Rabbitisrich

It's not just RLI. Insurance is the Rodney Dangerfield of businesses and the market is pricing companies like HCC at 1.1X book. I've been loading up in anticipation of a fairly low risk 8%-12% over many years.

Actually, Buffett did "sell" large cap stocks like Coke, Amex, and others in 1998 by acquiring Gen Re for all stock transaction when Berkshire shares were trading at a significant premium to book. In other words, he sold ownership in Coke to Gen Re shareholders while receiving their bond portfolio in exchange in a tax free manner. Pure genius! It is the opposite of idiotic Kraft transaction with the Pizza business sale. An unintended consequence however of the Genre transaction is that Berkshire also inherited Genre underwriting problems which were eventually fixed. Regarding the Fairfax conference call, I thought Watsa punted a very good question from Jaideep. It is very disappointing. Can you imagine Buffett ever not answering such a question when the whole purpose of the call is to answer shareholder questions? The conference call is intended to be a review of the reported quarter and to fill in any blanks on topics that weren't covered in the report. Questions of strategy and such distract from that purpose. Doesn't FFH also have a policy of not discussing of individual investments they make? I've read reports from boardmembers that management goes into specific companies at the message board dinner prior to the AGM, as well as at the AGM.

This seems like more of a moral argument for buybacks (CEO as an implicit financial advisor). The economic argument simply rests in the tax efficiency and, in my opinion, in the behavioral effect. I wonder how long ALD would have survived had it replaced the dividend with a buyback program.

The article writer is a smart guy and worth following, but he seems to ignore tax effects on land sold, and he double counts the value of the U.S. land in his business value. A going concern on a piece of property is a competitor to the next best use, so a multiple on the business is also an implied valuation of the current use of land. The article notes a current after-tax FCF to real estate yield of 8.3% which should be regarded as a competitor to the 7% cap rate before capital tax.

FBK showed ($3,267) OCI as of 9/30/10 and ($8,133) for FY 2010... maybe the manager's discussion will explain the difference.

The size of the WFC stake would require a bespoke put contract that would be difficult to unload before maturity.

Actually, Buffett did "sell" large cap stocks like Coke, Amex, and others in 1998 by acquiring Gen Re for all stock transaction when Berkshire shares were trading at a significant premium to book. In other words, he sold ownership in Coke to Gen Re shareholders while receiving their bond portfolio in exchange in a tax free manner. Pure genius! It is the opposite of idiotic Kraft transaction with the Pizza business sale. An unintended consequence however of the Genre transaction is that Berkshire also inherited Genre underwriting problems which were eventually fixed. Regarding the Fairfax conference call, I thought Watsa punted a very good question from Jaideep. It is very disappointing. Can you imagine Buffett ever not answering such a question when the whole purpose of the call is to answer shareholder questions? The conference call is intended to be a review of the reported quarter and to fill in any blanks on topics that weren't covered in the report. Questions of strategy and such distract from that purpose.

The accounting treatment provides greater transparency and allows for opportunistic sales without sudden reporting shocks. I don't think that it has much effect on statutory capital. Speaking of which, is anyone savvy on the NAIC treatment of cash deposited for collateral? Last quarter FFH posted collateral similar to the fair value of its swaps. Are these amounts +/-'ed from statutory capital?

Has Berkowitz outlined the operational changes he wants to enact? Fairholme responds: Andy Dietderich, principal outside counsel to Fairholme Funds, said “The Company did not read Fairholme’s release. A take-over? How can you take over a company by asking the other shareholders to choose directors? That’s the opposite of a take-over. Fairholme Funds has absolutely no intention of taking over anything. We are giving the company back to all its shareholders. It’s a dividend of governance.”

If CNA is going to offer a higher bid it will probably have to come before the SUR results come out in May. Perhaps 1.3X ending 2010 BV is a reasonable expectation. Or maybe CNA expected an easy buyout at the $22 bid, and isn't particularly eager to purchase except at a steep discount. It's worth holding SUR at the current price, in any case.

Probably not. 7 years have passed and Iraq/Afghanistan never seemed to have a major direct influence on Egypt's government/public dynamic. I'm guessing that more credit should be given to the 20%+ inflation rates, high reliance on food imports, and government management of commodity quantities along the culture produced when government compensates by subsidising the food costs of 70% of the population.

The stock plunged today on earnings and a downgrade from Stifel Nicolaus (I haven't read the report but I'm guessing it's related to disappointing contribution from Japanese tourism). The company is still benefiting from the exit of Aloha Air, and currently dominates inter-island air transport. Operations are still lean since emerging from bankruptcy in 2005; costs ex. fuel per available seat mile are below industry averages, although they should creep up due to lower capacity utilization and rising expenses as new fleets are delivered and available seat miles increase. Expansion into Tokyo and Seoul routes should compensate for margin pressure from Western North America routes. The stock is trading at a low ratio to trailing earnings. It doesn't pass the "Can you kill it" test, but this seems to be a reasonable place to start a position. Any thoughts?

