txlaw

Could be. This is unbelievable. I'm on vacation, but watching CNBC right now. Dow is down 600. I said a couple months ago that I didn't think we could have a downward trajectory like this in the market again. Boy, was I wrong!

Don't forget that the warrant strike price adjusts downward once dividends hit a certain level.

I'm not sure I agree with you here. I think there is a way to create social welfare systems that actually make countries more competitive than places without them. The insurance function of these publicly provided welfare systems allow individuals to better realize their potential and add value to society in a more optimized way. The problem, however, in my opinion, is that most developed nations have a pay as you go system, rather than a fully funded system, and that there is a tendency to provide benefits in a way that does not actually bolster the economy-boosting insurance function (e.g., exorbitant Medicare benefits like the prescription drug payment plan).

Absolutely. http://www.bloomberg.com/video/73607630/ S&P guy cites the recent political brinkmanship as the main impetus for the downgrade, since it calls into question our ability to solve these problems. Awesome.

Well, we define credit risk differently. What you're talking about is credit risk and currency/inflation risk combined. If we took your approach to ratings, every single corporate rating would have to change and would be much harder to do because the idiots at the ratings agencies would have to think much harder about their ratings. Berkshire, of course, would be AAA.

But that's the point. The ratings are not supposed to take inflation into account. They're a measure of credit risk only, not the value of the promise on a purchasing power basis. So S&P's downgrade makes no sense. The US can print money whenever it wants to pay people back.

It might be a good wake up call for the US, but it's a bad call, generally. WEB is right -- it just doesn't make any sense. It's really crazy how many investment decisions depend on the pronouncements of these guys at the ratings agencies.

Full text: http://www.zerohedge.com/news/sp-downgrades-us-aa-outlook-negative-full-text Likelihood of QE3 just went up quite a bit.

haha, nice ;D

Anybody buy any MBIA? I did.

Yeah, he mentioned that and the inordinately low taxes that pharma pays in a Morningstar interview. I'm just not convinced about the recurring non-recurring expenses explanation. I figure he would have already known this. I guess it's possible that he was worried about the risk that the tax code would be changed to remove the tax benefits that Pfizer currently enjoys. Who knows, though?

Good point. Certainly, he can't do so now, being close to fully invested, and having such an increased profile. It would be nice at some point to get the full story, though.

I bet you're right. Moynihan seems like a stand-up guy.

What do you think is the probability that we get QE3 fairly soon? I put the chances at 75%. (Just a fun poll. Please don't chastise me while quoting Ben Graham or WEB.)

You cannot be right about everything. And when facts change, like a CEO doing a mega merger and financing it by cutting the 10% dividend yield, ... Absolutely. I agree. But Berkowitz has never said that he was wrong about Kindler, and that irks some people (not me) based on comments about Berkowitz on other threads. In fact, I would not be surprised if long time investors with Berkowitz who have recently left feel that he is refusing to acknowledge that he is wrong about JOE. I would argue that he probably does not think he's wrong about JOE and is not letting his analysis be colored by the fact that Fairholme has gone all in on JOE. But some people seem to believe that. What I'm suggesting is that Berkowitz should probably explain once and for all, in a definitive manner, why he sold out of PFE and what he thinks of Kindler, given the fact that he brought Kindler onto a Fairholme conference call. Was it really the recurring non-recurring expenses and tax rates that caused him to dump PFE or the mega merger initiated by Kindler that seemed to have taken him by surprise? Did he change his mind about the jockey? The reason I want him to explain this in a definitive manner is because I think he should be CIO of Berkshire. And so he needs to engender confidence in his investors.

Hey we bought both today! Both are really cheap and completely undervalued. Cheers! Ha, same! Well, bought WFC warrants yesterday and BAC warrants today.

Well, Berkowitz seemed to indicate that he was bullish on Pfizer for the long term for several reasons, one of which was that he thought the market was misjudging Kindler and the effect that Kindler would have on capital allocation/strategy at Pfizer. Then he completely sold out of PFE. Totally weird. I've always defended Berkowitz on his most controversial calls (JOE, BAC, MBIA, AIG) because I have always thought he was right. He may have been wrong, though, about Pfizer, at least with respect to Kindler.

Also have no more cash left after today. That's worrisome. But I feel very good about my portfolio and expect to do very well over the next year.

Didn't Bruce B. do this with Pfizer a couple of years back...then dump the shares a quarter later? He did. Vinod pointed that out above. His stated rationale for dumping PFE was because of recurring non-recurring items. I'm not sure I buy that. It's possible that he realized his jockey, Kindler, either wasn't going to be there much longer or was not who Berkowitz thought he was. Did you guys see the recent article on Kindler's ouster?

The Fairholme press release is really unusual. http://www.fairholmefunds.com/pdf/bacpressrelease.pdf

Bad omen :) The last time he brought CEO of Pfizer on just such a call, he sold out of the position in a few months. Vinod Haha, that's true! ;D Hopefully, same thing won't happen this time.

Wow, so the Allocation fund has 27% in MBIA and almost 24% in AIG. Now that's conviction.

AIG.WS

I'm a big fan of Wilbur Ross. I love that FFH is joining forces with him on this deal. Hopefully, this is a sign of more deals to come.

WFC and, to a lesser extent, PNC are my major financial industry plays, along with a basket of community banks. You can benefit from the non-interest expense drawdown, loan performance improvement, and asset management and advisory fees. There are also plays like BK where the businesses warrant a higher multiple. Lots of places to make money in this sector. I like BK as well. I own it for my parents but not for myself. It's one of the least risky "banks" out there. Should benefit from higher interest rates and long term growth is tied to the growth of financial assets as investments, which is a given over the long term.