Parsad

As someone who doesn't short and doesn't plan on investing in any Chinese companies any time soon, I do find it odd that so many on this board are so vehemently anti-shorts. So long as people make their investments in an appropriate way, why so troubled? No one seems to care when people are long and come out and tout their stocks, but when short and they tout that, it seems to be viewed as a very bad thing. People seem to forget about the goose and the gander. Just my 1 cent. I do have a problem with it. I've had a problem with it for the last eight years. And that isn't because of someone shorting stocks in and of itself. But because disclosure rules for those with short positions, still aren't the same as those with long positions. They've talked about it...they plan on implementing it...but it still isn't the same yet. Once they do I won't have a problem. After that I'll move on to derivates traders and how their disclosure rules aren't adequate. But until then, hell yeah shorts are on my scope! The rules should be equitable, and no one should be given any special privilege in hiding their incentives or motives. Cheers!

I totally agree. I just don't like the way he approached this whole thing, and I'm suspect of how covert he keeps his operations. This strikes me more as Barry Minkow's "Fraud Investigative Unit", then say Bob Woodward and the Washington Post. Cheers!

From the comfort of living in N. America it is easy to romanticize India from afar. Or China for that matter! Every decade, North American's go through how good things are elsewhere. First it was Hong Kong, then the Japanese, then Europe, after that China...now India. Yet all these countries went through their boom and bust...China and India the exceptions. Although China is getting close and at some point India will also. The system here works. People are panicking about the debt ceiling debate, but the system of checks and balances is actually working. I can't stand the Tea Party idiots, but they are actually forcing the Democrats and moderate conservatives to really look at getting the country's fiscal house in order. But the Tea Partiers may be dumb enough to take it too far, and that is my only concern. I think at the end of the day, the majority of them will come to their senses and we will have a compromise. But it will be compromise that would not have occurred if you only had one party controlling both houses. America has its problems, but it also has the ability to overcome them. Some people were complaining about the bailouts, but the Americans in two years have done what Japan couldn't do in ten years. Wash 'em, hang 'em out to dry, and then start all over. Look at Europe...they still haven't strengthened their financial institutions. The worst banks in America are stronger than the best banks in Europe. Other countries love to save face, but they don't want to get down and dirty. Fortunately, or unfortunately, America loves to get dirty and they don't get embarrassed easily. You screw up and then you go fix it. Cheers!

CNBC has an article on Block that also isn't very flattering. Sounds like a frat boy turned attorney turned short seller. Apparently, he's figured out he should now go long on some ideas, since he could make a heck of a lot more. http://www.cnbc.com/id/43765929 On another issue, has anyone actually visited Block's father's company website - WAB Capital? http://www.growthequities.com/wab_faqs.html#002 Not sure how they do anything different than the various investor relations firms, large and small, that push a company to institutional clients and investment banks. In lieu, they usually get a cash fee and and equity stake through shares, warrants or options. The stock goes up as the investment bank pushes the company on their retail client base, and the IR firm and investment bank liquidate their stake as the price rises. Hey, I guess they provide a much needed service! Cheers!

A theoretical portfolio with 100$ each in each of 30 stock has returned $3095, so the short position has a loss of $95 excluding commissions & other fees. If the assets are with a fund manager, depending on how they receive their management fees (incentive, fixed or both), then there would also be that expense. Unfortunately, I'm in agreement with Buffett & Munger on this subject. Why would you want to have a basket of 30 positions plus? Diversification or deworsification? Much easier to find things to go long on and just buy a few...the upside is significantly more as well! Cheers!

NY Times article on high frequency traders. Cheers! http://www.nytimes.com/2011/07/18/business/fast-traders-under-attack-defend-work.html?_r=1&ref=business

I totally agree! That's why I said his conduct was fishy to begin with. If you are going to play in the big leagues, and you are going to take pot-shots at people's livelihood, including the accumulated investments of private shareholders, then you better be willing to take the flak if you think you are right. No one takes kindly to being spit upon, and if you are profiting from someone's downfall, there are always repercussions. Plenty of journalists take the same risks, and they don't take to this hiding under a rock behavior. Take a look at David Baines, who is an investigative journalist for the Vancouver Sun for the last 20+ years, and he focuses on uncovering fraud here in Vancouver. Numerous death threats that you can no longer even count, and he's uncovering fraud after fraud. Yet, he never goes into hiding. He just goes about his work doing the honorable thing, and he's never taken a payday from uncovering such fraud. Cheers!

