txlaw

http://www.cbsnews.com/video/watch/?id=50139345n

I've recommended FAIRX and FAAFX in the past to some friends who are business savvy. But be warned -- even the most business savvy folks can't handle volatility, and given the volatility of Bruce B's funds, these may not be the best choice for friendship's sake. Yacktman is good. Sequoia, naturally. Maybe Dodge and Cox? There's always BRK and FFH. I've actually recommended being overweight the Vanguard value ETF and the Vanguard financials ETF to a colleague who prefers low cost indexing. Most of the time, I just tell people to index (with Vanguard) and collar cost average -- and be consistent about it.

I've been tracking UNH ever since they made the Amil investment, but I wasn't sure how revenue growth would offset the medical loss ratio mandate (or whatever it's called) in the US. Looks like it might not be so bad. Still a lot of work to be done here, but these guys certainly look cheap on the surface.

I have no idea on MB -- I've never done an analysis. Would love to get more detail on why you think MB valuation is attractive right now.

http://www.npr.org/blogs/money/2012/12/13/167055503/why-legos-are-so-expensive-and-so-popular

Good job, racemize! I'm surprised you're willing to disclose personal financial info like that, but it makes sense since you're trying to build a track record. Just curious, why not start a virtual portfolio (like with Marketocracy or Covestor or whatever) that tracks your real portfolio instead? Just an assessment that people won't be as convinced as if they see your actual results with your own money? Also, did you get the idea for CRUS after seeing their building on West 6th going up?

+1

As if one ERICOPOLY weren't enough...!! ;D racemize, why have you started this thread?! To make me suffer like hell??!! ;D ;D PS txlaw, just joking! And congratulations!! ;) giofranchi Haha, thanks gio.

Thanks to you, brker_guy, for keeping me in CLWR, as that certainly helped out.

About 94% for me in 2012. I was about -18% in 2011, so I'm quite happy to have made that up in 2012. As with most other folks, AIG and BAC exposure really made the huge difference. RIM, CLWR, and SHLD together had a material affect on my portfolio as well. MBIA has been a drag on my portfolio, though. Hope it works out this year.

Happy new year, folks!

Link to NERA report on US nat gas exports that was commissioned by EIA: http://www.fossil.energy.gov/programs/gasregulation/reports/nera_lng_report.pdf

That's exactly right about the recycled paper/cardboard. That's what it was.

I highly recommend watching this series: http://www.pbs.org/america-revealed/episode/4/ IMO, Bruce Greenwald is dead wrong on the decline of manufacturing. Manufacturing has continued to grow in the US but has changed in nature. The nat gas revolution and the robotics revolution, not to mention the advent of the 3d printing era, will mean that manufacturing continues to grow but changes in nature. Fun factoid for you pulp producer fans (ABH shareholders, I'm looking at you), in the video we get to see that the US ships more containers of paper to the world than anything else by far. There's even a shot of paper made by ABH at 6:07. ;D

Oh, you're referring to calls, as opposed to LEAPS. I guess it depends on your particular situation. Sanjeev's strategy seems reasonable.

Are you going to pay tax on your capital gains? At the very least, perhaps you should wait for the new year?

Happy Holidays, folks.

I wasn't saying that all gun advocates are crazy militia-types who want to overthrow the government, although there certainly are those types throughout the US. In fact, I believe I did say that we should allow guns for self-defense, especially in the home. That would include self-defense against state actors. However, once we start talking about assault weapons or anything as or more dangerous, then I think we have to make decisions on what really is an acceptable scope of the right to bear arms given the costs.

