ERICOPOLY

Wow! Not very PC of Mauldin to write this to the Japanese: Rots of ruck, guys.

I never took you for a Mafioso ;) You don't like blood on your hands, so your hired gun (FFH) invests in such banks (WFC -- a non-owner operator bank) on your behalf. You have no direct knowledge of any such crimes.

Now I've got the guy who pulled out the stock price of Y over 10 years (instead of the BV growth) lecturing me on forward looking results :o Prem's stated goal is 15% annualized. Buffett's is a couple of percentage points above the S&P500, measured over long stretches of time. And Buffett's goal is pretty darn close to what Alleghany aspires to. How about, risk adjusted, which is the more impressive result even if they turn out to be exactly the same? I just don't see the allure of Y with the other option available.

Okay, I think you are saying it would have hurt the Y stock price. How about if we go farther back in time then to take the sting out of the Berkshire valuation compression. Going back 20 years the stock price of Y has delivered a shade under 10% annualized. Is that phenomenal?

Yes, however price performance of Y wasn't what I was referring to. I was referring to whether management is beating themselves up for nothing when instead they could play golf. The Alleghany management could have wound up it's operations ten years ago and instead put all of it's equity into Berkshire stock. BV at Alleghany would have compounded at 8% annualized (Berkshire's stock price performance). This despite the contraction of P/BV for Berkshire over the same period. The "look through" performance of Alleghany would be far superior of course -- not only because the "look through" BV would have grown at 10%, but because IV grew even more. This was even during a period when Berkshire's equities did relatively poorly (high valuations for the big blue chips). This isn't to say that Y can't do better, but if their goal is 7% to 10% and they merely achieve that, I'll reassert that they are wasting their efforts.

Berkshire looks to have done a bit better than 10% annualized growth in BV (and more in IV), versus the 7.8% growth in BV for Alleghany. Unless there was a special dividend that I'm missing, Berkshire smoked 'em.

I'm surprised at that, I thought BRK had done better than Y over that period. Alleghany reports: For the ten years ended December 31, 2011, Alleghany’s common stockholders’ equity per share increased at a compound annual rate of 7.8%, There is something else to consider: Berkshire's IV has grown faster than BV in past 10 years. The result of the large operating company weightings at Berkshire.

I guess this would be considered a big risk by some people. Anyway, they are very good equity investors if your benchmark is the S&P 500, not if your benchmark is Ericopoly ;) Why would an equity investor determine that Y is a better risk than Berkshire for the same expected returns? A "Baby Berkshire" ought to deliver substantially better rewards, otherwise... why not just own Berkshire? That's how I think anyhow.

7-10%? Why do they even go into work every day? Why not just shut down the operations and put the equity in Berkshire stock?

True. An intelligent person who doesn't want to be insulted (labeled a psychopath) isn't going to answer "no, I don't care if an animal is suffering".

If I mistake in my own portfolio, I live with it and no one can fire me. Even if I institute a lock-up, if I screw up with a big position, when that lock-up comes due...those partners will leave regardless. So, while I may be able to take a slightly bigger position than I currently do now (our max is 25% right now in a single idea), it won't really make a huge difference because I'll be inclined to still not go to 50% or better with other people's money. The obligation, if you are honest and ethical, is to do them no wrong. So you do no wrong because you want to be able to live with the worst case decision. To put it as simply as I can...I would feel ten times worse losing someone else's money than my own! Alot of people don't feel that way. Cheers! You could always have a separate public fund that is more concentrated -- Berkowitz does something like that. You could claim it's your "single best idea" fund and that it would be concentrated in a single stock. This puts it up to your fund's investors to decide if they are comfortable putting a sizable amount into just one position. Takes all of the pressure off of you -- the ball is in their court to appropriately manage their exposure. I guess the time will come when I'll put some money into the funds of a few different managers and I'd actually prefer if they offered something like that. I feel like I'd rather get the best out of each manager, and spread the risk by putting money with more managers.

Nicely done.

No, I never use words like "information arbitrage" -- too big for me. I would be the guy just telling the interviewer that I merely cheated off of the smarter kids in the classroom.

I made money in Fairfax options in 2006, 2007, 2008, and in 2009. However, by "the fairfax options trade" I presume you mean 2006 as that was the big year. Fidelity reports (excluding December 2012): My RothIRA: +40.93% 3 yr annualized return +69.30% 5 yr annualized return Wife's RothIRA: +50.59% 3 yr annualized return +58.22% 5 yr annualized return

Well, I can see that I'm the reckless one of the bunch... +67.25 annualized in my wife's RothIRA from 2/28/2005 until end of November (and up another 32.6% in December). +70.41% annualized in my RothIRA from 1/31/2003 until end of November (and up another 35.7% in December)

+200% in 2012 mostly leveraged BAC, some leveraged AIG.

And me a better speculator! Happy New Year.

Only 100%?? :) It's the new normal.

I'm sure he buys on the basis of the expected forward earnings of the investment. Take a bank like WFC which is one that he is buying. Is it in an earnings bubble? Of course not.

I bet Sanjeev enjoyed the Meredith Whitney video a whole lot more.

I have no idea. I'm only using Fidelity for my RothIRA -- problem doesn't exist for me.

I also told Fidelity that I was concerned about their security. I told the man that all somebody needs to do is trick me into installing their keystroke logging software, and then they'd have my username and password for Fidelity. Once they log into my account, they use my account to bid up the prices of some illiquid penny stocks that they own (selling into my bid), and thus I'm robbed blind when the penny stock subsequently crashes a few minutes later. So he sent me a Verisign tool that hangs on my keychain. It is paired with my account and randomly generates a code that expires after 30 seconds. I'm challenged for that code after logging in with my user name and password. A third line of defence. I wasn't charged for the Verisign tool. Just had to know what to ask for :)

Did you eventually open an account with Wells Fargo? Any opinions on their service and execution? I've had a checking account with them since 1984. But I was trying to get them to give me a mortgage in late 2010 based on my assets. At the time, I had a lot of exposure to Wells Fargo equity and that was creating a problem -- they said something to the effect that they can't express an opinion on what their own equity is worth. But they did say that if I moved my brokerage relationship over to them they'd be happy to put a mortgage together for me. Fast forward to today, and now I have too much exposure to BAC. I'd rather be with Merrill Edge if it comes down to needing to moving my RothIRA assets in order to get a mortgage, but I'll be hit with the same problem. BofA will probably tell me that they can't express an opinion on the value of their stock. However hopefully the size of the RothIRA will allow them to want to estabish the relationship anyway despite it not being based on an asset valuation. Merrill would be the best for me as they have an office a 1/3 mile walk down the road for me. Very convenient.

I called them up a couple of weeks ago asking if they'd offer me a home loan (I knew ahead of time that they don't offer these). Then I explained how I could only get a mortgage through Wells Fargo if I moved my brokerage relationship to them. The Fidelity guy immediately started offering $5 commissions and asking what else he could do.

WSJ ran an article recently called: The Power of Negative Thinking. It makes you happy! http://online.wsj.com/article/SB10001424127887324705104578147333270637790.html?KEYWORDS=negative+thinking