Parsad

Eric, Dost thou mock the Calistri? She's up 22% this month...ok! Analytics my friend, analytics. Cheers!

Hi Folks, I emailed Joe Koster last week, and he suggested that everyone that is attending the Pabrai Funds AGM in Chicago meet at the lobby/lounge of the Marriott Suites O’Hare around 2pm, which is right next to Carlucci’s. I’ll confirm with Joe when he gets back home on Tuesday or Wednesday, and if there are any changes, I’ll make a subsequent post. For those interested in hitting a Steak’n Shake, Sardar told me that this week is a great time, as they will have new products out. He’s also interested in any feedback we can offer after visiting the restaurants. I’ll be hitting three, so anyone who wants to go to one let me know and we can go as a group. I’ll be hitting the one in Rosemont late Thursday night after my flight arrives, another on Friday around 3-4pm and probably one Sunday around noon…and yes, I’m going to take it very easy at each visit! I’ll also try and hit one of the HI-owned Hooter’s in down town Chicago, as I have a meeting there Friday morning…not at Hooter’s, but somewhere else. If you plan on coming to the Marriott, let me know (sanjeevparsad@shaw.ca) so that I can get some nametags printed up. If there are any changes, I'll update as necessary here. Hope to see you guys there! Cheers!

Watsa, I agree with you, except that I think the 1.16X offer should be on current book, not June 30th. Either that or Fairfax should pay 1.2x June 30th. I think at $63, they would get 2/3rds of the remaining shares. I have a hard time believing that it will happen at $60. I'm not complaining though! ;D Cheers!

In line with our past assumptions regarding the economy, larger and larger numbers of food stamp users are those that remain statistically employed, but have had their hours or hourly rates cut back. The numbers continue to be very shocking. There will be no consumer lead rebound. Cheers! http://www.ft.com/cms/s/0/c1e698a2-9984-11de-ab8c-00144feabdc0.html?nclick_check=1

Hi Cardboard, I think your thought process on the transaction is the correct one. That would make sense why they had to issue equity but pay for ORH in cash. Cheers!

Short, but good article on Florida's first net emigration of residents in 63 years! Cheers! http://news.yahoo.com/s/time/20090903/us_time/08599191991600

I don't understand why they didn't just offer a specific amount of shares of Fairfax, fixed to Odyssey's price today. That would make the transaction tax-neutral and they wouldn't incur all the investment bank costs to issue new FFH equity to buy ORH with cash. Cheers!

Hey, I did my part too...you know how hard it is to keep Fairfax's market price up by eating a huge lunch every day! ;D I think some of us will sneak some beer into Steak'n Shake next week. Cheers!

I suspect they'll have to sweeten that a bit. They paid 1.3x for Northbridge, and the 1.16X they are paying for ORH doesn't include the change in book value since June 30th. Cheers!

Some board members here got it right! A 20% premium to today's prices. Cheers! http://finance.yahoo.com/news/Fairfax-Proposes-to-Acquire-iw-1475079578.html?x=0&.v=1

I'm bewildered by all the amazing press Steak'n Shake is getting these days. It started with Roger Ebert and his ode to Steak'n Shake. Numerous articles later by other people, and we have another ode to the company. This one is about a student, his visit and how he is in love with the experience. Amazing! Perhaps, the cult of "In-&-Out" isn't so far-fetched. Cheers! http://www.studentprintz.com/opinion/a-love-story-the-journey-to-steak-n-shake-1.349239

The first group of unemployed to lose their benefits after 18 months will occur at the end of this month...some 400K people. That number is expected to triple by year end. Currently, there are over 6M people on unemployment benefits and that number is rising by roughly 500K a month. Roughly 3.4M are already on the 53-week extended portion of their benefits the government implemented. Cheers! http://www.cnbc.com/id/32677734

As we also mentioned in our letters, we expect unemployment to continue to rise through the next year. Businesses are streamlining, becoming more efficient...the cost of which is greater profitability per employee. And the unemployment numbers below are with the Federal government more than doubling the normal term of benefits. Imagine the situation when those benefits cease, and productivity and employment don't start to increase through 2010 and 2011. Cheers! http://finance.yahoo.com/news/New-jobless-claims-dip-less-apf-386475816.html?x=0&sec=topStories&pos=4&asset=&ccode=

That was pretty funny! They even got Warren in there. Cheers!

