T-bone1
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Posts posted by T-bone1
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Agree, this is a great event for a great cause and we are all lucky that Sanjeev and Alnesh put it on!
I'm genuinely puzzled as to why "politics" was listed as a reason not to go, but maybe I wasn't paying enough attention at last year's dinner...
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Sleeze... I think the problem is the whole business model is built off of something that's a bit shady.
"Hey guys, let's build a hotel except we'll sell the rooms for a high upfront cost then charge people a yearly fee to use it."
Consumers think "oh it's an INVESTMENT" and that they can get out. Except there are so many suckers buying these things that developers have trouble building enough. The market is saturated and there's no residual value.
How could there be residual value? You're selling a liability!
So you are saying it's like having a long-term below-market lease on a K-Mart??? :-)
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Does anyone have any good suggestions of a well-structured and low cost fundamentally-weighted index or ETF?
Thanks!
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A few anecdotal observations fwiw:
In the beginning (market down 20%) it was very easy to double down on things. There was a general perception that the government would step in and that the "greenspan put" protected the downside.
Towards the bottom, it was very difficult to double down on things and we (like many value investors) were only allocating funds towards distressed fixed income investments that we were sure were "money good" under a very wide range of outcomes - because at the bottom the range of possible outcomes seemed very wide indeed.
I think the Bear Stearns bankruptcy really shocked a lot of people - up until that point in the cycle you could do no wrong buying something at 25% of "tangible book value"... and then a lot of people lost 90% overnight doing just that. That led to the type of mentality that allowed Klarman to buy AIG paper a few days from maturity for half off (doubling his money in a few days).
In general it sucked... the opportunities were great and we made money coming out of it, but it is a whole different world when things go down 80% (once in a lifetime bargain!!!) but you know they might go down 90% (you just lost half your money in a month!!!). Given the above, I'm not sure how to really do things differently. Knowing what I know now, I think I would still take the safe 40% IRR in fixed income, but possibly adding 10-15 1% positions across industries in highly distressed equities (knowing they might go down another 50% the following week).
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FFH is much less hedged currently than they have been in the past - particularly with regard to the massive fixed income "hedges" they held in 2008.
Even in 2008, the stock went down initially even as the intrinsic value was soaring - you would have been better holding cash.
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PGN - offshore oil driller that recently spun out of Noble. The company spun out above $10 last year and now is trading at around $1.10.
In my opinion several things are causing the stocks decline, 1) fall in oil price, 2) offshore rig sector has been weak based on speculation that the market will be oversupplied for the next 2-3 years as chinese rigs come onto the market, 3) selling as a result of the spin off, 4) recent debt for equity swap by similar competitor HERO and 5) fears about bankruptcy
Market cap: $95M (first quarter operating cash flow was $210M!!!)
Debt covenants are 4.0x EBITDA and 3.0x Minimum Interest Coverage Ratio and only apply to the revolver. As of March 31, 2015, the covenants under the Revolving Credit Facility were a net leverage ratio of 2.39 and an interest coverage ratio of 7.90
You might want to take a look at what PGN looks like in 2016 and 2017... they have some very high priced contracts rolling off and their rigs are more likely to be scrapped than re-contracted over the investment horizon before this company goes BK
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FWIW, it is well known within the fusion community that the NIF at Livermore is only being funded/used to simulate the decay of our stock of hydrogen bombs, because we cannot currently test hydrogen bombs due to the test ban treaty (thank goodness!).
No one expects anything worthwhile with regard to practical fusion to come out of NIF... unfortunately they suck all the funding out of otherwise promising branches of the field
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I think Elon Musk has set a great example in SpaceX for how fusion (or more accurately fusion research) could be accomplished for a much cheaper price tag.
Basically, the science is all done and now it is a question of engineering (akin to knowing how to make a rocket conceptually, and then actually building one that will work). ITER is a $27 billion (and counting) science experiment that will basically move the ball down the field. Other researchers are having some success with Stellerators and work on spherical Tokamaks looks promising.
