ERICOPOLY

Instead of blaming Greenspan he talks about idiots that were allowed to be in control, and he also talks about the mess that was created by deregulation of financials. Putting it together, it looks like Munger thinks the purist free market types came to power and wrecked everything with their ideology, and that those people are idiots.

A CEO paid $242k, and the shareholder represents this as an outrage? His raises have only been 5% per annum, and that appears to be what all the fuss is about.

It must be easy to lure people away from a firm that won't pay a bonus for effort.

A strong insurable event would lead to a hard market and lots and lots of profitable float which could quickly bring intrinsic value up by a 8-10 billion dollars. Thats why using BV as a wading wand for intrinsic value ain't the smartest thing in the world...but I understand why many chose to do it, anchoring. The gap between IV and BV will only increase when they start do more business. The key phrase is "when they do more business". Sanjeev pointed out recently that soft markets can last more than a decade.

That's pretty close to what I get (I get about 0.72x using $125 US GAAP figure and stock at $90 in June 2006). An assertion was made that a terror attack or a hurricane would knock down the valuation to 0.6x book... Let's look at what happened to ORH after the 9/11 attack: the stock was driven down to $11.29, but ORH had a book value of about $13.50 at the time (not the exact figure, I'm working from memory). So that was roughly .8x book. Then there was Katrina/Rita/Wilma -- it drove ORH P/B down to about 1.0x. But it was already trading near book in the first place. I mean, the stock actually was higher in November than in July! So today FFH is trading at book value... will KRW repeat, and if it does, will FFH follow ORH and actually go UP?

0.6x US GAAP book has only happened once, in 2003. Some people think there was a huge book value discount in 2006 but much of that was due to differences in how Canadian GAAP valued those finite re arrangements.

I would be amazed if Mohnish would buy that lunch were it not going to charity. This was a convenient means of giving back to society while also securing a meeting his mentor. Now, if Buffett tried to sell lunch for $50k and pocket the profit, I doubt anyone would pay (out of self respect).

http://seattletimes.nwsource.com/html/businesstechnology/2010131911_wamu25.html "Someone in Florida had made a second-mortgage loan to O.J. Simpson, and I just about blew my top, because there was this huge judgment against him from his wife's parents," she recalled. Simpson had been acquitted of killing his wife Nicole and her friend but was later found liable for their deaths in a civil lawsuit; that judgment took precedence over other debts, such as if Simpson defaulted on his WaMu loan. "When I asked how we could possibly foreclose on it, they said there was a letter in the file from O.J. Simpson saying 'the judgment is no good, because I didn't do it.' "

I can't figure out why anyone would value Dick Bove's opinion above Warren Buffett's. Seriously, can this be explained?

I think FFH actually grew book faster than ORH over the last quarters. FFH went into this quarter with a higher percentage of book allocated to equities, and that brings more punch to the party. Perhaps though they sold investments early and that's one thing that would lead to exagerrated expectations, just like Q4 last year with the long bonds.

I can't take credit for any hedging. I was doubting it actually (before the crash). I didn't do anything to hedge until FFH was already at $250, which is a little bit slow on the uptake really :-\

Say 1.5x in 6 yrs from today's base of approximately 0.95x. That's 8% per annum tailwind from the book value expansion. Then add in 12-15% per annum from investments/operations, and you've got 20-23% per annum. That's tax-deferred compounding -- equivalent to getting more than 30% annualized from short-term trading (I paid 35% tax on that stuff this year). And with fund manager fees, you're looking at more than 40% to beat it... unless you are the fund manager :)

Personally, I can't tell you... but I think I can use HWIC as a proxy for smart money. (one strategy -- of many -- is to follow the smart money) Today, the S&P500 is up 16% since the peak of December 2008. Did HWIC invest "all in" (or nearly all in) for a mere 16%? To be that far into equities last December without any selling or hedging, are we to infer anything from it other than that they expect the risk of loss to be less than the potential of gain? Does a 16% pop materially change that view?

I agree. Adding to that, looking back 3 yrs... the driver of the stock price has been results. In June 2006 the stock was at about $90 at the bottom, US GAAP book was about $125, and today the US GAAP book is somewhere in the $380 ballpark. So yeah, the stock was maybe 25% below book at the 2006 bottom, in hindsight, the biggest driver in the share price has been the profits. This company IPO'd at 2x book. One might have argued then that there was no point to invest as it was not a Graham value.

I have 50% in FFH, and it's a large sum of money. Therefore I sleep fine because in the worst event I'll still have a large sum of money.

Put it this way, the only way to get the full $65 per share was to wait it out for the actual Fairfax buyout to occur. The bid/ask was lower than that price all along since the date the buyout was announced. Anyone truly desperate to cover could have offered anything between the ask and the $65 final figure for over a month now. People would have been tripping over themselves to sell at $65 to a short several weeks ago versus wait for the Fairfax cash today. The time value of money dictates this.

These days I figure the 'goodwill' from NB & ORH takeovers washes it out...

The foreign bonds in large part are invested reserves. Take the $1.4b cdn gov for example... are you pocketing this gain without counting the increase in forex liabilities?

