Mephistopheles

Been a while since I posted here. I'm incredibly pleased with the news! Special thanks merkhet, cherzeca, and everyone else for their analysis. I agree that the sheer number of parties involved makes settlement a harder. But one very reasonable and possible settlement is - 3rd amendment is overturned, but the '08 bailout can't be touched by any shareholder current or future. Although I don't know if this is legally possible; if I were a non-Fairholme non-Perry non-all other parties involved shareholder since pre-crisis, and wanted to sue over the bailout, wouldn't be fair to me would it? At this point it's about pride and not money I think. Stealing all the money is not really an upside for anyone because nobody individually benefits, and Congress only collectively benefits, and even then it's a fairly small % of Government revenue. The downside on the other hand is born by the few, as more documents are released, more names of those involved brought to the public, etc. I suppose the true upside is to the Government lawyers, and perhaps that's one reason why there hasn't been a settlement yet...

(1) Because 8-9% is too low for the effort; OR (2) 8-9% is too low to compensate for mistakes? That is, the 9% bull case can't compensate for a mistake elsewhere so you'll end up lower? What's the effort? +1 The only research I do on Berkshire is read the annual letter, watch Buffett's interviews, and read the transcript of the annual meeting. A lot can be learned from that for investing outside of Berkshire, so it's almost zero effort made to invest in the stock for me. And it's also very pleasurable effort, the little that there is. So, no brain damage. I'll gladly take the 9%

thanks!

Just a side note - I don't think he was rebalancing his portfolio to pre lamberth because right before Lamberth he was sitting on huge gains. I think current levels or maybe slightly above is when he initiated the position, so he did add more shares purely to increase the position size (for better or for worse)

Put it another way - say someone offered 10x or even 5x or 3x BV to Buffett in 65, I'm sure he would have gladly sold out...

If you say IV in 1965 was well above 10x BV, then the inverse must be true too. For example, Lehman's IV in the 1870s was 0, as it was in all other years, and any non zero estimate of IV would be wrong. I don't think it works like that. IV changes as the facts change, sometimes dramatically. It wouldn't be at all reasonable to assume, in 1965, that Berkshire would have such a magnificent success as it has. Yes, it would be in a range of possibilities, but that's a wide range. And the reason for the growth since 65 was purely because of the CEO, not because of some intrinsic quality of the business. Buffett could have gotten hit by a bus in 66, and then paying 10x would have been silly. Huge range of possibilities.

In that case why not just release them regardless of the courts? Actually I agree that 80% up front is better for multiple reasons and wouldn't be surprised if Obama does just that right before the election. It makes for a great headline number, and if I were a politician I'd rather spend 80% all by myself than share 100% in perpetuity with others. But again, why fight it to death in the courts? Re: the capital, in the Government's hands they have an infinite line of credit to cover any losses so it's not like they need all that capital at all times or any given moment. I didn't read Watt's statements yet but I don't understand why do all these people think that recap and release is essential? From their perspective (non financial) what are they worried about if they have essentially unlimited govt backstop in the situation we have today?

In general, the issue is how you re-capitalize (and eventually re-privatize) the GSEs when you have just screwed the last group of equity holders. It is difficult for me to see anyone providing what will have to be hundreds of billions of private capital when the last guys were wiped out for reasons having nothing to do with the profitability of the enterprises. I know we've talked about this before but I still don't see a reason why they have to recap and release. If we lose all the cases, what's the incentive in doing that when they can get an endless stream of profits to help pay for the budget? I know there is pressure from many sides to do this but it's their choice and I don't see them walking away from free money.

I wouldent read too hard into that. the intrinsic value (for lack of a better term) of the GSEs is their litigation value. pure and simple. however trading values have a signaling value, and what it is signaling to me is that 30% upside change in trading value means some sort of wind shift in sentiment. now sentiment means nothing in the face of an adverse litigation result, but i sense that there is some accumulation going on, and nobody is accumulating these stocks without some deep thinking Unfortunately, that same sentiment doesn't apply to the prefs

Also the 1 hour intro videos. It would be a crime to never release them because they are so hilarious. Maybe Buffett is planning having them released after him and Munger are gone.

Research is important but only if the right material is being researched with the right mindset. Let's just take a recent example: Valeant. Apparently Bill Ackman read like a hundred thousand pages of filings for his MBIA short and it's safe to say he did something similar for Valeant. Then you have Charlie Munger who probably didn't even crack open the 10-k. But through all his years of reading about psychology, history, biographies, he's smart enough to recognize a problem from 10,000 feet away, and he did in Valeant. So now we have two people, one who probably knows more about Valeant specifically than almost any person in the world and another who is very well versed in business generally. The latter is the one who was right. So you can say all the knowledge that Buffett/Munger have accumulated over their lifetimes is "good research". This is not to say that it's wrong to read a 10-k because obviously they do that too. But I'm just trying to say that it's important what you read not just if you read. I think we all take pride in earning money through hard work. Easy investment decisions are not as satisfying as ones that we pour sweat and tears into. But the latter can be a sign of danger; if you need to work so hard to decide if something is the right decision, it probably isn't. It's like finding a mate - it either happens or it doesn't. If you need to work your ass off just to be attracted to someone, you're probably not meant to be. As Buffett says, it's more important to look for two foot poles. We don't get rewarded for effort but for results. It probably took 5 seconds for Charlie to dismiss Valeant, and 500 hours of work for Ackman to make the investment, and he was wrong. Just my humble opinion.

