valuecfa

<<<As investors, if we are to do as Buffett prescribes, that is, "trust the management team," then we must apply the same principles to the institutions who are aligning with the management teams we are trusting, in this case, Fairfax, Longleaf or whomever. >>> You have much more faith in institutional money managers and management teams than I do. Keep in mind that there are shareholders other than longleaf and fairfax that can cause a section 382. <<<Stated differently, I believe Fairfax is quietly ensuring the percentage triggers are NOT breached. To expand further on risk factors and SEC filings, and the like, if I took to heart every risk factor contained in all public company documents, I would bury my head in the sand, and all of my cash, discretionary or otherwise, with it! Of course, I would suffocate by committing suicide, so you get the point! >>> Fairfax can't quietly stop anybody from creating a section 382 event. If there are no ownership limits, then they can be breached at any given moment. Fairfax and Longleaf can only manage their own respective ownerships within the company. They have no control over other shareholders decisions. And with no limits in place, neither does LVLT mgmt.

<<let me explain why I expect the underlying owners who might trigger such an event would NOT want to do so!>> <<I believe they will cut off their right arms before they let more of these valuable offsets to future income streams become lost again>> I agree. No owner would WANT to cause a section 382 event. That would obviously be foolish. I only scanned LVLT's filings for a few minutes, but i didn't notice them protecting these NOLs in any way. I didn't notice any language that stated any caps on ownership, or any other methods that may be used to preserve them. I am actually quite shocked that they are not preserving these from further triggers, since the remaining NOLs have substantial value. (Perhaps they are and i just missed it, during my quick scan). It is the excess NOLs that have little to no value, in my opinion. What might be considered excess depends on how much you think they might earn over the next 20 years. Also worth factoring in is that they are likely to add further to these NOLs over the near term. I won't make any judgments about the CEO or the business itself. I don't know much about the CEO other than a few short opinion pieces here and there. And frankly LVLT's business is over my head. I'm not very savvy at all when it comes to their business, its potential, its future competitive threats, or disruptive technology that may affect it, so I'll refrain from opining on something I know little about. As a Fairfax shareholder I certainly hope LVLT uses up every last cent of their tax assets.

They will never get back the NOLs lost in 08'. That is gone forever. Note that this is not a valuation allowance, but an ownership change limitation. If Google or anyone else takes it over, then this would also be considered an ownership change. They'll be cut again. This would further greatly reduce the remaining value of the NOLs, that are currently in the $5.2 billion range. If Prem or Hawkins get trigger happy and up their stakes during the testing period (enough to trigger), then this would also reduce their value. I'm sure they are aware of this. Though it is difficult to imagine that the $10 billion in NOLs they once had would ever get used anyway. So the loss of the $5 billion or so in NOLs in 2008 is really a non-event.

That's interesting. Black Scholes option pricing models include the regular dividend rate as part of the formula, so in a sense the formula "adjusts" for the regular dividend rate. Are you saying that the exchange or the specialist or market maker makes a manual adjustment, as for example to the strike price, when a special dividend is paid? If so, that makes sense, and I stand corrected. Yeah, they just adjust the strike when a special dividend is paid. It used to be a 10% of market value divi was considered "special". The rules changed recently to being "special" if the divi/contract is at least $12.50 or greater. Tricky or iffy situations where the divi/contract is higher than $12.50, yet consistently pays the divi quarterly are voted on by a panel, as to whether or not they will be "special." Old options are still grandfathered in under the old 10% rule. Well, in that case, the special dividend case presented by jasonw1 wouldn't reach the threshold for adjustment to the strike price. What about rights offerings below the strike? How are they handled by the exchange or exchanges? Jason's hypothetical example would qualify for adjustment since it meets the $12.50 threshold (Assuming it is not an old option that was grandfathered under the old rule. If it is an old option than i would have to know the market cap of the company to determine if it were a special dividend). As for the rights offering, there usually isn't any adjustment other than the right to delivery of the rights that were issued. My bad. I was squinting at fine print on my i phone and misread Jason's price. Re. adjustment for rights offerings, in 06 USG had a rights offering that doubled their shares outstanding. The rights were for $45 per share when the stock was selling for more than twice that amount. The exchange implicitly lowered the strike prices of the outstanding options that expired after the record date for the rights offering, to about half the previous price by doubling the number of shares from 100 shares per contract to 200 shares upon settlement after the effective date. Is this type of adjustment, increasing the number of shares per contract, rare and only done in extreme circumstances? Thanks for your patience, valuecfa while answering all these questions. :) No problem. I love chatting about stuff like this. I googled around to find this contract adjustment for USG in 06 for a rights offering. Maybe it will help: http://www.optionsclearing.com/components/docs/market-data/infomemos/2006/feb/21406.pdf As you can see, there was no change in the strike, multiplier, or number of contracts. Just where the old contract called for delivery of 100 shares of USG. The new adjusted contract called for delivery of 100 shares of USG plus 100 rights to purchase 1 USG share per right. If a call option, for example, is excercised, then the shares plus the rights have to be delivered. It goes on to say... If USG distributes the Rights at a time when the price of USG stock is substantially above the exercise price of the Rights, the Rights will have substantial value, and the stock price may fall sharply on the ex-date for the distribution. If USG options are adjusted as indicated above, the Rights will be part of the USG options deliverable, but only until the Rights expire. When the Rights expire, they will become worthless and any value the Rights had will be lost. As a result, holders of in-the-money calls may be disadvantaged unless they exercise in sufficient time to obtain the Rights. After the Rights expire, holders of short put positions who are assigned will be required to purchase USG stock whose value may have been substantially diminished by the Rights distribution. Edit: By the way in Jason's example, i was kinda vague. Assuming it is a standard contract... You have to go by the divi/contract, not divi/share. So, in his example it was 100x3= $300. $300 > $12 = special