This is a very important point. Assuming that there is a fairly unrestricted right to bear arms under the Second Amendment that may not be infringed by either federal or state governments, what exactly should be the scope of this right? Does it cover anything more than single or six-shot firearms or shotguns? What about assault weapons and explosives? What about war machines, such as tanks and military planes? What about drones that can be loaded up with weapons and explosives? Chemical, biological, and nuclear weapons? Using a cost/benefit analysis, I prefer to draw the line at allowing non-automatic weapons for self defense and for hunting (it's a cultural thing -- especially, here in Texas). If we must use an automobile analogy, I suppose I would say that gun control is like requiring people to wear seat belts or forbidding them to drink alcohol when they're in their cars. It will, in fact, prevent a number of unnecessary deaths, and it is worth it to do so in this case. The one important benefit that gets lost with such policies is the ability to "overthrow the government." Frankly, in the modern age, the level of bearing arms you would need to overthrow even many local governments would require so much firepower that I think would be dangerous to society, generally. So I would prefer other systems and policies to be set up that keep US governments in check rather than relying on the Second Amendment. I also would heavily restrict gun manufacturing capacity and output in the US. I think it's terrible that guns manufactured here flood into the world and are used in wars, genocides, drug violence, etc. If some other country wants to specialize in gun manufacturing, let them. We don't need to make it so easy and efficient to manufacture and distribute these assault weapons.

I think it's what's wrong with human psychology. If you're already disturbed, seeing the shooting in Oregon gives social proof for going out and doing something similar. Just like airplane crashes increase after a first well-publicized one. Let's hope you're wrong, but unfortunately you may not be.

Wow, just saw the news. This is terrible. Just makes you wonder what's wrong with the world . . .

The amazing thing is that over the next decade or two, BRK's position in BAC (after WEB exercises the warrants) will likely start to creep up towards the 10% limit, as BAC buys back their stock. This could possibly be the best "WEB stamp of approval" investment that BRK ever makes!

I agree that earnings growth in this biz line could stall. Maybe even start to decline at some point. But I think it's overly optimistic to say that everything will be outsourced to major cloud vendors and that there won't be growth in sales over the long run. There will always be a need for private cloud hardware, and while I see public cloud taking a much bigger share of the pie for the foreseeable future, I think the pie is expanding such that there is still a runway for volume growth of ready to deploy solutions (think hospitals, utilities, government agencies, etc.). In any case, I'm not so worried about a flattening of growth in cloud hardware sales for DELL because my focus is really more on ES&S revenue growth generally, which includes cloud hardware (not to mention client hardware). Obviously, we disagree on gov't. ;)

This is absolutely something DELL investors should be aware of, and it has been pointed out in the past on the board that DELL itself is quite aware of this competitive threat. Now, talking about the data center, the data center solutions I talked about are clearly quite different than the database solutions that you're bringing up, which is some very large service -- I'm just explaining your question -- some very large service providers are sophisticated enough that they want to bring the components down to the very base level buy the most inexpensive components, and they'll do all the integration, in essence, themselves. And there are some ODMs that are competing for various components in those, and quite successfully. Dell also competes in that business. We have actually a very large business in providing a very integrated set of solutions. So, for the companies that don't want to invest in all their own integration and engineers to do that, we have the ability to integrate not only the very low cost server elements, but also the networking, power, cooling, storage, into, in essence, a very large infrastructure that we can deliver, in essence, as a data center in a carrier, and we can drop that on people's roofs, and have, or we can put it in a field. And in a very short period of time it, in essence, is a data center. So, our offering is very different from what some of the ODMs are offering, which is very low cost piece parts, but you must integrate it and build the data center on your own to we have a very low cost and efficient integrated data center offering that we can drop and really shorten the time to deployment. Again, our strategy is all about ease of use and time to deployment. And so we are very consistent on those themes. So, our implementation dramatically cuts down on all of the effort that the customer needs to do in order to implement our solutions. So, we have a very different strategy there. Now, I also would like to explain that many companies must decide which applications they want on and off premise for the reasons I articulated before, whether it's security, regulation, performance, whatever the reason is, many customers, if not most, are going to live in a hybrid world where they run some applications on premise, and some applications off premise in some form of a public cloud, let's say. But once you've made that determination that you've got to have some applications in your environment. There are all sorts of advantages for a company like Dell that is a developer and distributor of those core components, because we'll be able to burst to a comparable environment. So, that will allow customers to operate their data center at average workloads versus peak workloads as long as they know the infrastructure on the public cloud side is comparable to the private cloud side. Then that provides all kinds of flexibility for them, which a traditional public cloud can never provide, because they can't mimic the exact environment they'll have on premise. So, again, a different strategy, but one that clearly in that space also advantages our unique capabilities. So, whether or not it's in the purveyor of data centers that lends itself to our capability to fully integrate, or whether it's a public-private cloud hybrid, it plays to our ability to provide a comprehensive set of software, hardware and solutions that represent the next generation of converged infrastructure. http://i.dell.com/sites/doccontent/corporate/secure/en/Documents/2012_09_CLSA_Transcript_Web.pdf

