Ballinvarosig Investors

Harry's a good guy. Even though there wasn't much in it for him, he took a few hours of his time to have a chat recently. The guy is independent, focused, and very driven - so I can see why he would clash with some folks on here. Unlike a lot of stuff out there, his ideas are original, which counts for an awful lot in my book. Things like NFLX and CRM aren't for everyone, but his writings on Fremont Michigan and on insurance were informative and quite frankly brilliant. All his stuff can be found on Google, and is a must read for anyone who has any interest in the subject. This place would be a poorer place without the debate that he generates.

The carpetbaggers have arrived! Proxy fight! Will the people pushing for the sale have enough votes? (remember, they need 66% to approve a takeover) People for the takeover Biglari has 9.8% Frank Kavanaugh has 6.7% Loeb now have 9.1% People against the takeover Dunning + Board has 15.2% Mitchell Partners, L.P. have 10% - but their intentions haven't been stated - has anyone called to find out? I'm guessing they would vote for the sale.

I agree with you on this - Bank of America scares me, quite frankly. Just to preface my comments, these are concerns, I have no idea whether they're valid or not, but they worry me enough to keep me from investing. I think there are other banks out there that are a heck of a lot safer, with (possibly) marginally less potential performance. With regard to Wells having a high interest rate margin, part of this stems from just how aggresively they are actually making loans, almost every penny they have on deposit is lent out. Now, this is all well and good during boom times, but when the business environment is poor and there are bad loans everywhere, then you've got to be absolutely sure that the loans you're making won't default. Given that Wells' NPA's are still rising - I have serious concerns here. While net interest rate margin is important, I think that the level of loans to deposits as to be looked at in tandem with this. In my opinion, sometimes it's best to be safe, rather than sorry. If you can't find suitable credit risks, then it's best to simply take the hit to the net interest rate margin and invest in lower yielding investment securities. Secondly, you talk about Wells returning to normalized earnings. When will we see this happening, months, years, will they ever? I have no idea, but I think it's silly for anyone to take a stab at guessing. With that said though, instead of investing now for the turnaround, why not look at other banks out there that are doing better ROA and ROE than what Wells are doing? Who said the war ended? ;D There's still a heck of a lot of bad loans out there and more deleveraging to come.

Non-performing loans are still increasing. Dec 2009: 3.53% Mar 2010: 4.03% Jun 2010: 4.30% Efficiency ratio is creeping higher. ROA/ROE is nothing to write home about. Free cash flow has been static when we're supposed to be in recovery mode. There has been share dilution. I do not like the growth by acquisition model for banks, you mix turds with anything and you just end up with turds. High loan/deposit ratio. But hey, Warren says Wells is a wonderful bank, so pile in.

Munger has fallen for the propaganda of the Chinese government, hook, line and sinker. Centrally planned economies run by politicians are always going to fail, as a student of history, I am surprised that Munger has neglected this. Anyway, Vitaliy Katsenelson has recently written about his impressions on China, I agree with a lot of what he has said. http://www.marketoracle.co.uk/Article23491.html

Munger's comments on China are quite frankly disgusting.

This is why I love investing. You have two people, one of the greatest mutual fund manager of the decade, the other (arguably) the greatest hedge fund manager of the decade. Both have done extensive research on the same company. One comes up with a valuation of $0, the other comes up with at least $40.

I wasn't quite getting at that.

By the way, I'm surprised that no one has commented on the nature of the offer. All-cash, unlike the cash + shares deal that he offered last time. I will leave you guys to make what you will of that.

Here was me thinking that the Efficient Market Hypothesis was dead in its grave. $24.50 was the original tender offer made back in December 2009.

Are you out of your mind? The initial $24.50 offer was an insult. He wasn't even offering book value for a highly profitable operation with good underwriting and prudent reserving. Even in today's market, the offer was ridiculous. Since the initial offer, the business has grown and book value has correspondingly increased; the business is clearly worth more now, than it was 9 months ago. Just because Dick Dunning is trying to save his own skin, it doesn't mean that he's incompetent or that the operation that he's running is useless.

