Myth465

5 years. All my capital. I would go boring. FFH, Mastercard, Corelogic, Berkshire. Maybe or probably ATSG actually after some thought. 5 years is a long time and 100% is tough. --- T Bone why CHK over SD, and did you buy the SD preferreds? I think SD is safer over 5 years (due to the headstart on oil). CHK would need a gas recovery inmo to do as well. Speaking of which both got killed today :). Its days like this I think of JP Morgan + Prem Watsa - It will fluctuate, generally in no relation to the underlying business.

I think its helpful for the reasons rranjan outlined. Surprisingly enough I am studying for FAR right now and avoiding my multiple choice questions on deferred tax assets and liabilities by posting here. I think these are helpful too. Accounting is a work of beauty once you understand it really. Its when you dont that it turns into a nightmare. The best Finance guys are the ones smart enough to understand accounting, but also smart enough to avoid having to do it. Bronco has your CPA helped you much? I cant wait until this thing is over. Also whats FOS? I agree though. I like the way reports are generated, but believe its up to Management to come up with a way that makes sense. Loews does a beautiful job of this. There financial statements with CNA consolidated are garbage. I agree with you though. A reconciliation of price paid, current earnings / fcf, required capex, and cumulative capex and earnings would be far more useful as an owner with regard to major acquisitions. Actually come to think of it you are right. The valuations inmo are trash and include things like customer lists, and stuff like that. Goodwill is really just a plug after someone at Duff and Phelps has valued assets he hasnt even seen in an industry he doesnt work in. Damn 2 agreements this week, what the hell is going on. --- Also Buffett said a word for word transcript is on the Website. Between that and the interviews I am good on the meeting.

These guys could have been some really crappy engineers basically doing low level R&D on pipe fittings. Not everyone is a rocket scientist. Buffett has surely made a difference working in Finance. Do what you love, keep your noise clean (or not), and leave the world slightly better than you found it. Those are my rules. Trust me working in Audit, Low Level Engineering, or some other career does little to improve the world either.

It is very interesting. Just a fact of life, I suppose. We all have our prejudices and biases towards the other peeps in the world. The rationale person doesn't claim that these prejudices/biases don't exist, but rather tries to understand them and act properly/rationally despite having them. Quote of the day moment. I think you win today.

Thanks Shane Smith very helpful indeed. I would love to get into investing and plan to use your approach at some point once I resettle.

Tx you have a point. What people say behind closed doors is one thing. Black folks or we, tend to say whatever the hell we want about anyone. Its the gift of being the underclass. I have found that in the US, everyone stays very PC when other races are around (minus drunk assh*les of course). Australia was weird, because Aussies were bitching to me about Aboriginals and it was fully unfiltered, which was very unique. I am usually not treated to such commentary (pretty much anywhere else in the world). People usually have a lot of filters and qualifiers as they talk about their underclass in Europe or South America (especially with me lol). Perhaps it has more to do with Aussie frankness then racism or anything else. I felt as though I would have a much easier time in Australia than an Aboriginal which is strange (when you think about things from an American racial perspective). My comments could be colored though, coming from a fairly mixed large US city. I know Alabama, Mississippi, Louisiana, and other places have totally different race dynamics (I hear it sucks in cities that are mostly white with a huge black population and not much else). I have a huge population of Indian and Pakistani friends, and after 9/11 they joked with me about being new blacks. They caught a massive amount of hell here, and all over the US for a number of years, and would probably have problems in either smaller towns or where they are a significant minority. Also in the Southwest it feels like Hispanics are really the new target. Its all quite interesting, same story in every country I have been in, just different groups filling the same roles (oppressed and oppressor or immigrant and local or real whatever).

I would say blacks are doing ok down here. I mean there is no Aboriginal President anywhere around the corner. As a black guy, I think the Native Americans are a much cleaner comparison. Though all parties involved got screwed over in History. Having been to Oz, I will say I think the Aboriginals have it way worse. The things an Australian can say about an Aboriginals in a crowded room made me blush, and its hard for a black guy to blush. Again very similar to Native Americans, these things usually arent said about blacks due to fear and PCness. --- Damn Parsad, way to make a proud (but disgruntled) American blush. I like to refer to Canada as the 51st state. That reference feels a bit dated, perhaps we should follow you guys. And you are correct its always a great day to be an American, Not too many other places I would rather be from. I dont think anyone here (especially on this forum) would reshuffle the deck and choose another of the 6 - 7 billion cards.

TX I have the same problem. I usually focus on growing / turn around small cap (FBK, ATSG) deep value type stuff. Usually pe less than 5 or so with mass concentration. Right now large caps are retardedly cheap (sorry if that offends anyone). I find myself questioning my strategy. I dont see any clear doubles, and dont like to buy on the hope of revaluation, but see easy singles between Big Tech and Pharma. I may just do one quick writeup called cheap large cap, and buy a basket of these with 25% of my port. Leaps on J&J, MSFT, GOOG, APPL, BBY, and a few others.

