twacowfca

I'm curious about how you were able to get comfortable with them, as others have noted, given that they are based in China. What specific markers do you look for indicating quality? In a sense, I suppose investing in Chinese microcaps is a true contrarian bet. 8) Check out the blog post I linked above. But it's simple: company IPO'ed in 1995 and raised $30M. They have paid almost $100M in dividends since without raising new equity or debt. If that's all part of an elaborate fraud: you got me! The proof of the pudding is in the eating. Meecham does an incredible amount of dilligence and holds a mere handful of stocks. The risk of fraud seems very low. Besides, are they a Hong Kong listed co, despite being outside the Hong Kong limits? I would never trust the due diligence of someone else as proof that a company isn't a fraud. So many well known hedge funds and managers ended up with worthless Chinese paper, and you would have thought in all cases that they had done tons of due diligence... I agree that even the best investors can be fooled, especially if they have a large portfolio. However, dividends don't lie.

I'm curious about how you were able to get comfortable with them, as others have noted, given that they are based in China. What specific markers do you look for indicating quality? In a sense, I suppose investing in Chinese microcaps is a true contrarian bet. 8) Check out the blog post I linked above. But it's simple: company IPO'ed in 1995 and raised $30M. They have paid almost $100M in dividends since without raising new equity or debt. If that's all part of an elaborate fraud: you got me! The proof of the pudding is in the eating. Mecham does an incredible amount of dilligence and holds a mere handful of stocks. The risk of fraud seems very low. Besides, are they a Hong Kong listed co, despite being outside the Hong Kong limits? Can anyone explain their recent downturn in sales? Is this likely temporary or not? We can assume that Mecham thinks it is not.

From Allan's latest Edgar filing, BRK once again represents more than half his fund's holdings. I always knew I had a long lost twin separated at birth. :) Just kidding. :)

Well that didn't take long, looks like your 97.5's have doubled, way to go TWA! Thanks, Wayne. BRK has a lot of tailwinds. Nevertheless, we've reduced the VAR by taking money off the table as the stock gets increasingly above the repurchase limit at the same time we've increased the notional exposure. :) Feb 24, update We happily had the opportunity a few days ago to take advantage of the little bounce around the expiration date that coincided with the announcement of the Heinz acquisition. We closed out all our short term calls as the stock is now about 10% above the repurchase limit. However we continue to hold the common and leaps. This investment/trade has worked out almost as well as the awesome Fairfax short squeeze in 2006. The price movement of BRK has been less, but we have put a lot more into BRK than we added to FFH in leaps in 2006 because of the high MOS as a consequence of the Buffett "put". :) Feb 24 update above.

Yes. Being there is the most important thing. I agree. Though, since 14value asked for some writing that might help his friend in such a time of sorrow and need, I attach a very brief tale by Lev Tolstoj. All his Christian short tales have both the simplicity and the power to let me put life in the right perspective, with all the meaning it truly deserves. I hope they will continue to do so, when my time of need and sorrow finally comes. God bless you, Giovanni Thank you Giovanni. You have blessed the start of my day by reminding me what is the most important thing. :)

The market is generally more efficient now than then, but there are also more opportunities available without having to dig through illiquid securities. Simply by identifying small profit situations that are nearly sure things and levering up with non recourse leverage, one of the smaller accounts we manage has increased in value more than five times in the last several months, other, larger accounts, not so much. :)

Yes. Being there is the most important thing.

Angel Unaware, a 1950's best seller by Dale Evans, sparked a great change in how we look at ourselves, and children. It's especially for those who are parents of a child with difficult health or development problems. :)

OID is great, but the editor's difficulties have led to erratic issuance. Screens are the least useful source of profitable information because screens lead to adverse selection of problematic companies or frauds. We may pride ourselves on our perspicacity, but cleverly hidden or latent proplems often pop up later to our loss. The most certain source for profit is plans of reorganization (PORs). Some of these present free money after confirmation when the probability of certainty is virtually 100%. For example, in Nextwave's first reorganization, we bought a lot of restricted stock that was eligible for a cash distribution two months later that was 10% above what we paid when it was illiquid. Another was Muerelo Maddux with three competing PORs, each of them with value that was two to four times what the stock was trading for. Buying stock of a company in bankruptcy is usually a way to lose all your money, therefore, distressed debt investors often overlook these opportunities. :)

Chutzpah. I like the story of his finding the best businessman he has ever known, working in an unpaved junkyard with mud on his boots.

