txlaw

No. He said $13 Thanks MrB. That makes a bit more sense, although it's still a surprisingly large number. Did Chou say how he got that valuation -- for example, by getting a patent litigation boutique to give him an analysis? I know that at least one analyst has said that the RIM patent portfolio is only worth $2.5 billion, which comes out to about $5 per share. This is clearly something we should examine, as it explains why FFH bought into RIM at such high prices.

Also, merchant power generators have been killed because margins are tied to the price of nat gas. Might be able to find some value there that is not directly related to nat gas production and distribution.

Brookfield on nat gas prices over the long term: Power prices across North America remain under pressure due to under-utilization of industrial capacity and the current over-supply of natural gas from drilling shale gas deposits. While few predicted a $2 price for natural gas, the technological breakthroughs that have made this possible are very meaningful for the long-term health of the United States as more energy is produced from natural gas and less foreign oil will have to be imported. Longer term, we believe that natural gas will revert to higher pricing as rising consumption matches supply and exporting becomes a reality. This will come about from market dynamics as global natural gas prices are now five times greater than U.S. domestic prices, and the oil to natural gas conversion factor is currently at historic highs.

ECA has also been mentioned by some folks as a low cost NA nat gas producer.

Thanks, Norm! The last paragraph on Francis Chou's thoughts is interesting. Looks like he might be reporting a stake in AIG soon. Wondering, though, where he's getting the $30 in patent value per share for RIM. Can someone else confirm that he said there was $30 in patent value there?

+2 I concur.

And Bloomberg on the quarter: http://www.bloomberg.com/news/2012-05-04/berkshire-profit-doubles-on-insurance-results-derivatives.html

Yes, thanks Norm. Can't wait to see your notes!

how was the meeting? anything worth noting? thanks. Would also love to see any notes on the meeting.

http://abcnews.go.com/Business/wireStory/sears-execs-retailer-financially-strong-16262264 Pretty interesting to read that Lampert said the following: "We can't deny that we're, one, a real estate company, and two, a customer company," Lampert said. "We still have the paradigm of trying to improve our operations but realizing we have a (real estate) asset base that deserves a return."

Loews' CC worth reading for Tisch's view on nat gas: http://seekingalpha.com/article/543061-loews-ceo-discusses-q1-2012-results-earnings-call-transcript One of the more interesting observations: We’re always looking, but the problem is that they are not stupid in the market. If you look at the forward price for natural gas in the futures market, that anticipates that -- it anticipates that the recovery is going to come back to natural gas prices over the next 2 or 3 years. So my prediction of $4.50 natural gas prices is not substantially different from the futures market. And the people that are actually selling properties today are able to sell on the basis of the forward price for natural gas, not the spot prices. So to date, we haven't found any veritable bargains.

http://www.bloomberg.com/video/91561018/ Odd conclusion at the end, as one might expect from a financial news TV network. "Berkowitz thinks financial have run their course, at least in the near term . . . " (paraphrase)

Thanks for posting. Didn't know Tom Ward would be at that dinner. Pretty cool.

With a 74% loans to deposits, there is no need for expensive financing especially if it is expensive and does not contribute to capital ratios. Too much liquidity! Indeed. We've been seeing WFC constantly do this over the last quarters. I love seeing BAC do this as well.

Speaking of XOM and nat gas: http://tech.fortune.cnn.com/2012/04/16/exxon-shale-gas-fracking/

Interesting observation regarding unproved resources being baked into the market assessed NAVs. I confess I haven't looked at the space as a whole but have focused on companies where the ratio of unproved to proved is quite large and where I do not believe the market is fairly valuing what appear to be "hidden assets." I agree that you have to factor in liquefaction and gasification into the cost component. In fact, I recall someone -- maybe Boone Pickens? -- recently talking about adding $4 to $5 for LNG transportation costs in the current environment. I expect that transportation cost will go lower as we get more permits issued, achieve more scale in the midstream supply chain, and improve the technology. I'm not so sure that the shale formations all over the world will be as prolific as those in the US. According to XOM, there are a number of touted foreign shale formations that haven't responded as well to the fracking techniques used in the US. Also, by virtue of the scale of the industry in the US and the expertise developed here, I expect that the US will indeed be the low cost provider of shale gas, though any views and explanations to the contrary are welcome. This statement intrigues me: "[M]any of the LNG liquefaction plants operating today have supply costs measured in tens of cents, I believe." Would love to see more info on this, as this is material information that could change the thesis. Completely agree here.

