Zorrofan

It will be even more interesting when some country wants to default or to see the size of the wrtedowns on those bonds......then all we need to worry about is the slowdown in growth. cheers Zorro

http://www.businesscycle.com/reports_indexes/reportsummarydetails/1091 "U.S. Economy Tipping into Recession Early last week, ECRI notified clients that the U.S. economy is indeed tipping into a new recession. And there’s nothing that policy makers can do to head it off. ECRI’s recession call isn’t based on just one or two leading indexes, but on dozens of specialized leading indexes, including the U.S. Long Leading Index, which was the first to turn down – before the Arab Spring and Japanese earthquake – to be followed by downturns in the Weekly Leading Index and other shorter-leading indexes. In fact, the most reliable forward-looking indicators are now collectively behaving as they did on the cusp of full-blown recessions, not “soft landings.” Last year, amid the double-dip hysteria, we definitively ruled out an imminent recession based on leading indexes that began to turn up before QE2 was announced. Today, the key is that cyclical weakness is spreading widely from economic indicator to indicator in a telltale recessionary fashion. Why should ECRI’s recession call be heeded? Perhaps because, as The Economist has noted, we’ve correctly called three recessions without any false alarms in-between. In contrast, most of those who’ve accurately predicted a recession or two have also been guilty of crying wolf – in 2010, 2005, 2003, 1998, 1995, or 1987. A new recession isn’t simply a statistical event. It’s a vicious cycle that, once started, must run its course. Under certain circumstances, a drop in sales, for instance, lowers production, which results in declining employment and income, which in turn weakens sales further, all the while spreading like wildfire from industry to industry, region to region, and indicator to indicator. That’s what a recession is all about. But how can we have a new recession just a couple of years after the last one officially ended? Isn’t this too short for an economic expansion? More than three years ago, before the Lehman debacle, we were already warning of a longstanding pattern of slowing growth: at least since the 1970s, the pace of U.S. growth – especially in GDP and jobs – has been stair-stepping down in successive economic expansions. We expected this pattern to persist in the new economic expansion after the recession ended, and it certainly did. We also pointed out – months before the recession ended – that because the “Great Moderation” of business cycles (from about 1985 to 2007) was now history, the resulting combination of higher cyclical volatility and lower trend growth would virtually dictate an era of more frequent recessions. So it comes as no surprise to us that, with the latest expansion only a couple of years old, we’re already facing a new recession. Actually, such short expansions are hardly unheard of. From 1799 to 1929, nearly 90% of U.S. expansions lasted three years or less, as did two of the three expansions between 1970 and 1981. In other words, such short expansions are unusual only with respect to recent decades. It’s important to understand that recession doesn’t mean a bad economy – we’ve had that for years now. It means an economy that keeps worsening, because it’s locked into a vicious cycle. It means that the jobless rate, already above 9%, will go much higher, and the federal budget deficit, already above a trillion dollars, will soar. Here’s what ECRI’s recession call really says: if you think this is a bad economy, you haven’t seen anything yet. And that has profound implications for both Main Street and Wall Street." At the very least, things will be interesting! cheers Zorro

IIRC, they are being asked to contribute an amount equal to the governments entire yearly budget to the EFSF. How would we react if the US was asked to contribute $1 trillion to the IMF (just to come up with a comparable example)? Slovakia is the poorest - or close to it - of the Euro nations involved in this.

