Parsad

That's not too bad then. Still, what's the harm in just gathering the cash flows over time and putting it to work? Cheers!

He's paying 10% annually on it, correct? He's going to have to get a pretty good return on the capital he's taking out. You spend all this time deleveraging because you want a rock-solid balance sheet, and then you lever it up again because you are impatient at deploying capital and need to get your hands on as much as you can. Cheers!

Not a good idea. Not the amount he's taking out and the rate at which he's borrowing. You start to make mistakes when you get impatient! Cheers!

A boardmember sent me a snippet stating that Biglari Holdings is recapitalizing Steak'n Shake by $160M through Jeffries? Anyone find anything on that? I'm looking and I don't see anything. From the snippet, it says he's looking at a $20M revolver and $140M 4-year term at 10% annual amortization. If true, he's levering the chain and I believe pulliing the money out to the holding company. Cheers!

Hi King, Yes, the SEC would be all over that if that happened in the U.S. Cheers!

Hi Uncommon, I think your reasoning and numbers are sound. That is based on the assumption...that WFC can achieve 15% ROE, while BAC achieves 8.2% ROE. No argument there...based on those assumptions! ;D Cheers!

You know, maybe that's why Fairfax's stock has been somewhat stagnant the last year and a half. I brown bag it almost every day, because I like to sit at my desk when the market is open and into after hours. Alnesh gets a little peeved, because he and his accounting partner like to go grab a bite every other day, and I hardly ever go because I always bring lunch. Andrew and Glen know to call my office number then, and they'll always get me on the phone. I think I remember hearing Jim Pattison say he always eats lunch at his desk. He gets an extra hour or two of work done by not going out for lunch. Although, I did go for lunch last week with an old MSN boardmember who was in town. How many of the oldtimers here remember "Marpro"? Marpro was with us right in the heyday of the short attacks. He had some good verbal spats (along with myself, Uccmal, Bsilly, etc) with the various aliases of John Hempton. Anyway, Marpro still follows the board, but doesn't post. It was nice to meet him and have lunch! I believe Fairfax stock was up $6 that day! ;D Cheers!

The 2nd quarter charge, which included a huge amount of reps and warranties reserves addition, was actually great. It reminded me of Wells taking a huge quarterly loss a couple years back to get it over with. I remember the first time we met Sam Mitchell at our dinner, and we asked him about the large restatement and hit Fairfax took that one year. It was shortly after he joined Hamblin-Watsa, and either Prem asked for his opinion, or perhaps Sam just offered it, but he said something to the effect..."Prem, we just can't have one issue or another coming up every quarter. One shot...clean it up and move forward." And that is what happened. I believe when corporations have issues with operating companies that need to be rectified, this is the best way to do it. You don't want to piece meal it quarter after quarter, year after year. Moynihan is doing that...take the big hit, clean it all up...move forward. Eventually, the market will recognize this when things look clearer. Cheers!

Mr. Market appears to be convinced that BAC will have to raise capital through a dilutive equity issuance, although even many of the analysts who believed that have changed their positions since the last quarter and CC. They do not have to issue equity. They could raise $20B in a week by selling their stake in China Construction Bank alone. As long as they don't suffer any more egregious charges like the 2nd quarter, they should be able to grow their way out of this with a few small asset sales. If they need more, they could sell that stake in CCB. Cheers!

If he provided material forward-looking information...projections on revenues, etc...then it would be considered inside information. Buffett used to do the same thing back in the 50's and 60's. Today it would considered insider trading! I believe Alice Schroeder gave an example in her book. Cheers!

I don't think deflation is likely. If anything, we will continue to see a stagflationary environment, especially if China doesn't slow. The deleveraging process at the soverign level won't allow a full-blown recovery...just too much in frictional costs from increased taxes, fees, regulation, etc. At the same time, you've got devaluation occurring for many currencies, including the U.S. dollar and Euro. For the U.S., it means that it's citizens will consume less as the cost of importing goods becomes prohibitive, but it also means that much of the rest of the world, will probably purchase more U.S. goods and assets. So economy recovers, but we spend carefully thus no blowout recovery. A "recovery" nonetheless! But this is all conjecture. Buy cheap, sell dear and forget about the rest! Cheers!