Depends on the definition of good research. Researching what is relevant is good. Looking at every number and sentence from every 10-k from the last 10 years is not relevant, therefore not good but rather wasteful. Having an understanding of the big picture = good research. Doing excess projections and discounting = not good. Just imagine you owned a business. Imagine what you'd be thinking about as the owner, and equally importantly- what you couldn't care less about. That's the best way to go about it. I don't think reading hundreds of pages of documents is what you'd be doing or need to be doing if you owned a business.

Thank you!

And/or maybe Reade might be a wannabe Lamberth too. I'm also worried. For all we know, the administration can just be buying out all of these judges and willing to excuse their behavior with Presidential Pardons. The law is on our side but what if that's not enough?

There are complete transcripts out there for free. Is there a value-add to your notes? Not trying to rag on someone looking to make a buck, just curious. I'll just chime in, having purchased these notes 3X before (in addition to one meeting which i attended). I'd say this - it's the best transcript available - and almost like being there. I missed so many things in my own pages & pages of notes in 2013 meeting. All the other notes I've seen are fairly condensed - and very good - but not the same in my book. Too many nuances and fine points to capture. And if my small fee - allows me to not travel and incur much expense - I want the best notes possible. JMHO But there's also audio available (which I would say is a lot more like being there than a transcript), $50 sounds like much when there is free audio. Where can I listen to or download the audio?

Agreed, I'd hate a cold calculated rational world devoid of emotion. The best things in my life looked at through a calculating rational financial lens would be considered mistakes, but without them I couldn't imagine life. For example, getting married, having kids, spending money on hobbies, vacations, taking days off to relax etc. Rationally I'm better off maximizing my time, working, getting more money etc. I'd rather enjoy life. The grocery bills have exploded with three boys, the time I get with them is invaluable. Rationally I'm better with my nose in a book learning wisdom or something..no thanks. I'll take a beer with friends any day over sitting alone in a library. And I like to read! From my understanding, Buffett and Munger are not suggesting to always do the most financially beneficial thing when they say to be rational. I don't think either of them regret getting married (at least with their 2nd marriage), or having kids, or taking time off to play bridge. The advice is rather geared towards not letting your emotions clog your judgment - having the right temperament in investing, or willing to change your decision if the facts change, focusing on your inner scorecard rather than living someone else's life. All these things are obvious and logical but often times people don't do what's right. In terms of spending money to live and enjoy your life - that is arguably the rational thing to do over collecting as much as cash as humanly possible, because if you're not having fun then what's the point of earning in the first place? Working away just to grow your bank account is rather irrational imo!

I guess she can go the Lamberth route and rule that the Court doesn't have jurisdiction, which is what the Govt will argue. But then, I would think that she wouldn't have ruled the motion to dismiss as "moot"...

That's true - but at least it tells us the discovery is not worse than expected. Also, assuming he's being 100% rational, he's willing to go back to pre Lamberth levels even after the Lamberth decision. Meaning the odds didn't get worse after Lamberth threw out the case, if you count for all the good info produced.

let's remember that conversations between lawyer and client are privileged, so whatever conversation cooper & kirk may have had with berkowitz would not be discoverable, unless berkowitz were to waive privlege...which he wouldn't i fully expect that berkowitz has a fair idea what is in the discovery. not details of course, but color, body language. we are talking about real life and big bucks here. To be clear, Berkowitz probably knows IF the documents are favorable, but he probably doesn't know HOW/WHY the documents are favorable -- my comment was towards whether Cooper & Kirk is feeding Berkowitz document content (even w/ a wink & a nudge) with the idea that their conversations wouldn't ever see the light of day. My guess is no. I agree and I never thought that they'd be feeding document content to him - but yes even with just body language I'm sure he knows if they are favorable. Which is still significant IMO. And he did up his stake so it's a good sign. Unless of course he's in denial like he is with SHLD. Not something to base an investment thesis on obviously but just to take it as a good sign.

Haha yea. But just curious as to what you think about my assumption, given you've worked in the field. Is it fair to assume that the lawyers would give hints to the client, without divulging all the information? Frankly, if I were Bruce's lawyer, I'd have a harder time holding a poker face than keeping the information from him via subtle clues. Looking at the inverse - what are the odds that discovery has been worse than expected for the plaintiffs, yet Bruce continues to increase his stake? In my humble opinion, human nature exists here and he knows a tad bit more than the rest of the public of what's going on.

I feel like some people might quibble with that re Sears & St. Joe, but, that aside, I think he's probably correct about Fannie & Freddie. (Except, I'm likely biased given my ownership of Fannie Preferred.) I know, I was being sarcastic :P Referring to SHLD

Ok, so I know the rules say his lawyers can't discuss the discovery with him. But how much do they really have to divulge for him to get a hint on where the case is going? All it takes is a wink wink. He upped his stake from an already significant position that he had before (for a coin flip anyway). He got back into the common after selling out a while ago to Icahn. Call me crazy, but I think that's a pretty good sign. Besides, if I know one thing about Berkowitz, it's that he never stubbornly gets attached to his investments if the facts change.

Bloomberg - hopefully he runs and wins

My guess is he can get through the footnotes in about a quarter of the time the rest of us do. ;D That means instead of the required reading of 500 pgs/day to be considered a true value investor, he probably gets through 2,000 daily!

Clearly they're great lobbyists. And not just of politicians and regulators. Lol