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I think is a little misleading and is based upon the assumption that all the spending done was fixed and explains where the financing came from. The war numbers are fine but the question about the other spending is it better for the gov't to direct that or individuals with a tax cut? Packer

I think the difference betwenn AIG/BAC and GLRE is the market's percepetion of them versus the underlying economics. All AIG and BAC have to do to be winners is achieve average performance and have a typical market to approach book value. GLRE has to have above average performance and receptive market to price it above book value. It also depends upon what your objective is in holding these stocks. If it is a more defensive position then GLRE and FFH may make more sense but if it is to increase capital gains betting on BAC and AIG has better odds (returns) as long as BV is a conservaitve estimate of value. On note on GLRE, Mr. Einhorn gets paid pretty well to run GLRE so a good portion of the gains go to him vresus the investors. Packer

In addition to Reagan's tax cuts what about Clinton's cap gains tax cut and Kennedy's? By lowering the tax rate it encouraged sales and new re-investment. Is it a coincidence that large economic growth occurred after these tax declines? The real question is what is the alternative a larger amount of GDP controlled by the gov't with better results? If I knew that a tax increase was not going to be controlled by DC but my local gov't that I am closer to or close the deficit, I would be more sympathetic to the cause. But money going to the cronies of whoever is in power is not a way to run a gov't. Packer

Good analogy Myth. Packer

If you look at some of the data provided by the "fact checker" you need to question his honesty: 1. As to Medicare, the Romney/Ryan plan does not have this cut. Based upon this logic, Obama should be tied to the public option as in the past he supported this option. As to future cuts whoevers plan is adopted there will be cuts. The question is should the cuts be determined by choices people can make based upon how much the gov't will spend or gov't fiat via the Healthcare board who will determine how the gov't will spend the money. 2. The point he is making about the stimulus is accepted by most that it was not the most effctive use of funds. He has never stated that he would not try to get largesse for his constituants if it is available. 3. The point that he cannot bring up the point about no plan from Obama because he did not vote for the plan is a statement of fact and the point that Obama has a much larger influence than Ryan. Equating Obama and Ryan's role about Boles/Simpson is a little dishonest. 4. The GM plant promise was made in the campaign so I don't see how this is not true. Does the reporter try find out why Ryan voted against the GM bailout plan? No he assumeds Ryan was fine with closing it for which there are no facts to support. If these guys are not in the tank for Obama, I don't know who is. I do like it better when Ryan has a positive message vs. his attack dog role. Packer

My two are: BAC and SD Packer

I think the best way to think about this is there is a good price and a bad price to purchase most securities. You can use a valuation model to estimate these prices. I think folks spend too much time waiting for great firms to sell at good or great prices which occur infrequently. If you realize these bargains are rare and many times are illusions (see Longleaf as an example) you should spend time valuing OK firms that are selling at cheap prices. The one question you need to ask yourself though is is this a growing firm or one that is the victim of obsolescence from which it may never recover. Packer

I am not sure I want to be short a call option with no expiration (JOE). What will make this go down? You have Fairholme on the long side of this bet. Packer

Given the cheapness of the stock and if you compare the combined ratio of Hartford vs Allstate on the consumer side, they have better performance but not as good as Mercury or Progressive. Do you know the specifics of Mr. Stockwells concerns. They don't look like a Mercury but appear to be a good deal for the price and the warrants provide some cheap leverage. Packer

I think over the long term markets are efficient or value investing would not work. I think the right way to think about efficiency is in degrees not either yes or no. I have seen some of these EMH guys state that value, size and illiquidty are risk factors and thus with higher exposure to these factors you can get higher returns with commensurate higher risk ???. You have whole shops AQR and DFA come to mind who orient portfolios to maximize exposure to these risk factors. It is an interesting approach as the portfolios can be constructed at a lower cost than active management and get some of the returns associated with these factors. I think the evidence from Longleaf and some of the other managers mentioned illustrates that for the most part large caps are efficient and most of the misspricing should be in the small/micro-cap area. The real question I ask is if the stock is a large cap and cheap why would somebody want to sell this asset to me? I also try to find forced sellers but that is a difficult thing to do. With FFH you had short sellers which helped and with C and BAC you have alot of shares due to dilutive sales of equity. Packer

I was wrong in purchasing the preferreds as in essence the Treasury has removed all the incentives for restructuring (the only scenario were the equity has value). FNMA and FMCC will decline as an entity in size and continue to provide guarentees but all the earnings will go to the gov't. At some point this may be privatized but not to existing shareholders and IMHO not with current administration. Treasury's objective is not to restructure but to have a pool of money to pay out for the guarentee claims. However, I don't see the point of the gov't having pools of cash around to pay-out on claims unless they want to get into the insurance business. Packer