Totally agree with you! But that is what is happening. At some point...the tipping point...you will see confidence restored and money come pouring back into the economy. Thus creating jobs, consumption and stabilization in demand for housing. But it will only happen over time and as these companies and savers become comfortable. It still hasn't happened in Japan after 20 years, but I think things are different in the U.S. You have a significant influx within the population, thus you will eventually have increased demand for goods, housing, etc. Japan is a country mired in stagnation. They need to open the flood gates and increase immigration over there, as the general population is aging with few youngsters coming up to carry the load. Cheers!

You won't find much detail in the 10-Q. Go to the 10-K: http://www.sec.gov/Archives/edgar/data/70858/000095012311018743/g25571e10vk.htm Check the MD&A under "All Other". That will give you some idea of the type of assets they hold, but it won't give you the fine, nitty-gritty stuff. To do that, you are going to have to dig into their filings...big job...and you still might not be able to find all of what you are looking for. But in the MD&A, you will get some idea of those assets, and you can come to reasonable estimates or more like "guesstimates" of potential for loss. Then compare that to other assets, capitalization of the bank and cash flows. In general, read the 10-K. Cheers!

Check out the post before yours. Already a discussion on BAC, and you probably want to join that one rather than start another. Cheers!

Piles and piles of cash and everyone afraid to use it. Contrary indicator? Cheers! http://www.theglobeandmail.com/globe-investor/investment-ideas/streetwise/corporate-cash-hoard-in-the-trillions-moodys/article2111286/

How does anyone know whether Moynihan is changing the culture of BAC? This is a 100,000+ person organization. Perhaps he is changing the incentive structure for most/all of the company. But that does change the culture. IMO, that change takes years and years not months. How did anyone know that Buffett would change the culture at GenRe? What about Prem at C&F and TIG? These things take time, but it all starts with accountability from the top. Moynihan is getting lambasted because BAC was in bad shape from past mortgage underwriting and acquisitions. Between him and the government, as well as the future Basel 3 requirements, there is enormous oversight on the large "too big to fail" institutions. If anyone thinks things aren't different today at these institutions than say three years ago, they're nuts! The system is slowly fixing itself. These institutions will be the foundations upon future economic recovery. The numbers and balance sheets show that they are slowly restoring themselves or have already done so in the case of WFC & JPM. It doesn't mean there won't be bumps in the road, but it does mean that things are going to get better over time. Anyone here think WFC is going back to $9? Or GE is going back to $7? I remember no one wanted to touch either one when I was buying back in late 2008, early 2009. I was told I was nuts and it was a black box, until it was revealed that Buffett was buying both. Today, people are afraid of BAC, even though the tide is turning. Prem is buying a bank in shittier shape...Bank of Ireland! You check the numbers, you do your analysis, and then you buy when no one wants to touch the thing! People are pulling money from Berkowitz...but Berkowitz is right! Cheers!

