MrB

Nice one

http://www.propertycasualty360.com/2012/10/03/insurer-dont-blame-a-pelican-for-submerging-your-b?t=es-specialty-business&utm_source=PC360DailyeNews&utm_medium=eNL&utm_campaign=PC360_eNLs

http://www.bestmindsinc.com/documents/RidersSection_4.pdf

Sorry, that was a bit of a jab, but it was well intended. You have me interested now, thanks for bringing it up. I think the real story is in the 1983 story. http://www.businessinsider.com/jim-chanos-baldwin-piano-2011-12?op=1 Check out the geeky photo and good coverage http://books.google.co.uk/books?id=wR0DAAAAMBAJ&pg=PA79&lpg=PA79&dq=chanos+1983+%22wall+street+journal%22+baldwin&source=bl&ots=XEGFb2ojkX&sig=wbHmCVpMTStoe2VjKcymcgaxQhU&hl=en&sa=X&ei=dn1lUO_PFLGM0wXW5oBA&ved=0CFQQ6AEwCA#v=onepage&q=chanos%201983%20%22wall%20street%20journal%22%20baldwin&f=false

2000,2001,2006 & 2008 Burry-00-01-06-08.pdf

What's wrong with you man? Just Google it ;D http://www.google.co.uk/url?sa=t&rct=j&q=&esrc=s&source=web&cd=3&cad=rja&ved=0CC8QFjAC&url=http%3A%2F%2Fwww.deepcapture.com%2Fwp-content%2Fuploads%2F2009%2F06%2FWall-Street-Journal-Chanos-1985.docx&ei=AWVlUL-kFcOr0QWq-oCICQ&usg=AFQjCNFBtIgQf-6XNjLt_4YJCEoeO7tz4g

Time to start a separate thread? Kicking off with a quote from FrankArabia Then this today.. UPDATE 2-Prudential near deal to buy Hartford life unit-WSJ (RTRS) Today at 10:23 * Deal could come as soon as Thursday-paper * Hartford has been selling assets since March * Shares sharply underperform sector (Adds details) Sept 27 (Reuters) - Prudential Financial Inc (PRU.N) is close to a deal to acquire the individual life insurance business of Hartford Financial Services Group Inc (HIG.N), and a deal could be struck as soon as Thursday, the Wall Street Journal reported. The paper, citing a source familiar with the talks, said it would be structured as a complicated reinsurance transaction and that bankers had valued the business at about $1 billion. Hartford officials declined to comment, and a Prudential spokesman was not immediately available to comment. The Hartford is nearing the end of a restructuring program unveiled earlier this year that was designed to tighten the company's focus on its property and casualty insurance business. Under pressure to improve returns from its largest shareholder, hedge fund manager John Paulson, The Hartford said in March it would shut down its annuity business and pursue sales for its broker-dealer, retirement plan and individual life operations. (nL3E8EL4N8) Chief Executive Liam McGee predicted a sale process of 12 months to 18 months, but if there is a deal with Prudential, all of the transactions w i ll have been done in just six months. The insurer sold the broker-dealer business to American International Group Inc (AIG.N) in July and the retirement plan business to MassMutual earlier this month. Shares of The Hartford were up nearly 3 percent at $19.22 on Thursday morning on the New York Stock Exchange. Since announcing the break-up plan on March 21, the stock is down about 11 percent, against gains of 2 percent for the S&P insurance index (.GSPINSC). Paulson's primary complaint has been the insurer's anemic valuation, which has not improved much this year. Whether using price-to-book ratio (favored for property insurers) or a forward price-to-earnings ratio (preferred for life insurers), The Hartford trades for less than half of the sector averages. Prudential, on the other hand, has been struggling to meet Wall Street expectations of late. The company has missed consensus earnings estimates three of the last four quarters, and its stock is down 17 percent from highs in late March. Earnings in the individual life segment of Prudential's business fell sharply in the second quarter from a year earlier, as an unexpectedly high death rate from older policies ate into results. Prudential shares rose nearly 2 percent to $54.75. (Reporting by Ben Berkowitz in Boston; Editing by Gerald E. McCormick, Matthew Lewis and Jeffrey Benkoe) ((Ben.Berkowitz@thomsonreuters.com)(+1-617-856-4334)(Reuters Messaging: ben.berkowitz.thomsonreuters.com@reuters.net)(Twitter: @BerkowitzRtrs)) Keywords: HARTFORD PRUDENTIAL/

