merkhet

It was an interview focused on just financial institutions -- so no, it's not strange that Sears was left off.

The problem with having two chiefs is that they both think that they are Chiefs. So that probably wouldn't be as good an outcome as you believe, especially if those stories about Bill Gross are true.

+1

Or people are fleeing fixed income entirely.

http://blogs.wsj.com/moneybeat/2014/09/26/bill-gross-leaving-pimco/

I don't think they were stocking for the holiday season even when they kept closing stores open until after the holidays.

"We don't formally have discount rates. Every time we start talking about this, Charlie reminds me that I've never prepared a spreadsheet, but I do in my mind. We just try to buy things that we'll earn more from than a government bond - the question is, how much higher?" -WEB I believe him when he says he doesn't write them out. Can he do them mentally? 1) We're talking about a man who can calculate compound annual return figures in his head; I think the mental math ability is there. 2) I am not suggesting the DCF is done with precision. He's noted before that others would be surprised at just how imprecise he is. The more I do these DCF calculations in Excel the more mental shortcuts I find. With enough practice I don't think doing these without Excel is so far fetched. Example... It's 2011 and he is sitting in his bathtub thinking about how even with a middle-of-the-road management team BAC will earn a consistent 13% ROTCE in a few years. He only has to multiply 0.13 times $14 and he's got $1.82 in earnings. That's a 26% yield on $7 price tag. Does he need a spreadsheet? No, this is basic math stuff that can be approximated in your head even if you can't calculate $1.82 precisely. He knows that there might be no yield for 3 years (going to cleaning up the mess), so he knows that $1.82 is still a fine yield on $9.50 stock (approximating a 10% return for the first few years before earning the yield on top of that). It takes more effort to dig up Moynihan's phone number. +1

Although, to be fair, he only says that it may turn on a similar issue. Not that this is necessarily precedent.

http://online.wsj.com/articles/u-s-government-puts-points-on-board-in-fannie-fight-heard-on-the-street-1411496516 Interesting that this came out today given that he and I have already had a discussion no why the Jackson case is not applicable. *shrug*

Yes, but what Eric was saying before is that Banking is a good business whereas Insurance is a mediocre/terrible business. If you have G/M management in banking, you'll do fine. You basically have to have G management to do fine in insurance. That's all I'm trying to explain.

But he also has repeated many times how results of the insurance business in particular depend on good management! Hasn't he? Gio Munger has mentioned multiple times that insurance is a perfectly terrible business -- except in the hands of Buffett. Every now and then, you might be able to find a person who can run a perfectly terrible business in a good way -- Ajit Jain, Warren Buffett -- but statistically, it's unlikely. The results of the insurance business do depend on good management. However, the question is whether good management only makes a terrible business into a mediocre business. I feel like there's a matrix here: (Manager, Business, Results) G=Good M=Mediocre B=Bad (G, G, G) (G, M, G/M) (G, B, M/B) (M,G,G/M) (M,M,M) (M,B,B) (B,G,B) (B,M,B) (B,B,B)

No, I do not compare Fairfax to BAC. I only say that in any investment I always look for good people, a good business, and a good price. If you are fine with BAC being led by a mediocre team, well then ok! Maybe the price is wonderful enough to justify that… I am more comfortable with a good price and a good management, rather than a wonderful price and a mediocre management. Gio I believe what Eric is saying is that insurance is a pretty bad business most of the time. And Buffett has a saying about what happens when good management tackles bad business. It's a rarity that good management can turn a bad business good. Berkshire is one such gem w/ its insurance operations. It's currently unclear whether Fairfax can be the same.

I think you can break things down in the following way: Good management is always the best bet for both (A) good companies and (B) bad companies. Mediocre management is probably okay for (A) good companies and terrible for (B) bad companies. Terrible management is bad for both (A) good companies and (B) bad companies. For instance, Coke is a pretty damn good company, but if the CEO started buying a King Digital a month, well, it wouldn't stay a good company for long... Ken Lewis falls under "terrible management."

http://www.ft.com/intl/cms/s/0/ad13e938-4290-11e4-847d-00144feabdc0.html#axzz3E5qCSECw

That's me.

No -- but usually people buy 9.9% of a company to avoid triggering various filing requirements.

Basically, yes. In the Ackman case, he alleges similar things that Perry alleges but on behalf of the common. So, again, it's unreasonable to believe that the FHFA will sue itself.

Sorry that I posted and ran this morning -- I had an alumni thing that I was in charge of throwing. So, I actually agree with the ruling here, but it doesn't matter for us. The problem is that the plaintiffs are suing Treasury on behalf of Fannie Mae via a shareholder derivative lawsuit. (1) FHFA has already moved to stand in place of the shareholders in this lawsuit against Treasury. (2) The issue that the court ruled on was basically that just because FHFA was following the rules of the contract it struck does not mean that Treasury & FHFA are essentially the same entity. Notably, this is differentiated from the Perry & Fairholme suits because (A) Perry is suing as a shareholder, not as Fannie Mae, and (2) Fairholme is suing FHFA directly. In neither case does the issue of shareholder derivative issue come up. The wrinkle in the Perry case is that, while it might be possible that the FHFA would substitute itself as a plaintiff, it has made absolutely no indications that it is going to do so -- and what Perry is suing for is basically misconduct on the part of FHFA. On the Fairholme side, the FHFA cannot be expected to sue itself for actions it caused. As for the anti-injunction provision of HERA, the court specifically states the following: In both the Perry & Fairholme cases, that's exactly what they're suing for -- the fact that the FHFA exceeded its own powers as a conservator in executing the Third Amendment. Perry for procedural mishaps under the APA and exercising powers outside of those granted to a conservator. Fairholme for an illegal Taking w/o compensation.

Looks like the reason for the sell down yesterday was a ruling from Judge Jackson on derivative standing. 2014-09-19_Memorandum_Opinion_in_Sweeney_Estate_Marital_Trust_Case.pdf

It's about magnitude. The former is with respect to small losses, and the latter is respect to large ones. Sometimes a small loss turns into a big loss without you being able to do anything about it.

Yes, thanks! That was a great interview.

I think we don't hear about Buffett's failures because he just doesn't have that many.

Also to not act. This is really, really difficult. The most successful active investment, ironically is minimally active. The twenty ticket thing. That's a really good turn of phrase.

If you find yourself working on complex DCF calculations or poring through Excel spreadsheets all day, then yes, you are in fact trying way way too hard. My personal belief is that the benefit that comes from quantitative value investing is the systematization and not the quantitative nature of the investing. The systematization prevents psychology from entering the equation -- I remember reading that Glenn Greenberg's son started a quant firm, and they sometimes overrode their algorithm only to figure out that they were wrong to do so. It turns out those really crappy looking investments eventually recover, but, they do not necessarily recover fast enough to calm an investor's nerves.

Damnit. I didn't even have to open the link and the song got stuck in my head. (Great movie, though.)