset is priced in the future which we do not know a-priori. The issue is price and risk are related (as the price of an asset declines so does its risk). So all we can do is buy cheap assets and if available use cheap leverage to purchase them if they are really cheap. Packer

I think just being there is what has worked in the situations like this I have been involved in. My wife put together a nice montage of photos and a poem for a couple that lost their son as rememberance. In another situation where a friend at work lost his daughter 8-yrs old to luekemia, being there for him worked at the time. He enjoyed his work so working provided a way to think about something else he could do productive (more so after she passed away). Another tribute was to sponsor and be a part of a team of friends for fundraisers for the pediatric hospital she was treated at. Packer

You have to be careful on how you use the small cap data. Look at the performance of the DFA small cap value fund to get a better idea of real performance. The stocks that are small have large bid-ask spreads that can distort the data you also have the survivability bias in the data. Packer

You can find value in small caps but you have to make sure it is not trapped by management or controlling shareholders. Look at ITEX and Western Sizzlin as an examples. Good companies that many on this board have invested but had governance issues. I personally like the small cap area (let say mkt cap greater than $50m up to a few hundred million) unless I really know and trust management. Also in this larger space most of the companies if they are poorly run can have enough investors oust the current management, like what is going on the SD right now. Packer

What you could do is expand your circle of competence. There are some interesting areas of high yielding investments in the leasing, banking and real estate spaces. Real estate is so large you could spend alot of time just becoming familiar with that space. I am trying to look at this area and may attend the Brookfield annual meeting to start in this area. (Note: our friend Plan has found an interesting transformation stock in GKK - going from a CDO in investor to a NNN company). Packer

The plan of reorganization is typically an SEC filing if the company was public and can also be found at the companies website. Packer

I had the same experience with Magellan Health. The equity was selling for less than the re-org cash distribution and received some warrants for free (which turned out to be valuable a few months later). Packer

One cheap source of data I like in Morningstar. Although scuttlebutt can be a point of competitive advantage, you need to ask yourself how much of an advantage is it going to provide and would buy because of it. I tend to look at valuation first then try to tear the idea apart. If it still stands then I invest. Remember most of the value added is going to come from purchasing mispriced securities not buying great companies for slightly below average prices. (As these firms are only really cheap in once in a century swoons) Most of the mispriced securities I have looked at have something wrong with them and/or are miscategorized. I just have to determine if this blemish is fatal. The other aspect of scuttlebutt is what was previously scuttlebutt can now be partially obtained via the net and boards like this. Packer

This appears to be a bombed out sector. Has anyone looked at these? It looks like Telecom Italia, OTE and Telefonica still have growth due to their emerging market exposure. These have EV/EBITDAs in the 4s to 5s range and FCF yields in the low 20%. Packer

I think Buffet groupie is onto something you may have missed. If you look at Prem and his mentor John Tempelton, they have similar approaches to investing and life in general. They have an ability to build teams around them and give them meaningful responsibilities (even in their areas of expertise). They also have a sharing temperment and a stewards mentality about their business. They don't own the business they are stewards. While Buffet easily shares his knowledge and wealth, I think he has a hard time giving up control of the investing part of the business. Look at how long it has taken to find successors and he has always enjoyed the lime light and publicity. Many in the value investing community are loners by nature and faith I think has stretch a few of them beyond the loner mentality (I know it has for me). In any case, I think this would be an interesting question to put to Prem and see what his response is. The net impact on the businesses each of these gentleman leave behind I think will be the test. From my observation, I think Buffet will be missed more than Prem due to their differences in viewpoint in stewardship which I think is in part shaped by their faith. I think leaving the faith question out of who these guys are is ignoring an important aspect of who they are. I am not saying people of faith are going to have a better or worse investment record, they go about it in a different way. Each person is going to have to judge for themselves which one they like better. Packer

One of the biggest deflation proponents (Hoisington) has a bond fund comprised primarily of 30-yr zeros. That is purest deflation play I know of. Packer

What is the rebate in this context (discount to NAV)? Packer

Are taxes included in the analysis as they appear to have a material effect on value Packer

