Parsad

David Lau was kind enough to send me a link to some terrific photos he took in Omaha this year. Always fun to see what people enjoyed while in Omaha. I haven't been in three years, so I think I'll definitely go again next year. In particular, he got some great shots with Prem, Tom Russo, Tom Gaynor and Becky Quick. He also took one with Whitney Tilson, who naturally was able to plug his book! That guy is just non-stop! ;D Cheers! http://picasaweb.google.com/dahhuilaudavid/Berkshire2009AGM?feat=directlink#5342740300931216898

Success Magazine has a little article on Overstock.com and Patrick Byrne. Overstock's customer service was ranked second behind LLBean. There is also a typo in the article regarding the market cap which is not $60 billion. ;D Cheers! http://www.successmagazine.com/from-the-corner-office-patrick-byrne/PARAMS/article/714

Staying concentrated is what has created most of the richest in the world.... so see no reason not to be, without being stupidly concentrated. Some on the board have said that if it was your own business they would be comfortable putting 100% in.. do they not trust Prem (Chief Risk Officer) is thinking long and hard for them out of his own self interest? (Prem is probably better to make the decisions too!) To avoid gambler's ruin I argue against 100% but don't argue against a concentrated portfolio. Prem and Warren aren't concentrated for charity, but because they think that it's the best allocation of there own money... which doesn't just mean the highest return available, because we know Buffett makes higher returns in his personal portfolio. Got to get paid for when you are right! Example-100 stocks and one doubles, you now have $101! We run a pretty concentrated fund...anywhere from 5-12 ideas. At the moment, we have about 65% of the capital in five ideas. So, I agree that a fund should be relatively concentrated. In regards to the putting all your capital into one stock: Why didn't Prem put all his money into Berkshire? Prem puts nearly all of his wealth in Fairfax, because Prem is more comfortable with Prem's decisions. Buffett puts nearly all of his wealth in Berkshire, because Buffett is more comfortable with Buffett. Sanjeev puts nearly all of his wealth into Corner Market Capital and the MPIC Funds, because Sanjeev is more comfortable with Sanjeev, than he is with Prem or Buffett. That's just the way it is...you can go ask Sardar the same thing, and he'll tell you the same. That doesn't mean any of us aren't willing to make a bet on each other at given times, but that it is unlikely that we would hold onto that bet for the duration of the game. I've had my entire net worth in Berkshire and Fairfax at various times...but I just wouldn't leave it there forever...primarily due to size. Even Fairfax's growth will slow over the next decade. A friend of mine over the last couple years has been asking if he should change the way he has played the 'game' over the years, as he has more than enough money to live for many generations.... and he has concluded that by trying to avoid losing, you end up losing... just like in sports so he has decided to keep doing what he is doing!! What has got him to where he is (investing for the long term, concentrated holdings, focusing on downside) will protect his wealth and make it grow, and he has decided that he will continue to invest this way instead of changing and 'blowing it'! What has worked for Prem and Warren is what they should continue to do. Everything else is irrelevant for most people... except when you are quite old and of more limited means. Go with what works! Both Boston and San Jose pretty much played the same game in the playoffs that they played in the regular season, yet they did not dominate the playoffs. I humbly beg to differ that they actually didn't adapt their game to the playoffs, and kept doing the same things that got them into trouble. Bill Miller didn't do anything different in 2007 and 2008, that he didn't do in past years. Neither did Mohnish or a myriad of other investors. I think that was the problem. They did exactly what they were taught. They stuck to the playbook and listened to the coach. Yet here we have Prem who changed his game...he went and bought something that has nothing to do with Ben Graham investing...credit default swaps. He bought insurance! I believe it was Sam Mitchell at our dinner, who said something to the effect that Buffett went and did something completely different than what he was saying for the millionth time, and everyone started chuckling. Buffett preaches what he has to, so that he has a group of shareholders that buy into the cult. It helps him long-term, and the end result is that it ends up helping those shareholders. Yet, Buffett often does things that are contradictions to what he preaches. 3) Munger says to be a good value investor you need a f-you attitude to a degree. I understand that you need to temper the market volatility for some of your shareholders, but maybe that is telling a person that they have the wrong shareholder's? If I remember correctly it is Munger who gets very upset when he is asked the question about how you would act different if it was just your own money you were investing versus running a public company or a partnership of sorts. I think you need a f-you attitude in relation to the investment process..what you are buying and what you are selling. I don't agree with that sentiment when it comes to empathizing with your partners. It's their capital and they are your partners. Buffett wrote to his partners as if they were all his aunt...in a simple to understand, straight forward manner. He laid out the ground rules of how the funds would operate, but he never showed any sort of take-it-or-leave-it mentality. I guess it comes down to personal choice. I can say for a fact that it never hurt his results, and it certainly hasn't hurt ours in any manner. You could probably get away with that more in a public corporation than you can in a partnership. We want our partners to be able to redeem their capital whenever they want...we don't lock it up, and we won't ever close the fund down so that they can't redeem. Sanjeev, you would have a lot of knowledge with this, more than I would, and would have had to deal with a lot of difficult circumstances due to other's temperaments in the last while, so I am in no position to argue this point but know that any coach I have ever seen in hockey that coaches to keep other's happy, ends up sinking the ship... and he feels terrible about it, because he wasn't even doing what he actually wanted to do! Bobby Knight has won three NCAA championships, but how many of you want to be Bobby Knight? I certainly don't. I think a coach's entire job is to find a way to motivate his team, and help them form a cohesive bond that allows them to reach their maximum potential, regardless of the circumstances. I bet there are many different personalities within Fairfax's executive teams...just take a look at Sam Mitchell, Greg Taylor and Dennis Gibbs. I think anyone who has met the three, would say that for the most part, they have very different personalities, even though they operate very successfully as a team. Now how do you manage the egos of three very different, very successful people, with three significantly different areas of expertise? Well, a good coach takes more of the blame and less of the credit first of all. Prem does that all the time. In the years I've known him, I've never ever heard Prem take any credit for himself...ever! It's always someone, or "we at Fairfax", or something to that effect. Second, he knows how to make everyone feel useful...give them a very specific purpose and goal. Why are the best penalty-killers in the league, guys that don't do a whole heck of alot other than that? Third, you get everyone to buy in to the philosophy. We mitigate risk to a certain degree for two reasons: preservation of capital, and because regardless of how good the culture is at a company, you will always find investors that cannot handle the volatility as well. It doesn't mean they aren't good long-term partners, but I think a 50% drop would scare off at least 30-40% of partners in a fund. So unless you can meet redemptions for all those people, or lock up your fund, you are going to have to shut down. Take a look at Legg Mason. You had a manager who was a God, and beat the markets for 16 years in a row. One hit and he loses more than half his assets. Miller runs a mutual fund, so he wouldn't have to close but what about all those hedge fund managers out there who did. Even in Mohnish's case, he's fortunate that his redemptions are just once a year, and the bulk of the losses came in the last two quarters. He didn't get much in redemptions. But if his investors were allowed to redeem into the 1st Q of this year, it would have been a much different story. His fund will recover alot of ground over the extra year he has now, and he'll end up keeping most of his partners, but if redemptions were allowed into the 1st quarter, he may have had a difficult time meeting redemptions. In Seller's case, he closed his fund! Cheers!

