Morgan

Wow great share! Thanks!

Working in real estate full-time for 2 years and 5 years part-time prior. Now it's back to part time, plus working in the investments department of a wealth management firm.

Seems like it's time to find a loan: http://finance.yahoo.com/q/ks?s=EDS+Key+Statistics I would be careful with chinese -EV stocks. isn't this one about to be acquired? Its being taken private for U$60M I beleive. Interesitng to note that Mr. Ding is the brother-in-law of the Chairman and CEO. I don't read tons of executive profiles, but that seems like an odd thing to add to the description. http://www.ir.xdlong.cn/phoenix.zhtml?c=217204&p=irol-govmanage This is a pretty cool situation on the surface, buy a company for U$60M and get U$85M in net cash (I think from my quick look), but since it is in China you'd have to do some serious due diligence. If you're interested in Chinese Law and all the various shenanigans that can happen, check out Dan Harris' "China Law Blog". http://www.chinalawblog.com/

The first loan we got was in early 2007 and it was from Citizens Bank. All the other loans are through WesBanco and we got them in the last two years. We haven't been turned down by them thus far (knock on wood). Hope that helps.

I'm surprised you're having so much trouble Eric. In my little town in WV, we've been able to secure loans for multifamily properties relatively easily despite using more leveage and being (a lot) less wealthy than you. The only things I can think of that would benefit us is that we run an apartment business (50 units now), and the market is different here (gas boom). Bu still just from what you say, you seem like a solid credit. Have you applied to a number of other banks?

Same to you Parsad and everyone else here! Happy Holidays! To another successful year!

I looked at M&T Bank and they have acquired quite a few banks (22) since 1987 (http://ir.mandtbank.com/acquisitions.cfm) and have gone from $2bn in assets in 1983 to $84bn today. Their stock appreciation hasnt been too shaby either - $1.20 in Jan 1983 to $115 today or about 16.5% annualized. That sounds like a pretty good business to get into. Inspired by the history of M&T I'm wondering if anyone has here been involved in aggresively growing a bank starting from something decently small? Or gone through the merger or acquistion process of a smallish community bank? Other questions: What was your process for investigating banks to buy? What made you reject a bank? Once a bank was purchased, how did put your culture in place? How did you decide which lines of business to expand?

can you give me detail in the process you look for them ? And how you value them? Hi King, I have been thinking about giving an example. Here it is. I own a company in AU called Jumbo Interactive. I bought it @ 30 cents. The annual report laid out everything very clearly. It is trading at 2.5x P/E before cash. JIN's business is to sell lotteries on the Internet, which is highly scalable. In the last five years, the business has grown just like other online businesses. In normal condition, this kind of business should garner 20x P/E. This is an outstanding business trading at ridiculous price. You see, magic formula wants good business trading at cheap prices. That is simply not enough for me. But the situation is not normal here. JIN's online business hangs on a contract with Tatts, which is expiring at the end of 2014, although the contract will be renegotiated a year earlier. Tatts is a monopoly in the lottery industry which owns the only nation-wide license given by the government. Recently, Tatts launched its own website to compete with JIN. Therefore, the probability that JIN will renew the contract seems low. I believe each of us has different opinion about risk/reward and you can make your own guess. Here is mine. Let's say JIN simply operates until the end of 2014 and then liquidate, the cash will cover more than the current market cap. This is third grade math so I would not give the details here. This is is the bottom line. I personally believe, after some thinking, that there is around 30% chance that the contract will be renewed as it is now. If it is renewed, I will hit a home run; if it is not, I would not lose much. There are also other complications, but I will keep things simple here. This is basically how I make my investment decisions. Hope this helps. Just looked breifly into JIN. Nice job on the analysis Baoxiaodao! As you said, if they sign the lease it'll be a home run. Depending on when you sold, you may have had a 10 bagger! Any update on what you did with your position?