Not a particularly flattering portrait...both the picture and the article! Cheers! http://www.theglobeandmail.com/report-on-business/managing/the-lunch/carson-block-the-man-who-felled-a-forestry-giant/article2099190/

Sanjeev, Any ideas about his position in MannKind? He spoke about it at the dinner I believe when someone asked him a question on it. He said that it was cheap, but primarily a bet on the CEO, who poured millions and millions of his own money into the business and the insulin inhaler. Hasn't worked out the way he wanted it to at that point, but he was still optimistic. Can anyone else remember what he said exactly? Cheers!

Sanjeev, Why did Francis leave Fairfax? When Fairfax was trying to simplify their business because of all the criticism around the complexity of the company, one of the things that someone was critical about was that Francis was a vice-president at Fairfax while running the Chou Funds, and Fairfax was an investor in the Chou Funds as well. Even though Francis was not receiving compensation for working at Fairfax, they decided it was better to make sure there was no way anyone could be critical of the relationship. So Francis gave up his position there and runs only the Chou Funds. Fairfax remains an investor in the Chou Funds, so they are arms length. That doesn't mean Francis has no influence on the investment process at Fairfax. I'm sure they talk about investments all the time with him, and mutually desireable ideas come along all the time...for example Abitibi debt, Level 3 debt, etc. If they also ever needed him for anything, I'm sure it would take no prodding at all for him to assist them anyway he could. That should alleviate concerns for those that believe the hierarchy at HW is getting a little long in the tooth! ;D As one of the largest individual investors in Fairfax (and he's got all of his shares he bought at $3), I would love to see Francis on the board one day if there ever was an opening. He's smart as a whip, a brilliant investor, understands insurance, and his ethics and humility are unparalleled. Cheers!

OK, that makes more sense. I take back my initial comment if the quote was taken out of context. You know the smartest thing to do would have been for the writer to fact-check the article with Mohnish before printing. Especially, when you are quoting someone in an article and then you are critical of their comments. You see this all the time with Buffett or whoever else. A very specific quote is taken out of context, or perhaps Buffett hasn't clarified the response appropriately. Example: Buffett - "I don't understand technology" comment from years ago. How many people reamed him for it, including Jim Cramer in that famous challenge where he listed ten stocks that would outperform Berkshire Hathaway. Over the next five years that portfolio was down 95%! It was never that Buffett didn't understand technology, but only that the outcome of technology companies were harder to determine and that would directly affect any calculation of intrinsic value. Cheers!

I would re-read his comments. He was stating that the primary benefit of a net-net is that it provides down-side protection. His example was one of which the net-net was trading at a discount of 10% to cash, and perhaps 80% of intrinsic value ($100M in cash and recurring income valued at $15M - trading at $90M total). If you liquidate that, you get a 25% return. The same thing if the cash was at $110M and the market cap was $90M. The bang for the buck is not worth it to him. He looks for companies that go up 2-3 fold plus over a few years. I personally look for those 20-50% returns over shorter time frames with that downside protection, but he looks for multiple-baggers over several years. He isn't going to find that in the stuff I'm looking for...thus the volatility in his fund as well. Again, he's trying to explain this to the person who asked the question. Incidentally, before you ask, he isn't saying he wouldn't buy net-nets. Only that the return on them be commensurate with what he is aiming for. For example, he bought Fairfax at 50% of book, but it was a business that could also generate a signficant stream of income over time. He's bought other net-nets as well. His point was that a net-net in and of itself, does not mean he would be a buyer. Cheers!