Probably matters to investors what the "real" earnings yield is. 1982 inflation (actual and expected) was very different from 2009 inflation & expectations. Investors should naturally ask for a higher earnings yield in order to earn a return in excess of the rate of inflation. No? How about comparing the real earnings yield of the market in 2009 vs 1982? That's a good point. Ron Muhlenkamp his book has a good chapter showing that market returns have a high correlation with the real earnings yield which was much lower than the nominal earnings yield in the 1970's through early 1980's. Well, what about 1949? The secular bear ended with a Shiller P/E of 9 and long-term interest rates that were as low as they are today. I would keep it easy: not only we are in a secular bear for stocks, but we also find ourselves at the end of a 70 years old debt super-cycle. High general stock market prices + High level of debt that must come down = High probability that something might go wrong. That doesn’t mean something WILL go wrong, but it is enough for me to prefer to be cautious, rather than aggressive, in my investing right now. giofranchi “As time goes on I get more and more convinced that the right method in investment is to put fairly large sums into enterprises which one thinks one knows something about and in the management of which one thoroughly believes. It is a mistake to think that one limits one’s risk by spreading too much between enterprises about which one knows little and has no reason for special confidence.” - John Maynard Keynes The post 1929 crash US bear market low in 1949 came after one of the most inflationary periods in US history. The CPI rose from 14.000 in 1941 to 24.500 in late 1948 as the back of post war inflation was finally broken as it was in the 1970's through early 1980's inflation under Volker. Yes, of course war times are inflationary. But what about the 50s? If I were living in 1949 I would be worried about what inflation would be in the 50s, not what inflation had been during the war. My real earning yield would depend on future inflation, not past inflation, right? Do you think we will see inflation or deflation in the years ahead? If we have inflation, like almost anybody now believes, interest rates will have to rise. And when interest rates rise, the prices of every asset class fall. Vice versa, if we have deflation, stocks will fall. The fact, I think, is simply that secular bears in stocks end when stocks are very cheap anyway you look at them. Forecasting what future inflation will be is not something people do easily. Secular bears in stocks end when it is very safe to invest aggressively again. Today I simply don’t know of anybody else who could recognize one of those time better than Mr. Watsa. And he is clearly warning that we are not there yet. giofranchi “As time goes on I get more and more convinced that the right method in investment is to put fairly large sums into enterprises which one thinks one knows something about and in the management of which one thoroughly believes. It is a mistake to think that one limits one’s risk by spreading too much between enterprises about which one knows little and has no reason for special confidence.” - John Maynard Keynes Inflation continued to be generally low in the 1950's. the 1950's was the best decade of all for stock market annual performance with compounded annual returns of over 19%. However, currently, we are not at bear market lows as in 1949. Therefore, the market is apt to be choppy going forward as it was in mid to late 1950's. in the late 1950's, the Fed Chairman, Martin, said his job was to "take the punch bowl away before the party got going." I don't think Bernanke's there yet.

Probably matters to investors what the "real" earnings yield is. 1982 inflation (actual and expected) was very different from 2009 inflation & expectations. Investors should naturally ask for a higher earnings yield in order to earn a return in excess of the rate of inflation. No? How about comparing the real earnings yield of the market in 2009 vs 1982? That's a good point. Ron Muhlenkamp his book has a good chapter showing that market returns have a high correlation with the real earnings yield which was much lower than the nominal earnings yield in the 1970's through early 1980's. Well, what about 1949? The secular bear ended with a Shiller P/E of 9 and long-term interest rates that were as low as they are today. I would keep it easy: not only we are in a secular bear for stocks, but we also find ourselves at the end of a 70 years old debt super-cycle. High general stock market prices + High level of debt that must come down = High probability that something might go wrong. That doesn’t mean something WILL go wrong, but it is enough for me to prefer to be cautious, rather than aggressive, in my investing right now. giofranchi “As time goes on I get more and more convinced that the right method in investment is to put fairly large sums into enterprises which one thinks one knows something about and in the management of which one thoroughly believes. It is a mistake to think that one limits one’s risk by spreading too much between enterprises about which one knows little and has no reason for special confidence.” - John Maynard Keynes The post 1929 crash US bear market low in 1949 came after one of the most inflationary periods in US history. The CPI rose from 14.000 in 1941 to 24.500 in late 1948 as the back of post war inflation was finally broken as it was in the 1970's through early 1980's inflation under Volker.