That's interesting. Black Scholes option pricing models include the regular dividend rate as part of the formula, so in a sense the formula "adjusts" for the regular dividend rate. Are you saying that the exchange or the specialist or market maker makes a manual adjustment, as for example to the strike price, when a special dividend is paid? If so, that makes sense, and I stand corrected. Yeah, they just adjust the strike when a special dividend is paid. It used to be a 10% of market value divi was considered "special". The rules changed recently to being "special" if the divi/contract is at least $12.50 or greater. Tricky or iffy situations where the divi/contract is higher than $12.50, yet consistently pays the divi quarterly are voted on by a panel, as to whether or not they will be "special." Old options are still grandfathered in under the old 10% rule. Well, in that case, the special dividend case presented by jasonw1 wouldn't reach the threshold for adjustment to the strike price. What about rights offerings below the strike? How are they handled by the exchange or exchanges? Jason's hypothetical example would qualify for adjustment since it meets the $12.50 threshold (Assuming it is not an old option that was grandfathered under the old rule. If it is an old option than i would have to know the market cap of the company to determine if it were a special dividend). As for the rights offering, there usually isn't any adjustment other than the right to delivery of the rights that were issued.

That's interesting. Black Scholes option pricing models include the regular dividend rate as part of the formula, so in a sense the formula "adjusts" for the regular dividend rate. Are you saying that the exchange or the specialist or market maker makes a manual adjustment, as for example to the strike price, when a special dividend is paid? If so, that makes sense, and I stand corrected. Yeah, they just adjust the strike when a special dividend is paid. It used to be a 10% of market value divi was considered "special". The rules changed recently to being "special" if the divi/contract is at least $12.50 or greater. Tricky or iffy situations where the divi/contract is higher than $12.50, yet consistently pays the divi quarterly are voted on by a panel, as to whether or not they will be "special." Old options are still grandfathered in under the old 10% rule.

Option prices are adjusted for special dividends. They don't get adjusted for regular divis.

This is a steal for the right buyer. Reed's, IMO, is not the right buyer. I would not be surprised if this acquisition takes Reeds under, given their capital base. It is a gutsy move for Reeds. $5 bucks says Reeds is biting off more than they can chew. I give them 2 years to pull off a miracle turnaround.

Article about demise of GEICO's credit card http://money.cnn.com/2010/02/27/news/companies/berkshire.geico.fortune/index.htm

Watching a live blogging of the event, as i couldn't find a live video stream. Latest Tweet: 9:31AM Coming on stage: John Donaho of eBay, Bill Simon of Walmart, ... FedEx, Cox, Brian Kelly of Coca-Cola, and Google's Larry Page. There are quite a number of heavy hitters on stage.