What we need is someone like Buffett/Gates or Lockheed to build an ITER type machine for $2 billion rather than $27 billion (Musk was able to source many equivalent parts from non-rocket contractors for 1/20th the price). The problem - as I see it - is that the government is the only person working on projects with a 10 year+ payoff and the government is incredibly inefficient.
Probably the best chance of success is that China throws a few billion a year at this as a hedge against importing oil for the next 50 year... I can't think of anyone else willing to spend a few billion without a return, while also getting something done on-time and with a reasonable budget. We probably need to build 3-5 ITER type experiments before we get a working Fusion reactor, and at the current pace we are building one every 15-20 years... (and you have to build them one at a time so that the next model can be improved upon based on what was learned from the last iteration).
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Awesome. So, Mr. Gates bought the property in 1988 and presumably built the house in the late 80s and early 90s, right around when Microsoft came to dominate PC software... Does that mean Mr. Berkowitz's project is bullish for Fairholme? ;)
Or does the Miami structure need to be a house for this to be bullish?
Charlie Munger has spent time on projects (erected an office building, hospital Board of Directors, etc.) outside of Berkshire and DJCO, and look how that turned out.
Maybe this hobby will be good for Mr. Berkowitz
Don't forget "Munger's Folly", the huge trimaran yacht that he basically supervised construction of after creating a company to build it for him
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Are you asking for a friend Sanjeev? Or rolling up the industry? ;)
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If you read Soros' 13F, he has hedged about 17% of his portfolio with puts on the S&P. . . this probably cost less than 1% of the portfolio.
13F filings always report the notional value, which confuses people (see some past SHLD 13F filings).
Soros also held calls on the S&P with a notional value of 5% of his portfolio. It looks like he is basically hedging and betting on more volatility.
Another way to look at this is that he is going to "keep dancing" like Drunkenmiller said he was going to do in his last interview ("the difference is I can get out... the central bank can't")
Have a good weekend.
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Haha is this a serious question?
We certainly like FST, but end of the week is an awfully tall order...
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Gio, I held FFh shares for 15 years in some form or another so I have really paid attention to FFh over the years. I got so I would cringe everytime they announced a new stock buy. FFh has not shown the same ability by any stretch of the imagination as Buffett has in assessing people or businesses.
A few names come to mind: Canwest; sfk/fbk/ resolute; tom ward; RIM (although Chen seems like the real deal finally); TIG/C&f, midland walwyn, lindsey morden. This is not an argument about character or integrity, but capability. I admire where Watsa has bought the company but I think he needs a very strong Munger or Buffett on board these days.
We have had this argument before but it is unlikely they will reach their 15% bogey, and they are still a small company. It is getting harder each day.
Whatever they have compounded book value at in the last 10 years is likely closer to the norm going forward.
I would add a question that perhaps Sanjeev can answer: Who if anyone is (effectively) the chief investment officer? Is this Prem and if so, does he have time to do this while growing his operating businesses?
Cundill, among others, has talked about the danger of investing by committee. I could be way off base here, but it just seems like a lack of focus in their investing . . . It made a lot of sense when Prem said they were buying quality businesses for the long term (KFT, JNJ, etc.) in 2008 . . . it made a lot less sense when they started buying over-levered crap after that and hedging with the Russell . . .
These guys individually and collectively have great long term records and I have benefited from their investing prowess as a shareholder in the past. I'm just trying to understand their current investment process now:
1) Is Brian in charge of Macro? He has done this better than anyone in the past, but is this an official designation? Do they have any sort of designated "devil's advocate" to argue for inflation in their investment meetings? I've had very worthwhile conversations with some of the guys from Hamblin Watsa about this, but they seem disturbingly all on the same page.
2) What is the goal of their energy investments? Are they trying to get exposure to cheap natural gas, use this as an inflation hedge, or do they just see SD and XCO as great investments. Do they talk to consultants or have anyone from the field actually look at these assets before they buy them?