Nice one More..http://www.hoisingtonmgt.com/pdf/HIM2012Q2NP.pdf

One simple way to think about it, is to use your track record as a rule of thumb. If you were able to generate say 10% over a period of more than 5 years then that is the potential return you can ascribe to your cash. The longer the time frame the higher the probability; put another way, the more certain you can be. If you are being paid 1% to tie up your cash for a year you are leaving 9% on the table. If you are paid 4% then 6% are left on the table, etc. Using that you need to consider the general opportunity set and the less it is (which will happen as the market gets more and more overvalued) the closer a "crash"/revaluation. In this case the option value of the cash increases the closer you get to the point of the "crash"/revaluation. Having said all of that, for me at least, in reality cash is a residual of my ability to find things on my terms. So cash builds in general as the market goes up, not because I take a view on the market, but because I cannot find things that fit my criteria anymore mainly because it is too expensive.

I don't fault your logic in general, but I will caution on the possibility that you might be driving while looking at the rear view mirror. An increasing capital base and low interest rate environment makes it almost impossible to replicate those returns without taking on significant more risk. The historical 15 years for Fairfax looks very different to the future 15 years when you use say 2007 as the midpoint. Just something to consider.

I just want to say, this was an excellent post. Thanks writser! Then you can spend all the time that would have gone to becoming an outstanding investor on other things, which could be increasing the value of your own intangible assets (which allows you generate more earnings from labor), spending more time with family, a favorite hobby, or whatever. But if you want to trounce the averages, then it's gonna take a lot of reading for sure, at least if you're investing in the public capital markets. (Note that you don't have to put money into the capital markets to be an investor.) I read a lot, and it takes up entirely too much of my time in the week, since I have a job where I don't get to read what I want to read. But I enjoy reading the stuff I do, so that's the way it will be for now. Depends what you mean by trouncing the indices. 85% of professionals do not beat the market and less than 1% beat it by 3 percentage points or more. Writser...Not saying it applies to you, but I don't think one can call it work. It is fun, not work and who would not want to be obsessed with having this much fun. I always say that I'm not scared to go up against people with more brains than me, because that accounts for the most of them. I'm not scared to go up against the person that started out with more resources and better connections or that was born in the right country/city etc compared to me, because that once again accounts for the most of them. However, the person that does scare me is the one that is more passionate about investment than me, because he/she is having fun while I'm "working" and when it comes to fun v work it is no competition. I'm playing around with words, but I think you will catch my drift. To invert. Why would anybody spend even 5 min doing something they do not feel absolutely destined to do? Life is too short!!!!!!!!!!!!!!!!!!!!!!!!!!!!! Especially when it comes to investment, because I can think of nothing more boring than a 10k to the average person. That is why the average market participant get such poor results, because what he/she really should be doing is too damn boring and what is exciting to the average investor is exactly what lands them in trouble. If anyone reading this feels it applies then honestly man. Get a life. Put all your money in an index fund or hand your money to one of those weirdos that's been put on God's green earth for one reason only. To read 100 10k's, pick up the phone and place and order and then repeat. Go for your passion!

