Parsad

Guru Focus had a little breakdown of Fairfax's investment results in the 2nd Q. Cheer! http://www.gurufocus.com/news.php?id=63808

Most people will continue to pay their mortgage, but obviously like anything, there is a moving line where some owners will feel that it simply isn't worth it to continue paying interest on an asset that has depreciated significantly from when they bought it. If the statistic was 25%, you could probably assume that 1-2% may default. If the statistic jumps to 50%, then reasonably you could assume that default rate jumps to 2-4%. Most bank loan loss portfolios for mortgages are around 1-1.25%. In these times, they've increased that to 1.5-2%. So what happens if the loan losses climb above 3%. Then you also have institutions that wrote more Alt-A and Option-A mortgages...the delinquincy and default rates on those will be far higher. The statistic has meaning...the question is how high or low are the analysts from where we eventually end up. Cheers!

Hank Greenberg has settled his case with the SEC. What's idiotic is this comment by SEC Enforcement Director Robert Khuzami: "Corporate leaders cannot avoid the truth and consequences of their companies' performance by using improper accounting gimmicks and signing off on distorted financial reports..." ...Unless they are very wealthy and can just pay $15M. Sheesh! Cheers! http://www.bloomberg.com/apps/news?pid=20601087&sid=ar98JzRqWfR4

Another article by CNNMoney covering the same report. They have details from other analysts and their estimates. The Deutsche Bank analysis is the most dire, but the others aren't that far off either. http://money.cnn.com/2009/08/06/real_estate/underwaterworld/index.htm Behaviors have changed somewhat and I believe we will continue to see greater psychological effects on consumers from this era. One of our partners in our U.S. fund was telling me how things are so bad in California, that when it came time for lease renewals on his commercial and residential properties, he had to throw out 20% across the board rent decreases to keep his tenants. I asked him if his other friends with properties were doing the same. He said "Hell yeah! They've got no choice!" Cheers!

I don't think the author actually makes valid points on the subject matter. It isn't just Buffett benefitting from the government's largesse. Without the bailout, the average consumer's savings accounts, GIC's, mutual funds, investment accounts, etc. would have all been at significant risk. It was a systemic risk that would have affected everyone from the very rich to the very poor. Even Prem would have suffered some losses on investments and they were well-prepared for armageddon. Cheers!

Here's another guy trying to make a name for himself. They're coming out of the woodworks! http://blogs.reuters.com/rolfe-winkler/2009/08/04/buffetts-betrayal/ - He doesn't mention that Goldman and American Express have already repaid their TARP. - Wells took the damn money because they wanted to support the program. They could easily pay it back, but the government's own stress tests (which negate credit quality of mortgages or credit card holders) don't allow it. - Berkshire only owns $34M of BAC stock, which accounts for the bulk of the TARP funds numbnuts refers to...probably a Lou Simpson investment...not sure how rich Berkshire shareholders will get from that investment. - Berkshire also only owns about $37M of STI...again a Lou Simpson call most likely. Cheers!

Bloomberg article discussing the optimistic view on low-rated debt. Includes a short comment by Biglari associate Martin Fridson of Fridson Investment Advisors. Cheers! http://www.bloomberg.com/apps/news?pid=20603037&sid=aKAEcqlaVgfs

CNBC article discussing the upcoming quarterly report. Cheers! http://www.cnbc.com/id/32300978

A couple of Deutsche Bank analysts are predicting that nearly half of U.S. homeowners with mortgages will owe more than their home's value by the end of this housing recession. I think the number will go significantly higher from where it is today (close to 30%), but I think these two are probably way on the high end. Cheers! http://www.bloomberg.com/apps/news?pid=20603037&sid=ac9y1xr7yNhQ

Nice article on Steak'n Shake at the Examiner.com. Cheers! http://www.examiner.com/x-8396-Orlando-Burger-Examiner~y2009m8d4-In-sight-it-must-be-right-Steak-n-Shake-Steakburgers

But I thought naked-short selling doesn't really exist? ;D Cheers!

Nope! There's alot of stuff that I've heard over and over again, but there's also alot of stuff I keep learning about. The circle just gets wider. Cheers!

