Ballinvarosig Investors

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.

I think Betfair Group is something that would interest you - http://www.google.com/finance?q=LON%3ABET Gambling is mostly illegal in the States, but in Europe, it's a huge business. Historically, the industry has been dominated by a small number of large companies that ran the business out of bricks and mortar establishments. Betfair came along a few years ago and completely changed that dynamic. This company has not only taken gambling online, but has also taken the middleman (i.e. the bookie) out of gambling, allowing people to put wagers on sports events between themselves. Because Betfair operate solely online, this means that their revenues and profits are driven by by innovation of their website, and stability of their system. This is not trivial, as the volume of bets that they take on a typical days is in the million (if not tens, or hundreds of millions). If gambling is ever legalised in the States, Betfair are basically the only company in existance who have the scale and dominant position in the industry that they would just completely clean up. The price has come down a bit since it IPO'ed. A little expensive for my tastes, but the business itself is basically a monopoly and has some incredible growth prospects.

It seems strange that Sokol would make a bank his investment vehicle with the restrictions it would entail.

I don't think you're getting the gravity of this. For a senior Berkshire Hathaway manager (let alone a possible successor to Buffett) to try something like this is completely against the core principles that Buffett has instilled in the company. I suspect that this incident will have shaken Buffett more than he has let on, and will probably force him into putting more controls around what employees can, and can't do, just like Parsad said.

Lubrizol was not "for sale" anymore than every public company is "for sale" on any given day. It was on a list of chemical companies, not a list of chemical companies being 'shopped' by Citi. LZ was, in fact, considering a very large acquisition. It was arguably undervalued and fairly un-leveraged, which would make it a target - but the company was not being shopped and the management was not considering a sale. Why would Citigroup come up with a list of possible acquisitions for Sokol, unless they knew that they could be acquired, therefore earning Citigroup a cut on the deal? I think Sokol knew Lubrizol was open to a deal, and he used this information to profit from the takeover.

To compare what he did to Munger is just wrong. Sokol obviously knew that Lubrizol was up for sale, and that in the event of a takeover, he would stand to profit very handsomely.

I am not so sure. Citigroup presented Lubrizol to Sokol last Autumn as being on the block. Sokol used this information, that was not public knowledge, to acquire stock. That seems pretty open and shut to me. I do agree, that Sokol's position in the company was untenable and if he hadn't left by choice, he would have been pushed. Some questions that this throws up. 1. Sokol still owns 6.2% of Mid-American energy. Will Buffet buy him out, or will he cut the cord to Berkshire himself? 2. Middleburg financial have just served notice for their AGM. Sokol's name isn't currently on any of the proxy documents. If he is going it alone with Middleburg, he would want to be throwing his name into the hat fairly soon.

Don't listen to anyone else but me on this one. Get a job with Process Driven Trading (PDT) at Morgan Stanley (looks like they are spinning it off). Nothing else will be as good. They're the Skunk Works of the operation. That's where you want to be as a technical person--on the cutting edge. A friend of mine was headhunted for this very operation. This guy is the smartest person I know, but the only way this guy kept up with everyone else who was doing 60-70 hour weeks was by doing 80-90 hour weeks. He told me stories about people who came into work violently sick and vomiting into bins (cleaning staff would be summoned to clean so work wouldn't be disturbed of course), one chap who managed to lose several teeth from lack of sleep/stress on the job, etc.

The biggest issue now appears to be burning of the spent nuclear fuel that's stored above the reactor. If that stuff is broken down into particles that are small enough to be ingested, or inhaled; this will become a disaster.

If you get involved with this, you might as well be opening a mystery box, or buying a lottery ticket, because it's certainly not investing.

