Valuebo

Is the normal ticker CCLR (OTC) or CCLR.OB? Google finance tells me it is down 30%, standing at $2.75 atm. Surely I am missing something and there is another stock quote with real liquidity? :P ???

Viking, I think possible premium growth for fairfax in a hardening market could be significant. At Zenith for example, expense ratio exceeds loss ratio as premium volumes more than halved in 6 years ($1.1b to $450m). The potential is there if the market turns, they are waiting for it to happen. You already see them writing more business and it seems likely the trend will continue in the coming quarters. It will take some time before it will be reflected in CR's but it will happen and it will have a significant impact on underlying performance imo.

Yes, I had a quick look at ebit etc. as well and it looks crazy cheap. Ajusted for their 79% stake they get $200M in earnings per year and possibly growing. :o I sold some BRK for LUK at $24 and later at $20,2 and think they will do very well, as they did in the past. Great to see that they are making big deals that won't be affected by Mr. Markets sentiment and will provide steady streams of cash.

They sure are. http://www.reuters.com/article/2011/12/02/us-usa-economy-idUSTRE7AL14I20111202

I should thank you again for the two extra informative posts in the "How to hedge a global depression?" topic. So -> thank you. ;) Looking back, history seems to show periods of almost 20 years of under- or overperformance against the average stock market return aren't exceptional. All things considered, at current valuations we could still face sideways markets for 5 years (?) until equities get really cheap. Question is whether this will happen and why any individual investor should really care about it if he can find enough value.

Could window dressing in december have extra impact on stock prices of financials? Or is the effect hardly noticeable? Not that I plan to invest accordingly, just curious! Tier 1 for BAC will be around 9% by the end of this year, they have a lot of reserves in place and they can spin out lawsuits in the coming years. Previously masked earnings are going to add substantially to BAC's capital, hopefully already in 2012. Not sure where the dilution is supposed to come from. :-X?

Also, regarding housing (no need for another topic): http://www.gurufocus.com/news/154127/sp-interviews-robert-shiller Interview with Robert Shiller and Karl Case. Shiller isn't exactly bullish but Case is seeing potential for a rebound of housing in 6-9 months.

My feelings exactly. And knowing that this business should still be in their line of competence... I really don't want to know what different things could possibly go wrong if they bought a "shrimp farming business". This is Balmer, not Buffett. :x

Good argument. Thanks for the post omv, I'm going to look into this further.

Yes, all options should be considered and capital should be allocated to where the best risk/reward comes from. You simply can't disagree with this logic, makes perfect sense. Sadly however, this isn't a perfect world filled with Buffett's & co and I really questions wether most management teams are capable of correctly estimating the risk/reward profile in stuff they have no or little experience in. I really agree with what you are saying, I just don't think it is realistic to ask that of average management and expect to get the best possible return if we are talking about acquisitions in new territory. Most of the time, in this regard it seems management tends to underestimate involved risk and overestimates its skills and abilities.

It would be entirely dependent on what they decide to add. The question is more: Is management capable of recognizing good businesses with durable competitive advantages and acquiring them at good prices. Most managements can't do that, and so it ends up being diworsification. It's the difference between Buffett adding varied businesses to Berkshire, and Coca-Cola going into the movie business or whatever they did back in the day... I agree, of course. (In this particular case I would like to give M. Dell the benefit of the doubt. He has been doing smart acquisitions in the past and has grown this business from scratch, now reinventing it step by step since he came back. Disclosure: No position atm.)

