SmallCap

Interesting company, thanks for bringing it up. At first glance the fact that there have been extensive stock sales by primarily one 10% holder is of concern, I haven't seen them do that very often in smallcaps were the company is a viable or likely buyout target. The last quarters profitability is due completely to a settlement and a tax refund. Still worth looking into some more.

I have been trying to figure out how to invest in some companies that are not denominated in US dollars because of the potential devaluation of the US dollar. The problem that I am having is that so many of the companies that I have looked at which are located abroad do much of their dealings in US dollars and so even when the company is located in Israel a drop in the dollar would have a significant negative impact on the company at least temporarily. Am I looking in the wrong places to try to get away from the US dollar? In our interconnected world is it worth it to strive for access to other currencies. To date with the exception of a few very minor positions in non US companies the only way I have been outside the us is by using international Mutual funds.

does that apply to those who invest through a IRA?

Give that Warren Guy from Omaha a call, I am sure that he has put some thought to the same question and might have come up with a good solution.

for the last few days I have been wondering what kind of logic someone would use in order to justify buying a 30 year treasury at this time? Without knowing the future I just can't see doing it under almost any circumstances and yet plenty of 30 year treasuries are being sold. Amazing. It would be nice if the treasury could sell as many of these as they are able to at these interest rates. SmallCap

I have been trying to figure out which type of businesses or business models work well in a high inflationary environment. for this question I am looking beyond the standard answers of companies that have hard assets, commodities or high amounts of debts. I am looking beyond those things at the business models and types of businesses. For instance I have been thinking that pure franchise plays should be able to survive in a high inflationary environment, they may not do as well as commodity companies but they seem like a company that should survive and do OK in a high inflationary environment. I also think that investment management companies should do OK in a high inflationary environment. Of course I am only looking at one aspect of a company and there are others that would disqualify them. What other types of companies are there that should do OK and do you see any problem with what I have laid out? How do you think that banks would do in a high inflationary environment? SmallCap

I don't believe that Ben Graham ever talked about buying "quality" companies below book value, one of his basic ideas was to buy a large number of companies below book, some of them would do well and some of them would die, over all you should come out ahead. this doesn't sound like quality companies to me and is very different from the WEB pattern of buying quality companies with a wide moat. SmallCap

Good statement Vinod, I also really appreciated your quote from Buffet in 94. I would say that my approach to investing has changed after getting my head handed to me because of the macro events in 2008. I still have no confidence in predicting macro events and do not invest based on potential macro events. I will say that at this point whenever I look at companies I am emphasizing a couple things more then I ever used to. 1. I look for a larger margin of safety, Duh, don't we all. 2. But I am now willing to sacrifice growth potential for a solid balance sheet situation. 3. I now look at every investment and consider this investment in the light of hyper Inflation and deflationary environments. I know I should have always considered this but my macro prediction is that we will have either deflation of high inflation in the years ahead, I have no idea which it will be but I don't see the next few years running in monetarily smooth waters. So as difficult as it is to account for both types of environments I am trying to make sure that the company could service either eventuality. Any thoughts that others have on this perspective would be welcome. SmallCap

His views on what is going on currently seem like they are shaped by his belief system. I have been guilty of this many times and have watched others do the same where one only sees what matches up to their belief system and everything no matter what it is somehow reinforces their belief system. His belief system or point of view (anti gov, free market....) seems to be so entrenched in his thinking that he has a hard time looking at things objectively.

I have been thinking about the non cumulative nature of Preferred shares and wondered what there was to motivate the company to declare a Dividend. 1. Reputation and their ability to go back to the market for more capital 2. they want to pay out to the common shares 3. ???????? I wonder in a situation where they are staving off BK (their reputation is already gone and they won't be paying out to the common for a long time) wouldn't they feel free to just discontinue to pay the dividend on the perferred? What else is there to motivate them?

I will start by sharing what I have and am looking at. I currently own ORH B - Now owned by Fairfax - 3.75% over Libor Looking into Goldman Sachs Group Series A, C and D - all are adjustable rate roughly 0.75% over Libor with a floor of 3-4% Suntrust bank Series A - Adjustable rate 0.53% over Libor with a floor of 4% As you can see I have been focused on adjustable rates. Not many of the fixed rates seem as attractive to me at this time. SmallCap

I just went back and reread the entire thread on preferred shares that started last Jan and was active through May of last year. Wow that was a great and very useful thread. After reading it I wondered if we could try to do something like that again. I know that the opportunities are not around like they were in March of last year but from what I can tell there are still some good opportunities out there. I think it would be interesting to post what you are currently holding and what you are finding that is interesting in the Preferred shares arena. SmallCap

I have checked that out but he uses the same methodology as the CPI used to from what I can gather.