Probably matters to investors what the "real" earnings yield is. 1982 inflation (actual and expected) was very different from 2009 inflation & expectations. Investors should naturally ask for a higher earnings yield in order to earn a return in excess of the rate of inflation. No? How about comparing the real earnings yield of the market in 2009 vs 1982? That's a good point. Ron Muhlenkamp his book has a good chapter showing that market returns have a high correlation with the real earnings yield which was much lower than the nominal earnings yield in the 1970's through early 1980's.

The main parameter is a rank which combines several value ratios and financial solidness indicators (something which is present, one way or the other, in all value screens like Graham's Enterprising Investor or Piotroski's). Then I apply a moderate momentum selection (which helps to avoid falling knives, and reduces drawdowns) and try to buy the smallest possible companies (but always with enough liquidity). I buy a bit every week and typically hold the stocks for at least a year. Interesting. May I ask how it has worked for you?

About 140% to 180% long depending on the timing of rolling over BRK calls. We added a lot of non recourse leverage to our BRK position through cheap calls and leaps over the last year. This now more than matches the long term non recourse leverage we have had for many years in our Lancashire holding. Yet we still have about half of the cash left over from the Lancashire dividend as we've begun to nibble at two new positions. We hedged somewhat the last week of December with S&P puts, but bailed out quickly after reading the tea leaves on the developing resolution of the fiscal cliff stalemate. Amazingly, we actually made a small profit on some of these, exiting before the market took off at the end of the year. Were it not for the free put on BRK, we would be holding more cash because the market could be on the last lap of its bull run. We continue to monitor a few key macro gauges: change in gov/private savings, M2, WSbase, margin debt. These all look very positive. We also note the US unemployment rate and CPI. When these approach Bernanke's threshold for ending QE and allowing interest rates to rise, we will delever and look for more downside protection.

Have been following this story since swizzled first brought it to our attention, and made some money from it just after spinoff of Petrominerales. I haven't dug enough to know but I suspect that the properties (Asset number) held by PBG as oil producers may be conditional on THAI being used - no THAI, no oil. So if they have a bunch of property in Alberta that will produce oil using THAI and Alberta is making it impossible for them to use THAI then those properties are worth NIL. That might explain the crazy price/book. Sheer speculation on my part. That's interesting. What's the reason for thinking that their rights to produce oil on those lands are conditional on using THAI? Why haven't the rights to produce on the Dawson Creek lands lapsed since they suspended the THAI project there a few years ago? They now sai that they are going back to Alberta and drill some wells to "condition" the field for THAI. Is that a possible loophole for conventional production there?

Yes, I think this is what is happening. He learned a very tough lesson with the amount of redemptions he had to deal with. I think he may have been at the point where "how do even my long-term investors lose faith in me? Time to reduce that risk." Cheers! Yup. :)

This is not a bargain for what is apparently an old hotel with low occupancy, even if the books are clean. If you think this is going to be a successful investment without being on site 24/7 and having the fortitude of one of the "Patels" as described by Monish, I've got a bridge in Brooklyn I'd like to sell you at a bargain price.

