twacowfca

May I ask why you think the Ad Hominem argument trumps the objective evidence, particularly the satellite photos showing blatant fraud?

Nice day on NABI. Down 69% so far today! I know Hester's not a fan, but if you look at the list, which is probabilistic in nature, overall, it's done very, very nicely! ;D But Harry, we're looking for Lake Wobegon companies where the trades are all above average. ;)

You got that right! Or at least in a very small group that includes Prem and a few others. :)

Having a full service account with a large broker can be very helpful in this situation because the depth of the market is often much more than what is shown, especially on the pink sheets. There may be a regional broker who may be especially familiar with a particular pink sheet stock if he had clients who were in it before it was delisted. A call to one of those clients by the broker might shake a seller with a large block of shares out of a tree. Alternatively, you might make an all or none bid that is substantially below the current bid and see what happens. Someone might take your bid or perhaps show interest by posting a similarly sized ask offer at a higher price. Then, you can dance around until you arrive at a mutually acceptable price. If there are no takers, you might increase your bid by a small amount to show that you are serious. :)

If the spinoff is a large part of the business, the company may need to file a proxy statement for shareholders' approval rather than Form 10-12b. :)

Not a viable option. Now the massive deficit is financed by a massive expansion of debt and a small expansion of money. It would take a huge expansion of money to finance the deficit without the use of increased debt. The rate of money expansition would immediately jump to double digits without massive cuts in spending. The international banking system would dump dollars on the prospect of continued hyperinflation of the dollar. US credit would be shot. And then things would get worse.

I think almost all US banks have been wards of the state since Roosevelt's bank holiday. We merely pretend they are not after enough time has elapsed from the most recent rescue. It doesn't have to be that way. Know your customers. Keep in personal contact with them. Don't lend money to people who don't pay bills on time or to those who don't calculate the balance in their checkbook. Make sure loans are well collateralized. Roll over loans to treasuries when the credit cycle expands to imprudent lending practices. Old school banking basics from a relative who owned and ran a small bank until he semiretired in the late 1980's after he turned 100. His bank's balance sheet was so strong that he increased its book value 50% from 1929 to 1932 after converting most of his bank's assets to treasuries before the stock market crashed in 1929. :)

Why pay more than book for a commodity business with absolutely no barrier to entry, especially when there are better businesses that might benefit from normalization of construction? Home builders that survived the late 80's and early 90's real estate recession barely scraped by for many years until prospects improved around Y2K. Well, you better look at NVR's performance to understand why it is trading at a premium to BV. I had the chance to buy it @ a little over 100, but wonder why I did not pull the trigger. There is a writeup on VIC in detail, it will be of tremendous help to understand the business. Some of the best investments were discovered in a lousy business. NVR is one of them. If we have the bias towards certain categories, we would never undercover those gems. Realize that homebuilders are merely vehicles for speculating in land. Over the very long cycle, they don't come close to making their cost of capital on the construction part of their business, although this part of their business was profitable during the bubble years. The only reason most residential builders are still in business is the massive stimulus. Generally, the only builders that do OK over the long cycle are those that got started at the very bottom or the very few that still have enough resources to acquire land for pennies on the dollar near the bottom of the cycle. A few builders like NVR that have land in development constrained areas may be better off than most builders who may not have accurately marked all their land to current market value. The problem with the idea that this is a great time to buy homebuilders is that the opportunity is in reality only so so because the stimulus did not allow the residential real estate market to reach a market clearing floor price. Even now at what seems to be near the bottom, prices are still not quite back to the long term trend line. This limits the upside, compared to the last two deep US residential real estate cyclical bottoms in the 1970's and early 90's.

Please let me know if you can find a magic formula that will reveal this; then we'll both know. :) One red flag might be capex significantly below industry peers. When in doubt, go see for yourself. Example: American Airlines has a very old fleet of planes that has frequent disruptions of service to fix something, not to mention pieces of planes falling off in flight.