http://www.sovereignman.com/expat/how-to-explain-greece-to-a-complete-idiot-politician/ This kind of says it all...... "Let’s pretend for a moment that Greece is a human being. I’ll call him George. George is a hairdresser and makes $40,000 per year. George has limited assets. He has zero savings, no precious metals, and is way underwater on his mortgage. His credit card debt is over $100,000, and his bare minimum living expenses are $45,000 annually, over 10% more than he makes. George’s credit is pitiful, and he cannot obtain any more new loans. George’s neighbor Hans has a big family. All the kids work hard and contribute to the family savings. Hans sees George’s plight and decides the neighborhood has to stick together; he starts loaning George some money out of his family’s savings, and eventually begins to take on more and more of George’s personal debts. Many of the other neighbors– Luciano, Seamus, and Juan– are in the same boat as George: drowning in debt with massive personal expenses and no hope to pay them back. Everyone is looking to Hans for help. He’s the responsible one in the neighborhood. Now, Hans doesn’t want them all to go bust because he knows it would be bad for the neighborhood property values… but Hans’s children are balking at the prospect of working hard on their newspaper routes just so that George can keep his plasma screen TV. Very soon, George is going to run out of options and will have to have a difficult conversation with his credit card companies. In the real world, there is no other choice. In the pretend world of politics, however, European leaders have been able to convince everyone that it’s all under control. Never mind that the whole situation has completely fractured capital markets; traditional valuation metrics have taken a back seat to rumors of secret meetings and loud talk of bailout plans. Think about it: Dexia passed summer bank stress tests with flying colors. A couple of months later it’s going bust. How can markets function without confidence in balance sheet accuracy? Or whether a government will even be around tomorrow? This is kind of a problem when sovereign debt is the cornerstone of the financial system… And yet, stock markets worldwide surged today on the news of a European ‘pledge’ to help banks." Anyone really think it is over yet?? There is a reason Prem is so worried..... cheers Zorro

After Dexia comes.....Austrian bank Erste, which today disclosed some major losses on its €5.2 billion CDS portfolio, consisting of EUR 2.4 billion related to financial institution exposures, and EUR 2.8 billion related sovereign exposures. And, apparently Slovakia may not approve the July agreement to expand the EFSF. Apparently one of the government coalition parties is refusing to support the changes. Prem may once again be ahead of the curve on this one....how many billions does FFH make on the deflation derivatives it bought?? cheers Zorro

If you compare tax rates in the US today to what they were in the 1950's, taxes today are lower. And yet the 1950's were an era of prosperity. Makes it hard to argue that sensible tax reform will prevent economic growth. Unfortunately Biaggio you are using common sense, something that seems to be in short supply in Washington these days.... cheers Zorro I was thinking the same thing. I live in Canada Nobody likes to pay taxes. Myself included. They argue that taxes will stall economic growth. The best way to get someone to do what you want, is to get them to want to do what you want. My understanding is that whatever you tax you will have less of. Why don t they increase tax on things they want to decrease? Examples: -Energy consumption -hazardous life styles (value added tax to all fast food, junk food, cigarettes, alcohol...sad thing is that people will still probably pay, but at least you can recoup the health care costs) -short term investments (how about a very small VAT on derivatives, high frequency trading, naked shorts...) -I think they need to start charging other countries for defending,+ protecting them i.e they need to start sharing in the cost Eventually-cut taxes for real personal income. Encourage people to work hard. In Canada you pay a higher tax % of income the more you make-it does not make sense, -Cut taxes or give some sort of credit for companies creating jobs There is no free lunch. The free market is a wonderful thing. It eventually gets us to do what we must do.

As Myth said, that may be a while. It seems that the small retail investor is always last in and ends up being hurt the most in any correction. If you don't mind my asking, what are you using to hedge? General puts on the S & P? cheers Zorro

Do you know this for sure or is this just an ASSumption on your part? ;D cheers Zorro

Sanj, Perhaps a copy enclosed with the annual report this year? If not, a PDF version on the website would be great too! cheers Zorro

One does not preclude the other - a multi-pronged approach brings strength & stability. It also provides capital in times of crises which can be deployed to take advantage of opportunities, ala BRK.

Cardboard, In a roundabout why you are actually helping to make my point. The team at FFH does well finding the undervalued JNJs, the bond team is great, but they have not done so well with the Canwest & Abitibi types of investments. That is why I think they must start looking at small, quality companies that are not cyclical or in declining industries. Ridley was not the right type of investment to buy a majority stake in. It was small & cheap. They need to step up and invest $3 - $5 billion in a quality company. MKL is taking this next step, following BRK, and for good reason. They are going after the steady, growing stream of cashflow. FFH can do it, they are highly astute, they just need to invest enough to get quality not just cheap! cheers Zorro

Uccmal, You made me LOL with that one! ;D One of the many things I like about this board is the fact that we can disagree in a cordial manner. I understand your concerns, and I do agree that I don't want FFH buying FFH Weed & Feed types of businesses. But there must be some sort of reasonable-priced business FFh could buy 100% of - notice I mentioned a small utility. I want them to pay up for quality, and I have no problem with them investing $3 -$5 billion to do so. Out of a $22 billion dollar portfolio that is not unreasonable. I am confident that FFh can tell the difference between a Graham type of investment and a FFh sized version of See's. They are investing in partnerships so to me, they are almost there. They need that third leg, a quality company that can generate steady cashflow. To my way of thinking it just makes sense and I truly believe that is what helped tranform BRK into BRK. cheers Zorro