I'm afraid we are now entering the realm of personal opinions: far more healthy, according to whom? Society's standard of beauty is anything but static. Abercrombie & Fitch (ANF), American Eagle Outfitters (AEO) et al made a killing between 04-08 when the bulky, masculine "country boy" look was all the rage among young male. The torch has since been passed to retailers such as Urban Outfitters (URBN) or J Crew Group (JCG) which sell close fitting shirts and slim jeans that are in vogue with the thinner urbanites. I think you are taking this way out of context. I wasn't talking about some advertising campaign targeted at youths or who-ever. I was talking about comparing two types of elite athletes. Long distance runners look skinny and frail, even bony in appearance (for some you could almost say they are sick looking). On the other hand, sprinters have well developed muscles, they look strong, fit and healthy. It's not a subjective matter of 'according to who?', this is just the way they are. An athletes physical stature might dictate what athletic career path to chose - but their fitness regime has a lot to do with sculpting their physical appearance. And before it is brought up - I don't question either athletes grit and determination at all - both work tremendously hard to achieve the ultimate goal. If you are talking about extremes, it's difficult to impute the results to average people. Sprinters look great but they destroy their knees in the process. If you want that tone and strength, a good diet, sensible cardio, and deadlift/squat intensive workouts will get you there in one piece. Boxers look way healthier than marathon runners too, until they don't.

Don't get people so hot SD. Management has let its shareholders down before.

I guess it depends on the relationship between the your thesis and the causes of the stock decline. I don't know much about technical analysis so I can't speak to your friend's argument, but everyone is prone to overconfidence. We are talking about subconscious effects so, in a sense, you do have to "be lucky" that your emotional makeup doesn't subvert your analysis.

A couple mitigating factors include Schwarz's large personal holdings and the fact that he increased HALL stakes through controlled companies. This particular transaction probably reflects liquidity concerns rather than a change of intrinsic value. There are a lot of conflicts of interest involved in running a hedge fund while managing the portfolio of a controlled company, and they will eventually emerge for better or for worse.

This week was better than last. Even a few majors are coming around on WDC, and the rebound in ATPG was a nice surprise. With that said I am still looking for a few ways to raise cash and plan to hold onto what little I have. Rabbitisrich - How do you feel about the changes at HALL, relating to the big owner being able to sell shares. SD has run quite a bit, but I think we could see $11 or more if the stock sell and new play works out. I have been thinking more and more about it, and they can only drill 250,000 worth of land. There has to be something planned for the other 60% outside of the new stock sell. I don't see any justification for the transaction that fits in with Schwarz's fiduciary responsibility. My bet is that Schwarz will not seriously impair the company for personal benefit ala Mozilo or Stronach. But it's true that any bet on HALL implies a degree of trust in Schwarz. In addition to the information asymmetry inherent in any financial, the equity portfolio is below the amount required for mandatory reporting. He could easily use the portfolio to improve quarterly returns in the Newcastle partnerships while hiding the trading losses in Hall's income statement.

http://www.chk.com/News/Articles/Pages/1518894.aspx It looks like Simpson will join the CHK board after a recommendation from SouthEastern.

True, but RLI probably warrants a lower discount rate due to the safer mix of insurance products. Their investment team is nothing special but at least they don't chronically over reach on that point.

Very interesting article, thanks for posting.

Bond Girl from Self-Evident.org consistently posts thoughtful stuff on the muni market. She has an article that explains some of the factors discouraging a "contagion" of Chapter 9 filings, and the differences between a private market bankruptcy and a Chapter 9: https://self-evident.org/?author=35

Thanks for the link(s).

The Einhorn comments referred to Fairfax in late 2006, a time when reasonable questions could have been brought up regarding certain repo dealings and reinsurance receivables quality.

Judging by 13f-hr filings between 11/08 and 11/09, Buffett put a lot of pressure on Simpson to raise cash by selling deeply undervalued shares. At least, that's what I assume because Simpson was doing things like selling Carmax at 11-13 times 2007 earnings. In addition he seems to have been excluded from consideration for the management of holding company assets. The argument that Simpson is too close in age to Buffett and Munger implies no confidence in Simpson's ability to select a replacement. Simpson slammed into the glass ceiling and even (probably) lost his historical autonomy.

My only major recent purchases were HALL and SD. I still have about a quarter of my funds in cash due to a few major holdings reaching fair value at around the same time (the dark side of increasing correlations).