Zorrofan

I wanted to get the boards feedback on PennWest. The company has been undergoing a number of changes over the past few years, leading up to it's converting from an income trust to an E & P company on January 1, 2011. Here are some of the highlights, as I see them GOOD - brought in Murray Nunns a couple of years ago and he has been working hard at tightning things up operation wise - reduced debt by over $1 billion - increased land holdings in key production areas through acquistions and direct land purchases & swaps - sold off non core assets - joint venture to develop Peace River oil sands - joint venture to develop northern BC gas holdings - has over 7 million acres to explore & develop - still pays a $1.08 dividend, so you get paid to wait The BAD - production has not increased even though company has a significant capital budget and has in fact dropped by 25,000 BOPD over the last two years, although some of that is due to land sales - the pricing in the oilsands joint venture seemed a bit weak In the interest of full disclosure I both hold the company and do like it as an investment, but I strongly believe Munger's credo to invert! I am trying to decide if it would be better to switch to SD instead. Comments? cheers Zorro

I recently read a report that consumers are willing to spend on esentials (like socks I hope!) but not so much on non-esentials i.e. luxery goods etc. I still think consumer spending is pretty weak overall. Cheers Zorro

Sanj, Sounds like an exciting venture and I wish you success. (I still think you should have ran for the board of SNS! :'( ) Cheers Zorro

The cynic in me says others don't do this because they prefer to give themselves stock options, large bonuses and to get rich off of the shareholders instead of with the shareholders. It just serves as an example of what is wrong on Wall Street today. Sad that others don't follow Peaks example... cheers Zorro

Your comment about fear is really quite interesting. It may help explain why the market in general seems to be desperate for good news and is always looking at the smallest bit of a silver lining and not the big picture. For example, comments on the latest jobs numbers - jobs are still down but the market instead goes "it only down 50,000 not the 100,000 that was predicted". The ERCI weekly leading - IIRC - has never been this low, for this long, without a downturn in the economy. The next few quarters may be quite interesting... cheers Zorro

Here are a few comments from my favorite bear.... David Rosenberg rains on the bull parade and explains why the employment report was more bearish than the market response: But there were many other parts of the nonfarm report that left much to be desired. Here’s an unlucky seven examples of softness beneath the surface: 1. Aggregate hours worked were flat. 2. All the employment gains were part-time — full-time employment, as per the Household Survey, plunged 254,000. 3. Those working part-time for “economic reasons” surged 331,000 — the biggest increase in six months. 4. While private payrolls were better than expected, 10,000 of that +67,000 tally reflected returning construction workers who had been on strike. 5. Manufacturing employment was down 27,000 and total goods producing jobs were flat — hardly signs of a robust economic backdrop. 6. The diffusion index for private payrolls actually fell to 53.0 from 56.7 in July — a seven-month low. It was 68.0 at the April high, which is consistent with an economy slowing down to stall-speed. 7. The labour market gap widened with the all-inclusive U6 unemployment rate rising to a four-month high of 16.7% from 16.5% in July. This is why the odds are stacked against a sustained acceleration in wages. Source: Gluskin Sheff cheers Zorro

Are you talking globally or just the US? THe US is still very likely it go into a double dip or at least very slow growth (1% or less). As fast as the "BRIC" economies grow they are not yet large enough to generate sufficent growth to totally offset the US slowdown so global growth will likely slow as well. But we will see food inflation with drought in Russia and Australia and global grain stocks at mullti-year lows.... cheers Zorro

I couldn't agree more. When you look at the likes of WEB & Prem and compare their actions to those of the vast majority of CEO's is it any wonder that Wall Street is in the mess it is today. Seriously, CEO's making huge salaries, paying themselves bonuses and generous stock options even when the company is doing poorly. No concern for the actual shareholders - the people who are supposed to own the company! Then compare that to Prem, WEB etc..... cheers Zorro

Is the next shoe about to drop in commercial real estate? http://online.wsj.com/article/SB10001424052748703447004575449803607666216.html?mod=WSJ_hps_LEFTWhatsNews cheers Zorro

You need to stop thinking about gold as an investment - its not. Gold is simply a hedge against economic collapse. If you think the Euro will self-destruct or the US government will default, you buy gold. Sanj's good buddy Eric Sprott thinks that the global economy is headed for the mother of all downturns, so he holds gold. My $0.02 cheers Zorro

Interesting that there is not much chatter on this thread. Could it be most on this board are not that optomistic? Maybe it is just me but it seems that there are two types of media reports lately: doom & gloom (get your guns & ammo now) or the silver lining type (glass half-full). For example, Yahoo today reported on the second quarter GDP. Preliminary GDP was revised down from 2.4% for the second quarter to 1.6%, but this was reported as positive because economists has feared it might be as low as 1.4%. Instead of focusing on the actual results the focus is on the fact that the economists were wrong. Same thing yesterday with inital claims for unemployment. Its like people are desperate for any good news wherever they can find it.... cheers Zorro

Both FFH and Prem himself own a stake in SD. It is - IIRC - the first time Prem has bought a stake in a company FFH has invested in! cheers Zorro

Sigh - I wish it was 60% of the other BRK! oh well... cheers Zorro ;D

Now your just teasing us!! :P But you can't go wrong - IMHO - with JNJ or LUK..... cheers Zorro

I would guess that's what it means. IIRC Lou is only a few years younger than WEB.... cheers Zorro