Nothing is correct when viewed in a vacuum. Diversificiation is dependent on the investor's abilities and emotional constitution, thus it isn't a one shoe fits all type of question. The other issue of Prem and Warren having 90%+ of their networth in one business is also erroneous. The 10% of Prem's net worth that isn't in Fairfax would be about $50M...that's a hell of alot of money to live on even if Fairfax implodes in the worst case scenario. In Buffett's case, 1% of his net worth is $500M, or Prem's entire net worth! If Berkshire collapses tomorrow, Buffett won't be standing in any bread lines, neither will his children, grandchildren, great-grandchildren...well you get the point! Diversification changes with age, temperament, abilities, constitution, the construct of the holdings (inside a corporation, retirement plan), etc. For myself, I have no problem holding just one investment at any given time, but I doubt I could do that over many, many years, unless it is my own company. Even if I have my whole net worth in say Berkshire, there will come a time where I will say to myself that perhaps the stock is overvalued and market risk could be mitigated by moving it to undervalued ideas. It doesn't negate the long-term prospects of Berkshire, but I would simply be acting in a prudent manner. Now you can't do the same thing with investor capital, because each partner will have a different mindset. If you go through a period such as we have, you will get some investors who become very afraid. Unless you have liquidity, you will have to sell to meet redemptions, thus you cannot stay fully invested in one single stock...especially if it isn't liquid. The only way you could so, is if you do what many other hedge fund managers do, and lock in your partners, close the fund, or only allow redemptions once a year. The end result is that diversification cannot be viewed singularly or in a vacuum. There are many aspects to why someone should or should not be diversified. And safety of capital isn't one of them...just ask Bill Miller! Cheers!

