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Berkowitz on TV this weekend


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For those of you who follow Bruce Berkowitz as I do, he will be appearing on public television's Consuelo Mac WealthTrack this weekend. Apparently the entire program will be devoted to The Fairholme Fund and its current investment strategy.

 

Should be interesting, Bruce is always open and forthcoming with his investments and the reasons behind them.

 

Show will also be streamed on Wealthtrack.com stating Monday.

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Thanks for the link.

 

Enjoyed the interview.

 

Some interesting quotes:

 

-2/3's in equity, 1/3 fixed income or cash, because all  great investors never run out of cash.

 

-what worries him-  "is knowing that it is usually a person's last investment idea that kills him...because as you get bigger you put more into your investments and that last idea that may be bad will end up losing more than what you have made over decades.

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First time watching him.  Downloaded on iPad...terrific interview.  Wish he talked About shld.

 

I will look into mbia. 

 

Kind of a revenge of the nerds guy...seems like he is humble.

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This is a very smart guy. Whenever I hear him talk I can't help but notice the Buffett influence. One of the things he has learned from Buffett is to use the media to communicate with shareholders, and that's exactly what he did here with the Consuelo Mack interview. He used this opportunity to reassure shareholders that his investments in financials are based on sound theory and that they should not be concerned by what is being said in the media.

 

Unfortunately living in Canada I can't invest in his fund, but I do coattail some of his investments.

 

Great Interview.

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Other points of interest to me:

 

1. C can earn $1 per share

2.  His mom fired him during the credit crunch

 

Haha, yes those comments were interesting.  I believe he said the same thing about his mom firing him in another interview too.

 

The $1 a share earnings lines up with Ackman's comments about Citi's earnings power.

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Again, I've been following Berkowitz since the early 1990's when he was interviewed in Outstanding Investor Digest.  That's where his delivery of Wells Fargo was posted originally.

 

It is my estimation that given the info provided by OID at that time and the mutual fund record beginning 10 years ago--- that Berkowitz' managed money has beaten Mr. Market by about 4 or 5 to 1.  Not bad?  Ha!  Unbelievable.

 

I bought LUK based on the OID interview and invested in his fund immediately when it became available.  Had already owned Wells and other banks prior to the OID piece.

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Dealraker

 

Me too.  I remember his analysis of Leucadia back then - he was one of the few that really tried to understand how they made it happen.  Good guy who is bright and transparent.  He seems to really care about his customers in an environment where he could easily run money in hedge fund world and dispense with the little guy.

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The thing I can never get past is that he, repeatedly in interviews, very clearly lays out the problems with the fund being so large.  It's not just the current level of assets, but the level of assets in 5 and 10 years if he continues to do well. 

 

And yet he still refuses to close the fund. 

 

I laughed a little when Consuelo referred to this as a "very rare interview" with Berkowitz.  Other than Heebner, there aren't many managers who are on tv more.

 

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The thing I can never get past is that he, repeatedly in interviews, very clearly lays out the problems with the fund being so large.  It's not just the current level of assets, but the level of assets in 5 and 10 years if he continues to do well. 

 

And yet he still refuses to close the fund. 

 

He clearly states in this interview (and others) that the size of the fund has been an advantage in this market.

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The thing I can never get past is that he, repeatedly in interviews, very clearly lays out the problems with the fund being so large.  It's not just the current level of assets, but the level of assets in 5 and 10 years if he continues to do well. 

 

And yet he still refuses to close the fund. 

 

He clearly states in this interview (and others) that the size of the fund has been an advantage in this market.

 

Of course he says that.  It probably wouldn't be very good for business if he said that his asset size is hindering his ability to outperform going forward. 

 

When have you ever heard Warren Buffett say that his asset size is an advantage?  In fact, he says the complete opposite - that it's much harder for him to move the needle at his size:

"If I had $1 million to invest, or $10 million for that matter, I know I would achieve 50 percent per year."

"As we get bigger there is more media interest and being larger makes it harder to grow at previous rates."

“The big minus is that our performance advantage has shrunk dramatically as our size has grown, an unpleasant trend that is certain to continue.”

 

If you don't believe Buffett, there are plenty of academic studies showing an inverse correlation between asset size and performance.

 

You only have to look at your moniker for an example of a fund AUM casualty.

 

 

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I think size could potentially be an advantage for Berkowitz in this environment. He can deploy it into workouts like GGP where the returns are more market neutral which would help. When you get to that size you need to find ways to invest that help you from being just an ultra concentrated version of the S&P 500.

 

I don't know if his mutual fund structure prevents it, but if he could do preferred deals like Buffett he'd be in a good spot. I think that during crisis big funds don't necessarily need to be buying at the absolute bottom -- being able to loan out money at 10% in a low interest rate environment is pretty good.

 

 

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I think size could potentially be an advantage for Berkowitz in this environment. He can deploy it into workouts like GGP where the returns are more market neutral which would help. When you get to that size you need to find ways to invest that help you from being just an ultra concentrated version of the S&P 500.

 

I don't know if his mutual fund structure prevents it, but if he could do preferred deals like Buffett he'd be in a good spot. I think that during crisis big funds don't necessarily need to be buying at the absolute bottom -- being able to loan out money at 10% in a low interest rate environment is pretty good.

 

 

 

But it's not as though FAIRX was the only well-performing fund in 2008-9.  Plenty of funds that don't have 15b in assets did/are doing just fine in this environment.  The problem, as you know, is that Berkowitz's set of potential investments going forward decreases with every billion that flows in.

 

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I would take Berkowitz at his word on whether keeping the fund open is advantageous to existing shareholders.

 

But regardless of whether you trust him or not, I think he points out some good examples of how keeping the funds open have helped out existing shareholders.  Could he have done the ACF ABS deal if he didn't keep the fund open, and would the  outcome of the ACF investment (both common and bonds) have been as good if he didn't have the deep pockets to help them out during the depths of the financial crisis? 

 

Could FAIRX have participated in the GGP bankruptcy in a material way had he not kept his fund open? 

 

What else is coming down the pipeline in terms of recapitalization transactions?

 

Berkowitz's argument is that size matters in this environment.  There are so many macro discussions going on right now talking about how we're still in a deflationary environment and how balance sheets need to be repaired.  That means opportunity for those who have large amounts of cash to deploy in a distressed environment! 

 

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The one thing that bothered me about the interview was that I thought he skirted around the question regarding Citi and other financials being black boxes.  He famously said that he read 1-2 pages in the 10K of AIG about derivatives and didn't understand it, so he passed on all the financials.  Now when she asked about Yacktman claiming that they are black boxes, he sort of answered, but he didn't take the question straight on I don't think.  He did say that they've had time to play out, and that there has been a lot of scrutiny, but he didn't say anything about derivatives etc.  I was a bit disappointed in that.  But I still like the guy :-)

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