Excellent point, I agree and you gave great feedback for me to play around with. If I interpret what you are saying correctly then; just as you can't compensate for risk or create MoS by simply increasing the discount rate, you cant define risk of debt in absolute terms since it comes in different forms and variations. giofranchi, many thanks for input and putting value on the table. Kraven You provide very good arguments and I thank you for it. It is a pleasure to get inputs from other angles. That said, you know when Graham said that "investing is most intelligent when it is most businesslike" and then later Buffet said that "these are the nine most important words ever written about investing." Maybe I take this to the extreme but hear me out. I have a company that has cash as an asset (portfolio) and, if I use that asset to buy 100% of a company, it would be natural for both investors and accountants to consolidate that new capital structure into the company. So is it then not logical to think that buying 1% would should create the same pattern, even if accounting states it differently? When I invest, I write down how much my shares generate, ie I own 1/100 and the company earns 100 dollars, my shares generated 1 dollar, regardless of fluctuations in market price and where the price will be year end. I also sum up how much equity in x amount to see how much that is covered from company failure, it would be illogical to leave out the debt since all three financial statements are integrated. I might be wrong, but it helps me to view things as a businessman. Best, I do not want to sound as if I am trying to speak for Kraven, but I don't think he faults your logic. However, you have to be acutely aware of limitations of that thinking, because you can only take it so far. Overstep the boundaries and you will probably notice a funny smell when you get into the car ;D

LOL! That is a classic line.

It is important to know what you are doing and to remember that there are no extra points for solving difficult puzzles with investment. For me, which does not mean its the same for you, it is a case of too complex and too difficult and I can get more out of my time by spending it elsewhere. Leverage is not what gets you in trouble it is going to be only one check (claim on your asset) that you sent to meet the liability (interest payment or margin call) that does not clear. So it is the liability that gets you in trouble, not the leverage. Put differently; using $1m of leverage with money you borrowed from your billionaire unmarried childless uncle of whom you happen to be his blue eyed boy is a different liability when using $1m you borrowed from the local loan shark who also happened to be the local drug lord that might urgently need that money if his deal of a lifetime goes bad next Saturday night. I'm actually trying to make a serious point. Accounting and our attempts of analysis does not even try and account for that, instead we talk about leverage of 10:1 and 1.6:1 and LTCM as if it is the same thing. It is not because the liability of float, depositors and loans are vastly different. For the bog standard retail bank it means taking the interest payment you received this month and passing it straight on to the depositor while clipping the coupon. With the crop farmer it is significantly more difficult, because you have to plant the crop and then it might or might not rain for several years and then only will you get paid. In the meantime you need to have checks that clear. Now having both those in your portfolio produces very erratic cash flows and now you introduce portfolio leverage into this mix. You don't have a claim on those cash flows, you have a claim on a claim to those cash flows (say equity) and that claim (share) is priced imperfectly (share price). If you can deduce those cash flows and your portfolio liability (say margin) into the risk of permanent capital loss then you should do it. For my portfolio no thank you. For my business, absolutely and that is why I leverage it by using OPM as my main liability, but strictly on my terms. Looking at it yet another way. "Value" investors, by the way I hate that term, are relatively ignorant of volatility and have investment horizons that probably average 3-5 years compared to the less than 1 year for the market. I think that most market participants will agree 100% with the thesis of say AIG on this board, but because they are in the sub 1 year and scared of volatility camp they cannot buy the stock. We can and we do and portfolio leverage reduces that advantage because with leverage you will enjoy increased upside and downside plus you increase the risk of being called out of position under 3-5 years. So there you go; I just beat GK at rambling, but it should provide ideas to play around with.

"Oh, it will happen, and interest rates will eventually rise." Really? Why? Because of inflation? As the author said, charts are wonderful. http://www.crestmontresearch.com/docs/i-rate-relationship.pdf

Exacto!