That's not at all what it sounded like he meant in that article, for what it's worth. It sounds like he believes in 17 year cycles. Why else would he have said the next bull market will end in 2033? He's giving an analogy: So we have these perfect symmetry events where 1982 to 1999 the market ran a lot. And from 1999 to 2016 let’s say it does nothing or did nothing. So all we have to do is get to 2016 with a pot of cash and then we climb again until 2033. So when those puts expire, which is way after 2016, my view is that Berkshire will be just fine. They will have no pay out on those. But if you’re concerned you should ask Warren at the annual meeting and maybe he’ll give a better answer. He's saying suppose we have this perfect symmetry of events (there is no such thing as perfect, thus he's using the analogy) and markets ran alot from 1982 to 1999. From 1999 to say 2016 they do nothing. Now you have another bull market for simplicity's sake running to 2033. Berkshire's contracts would have no losses as the bull market would be a few years under way. He was simplifying it for the idiot who asked the question! He's just too polite to say that, whereas...well you know me! ;D Cheers!

I was there when that question was asked. He wasn't saying that markets ran in perfect 17 year runs. All he was saying, in response to the question about the S&P contracts Berkshire insured, was that if markets run flat for the next few years because of the deleveraging process and then a new bull run starts as many people expect, including Munger, then Berkshire would not incur much in losses...if any...as the coverage dates were well out! That's all he was saying there. In regards to the net-net question, again all he was saying is that a net-net with little in the way of recurring income, is of little interest to him. He's not an activist, so he isn't going to buy the net-net and reinvest the excess cash. For someone else, this may be a much more attractive investment, such as Sardar or myself, where I would be happy to get my hands dirty and redistribute the cash. If the cash is redistributed, then that changes the intrinsic value of the investment based on the recurring income. If the cash sits there like an anchor, and does nothing, then that business is of no interest to him. Not sure why this is so difficult to grasp for some. Cheers!

The best way to describe Francis is the way I see him: Clark Kent to the outside world, and Superman when it comes to his depth of knowledge in investing. He has one of the most mild-mannered personalities you will ever meet, and he will never do anything to hurt or insult anyone. But his investment mind is superb and one of the best I know. Everyone at Fairfax holds Francis in very high esteem. I don't think there is anyone who could ever dislike the guy. Incidentally, for all of you folks who enjoy our annual dinner, he's instrumental in getting all those people to show up, along with Prem. I consider both my mentors, as well as Tim and that f'n crazy Pabrai that some have recently jeered! Cheers!

8 European banks out of 90 failed their stress tests. And that was Tier 1 capital being maintained at only 5%...yikes! Cheers! http://finance.yahoo.com/news/8-banks-flunk-European-stress-apf-202243619.html;_ylt=Alcrz2CgFjp04HtTEPIxAOO7YWsA;_ylu=X3oDMTE1ZDR2bmwxBHBvcwM1BHNlYwN0b3BTdG9yaWVzBHNsawM4YmFua3NmbHVua2U-?x=0&sec=topStories&pos=2&asset=&ccode=

No, I was there when it was asked. The question was about internet stocks, and after Warren gave a long-winded answer, he turned to Charlie and he said "When you mix raisins with turds, you still get the turds." We all went crazy in the Civic Auditorium. Although that answer still could be applied to a number of things. Cheers!

What's interesting is that if you look at the little side poll on that page, which asks: "Should lawmakers support Senator Mitch McConnell's proposed "backup plan" if debt negotiations remain deadlocked?" 53% of respondents say "No!" If the general public is split on this issue and actually the majority say "no", then what do you think politicians who are only concerned about their own station in life are going to do? They are playing with fire, and somebody's already poured the gasoline! Cheers!

Very interesting and exciting! Cheers!

Hard to slow a bull's momentum! Not going to end well. Cheers! http://www.bloomberg.com/news/2011-07-14/china-to-intensify-housing-curbs-in-smaller-cities-as-price-gains-quicken.html

I would boldly suggest there is a greater than 5-10% chance that they do not raise the debt limit as soon as many people think. I would even suggest that number is closer to 30%. People will often do the most absurd things to make a point. Even if that means the outcome is far more costly than to concede. Cheers!

