Parsad

I suspect there will be multiple such settlements and trusts for all of the various lawsuits that are out there. Banks, not unlike the tobacco companies in the last decade, will put these issues behind them through settlements. Cheers! http://www.cnbc.com/id/44403367

Moore, I'm not bashing gold, I'm bashing speculation and overvaluation. I owned gold from 2003-2004 to 2009-2010. Just like I own the same technology stocks today, that I was reeling against in 1999 and early 2000. Or financial institutions from 2006-2008, which I own in abundance now and am buying more of. Now I'm reeling againt the overvaluation in gold. I don't short because the liabilities are unlimited and the upside is limited, but if I was someone who was inclined to short overvalued and irrationally priced investments, then I would be shorting the hell out of gold right now. With CRM and OPEN down significantly (CRM still has room to go), there is nothing else I can see that I would want to go completely short on right now more than gold...nothing else! We can both make arguments till the cows come home, but I see it as clear as my hand in front of my face. Based on supply/demand, gold is over double what its price should be. It probably will go higher because there just is so much fear, but it is overvalued. And when it does correct, it won't be over a long period of time, it will be a rapid correction with many late buyers getting creamed. That's just how it works: - 12 years ago Microsoft was at $140 and dominated the computer software industry. Everyone wanted to own it. Today it's at $25, makes more money per share than ever before and has virtually no debt, yet no one really wants to own it. - 10 years ago Citigroup was at $50 and was the largest financial institution in the world. Again, everyone wanted to own it. Today at a split-adjusted $5, no one wants to own it, even though spreads on lending and deposits are the best they have been in 20 plus years. - 7 years ago, gold was at $300/oz and no one wanted to own it. People thought gold had no value left and anyone buying was a fool...I was stuffing my safety deposit box. Today, it's at a higher inflation-adjusted price than the average price in 1980 when inflation was rampant, and everyone wants to buy it because they are scared. I don't need to know about the velocity of money, quantitative-easing or fiat currency. All I need to do is apply some common sense. Cheers!

The average price of an ounce of gold in 1980 was about $1,825 inflation adjusted dollars, while the single peak price was about $2,350 in 1980. At $1,900 per ounce, gold is now higher than the average 1980 inflation-adjusted price...during a period when inflation was actually rampant! While there is elevated inflation right now, it is not running significantly greater than the historical average. And in actuality, Europe without a package, may be headed into a inflationary/deflationary spiral as the economies slowly seize to a halt and the Euro devalues. That's alot of interest in gold, during a period of relatively insignificant inflation, a possibility of deflation in certain parts of the world, and stagnant economies in Europe, the U.S. and Japan. At these prices, gold investors better be right that they expect paper money to all but disappear. Cheers!

I suspect we are getting pretty close to seeing some sort of huge European bailout package/fund being approved. The $440B package was delayed till at least October due to voting, but I think we are going to see something sooner than expected. We aren't going outside of North America (no need at our size), but European investors can probably find many things that were priced as cheap as U.S. stocks in late 2008 and early 2009. I would not be surprised to see Fairfax and Berkshire announce further large investments in Europe as well. Cheers!

Sanj, have you thought about setting up a fund like that? I would think a lot of partners would easily do something like that. If I'm not comfortable doing that with another manager, then how can I expect anyone to do it with me? Although I'm happy locking up my own money with myself! ;D Cheers!

I think his goal is to just scare companies into either adding him to the board (CCA Industries) or forcing them to seek strategic intiatives (Fremont Michigan, Friendly's, Penn Miller). If he gets either option in 50% of his attempts, then he is going to do well relative to the time, effort and cost of the activism. He knows that. It's the same thing Ackman and Icahn do, and he admires both. It doesn't really matter what the argument is. For example, the criticisms of Cracker Barrel's CEO were pretty weak. So they didn't fully break out the disclosure of the two lines of business. Big deal! He's just throwing any sort of gas he can find, and then lights a little match using the threat of a proxy. You'd think at least there would be some comparables in salary, bonuses and option grants relative to competitors, poor operating performance, low return on invested capital...something of more substance. But he doesn't need it anymore. His reputation is almost enough now, and all he has to do is pick a fight. Cheers!

2) Yes, absolutely that is the only advantage we have as value investors. For this exact reason I am advocating always being fully invested, however, I am advocating hedging in certain times instead of going to cash. ie if you are a really good value investor, harness the value investing advantage at all times by hedging when others are greedy. Sorry Mungerville, I mis-understood your original comment. I thought you said you were 100% cash AND hedging. Yes, I would agree that if you are fully invested, then hedging would be a rational way to protect your capital. Personally, I prefer cash in most circumstances, as the frictional costs from hedges can eat away at returns if you are wrong for a significant period of time. We've moved pretty quickly in and out of cash over the last couple of years, simply due to the massive swings. We were fully invested a couple of weeks ago, and a couple of our investments recovered rapidly where we averaged down significantly, so we built our cash position back up to about 15%. Cheers!

