Myth465

ERICOPOLY, I agree with your statement. Watsa the are you better off now than 30 years ago is fairly shocking. Very few groups are worse off. I cant really think of any off the top of my head, especially any that liberals usually support. --- This is going to shock some of you. But I actually don't mind the liability cap. Working in the industry it makes sense. If you remove the cap then only the super majors can drill, and they likely wont due to insurance costs. Plus the cap goes out the window with criminal negligence. It should be raised though to around $1 billion. This is actually a piece of legislation that appears to be designed well. If BP is found criminally liable which they will be, it becomes a non issue. Drilling should be heavily and sanely regulated (good regulations that are enforced), and the oil and gas tax should be raised. I believe they have a per barrel oil tax which goes into a fund to clean up these sorts of issues. Similar to deposit insurance for banks. This should be raised to generate a bigger fund, an actual super fund. This creates other externalities similar to banking, but Criminal Liability and actual prosecution of Executives why create an environment which leads to these types of things would very quickly alleviate those. Start with the guy at Massey Energy. I think all the ideologies have good ideas, but the key players are a bit too dogmatic. The Republican party has also been taken over by people who have been captured by industry, believe in no regulation (the government is always the problem), or sadly both. I see a bit more realize on this issue with Obama and Kerry than anyone on the right. Liberals are just as flawed but I find that they will listen to you. When you ask them would you rather - walk, drill offshore, use nuclear, use coal, or pay an obscene amount for solar - you can eventually reason with them. Very different than drill baby drill and no government regulation.

Very interesting and unexpected development - By the way, Norway despite having already safer regulations is now not issuing anymore certain offshore drilling permits. The British could also follow soon. http://af.reuters.com/article/energyOilNews/idAFLDE6571SP20100608 Thanks again for the link Cardboard.

Thanks for the link Cardboard, now this is a cause for concern for the drilling sector. The gulf is one thing but if the rest of the world follows than. ..

That is true, Watsa. But I also think you are going to get 100% judging by the quality and nature of this board. So I cant believe the point of this thread was for us to take that quiz there? It really couldn't have been the point. --- I would prefer to discuss this, aspect listed below. How did the six ideological groups do overall? Here they are, best to worst, with an average number of incorrect responses from 0 to 8: Very conservative, 1.30; Libertarian, 1.38; Conservative, 1.67; Moderate, 3.67; Liberal, 4.69; Progressive/very liberal, 5.26. Americans in the first three categories do reasonably well. But the left has trouble squaring economic thinking with their political psychology, morals and aesthetics. --- My thesis is the left is foolish because the right is deluded and has no economic principles. They should educate our liberal friends, and practice what you they to preach.

Well said. The answer to every question is it depends. I can show you both sides where the statements would be true or false, regardless of dogma. Would you really want an uncertified heart surgeon? Some are slaves to government control and some are slaves to the trappings of a free market. Either is a foolish move to me. Free market types forget that the economy is simply a means to an end, the end being quality of life and Human well being. If someone cant see the failures of both the Cowboy / crony capitalistic free market system (we have in place), and useless regulation / unwillingness to properly regulate business (we have this too) after BP and the Financial crisis then they are simply lost to one particular ideology. As Keynes said - "The ideas of economists and political philosophers, both when they are right and when they are wrong, are more powerful than is commonly understood. Indeed the world is ruled by little else. Practical men, who believe themselves to be quite exempt from any intellectual influence, are usually the slaves of some defunct economist." Rothbard, Marx's, Rand, and Keynes are all useful to one degree or another, but whole hardly following one and refusing to examine the facts is a fools game. ---- And the market does nothing about externalities unless properly regulated. Check out China for great free market environmental examples. Its generally cheaper to destroy the earth then to properly conduct business. This is known as externalities. The only way to solve this is to tax or regulate, making it cheaper to protect the environment than to dump waste. Its hard to design regulation though when one side believes in total anarchy and blames government unless we try it completely. 1 side is misguided and 1 side completely crazy. We both know the people installing these liability caps claim to want a completely unregulated free market.

This has and continues to be my biggest problem with Berkshire. I think its a great store of wealth though. The problem is I don't have much of it, still in the building phase.