3) Is it a policy to focus some portion of the portfolio on Canadian investments? If so, they should make this official. The fact that they elected to pay the Abitibi/Bowater pensions in full (when the Unions were prepared to take a large haircut in Bankruptcy) is more disturbing than the BBRY investment in my book.
Overall, their investments just seem disorganized. MKL has one guy at the top, BRK has two and then Todd and Ted below them. FFH has what? A committee at Hamblin Watsa along with an unofficial group of former employees, friends and business partners? Regardless of the quality of all of the people involved, it would seem they would be much better served with some sort of clear and concise investment philosophy, framework, and medium term allocation.
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I would say specialty insurance by a mile.
As a general example, take insurance on classic cars. People who own classic cars tend to be wealthy and place a lot of importance on these vehicles, so they are willing to "pay up" in terms of premiums. These people also tend to drive slowly and carefully and are generally super careful of anything happening to these cars, so they have much much lower claims rates.
I believe yacht and private aircraft insurance is similar, where the vessel is professionally maintained and piloted, but of enough importance to the owner that insurers can charge a high premium.
I expect pet insurance is also very lucrative.
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Thanks again for everything you do surrounding the annual meeting each year Sanjeev! You are truly responsible for a lot of what makes it such a worthwhile experience.
I apologize for only ordering iced tea at Norm's event. Please let me know where to PayPal you and I would be happy to help defray the cost of the tab.
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Sony 13.3" reader will be available in May for $1100
http://www.pcmag.com/article2/0,2817,2455696,00.asp
I saw this the other day and I really hope it lives up to expectations. If anyone gets one, I would love to hear what they think of it.
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Hey gio, don`t be upset :). Your time will come and being a lonely rider is not the worst position to be in the investment world. The problem is only that you are not so lonely as you think when you look outside this board. At the moment i feel that being a bull is a lot harder after the last year. Anyway, FFH is probably the only reasonable portfolio hedge one can think of and it was you that convinced me of that.
You want to take a look at what happened to FFH in 2008. I love the company and management, but as they are currently positioned, I find it hard to justify owning the stock. If the market goes down, FFH will certainly go down in the short term. If the market goes up, FFH will decline in value.
I would rather own cash that is earmarked for FFH and buy it once the market declines . . . if the market doesn't decline, I would rather hold cash than FFH.
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GST . . . company could probably be sold tomorrow at this price and likely worth $9 in six months
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CHK - The company is shedding non-core assets, cleaning up the balance sheet (both in terms of total debt level and complexity) and will finally not outspend operating cash flow (or come very close to not outspending) in 2014. At some point in 2014, there will likely be visibility into FCF production in 2015. I wouldn't be shocked to see further cost cutting and layoffs as well as higher productivity and lower costs as the company moves from building new pads and holding acreage by production to drilling lower cost wells from existing drill pads.
Big potential upside if they sell a predictable long-lived asset like the Barnett shale to someone with a low cost of capital (like an upstream MLP). Rising gas prices from a cold winter make this more likely.
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I think SHOS should make the list. Also MIL, NES (not as enthusiastic about this one), CCU, SD, SDR,
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yes, i guess i was just curious.
it would be interesting if top 5 or handful of investments contribute majority of WEB's success.
Are you trying to quantify WEB/Munger's statements that the top 20 decisions have contributed to the majority of their net worth?
I would guess that it is a combination of public investments (American Express, GEICO, KO) and the private ones that never needed additional capital (See's Candy, others?)
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I can't say I've seen anything but inflation in the US in my day-to-day life, but apparently the CPI is falling . . . is it possible that Fairfax was making a bet on the specific components of the CPI rather than a depression? Or that they are just right and I am thick in the head? Either way, I hope those derivatives work out for them (but I don't hope for a deflationary recession):
http://www.businessinsider.com/historical-cpi-in-one-chart-2013-11
Thank you (Premier/Fairfax Dinner)
in Fairfax Financial
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