Bronco you are probably right though I am not sure if I will be that successful. Paying millions in taxes is a problem I would like to have for now, but would likely hate it upon writing my first check to the feds. What did you think of Loews, earnings. Feel free to reply in that thread, we have already derailed this thread enough. I am looking at all the companies you listed.

I feel like Personal freedoms, or belief in government over the individual is nonsense code speak. Im not saying its code speak for racism. I am just saying its what you say when a Democrat is in the White House, when you need a reason to make your dislike sound legit / intellectual. Civil liberties have been under attack for decades, and really went down hill after 9/11. I dont see many differences in terms of personal freedoms under either administration or party. They seem to get chipped at with each passing crisis, and never get fully restored. I also think Americans and perhaps Canadians have no idea what its like to be have your real and true freedoms under attack, to have your wealth redistributed, or to have your land appropriated. Some of the stuff I read about in the third world is truly scary (Check out the Obit in the economist the week before last about a white farmer from South Africa), and makes the Obama assault on our personal freedoms seem quite comical. Also where is this smaller government everyone speaks of. It seems to grow regardless of who is in power. Some people want to give money to colleges and poor people, some want to buy military kit and maintain bases all over the world. Some want to pay for things today via tax hikes, some want to put it on the credit card and let the magic of the market work its magic. Either way year after year, the Government grows. Yet we have a party of smaller government (that seems to expand the government more then the other party), and one of big government. Its all quite amusing. Just my thoughts.

Buffett is interesting. I agree with him on just about everything he says, but also feel that he is misquoted sometimes. I think the housing market will turn, but dont see great profits for anyone. He will make a decent return, due to his business being tied to new home starts, but I dont think its reason to buy a house. His comments are usually tough to argue with, but are very easy to misunderstand. They can be taken pretty much however you want. I dont think he has great insights into MSFT, I just think he sees a monopoly with a PE below 10, and tons of cash on the books. Hard to argue with that. Even if the moat is being shredded (which I dont think it is), they still have another decade of tech dominance inmo.

This is actually a good point, and you are right, It could prove to be disastrous for someone if they ignored alot of the other items. Its tough. We have so many different types of people on the board right now.

But you are forgetting the X in Parker's and my example. Its TBV x X = Where x takes into account all of those items you listed. You have a point though, I should have quoted you to make it more clear, I missed that in my long winded tirade. The comments were partially addressed to you, but were really more about the community in general.

Ok, after rereading I see what you mean, I can try again. I want to know what the net tangible assets of an insurance company is. Then I look at reserves, past, management, blah blah blah. Based on that I come up with some sort of earnings estimate or target. Lets take Prem at his word and go with 15% return on assets. Now every dollar I pay more than Book Value reduces that return, we also have a soft market, low yields, and a high cat year. We may enter a medium market though so who knows. Investment gains have been largely taken off the table due to hedges, but FFH is well positioned defensively. From where I sit 15% may be hard over the short term, unless things harden. Based on all this I pick a multiple for Book Value and go with that. Thats IV for me, its an approximation. I obviously want to pay less than that. I think 1.5 Tangible Book Value is a fair price for FFH. I think FFH is a quality above average insurance company and deserves a decent multiple. I also have to take into account that there are several very good insurance companies trading at .95 - 1.25 book value, and finally have to consider that someone buying at 1.5 is getting a fair return but nothing specular. Thats a good price for them, but I am a value guy. I guess the confusing part is that when they buy something TBV goes down if they pay more than net assets. For me its not a hard and fast rule. I dont go FFH bought a company, let me remove this and blah blah blah. I would wait and see how it goes, but as FFH drifted up to vs. tangible book I would have to look at my other options. If FFH is at 1.7 tangible book and LRE is at 1.0 book value. I am moving. If nothing is out there I may let it ride. Who knows, its just my way of thinking about things. Also for FFH I care more about the investments then the underwriting. I usually love to buy when I see giant hidden investment gains. I agree with Harry, if I am buying for underwriting. I want to see very low combined ratios and reserve releases over a decent period of time. You want to give Prem credit for buying an insurer at 1.3x book value (Zenith, Mercury, pretty much any of the deals they have done). Thats nice, but I dont want to pay 1.3x book, so I dont give much credit for it. I wouldn't sell at 1.1 book value because a take over created goodwill, and pushed up the tangible multiple, but it all gets taken into account. Before I could just take stated book, and know that ICIC was undervalued. Now its a bit more complex. I prefer to give create for the acquisitions after they start earning their keep. These are great acquisitions, which feature what FFH lacks. Solid underwriting. Between them, ORH, and the Asian subs things will get better. I predict they are solid buys, but I personally dont want to pay up for them. I didnt own any of them at book (except for ORH), wouldn't have bought them at 1.3x BV. Prem gets control, and headache free float. You can pay up due to future earnings, and as a buy and holder it makes perfect sense, but the environment is a bit off for me, and I dont have the capital to buy and hold for a lumpy 15%. I want bigger fish, and will likely be burned for it lol. Finally, the qualitative factors weigh on me much more than the quantitative factors. I simply dont like the environment and it doesnt make sense to me to walk around saying FFH is worth 2x BV when you have great insurers available for much cheaper. ---- Im used to FFH having a stated book value of $250, and actually book value due to unknown gains of $300, a none event hurricane season, and a stock price of $240. Thats a fat pitch. Thats what I want again. We also had leaps to boot. ---- You guys kill me with this nothing represents the intrinsic value of the company stuff. Give me a break, plenty of ways to fry an egg. We all just want to eat. Pick one and get to cooking. I feel like some folks can get too theoretical in the value investing community. IV is unknowable, pick a method and move on inmo. But you are right FFH is worth precisely its future cash flows properly discounted at an accurate / conservative rate. Since all of those variables are unknowable, I will stick with my approximation ;D.