I cant say I am surprised by Tilson. He seems to be a scan the headlines kind of guy. I think he will make money though off this one, but not prior to alot of pain. 1 or 2 of the EPA fines is by the barrel. I believe the negative headlines will keep coming even when the well is plugged. We will have one about the flow rate and 1 relating to the safety violations. http://www.examiner.com/x-21743-New-Orleans-Progressive-Examiner~y2010m6d8-Scientists-from-the-Flow-Rate-Technical-Group-dispute-BPs-oil-containment-claims Additionally, Leifer says, there is a possibility that the ruptured oil well may be spewing what BP has called its worst-case scenario; as much as 100,000 barrels a day from a freely flowing pipe. http://www.pressherald.com/news/nationworld/bp-ignored-safety-policies-across-north-america_2010-06-08.html The confidential inquiries, which have not previously been made public, focused on a rash of problems at BP's Alaska oil-drilling operations. They described instances in which management flouted safety by neglecting aging equipment, pressured employees not to report problems and cut short or delayed inspections to reduce production costs.

Very good points, and I will likely leave my exposure to CNA within Loews. Motamed seems to want to build a smaller Chubb, and appears to want more of a vanilla investment portfolio. I think they are working on the underwriting, but have the same fears as you. The large portfolio basically controls book value, and will likely cause a severe drop in BV should the bond market correct. They have worked to better position the assets, but still have huge exposure to a fairly volatile market. The Tisches are also worried a bit about inflation given the low rates, huge portfolio of bonds, and long tail nature of the insurance they write.

Here is a good writeup for Seahawk. There is also a good short writeup for Seahawk on VIC - http://seekingalpha.com/article/208222-seahawk-drilling-facing-a-perfect-storm-which-is-why-i-like-it I think Seahawk is a bet on the industry recovering. I think their and HERO's rigs will be the last ones back to work due to age and technology. --- I like drilling because its a play on oil, but you have some protection due to the long term contracts and backlog. The higher quality deepwater / high spec jackup drillers typically have pretty hefty backlog which protects you a bit when prices drop. I think you have the pros and cons for ESV and the industry properly setup. As for further research, I recommend listening to a few of the Conference calls and investor presentations for Ensco. They are a bit repetitive but really give you a good gauge on the industry. Ensco has great margins and probably has one of the lowest break-even costs due to the lack of debt. I also like to look at the monthly rig status reports to get an idea of what the trend looks like. Ensco also makes most of their money abroad which helps. Rig Status - http://www.enscous.com/default.aspx?id=55 Presentations - http://www.enscointernational.com/default.aspx?id=139 The big question is what do they do with that cash, especially considering the weakness with the drillers. The way you are thinking about the industry is basically what the Tisches said they thought during the downturn when they acquired the DO assets. They had an investor presentation and will probably also be making some interesting moves during this period.

I thought the NOLs were written off. What do you make of the new Aussie miners tax, LUK said it hurts but the mining company should still be very profitable.

I am actually surprised that FFH is rallying. The stock portfolio has to be taking a slight beating, and they dont have a full hedge. They sold quite a bit prior to the downturn so maybe people think they are buying with the downturn. It appears that Prem was definitely right about the US listing.

It could trade up but I kind of hope it doesn't mainly because I dont think I will be able to subscribe due to holding pink sheet shares, and being based in the US. I will put in a call after my shares convert to see what the process looks like. Im just hoping out loud, also typically a rights offering kills the stock price for a bit. As Sharper pointed out we dont have much volume, so I dont know what would push the price down, but I hope it will go down or that I will be able to subscribe. If I can subscribe then I naturally want it to trade up from today.

Good call lessthan. Glad to see you were right. I think this will end up like FUR. It will trade down over the rights and then should begin moving up once the shares are bought. I would actually like to subscribe. Not sure how that will work with the pink sheet shares and being based in the US. The rights offering is priced at just slightly below my basis. If I cant subscribe then I hope the shares trade down ;D so I can buy some on the open market.