According to JP Morgan, stock funds are trailing the markets the most since 1998. In the nine years that stock funds did trail by the end of August, the markets rallied in all but 2008. It doesn't mean diddly, but it's an interesting statistic. Cheers! http://www.bloomberg.com/news/2011-09-02/stock-mutual-funds-are-trailing-market-by-most-since-1998-jpmorgan-says.html

No, no, he provided those results long before. His results may be better or worse from then. I don't know what they are like now, and that's why I asked. It was over a very short time period, and from what I saw, systems did not provide any advantage whatsoever. There were also 3 and 5 year lockups. If I had a five year lockup, I could get 18-20% a year for partners. Lockups provide enormous advantages! But I personally would not feel comfortable being locked up with a manager for five years, so that is why we have no lock-up. It's the partner's money and they should have access to it if needed. It just means I have to be that much better at my job, and I can live with that if it gives them more comfort. Cheers!

100% agree Al! Also 100% agree with this! Cheers!

Hi Packer, This one is an auction and the proceeds are going to Dakshana. We are going to see exactly what the free market values it at! ;D I've got another signed copy that we will be raffling off at next year's dinner in April 2012, and those proceeds will go to "The Crohn's & Colitis Foundation of Canada". I also still have the autographed Peter Cundill book too. And that will be part of the raffle as well. Cheers!

1) Stock Market Valuation I am not as optimistic as my friend Uccmal whose views I respect very much. For example, I think the US stock market has been significantly over-valued for the last 14 years (roughly the entire period I have been investing), with only very brief periods of fair valuation (eg March 2009). There have been longer periods in those 14 years where stocks have not been outrageously /dangerously priced (just “high”), however, in no time in these 14 years have these “high” prices been accompanied with governments and central banks both “doing the right thing” at the same time from a long-term perspective in order to give me the confidence to fully take off the hedges. Rather, its been high prices accompanied by kicking the can down the road one more time. The methods of other smarter people than me also indicate stocks are “high” (assuming price stability that is): Buffet’s Fortune articles in 2000/2001 go over how to value stocks to GDP (although he was being somewhat optimistic in those analyses so adjustments are necessary, and one can track Munger’s comments from the period to get a sense of the adjustments necessary), Grantham’s valuation methods for the S&P 500 have been very good over the last decade. My conviction on valuation leads me to continue my hedging … You are assuming investors are only buying the market. If the market has been overvalued for 14 years, then how did I manage to quintuple my initial investment capital in that time? In fact, my initial investment in Corner Market Capital is up 4,000% over the last five years. If you are searching for value, then you are buying individual investments...equities, bonds, entire private businesses, etc...not the market. 2) Portfolio hedging and the kicking of the can Watsa bet along with Buffett in late 2008 that the can would again get kicked, and kicked it was - big-time, and Watsa took off all the equity hedges. In no way had anything fundamental been fixed and he knew that when he did it (Watsa that is) – he bet on the stimulous having a huge effect (Grantham also called that – and exactly in March 2009 no less). Its one thing to bet on the can getting kicked and the effect – you have to be very wily to be sure the can will a) get kicked again, and b) of the effect of the kicking - however I would argue that that involves some degree of risk because the politics could somehow turn against you and then you get caught 100% in stocks in a depression. Both Buffett and Watsa – being wily enough though - took that calculated risk at the end 2008/2009 and were proved right. Actually, although sometimes I thought I was nuts to do so, I have been hedged to at least some significant degree probably at almost every point since I started investing over a decade ago – because stocks have either been 1) way over-valued or 2) highly value accompanied by mismanagement of the economy at all points in that period (other than very brief points like March 2009 where we got to some level of fairish valuation). I was fully hedged going into the crisis, but I could only bring myself to take off 50% of my equity hedges at that same point Watsa took off 100% of his. I have been 100% hedged through all of 2011 having fully transitioned up again from that 50% hedge. If you contrast the last 4-5 years of my hedging with Watsa, he took off 100% of his hedges in 2009 … but they went back on in 2010 and he is again 100% hedged now – so he wasn’t long without them precisely because nothing has been fixed, the can keeps getting kicked and the stock market remains high. But now what is changing is that they have kicked the can so damn far down the road, they got to the end of road, but that didn’t even stop them, they went out and got the dozers and built more road to kick it a couple more times. So although I want to simply hedge 100% (ie basically 100% cash plus a value spread) like in 1997, I can’t be what is effectively 100% cash now (ie the financial system was going to collapse then and effectively 100% cash was great then, but now the threat has been shifting to the monetary system – and 100% cash is not good in that situation but nor do I want to be unhedged 100% long in stocks because nothing has changed on that front either - ergo Watsa is 100% hedged) … This argument doesn't wash with me, and I have no idea why individual investors always reflect back on what Prem is doing. Fairfax is an insurance company. One that carries asset to equity leverage of 4-1 and about $2B in consolidated debt. Their business absolutely exists based upon their credit rating and levels of statutory surplus. If either goes down, they could be out of business. It is very likely that Fairfax's credit rating would drop significantly if they lost 10% of their assets, which would be roughly 35% of their equity. If somehow the credit rating stays intact, the amount of business they could write would shrink enormously in such circumstances. He has responsibilities to his employees, shareholders and customers. Especially the customers who bought policies that need to be paid out in the most dire of circumstances. Like Berkshire, or any other insurance company, Fairfax's check cannot bounce. That's why Prem hedges. 3) The Right Dry Powder (precious metals versus cash?) and Optimal Hedging/Portfolio Construction in this Environment As value investors, we have been content keeping our “powder dry” in cash in the past, or like Pabrai did before the financial crisis started, some have even kept it dry in Berkshire Hathaway. Like Pabrai questioned himself keeping his powder dry in Berkshire during the crisis, I question keeping powder dry in cash in these times. Maybe this thinking came from my hedging, but I started thinking a couple years ago, if I am 100% hedged like Watsa, my net position is basically 100% cash with, hopefully, me earning my value investor stock picking spread. But its basically 100% cash plus a spread and do I want to be 100% cash now at this point. In the past decade that has been fine, stocks have gone nowhere overall so hedging 100% and being effectively 100% cash plus a spread has been fine, but not now because other forces are becoming increasingly prominent: one of the potential directions we are headed in seems to be towards a whole new monetary system (maybe the odds are 60% in my view). The others are a depression (maybe at 20%), and also the chance of just some sort of muddle through (20%) which eventually becomes inflationary/ stagflationary – this is what the central bankers are shooting for as it’s the most palatable option. I certainly don’t want to be 100% in cash if we go to a new monetary system, nor do I want to be 100% in highly valued stocks if we go into a depression, and I don’t think I want to be 100% stocks in stagflation. At a minimum, I want my “dry powder” to be “safe” in all situations and ready to deploy in undervalued stocks. But forgetting the minimum, from an optimal portfolio perspective for the next 5 years, I want to make as much money as possible in a safe way without anyone robbing me of my value investor spread (that spread being the spread between the growth of the value of my portfolio measured against both i) the stock market performance, and ii) cash) by inflicting on my portfolio either 1) significantly higher price levels, or 2) a depression. And if we see deflation, which is also one of Prem's hedges? What is gold's price going to do from where it is right now? Macroeconomic forecasting is a very dangerous thing for the average investor. If the best economists in the world can never get it right, what advantage do we have? The only advantage the value investor has is the intellectual framework that allows us to come to some estimate of an investment's intrinsic value, and then apply a margin of safety before buying. That's the single greatest advantage we have. I do not know of any other aspect of finance where we have such opportunity or probabilities. Cheers!

