twacowfca

Quantitative easing is a misnomer for much of what has occurred . Initially, a huge amount of money was injected into the financial system to increase reserves and counteract the dramatic contraction reflected in the reduced velocity of the money that was in the system. This was truly quantitative easing. Since then, the stimulus spending has been directed to nonproductive parts of the economy ( subsidizing government spending and favored groups that don't produce much ). This spending has largely been offset by a corresponding increase in government debt. Therefore, it's mostly NOT quantitative easing. Some of this stimulus has trickled over to big business, and big business has made a partial recovery. Recent economic studies have found that the rationale for this policy , (Keynes' multiplier) is deeply flawed. Keynes' multiplier is no multiplier at all, it's actually less than 1. In a sense it is actually a relative deflator because directing funds to nonproductive uses through government spending, squeezes out productive enterprise, especially in small businesses and among the self employed that make up over half the economy. This is where most of lingering unemployment and recession hangs on. The stimulus fails to help "the little people" to use the phrase of a dismissed official. What would have worked? That's simple. A deep cut in the most regressive tax: Social Security withholding. Suspending this most regressive tax for the duration of the recession would result in a 7 1/2 % increase in take home pay that would be spent for the most part rather than saved because this tax falls disproportionately on the lowest income taxpayers. This increased spending would be directed to useful goods and services and mostly toward the part of the economy that is still mired in recession. This would soon supercharge the economy and take up the enormous slack that has developed. The cost would be far less than the counterproductive stimulus spending that has resulted in a huge increase in government debt that will be a drag on the economy for many years.

He used to work for Morningstar and became impressed with the importance of having a moat. Therefore, in his mind, the fact that MCF was a low cost producer may have trumped the risk of investing in a commodity business at the peak of the cycle.

I was just thinking about this. Was about to read that article after a cup of tea. My first thought was focus on the downside - Isnt this the same guy who went all in on a commodity stock when it was at an all time high, with no hedges? With that said, I have learned alot from Sellers, it should be a good read. Yup. He rode it up and then rode it back down, all the while maintaining that he had this huge margin of safety. He was oblivious to the fact that commodity businesses are cyclical. There was similar blindness about a couple of other major holdings. His investors bailed out, so he closed his hedge fund because his chance of making up the deficit in his incentive fee was unlikely. He may have consoled himself with the incentive profits he took out of the fund before it tanked because he said he was going to live off of his investments when he closed his fund. There's a lesson here. We all have our blind spots. That's why it's important to get honest, perceptive feedback about our ideas.

Isn't there some guy in Omaha who runs a sizeable operation with something like 13 1/2 people? :)

It's astonishing to see the interest in this thread. Where's the margin of safety when astute observers estimate that most Chinese companies cook their books. Has anyone read the book, Mr. China? It's a humorous but sad story of fraud and deception.

Generally agree. Shareholders are all to often seen merely as one of the constituencies that CEOs who don't have much skin in the game have to appease. CEOs that have most of their wealth invested in their company are a different animal. Most of these have shareholders' interests at heart. What's important then is to identify any companies with CEO owners who may be big liars or overreaching and reject them as possible investments.

Generally agree. One thing that I appreciate about Prem and Buffett is that under stress they didn't lie which is quite different than not highlighting the worst case scenario. The worst case was there for all to see in the adverse development of FFH's prior years' loss development triangles. Once in the darkest period, Prem was asked during the AGM about why not sell one or more of the subs. His answer was simple and truthful: "You wouldn't like the price we would get."

That's good!

The relationship holds strongly in other markets. Please see the recent posting by rick_v in the Japanese Research as Promised thread. In his graphs, one can see how the acceleration in the growth of the Yen M2 money supply supported the stock market bubble, and then how the sudden slamming of the brakes on the growth of the money supply precipitated the crash and influenced the steep decline. When a large bubble develops, markets become exquisitely sensitive to small changes. It doesn't take much to prick a bubble that's about to pop.

During the last two years, the U.S. stock market has been very sensitive to changes in the monetary base, the “high powered money” part of the money supply. The sharp decline in the WSBASE earlier this year preceded and likely precipitated the sharp selloff in the market late this spring. Since then, the WSBASE has stabilized and stock market volatility has dampened down. However, the very slight recent downward trend could be a little bearish if continued after the U.S. Congress returns for business September 13, 2010. Congress being in session in turbulent times is a big negative predictor for stock market prices.