I think short term this will add fuel to a raging fire. Thankfully as you said its in shallow water. ---- Call me crazy but long term I think this will be slightly positive for the industry. I think the suppliers will sell new equipment, and the Drillers will have margins squeezed by insurance costs, new equipment costs, more inspections but will pass some of this on to their customers. The big upside for drillers is a change which could require the drilling of a relief well at the same time. Senator Kerry spoke about it on Charlie Rose, and it seems to have a small chance of being included in plans. That should require 2 rigs. It would pull down returns and would require a higher oil price but, would workout well for drillers once prices exceed the hurdle rates. It will be interesting to see what the shallow water requirements look like in a few days. ---- Looks like your fears were right. This things been leaking since 2004. Really did a number for Diamond. 4x average volume. I wonder if they are buying back shares at this point. http://www.latimes.com/business/nationworld/wire/sns-ap-apfn-us-oil-obama,0,5467547.story There was also a report that another rig was leaking oil into the Gulf. Taylor Energy, which owns that rig, said it has been leaking since 2004 when it was hit by Hurricane Ivan and a pipeline broke. Taylor says repair work has been going on ever since and a dispersant ship has been handling the leak. ------ Here is another update. Doesnt look so bad for Diamond based on this. http://www.businessweek.com/news/2010-06-08/diamond-offshore-falls-after-report-of-gulf-oil-leak-update2-.html

Good to hear, hopefully mines move over at some point this week.

I wonder what will come of this. http://www.businessweek.com/news/2010-06-08/diamond-offshore-falls-after-report-of-gulf-of-mexico-oil-leak.html Diamond Offshore Drilling Inc. fell in New York trading after Businessinsider.com said the company’s Ocean Saratoga rig is leaking oil into the Gulf of Mexico.

I am having a hard time getting details regarding the pink sheet shares. I figured it would just flip over similar to how FFH did. TOS recommended calling the investor relations for SFK Pulp, but somehow I dont think thats going to add much value. Thanks for the update, hopefully this gets sorted out over the next few weeks.

I don't think that's being fair. I have written about CNA, and preference every statement with they have sucked for 10 years and are basically a turn around play, due to the new CEO from Chubb. Many have even questioned why its worth pursuing and most short it out of their Loews holding creating a stub. They have never really made money on insurance, and the float has basically followed the market. They got killed in 2008 due to the huge MBS and Corporate bond holdings, and had a nice rebound in 2009 because of it. They will probably have a hard time getting above book value due to this long record, of basically losing money / breaking even despite $40 billion of float. With that said, I don't really think its worth shorting out. Even in this thread, I said in terms of quality CNA is dodgy. Similar things were said in the Loews thread. Perhaps there are some who like it because of the Tisch family, they play a part in how I think / look at it. They have moved some of their personal money to CNA and so has the new CEO. I think its one thing not to like an idea, many have issues with several of the ideas discussed such as ATSG, SFK Pulp, SSW, but its quite another to assume that people just flat out have no idea why they are buying something. Also because 1 insurer is better than another based on a set of metrics doesnt mean that the investor in the first insurer wont do well. If AWH returns 20% annually over the next 5 years, and Harrylong's pulls 23%, is the first investor a failure?

I was about to make this post. I am getting slightly interested, but would like it to fall a bit further.

As many people know I am fairly left of center on most things. With regard to fiscal issues, I would probably be a closer to the conservatives (but they really dont have a leg to stand on with regard to fiscal sanity). My motto is do whatever you want but pay for it and be honest with the public about the costs. A rule like that would keep everyone honest. --- The conversation always gets taken off course in my opinion. You have the far left which isnt serious (they want the world to run on hugs and love, and really dont understand that Energy has no good answers (nuclear, onshore, offshore, or coal - you can research but alternatives are far away even with a tax on oil) about the issue and the far right wants no regulation and total free market (basically Corporate control). You also have an industry which doesnt say much or work to educate the public. The moderates (such as Obama) get lost in the shouting match. When one side doesn't want drilling and the other side wants government to be eliminated its hard to compromise. Obama is pro offshore drilling, as long as its safe, but political its fairly hard to make the claim that its safe at this moment. The feds have also botched the response, there is no excuse for keeping Jindal waiting on those islands especially if you can make BP pay. I believe the US has too much regulation, but not enough good regulation with regard to most things. Having a million and one rules to do anything, but waiving basic safety plans and key equipment is stupid. Finance is similar the fed had all the power they needed, but the guy in charge of regulating doesn't believe bubbles exist or that fraud should be prosecuted (Alan Greenspan). The company I work for actually sold the BOP and its pretty stupid to waive the requirement to have a working BOP on site. I listened to the hearings and apparently the battery in the Control panel was out. The BOP is fairly old, and it will be interesting to get the full story when they get it on land. The oil industry lobbying against a requirement to have a relief well drilled at the same time is retarded as well, sure its costly but when the stakes are this high you spare no expense. Especially when you really cant do much to clean it up. How would people feel if the nuclear industry did the same to "maximize shareholder wealth". The officials also have a major cross to bear. Basically everyone is corrupt and campaign finance reform and term limits is the only real solution to many of the problems.