This is not a case of comparing apples with apples. Portfolio leverage is not akin to company leverage and company leverage varies depending on the business model, which is again driven by the stability of the cash flows. It explains why you can leverage a utility, bank etc much more than a crop farm. Therefore you can probably get to an answer if you have a portfolio with two retail banks, but as soon as you have one retail bank and one investment bank it gets trickier and the makeup of your typical portfolio makes that unanswerable in my view and that is why I just stay away from leveraging the portfolio and stay away from companies with debt. Also traditional metrics of leverage gives a false sense of certainty. If you see leverage of 30%, 10% etc or financial leverage ratios of 2, 5, 10 or for European banks of 30 then you think you understand what you are dealing with. However, these ratios only give you some sense of what it is really about, which is the match between fixed cash flows and varying cash flows; regular bank payments v sales and collections from selling cars for example. Once again different in the case of a utility v a crop farm. Measures of leverage never address the timing issue, the best sense you can get is that in the case of a bank financial leverage of 10 is safe and 30 you are in trouble. Leverage a crop farm 1 time and you are probably nuts. So ultimately not only is the analysis imprecise, so are the tools of analysis, but because you can neatly write it down on paper, people think they understand what they are dealing with. Leverage will only get you in trouble once, but you will most likely go out of business and the majority of investors do not use leverage just once...eventually it gets them. LTA: Why think about an issue that can only land you in trouble? Run with net cash, stay away from leveraged companies and move on.

I had already seen this some while ago,... but don't worry,... it only seems he had managed to average in and out a little. He bought at much higher prices,... very early, and bought at lower values in the 2nd half of 2011, thus averaging down,... probably around the December lows around $2.00. It seems that he trimmed some of these purchases recently. http://holdings.nasdaq.com/asp/OwnerPortfolio.asp?FormType=OwnerPortfolio&CIK=0001389403&HolderName=CHOU+ASSOCIATES+MANAGEMENT+INC%2E http://www.investorpoint.com/stock/BAC.WS.A-BANK%20OF%20AMERICA%20WARRANTS/ I personally don't plan to trim my a warrants. I think one is better served to take Francis on his word, meaning that if he says he still likes something and sells it, it is not a contradiction. Any fund manager will tell you that you are sometimes forced to sell things you do not want to sell e.g. redemption, increasing your weight of cash as a hedge, regulatory changes (especially in the case of warrants) etc. In the case of the warrants different countries have different rules around how much you can weigh a stock v a warrant and whether you use market value or cost, strike etc, which can impact your decision to switch between the two. Just something to bear in mind.

Great read..

I assume you mean 2.5 B for your price, any thoughts on market? Yes. Please clarify your question.

2.5Bn tops especially when don't know what pension assumptions look like

Something like that http://www.nasdaq.com/quotes/institutional-portfolio/brant-point-investment-management--llc-622498 Will call them tomorrow to hear whatz up. Ritcap got a chunk of the fund, so cannot be too shabby. Good dig thanks.

"Schroder Ultra returned 75.8%, on average, for the five years ended in October, compared to a return of 1.4% by its peers" http://www.advisorone.com/2002/12/09/schroder-ultra-loses-fund-manager http://articles.baltimoresun.com/2004-01-04/business/0401030156_1_hedge-fund-closed-end-fund-investors http://www.marketwatch.com/story/schroder-ultra-rides-micro-caps-to-huge-gains-in-2001 1. Anyone has some good solid information? 2. Old fund reports? 3. Name of the new fund he started?

Price is what you pay and value is what you get. Repurchases only make sense if done at the right price. In this case value is dictated by book value and it will be tough to grow that in a deflationary world. Book value /share? Now that is another matter. Brian has proved himself as an astute operator, but how good a capital allocator is he? I like what he did with the reduction of debt and Trups, but will he have the discipline and commons sense to step on the gas with buybacks and cut dividends when it is below book and let up as the price approaches and exceeds book value in which case he can increase the dividend? Probability is low, but not impossible. However, it will be the distinguishing factor; is he being outstanding or brilliant? Most probably he will just have to settle for outstanding Read this...http://www.lmcm.com/908178.pdf

Update for the broken link http://www.fairholmefunds.com/sites/default/files/071012-FairholmeStaysTheCourse.pdf