I don't know that it was bad reporting. He purposely only gave a glimpse and few details to the Bloom device, a clever marketing ploy. They even have a countdown clock on their website that upon completion will unveil more press info, it could be an interesting event (about 2 hours from now). In a rarely seen flood of interest in a previously little-known company, Bloom Energy Corp. is set to officially unveil what it calls a break-through in fuel cell technology on Wednesday. The Sunnyvale company lifted the veil slightly in a "60 Minutes" episode on Sunday that triggered a wave of inquiries about what it does. Among those expected to be on hand Wednesday are Gov. Arnold Schwarzenegger and Colin Powell, the former secretary of state, and prominent venture investor John Doerr. Both Powell and Doerr are members of Bloom’s board. Bloom CEO K. R. Sridhar claimed in the TV story that devices made by his company generate electricity at a cost of 8 to 10 cents a kilowatt hour using natural gas, lower than commercial prices in some parts of the country. The fuel cell boxes are roughly the size of a parking space, cost $700,000 to $800,000 and have been tested by Google Inc., Wal-Mart Stores Inc., Bank of America and other large corporations. Bloom is hardly an overnight success story, however, raising $400 million and taking eight years to develop a new type of solid oxide fuel cell. Despite the claims and the publicity, questions remain on the company’s technology that may begin to be answered with Wednesday's press conference. Fuel cell adoption to date has been limited by their cost and durability. Among the financial backers of Bloom are Menlo Park venture firms Kleiner Perkins Caufield & Byers and New Enterprise Associates.

Anyone heard of this yet? I am a naturally born skeptic, but if it works, it has the potential to be a very disruptive technology: http://www.cbsnews.com/video/watch/?id=6228923n&tag=contentMain;contentBody

Daytripper, you have a bundled commission structure (by default, as all new accounts do) with Interactive Brokers. You are charged .005 per share in commissions. With a minimum per order commission of $1. And a maximum per order commission of .5% of the trade value. In your case this is the breakdown: Ford: (.005)1500= $7.50 JPM: (.005)100= $.50 , the minimum commission is $1 so you are charge $1. SNV: (.005)5000= $25 EK: (.005)2500= $12.50 AGNC: (.005)1500= $7.50 (mulitply everything times 2 since you bought AND sold the stock) It's all easily explained here: http://www.interactivebrokers.com/en/p.php?f=commission As you can see it is a cheap commission price on average, unless you trade a lot in low priced shares. For normal to high priced shares you will usually pay a really cheap commission. For low priced shares you will pay a higher commission (but it will never exceed .5% of the trade value).

It depends on how the securities are classified (trading, available for sale, held to maturity, etc). Examples: Trading securities: unrealized gains and losses are reported as income Available for sale securities: Unrealized gains and losses go to equity via other comprehensive income Held to maturity: Amortized Cost Significant Influence (typically 20-50% ownership of a company): Equity Method of accounting Control (typically >50% ownership): Consolidation of financial of other company EDIT: To avoid confusion, the above examples are with respect to how the financial statements (and book value) are prepared (according to GAAP). As far as the 13-F goes, the represented figures on the 13-F show the market values of the securities held as of the close of the period shown on the filing.

The warrants won't be adjusted for any dividend that is equal to or less than $.38 cents. -Check out page S-13... the exercise price of, and the number of shares underlying, the warrants will not be adjusted for any regular quarterly cash dividends that are in the aggregate less than or equal to $0.38 per share of common stock, which is the amount of the last dividend per share declared prior to the date on which the warrants were originally issued to Treasury in October 2008.

Looks like the plunge protection team took a long lunch today ;)

Short Chinese CRE and/or banks exposed to it, and companies exposed to lower rated credit there. Re:NPD While looking at this company a few years ago, I recall passing mainly b/c of some aspect of their ownership structure/insider relations with the company. I can't recall right now, but I would look into it if it if the company is on your radar. Also, if my memory is correct, the vast majortity of stores are leased. China has had quite the CRE boom this past decade, so I would check to see or guesstimate what the lease reset terms might be if any are due to expire relatively soon.

Hi Parsad. They definitely don't file any statements with the SEC, and I don't believe that they file audited statements period. At least the filings at the pink sheet site doesn't show them as audited. No auditor's acknowledgment, signature, or opinion anywhere. Ditto at their corporate website. The pink sheet system has multi-tier levels for companies that provide them with audited statements that is different from the one they are currently listed at, which is much lower. The annual report itself is only 5 pages long (including the financial statements, which is missing a cash flow statement) . Correct me if I am wrong, but I don't believe they are actually an "insurance company" (and just provide back office support, etc. to insurance companies) and therefore don't fall under NAIC guidelines. EDIT: I just searched the NAIC filings database and nothing came up under Marketing Alliance.