Forget for the sake of argument what The Fed has done to provide stability to the banking system and liquidity greater than hurricane Sandy. Look through all this to the flow of funds between the federal government and the private sector. The results are surprising. Federal deficits (the government's negative savings rate) peaked in 2009 and have been coming down since then. Offsetting the government's deficit, the private savings rate (consumers and businesses) also peaked about then and likewise has been coming down ever since 2009 as GDP has been picking up. There is still slack in the economy, and the US is leading Europe out of the depression. The fiscal and debt ceiling cliffs are looking more like green ski slopes. Keep an eye on the change in the private savings rate. If it doesn't begin to increase significantly, markets have a way to go by the Fed Model before Prem and other bears will eventually be proven right. :)

Almost certainly an error of substance. Sometimes reports are misperceived as when Charlie Munger put most of his BRK shares into a trust or something like that several months ago. :)

Yeah, real uplifting, especially when the poor man dangling and jerking from the end of the rope had a darker skin than the skin of the executioners. And then there was the lovely practice of the Conquistadores of "putting prisoners to the stake". I'll spare the details of what that would look like in Central Park on a festive occasion.

There is one guy that has outperformed the market by a huge margin with relatively low volatility for more than half a century. He lives in Omaha. Volatility is normally defined stochastically. However Ziemba notes that most of Buffett's volatility has been up volatility. His adjustment of how the Sharpe ratio is calculated to look mainly at down volatility, shows that the adjusted low volatility of Buffett's returns is also an outlier. :)

Would love to see a fund which guarantees returns, "or your money back". Anyone know of one? Collecting fees is so damn easy. Shouldn't it be enough, if someone builds himself a decent portfolio,... purchasing a "$100 dollar bill" and paying it with a $50 bill note of the same currency. It's not a guaranteed return, but a pretty sure bet or with a decent margin of safety. If this cushion isn't a guarantee, what else do you want? Otherwise I remember some decades ago,... in a period of much higher long term interest rates,... some financial marketing guys build products with some guarantee of principle,.... 50/50%, splitting half of the money into some speculative future fund, while the other half would be put in some safe zero bonds compounding around 7-8%, thus doubling the half over some decade to the original nominal face value of the invested capital in case if the other half would blow-up. Someone wouldn't have lost anything, but neither way would they have gained much. For any guaranteed return or guarantee on principle, there goes a hidden premium paid, and that's the flip side of the coin, that someone has to subtract from your total return. There is no free lunch. Or,... maybe BRK itself offers an investor currently some guaranteed return, after the hidden "put" repurchase feature. Only some food for thoughts. Berkshire Stock Outperformed the S&P 500 by 83 Percentage Points in the Year After the Only Other Time Buffett Offered to Buy Back Stock At page 20 of the slides http://www.tilsonfunds.com/BRK.pdf I think the strategy you suggest is what Taleb (with Empirica Kurtosis) and Spitznagle (with Universa) have done. Their main strategy may have been to buy low duration Treasuries and get a little positive income and then put a small amount of their funds into option misspricings to make a little more income. However, instead of returning those modest profits to their clients, they take more than half of that modest income (leaving some income in the account to show clients that they haven't lost money) and buy way out of the money options (multi sigma) that will pay off at some unbelievable gain in the rare event that there is a market crash. That strategy was too underperforming for their clients in the former fund during a low volatility period in the market, but made out like a bandit in the latter fund when the market crashed in '08. :)

Is it sick to admit that the best part was watching Bin Laden shot? I saw it last night. Yeah, that's sick. The original plan was to capture him and bring him to New York City for trial like Bush's Guantanamo Bay prisoners, read him his rights, provide him with the best attorneys and waive the death penalty out of compassion for his extended family with many wives and children. Then, if convicted, probation and rehabilitation like the prisoners who were rehabilitated to Saudi Arabia. That unexciting plan was ditched after Hollywood took over.

Would love to see a fund which guarantees returns, "or your money back". Anyone know of one? Collecting fees is so damn easy. Segregated insurance funds. Other than that, I believe it may be a contravention of securities laws...or at least completely frowned upon to guarantee such a thing. The other funds that make such guarantees are often found to be frauds or ponzi schemes as well. Cheers! There is a way to do almost that without running afoul of securities laws. Invert. No management fees or rake off for the fund manager until a hurdle like beating the S&P 500 average is cleared, and then no cut for the manager except over a three year rolling average. Hmmm. Seems like someone actually did set something up like this not long ago. :)