Uccmal, With all due respect, you are wrong. I don't want to speak for others, but I am not talking about FFH buying 100% of some small micro-cap. They can put a portion of their equity portfolio in a stock like that. Insurance is cyclical and will go through hard and soft markets. There are times FFH can make a lot of money from bonds, other times from equities. But what about times like now, when it seems neither will generate those large gains we all like? A third leg is to purchase 100% of an appropriate sized business that throws off cashflow in good times and bad. WEB did this, it is what makes BRK so strong today - WEB gets those regular inflows of cash month after month. Markel is heading in this direction - and they are pretty sharp operators too. By moving into ownership of whole businesses FFH gives themselves a stable and growing income source regardless of market conditions. They don't need to be business managers - WEB says he only buys businesses that come with solid management in place. Why should FFH be any different? Why can't FFH buy some small, Canadian utility that will provide a steady, growing income stream? Seems so logical to me. cheers Zorro

I hope so - BRK did it, MKL is starting to do it. It seems like an excellent "next step" for FFH. Fron your lips to Prems ears..... ;D cheers Zorro

Do you mean, for example, the unrest in the Middle east/North Africa, and gold doing little and the S & P rises when in the past gold would be way up and the markets way down? Nope, didn't notice that at all..... :D cheers Zorro

I will contribute my meager $0.02 worth......WEB has already stated that he will pay a dividend when he feels it is no longer possible for BRK to outperform the S & P. That should be the end of the matter as long as WEB is in charge. Having said that, BRK should pay a dividend once the Gates Foundation holds all of WEB's shares. This way the foundation could receive funds it needs to meet the IRS requirements without having to sell BRK shares. I would like the foundation to hold the BRK shares forever, and help preserve what WEB has spent the last 50 years building.....in the meantime it should be most interesting to see what WEB buys next. cheers Zorro

Here are the latest results, conference call tomorrow..... http://phx.corporate-ir.net/External.File?item=UGFyZW50SUQ9ODMxOTB8Q2hpbGRJRD0tMXxUeXBlPTM=&t=1 cheers Zorro

Cash is okay during deflation, but hard assets are better during inflation are they not? And just for arguments sake (in a friendly kind of way) isn't Ben's goal in life to print enough cash to cause hyper-inflation...er inflation? cheers Zorro

I have my pen and paper ready now. Go ahead... I can't disagree with what you said Cardboard, but I second Eric's comment..... cheers Zorro

One only needs to look at some of the other message boards (like Yahoo) to appreciate this forum. Sanj, you are to be truly congratulated for creating a forum where intellegent debate can take place. We may not (as a group) always agree, but for the most part I think we have civil and informative debate. Who can ask for more. Once again, well done Sanj..... cheers Zorro

Sanj has stated that Prem & others at FFH read this board, so perhaps this will be what gives them their next big "CDS" type idea. They could no doubt find a way to play this type of investment far eaisier than a retail investor could. I would be happy to see them make a move into this type of investment as it gives FFH holders an indirect exposure. But reading Bass also makes me want to revisit hedging my own portfoilio as well. But the question is how to get the most bang for the least buck...... cheers Zorro

Everyone seems to be quick to trash both gold & Sprott, but he has done 20% per year for the last ten years. With China buying gold and the US racing towards $24 trillion in debt can gold go anywhere but up in US $ terms? cheers Zorro

Roger, Thanks for posting this. I find it interesting to see what Klarman & Parabi are investing in and see if there is any overlap with my own portfolio..... cheers Zorro

You have to laugh when you read something like this. Hmmm lets see, WEB is worth $40 billion and you are worth......like Bronco said, just an attempt to grab some headlines. ;D cheers Zorro

Myth, don't quote me but I thought Ward had said something about leasing more rigs (possibly when when at the Credit Suisse conference?). With the royalty trust plan SD may hope to hold more acerage through the use of either more trusts or selling more acerage into the one trust......gives Ward more cash to lease rigs and drill more wells. Cheers Zorro PS What are your thoughts on Lou Simpson joining the CHK board?