I suspect that the reason is that not everybody wishes to hold FFH for a decade like you and me. Some people are more active investors and want to pick up a 50-cent dollar and then turn around and sell it for 80-cents in a year or two. People who are able to do that reliably can have a better return than just holding FFH or BRK for lengthy periods. I suspect that people are now looking at FFH as an opportunity to buy very cheap and sell a little bit less cheap sometime during 2013 for a quick 20%. As an observation, back when ORH was still publicly traded, many of us made good money by flipping back and forth between FFH and ORH depending on which looked more attractive. For whatever reason, the relative valuation of the parent and subsidiary would swing perhaps 30% back and forth a couple of times per year so you could play the relative valuation while retaining a long-term exposure to the basic P&C business and to the investing prowess of Prem et al. Too bad we can't do that anymore! SJ Or it could be that FFH at the current price meets these investors' hurdle rates for investing. I can tell you that I don't just go by the rule of thumb that FFH will increase BV by 15% and, therefore, I will get a 15% return over time if I buy at BV. I have my own assessment of when I think FFH is cheap, and it's not dependent on nominal IV (i.e., BV). Would you mind sharing your thoughts on when it is cheap? e.g., if you agree with their current bets (such as hedges), hardening market, etc? I won't say exactly when I think it's cheap, although I did just tell you guys that I bought some FFH, so that should say something. As to underwriting, I think that their current conservative underwriting will show up in the results over time and part of the problem is that the operating leverage involved with the insurance biz won't show up until they start writing material amounts of new business as the economy recovers. Also, we still have drags in some insurance lines that are a result of the slow economy (for example, Zenith). We may not see it now, but at some point, FFH shareholders will reap the benefits of their underwriting process. But, frankly, there are people on this board who are much better than I am when it come to analyzing insurance underwriting, and so they are the best people to talk to in this regard. As to hedges, I'm quite happy to have both inflation and deflation hedges, but I'm not a big fan of a fully hedged equity portfolio, which is one reason why I probably don't think it's as cheap as others think it is. Now, I do think the equity portfolio will substantially outperform the market, so there will be return despite having a fully hedged equity portfolio. But I would rather have seen FFH put more into cash flowing equities to potentially mitigate volatility -- more of a MKL like portfolio. But HWIC has their own style of investing, and so who am I to say that they're going the wrong route? I'll give you an example of the types of companies I would be putting money into if I were HWIC. I'd be putting a lot of money into an RSG, which is a utility type business that benefits from scale over time, that has some level of pricing power (though there is pressure there), a moat for sure, a nice dividend to cover cash outflows from the insurance biz, and the optionality of harvesting waste for energy, recycled materials, etc. I believe that's why Gates is going heavy into RSG, and I think it makes a lot of sense for an insurance co like FFH to be invested in such a company. But I really like FFH's increased focus on new operating businesses. I like their actions abroad. I like Fairbridge. I like the ventures with Wilbur Ross and Bill Morrow. I think they're coming into their own in terms of distressed investing, generally. There are more things I'm forgetting, I'm sure. So many things to like despite a fully hedged equity portfolio.