They were relatively stiff softcover books. Cheers!

Harry, I only have unaudited Contrarian Partners LP returns you sent me in the past from August 2009 to May 2010. How have the systems been working for you since? Better or worse? Cheers!

PStahley, I don't think Harry is hard of hearing. Just averse to disclosing his actual returns. ;D Cheers!

I was short, I covered. How did you like the "short" thread? Geez Harry, not sure because it might have been one of the threads and posts you asked me to delete under threat of libel and slander against people who posted comments you did not like. Cheers!

I agree with Fritz...I mean Fred...no, Harry! Geez Kraven, you've got me all confused. Now what was Fritz...er, Harry saying? Cheers!

Hi Folks, No, the auction has not happened yet. It is scheduled for sometime in October, as Mohnish will be auctioning both the book and a lunch with him simultaneously. He'll give me the heads up when everything is set to go, and I'll post the link on here. Cheers!

That's fantastic! Great to see, and what else would you expect from Fairfax and its executives. Cheers!

Actually, according to the letter Cracker Barrel sent to Sardar, I think they were more than fair. If he's not agreeable to what they offered, I too would tell him to go to hell. Woodhouse was much more polite! ;D http://finance.yahoo.com/news/Cracker-Barrel-Responds-to-bw-2034856243.html?x=0&.v=1 Also, they've done their homework on him by the looks of it. Cheers!

Hi RJ, Good books, but I need each of them in the format of: "Title" - "Author(s)" That way we have a running dialogue on a specific book, so if someone wants to know about that one book, they can read the thread and find out if it would be a good choice for them. Cheers!

My friend, Guy Spiers of the Aquamarine Fund, was on Bloomberg last night. He had some terrific comments about the current economic malaise, financials and Japanese stocks. He's also one of the nicest guys you will meet in this business. Cheers! http://www.bloomberg.com/video/74680581/

That only makes sense...the FFH position strategy, not the dislike Tilson part. ;D Cheers!

I suspect they sold FFH simply because there were bargains to be had and Fairfax's stock didn't move around much at the time. I think Zerohedge is blowing the loss out of proportion. It's not any worse than Berkowitz, and they got pummelled because they probably had little cash as they short. The T2 fund actually has a pretty good record, so I suspect if any of their partners pull capital, it will probably be a mistake. There doesn't seem to be anything in their portfolio that looks worrisome. Cheers!

Totally agree. There is alot that Google Docs still can't do. It may be fine for students, non-business users, etc. But the software does not have the capabilites for business users. Yeah, the problem is that it will only work if you use Chrome. And there was something else that was silly...I believe you have to toggle between two platforms or something to be able to use it offline, if you were already using it online. You do not have to do that when using 365, which is probably what I'll switch to when the next Office versions are released. Cheers!