Rabbitisrich

Munger made a point of reminding the last Wesco audience that Wesco's independence was by accident. I think The Snowball reported that the former owner required its independence, and Munger's leadership, as a condition of the sale (I might have remembered wrong!). He said that he and Warren had wanted to fully incorporate Wesco years ago, but that "groupies" drove the price to unreasonable levels.

The SF Fed posted two articles that are relevant to this topic: http://www.frbsf.org/publications/economics/letter/2009/el2009-19.html This article references a model that looks at lighter than expected declines in core inflation to infer that the ouput gap is less than estimated by the CBO. If the natural unemployment rate has risen--8.6% in the August 2010 update!--then pricing pressures should be comparatively subdued. http://www.frbsf.org/publications/economics/letter/2009/el2009-16.html This other article looks at Japan's non-financial private business develeraging throught 90s as a benchmark for U.S. household deleveraging. Assuming an effective nominal interest rate on existing household debt of 7%, a future nominal growth rate of disposable income of 5%, and that 80% of future saving is used for debt repayment, the household saving rate would need to rise from around 4% currently to 10% by the end of 2018. A rise in the saving rate of this magnitude would subtract about three-fourths of a percentage point from annual consumption growth each year, relative to a baseline scenario in which the saving rate did not change. Emphasis added. The model assumes a near-term impact of (.5%) on GDP along with a 5% growth rate of disposable income in a 10% savings rate environment :-*.

Thanks for that link. It has useful content including the VIC presentation with the exact title of interest to me. Looks like, ultimately, mental make up decides the concentration. I have had to make many mental adjustments, including the one which lead me to post this thread. I have never felt more comfortable than now with concentration, despite uncertain markets and such. I sleep well now. Also my mental make up today is to not be a busybody in the name of "finding" values. My question "how many 15% ideas?" has this in background. Also that value investing is a loose term. Lynch was right, when you take your 15% to the bank it does not matter if it came from 1 or 3 or 100 ideas, it is just greenback. I (we) have been spoiled that for ten long years, FFH and BRK continue to be deep value ideas themselves, making me not work hard at all. I doubt very much that 5 years from now we will see this kind of opportunity, so I am making the proverbial hay now. It does not get better than this. Never-in-history times will be these....looking back from 2020 or later! I have even bought the mythical "$10000 invested in BRK in 1954...." in my kids accounts at these prices. Simply unbelievable! I think that the role of emotions in "rational" decision-making is deeply underrated. There are so many factors to consider in even small decisions that if we had to work through them all we would just sit at home considering nuances. Just like ants use pheromones to communicate short cuts, we use conviction, boredom, greed, etc. to guide our logic systems. That being said, diversification is a hedge when the nuances become a big deal, and our decision making framework skips over the difference because of years of success. I would point to Bill Miller with financials, Weitz with Countrywide, and Pabrai with DFC and CCRT and PNCL. It's easy to point fingers at their mistakes, but it's more productive to realize that all those men are very smart and very successful and they still screwed up. My guess is that their past successes produced emotional networks which caused them to feel too comfortable with some risks, and too certain in the face of new information.

I think the statements Hawks references are simply generalized statements about uncertainty about stock theses. Every bottom-up analysis implies a macro view, and most value investors try to mitigate an imprecise macro view with price discounts and scenario tests. Keeping cash on hand allows for maneuverability if new information comes along that blows your views apart. I remember in March of last year I felt a surge of undifferentiated anxiety. I kept looking over my holdings in an unproductive fashion. It wasn't until I forced myself to be specific about contingencies that I could make some money.

It's a bit scary that the CFO resigned given that he was appointed by the current CEO, who had been the CFO from '05 to '09.

Sorry to hear about the job loss. Have you considered Singapore? It's a great city for foodies, and it has a pretty robust financial community.

I like Weitz's fund, but his experience with Mozilo really informed my distrust of managers. They knew each other for over a decade, but Mozilo still burned Weitz when it seemed that the relationship no longer represented business value.