I think taxes can make a big difference. As Onyx stated the NY taxes are the highest in the nation. I like in Rochester and the taxes are similar here. One effect here is the high taxes keep the RE values down. If folks were not paying these taxes they could afford to pay more $ for the homes. I think how you grew up makes a difference to. If you grew up in the middle class you most likely have a do-it-yourself approach to life. With such an approach getting a property with more than 3000 to 4000 sq. ft. is alot to keep up with other priorities. I feel that way myself. We felt uncomfortable having someone else coming and cleaning our house but finally are doing it and I still cut my own grass. Packer

What sources for ideas (outside of this board) do folks use? I use Value Line (paper - I am a dinosaur) as a top level screen and look at holdings of other value investors I like (Fairholme, Baupost, etc.). Has anyone subscribed to the Deep Value letter? TIA Packer

I am glad to see a few others long. I am 100% long but am looking at rolling some gains into FFH and other special situations (AIG, HNR and CXPO) for example as some of my holdings approach fair value. For those who don't hold alot of cash, what was your performance in the last decline (08) and those who hold alot of cash what was it? I got clobbered with a decline of about 50% that I would not like to repeat. Packer

There is a book called "The Internet Bubble" by the guys who used to publish the The Red Herring magazine which provides a pretty good narrative of the times. Packer

Interesting article. The one aspect I he did not get into on the advertising end is the options available to the advertisers. I think this is what is driving the demand and pricing for advertising. Where are the advertisers going to go? Look at a local car dealer or CPG company for example. Are they going to reduce their TV advertising and replace it with what? More internet that they already have. He appears to imply that advertising revenue in the aggregate will decline or that it is a variable cost for which he supplies no rationale. My understanding is the cost is fixed and required for maintaining brand image and audience share. In the newspaper and record era, the audience migrated from a pay model to a free internet model. For broadcast TV, the access is already free so the audience will not migrate for price. This may be more of an issue for the cable companies but in theory their content costs should decline. I see his lack of addressing the free content TV model as a flaw in his analogy to newspapers and records. Packer

I think part of Pzena's problem (unlike Fairholme) was he was concentrated in financials on the downswing and then diversified at the bottom so he missed the upside. Packer

I have 2 comments. First, although the absolute yield looks low the HY OAS to treasuries is closer to 500 bp which is closer to normal. The historical OAS lows were closer to 250bp in 2005 to 2007. Second, a way to take advantage of the market is to issue debt at a low yield to buy equity at a higher FCF yield. Sort of a do-it-yourself capital structure arbitrage. I see this in some radio and TV firms via purchasing FCF generating assets with low cost debt and shielding existing FCFs from taxes. Packer

How many of these have you personally met and know or you saw on admittely spinned (looking for extremist without context) news shows? Packer

Based upon the investor returns from mutual funds this is the biggest problem. If some of your friends are immune to this influence then great but I would make sure that this is the case as most people are not . The worse position to be in is to think you are immune when you actually are not. Being honest with yourself will save you time and stress. Packer

The only concern I have about indexes is as they become more popular as they have they will lag in performance even more they have to. The higher demand will push up the premium of the securities in the index until the last index buyer arrives then they will underperform. The question is will they underperform greater than the difference in fees. Historically, this has not been the case. I guess another perhaps more important question for the young man is how will he react to downturns. I think more money is lost when shareholders sell at the bottom versus difference in the index actively managed funds. Just observe the investor vs. NAV returns on mutual funds per Morningstar. For the Vanguard 500 Index it ranges from 115 to 250 bp per year from 5 to 15 years and for Fairholme it ranges from 160bp to 750bp. These numbers are typically in excess of the differences in fees. So he needs to adjust his allocation to where he is comfortable with the loss levels. Packer

I would say invest with someone doing something different than broad diversification of large stocks (as many folks do that). Some examples would include Fairholme and individual firms like BRK, JEF/LUK and FFH. I would be careful in purchasing diversified value funds as even the best (like Longleaf) have had a hard time beating the market because of their diversification of average ideas with the best. Packer

I think once a firm reaches a certain size the growth slows down along with the growth expectations and the valuation follows. You also have the trade-off of scale versus effective management. I think Monish Pabrai observed that the largest firm is not there for too long. Packer