Ballinvarosig Investors

;D Oh come on now! The insurance sector might have been "weak" ten years ago, but at least everyone knew that it was real. The Chinese sector on the other hand isn't so much "weak", but rather non-existent. The litany of frauds exposed over the past year has been relentless and if you had went long on any stock that had a report issued on it by the likes of Muddy Waters then you would have lost almost all of your investment. Excuse the pun, but some folks can't see the woods for the trees.

Can you tell us why you're short MSFT? Looking at the revenue growth and the maintenance of margins, it certainly isn't immediately obvious to me why you would want to be short them.

Completely agree. I have an acquaintance who goes through all these Chinese companies in an effort to try and uncover a genuine company, It reminds me of a quote from The Snowball where a friend of Buffett asks him what he's looking for a golden needle in a haystack full of gold. In this case, what if there is no gold, but merely a haystack full of sh!t? Even at the top echelons of Chinese "capitalism" (Baidu for one), insiders are trying to deceive shareholders out of what's they own. One of my best friends in the world is Chinese; he is the bravest individual I have ever met (and this is coming from someone whose grandfather was gassed, and went over the top at the Somme in WW1). This is a man who has had members of his family made disappear (tortured and executed) because they dared to speak up against the government. When he protested, he was one of the lucky ones, given the choice to leave rather than just rot in a prison and die. If the Chinese goverment does this to their own citizens; what kind of respect do you think they will pay towards the shareholder rights of foreigners? For the record, this is the reason why Charlie Munger's comments on the superiority of the Chinese system over the American one disgust me. The American system has failings, but at least you're not trying to execute the dissidents that disagree with it.

Precisely. And yet the government thought it terrible that Microsoft wouldn't let the OEMs do this or that. Those OEMs only exist in the first place because Bill Gates is no Steve Jobs. Imagine a world with no choice of PC hardware -- personally, I think that's where the OEMs belong, hardware differentiation only. Microsoft should be allowed to control the look and feel of the Windows experience as it's their IP. And that includes reducing desktop icon clutter as they see fit. Yep! Initially, when Apple announced they were going to expand their physical prescence I was apalled. What the heck does an IT company know about running a retail operation? The more I thought about it, the more I realised that this sub-optimal allocation of capital had nothing to do with generating a return, it was more about building the moat. Each time you have a product launch, you have a focal point for the media and public to gather and generate publicity. You also have the ubiquitous Apple logo hanging off the side of any large scale mall or shopping street in the world.

Yep. I had an mp3 player long before Apple unveiled the Ipod, infact, I had things like video and album art long before an ipod user ever did (incidently, the company who made it ended up going bankrupt, so much for the best technology winning!). The Ipad is basically an inferior version of older HP technology with a crippled OS, see here - http://www.blameitonthevoices.com/2010/01/ipad-vs-hp-tc1100.html. It's also widely accepted that older Apple "innovations" like GUI interfaces were stolen from Xerox. The real innovation with Apple is clearly the marketing, joined-up thinking, and culture that Jobs has developed around Apple. Technically, Apple is probably even more evil than Microsoft. Not only do they want to control the OS, they want to control the hardware, how you shop for media, the underlying platforms, practically everything! Each barrier that is thrown up, it effectively widens the moat creates a toll booth. I don't know what it's like in the States, but we have folks over here in Europe signing up to 24 month contracts, paying €200-€300 for the handset, then paying €50-€70 a month to use the damn thing. These guys then use the device to logon to itunes or the appstore, funneling even more revenue into the Apple machine. The culture and brand is so stong, that you have the very same people actively evangelizing and marketing Apple to their friends for free.

