Myth465

I think there is enough blame to go around, at least I have enough. I listed alot of the parties. I would say the bankers were most culpable and surely shouldnt escape any blame, just as surely BP shouldnt escape blame. I would put down the tiger and fire the zoo keeper. Instead of making excuses for one or the other.

Everybody seemed fine that the banks were giving out easy credit until they collapsed. Then it was the banks' fault! It was the banks (plus fed, regulators, Congress, Presidents, and ......) fault. There will always be idiots lining up for loans they cant afford. The duty of care is with the Lender. There is and always be will an unending appetite for free cash. Are we really to blame the idiots, for bringing down the house? Here is a quote from Buffett to a Minority bank director - You will notice that the President of the bank said, "When we started business, it was our plan to aid minority investors and the so called little guy.l This we did, but some of them didn't treat us very well in paying their debts, and that was our downfall." The President is making a mistake in blaming the borrower. Every bank gets offered lots of bad loans, and its the banker's fault if he accepts them. I am all for personal responsibility but do you really want to trust the economies health to hoping that people will properly self qualify themselves for loans?

Obama is trying to rebrand it towards his energy bill, but I think he will fail. Someone posted a quote from a President who said the hardest job is dealing with the bloodlust of the citizens when things go wrong. There will be blood, the American people demand it. Obama tried the cool calm and rational, but was attacked by both parties and the public because of it. The political outrage from both sides is annoying but I truly understand people who live in the gulf being extremely pissed off. The oil companies for years have been saying they have extreme safety requirements and better technology than NASA. Then we here about throwing gulf balls and trash into the hole, and realize that they dont have anything. Its easy to say this was bound to happen, but if you live off that water this doesnt go away next week or month, and may not go away over a lifetime. So I get people like Carville being extremely POed. Plus this was literally a man made failure, and the corruption of Government officials and lack of regulation has added fuel to the fire. Churchill was right, Americans are good at doing the right thing when they have no other options. We simply havent hit that point. Peak oil / Peak cheap oil is the only thing that will bring us into action. Similar to our debt situation, the shit needs to literally hit the fan before we change courses. This guy basically says the same thing you just said. http://www.c-spanvideo.org/program/293792-1 - He feels that the industry could do a bit more to get the word out on the coming situation. BP's record though doesnt help the situation.

I dont think the spill will have long term impacts on anyone except for those living in the gulf area. It will be similar to Katrina. Its tough because it really is a way of life out there that could be destroyed. Fishing and Tourism they say employs twice as many people as oil and gas, and it will be hit pretty hard if the oil seeps into the marshes and infects the coastlines. BP will be paying for years but will survive and may thrive for shareholders getting in over the next few months. They will be hated though, similar to Haliburton was / is. The US will pay more for seafood as a whole and will strengthen drilling requirements. I doubt we get a serious energy policy though. Drillers could get hurt or may win drastically cause of this (what if they mandate the drilling of a relief well each time a deepwater well is drilled). Smaller oil and gas companies will get hurt by the tougher regulations because they dont have the deep pockets to deal with them. The Gulf will see a boast due to fighting the spill, but will get hosed when everyone forgets about it and the tourism and fishing stay offline.

I dont think BP has raised safety. They didnt after Texas City, and have a horrible record. The worst out of any major. That doesnt go away overnight and wont go away due to a spill. Its a cultural thing and people have to know their jobs are on the line if they do unsafe things. --- This really brings it all home for me and sums up the situation. As one of my colleagues remarked: “His company’s just scattered oil over the most litigious country on earth, the world’s most powerful man is breathing down his neck, and that call sounded all business as usual”.

Very Good Point, Asbestos is a good example. Makes LRE all the better.

Thanks for the insight RRJ.

True, but BRK may be in a class by itself. A few years ago the SEC subpenaed BRK requiring them to doccument how they set the amount of their reserves for long lived liabilities like A&E. This was peculiar because BRK had the most conservative reserves of any P&C insurer. It seems that the SEC wanted to use BRK as a standard of comparison for other cos like FFH that they were investigating then. The doccuments were eye opening. FFH had strengthened their A&E reserves then to a level of about 9 years or 9 times its annual payments, a level that was above average compared to their peers. BRK's reserves were 17 years, far above the reserves of any P&C competitor! Very Interesting. Things like this make book value a very difficult metric to rely on and make trust in Management an important key for insurers.

And it continues. http://www.gurufocus.com/news.php?id=96582 Here is Bill Gross on Europe and Job Numbers. Anyone find that the market has gone down but not the items on their buy list. I missed great deals in SD, SSW, and PDS due to work. Everything else on the buy-list has held up well and the items listed rebounded within days.