Anyone have thoughts on SUR's excess capital? It seems like they have plenty of statutory surplus, flattish written premiums, and a low yielding portfolio. Assuming that loss experience doesn't hike up, it seems that management should pay dividends or repurchase stock. They could have done so from 2008, actually, if we assume a steady loss experience.

http://www.frbsf.org/publications/economics/letter/2010/el2010-24.html Figure 3 exhibits the herculean task the Fed is undertaking. Not surprisingly, Watsa spoke about this factor last year with his 20% of spending against 80% of the economy quote.

Or actually, shouldn't the liquidity discount (premium) be implied by the current rate of T-Bills?

Wouldn't the liquidity discount be a negative number with regard to T-bills? I thought the LIBOR-OIS and TED spreads demonstrated the cash like quality of perceived "risk-free" securities by showing how valuable they became relative to risky securities.

If you agree with the 12% growth estimate and the 1.5X book valuation, then you are implying a 10.5% return at intrinsic value. That's a pretty high required return relative to current borrow costs, and a pretty low growth estimate relative to historical returns. 1.5X is a good starting point to think about selling significant amounts of stock, but I would want ready alternatives before selling at that price.

They made a purchase through TIG: http://www.marketwatch.com/story/fairfax-financial-holdings-limited-second-quarter-financial-results-2010-07-29?reflink=MW_news_stmp Search for "On June 11, 2010, TIG Insurance Company ("TIG"),".

If we are assuming financially savvy management, then, as a small investor, I would prefer buybacks. The company can act as a source of liquidity to draw out less savvy sellers and pass the value proportionally to the holders. In a dividend situation, the extra value will concentrate on the most liquid holders, as everyone else can only apply their dividend plus small reserve to purchasing stock. Ericopoly, I definitely appreciate your arguments, especially considering the prices I've seen for actual buybacks. However, regular dividends seem to have a stultifying effect on shareholders. If the company needs cash and wants to cut dividends to issue equities, you get massive selling. If the management wants to divert attention from operations, it increases dividends. There is something about giving out cash that seems to placate people.

One thing to consider is that Buffett very clearly attributed the BYD purchase to Munger, and he hasn't professed any particular insight into the company. If BYD truly explains most of Lu's outperformance, then circumstances have changed, or we should view the article with some skepticism.

Has anyone tracked down the Munger interview referenced in the article? "In my mind.."

Miller drew his numbers from the Motoko Rich article, which cited a Moody's study of Fed data. I can't find the actual study, or even the data referenced, but they may estimate income differently.

Uccmal, are you underwater on the lots you sold? If so, do you get the tax loss even if you exercise the rights?

http://www.nytimes.com/2010/06/29/technology/29dell.html?src=busln Lawsuit aside, Dell's delay tactics imply an inability to solve the dysfunctional supply chain issues. I remember Michael Dell referring to broad strategic plans as a reason for his return, but I don't recall him specifically referring to supply chain reliability, or reputational goodwill amongst IT managers. Is anyone long this company?

Wouldn't you be better off with a CPA or a CA? I am waiting for my level III test results and I wouldn't hire myself over a CPA/CA with fund accounting experience.

LRE posts 4 years claims development somewhere near the end of their AR. It's under 'claims development' and breaks down into the gross, ceded, and net tables.

Really? My cousin and her family moved to Montreal a couple of years ago, and they make it seem as if the taxation is tyrannical.

Some interesting news about Dell and the Chrome OS: http://www.reuters.com/article/idUSTRE65K19S20100621

I had a difficult time getting through the article due to all snarky implications in place of substantive analysis. At some point there should have been an argument for Einhorn's analytical errors; instead, Mitchell provided cui bono arguments. Seymour Hersh, he is not.

Thanks for the link. It seems like a roundabout way of attacking the NRSRO system, i.e. a practical non-starter.