Article in the Omaha World-Herald about the lady selling Buffett's childhood home: http://www.omaha.com/article/20110615/NEWS01/706159915 I've read a private email she sent someone regarding the home, and I can tell you that she definitely is sincere and is huge fan herself that it was the home that Buffett grew up in. She hopes that whoever buys it also cherishes and relishes that fact. Cheers!

Exactly as Max described. So whenever the high watermark is reached, that is where the compounding continues from. So any new investor coming in when the fund is down to $14/unit, would have the benefit of the high watermark being at $15, as well as the 6% annualized compounding from $15. I think it's the most equitable way to compensate the manager...if you don't perform, you don't eat...and the greater you outperform, the more you make. This forces the manager to minimize losses (as you don't want to be underwater long), and make bigger bets when they believe it is more advantageous. Cheers!

I would assume the 6% annualize mean if your fund is above $11.91 per unit you get to charge a fee ($11.91 = $10 * 1.06 * 1.06 * 1.06) Or does the annualize mean it has to be higher than $15 * 1.06 = $15.9 (which the fund is not) so no fee Make sure in the agreement. The LP Agreement is the end all of the fee structure and is the equivalent of a legal contract. Different funds have different rules. Our fund operates the same as Mohnish's. Every time the fund is valued (in our case monthly, but some are quarterly, etc), if the fund reaches a new high then that becomes the new high watermark, and the fund has to achieve the equivalent of 6% annualized before any incentive fee is paid. another stupid question. what about new money that comes in? if your fund its at $14 per unit (via the example) and new money come in at $14. what is the high water mark for new money? is it $14 or $15? Our fund operates only on an incentive fee. There is no set management fee like many other funds. Again, you need to clarify how the incentive allocation is calculated with the fund manager, and you should probably get it in writing if it isn't clear from the LP Agreement. With our fund, if the fund is below the high watermark, no incentive fee is paid at all until all the partners, old and new included, are made whole and then their 6% annualized return is also achieved. The general partner doesn't receive any partnership income at the expense of the limited partners. This is something you really need to pay attention to. Alot of funds back in 2008 did not take incentive fees on old money because their fund was below their high watermark, but they did take incentive fees from all the new money they took in. In our opinion, this isn't fair as the markets rebounded significantly in 2009/2010, and these managers took healthy incentive fees while many of their older partners still had not been made whole. The Pabrai funds that you cite are unusual in that these, in the fashion of BG and WEB's funds, have not, I think, charged the usual about 1% or 2% annual management fee. Very few investment managers have been able to survive long term by waiving all but the performance fee. Tilson did this for a few years, and then changed terms to add the management fee. The S&P500 P/E 10 is currently 23+, above the long term mean of about 16. It will be difficult for any hedge fund to survive long term without an annual fee as the current PE 10 almost certainly will regress from the current record profit levels to a lower mean at reduced profit levels. This is true, but let's examine the reason why. I would bet that the majority of fund managers who don't last long-term, usually do so for two reasons: 1) Exorbitant operating expenses...they want the fund image to be like a typical Wall Street bank and a salary to boot! 2) Excessive risks...they decide they want to operate like a typical Wall Street hedge fund! You cannot survive long-term without running your fund as lean as possible, and you have to always do everything to avoid risks that could lead to permanent loss. We've managed five years on a shoe string budget, beaten the S&P500 handily, and mitigated investment risk. The way we've managed the fund, means that long-term isn't an issue for us at all...and we are tiny! If you don't survive long-term, it comes down to the two points above. Cheers!

I think the income will be retained in HOA Holdings. I don't think any of it will be trickling down, but they will benefit from their ownership in HOA. I thought Chanticleer would have gotten significantly more for their right of first refusal ($2-3M+), but it looks like they just got a seat on the board, and Chanticleer will be paid $100K a year for consulting. It looks like their only ownership is the $500K investment through Investors LLC. Maybe they'll shed more light on the subject in the next quarterly report. Cheers!