Probably not the only pension plan to do so. Cheers! http://www.bloomberg.com/apps/news?pid=20601087&sid=aoTyg2MYCvbI

Little blurb on Wally Weitz and his funds. Cheers! http://finance.yahoo.com/news/Omahas-Other-Oracle-Beats-indie-1230032855.html?x=0&.v=1

In regards to the questions: 1) We don't know the true reasons. It only says he wants to spend time with family and pursue other interests. It could very well be that it is a health issue for Santulli or a family member. I would think that running Netjets requires him to be away from his family for extended periods, including overseas in Europe and the Middle East. Perhaps, there are underlying reasons he needs to be with them and also why the resignation is immediate. 2) There very well could be a replacement, but perhaps because of the speed of his resignation, Santulli and Buffett feel more comfortable with Sokol overseeing the transition. Or it could be that Sokol is an excellent in-house manager who always was going to take over Netjets, since it is a global, capital-intensive business that is customer-oriented...not unlike Mid-American. Frankly, I'm not sure you could find a better manager than Sokol. Everything I've heard and read about him, both publically and privately, is that this guy is the real deal...not unlike what I hear about Mark Ram at Northbridge. Cheers!

I'm sure there are plenty of great candidates at Berkshire, but I REALLY like both David Sokol and Ajit Jain. I think if you could get those two to run it going forward, it is very likely that they would get along great and would do an exceptional job on the operating and insurance sides. You have Bill Gates overseeing the Buffett shares through the Gates Foundation and Howard Buffett overseeing the culture as figurehead Chairman. I think that group could do a very damn fine job maintaining the reputation, results and culture. Cheers!

Rich Santulli has decided to step down from Netjets to spend more time with family and pursue other interests. He will stay on as a consultant for a year. Interestingly enough, David Sokol will take over...I suspect Sokol is the front-runner to run the operating businesses, other than insurance, when Buffett passes. Cheers! http://www.reuters.com/article/marketsNews/idINN0417370320090804?rpc=44

Richard Losch, of Losch Tabakov Capital, has some interesting tables on Berkshire on his site. Cheers! http://www.loschtabakov.com/Berkshire%20Hathaway/Financial%20Tables/20_year_financial_tables.htm

I'm guessing a bunch of hedge funds are sighing with relief from the rally in stocks over the last three months. I'm sure more will allow redemptions that had previously closed their funds. Although Mark Sellers is probably going to have to wait longer, since Contango hasn't moved that much. Cheers! http://www.bloomberg.com/apps/news?pid=20601087&sid=at.3HknPAnbs

You would think they would have done this a long time ago. About friggin' time. Cheers! http://www.bloomberg.com/apps/news?pid=20601087&sid=aoCJnYcSVhYk

That's a funny one. The other one that keeps popping up is the one with the picture of the lady in the hat...Amy Calistri...she also made a fortune in a very short period of time. The one thing that I find interesting is actually Google's ad marketing. While we do often see some ads that are of little interest, I'm actually surprised by how many I see that are more interesting and pleasant to read. No wonder they rule the online ad market. Cheers!

Looks like a new Steak'n Shake is opening in Richmond, Virginia. I'm guessing that we should start to see more franchisee interest with the improvements Sardar is making. Cheers! http://www2.richmond.com/content/2009/aug/03/why-richmond-whyecho-harbour-dean-deluca-drive-ins/

Folks, I don't think many of you are grasping the exact reason why Buffett and Watsa run insurance businesses. It's got nothing to do with zero cost float, and it is something that cannot occur within the hedge fund structure. Under the corporate structure, the shareholder equity is permanent capital. No en masse redemptions ever! It's the same reason Sardar is moving to the corporate holding company structure. For Berkshire and Fairfax, by writing long-tail insurance, they also create another near permanent form of capital, where they can do what they want with it for 10-15 years plus. Whether that float is zero-cost or low-cost is irrelevant, as long as the cost is less than issuing debt. Naturally, zero-cost would be preferrable though. Cheers!

We hold all our shares. That's about all I can comment on from that aspect. If you would like more information on Chanticleer, it's probably best you contact them directly at invest@chanticleerholdings.com. Mike Pruitt, Matt Miller and Joe Koster will be able to give you some more information. Basically, you have Chanticleer Holdings, which is the publically-traded holding company and the one that is trying to consummate the Hooter's transactions. And then you have subsidiary Chanticleer Advisors, which is the investment advisory business and they run an investment partnership for accredited investors. So you can get public information on Chanticleer Holdings, while you might be able to access their quarterly letters for their investment fund at Chanticleer Advisors by contacting them. Between the two, you would be able to get a better idea of their investment philosophy. Cheers!

The interest rate environment in the 1980s was such that you could still be doing great even if losing a bit on underwriting. That's correct, but combined ratios were still over 100%. Fairfax will rely on their equity investments, as well as their municipal bonds and preferred share investments since interest rates are so low. Also remember that Fairfax can always refinance their debt at lower rates as well, offsetting the low interest they would get on treasuries. They are in a much stronger position today, than they were when they issued their various long-term notes. I have no doubt whatsoever that they will continue to increase book value in today's environment. Cheers!