I tend to agree--if they had to buy them for competitive reasons, that's not much of a moat... Moats don't necessarily mean monopoly. Facebook has a decent moat, particularly because of its partnership with MSFT. But it could have market share taken away by a Google, Apple, or even a Twitter. Who knows? Maybe AAPL was interested in doing a deal with Instagram or embedding it in iOS like they did with Twitter. It will be very difficult to judge whether the Instagram acquisition was worth it because we're talking about a counterfactual situation -- if FB had not bought Instagram and someone else had bought/partnered with it, would FB have less sticky users than it otherwise would with the Instagram purchase. As to why FB didn't develop a competing solution, that wouldn't solve the problem of having Instagram users flock to a Google+ or Apple alternative if Instagram were bought by those companies. Clearly, development cost was not the key issue for this deal. The deal had to have been based on strategic reasons.

I personally hate facebook and use G+. My main reasons for this is the required symmetry of facebook (you have to mutually agree to be friends) versus the asymmetry of G+ (you follow and share to whoever you want). Also, G+ has a lot more of my tech friends whose posts are actually useful versus friends/family on Facebook, who largely post things I don't care about. That being said, there aren't that many active users on it... The asymmetric sharing aspect of Google+ is also why I signed up for the service when I got the chance. But I'm not an active user. Of course, I also don't really use Facebook that much. If people are interested in exploring what asymmetry sharing refers to, take a look at this presentation: http://ross.typepad.com/blog/2011/07/asymmetric-sharing.html

http://www.fastcompany.com/magazine/165/steve-jobs-legacy-tapes

Apparently, Zuckerberg did the deal on his own, and the Instagram guy actually asked for $2 billion, rather than $1 billion. http://news.cnet.com/8301-1023_3-57415565-93/zuckerberg-did-$1-billion-instagram-deal-on-his-own/ Quite interesting. I wonder if Bill G influenced Zuck in any way regarding this acquisition. The Instagram deal reminds me a lot of the Skype acquisition by MSFT, where Wall Street immediately complained about overpaying without thinking about the defensive aspect of the deal. I would agree with other board members that this was a judo move. I have to wonder whether Google was also talking to Instagram in order to try to gain some more active users for its Google+ service. Photo sharing is, indeed, a core feature of a Facebook or Google+. And I have yet to actually meet anyone in real life that really uses Google+.

Let me clarify. When I say that that the price of nat gas companies are trading based on the spot price, I do not mean that the market is not coming up with cash flow models and calculating NPV based on forward prices in NA and hedges. Indeed, it's fairly clear that the market prices of these NA producers are based almost solely on discounted cash flow models generated using these NA futures inputs (plus hedge prices) and estimated production. What I mean is that the market sentiment on nat gas companies is tied to the spot price of gas, resulting in the assignment of very little/no value to the creation of a global nat gas market over the long term or to the value of unproved/possible reserves. (I may not be using these terms properly, as I'm not an energy sector expert.) Therefore, value investors are given the opportunity to "arb" the difference between NAV based on US futures price inputs (which, I think probably represent marginal costs at best) and the NAV based on average global futures price inputs, and further get to "arb" the difference between proved future production and total future production (proved and unproved). Perhaps I'm wrong on the unproved future production part, but I think you're seeing this thinking with all of these JVs where large producers are buying up stakes in exploration projects. In fact, I think we will see M&A going forward that is directly tied to this "arb" opportunity. Would love to hear others weigh in who are more knowledgeable and more experienced in the energy sector, whether or not they agree with me.

While I disagree with some of Gundlach's opinions on the US being a tragedy waiting to happen, I believe he has the correct view on nat gas. Who cares what nat gas prices go to at this point? Nat gas is likely trading at well below the marginal cost of production. You want to be in a position to snap up nat gas assets from distressed companies. Partner with the best to do that, I say. I think you have to differentiate between spot nat gas and longer dated nat gas, looking at the futures curve, you do see it upward sloping especially when you go longer out. At that point I don't see prices getting too below marginal cost That is correct -- I am referring to spot prices. The key is that the price of nat gas company ownership stakes -- even for the low cost producers in NA -- seems to be tied purely with the spot price in the US, which makes no sense to me. I think if you make a bet on US nat gas producers as a whole, you are making the bet that the US maintains its lead as the lowest cost producer over the long run in a commodity market that increasingly becomes global rather than regional. You could simply buy a basket of US nat gas companies that have good balance sheets, and you will probably do well over the long run.

While I disagree with some of Gundlach's opinions on the US being a tragedy waiting to happen, I believe he has the correct view on nat gas. Who cares what nat gas prices go to at this point? Nat gas is likely trading at well below the marginal cost of production. You want to be in a position to snap up nat gas assets from distressed companies. Partner with the best to do that, I say.

Nice to hear the comments that this is not a big deal.

That was painful to watch.