David Sokol, CEO of Mid-American Energy, spoke at the Ira Sohn Conference. He has some interesting comments to say about the housing market and the economy in general, which I think are dead on. Cheers! http://www.reuters.com/article/marketsNews/idAFN2826249320090528?rpc=44

Perhaps, it was the only way to appease the Gods of investing, but Time Warner will spin AOL out as a seperate company...after the ludicrous $147B deal back in 2001 combining AOL and Time Warner, which epitomized the irrationality of the internet bubble era. Cheers! http://finance.yahoo.com/news/Time-Warner-to-spin-off-AOL-apf-15368617.html

i am sorry guys but ostk was (is) a good short and a bad long. its not a good business and the ceo is nuts. The shorts have been saying that for five years...it's still around. In actuality, anything is a good short at some point in time (even Berkshire), but that doesn't mean it isn't a good investment at various points in time as well. Cheers!

I think the most valuable thing Buffett does with his notoriety is inspire others. Take a look at Mohnish, who was a successful entrepreneur, but started the Pabrai Funds and grew it to nearly $600M at one point. He then started his own foundation to help underprivileged, but talented students, in India to increase their odds of getting IIT placement. Dakshana just put out a press release that shows the enormous success they've had in their first year helping these students, and I'm sure they will help many thousands more over time. But each of these students will go on, and many of them will somehow give back because of the help Mohnish gave them. That's probably the most important lesson Buffett has provided...giving back of one's wealth and more importantly one's time, and seeing that success passed on. Congratulations Mohnish and to your staff at Dakshana! Cheers! http://www.dakshana.org/news/first_Dakshana_Scholar.asp?id=6

Are the shorts on Overstock finally covering and moving on to other pastures? The short interest which was at 5.5M shares at May 30, 2008 is now down to 2.8M at April 30, 2009. Alot of the noise on various message boards has subsided to a din, and Overstock has barely put out any sort of significant rebuttal to the hoard of journalists who previously were on a rampage. The most recent piece of crap written, is by purported forensic accountant Tracey Coenen, on her blog. She says she's pretty much tired of covering Overstock and Patrick Byrne's attacks on such ethical and noble journalists such as Jim Cramer, Herb Greenberg, Joe Nocera and Gary Weiss...pphhhhphhhttt! http://www.sequence-inc.com/fraudfiles/2009/03/11/in-agreement-overstockcom-sucks-and-patrick-byrne-is-wacky/ Even Sam Antar seems to have quieted his garrulous attacks on Overstock and Byrne on the various message boards. I wonder what other targets these guys have picked? What is the next big score...could it be Interoil? Cheers!

Star manager, Jean-Francois Tardif, will be retiring from Sprott Asset Management at the obscenely old age (which I turn in July) of 40! Tough for Sprott, but great for Tardif. Cheers! http://www.globeinvestor.com/servlet/story/RTGAM.20090526.wtardif0526/GIStory/

Acquired loans by many banks including JPM and WFC, will end up providing them with income over the next few years due to purchase accounting rules that forced them to mark the loan values down when acquired. Probably the income will be well over the actual acquisition cost of the companies they bought. Cheers! http://www.bloomberg.com/apps/news?pid=20601087&sid=aZ838mo99dGo&refer=home

Do not fall in love with stocks, be it Berkshire or Fairfax. Prem is my mentor, but if somebody wanted to pay me 2.5 times book for Fairfax, I would sell in a heartbeat. The market provides the opportunity of exploiting inefficiencies that whole business ownership does not. If you are a passive investor, always base your decisions on price, quality and risk/reward. That will secure a retirement better than any one investment. Cheers!

That's right ubuy2wron, I forgot! Cheers!

Yeah, the same thing happened to Martha Stewart, except it was an officer of the company who told her the information. In Cuban's case, I believe it was an employee, but not one of the officers. It's still non-public information that he traded on. Cheers!

Mark Cuban's SEC investigation for insider trading is coming to a head, and he has five professors who support his stance. But the comment from one of these professors in this Globe & Mail article is mind-boggling to say the least! One of them, Alan Bromberg of Southern Methodist University in Dallas, said he researched the case after being contacted by Mr. Cuban's lawyer, Ralph Ferrara, and came to the conclusion that the SEC has gone too far. "It's like if somebody from company X called you and mentioned there's about to be an acquisition at a very attractive price but asked you not to tell anybody," Mr. Bromberg said. "You might say, 'Well, sure, I never spill information I get from prospects or contacts,' or you might say, just as a courtesy, 'I'll keep this information confidential.' Does that make you an insider? We don't think so." Insane! Cheers!

