Partner24

Regarding your specific question, you have to ask yourself what is the approximate intrinsic value per share of WFC first (by the way, I don't know that answer).

This guy (Kass) reminds me a song that I often hear on the radio these days: You change your mind Like a girl changes clothes... Cause you're hot then you're cold You're yes then you're no You're in and you're out You're up and you're down You're wrong when it's right It's black and it's white

I have never used DCF to value businesses. In terms of valuation only, what I basicaly want is a high enough yield on free cash and profits generated by the company actually (on a trailing basis or on an normalized basis on insurance companies) and get a fairly high level of confidence that the cash generated will grow over a long enough period of time. But I don't try to figure out what will be the cash that the business will generate in infinity. In infinity we're all dead and if we're not martians will attack us ;-) And with Leucadia, how could I do that? So, in some cases, I use the equity that the business have, try to get it at a discount to a fair multiple to it and try to figure out by approximately how much the jockeys will be able to grow it over the next decade. In each cases, I try to get a discount on the estimated fair value of the business and have some substainable growth prospects so that time will be my ally instead of being my enemy. With that, you get the best of both worlds: a return on narrowing the gap between price and fair value of the business AND a return on the increased fair value of the business.

Just like he seems to have done at his beginnings at Cundill, will he work for free for us? I wouldn't have any problem to double his salary then. A formal proposition anyone? ;) ;D

Crip, as usual. I couldn't agree more. I don't know neither about the economy recovery. That being said, if history serve us well, 5 to 7 years down the road we should be in a better situation. Regarding your investments, I've also been buying LUK since last few months. I was very tempted to pull the trigger on WFC when it was below 10$ per share. It has what seem to be a conservative management, a good track record, a good corporate culture, etc. but in the end this business is outside of my circle of competence and I've learned to avoid these kind of businesses even if some of the greatest value investors own them. And they say that if you don't know jewelry, you should know the jewelrer, but I don't know enough about WFC top managers to invest in it. Cheers!

Very interesting chart! Thank you arbitragr. Cheers!

Yes, you're right. I should have wrote "MORE bull**** is allowed..."

Bull**** is now allowed in financial statements. http://www.reuters.com/article/newsOne/idUSN0235590020090402 Some executives and their accountants to the ultimate owners of the company: we'll now hide you the true value of some of your assets. But don't be worry, our lobbysts will find a lot of reasons to justify this nonsense.

"is there a worse industry?" Insurance? Bad news first, it's an industry that is run by some of the most idiots people out there. Ok, here is the good news: It's an industry that is run by some of the most idiots people out there.

Hi Crip, I would like too, but frankly I don't think I'll go because I have nothing to say or ask to Prem this year. I would have liked to start a standing ovation, but it seems that he had one last year. I would have really liked to have a smack on the top of my head from you, but it wouldn't be a good excuse to my boss to be out of the office. I'm sure he would say that he would be really willing and able to do that himself for free! ;) ;D

See the link below for more details: http://alchemistpoonam.files.wordpress.com/2008/04/jester.gif

Ericopoly, that's right. After having reading all of the posts regarding the issue between you and some others, I still don't know what's going on, and honestly I don't care that much (not you and the others, but the issue itself). So here is my 2 cents advice: They say that night sleep is a good advisor. Just take time to breath and relax, enjoy having some of the best jockeys in the world (BRK, FFH and MKL) to invest your money on your behalf (by the way, that's what I do me too) and come back in a few days/weeks. You will be surprised how old this sad story will have become and guess what? I'm confident that you will be happy to post and we will be happy to read you just as usual. Cheers!

Some news about Abitibi: http://www.bloomberg.com/apps/news?pid=20601082&sid=atM7AKT5LJzU&refer=canada

Guys, That's a sad situation. Let's all try to be very careful in what we do with others.

That's an interesting chart. History doesn't repeat iself, but it rhymes.

Al, in my mind you're absolutely right. That's a very good comment from you. Fairfax, like Berkshire, is one of the ultimate owner-capitalism friendly companies and it put the bar very high for the other companies around. But obvioulsy some people don't see that and to them be a shareholders friendly management company is just a very secondary factor in their analysis. Cheers!

Give more powers to the owners of a public company is far from being communism... What about the idea of give the right to the shareholders to vote on the salary of their executives (especially the CEO of their company)? It would cut the middlemen (compensation commitee).

BRKA and FFH are the only companies that pass the smell test Well, not bad places to invest! But these are not the only ones executives that have pretty decent salaries. Cheers!

That's a very good article overall. Thanks for posting it. Cheers!

Hi Al, no problem with that :)

Or maybe it can be seen as an inflation hedge - in case inflation should run wild some time down the road Not sure about that. I don't see ABH as an inflation hedge. Wide moat businesses that can pass the cost increases to their customers are more efficient as inflation hedges in my opinion. A business that has overcapacity in it's industry and secular declining demand don't basicaly have time on it's side. That being said, that's just my 2 cents opinion and that's just my opinion for my personal investments. I don't second guess Fairfax neither. When I have a Babe Ruth kind of investor, I give him a bat and watch the show. In the end, I'll see if ABH has been either a homerun, a 3 strikes out or a base hit. And even if it's a 3 strikes out one, I will judge Fairfax on overall batting average, not just on one presence on the home plate (500 millions is significant, but it's not the end of the world). That's just my opinion respectfuly submitted, Cheers!

Well, correct me if I'm wrong, but it's too soon to conclude something about the Abitibi investment. I've always prefered the good quality businesses, because time is the friend of them and the enemy of the mediocre. I like to have time on my side. That being said, I understand that there might be good liquidation value investment, hidden assets, sum of the parts, etc. but that's not where I try to hit homeruns. Look at FFH overall scorecard on the investment side. It's terrific. So I trust them on their homerun zone. I don't know any hockey player that never had a bad game. If a hockey player play a bad game, he analyse his mistakes, put his skates and try to do better next time. That being said, correct me if I'm wrong, but to me it's too soon to say that ABH has been a "bad game".

I've also heard that a few months ago. It seems that AIG was doing that to keep most of their book of business because clients were concerned and some brokers did want to diversify further.

I know a very small REIT here in Quebec that pay a good yield (currently approximately 20% special dividend recently anounced included), has no debt and who's main client is Alimentation Couche-Tard (successful accomodation business here in Canada). It's name is Becker Milk (BEK.B). That being said, I haven't studied it seriously and deeply yet because I like very much what I already have in my portfolio.

My favourite is still the article on Berkshire being on the hook for 45 billion, from the indices puts they sold.... they forgot to check that they had a notional value of 37 odd billion and for it to cost the full notional amount, they would have all had to go to zero! Complete stupidity! Terrific! I could own all the companies on the S&P 500 for free. Forget about value investing. Here comes free lunch investing! 8) Cheers!