I was wrong on this one and in effect today Treasury has nationalized FRE and FNM with no residual to anyone but itself. I thought a restucturung plan was more reasonable but Treasury thought otherwise. It will be interesting to see the political ramifications of this. (Note: I was able to run out the door with about 32% of my investment of a few weeks ago and feel lucky to have gotten that amount.) Packer

The constraining factors which have been historically present are factors which remove large portions of the popluation from the labor market such as famine, disease, war and communism. These have cause a shortage of labor and thus have caused inflation and revsion to the mean for profit margins. Since the people cost are such a higher percentage of the products the developed world consumes, when there is surplus labor this component does not cause margins to tighten. Margins actually expand as automation reduces the need for labor. The offsetting factor is price competition. I think what you are seeing is leveling out at a higher margin levels. Unfortunately, the data to support mean reversion only goes back to the 1920s so the sample we are looking at includes 70 years of the factors present and only 20 years when they were not. Packer

The preferreds are an interesting position. The net income now being produced with normalized losses is quite substantial about $2 to $3 billion after 10% gov't preferred dividend. The PTPP profit is on the order of $9 to $10 billion per year. The total non-gov't preferreds have a FV of $14.1 billion adn are selling ofr 6 to 7% of FV. Packer

Montier's data is interesting but it is based upon a time period when many of the constraining factors where in place. Once they are no longer in place (since early 1990s), the mean increased. Similar to Grantham's commodities hypothesis. Packer

I think the overvalued thesis is based upon a false premise of mean reverting profit margins. Mean reverting profit margins is based upon having a supply/demand balance of labor. Historically, labor supply has been kept in check famine, war or just unproductive ways opreations (i.e. communism). But none of these check factors is now in play so we have a surplus of labor which will has lead to higher profit margins. Without these factors in play, I don't see how profit margins will mean revert and thus do not think the market is overvalued. Just mu 2c. Packer

For the bears, I would refer you to page 131 of Howard Marks book where he lists key factors in determining market sentiment. Of the 23 facotrs listed only 3 to 5 suggest we are in bull market top territory (primarily the low interest rate ones) and the remaining factors imply we are closer to bear market bottom territory. By these indicators, the markets are not in a pending decline mode as was the caes in 2007/8. Packer

I try to identify thier smaller holdings as there is less competition from other copycat investors. In my view the largest threat to outperformance is competition (the same is true for businesses). I rarely find a great business at a great price (maybe once in every 10 years) so I focus on average or slightly above average businesses at cheap prices keeping in mind obsolesence. I would add Howard Marks, Tim McElvaine and Monish Pabrai to the list. I also focus on the guys taking big bets like Berkowitz. Packer

If you look at his drawdown on his fund in the Appendix of The Intelligent Investor you will see was down 53% in 1973-74. Packer

There is new edition out with annotations by Seth Klarman, Joel Greenblatt and Chris Davis. This book much like The Intelligent Investor is better each time I read it. It has a very unique description of risk and states that the goal is to ensure you get adaquately rewarded for taking risk. He describes risk in the traditional sense (business quality and moats) but also introduces valuation risk and posits the question at what valuation does any security become less or more risky due to price. He also states that risks include illiquidity and leverage. The notion of loss is when risk meets adversity so you may never see risk until a challenging period happens. He tries to focus on securities that others deem too risky and thus avoid and ensures that he get enough upside to compensate for the risk. This is the first book that I have seen deal with risk in this way. Packer

Don't the triangles give you a sense how the future loss ratios may develop on average? If there are alot of redundancies then the loss ratios may come in lower in the future than originally estimated than if there are deficiencies. So if you focused on firms that only have recurring redundancies then you have some assurance that the underwriting is conservative over a cycle. This metric in conjunction with low combined ratios appear to be a common characteristic of some the favorite firms discussed here including RLI, BRK and Lancashire. Prem has stated that Fairfax has had on average 6 to 8% redundancies for FFH. Is there a way this number can be pulled out of the loss triangles? TIA Packer

In reviewing P&C loss triangles, I noticed a difference between calander year and accident year results. Does anyone know what the differences are? and which one do you use to determine if the underwriting is sound? A related question is for Life and Health firms is is there a similar metric for these companies? TIA Packer

You can short the mortgage insurers. Packer

If they can provide that type of ramp up these acquistions may be accretive. Given the sticky nature of enterprise software, unless they are replacing internal systems or nothing at all, those types of ramp-ups appear steep. In addition, even though the latest acquistion was large > $2 billion, it was only 6 mos FCF and provides a higher rate of retunr that the cash it replaced. Packer

[amazonsearch]How To Make Money With Junk Bonds[/amazonsearch] I great value investing book on junk bonds and evaluation of equities with large amounts of debt. Written by the guy who gave Greenblatt his first job and is written in a story format similar to The Little Book That Beats The Market. It provided me another tool in my investing tool kit for highly levered firms. Packer