Depends on who you pay your tax to. Let's say you are a US investor and pay the IRS (you are not one of the many Canadians here). http://invest-faq.com/cbc/trade-short-box.html Then, you can take advantage of constructive sale rules: For those who have read this far, there does appear to be a small loophole in the 1997 revisions that permit shorting against the box to delay a taxable event. If you have a short against the box position and then buy in the short within 30 days of the start of the tax year and leave the long position at risk for at least 60 days before ofsetting it again, the constructive sales rules do not apply. So it appears that you can continue shorting against the box to defer gains, but you have to temporarily cover the short and be exposed for at least 60 days at the beginning of each and every year. Bottom line... this is why I don't owe tax from when I hedged my FFH position to go long ORH. I wrote $240 strike 2011 calls to hedge against a 30% pullback and used the proceeds from the calls to buy $40 strike ORH calls which were implicitly hedged beyond a 20% pullback. Booyah! (sorry, Crameresque joke) ORH goes up 30%, I sell the ORH calls and buy back the FFH calls. I'm now unhedged FFH and I just need to keep it that way for 60 days and I'm golden (no tax on the FFH hedging). The rules may be stacked in our favor, just take advantage and don't complain :D

+20% 2008 (short selling ban helped a lot) +80% 2009 The past month (moving into WFC puts) marks the first time I've been less than 100% notional FFH (and it's subs) So, mostly this is due to HWIC being smart. I think of it like this -- if you had money in the Buffett partnership early on and today you are rich, did YOU make the return or did Buffett? I'm just lucky I didn't get wiped out by an unforeseen event while being 100% concentrated. I leveraged up with extra calls when FFH fell, and sold the extra calls when it rallied. In Feb/March 2009 I wrote 2010 out-of-the-money puts on a basket of names and used the proceeds to buy at-the-money 2011 $250 strike FFH calls. Then those underlying stocks rallied and I bought the puts back for practically nothing, and sold the FFH calls for roughly what I paid (and the stock was trading near strike at the time). Then I bought deep-in-the-money FFH calls. So I was basically unimpaired (down by 3%) when FFH began to rally from $250. Then I flipped it into ORH and got another 30%. A couple of other small gains here and there. I learned this year that I should have been buying something like WFC at $8, sold at $27 in May, and then bought FFH -- that's what I should have done, that's what I learned.

Funny you should say that, because I was in Walmart, Target, Macys, and Sears today. They all suck if you are looking for a suitcase that doesn't have any give to it (I have a special purpose for it and soft luggage doesn't cut it). So here I am at home tonight, struck out trying to get something so basic as a piece of luggage that isn't soft. I just wanted a big suitcase to cram full of flyboxes and reels without worrying about the suitcase itself getting crushed. I'm leaving tomorrow and now I need to pack my carry-on bag with this stuff which is not what I had in mind. Two years ago I bought a 65" Mitsubishi DLP television from Costco and had it fail a few months ago (20 months after purchase). The manufacturer had a 1 yr warranty on it but Costco automatically bumps all electronics warranties up to two years. So, thank goodness for Costco. And their telephone support lines are incredible -- they're open from like 5am until 10 or 11 at night and it's available every day of the week I think. They had a local repair company pick up the TV from my house, fix it, and bring it back to me. Costco is great! Anywhere else and I would have been paying for the repairs myself, because this was past the 1 yr mark. Today I walked past a wall of televisions at Sears and Walmart and thought, "The only place for that is Costco." Last year I read a book by David Halberstam titled The Best And The Brightest. I've been trying to find a way to think of Lampert as McNamara and Sears as Vietnam, but I haven't been able to make it quite work yet. I need to think more about whether whiz kid number cruncher Lampert is at all like whiz kid number cruncher McNamara. McNamara was pretty convinced in his numbers based strategy but reality really kicked his butt. He isn't a stupid person either, and he had a reputation for greatness at Ford. I don't get any feeling that Sears is on any upswing or anything. I didn't like Target either, it's just too small... Walmart is the place I'd go before either of those two places, simply because it has everything (except hard luggage) and it's huge. This Walmart is gigantic and it's only a few years old. Maybe we're just looking for a garden hose... we'll go to Walmart and get some groceries at the same time, save a trip to another store. Can't do that at Target. Once you have a couple of little children, you'll understand why making just one stop is important. My fascination with SHLD is that the shareholders seem to be making more money from lending the shares -- that appears to be the real business here. They're flat out printing money if Eddie can just keep treading water slowly enough to keep the shorts engaged.

It is just weird. 2x upside and 1x downside (if you write puts at-the-money and use it to buy calls at-the-money). Leverage is just wonderful as long as your downside isn't levered and your upside leverage comes at zero cost.

At times he was funny though: "A lot of the crowd were waving... some of them with all five fingers," - George W. Bush

Whoever keeps the rednecks stirred up I'll vote for. Greg Mortenson deserves it more though. He has made it possible for me to fight the war on terror with my checkbook (payable to Central Asia Institute). Those of you who have read Three Cups of Tea probably know what I mean, otherwise maybe not.

The difference is that with WFC you can buy the shares and write the calls for the same return as writing the puts. But with SHLD if you buy the shares and write the calls you are relatively a big loser compared to writing the puts. In fact, it would seem really dumb. There is a specific reason why I am better off writing the WFC puts instead of going the share/covered-call route -- I needed to preserve my cash to buy my TIPS. Otherwise, with WFC I would have been just as well off by writing covered calls. This is just weird. In the first place, if people are so certain that SHLD is going belly up why on earth is the stock up so high? And why isn't a large shareholder switching out of the shares and drilling the bid on the puts? Pretty inefficient market -- hope that guy isn't seriously getting the Nobel Prize. Unless... there is a very high yield that shareholders are earning by lending their shares to shorts... in that regard buying the shares might not be so bad, unless you are not lending them.