An absolutely fantastic interview with Wells Fargo's CEO. Any WFC shareholder will love this interview...a superb leader! Cheers! http://www.startribune.com/business/45799642.html?page=1&c=y

I love the guys at Hamblin-Watsa, but I wonder who had the Abitibi idea! Hey guys at Hamblin-Watsa, alot of us shareholders are going to give a beat down to the fellow who came up with that one. We're rolling up our Fairfax annual reports as we speak...and those babies are thick! ;D It would be pretty funny if it was Brian. Cheers!

I would say Buffett-mania has offically jumped the shark! Cheers!

Pretty cool Marlin! I wish the stats on here showed that stuff. Cheers!

Geithner discusses California...no TARP funds, but they will assist California only in certain ways. The bulk of the effort has to come from the Californians themselves. Buffett talked about Prop 13 a few years ago, which has created some of this mess as well. Cheers! http://www.bloomberg.com/apps/news?pid=20601087&sid=aaizmTjKpTlw&refer=home

Makes me think of the old line: "when the student is ready, the teacher appears." Wasn't that from Kung Fu Panda? ;D Cheers!

Thanks Kawikaho! Also, obviously lifestyle plays a part as well. Unless things get horribly worse in the job market, most people will continue to want to live in the LA or Bay area, since the quality of life is so good. While people will leave, over time more people will come back. I'm sure at the state level, most will get help from the federal government, but municipalities will fail except where the state's will intervene if they can afford it. Cheers!

I totally agree Rabbit, but at least Lewis' critical articles are more fascinating than anything Doug Kass spews about Buffett. Lewis does it with a bit more flair, which makes for better reading. I didn't like the Snowball either...it sounded very much like Lewis. But like Lewis, Schroeder also does write very well, so I kept reading even though I didn't enjoy the tone of the book. Cheers!

I think the most important thing is that they show an interest and act on it on their own accord. I've talked to hundreds and hundreds of people about Buffett and Ben Graham when they ask me about stocks and investing. Yet, I only know of maybe two or three that actually went and bought a book on them or researched them on the internet. And when someone does, I'm actually taken by surprise because I know it doesn't happen often. One of my brother's young friends knows I run a fund, and asked for some advice. I discussed Buffett with him and Ben Graham. I didn't think much of it afterwards, but a few weeks later, he came back to me with some more questions. I found out he went out and bought two books on Buffett and The Intelligent Investor on his own. I've probably said the same thing to a couple hundred people in the last two-three years, and no one has done that...yet here was a young man who did. I'm much more willing to give him much more of my time! When I first started learning about Buffett, I heard recommendations about the Intelligent Investor. I bought it, but it was difficult to get through in a first read, so I read other books and did other research. I then went back to it and re-read it once my base of knowledge was a bit better...it was much easier to grasp. Since then I've probably re-read it 10-12 times and referenced various passages on many, many occasions, but I did it on my own. No one asked me to read it or struggle through it. And I think that is the most important lesson for any investor...they have to have a real interest, otherwise they are wasting their time, as well as yours. Jimmy Pattison is a famous businessman in Vancouver, and he's acquired many businesses when people did not want them...very much like a value-investor. He started his company with one car dealership 50 years ago, and today is worth about $4-5B with businesses in various sectors. There is an old, legendary story of him firing the lowest producing salesperson at his auto dealership each month. One Christmas many, many years ago, he had to fire a salesman. He explained the situation, and the employee broke down sobbing. He explained that it was Christmas and his wife and children were expecting a cheerful holiday. Jimmy broke down with him, and they both commisserated while they sobbed. After they cried, he turned to the employee and said "I still have to let you go." When asked years later why he did it, he explained that if he did not, he wouldn't be doing the employee any favors. The employee would continue to struggle in an occupation he was not terribly good at, and he would continue to make low commissions. By firing the employee, it forced him to look for alternative work where his talents may be better served, and he could better provide for his family. In a twisted way, his logic is perfectly correct, even though perhaps he could have waited until after Christmas. The moral is, if someone has difficulty reading the Intelligent Investor, you probably aren't doing him or her any favors by steering them to some Robert Hagstrom book. Cheers!

Gurufocus.com has an aggregated BRK and FFH portfolio article. A few grammatical errors, but you'll like the gist of the article. In particular, how they praise the team at Hamblin-Watsa. Cheers! http://www.gurufocus.com/news.php?id=57161