I know without a shadow of doubt that somewhere out there in this large investing world there are better bargains than all of my holdings. If time and energy were limitless then perhaps I would simple work harder, but they arent. I think you completely missed the point of my post regarding the purpose of the board / thread. I get your point, and we will just have to agree to disagree.

You're kind of contradicting yourself there. As you've stated, Harry Long has been on record regarding Fremont Michigan for quite some time. Secondly, he does have a point. People here are supposed to be value investors, so it's amazing that anyone could recommend something like MFC. Maybe you have some insight that I don't, but I see a lot that scares me, balance sheet that isn't exactly transparent (who knows what sort of corporate bonds they hold), high variable annuity exposure (even sideways equity markets will hurt MFC), etc. The AIG debacle should serve as a lesson to insurance investors. If you don't completely understand everything you're reading about the insurer, you're at risk of 100% capital loss Fair enough. With regard to MFC, people like what they like. Many see value in C and AIG. Thats what makes it a market. If Freemont is the only insurance company in the world worth owning then maybe he has a point, but I just dont agree. He himself thinks Management stinks. At least 10 other names have been named. Is Freemont superior to all of them? It just doesnt seem right in my opinion to trash everyones names and not name one idea worth buying today, Harry liked Freemont, but does he own it or recommend it today? I believe the issue is he is coming in saying those ideas are .... heres a link try again. This is a discussion board / not an im the master you are the student work harder board. With Freemont - you said you see it as a net net with growth. Many see LRE similarly. What makes your idea better, or those listed so bad. I like Freemont, but dont like the Management or drama. It could workout next week or could be dead money for years so I look elsewhere. I still think its a good idea and wouldnt really diss anyone who owned it. AIG is a bad example. AIG shows that no amount of research can really protect you when it comes to insurers inmo, diversify was the lesson there. Insurers are prone to black swans, research is great but when the shit hits the fan (KRW, 911, Asbestos) we just have to wait and see who is standing. Its why I try to rely on Prudent Managers with skin in the game, who look out for risk and have been thru a few cycles. These are Harry's metrics taken from another post Do you know of any P&C insurer at less than $100 million in market cap with: Over-reserving? A good combined ratio? Zero debt on the liabilities side of its balance sheet? Selling at a discount to tangible book? A double-A rated fixed income portfolio? -------- Those seems like great metrics but will naturally exclude most insurers except for the small ones that the Chanticleer guys like. I can understand wanting to play exclusively in that market, but whats specifically wrong with the insurers listed such as LRE, FFH, or HCC?

Come on :-X That's just not fair - You got to post at least 1 idea, if you are going to keep making that statement. From what I have seen you appear to like the same type of insurance companies as the Chanticleer guys - http://www.chanticleeradvisors.com/faq.cfm

Yep with regard to Loews, CNA, FFH, and LRE. - Have owned FFH since late 2007 (sold Leaps last week) and owned Loews / CNA for just about a year before selling to raise capital. I have held Lancashire for about 8 months, it replaced ORH. I looked at and reviewed the financials for all of them and feel quite comfortable. Also have reviewed the conference calls and investor presentations as well. The only slightly dodgy one to me is CNA, but its hopefully being fixed up by the new CEO. Currently the only things I own are Loews (bought back in over the last few days) and LRE. Got great tips and am now looking at HCC and AHL. I am looking to move into insurers after hurricane season and am doing research and gathering names now. I would guess everyone here is doing the same. You got to start somewhere. The guy asked for a listing and everyone is posting / discussing their favorites. I would say most get ideas than do further research. Do you just not like the names or the way they are being discussed? What do you think is missing from the analysis and what names do you like?

I have a basket because I think the sector is undervalued and I really like 3 Insurers and find 1 very cheap. They all have different expertise and should capitalize on different opportunities.