Barron's has an article on Sardar, Steak'n Shake and his recent buy. http://online.barrons.com/article/SB125184183921777483.html On another note, one of our partners wanted to buy some underperforming Steak'n Shake restaurants as a lease buyback through a consortium of investors he's involved with. I put him in touch with Steak'n Shake and he spoke to their franchise manager. Our partner told us they have no restaurants they want to part with...company-owned or franchised. I'm guessing the assets for sale are assets they want to get rid of period, but they seem to think that their existing stores (franchised or company-owned) seem to all be completely viable in their own hands. In other words, I wouldn't look to see many more store closings, but more likely expansion of the business. Pretty amazing! I would also expect this quarter's traffic numbers to be on par with last quarter or better. Cheers!

Thanks very much! Terrific stuff. Cheers!

Well, Len Barrie, former NHL player, founder of Bear Mountain Resorts and part-owner of the Tampa Bay Lightning, may have pulled a Lenny Dykstra! Cheers! http://www.globeinvestor.com/servlet/story/GAM.20090902.LIGHTNING02ART22303/GIStory/

Berkshire and Leucadia have teamed up again in a $490M deal for Capmark Financial Group's mortgage and loan servicing business. Cheers! http://www.bloomberg.com/apps/news?pid=20601087&sid=aiWKNGNQZyNk

If you watch old episodes of "All In The Family", Rob Reiner's character (Michael) is constantly nagging his father-in-law about the Vietnam War, population explosion and the environment. I remember watching one episode in which he said the world would be out of food by the year 2000. Pphhhhttt! I was an environmental sciences major in University, and I could not disagree more with some of the rhetoric being spewed by the so-called environmentalists these days. They espouse clean energy, yet they don't focus on decreased consumption...buy a hybrid SUV, instead of driving a gasoline-powered Honda Civic. Doesn't matter if more hydrocarbons are required to create fuel cells than consumed by the smaller gasoline vehicle. Why don't governments just increase taxes on automobiles (hybrid or gasoline) and decrease fares for public transit? That would do far more for the environment. I remember Al Gore's movie and crusade that became a focal point for environmentalists and celebrities a few years ago. Yet Al Gore's home consumed 30 times more electricity than neighbouring homes. His decision was to continue to consume the same amount of electricity, but he powered it with newly installed solar panels and the purchase of carbon credits! Carbon credits! The biggest whack of horseshi* that anyone could have come up with. Let's not be responsible for our actions, but just buy our way out of it...or at least try and offset our pollution! In general, I'm very optimistic about technology & science improving lives world-wide, and that it will assist us as we do slowly deplete some resources. Cheers!

I don't disagree with anything Biggs says. In fact, we said exactly the same thing back in the first week of March in our Annual Letter to Partners, which a few boardmembers here would be able to verify: One final note on equity prices today. Just this week, the Dow Jones Index hit a 12-year low. This has happened only two times before…from 1921-1932 and 1962-1974. After 1932, the Dow was up +60% within two years. After 1974, the Dow was up +70% within two years. As horrible as the news feels these days, valuations for stocks are probably the most attractive we have seen in our investing life. In many sectors, they are probably the cheapest we will see in our remaining lifetime. Without a doubt, stocks and corporate bonds provide extraordinary value at the present time. As investors, we could not be more ecstatic! Our thinking now at this point is very much in line with what Biggs says at the end of his article: Does this mean we are in for a new bull market? Not necessarily. Secular bear markets are caused by severe structural aberrations and take time to heal. In America, such markets in 1932, 1938, and 1974 were followed by peaks and valleys lasting years. Japan's markets have had broad trading ranges for nearly 20 years since that country's bubble burst in 1990; the old highs are still far away. In this light, the U.S. and Europe have been in a bear market since 2000. I'm afraid the odds are that over the next five years, the mature G7 economies will grow more slowly than they have in the recent past, and financial-market returns will be uninspiring. That said, I would also argue that the rally that began in March has further to go, and that it's too soon to run for the hills. It takes courage to hold fast and be a pig, as they say on Wall Streetmy money is where my mouth is. The only difference is that we aren't pigs. We have no plans on ever getting slaughtered. Cheers!

