Rabbitisrich

Ah, sorry for the confusion. I meant future losses as interest rates rise and/or state and local governments begin to selectively default.

I made my last purchases recently between $339 and $350, although I fully expect to see downward price movement on the heels of mark to market fixed income and equity losses. If there is one thing I learned from the recession, if you think you can make 15%+ over time, don't worry yourself about whether you can make 30% in the future.

http://www.bloomberg.com/apps/news?pid=newsarchive&sid=a1gKwz7qcZfE Aronstein is one of the better macro oriented managers, and he usually doesn't substitute hyperbole for analysis. I know very little about the overall muni market, but I note that the LAUSD is set to sell $1.75 billion later this month. Los Angeles is currently over $200 million in the whole on almost $10 billion in outstanding debt. http://www.businessweek.com/news/2010-02-09/l-a-to-test-investors-deficit-aversion-in-1-75-billion-deal.html

eric, Have you had problems getting odd lot orders (less that 100 shares) filled? I'm not speaking for Eric, but I can only get odd lots filled for the FRFHF shares. There isn't much volume in the stock as of yet.

TRK looks very attractive after a quick glance. But what do you think about this Oasis Group nonsense? I note that the current CEO is over 80 years old, and his family member, the COO, appears to have limited experience in an executive capacity. Does the younger man intend to expand the business model? On the other hand, the acquisition of New Hampshire Speedway last year appears to have been at good price, and management didn't impair the balance sheet to get the deal. I have to do more research, but thanks for the pointer.

Did we do this thread already? Let me know. I missed out on BBEP and FUN at their very lows due to an overweighting of certain negative information. BBEP - I ignored management's history of profitably hedging their cash flow, as well as the value of said assets, which far outstripped the stock price. Instead, I obsessed with management's character and the atrocious corporate governance. FUN - I focused upon their inability to pass inflation, management's history poor capital allocation, and impending miss on the total leverage covenant. I was pretty sure that the lenders would use cash flowing companies like FUN as a means to safely boost yield. I ignored the strength of the underlying business relative to the stock price, and I didn't precisely quantify the likely effect of a covenant miss. I think management is kind of sticking it to the shareholders with the current buyout price however. So... fess up. Share your mistakes so that hopefully we will all skip out on them after the next bubble.

The argument broadly makes sense, but the author didn't put forth any numbers for a reason; as value-is-that-you-get said, there are just too many maybes. As the Kraft deal demonstrates, Buffett wants the synergies for free.

That was a quote directly from Thorp, based on his impression of the dealer's thoughts after his first score. How do I know? Don't ask. :) Now I must read the book.

Rosenfield also sold the pizza business at 9x pre-tax income to fund the purchase. Buffett referenced the Post sale from 2007 as an example of how the transaction should have occurred to avoid taxes. On the other hand, that was a reverse Morris trust deal and I don't think that many acquirers would agree to such terms. The costs of the Burlington deal might be a little higher if you include the sales of discounted companies like JNJ <$60 from Berkshire's portfolio.

The writer should have been someone with a more solid foundation in statistics. Nothing advanced, but he should at least know about the central limit theorem. I seriously doubt that a dealer would look at you with "an odd mixture of anger and awe" because you ended a single day with winnings.

I like the name change. It makes explicit, from the get go, that the holding company form dominates any particular business, regardless of the current earnings weighted importance of the business. I think that Biglari is aggressively managing the composition of the shareholders, and that he doesn't want shareholders who believe that they are investing in a simple restaurant turnaround. Farnamstreet's site contains a good article by Keith Stanovich that mentions how, even when people will buy X if A happens and if A doesn't happen, they won't buy when the status of A is unresolved.

Bexil warranted that valuation, IMO, due to the control position of an unreliable partner, the Winmill's.

Thanks for the letter. I also have a small stake in The Tandy Leather Factory, and it continues to astonish me that people will purchase discretionary leather products in the midst of a deep recession.

Thanks for the letter. As a DineEquity shareholder, I would like to know why he referred to the IHOP franchise debt as a "dog" ???.

It's difficult to source the quote from that article. The reporter doesn't state whether the information is first hand, or whether it comes from a biased source; for example, Rosenfield had lunch with hedge fund managers who owned Cadbury.

Buffett just gave an interview on Squawk Box where he said that he did not support the deal. He noted that Kraft sold their pizza business to Nestle for 9x pre-tax earnings, and that it did not make sense to purchase Cadbury at 13x EBITDA.

My guess is that the 2.7% figure slightly overstates the inflation experience of the average household. For example, a large portion of the increase resulted from the gasoline index, yet household energy prices fell with natural gas and electricity. Vehicle sales also contributed to inflation, but new vehicle sales include transfer payments from the government, while used vehicle prices probably benefited from consumers who would have purchased a new car. I also have trouble believing that shelter costs remained flat. Apartment vacancies in major cities are about 8%. I live in Los Angeles, and I received a $660 per month concession plus a free month in February of '09. I just renegotiated the rent and will only pay $190 more per month. The apartments in my area have not been able to sustain price increases.

If anyone is in Los Angeles, Gawande will provide a talk on Dec. 14, at the Central Library: http://www.experiencela.com/calendar/eventmore.asp?key=26899

Biglari competed with Lance Armstrong in a testicles contest. Biglari won... by three.

http://online.wsj.com/article/SB125746971902632491.html Mr. Fortuna's complaint lists as co-conspirators two other hedge-fund managers, each of whom allegedly fed him inside information. Neither hedge fund is named but, according to the complaint, one of the hedge-fund managers gave Mr. Fortuna information about a Massachusetts company, while another gave him information about a Texas company. Mr. Lee's complaint alleges he was exchanging information with at least six companies and one investor-relations firm as well as three hedge-fund managers who aren't named in the complaint. Mr. Far's complaint alleges he was exchanging information with four companies and four current or former hedge-fund managers who aren't named. The complaint alleges Messrs. Lee and Far paid some of their sources $2,000 per quarter in exchange for information. Other co-conspirators were paid $1,000 per quarter for information, the complaint alleges. They only paid $2,000 a quarter for inside information?

I'm not familiar with most of the hedge funds named in the article, but of the direct SAC spin-offs, only Prentice Capital seemed to deeply underperform the market.

That's too optimistic, I think. The interest might simply be a hedge against company performance; i.e., if the stock doesn't move at all, then Fairfax pays 4.2% of compounded appreciation in exchange for 5 years of 6% interest.

Thanks for the intro, Txlaw. Your volatility seems reasonable, although, as Oldye stated, much of the value is in the conversion option. And if Fairfax wanted to manage the duration of its portfolio, why would they accept common stock in lieu of cash? The structure of the transaction--mandatory conversion, management discretion of payment method, and low interest rate--suggests that SandRidge had other financing options. If Fairfax buys SD now at $8.80 and the price in five years matches the conversion price, you have 4.2% annualized. That seems like a fair discount to the 6% after-tax return after adjusting for the loss of liquidity. I'm not saying this is a poor transaction; it just doesn't look substantially better or worse than the purchase of common stock. I think it's an interesting case study on private market deals.

http://www.clevelandfed.org/research/commentary/2009/0909.cfm The Cleveland Fed produced an interesting analysis of the different, and surprisingly similar, factors leading up to the U.S. real estate bubble.

The Company may, at its option, pay dividends in cash, common stock or any combination thereof. I'm not familiar with Sandridge, but if they have a good future and they didn't have a liquidity issue, then why not simply purchase the stock? Even if Fairfax liked the Permian Basin transaction, why couldn't they demand a higher interest rate? Interesting purchase.