Thanks for the replies guys, much appreciated. When looking at PE10 it definitely seems like the market was fiercely overvalued even this year compared to the past. The rest posted below is just for fun and irrelevant for my investment decisions. Although Moore could believe otherwise as I am one of the younger posters (22) here. ;) I'm 100% invested with a big chunck in US financials. Anyway, I looked up earnings per year for the S&P500 (see link below) and got the following results based on earnings from 2001-2010: PE10 at year high: 20.65 PE10 at yesterday's closing price: 17.5 Overvalued? Of course! But if you ask me it is far off from the excesses in 1929 with a PE10 of 30. If I am not mistaken the PE10 of 30 is at year end in 1929? Ad interim stock prices were much higher. Still, 2000 was worse purely based on valuation. Furthermore, when adjusting PE10 with 2011 earnings (and thus removing earnings from 2001 which were only 38.85) you get a slightly different picture. I set 2011 earnings on 80. : PE10 at year high: 19.44 PE10 at yesterday's closing price: 16.48 I'd say 16.48 is already a big difference from 20.65 which we had in the first half of this year. Of course recessions causing lower earnings (in 2001, 2002, 2008 and 2009) are part of the game so you can't simply adjust all the bad years. Just mentioned this because next year's PE10 will already look better! 8) http://w4.stern.nyu.edu/~adamodar/New_Home_Page/datafile/spearn.htm Shiller's PE10.

Wouldn't that imply diworsification for the company? In the case of Dell, it is already in storage, services, service & networking, software, mobility and desktop PC's and sells all of that to Large enterprises, SME's, government and consumers. Seems like adding even more would only detoriate margins that are being built up right now or would make the company lose focus on what it is doing best. How is it not agreeable then to simply invest excess capital in your own company at such valuations. Am I missing something obvious here? Let me know, I appreciate the replies a lot! :)

Perhaps, but Eddie Lampert was buying back Sears Holding shares in the high $100's for some time, and it has not improved the business' economics or earnings per share one iota years later. He would have been better off not listening to shareholders and just holding the cash until large opportunities came his way. That patience is what is missing from most corporate CEO's because shareholders get antsy. Cheers! I don't know anything of significance about Sears Holding so I can't comment there. What would you suggest Dell does with $16b in cash & investments (would be $18b+ without buybacks from this year. Even more if you at the last few years) if they can't find an opportunity? A dividend? At these valuations share buybacks just seem more tax efficient to me. They are only deploying what is coming in and the pile of cash stays about the same. If needed there will still be plenty of cash left for an opportunity (that may never come?). If I'm correct you have a position in MSFT. Do you agree with their buybacks? Just to get an idea of where you are at.

So market valuation in 1929 = 2011? I very much doubt that. Maybe if we were in the year 2000 now but not today.

Good discussion and I agree with all that has been said. Although corporate America on average is bad at allocating capital efficiently, I think a lot of them are doing one hell of a deal in the current market. Take DELL for example. While revenue is flat and the market gives it zero love (like with many others), these are the facts: $25.6b market cap, $16b in cash and investments, $4.5-5b in operating income, low debt, no significant share dilution, ... They repurchased $2.2b in shares already this year and will have bought back around 10% of outstanding shares by the end of this year. They still have $6-6.5b left in their program and a long term owner can only hope current prices last a little longer. Eventually this will show significantly in per share data. 8)

just the $0.01 like it is since 3 years?

I might misread this topic but why would your hit rate determine the amount of stocks you should have in your portfolio? If you focus on high probability picks a concentrated portfolio will only give you lumpier returns but over time your overall return won't be different compared to a highly diversified portfolio, no matter what your hit rate is. Unless of course you have a very low hit rate (due to low probability picks or just lacking skill) combined with a concentrated portfolio, which could kill you. But opting for a lot more stocks and less research per stock is only going to get your hit rate down, not up. Imo, the only sensible reason to have a 'very' diversified portfolio (35-50+ stocks) is because your fund is to big for the stocks you are investing in or because you are buying groups of stocks with low probability that as a group should do fine. If not, you will be spending both research time and money on lesser ideas which translates in lower returns.

So he is worried about the loss-reserve release but has no interest in noting the 2b+ loss in derivates? For me the main take-away from this year is Buffett's (partly) regained focus on stock purchases after mainly focusing on buying operating businesses for almost two decades. That says something about stock market valuations.

Thanks Moore. I see it's from Adam Hamilton again. :) http://news.goldseek.com/Zealllc/1314374831.php

Seems oke. Great operating businesses earnings! ;D

Market won't like it but probably makes sense.

Two trading days old and the comments in this topic are completely irrelevant. :o EURUSD dropping hard as well, otherwise I would already be negative again for the year after today's open.

Mr. Market gaining new insights regarding the bonds and hedge?

Thanks for the links Eric, I'll read them later. :)