Great returns thus far at Chanticleer. Congrats on making your investors nice returns in dismal markets. I like your style in finding deep values where no one is looking, in the far corners of illiquidity. But, i wonder how you guys get comfortable enough with some of these companies given that some don't even provide audited financial statements, such as The Marketing Alliance (a 15% position as of the Q4 Letter). How can u get comfortable enough to make your largest position in a company that both doesn't provide audited statements, doesn't file with any regulatory body (like the SEC), and provides very, very limited information in which to analyze? Even on the pink sheets they are traded on a very low tier, just above their "Dark/Defunct Companies" category. In regards to Bexil. A 5 minute analysis does reveal a huge discount to a safe/hard book, that reveals a massive MOS. However, this company had perhaps the most opportune time to find their once in a lifetime investment this past year, yet they currently still sit in treasuries. This was their most recently revealed Q: Bexil Corporation Announces Third Quarter 2009 Financial Results NEW YORK, NY, Nov 06, 2009 (MARKETWIRE via COMTEX) -- Bexil Corporation (PINKSHEETS: BXLC) today reported its financial results for the third quarter ended September 30, 2009. Bexil recorded a net loss of $146,633 or $0.15 per share for the three months ended September 30, 2009 compared to net income of $72,836 or $0.08 per share on a diluted basis for the three months ended September 30, 2008. For the nine months ended September 30, 2009, Bexil recorded a net loss of $438,183 or $0.46 per share compared to net income of $295,572 or $0.32 per share on a diluted basis for the nine months ended September 30, 2008. The Company's book value per share at September 30, 2009 (991,592 shares issued and outstanding) was $38.47, as compared to book value per share at September 30, 2008 (883,592 shares issued and outstanding) of $43.70. At September 30, 2009, Bexil had positive working capital of $37,747,311, total assets of $38,408,030, no long term debt, and shareholders' equity of $38,146,124. The Company's primary source of income since the sale of our fifty percent interest in York Insurance Services Group, Inc. ("York") in April 2006 has been from interest and dividends earned from U.S. Treasury securities and money market funds. Not much info in which to analyze. Mgmt. did a fabulous job with York, so I don't mean to discredit them, especially with only a rather weak 5 minutes of analysis on the company. Yet, the company has lost 12% of book value while having no operations, in just the past year. Just how much are they paying themselves to roll over t-bills every few months? These guys aren't milk men are they? If you care to respond... Did mgmt. consider any offers within the past year?

Yeah, its already expired. It would have shown up in item 6 of the filing had it still been in effect. I believe it expired in 2006. As for a new sub, keep in mind the size of zenith, the current size of the FFH ownership stake, and the current multiple to book of znt. In other words, I wouldn't go out and buy call options just yet, but who knows.

Looks like somebody is back into zenith

I believe the following information is correct: The Cdn withholding tax does not apply to Canadian corporation dividends paid to US shareholder that hold the investment in an IRA. Similarly, US withholding tax do not apply to US corporation dividends paid to Canadian shareholders that hold the investment in an RRSP. -nodnub This is right. I had a FWT taken out for my regular account at the rate of 15%. However, my Roth IRA account had no such withholding tax. In regards to SharperDingaan, Canadians can hold Roth IRAs. For Canadians with US Roth IRAs: A new rule (2008) provides that Roth IRAs and similar plans are considered to be pensions. Accordingly, distributions from a Roth IRA (as well as other similar plans) to a resident of Canada will generally be exempt from Canadian tax to the extent that they would have been exempt from U.S. tax if paid to a resident of the U.S. Additionally, a resident of Canada may elect to defer any taxation in Canada with respect to income accrued in a Roth IRA but not distributed by the Roth IRA, until and to the extent that a distribution is made from the Roth IRA or any plan substituted therefor. The effect of these rules is that, in most cases, no portion of the Roth IRA will be subject to taxation in Canada. However, where an individual makes a contribution to a IRA while they are a resident of Canada (other than rollover contributions from another Roth IRA), the Roth IRA will lose its status as a "pension" for purposes of the Treaty with respect to the accretions from the time such contribution is made. Income accretions from such time will be subject to tax in Canada in the year of accrual.

Normally I would be really peeved off when a healthy company I own has a pref issuance (instead of debt), but the terms are really, really good on this one for the issuer. 4.75% for at least 5 years, with the reset to only the 3 month GOC T-Bill + 2.16%, and the reset option only given every other 5 years. That strikes me as a good deal. :) The timing of this issuance is interesting though.

I bought troy ounces of gold about five-six years ago at the bottom that I kept in my safety deposit box. Over the last couple of years I've sold them off with, the last block I sold last month. I'm curious who you would use to sell your physical gold too for the best price/fees.

He's a nice guy and a great salesman. I met him a few years ago, and he was not snooty in any way (during our encounter), though i can see how he sometimes comes across that way. He usually presents his ideas with clarity and they make sense. Whether they play out or not is one matter, yet his thesis always makes sense, if his variables play out. He rightfully so gets a rep for riding the coattails of other well know investors, and I think this lack of originality is what rubs people the wrong way, given that he gets lots of media attention on borrowed ideas. It is okay to borrow ideas though in my book.