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Sounds good where do we sign up. Packer

In these solutions infrastructure plays a large role. My question is there any positive NPV projects left in the US that won't require subsidies as far the eye can see. Most of the large projects I have heard of high speed rail and solar farms, etc. only are viable with a subsidy. If these are the only projects available (requiring subsidies to work economically) isn't borrowing money to fund these negative NPV projects just digging the hole deeper? Packer

I am sighing as my 2x FCF stocks become 1x FCF stocks. Two names that are this level are Lodgenet and LIN TV. What is incredible is that LIN TV bonds sell near par. In addition, Salem is the low 2.0' s times FCF. Just incredible. I wish I had more cash. Packer

You are right this is more of a detailed narrative from which you can draw value conclusions by looking at the data. You need a value framework (from Security Analysis or Intelligent Investor) to make sense of the data which is not provided in this book. Some of my takeaway were that gold stocks did great during this period and consumer staple and tobbaco held there ground. Just about everything else got clobbered. There was one investment firm (Atlas Corp) that did well by buying cheap stocks during the period. It also provided some insight into the banking collapse around the world and the currency collapse which led to the end of the gold standard. I found it interesting to note the similarities to the past and how the crash period rhymes with our current period. I am a firm believer that what we are going through now has been gone through in the past and studying the past is helpful today. Packer

I agree. I think the Intelligent Investor version he is referring to is the latest with Jason Zweig's notes. These notes are helpful for those who want to put money in "stocks" with no research. In my opinion, it is ironic that whoever owns the rights to the Intelligent Investor has hired an efficient markets guy to write notes on an iconically value oriented work. Packer

When do your investees need thier money? If they need it in a few years, then they should not be invested in non-hedged equities. If it is longer, then maybe the best course is to explain that they may loose a portion of there capital in a given year but will over the long term recoup it. Alternatively, you can hedge using S&P 500 puts as Frank Martin does but your returns will be lower. Packer

I disagree. I agree the loudest group are the extremists on both sides (don't raise taxes no matter what and hands off entitlements). The media is naturally attracted to the extremes to get a story which makes the situation worse. However, to say the Repubs are taken over by these folks is like saying the Dems are taken over by the hands off my entitlement crowd. I think there are large numbers of Repubs and Dems that are willing to deal with this situation. Even Cantor and Beohner are open to modifying the tax code but for some reason some Dems don't want to do this. For awhile, the President was also willing to talk and compromise (he was showing longsuffering) but now (I guess he ran out of longsuffering) he has joined in the food fight. Trying to find blame for this is a losing strategy and in my opinion is a waste of enegy that should be used to reform the tax system and purge the system of rent seekers. We will see what happens with the Repubs but a I think the folks that represent the extreme (Backmann, Palin, Perry and Cain) will at most get the VP slot. Just my 2 cents. Packer

The name of the article itself tells you it is written with a partisan tone. I think it misses a bigger point that making sure that gov't money is spent well is as if not more important than where it is available for least pain (which is what I think Buffett's argument is). In addition, both sides have there rent-seeking crowds. On one side you have politically connected corporations on the other public sector unions. Both need to be rained in for the good of all (as pointed out in the Michael Lewis article). Traditionally, these groups would align themselves with a political party for protection. This is where I think the media can provide a value-added service (identifying rent seeking groups trying to game the system) versus trying to blame liberals or conservatives for the wrongs of the world. Packer

I would stay away until BK filing. No buyer would buy the IP or divisions with fraudulent conveyance issues. Packer

What about a progressive sales tax versus income tax. This would be much harder to game. In addition to a smaller income and corporate tax. Packer

You may not like the rates but at least he has put out a proposal to talk about which is more than the others who want to tinker around the edges. Another point about capital gains is that alot of these are discretionary and unless folks are convinced they will go away forever they will defer until the rates change. This is one reason think Buffett's argument may have some unintended consequences unless you apply a different set of rules to the wealthy. Packer

That is how VC investments work. Many ideas just don't pan out. All we see today is the successful result not the tons of $ spent going down the wrong path. The gov't should stick to basic research and well defined projects that to meet defense and other defined requirements. Beyond that you are guessing what is going to work and not. Let the market figure that out (it is alot cheaper) and other centrally planned gov't who want waste money doing it. The other loan guarentees given today also look like questionable bets that create jobs at a cost of a few million per permanent job. How all these green subsidies help anyone but the well-off when we are talking about cutting middle/lower class transfer payments is beyond me. Packer