I knew this day would come. I agree, with Bronco (we tend to be on opposite sides in alot of discussions) and Eric and feel like some of you guys are making this way to complicated. TBV is a good way to compare insurers. After that you look at Management, reserving, track record, and what not and then pick your multiple. Goodwill used to be canceled out by the Indian Sub which is on the books for peanuts. With FFH buying 3-5 insurers at 1.3 BV, I dont think thats the case now. Goodwill is piling up with every acquisition. TBV can be useful. I dont think anyone is saying its intrinsic value. They seem to be saying the plug value of Goodwill is just accounting noise, and screws up BV calcs. Goodwill is literally just a plug because debits have to equal credits and entries have to balance. Literally. It means nothing. FFH is worth whatever you are willing to pay for it, but goodwill is BS. Google Goodwill to see how its determined, then tell me how you can get any real investment insights from it. All this theory stuff, is nonsense. Have a look at the Goodwill Accounting entry. If FFH bought An Insurer for 6 times BV, they would have a ton of Goodwill. Perhaps that info is useful (from a what the hell are they doing perspective) but why should they get credit for that when you are looking for a hard bookvalue? ------- My method for valuing insurers is simple. TBV x X. X being what I feel is the right multiple for the company given all qualitative and quantitative aspects. For me FFH is 1.5 tangible. I wouldnt buy for over book, but would sell at 1.5. I wouldnt buy over book because there are tons of insurers at or under book with decent records, we have a ton of cats out there, and I just dont see spectacular returns given the capital I would have to invest. Thats just me. If FFH earns a lumpy 15% to get that 15% compounded you have to buy at Book Value.

Prem has a pretty funny sense of humor. I really enjoyed this lecture and its a nice substitute for the annual meeting. I liked hearing about how they run money.

I agree, I really enjoyed his slides on Nokia.

Great video. Its funny how accurate it really is, when you think about it.

bargainman I hear you but I find your post slightly naive. Buffett spent the last 40 years building a pristine reputation as the last and only honest man on Wall Street. I mean we are talking about 40 years here, and his legacy. He then picks a guy, and the guy fu*ks everything up over $3 million dollars. I mean a junior analyst at Joesinvestment bank knows not to trade like that and this guy was supposed to run the 3rd or 4th largest company in the US. What would happen if he were CEO would he always front-run Berkshire. He also does it in a way that is sure to come out, sure to be investigated by the SEC, and sure to cause issues for everyone. Then he doesnt admit his error and walk away, he basically throws Munger and others under the bus. Sure if he cheated on his wife, or padded his expenses they could work something out, but he is being investigated by the SEC for something a college grad would have enough sense not to do at any investment bank in the US. He is also adamant that insider trading is perfectly fine, and doesnt believe he had a fiduciary responsibility. Buffett can go down, and destroy his pristine reputation or he can call a spade a spade. What would you do?

http://www.bengrahaminvesting.ca/Resources/Video_Presentations/Guest_Speakers/2011/Rooney_2011.htm Mr. Richard Rooney, CFA, Burgundy Asset Management Ltd., Toronto, Ontario March 10, 2011 read speaker biography see PowerPoint presentation - http://www.bengrahaminvesting.ca/Resources/Video_Presentations/PPT/Rooney_2011.pdf Interesting power point.

I have been kicking tires around MSFT for a while and was looking at doing what you were thinking. Using at / in the money options to juice the returns. I think you guys will make alot of money and TWAs trade on the rebalance will prove to be profitable. My cash is currently being moved around so I am out of ammo for the time being. I think holding SSW will prove profitable. They will raise the Div which should increase the stock price over the short term.

Value it as it will be used. Take pretax profits and use those vs. aftertax profits. I dont like assigning a value to them like they can be turned into cash.

Most people agree its both though. He even said in the letter that the long term price of oil and gas has been $16 for the last several decades adjusted for inflation. Has the dollar really been cut down by 60%- 70% over the last 10 years?