Not sure what you mean by that. Perhaps the bankruptcy itself was a surprise, but Graham noted many times, particularly in the 4th edition of The Intelligent Investors that even as late as 1968 through standard tests and analysis that no shares or bonds of Penn Central should have remained in any securities account watched over by a competent analyst. So anyone following his methods would not have been caught with Penn Central securities even if the ultimate resolution (i.e. bankruptcy) can never be predicted with any certainty. Thanks for the clarification. Apparently, BG himself had not been following Penn Central closely in his retirement when their bankruptcy took many by surprise. :)

Lean and not mean is the better way, the road less traveled, the straight and narrow, not the broad and greedy way of Wall Street. Blessings on you Sanjeev for taking the road less traveled. :)

Why pay more than book for a commodity business with absolutely no barrier to entry, especially when there are better businesses that might benefit from normalization of construction? Home builders that survived the late 80's and early 90's real estate recession barely scraped by for many years until prospects improved around Y2K.

Good account, but nothing is forever. Penn Central put off necessary capex for many years, and then suddenly went bankrupt to the surprise of Ben Graham and many others! :o

The Pabrai funds that you cite are unusual in that these, in the fashion of BG and WEB's funds, have not, I think, charged the usual about 1% or 2% annual management fee. Very few investment managers have been able to survive long term by waiving all but the performance fee. Tilson did this for a few years, and then changed terms to add the management fee. The S&P500 P/E 10 is currently 23+, above the long term mean of about 16. It will be difficult for any hedge fund to survive long term without an annual fee as the current PE 10 almost certainly will regress from the current record profit levels to a lower mean at reduced profit levels. :)

Yes, this is how it generally works, but make sure this is what the agreement says.

How a performance fee is charged is specific to the terms of the agreement. Unfortunately, each party to a contract tends to assume that the terms should be interpreted in a way that is most favorable to him. Therefore, any possible ambiguity should be clearly illustrated with example(s). You might write an example of how you think the terms should work and ask the other party to confirm your understanding in writing. If your understanding is confirmed in writing as being correct, ask that that example be incorporated into the contract or add that example as a separate, handwritten, circled clause in the margin, pointing with an arrow to the appropriate spot in the contract. Then, initial that revised point of the contract before signing the complete doccument at its end. Do this with two signed hard copies. Return both copies to the other party, asking that one hard copy be returned to you with a hard copy signature. Notarization of the signatures on the copies is optional. :)

The missing notes if they still exist are likely in Dodd's papers. Are these in a library or perhaps in the possession of his family?

Hope not to attract too much flame, but just want to share a little of my experience and thinking. I was also originally thinking that there was nothing wrong in Orient Paper and went long, but continued to do due dilligence and discovered a number of issues that made me change my mind. It was relatively costly to me. I no longer have any position in ONP. I ordered satellite photos of the factory, and from these it seemed evident to me that 1) the progress on the new line was no where near what ONP was claiming 2) the logistics of the factory was awful, making it a bad place to produce so much paper (missing roads, water access, room on factory site, to little waste paper, ...). Additionally, no trucks could be seen, as was expected on this time of the day, if it was really a very busy paper factory as claimed by ONP. 3) ONP according to themselves molested an old line to make room for the new line. Later they claimed that an audit (after the molesting) showed the old line *was* capable of producing what they claimed. 4) the machinery in the original video is very old and outdated - notice the old communist writing on the machine. This writing was then removed and do not appear on new photos from ONP web site (either the pictures from ONP was photoshopped, or ONP actually painted the old machine ...) 5) you only have ONP's word that MW tried to get money for issuing a positive report. MW themselves deny this. Now, if - and this is a speculative if - it's really ONP who are the crooks, then why wouldn't they lie also about this aspect. 6) ONP bought (or rather long term leased) a lot of farmland around their factory. This was in order to build the new line. But when allegations against their old lines emerged, then ONP instead tore down the old line in order to build a new on the existing premesis even if this supposedly would adversely interfere with the ongoing production. 7) ONP did an audit involving externals, but kept the actual result of the audit internal. Basically, ONP just issued a report saying that they found nothing materially wrong. But they did not say much about where and how deep the investigation was in detail. Nor did ONP disclose any evidence. Cheers! Thank you Niels for sharing your due dilligence investigation. You have indeed followed the principle to: "Go see for yourself." Satellite photos! That's objective evidence that trumps subjective opinion. Case closed as far as I'm concerned. :)