The debate on the Microsoft monopoly is so 1990's. What I find amazing is that no one is talking about the Apple monopoly that exists today. If you ask me, the reason why Steve Jobs is such a sucess, and Steve Ballmer is viewed as a failure is pretty much down to how they've marketed themselves and their companies. Essentially, Jobs is trying to get Apple to do the exact same things as Microsoft did in the 90's (lock down platforms, control standards, etc.). Despite this, anytime Apple release a product, you've got queues of people going around street blocks to buy any new product they release, some of these guys are the same people who lambasted Microsoft for pre-loading IE onto a Windows machine, but yet see nothing wrong with being forced to use Itunes (the most obnoxious bloatware I have ever used) in order to load songs onto their Ipod! Apple technology is essentially derivative (Ipads, Ipods are nothing new!), but they have managed to market their products brilliantly. Watch any significant television series or major Hollywood produced film and you'll see people using ipods or working on macbooks. It sounds like Jobs is trying to develop a Coca-Cola type moat. As a technologist, Jobs leaves me feeling cold, but as a marketer, I think he is right up there with Michael Eisner or Roberto Goizueta. If you ask me, what Microsoft really need is a Steve Jobs-type figure. Unless you want to compete with China in a race to the bottom, Microsoft needs an influential figure to generate good feeling towards the company, not a fat, middle-aged man running around the stage screaming with sweat patches under his arms.

Interesting to see that Biglari has a short equity position of $732,000.

Just to give you an idea of how bleak it is here. Debt-to-GDP is forecasted to rise to 120% by 2012 and close to 1 Euro in every 3 of the total tax take will go towards paying interest on the national debt. Unlike most other sovereign nations, we do not possess a printing press to QE our way out of trouble. Just like every dog on the street here knew that the Irish banks were finished in 2008, most people here acknowledge that it isn't a case if we default, it's when. Just last week, the government made a desperate grab for private pensions (similar to what Argentina did), we all know what happened in Argentina after that event. At the moment, the smart money is piling out of Irish financial institutions as there is a very real fear that the Irish government may go one step further and start confiscating deposits, or possibly exit the Euro, creating a new currency that will let them default by the backdoor (i.e. QE).

That's what I thought ??? Charlie is already invested in BYD through Berkshire and by being invested in Li Lu's fund. He's on the record on being keen on China and Hong Kong stocks. Don't see any reason why he wouldn't buy BYD for DJCO if it's such a high-conviction pick. The real question I think is what's the other stock? If it's manufacturing, it may be another HK-based company.

BYD is almost certainly one of those companies, I'd say.

I never drew those conclusions from his actions. The investment community is a small place, the value-side of it, smaller still. As Parsad will know from Fairfax, idle and unsubstantiated talk can easily spread. You and I are lucky in that sense. You can say what you like about me, but because I am anonymous, I don't have to worry about the reputation of my character. For Harry, it's different. When you put something down on the internet, it's recorded and easily searchable through the Google index. Also, I'm sure Parsad can tell you that this place is monitored by some of the big wigs of the investment industry. Perfectly understandable that Harry should react. Finally, Harry created several other threads on things like SURW, FMMH, and EBIX and we generated quite a lot of debate that was both positive and negative, so to suggest that Harry took the ball and ran off home just because someone disagreed with him is disingenuous.

Harry - I don't know why you're even bothering at this stage. One person has clearly gotten the wrong end of the stick, and tried to imply that you're plagiarizing. Two others seem to see nothing wrong with suggesting that you're a pump-and-dumper. At least one person was willing to man up and retract their incorrect statement.

I'm sorry, but that is completely ridiculous on so many levels. Are you seriously going to cast aspersions on Harry's character based on speculation? Harry is a young man trying to make a name for himself in the investing world, do you seriously think that he is going to jeopardize his name and reputation to make a few bucks shilling a stock he doesn't believe in? You do realize the potential damage that you are causing to him with your allegations? You do realize that what you write on a message forum can be used against you in legal proceedings? If you know something the rest of us don't, then please enlighten us. Harry strikes me as the kind of guy who is quite passionate about what he writes, and has a high conviction in his beliefs. While some might have considered him abrasive in the past, I thought he bent over backwards to be respectful towards conflicting opinions. A few of you then made unfair personal attacks on him. It seems to me that a collective bout of groupthink seems to afflict some of you folks once Harry posts. Is it a success complex - I don't know.

It certainly looks that way: http://www.sec.gov/Archives/edgar/data/1334426/000092189511000896/sc13d07428007_04292011.htm When you're good, you're good :D There is no way Biglari is going to get PMIC for less than book, so I am going to hang onto my shares.

7x book and 22x free cash flow? Seems awfully pricey to me.