All that to say - Parsad, it sounds as if you potentially are in BAC...if so, how do you get comfortable with what is on BAC's balance sheet outside of the Bruce argument that BAC earnings $45 to $50B PTPP and can earn their way out of it? If in fact BAC is forced to write down fluffy assets in the next couple of years, that is not enough time to "earn" their way out of it due to limited profitability over the near term. They may have more in write-downs, but I don't think it will be nearly as significant as the current discount to book. Meaning, the stock is so hated right now that investors are ignoring all of the fundamentals, and it is discounted extraordinarly low relative to earning power and potential write-offs. Financial institutions in the United States today are stronger than financial institutions in any other country in the world presently. People are going to throw out Tier 1 and tangible equity ratios of Chinese banks, but why do you think they are so high? Because the Chinese know that they have a shitload of bad loans on the book. Presently, it is night and day in loan quality in U.S. banks from 2007. Credit quality is better, you don't have risky reset products, higher down payments, shorter amortizations in many cases, and house prices have fallen 50% or more in many areas. Many bank's loan provisions will be found to be high relative to the actual loan losses...think in terms of insurance underwriting, and institutions having surpluses. Requirements for small business and commercial loans are much tighter as well. Banks are doing what they were always supposed to do...take deposits and make quality loans! On top of all of this, you have more regulatory oversight than there ever has been in banking...far greater than there was after the Savings & Loan scandal or the Great Depression. The best way to buy is to use the warrants. You probably will never see a product like that again! How do you get comfortable with it? Like any investment...how do you get comfortable with Fairfax, Berkshire, Leucadia, Google, etc. There is always some risk, but which side of the equation are you on and what is the probability that you may fall on the wrong side? If you trust your analysis, that's all that matters. Cheers!

As innocent as the call may seem, you were provided privileged information that the general public may not have been given. Use Buffett's rule: If you are asking the question, then don't even do it! In my personal opinion, if you don't own the stock already, then don't buy. And if you do own it already, then you should consider yourself precluded from selling for a period of time as well. It's why investors should not speak to executives outside of conference calls, AGM's, investor presentations, etc. It happens all the time and is hard to avoid, but it probably should not really be occurring. Cheers!

He's also really cleaning up the culture...both at BAC and Countrywide. When the economy recovers, the engine at BAC is going to surprise everyone! You have a weak economy and weak housing market, while they are still turning around their operations and shrinking their business. Excluding the 2nd Q charges, you have a bank that can earn almost $16B net annually with current spreads...and they have less than half their assets in loans! In a couple of years, you will see a leaner, meaner bank that will earn net profits north of $20B...or about five times earnings based on its current market capitalization. Cheers!

Berkowitz is completely correct. BAC today reminds me of Fairfax 2005. Midst of a turnaround...the pig half-digested...investors underestimating earning power and improvements in the balance sheet. I also like Moynihan. It was his predecessor who made the Country-wide deal, while attempting to stabilize the system at the behest of Paulson and Geithner. Moynihan is doing alot of the right things! Cheers!

Well, they haven't been sued yet! ;D Many of the relationships have been covered in other stories by them or other journalists over the years. Some of them I have no idea. Cheers!

Sino hit $7.12 today! Maybe Block should have sold when his bear raid was plentiful. If Chandler pushes for change, and gets control, this thing could easily go back over ten bucks plus. Cericwb's purchase is looking pretty good about now, I guess! Cheers! http://www.bloomberg.com/news/2011-07-26/sino-forest-advances-on-speculation-billionaire-chandler-will-seek-changes.html

The SEC will monitor firms that are involved with large daily or monthly trades. Cheers! http://www.bloomberg.com/news/2011-07-26/sec-weighs-system-to-seek-abuses-among-market-s-biggest-traders.html

The Shareholder Foundation Inc., which is a class action lawsuit firm (if you can call it that...more like fly by night outfit) that files against corporations, has filed a lawsuit on behalf of "an investor" against Fairfax Financial in regards to the use of finite reinsurance and restatement of filings going back to 2003. Interesting how this suit comes up now...eight years later...just before we head to trial against some of the largest and most powerful hedge funds in the world. Cheers! http://shareholdersfoundation.com/case/fairfax-financial-holdings-limited-usa-hit-investor-class-action-lawsuit-over-alleged-securitie

Cheers, and since I haven't mentioned it yet, Congrats to the BRUINS! Damn you! Just as I was starting to forget that we lost. Thanks for ruining my day! About a month ago, I was just hanging out with my brother and cousin at a restaurant, and in the middle of dinner, I just blurted out in an exhausted voice "I still can't believe we lost the f**king Cup! How the hell do you lose a series when you are up 2-0 and you've gone through all of that to get there? And what the hell went wrong with Luongo!" They just looked at me like where did that come from. I said, "I guess it's just hitting me now!" ;D Cheers!