I think if we do have deflation it will be a small amount. Historcially, when deflation is met with a wall of money, the price level increases slightly (see Sweden during the 1929 - 1930s time period). I have been re-reading the 3rd edition of Security Analysis and it provides some insights to what was cheap during the 30s and 40s. Specifically, secondary stocks and bonds and preferred stocks that stopped paying interest/dividends that were adaquately covered by asset values. Today I am finding some of the same opportunities in radio/TV and tech companies. Packer

One buys value-oriented assets (stocks, bonds or pref stock). These have shown to hold thier or increase in value in every situation except large scale deflation. Packer

You are correct in the long-term and on relative basis this may be occuring as the $ declines versus the yen and euro. Another leg missing from the inflationary puzzel is the transmission mechanism of higher wages. If you look at most of the cost of the products and services we consume, it is in labor. Inflation will not happen unitl labor is tight. This is historically what has driven most of the inlfation (having to pay people higher wages becasue there have been fewer people or people were involved in low productivity tasks due to politics (communism)). Packer

From my reading Chapter 38 is new chapter. All the examples are from 1948 -50 and it summarizes how the asset value and income value are thought of differently in private businesses versus public businesses and the effects of excess cash on the pricing of common stocks. Packer

On the surface, I would not either. But given the FFH has money with them and respects and agrees with many of their macro positions, which have a tendancy to be non-consensus and correct is what led me to them. Their long-term record is also outstanding and what is interesting is the fund performance has done great during downturns and underperformed in upturns but overall is one of the best in the bond area. Surely beats PIMCO total return. Packer

The magnitude of the wealth transfer from the savers to borrowers is staggering. It is incredible that the politicians make a big deal about reductions in social security and other entitlement programs for those on fixed income while the foregone interest due to QE is probably orders of magnitude larger than any proposed reductions in future benefits. If you have a fixed amount for retirement and want income the gov't is transferring your interest to try to save the banks and over levered speculators. The savings of the banks and speculators will not be recirculated as this is recovery of unrealized losses and there is no appitite to lever up again. When will this be reported? Packer

Hoisingtons 2Q 2011 letter also provides some interesting insights: http://www.hoisingtonmgt.com/pdf/HIM2011Q2NP.pdf Packer

I am surpised that many folks think inflation will occur at some time in the near future. The only way inflation can occur is with both supply increase (loose money) and higher demand (ability to purchase or borrow to purchase). The first of these is true but the sceond is not until the debt is gone via paydown (deflationary) or default (inflationary after lower debt level is established). The paydown path will take years so the only way to get inflation (relatively soon) is from a debt default. Packer

I know a number of read the quaterly report for Hoisington. Hoisington also has a mutual fund that has had a great returns over the past 10 years (only slighly less than Fairfax's fixed income return). His fund is called Wastach-Hoisington fund. Packer

Its tough to say that about something that has an intrinsic value only equal to what someone else is willing to pay. Packer

I have noticed that the spread between firm borrowing rates and FCF yields has increased to high levels in firms large and small. For large firms such as Intel and Microsoft the FCF yield can be multiples of the borrowing rates. For smaller firms the spreads are very high. For example for Lin TV, its borrowing rate is from 7 to 8% based upon current bond pricing but the equity FCF yield is in the mid 30%s. For Cumulus/Citadel the borrowing rate is 7% but the FCF yield is in the mid 40%s and for Entercom the borrowing rate in 6% and the FCF yield is again in the mid 40%s. I remember some capital structure aribitrage firms shutting down after the crisis, maybe this is the result. For some reason there are buyers for the debt of these firms at much lower rates the holders of the equity. Has anyone else noticed this in some of the firms they own? Packer

I agree with the comparison in that the funds that have restraints that prevent them from achieving Graham's enterprising investor 5% premium of market returns over time. Frankly, when I started looking closely at mutual funds there are very few that beat the 5% bogey due concentration, redemption and diversification restraints. What surprises me is that there are not more private accounts that do not have those constraints and can focus on the best ideas in small niches of the market. The only way to beat the market is to be outside of the consensus and correct, a very hard task with the size and competition constraints most MF managers face. I personally do not like Tilson's marketing spin and think some of his ideas are wrong (Iridium) but he does have some good ideas. The same with McElvaine. I judge a manager primarily on his stock picks. If he gets the weighting/timing wrong that is another issue (and can be corrected - which is what McElvaine is currently doing) and a reason why I would listen to some managers picks and rationale and not buy his funds. Packer

I really wonder how much of the despair has to do with expectations. I see the Amercian Dream is under attack and ask the question what is the American Dream and maybe the dream is not under attack but the expectations need to be lowered to reflect reality. I see this in America and in the Euro crisis. Does it make sense to expect German-like behavior/culture from the Greeks, Spanish and Portugese when it comes to finances? And how long will Greece, Spain and Portugal endure 15/20% unemployment to satisify money already spent? Packer