OddBallStocks writes a good bit about banks on his blog (http://www.oddballstocks.com) and has a website with all the data you could ever want on banks (http://www.completebankdata.com/). From there you should albe able to get a decently solid grasp on banking. He also hs some banking primer posts. Read those posts and the comments: 1. http://www.oddballstocks.com/2013/02/a-banking-primer.html 2. http://www.oddballstocks.com/2013/08/a-banking-primer-part-2.html 3. http://www.oddballstocks.com/2013/09/banking-primer-part-3-first-northern.html 4. Case study - http://www.oddballstocks.com/2013/12/versailles-financial-almost-too-good-to.html From there get, and maybe sooner, get annual reports for small banks and read, read, read!

This thread is pretty old but... Why aren't the derivative markets regulated? If the big banks stand to lose potentially trillions (and presumably be wiped out) on defualts it seems that they should be regulated quite heavily. I can't remember off the top of my head but in "This Time is Different" by Reinhardt and Rogoff, on average a country defaults every, say, 15 years. From there if a country goes under, then it costs the banks hugely. Maybe they can afford it, maybe not. But what if there is another world war and a number of large countries defualt? Then how many of the TBTF banks go belly up? And how many at the same time? That has the potential to freeze the credit markets doesn't it? If Buffett thinks they are finaicial weapons of mass destruction, it seems pretty likely that that is true. What do you guys think?

I definetely agree that there can be some significant costs associated with owning real estate. One's own home isn't as investment, but a liability. Sure, some people make money buying a house and selling it later when it's time to move or they die. But I wouldn't be surprised at all if a pretty solid portion of people only break even becuase of all the transaction costs involved plus repairs/maintenance or bad market timing or whatever. I think it'll probably be a while before I own a house of my own as opposed to just living in one of our apartment buildings. Essentially free living, but obviously not as nice or as private as a single family home. I certainly know all about the costs of maintenance though. :o

I think he's saying that Koreans of all income levels generally value education more than low income American families. Which over two or three generations would make the Koreans quite wealthy, just as you say. I think the whole thing is dominated cultural influence (in other words, the parents). Completely agree. Don't know about the rest of your questions though. If I understand correctly, student loans (at least my students loans) are not forgivable in bankruptcy. Everything else though is pretty true. Everyone has many choices, people just need to live with the consequences of thier actions.

I think he's saying that Koreans of all income levels generally value education more than low income American families. Which over two or three generations would make the Koreans quite wealthy, just as you say.

Congrats on the new job!

Just out of curiosity oddballstocks, and maybe this is a silly question, but how would you go about actually harvesting the timber to sell? Hire a company to do 50 acres? Hire a team, rent the equipment and give it a go? Just thinking about it here - if you can buy land for 1k/acre and the timber is worth 5k/acre(?) and it costs 2-3k/acre(?) to harvest it you could definitely make some nice money. Especially so if you used some leverage.

I wonder about about that sometimes too. When getting loans to buy apartment buildings at 4%-5% thinking about the future where the rates may be 10% or 15% or higher... I mean, it seems crazy to buy more property. The purchase price of the building would need to be significantly lower to keep the financing costs in line. Maybe I'd get edged out of a high rate market, but who knows about others. People can be crazy. To counter that though, I know a guy who way back in the day got a loan for ~20% to develop some property then refinanced when construction was completed. He has been very successful, but he said he hardly slept during construction. Crazy, but doable I guess.

From what I know, he's published four books: 1. Real Estate: A Case Study Approach by William J. Poorvu (Mar 1992) 2. Real Estate Challenge, The: Capitalizing on Change by William J. Poorvu (Dec 22, 1995) 3. The Real Estate Game: The Intelligent Guide To Decisionmaking And Investment by William J. Poorvu and Jeffrey L. Cruikshank (Sep 13, 1999) 4. Creating and Growing Real Estate Wealth: The 4 Stages to a Lifetime of Success by William J. Poorvu (Feb 27, 2008)

Thanks for the list of books Liberty. Also the video was good too. I can see why Gates likes him. Smart guy. Thanks for sharing.

