scorpioncapital

let's talk real returns not nominal. If inflation is very low, as it is now, then whatever return your business gets is a real return - as low as that may be. 10% return is real in a zero inflation world. It is actually 11% in 1% annual Deflation. So sure your assets may come crashing down (they already have) but you can build them up again. If inflation is higher, then you have to substract it from your real return and your assets, while higher in price, also buy less. In the end, what matters is your real return, everything else is noise.

"i wish they would stop placing so much of their excess funds with 3rd party money mangers & do it on their own. and a few more cash generating operating subs would be nice." They've been starting to address this issue over the past 2 years. They have pretty much wound-up the 3rd party investments, except for 1 - pershing's fund invested in Target. Likewise, they said at the last meeting they have some durable operating subs with cash-flow in the pipeline, they were looking at 4 and Berkadia is in fact such a cash generating sub.

At these prices, I hope to make it a 100% position soon :)

"can't afford the current debt load, we are restructuring and everyone gets $0.50 on the $1" Because the buyers of that debt made the purchase under the assumption of price stability, mildly inflationary with prices creeping up slowly over time. Things like default turn those expectations on their head and you definitely get Japan and deflation in America.

"Japan is also different because they mostly owe money to themselves" The US also owes most of its debt to itself. Foreign holding of US debt is miniscule in comparison.

I don't know if I buy the argument that those with cash will lose while those with debt will win. Inflation is no picnic for anybody, look at the 1970s. No picnic for businesses, no picnic for individuals. The argument is that retirees depend on bond income. But those same retirees, presumalby have not been sold 10 year bonds, so they can easily take their cash and put it in a bank account paying interest. I did a study that showed that simple interest on short-term government bonds returned 2x the inflation rate so few have lost money except the mattress holders.

Am I wrong to believe that this one-sided charity argument is short on some facts? Buffett and Gates waited a lifetime after building giant businesses to donate. At that point they were able to donate far more than others, thus by deferring charity until they did, they were able to offer MORE charity - a net positive? Likewise, the article says that if one person had a cheaper car, a homeless person could get another meal, but what about the many indirect benefits of wealth in society? How many workers made that Mercedes and were able to eat? How much does Mercedes as a corporation donate in relation to each car purchased (I'd think the profit margins are quite large). In short, this seems to be more an argument for where and how you allocate your charity dollars. And for those who think the family is being altruistic, there does seem to always be a self-serving reason for giving, "The family had dinner together but their daily lives seemed to be drifting apart, each busy with his or her own activities. " Ok, my rant is over :)

Buffet's outperformance in down years was very much a function of special situation-workouts where a deal would close and he'd make the spread within the year. It is very unlikely that net-nets, or any other general investment would have done particularly well in these bad years. As Graham wrote in several writings, in a recession or bad year everything goes down, the good, the bad, and the ugly are all in the same boat.

Are you saying marriage is counter-cyclical, like the government :)

"Soros is known for changing his opinion at the drop of a hat" Sure, I do that too. Every time I'm wrong I change my opinion, that way I'm never wrong :)

I wouldn't put too much trust in what Soros has to say on the subject. In the depth of the 2008 crisis he was so bearish he was like it's the Great Depression, etc.. Anyone listening to him would have *also* missed out on one of the biggest rebounds of the century.

you got it :) However you have to add the tax saved to the gains in Jefferies and Americredit, this is my understanding.

"On the NOL, it is very likely they'll be able to use at least a portion of it against their stake in Fortescue and other relevant capital gains... so I would net it against the DTL that they have there" Not for Fortescue you can't do that - it is not an associated company and its gains run through comprehensive income similar to unrealized gains in insurance companies - the tax not paid is already included in this account. There is no "hidden" value in tax not paid on their mining investments.

A portion of the NOL's came back ON the balance sheet in 2009 so you can't add in the full amount that was taken off, that would be double counting.

How can you guys think that a $180 billion market cap company can possibly produce a return as good as a $5 billion one? Berkshire needs to create nearly $200 billion in market cap for your stock to double, Leucadia only needs to generate $5 billion or 3% of that. Being loyal to Berkshire is one thing, but stop and think about the kind of market gains you need.

I find the article quite reasonable, what's with all the angst?

I think LUK is extraordinarily cheap, selling perhaps 1/2 of intrinsic value. Give it time.

When the government extinguishes its debt by "paying it off", it does so by taking a small % of everybody's wealth to do so. When you see the debt calculator say something like $100,000 for every family in America, that means that every family in America is "giving" $100,000 to the government, if in theory, it were to pay off the debt. However, this doesn't actually solve any deficits because if your income is less than your expenses, the very next year you will be in the red again. In practice, the probability the government will pay off 100% of the debt is very close to zero. However, it might pay off enough to fund its deficits year in and year out and over time it could impact our savings quite a bit. There is no free lunch - the citizens of the country pay for it all , the question is if the government needs to go into a mode of asking its citizens to fund the debt more aggresively than in the past and that is not entirely within its control as may become apparent in future years.

Anybody know what stock is the mystery stock Buffet upped his stake in and might acquire? http://streetauthority.com/a/buffett-and-gates-could-be-staging-takeover-stock-456108

Munger says it's all about mental models. So maybe the mental model is, 'Should one invest with a manager that personally got so leveraged so as to get a margin call'. The corrollary being, what other actions will they do in the future, if not yet, to the assets under their control?

Not sure what but they said the assets were great, but imprudently financed.

:) You guys are all so funny. Obviously you didn't attend the AGM this year. Joe said they have gotten out of Cresud because they don't have faith in Eduardo's use of leverage.

I'm going to the AGM on May 10th, if anybody wants to meetup at the meeting or afterwards to "talk shop" and review what was said, please send me a msg.

But Goldman itself was the majority shorter of the 25 abacus deals before this one. I'm not sure what the ethical ramifications are, but whether Paulson selected 50% of the securities in this particular deal or not, would have made no difference, as all these so-called model portfolios lost most of their value. The idea that a disclosure would have caused ACA, which was the lead investor to can the deal is weird, considering they are the ones that went with Paulson's selections!

This is disingenious at best. Are we to believe that if Paulson didn't recommend some of the bonds in this product, shorters of sub-prime (like Paulson) would have no product to short? That Paulson had some uncanny ability to create a product that was "superior" for shorting? GS's argument that the reference portfolio had the same performance characterisitcs as all the other ones is a good one. Do we really believe Paulson had some amazing ability in 2007 to select the best shortable portfolio? Basically, if this suit works out, we can say that no party can short a product it had some input into creating and if there is no product that exists that you want to short, you are not allowed to create it either!