Is anyone aware of of any non government entity that tracks inflation using a different methodology then the CPI uses? I think that just as one measure (like PE ratio) doesn't do an adequate job of explaining the company's situation and it is nice to be able to double check against some different numbers I would like to check the CPI against another methodology of tracking. SmallCap

ERICOPOLY, I see the Gov CPI numbers as being an attempt to quantify and put into one number millions of small changes around the country. As such it will never be perfectly accurate and I don't expect it to be. I look at it in the same way I look and the DJIA, it was meant to quantify a lot of numbers into one number and approximate the impact of those other numbers. Both the CPI and the DJIA are flawed systems that have had to be adapted numerous times to account for changes in the system. one could make a good argument that some of the changes in the DJIA makes that indicator inaccurate. I see the comparison of ShadowStats and CPI the same way I see the comparison of DJIA and the S&P500 (maybe not the best comparison but you get the idea). One question I would throw out to the board is this, are there any non government organizations that track inflation? I know the university of Michigan tracks consumer sentiment I wonder if there is a similar organisation that keeps track of inflation.

http://finance.yahoo.com/news/WalMart-prices-on-the-rise-JP-rb-3284643011.html;_ylt=AiMQiXuXq.GNsBB0p4iAlQS7YWsA;_ylu=X3oDMTE1cHQ2cGFjBHBvcwM3BHNlYwN0b3BTdG9yaWVzBHNsawN3YWwtbWFydHByaWM-?x=0&sec=topStories&pos=5&asset=&ccode= I am not sure how much validity these numbers have but thought I would pass it on. So what can we deduce out of this as a potential indicator of Inflation? SmallCap

Watsa, Thanks for sharing, some good thought provocing ideas here. Would you mind sharing which ones. I have been trying to find more of these and having difficulty.

Watsa, If dealing with Deflation were so "simple" then why hasn't Japan done anything like that for the last number of years? SmallCap

Thanks Nodnub That is useful to know. SmallCap

is there a non subscriber link?

I think this is a key point in what you said, but I believe that the resulting impact on housing and consumer spending will play out just as you say in your post. From an economic perspective I think it may be a wash as you say but on a personal basis I know that I have a harder time feeling sorry for a guy today who lost his job but will collect a year of unemployment and his wife still has a job that brings in 70K in contrast to a guy who lost his job back in the 30s.

I know that my current situation must be an anomaly due to all the statistics out there but in reading through this discussion that my own personal experience is so different. At this point I can't think of anyone who wants a job who hasn't got a job and I live in Michigan with one of the highest unemployment rates. I know a couple who are casually looking for a better job but they are currently providing for their family and grateful for what they have. I work a great deal with the local small business community as a small business consultant and I am surprised at how much activity is going on. I picked up 4 new clients in June, 3 in July vs. 0 for the first 8 months of 2009. I know that there are a lot of people out there looking for work but for some reason I can't seem to find them. The only way I can account for this is that it is a fluke within my circle of friends and acquaintances. I have been wondering whether these unemployment numbers are not accurately compared to past unemployment numbers because of the dominance of 2 (or 2+) income households in contrast to say the 1930's when a person being unemployed meant that a household had no income. Today how many households are without any income? SmallCap

I often think about Peter Lynch's statement in One up on wall street where he said: from an investors perspective spending 15 minutes a year focused on macro economic issues is a wast of 10 minutes time. That said I have been drawn into macro issues more in the last 2 years then at any other time in my investing career. I would also ask the question about corporate earning improvement, Yes they have improved but in comparison to what? if you are comparing their great increases over last year then is that really much of an accomplishment? It would be interesting if someone put together an index of the strength of corporate balance sheets using an Index of US companies.

I am guessing I can find this information in the 10K but do any of you have a link to the details of those derivatives like when they expire and at what index levels they start to kick in?

I wonder if any of you are aware of situations where a country went from deflationary situation to a significant inflationary situation in a rapid period of time? Peoples arguments for why there could be significant inflation make a lot of sense but I haven't seen a historical precedent for it. SmallCap