I'm going to add in a bit more. 9. Initial claims for unemployment hit 500,000 - the highest level since November. 10. As for the economy gowing, well here is a quote from David Rosenberg Our suspicions have been confirmed — the recession never ended. Macroeconomic Advisers produces a monthly U.S. real GDP series and it shows that the peak was in April, as we expected, with both May and June down 0.4% in the worst back-to-back performance since the economy was crying Uncle! back in the depths of despair in September-October 2008. The quarterly data show that Q2 stands at a +1.1% annual rate (so look for a steep downward revision for last quarter) and the “build in” for Q3 is -1.5% at an annual rate. Depending on the data flow through the July-September period, it looks like we could see a -0.5% to -1% annualized pace for the current quarter. Most economists have cut their forecasts but are still in a +2.5% to +3.5% range. What is truly amazing is that despite all the fiscal, monetary, and bailout stimulus, the level of real economy activity, as per the M.A. monthly data, is still 2.5% below the prior peak. To put this fact into context, the entire peak to trough contraction in the 2001 recession was 1.3%! That is incredible. Interestingly, and dovetailing nicely with our deflation theme, nominal GDP fell 0.3% in May and by 0.4% in June. This is a key reason why Treasury yields are melting.” cheers Zorro

I think Charlie is Brk's greatest, somewhat unappreciated intangible asset. I know that Charlie always says to invert, ask yourself "am I wrong". Based on a number of recent threads it seems that many here, myself included, are bearish. Personally I think the market is due for a major correction and the economy is headed for a double-dip, perhaps worse. so I thought it might be a useful (and hopefully interesting exercise) if I laid out my thesis for why the market will crash and the economy enter a double-dip. My challenge is for you to help me "invert" my thinking - if you can!! cheers Zorro Here it is..... 1. Approximately 70% of the US economy is based on consumer spending on goods & services. 2. Since about 1974 the average american family has not seen any real growth in income. The majority of the growth in spending has been financed the last 30+ years through the use of debt. 3. Americans have financed much of the the debt they carry through HELOC's, loans the banks were willing to grant as house prices rose. 4. The housing market has collapsed, prices have fallen and banks are reluctant to extend additional credit to consumers. 5. Consumers are reaching the limits of servicable debt. i.e. they simply can not continue to add additional credit even if it was offered because they can't make the payments on more debt 6. With no new credit, high debt loads, high unemployment, consumers are now entering a phase where they are paying down debt, trying to build savings due to fear of job loss etc. 7. We read that US companies hold record levels of cash - true. But they hold these record levels of cash because they have issued record levels of debt. Corporations for the most paart of been extending existing loans and issuing new debt. Debt levels for US corporations are at record levels. 8. The ECRI WLI is at -10 for several weeks now, a level it has never fallen to without there being a recession We are in a balance sheet recession. Consumers, corporations and even government will need to pay down debt. The economy as a result will face slow, even no growth, until the debt is reduced. The economy had a one time bounce (globally) from the massive government stimulus. The market has over-reacted and as a result risen too far, too fast. As stimulus wears off, consumers, business and government retrench, unemployment remains high, the economy slows. The market finally realizes that the growth levels will be dropping and corrects.

thanks for posting cheers Zorro

It is nice to see Prem get some well deserved credit.... cheers Zorro

Sanj - what you say is not wrong but WEB always says that one should wait for the fat pitches, and that one gets as many pitches as they want before they swing. I just think the pitches are going to be fatter 6 months from now than today...... cheers Zorro

Myth - well said! You are far better at espressing yourself than I. You have expressed perfectly my thoughts on the situation. It will take a while for Asian savers to be converted into Asian consumers, at least to the degree that they would be able to decouple and sustain global growth. FFH survived 7 lean years, it may be time fo rthe rest of the world to have a turn. I fear it may be worse then we hope but hopefully not.... cheers Zorro

Myth - if the economy does fall into a depression energy demand would decline and prices would fall. But then if production drops off due to natural decline rates from existing reserves while new production is constrained due to lack of investment in new fields, then if production declined more than demand did it could cause oil prices to rise further exacerbating the depression with higher energy costs...? cheers Zorro ???

Cardboard - Amen to that. All i know for certain are two things 1. no one really knows what is going to happen 2. we live in interesting times! cheers Zorro

Sometimes I wonder if the truth is being suppressed deliberately or is it simply a desperate grasp for something positive if the face of the grim reality..... We are starting to see more stories like this - warning sign or for contrarians a sign of the bottom? "HINDENBURG OMEN: “SAVAGE DOWNTURN AHEAD”? 13 August 2010 by TPC A menacing sounding technical set-up is forecasting a potential equity market crash. This technical pattern, known as the Hindenburg Omen (named after the famous zeppellin that crashed in 1937) develops when all 5 of the following criteria are met: 1.That the daily number of NYSE new 52 Week Highs and the daily number of new 52 Week Lows must both be greater than 2.2 percent of total NYSE issues traded that day. 2.That the smaller of these numbers is greater than or equal to 69 (68.772 is 2.2% of 3126). This is not a rule but more like a checksum. This condition is a function of the 2.2% of the total issues. 3.That the NYSE 10 Week moving average is rising. 4.That the McClellan Oscillator is negative on that same day. 5.That new 52 Week Highs cannot be more than twice the new 52 Week Lows (however it is fine for new 52 Week Lows to be more than double new 52 Week Highs). This condition is absolutely mandatory. Yesterday, all 5 criteria were met. It’s an unusual event and Albert Edwards, the eternally bearish analyst at Societe Generale, says stocks are “tottering on the edge”: “Equities are tottering on the edge as increasingly recessionary data becomes apparent. It would not take much to tip them over that edge. A savage equity downturn is imminent.” According to Wikipedia a stock market crash has always been preceded by a Hindenburg Omen and stocks are generally down in the following months" Denial, a nice place to visit but I wouldn't want to live there! cheers Zorro