The offer today is just a fraction under 1.1 times book value, which is probably a small premium over current valuations for similar companies. This time last year, I would have told Biglari to get stuffed. I am more inclined to accept the offer because performance in Fremont has been deteriorating.

I see that the ITEX Board have submitted their proxy statement. It's disappointing that this has come down to a proxy battle. I would still like to see Steve White coming to an agreement with Polonitza/Pagidipati, but I guess it's too late for that now. Are there many ITEX holders here, I'm assuming that you're all supporting Polonitza/Pagidipati? Will Biglari support Polonitza/Pagidipati? I would say his stake will be key in which way the vote will swing.

Have you looked at the financials? In an expanding market, revenue for Nokia fell last year and has continued to fall as of the last quarterly. Because earnings are falling, the dividend doesn't even look sustainable in the long-term. Maybe I'm wrong, but an investment in Nokia looks highly speculative at this point.

Come on don't be so shy gives us your magic number :) Just invert what he has said. If I've read correctly, he'll ride this stock until the growth slows. The beauty of his strategy is that he should be able to sell at a little below the peak price (some day a 10q will come out with numbers that aren't so hot); assuming that he has the discipline to recognise this turning point (not trivial).

Have you answered your own question?

Shorting is difficult. Shorting something with momentum is even more difficult. A fund manager friend of mine lost big when he shorted a clearly overvalued housing market in 2005. Timing is everything when shorting. Anyway, I just can't understand why anyone would want to short, you can only ever make 100%.

You are correct. Buffett has compounded returns of 61% from 1951 to 1955. When I was in college working with only a few thousand Dollars, I got close to 50% returns over three years doing odd-lot's, splits, liquidations, tender offers, etc. I personally found that when you even started working with a 5-figure sum, that the return started to decline as a lot of the special situations that I was looking at were only worth a few hundred Dollars a pop. When you move up to a 6-figure sum, the special situation stuff that I look at barely makes a scratch on your return. While I think getting a 50% return on a six-figure sum is possible, I think it requires highly concentrated and selective investing with a good measure of scuttlebutt thrown in.

Following on from China and the CCME discussion. http://www.businessinsider.com/universal-travel-group-uta I couldn't stop laughing at just how incredible the story got. Certainly paints Chinese micro-cap's in a dubious light.

The buyback could just as easily be used to buy back shares held by company insiders.

Hey Parsad, I have a question about the Polonitza group, not ITEX per se, so maybe you can answer it for me. I'm curious, did you guys know each other before you got together for ITEX? I'm just curious because it's not often that you see such a disparate group of people get together for an investment. Also, do you see such a thing becoming more common place? It's certainly something I have an interest in because there have been times I have been able to own 1-2% of a company, which is a big chunk for me, but not quite big enough to influence a board.

Japan looks incredibly interesting at the moment, not just from a real estate angle. The Yen is making record highs, Japanese businesses are basically getting roasted alive. Look at the sheer volume of government debt that's financed at pathetic rates, if people think U.S. Treasurys are cheap they ain't seen nothing. Then you've got the stock market, which has been a dog for 20 years now, but yet has some of the cheapest companies in the world. It's strange though, it's still the (real) second largest economy in the world, yet it's treated as some sort of outlier, a sort of white elephant to be ignored. Real estate aside, has anyone got any ideas for investments in Japan, particularly with inflation in mind for Japan? I'm thinking low-capital intensive businesses like Nintendo, although I would rather find lesser known companies.

I think it's amusing that Jim Rogers has been talking about agriculture and gold for years, yet some here regard him with a little derision. Michael Burry talks about the same thing, and all of a sudden there's serious debate ;D

Well, let me put it like this. People on this forum have discussed RRGB quite a lot. To me, it's quite clear that there's value here. It's a $300 million company that's generating $90 million in cash from the business, management have already started to try and turn the company around, so it's clear you already have an instant catalyst for a great turnaround here. Farmland though, I dunno, I just can't see the value.

I think there is a big difference between buying farmland and buying a house in Florida. Of course, but farm land got artificially expensive in the credit boom. http://www.bullfax.com/imgs/b44ce4470a319e04e189d9e902f1adaa8de4ae0e.jpg