By John Hempton, a Sydney-based investor, recovering financial services analyst, and former Australian government official who writes at Bronte Capital I met Hank Greenberg in late 2000. He was chatting mostly to Ajit Jain – the Berkshire Hathaway reinsurance impresario and I was a spare wheel. But Hank was I thought the most impressive person I had ever met. He name-dropped shamelessly (he had had just flown back to New York on a private jet after “chatting” with Li Peng). But he was so far ahead of me on so many issues it made me feel dumb. He even looked – at least in the brief conversation – as if he were considerably smarter than Ajit Jain – and Ajit is no intellectual slouch. I was just out of my league… Anyway there is a view around AIG – a view that I shared – that AIG was built in the mold of Hank and it required Hank – a certified genius and an unbelievable workaholic – to keep it all together. AIG you see had a single risk control mechanism: Hank. In this view Elliot Spitzer by causing the demise of Hank Greenberg caused the demise of AIG – and by extension the demise of the entire financial system. I thought that might be going a bit far – but it is hard to argue against the proposition that AIG got much more risky without Hank around. And the stories were legion too. I know someone who was on a trading floor for AIG in Taiwan. There was a big error and it potentially exposed AIG to hundreds of millions in losses. Everyone was kept silent because if it leaked then people would front-run AIG closing their position and thus increasing their losses. People slept at their desks. But the next morning – fresh off the private jet from New York – there was Hank. He had come to take control of the situation – and he stood behind traders as they solved the problems for minimum losses. Hank was the man. Now Hank is only a couple of percent the man he used to be. His multi-billion dollar holding of AIG has been reduced to its last few hundred million. His main asset is Starr Asia – a holding company for a variety of Asian investments (and some old AIG stock). It was through AIG that Hank made his investment in China Media Express (CCME). At peak Starr’s investment in CCME was worth over $60 million. This is nothing to the Hank of old – but the new diminished Hank probably thinks that $60 million is a lot of money. It might even be a reasonable proportion of Hank’s fortune. As recently as January 2010 Starr dropped another $30 million into CCME. And by that time CCME was a controversial company. The demise of CCME I wrote that China Media Express was either (a) one of the best businesses in the history of capitalism or (b) one of the most brazen frauds in the history of capitalism. Given the auditor has resigned and is suggesting fraud, the company is suspended and well – all sorts of other ugliness – we know which now. It was one of the most brazen frauds in the history of capitalism. And we know who was the biggest victim: Hank Greenberg. And given Hank’s much dimiished status this was not chump change. It was a meaningful hit. If your one-man-risk-control unit can be fooled by something so obvious then why couldn’t it also be fooled by someone offering 25 bps extra carry by double-levering life insurance statutory funds into the AAA strips of subprime securitizations? China Media Express – apart from being a really fun story – punctures the last Hank Greenberg myth – a myth that I personally believed. John PS. I think we can conclude that Ajit Jain really was the most impressive person at that table. I sure as hell wasn’t.

A few years ago a Chinese company called China Expert Technology (CXTI) was discovered to be a fraud. They also had a brand-name auditor if I recall correctly (a member firm of BDO Seidman?). Here is how CXTI did it: The auditor signed off on their year-end financial statements, for our purposes this might be December 31, 2009. The subsequent quarterly statements are unaudited, so management can invent them if they wish to do so. The next audited financial statements for the year ending December 31, 2010 would not be due until March 31, 2011 or June 30, 2011, depending on whether the company files 10-Ks or 20-Fs. So, management has more than a year to put out fake quarterly financial statements in an attempt to get the share price up while disposing of their own shares in the company (probably without making the requisite SEC filings), and/or stealing the actual cash on hand. This seems to be what CXTI did -- they disclosed a relatively modest cash number in the yearend audited financials (this was cash from the IPO or something like that). Then in the unaudited quarterly financials they made it look like cash was growing by leaps and bounds and the company was performing incredibly well. By the time the next year's audited financials were due, management had stolen the actual cash that was there and was gone without a trace, and U.S. investors (including Jeff Feinberg's fund) were left holding the bag. There was never any kind of justice nor did U.S. investors see a penny. What's interesting with CCME is that we are also seeing a very rapid increase in cash following the audited financials as of yearend 2009. At December 31, 2009 cash was $57 million. Then on March 31, 2010 it was $114 million (unaudited), and on June 30, 2010 it was $139 million (unaudited). I don't get to toot my own horn too much, but in this case, I think the analogy to CXTI was spot on. Back in September I said that the CCME fraud could go on until the audited annual financials were due. I think this type of fraud should be added to everyone's mental model -- just because the unaudited quarterly financials look good, it doesn't mean that the audited annual financials will look as good or even be released -- ever. I was thinking of your words when trading was suspended ;D It got me thinking. Since these fraud's are so easily spotted, surely it's a simple case of shorting them at the start of the new year - waiting two or three months for the auditors to come calling, have the fraud exposed and make a lot of easy money? You'd have to be fairly certain the company was a fraud, of course.

Not surprised BAC is gone, very un-Buffetesque and quite frankly a turd.

Good article, although he understated just how bad things are here.

http://www.prnewswire.com/news-releases/cca-industries-inc-announces-corporate-action-115665169.html Biglari really shot himself in the foot with this attempt.

Get rich, or die tryin' ;D