Great Presentation by Loews. http://ir.loews.com/phoenix.zhtml?c=102789&p=irol-EventDetails&EventId=3059069&WebCastId=999197&StreamId=1495753 Tisch says its the cheapest stock he knows. I think there are cheaper stocks but the man has a good point, especially in the large cap space. Also thanks alot for the spreadsheet, Its updated real time which makes it very useful. I was hoping Loews would get cheaper due to the DO situation, but its still has quite a bit of discount.

The crash was due to a misreport. They thought the ban was extended to all waters. http://www.washingtonpost.com/wp-dyn/content/article/2010/06/03/AR2010060302738.html

You have the same profit opportunities and no risks in most other oil and gas names. Drillers, Deep Water Producers, EU Based Producers, and Services companies are all dirt cheap right now. Again it reminds me of Bill Miller and financials. Sometimes the sentiment is correct. You are essentially making a political bet and not an investment at this point in my opinion.

Here is an interview with Einhorn. http://www.gurufocus.com/news.php?id=96450

Franken, Ackman, or Roubini all have good solutions to this problem. Roubini uses the analogy of paying teachers directly for the grade you get, with the option of 2 other teachers available for the course. The status quo sucks and I dont agree with Buffett on this.

Here is a good comparison on Safety - http://www.businessinsider.com/bp-has-been-fined-by-osha-760-times-has-an-awful-track-record-for-safety-2010-6 I actually found this to be an excellent interview. Its CSPAN and its by the Exxon Valdez Lawyer for the Fisherman he worked on the case for 20 years - http://www.c-spanvideo.org/program/293860-5 He doesnt see much happening to BP, Interesting stuff. He also talked about potential regulation.

My guess is he likes his bonds (namely the ones he insured), but hates the overall market for Munis given the macro view.

Smart man, I wish I had more options with my options. I felt trap because I couldnt exercise to hold and was at the whims of the market. Many sold and collected the Div in Dec/Jan and that proved to be the smart move. I dont know how short term money managers do it. Value goes out the window and you really do try to time the market when you dont have the discipline to hold or simply cant for whatever reason. I prefer vanilla value investing. Very interesting lesson. Now I have to buy and hold FFH the old fashion way via common. Hopefully we get a pull back soon so I can get started. Do you typically by Deep in the Money for some light leverage, or go for out of money expecting definite appreciation with options. I have a few other set of Leaps on some other investments.

That number keeps going up. Many think the Dividend may have to be cut. The criminal investigations dont bode well either. The latest estimate of gross liability for the Gull oil spill is up to $37 billion ($15 billion to $23 billion for cleanup and $14 billion in claims) from Credit Suisse. Those numbers do not include possible punitive damages awards or fines, which one report on Bloomberg today said could be as much as $9 billion. In combination, those numbers amount to $46 billion. Read more: http://community.nasdaq.com/news/2010-06/gulf-of-mexico-oil-spill-liability-payment-capacity-view.aspx?storyid=23423#ixzz0pjTXbYu2 --- It seems as though we are getting an even better deal on Total with the Euro mess. I tend to not like the larger oil companies, but there is value in this space.

Oldye I think we all agree with that, but the general market doesn't. The markets not right of course but it determines your gains over the short term.

Sandridge is in a tough spot. I think they need Arena more than Arena needs them. I never saw what Arena was getting out of the deal.

Personally I just want a return on my money (underwriting or investing - cash is cash), but insurers seem to be valued on underwriting. Top underwriters seem to get better multiples to book value, sometimes getting up to 2x BV. Right now many top underwriters can be bought at underbook value. So I thought it was unlikely that FFH would be valued at IV. 1.2 BV - 1.5 BV is what I would be comfortable holding a top insurer at (either underwriting or investing, or both). Its not really IV, but I am fine at any point under that amount. Above that and things get a bit more complex, and I have to consider selling depending on whats available in the market and the outlook for the industry.

For me its highly related to the fact that I have leaps and I cant hold them forever. At some point they will be exercised and I dont have the cash to hold more than 10% of the shares. So my focus is not what is FFH worth, its more what will FFH trade at over the next 6 months. If I sell and FFH rallies over the next 6 months (as happened today, then I miss out on 10% - 20% of upside). If the market turns down, or we have a large cat then I avoid a 30% - 50% loss. Its just not worth it for me, because I cant hold through the cycle. I am guessing FFHs book value is less than its current value and I believe it will trade down to reflect that. Top insurers (underwriters) are trading below book so I dont see FFH getting the multiple it deserves (1.2 - 1.5) BV. Its intrinsic value is far higher, but with options your investment game is timed. I would roll over the options, but there are no new 2012 leaps due to leaving the US exchange. We also have what could be a very nasty hurricane season forming. We have had 2 non event seasons and I dont think that trend will continue.

Just my luck. We get a rally the day after I sold. Always seems to happen. Good luck UCC

I dont buy alot of the conspiracy theories relating to the fed. I highly recommend Crisis Economics by Roubini if you want to get an understand of why and how the Fed did what it did.

Ya its been almost a week with no action.