By the way, the only thing that stinks about SUR is that their parent are trying to steal the bloody thing. A $26.50 offer for an absolute gem of an insurer with a book value of $24 is a complete joke. We've watched current management doing their utmost to put FMMH into a ditch, yet they can still get a bid of 1.3 times book value for a company that trades on the Pink Sheets and has a drastically deteriorating operating position. If CNA want SUR, they should be paying $36, even at that price, I wouldn't have an objection to owning SUR.

By the way Harry, when are we going to see your latest idea that you've promised? I know I am looking forward to it. :D

Look all you want but you won't find me ever saying they weren't over-reserved. What I said was that your evidence was weak. Oh come on, the information certainly isn't hard to find, see page 9 of the recent 10k here. If that's evidence of weak reserving, I would like to see what you would consider as being strong.

I suggested ProAssurance Corporation in the RLI thread a few months back, it's making all-time highs and has had another excellent year delivering a 68% combined ratio and a 13% ROE.

It's important to distinguish between the traditional bookie operating online, and the likes of Betfair. The traditional bookie competes with other bookies on over-round. The lower the over-round, the less profit the bookie makes and the more risk he is exposed to (it's basically the insurance game without the ability to invest float). Betfair is different - it doesn't care about over-round. In fact, it would actually want the over-round to be non-existent, or at least negligible. Remember, they take their cut from each transaction - therefore the greater the volume of bets being place, the more they make. This also explains why they have a near monopoly position. If you place a bet and you're looking for the best odds, you have to go to Betfair, because they are the only company that has the liquidity to get your bet matched. It's a vicious circle for competitors trying to compete. If they want people to use their exchange - they have to offer liquidity; however, because they're a new competitor, they cannot offer the liquidity, because they don't have it, more customers are even more driven to Betfair. A lot of competitors have tried to compete with Betfair (Betsson, WBX, etc.) but they have all failed and had to close down. Even when these guys reduced their commissions, they still couldn't compete with Betfair, the inertia and liquidity that Betfair had was too great. Like you've stated, the big challenge for Betfair is more likely to be legislation rather than competition. It's a great business, a little expensive right now. So I guess Betfair is starting to look really interesting now? :) I wish, the frosty regulatory environment adds a worryingly high speculative factor here. Shares have slumped because of a German proposal to impose a 16% turnover tax on betting over there. That would effectively drive Betfair out of the Germany market, having said that Germany only accounts for a small part of Betfair's revenues. If governments turned their attention away from gambling firms, I would certainly be much more interested in this one.

Congratulations to shareholders! I wonder where Biglari will be focusing his attention now to get an entry into the insurance market - PMIC?

We seem to be seeing something of a trend with Biglari; he might be able to spot value, but he is completely incapable at judging, or dealing with people. While he had initial success with Friendly, Western and SNS, that was before he was exposed as a cockroach. Who will want to do business with a man who is so greedy, tactless and completely devoid of empathy? For someone who models himself on Buffett, can you ever imagine selling their family business to him?

Which Canadian bank would be regarded as the most exposed to a slump in the market? Basically, who has the highest exposure to construction and real estate development, which bank is giving out the most amount of mortgages, etc?

Every dog on the street knew that Portugal was going to require a bailout, especially after the current government was overturned because they weren't able to push through their austerity budget.

It's important to distinguish between the traditional bookie operating online, and the likes of Betfair. The traditional bookie competes with other bookies on over-round. The lower the over-round, the less profit the bookie makes and the more risk he is exposed to (it's basically the insurance game without the ability to invest float). Betfair is different - it doesn't care about over-round. In fact, it would actually want the over-round to be non-existent, or at least negligible. Remember, they take their cut from each transaction - therefore the greater the volume of bets being place, the more they make. This also explains why they have a near monopoly position. If you place a bet and you're looking for the best odds, you have to go to Betfair, because they are the only company that has the liquidity to get your bet matched. It's a vicious circle for competitors trying to compete. If they want people to use their exchange - they have to offer liquidity; however, because they're a new competitor, they cannot offer the liquidity, because they don't have it, more customers are even more driven to Betfair. A lot of competitors have tried to compete with Betfair (Betsson, WBX, etc.) but they have all failed and had to close down. Even when these guys reduced their commissions, they still couldn't compete with Betfair, the inertia and liquidity that Betfair had was too great. Like you've stated, the big challenge for Betfair is more likely to be legislation rather than competition. It's a great business, a little expensive right now.