What I find fascinating about this is watching GOOG and MSFT (both of which I own) battling it out in over the top video calling/conferencing and "social." MS Skype is linked with Facebook, Comcast boxes, and MS business products such as Lync, and is available on all the major mobile device OS's. That covers a pretty good amount of potential usage. Google Voice and Video chat is linked with Google+ (see Hangouts, for example), Google TV boxes (eventually, I believe), the Google Apps suite, and will be available for access either by native app or web app on all the major mobile device OS's. I gotta wonder . . . where the heck is Apple with its Facetime solution? They need to get on the ball because GOOG and MSFT are running ahead of the pack in this space. Facetime is far superior to Skype in our experience, but it requires an Apple device.

You should totally contact cmattporter and exchange ideas! :D I guess it is easy to get anxiety after some members posted eye-popping returns. Congratulations. And I am glad finally I felt nothing when people have better results than mine, or I have better results than other people. That is a great prize I won :P Fan, this is a wise perspective. I'm one of those board members who is up a lot this year, but the truth is that the intrinsic value of what I hold is hardly up at all. Why should I take credit for the fact that Mr. Market, a crazy man, happened to agree with me during this period?

Everyone has missed the point of movie popcorn prices It's the opposite of what rational economists would expect! Having to pay a pretty penny for popcorn is part of the movie experience! Imagine a young couple or a group of young people of modest means going out on a date. Paying an exorbitant price for ordinarily inexpensive items that would not usually be consumed is an affordable way to impress a date, friends or family members. It's like paying a lot more for a box of Sees Candy than a bag of Hersheys Kisses. :) Would anyone be stupid enough to throw a bag of cheap candy in front of his sweetheart on Valentine's Day? The reaction might be about what one would get if one were foolish enough to try to impress a date by sneaking candy into a theater. :)

What about Enron? Worldcom? Hasn't it been proven very very very large and established companies can be rife with fraud? It doesn't have to be a complete fraud for you to completely lose your money. Yes, and there seems to always be pocket risk investing in countries where the rule of law is not well established. :-\

Cat losses in FL have been very low in recent years. It must have taken a lot of effort to put up CR's that high over not one but the last two years while writing homeowners policies in that low cat loss mileu. Why was their CR so high? A good homeowners insurer in FL should be able to have sub 100% CR's in low cat years while reinsuring most of their potential cat loss to prepare for the inevitable bad cats to come. Seriously, something may be wrong beyond merely having a single bad year. Perhaps, they don't reserve properly or insure a lot of vacant dwellings. That's just a wild guess. I haven't looked at their reports. Do they have any dodgy assets on their books? How long have they been in business? It's possible there may be value there, but is there good reason to think there are only a few cockroaches? Plus this is a microcap. Is it worth it to dig deeper if someone else controls it? Has there been a fundamental change in their business or management recently? P/B means little if BV isn't solid. Having approval for a big rate increase doesn't guarantee that their most responsible policyholders will renew their policies at the higher rate unless their competitors are planning big increases. Lots of questions . . . No answers. ???

This is an interesting observation. It's possible that there may be causal factors behind such an association, but these factors may not be entirely related to relative expensiveness per se. Cheap items are often consumables or replacement parts. Businesses that provide these often have a moat that is related to a customer's inertia in making a change for what seems to be a trivial saving. Expensive items are more likely to be one offs that require due dilligence to consider alternatives, as the savings from a single purchase may be considerable. Alternatives from start up companies that have no economic goodwill with customers may even be worthy of consideration if the price is right. However, businesses selling expensive things that involve large switching costs (think Boeing planes VS Airbus planes) that are purchased frequently may have good economics, but probably not as good as with the sale of cheap items. :)

Thanks for posting the clarification. It would be sad to see a good man brought down through guilt by association.