When you say newest one, do you mean "Creating and Growing Real Estate Wealth: The 4 Stages to a Lifetime of Success" from 1999? Or does he have a new book out? I just realized I didn't have one of his books, "The Real Estate Challenge: Capitalizing on Change". Has anyone read it? I just ordered it for a penny. Since this is a general RE thread, has anyone been involved in RE development? It seems to be filled with uncertainty and significant pressure to get space leased or face serious CF problems (you start from 0% occupancy!). The main benefits of developing over buying are that you get exactly what you want where you want it and it's cheaper? Does anyone know what percentage of developments fail compared to buying and managing?

Ah, didn't see the rights offering. Don't follow BH too closely though. Or Cracker Barrell either. Good to know. Thanks wecobrk!

BH has $100m in cash? I just checked their latest 10-q (July 2013) and it says $22.358m in cash and equivalents. Have I been looking in the wrong place all this time? I was unaware of the special dividend though, where did you find that info? Thanks!

What is Biglari's angle here? He owns ~6.3% or has ~$1.5m invested in CAW. BH has $23m in cash and equivalents and $131m in investments. How will a double, triple or even a quadruple in CAW move the needle at BH? This doesn't really seem like a good use of time for Biglari. Is he simply chasing sales? Add another $50m in sales to boost his ego? As arrogant as he can be, he's too smart for that. The products the company sells seem to be low quality with poor ad/packaging designs, silly (although usually descriptive) names and almost a gimmick of a product (Mood Magic - "color changing lipstick works with women's body chemistry to create the perfect shade"). It would make more sense, I think, if Biglari wanted to buy the company, revamp the product line over the next few years and focus on creating global brands for the long haul. This might be a cheap way to get into that business. Surely he could seriously boost the margins in the meantime for the company. Proctor and Gamble, Colgate-Palmolive and Johnson & Johnson have ~10%-13% margins. If Biglari could get CAW to half of that, say 6%, CAW's NI would go up ~6x from ~500k to ~$3m. That seems like it might be interesting to Biglari. Especially if he thinks he can grow sales 10x-20x in the next 5-10 years. It could be a nice company to own.

After writing this, maybe this should go into the Investment Ideas board... LEGO is a cool company. Despite being privately held they release financial reports (2012 AR attached), which seems odd to me (anyone know why? For the LEGO foundation maybe?). Just looking at some of the stats for the last five years shows they have a solid business. Ratios (%) 2012 2011 2010 2009 2008 Gross margin 71.1 70.5 72.4 70.3 66.8 Operating margin 34.0 30.2 31.1 24.9 22.0 Net profit margin 24.0 22.2 23.2 18.9 14.2 ROE 66.7 66.8 84.8 82.3 72.2 ROIC 140.2 133.4 161.2 139.5 101.8 LEGO has a few competitors that do blocks. Mega Brands, CoCo and Best-Lock Construction Toys. LEGO has sued all of them and only won against CoCo. Maybe that's why they been expanding into more branded lines (Star Wars, Harry Potter, etc) rather than their own designs. Other relatively similar building toy competitors are K'nex, Erector, and those marble track toys. They're pretty different than LEGO, but are still fun toys for kids. I know my friends and I all had some of them, but overwhelmingly we had LEGOs. From what I know about playing with LEGOs as a kid (the other brands weren't as good) and looking at the current line up of big name products, they seem to have a solid hold on this market. I wonder how long it will last? Big margins and high returns will attract other entrants. What is LEGOs defense? A combination of patents/lawsuits and licensing deals with the hottest new brands? This seems to have worked on CoCo, but not with Mega Brands or Best-Lock Construction Toys. In 100 years I would be very surprised if kids no longer played with LEGOs. Also, I'd be surprised if LEGO doesn't grow hugely all over the world. What do you guys think of LEGOs? I wonder if Buffett would buy this company for the next hundred years?

If you're really going to sell the place in two months don't rent it. Clean it and do some minimal work to make it more appealing. If you think it might take six months to sell, consider it... only if you are really in need of the money. Bad tenants can do a huge amount of damage very quickly. I've heard stories from other landlords about tenants who were doing a rent-to-own deal, and they stole the siding off the building, ripped all the roofing off because they were going to replace it and never did. Not to mention pet damage, plumbing problems, etc. In general I don't let tenants do any updates, painting, anything... who knows what they'll do...

+1 on Ragnar