Home Services of America has acquired Koenig & Strey Real Estate of Chicago. Cheers! http://www.nbcchicago.com/news/business/Warren-Buffett-Buys-Chicago-Real-Estate-Firm-56598322.html

I remain completely convinced that we will continue to see pressure on homes over the next couple of years, compounded by pressure from commercial real estate losses and credit losses. Take a look at this chart, and as expected, we are seeing considerable movement in prime losses and foreclosures. http://msnbcmedia.msn.com/i/CNBC/Sections/News_And_Analysis/_Blogs/Beat%20Blogs/Realty_Check/__DAILY%20POSTS/RC-foreclosures.pdf While subprime has stabilized due to government programs and bank workouts, prime delinqencies are rising rapidly. You now have the main drivers of consumer spending tightening their pocketbooks as they try and save their homes. As I mentioned before in a previous post, there has never been a period of such dramatic real estate losses, that wasn't accompanied by an elongated recovery process. That enormous Thanksgiving dinner isn't going to be that much easier to digest just because you chewed your food a bit longer. Cheers!

Congratulations to my friend John Zemanovich, whose children's future university education is probably more than fully-funded today! I remember John buying Marvel for about $4/share back in 2001 and adding to his holdings over the last few years. He bought that and Fairfax for his children's trusts...pretty damn good! I know some board members on the old MSN Board also bought plenty of MVL over the years. Cheers! http://finance.yahoo.com/news/Disney-to-buy-comic-book-apf-730717139.html?x=0&.v=16

Keep in mind that most all stocks in the US are still 50% off their 2007 high. Therefore, all those who think the current market is speculative, I ask compared to what? The S&P500 is off only 33% since its peak. You may be assuming that the previous high was fairly priced. In hindsight, we know it certainly wasn't. Intrinsic value is based on all the cash you can pull out of a business over its lifetime, discounted back to the present. Are cash flows going forward for the S&P500 going to be at the same level they were in October of 2007, or that the rate of growth in cash flows will be the same? I don't think so...at least not for the next five years or so. Think long-term not to make your investment statement beautiful for the end of the year. Are today's prices likely to look cheap over the next decade? If so, I would be buying on the dips as much as possible. Buffet bought BYD at $8 or so per share and is now contemplating buying more at $50/share less than a year later - if the company allows Mid-American that is. That is how investing is done, anchoring is a big mistake. Who is to say the stock is expensive at $50 even if you bought it at $8 if in 10 or 20 years it is worth $1000? You are correct. It all depends on what you expectations are. If you are happy with 7-9% returns going forward, then you probably are fine buying stocks. If you expect higher returns, it may be tougher. Buying a stock at $50 that will be worth $1000 twenty years from now, gives a return of 16% annualized. Buying the same stock at $8, gives a return of 27% annualized. That is an enormous difference. Thus, buying today all depends on what return you are aiming for. My original comments were simply meant to say that speculative money is now pouring in and those that think investing is easy are now fiercely in the game. Cheers!

AIG @ $50 is the equivalent of AIG pre-split @ $2.5. AIG at $50/share! Wow! You're kidding right? I know, too cheap! http://www.bloomberg.com/apps/news?pid=20601109&sid=a1aa.saUuNRI WFC is still down for the year. JNJ is down slightly. I think a core criteria for frothiness is that great companies at least trade in the black. PDF attached Cheers!