Or rather we have access to a rational operating program, but the default setting is "gut". :)

Are his lips moving? ;D Seriously, CEO honesty is positively correlated with abnormal returns. See: Do Business With People You Trust by L.J. Rittenhouse. :)

Wouldnt a skateboard company or a bike company have the same exposure? Wouldnt Wal-Mart have a similar exposure? Far less legit liability because skateboarding is all about wearing helmets and pads, but this isn"t the case with casual shoes.

Kicked Heely's tires a few years ago, but passed because they seemed to have lawsuit exposure. A kid on their shoes could suddenly go "whoops". Brain injury. What about this issue?

Excellent research rick_v. Keep in mind that Japanese companies had two other strikes against them leading up to the two "lost decades". Their crossholdings drug down the good companies with the insolvent ones. The greatest drag happened when their government removed the abnormally low peg to the dollar that Japanese companies enjoyed before their market tanked. Afterwards, Japanese companies no longer made abnormal profits.

Sept 10 is about the midpoint of the hurricane season. However, approaching the midpoint, the geographical risk shifts dramatically from mainly The Gulf of Mexico to mainly Florida and the Atlantic coast as few hurricanes form in the Caribbean and The Gulf while hurricanes forming out of weather systems coming off the coast of Africa become more numerous.

Investment banks will sell you an option on anything, it will just be a one-off derivative contract rather than a standardized "listed" option. Whitney Tilson did this a while ago to get LEAPS on BRK. For the right price, and if you are a big enough client, I'm sure someone would write you a derivative on FFH, but I doubt it would be worth your while as they would likely charge a high price (high implied volatility). My take is that this was all a lot easier to get done before 2008. The guys from "The Big Short" (cornwall capital I think) did the same thing to buy 5-8 year LEAPS. Actually, prices for customized options or synthetic options or other derivatives can sometimes be much cheaper than what's available on an exchange. It depends on what the counterparty has available to offset the transaction.

You mean: Alice really is Alice, and not The Red Queen!

I once was a member of a software users group- the kind that were everywhere in the early 90's and I asked a female colleague why there were no women in ANY of these groups. She replied that it was baffling to most women why men insisted on starting these things, after all women don't spontaneously form toaster or hair dryer users group to discuss exciting new features. Women do form user groups, but the unstated motivation is quite different: talk about a lot of other things in addition to the object at hand. Example: quilting clubs. The business of the club keeps the conversation from degenerating into mere gossip, and the more experienced members have the opportunity to guide the less experienced.

This reminded me of a comic I used to read: http://www.phdcomics.com/comics/archive/phd1105.gif But on a serious note, investing and finance is almost completely male-dominated. There was a list of value investors in another thread, guess what the most common thing about people on that list. :) A notable exception: Meryl Witmer. One of the very best value investors, IMO.

Thanks for all the digging. Looks more like an obstacle course than a set of one foot high hurdles. :(

Sanj, we publish a lot of "how to" books. If you really have something like 134 coupon saving tips, this might make a nice section in our next book. We might even pay you something for them. :)

Thanks, small cap, for pointing out this very important distinction.

Whenever there is a proposed M&A, certain cliques of trial lawyers do a cut and paste of standard allegations and solicit business. This has nothing to do with merit in most cases, but cases without merit are often worth something just to go away. John Grisham's The King of Torts is a good novel about this seamy side of the legal profession.

Read, read, read. Sometimes write. I've been hyperlexic :) since I was a small child. Also run, bike, swim. Spend lots of time with family and friends, but often miss some of the interaction because there is usually a book at hand. I study interesting subjects, including doing some original scientific research. We help support and spend time with many Christian missionary organizations that spread the good news to people about how much God loves them and help meet needs such as medical care in isolated places in poor countries. Sometimes, we go on these medical mission trips. They call me "the sterilizer" because I sterilize the medical and dental instruments. My wife and I have written books on prescription drugs, so we organize and run the pharmacy on these trips. In my day job, I'm a book publisher, but our wonderful staff does a great job and doesn't need much help. They get a big chunk of our profits. This helps keep them focused on the bottom line and gives me lots of free time.