Parsad

Alex Crippen compiled an interesting set of headlines that the media took from this year's annual report. http://www.cnbc.com/id/29455306 That's probably indicative of a bottom, since Jim Cramer recently said some stuff again, and Doug Kass believes he knows much better. Cheers!

Well Oldye, I'm glad someone can still afford $64/bottle right now! ;D It's a recession. Shouldn't we all be drinking only peach schnapps? Cheers!

I don't understand why they didn't buy back any ORH in Q4. They bought none, yet it traded down to $32. It may have been an issue of exactly how big was ORH's discount to intrinsic value (even at $32) compared to what else had suddenly become available in the markets during Q4. Companies shouldn't just simply buy back their shares when they have excess operating capital, but only if the best alternative for shareholder capital is to buyback one's own stock. Cheers!

It was the prudent thing to do. I'm glad they thought about it and decided that capital in their hands would probably be better served in this environment than simply paying it out to shareholders. Cheers!

I'm not sure that stocks can be called "cheap" by any valuation measure right now. The earnings power of the S&P is going to be hampered for a long time because of what we're in the middle of right now. Forget stocks, if you think they are still expensive...which I don't. You can easily put together a porfolio of corporate, municipal and distressed bonds that will generate 10-12% over the next five years. If you can read financial statements and understand the debt obligations and cash flows of corporations, you can put together a portfolio of distressed debt that will yield 20-25% annualized for the next few years. Things are very cheap across the board except for treasuries. Good investors can do very well going forward regardless of the long-term implications of a long recession and economic slump. Cheers!

I'm not sure Bernanke said anything wrong there. He's basically saying that the stock market is reflecting the fears of investors and their apprehension to risk, while credit markets are starting to show signs of life. That's basically what I see from everything I'm reading. The premium for stocks, corporate bonds, municipal bonds, etc. today is something I have never experienced before. Never seen a market this cheap with spreads so damn wide. I've read about them, but never actually ever been in one or seen one. And that is completely attributable to investor fears, both retail and institutional. Cheers!

We have a lot of very good members here, some of whom are a little opinionated (hi Sanj & Ericopoly ) Eric and I totally disagree with you Uhuru! We think you're completely and utterly incorrect. You're just plain wrong! ;D

If I understand him correctly, he's saying that because the number of ideas has increased, he's therefore going to run a more diversified fund. Why wouldn't you still purchase your 10 best ideas, and simply enjoy the greater future returns because they are that much cheaper? How does the increase in number of good investment ideas warrant more diversification? I suspect that he's trying to explain away poor performance with a non sequitur. Our funds will remain very concentrated. But there are some aspects of what Mohnish is doing that is just logical. For example, we have bought distressed debt for the U.S. fund, and income trusts for the Canadian fund. In those circumstances, you are better off buying a small basket of ideas at relative yields, then concentrating on just one or two. In the past, when we've had a highly concentrated fund, it was because ideas were not plentiful. You really had to dig around for ideas. Today, you can find multitudes of ideas that are trading at huge discounts to their net asset value. Instead of having a fund in say 7-8 ideas, we have closer to 12-14. But we aren't going from 7-8 ideas to 25-30 ideas. We think that's just wasted effort. At the same time, we would be hesitant to ever go back down to just 4-5 ideas, except for our own corporate accounts where we have just 4 ideas where all the capital is invested. That's because the retail investor, be it in mutual funds or hedge funds, just don't have the stomach for this type of environment where their portfolio could be down 50%. It is simply too much for them! I think that is really the primary driver behind Mohnish's decision. I can only imagine the hell he's been going through dealing with his partners, who are going through their own equally scary hell of seeing their investments down 60% in the last year and half. I would suspect that's the part that drove Mark Sellers to close his fund as well. Human psychology does not change. No matter how much an individual says that they can handle volatility, only the truth becomes clear when the actual crisis appears. And not only retail investors. There are alot of investment managers who can't handle the swing as well. I think many will never re-enter this business after what they've experienced. Cheers!

Hi Uhuru, I guess for some of us, it was a big chunk of our life for the last seven years, and it directly affected most of our pocketbooks. To tell you the truth, I know for a fact that Fairfax also found it very useful in hearing from their shareholders, and how to provide them the information they needed. So, yes I think it was a small but very important little board for many people, and it's ok to be a bit sad about it disappearing. That being said, I think this board maintains the continuity, and we will be as prosperous on here as we were there. With continued support from our membership base, and contributions from each of those members, the sadness of losing the old board will dissipate quickly. Ironically, the old board was terminated exactly one day after its seventh anniversary! Cheers!

One of the problems with me moving the posts onto here was that the dates of the posts would be different, and some data would be missing because this board only can show posts in HTML. What I did was archive the old board and all its posts and documents at Multiply. It was fast and easy migrating all of them over, and it is accessible still to the general public. You can view the archive at: http://msnbrkboardarchive.multiply.com/ Click "Blog" and it will show all the various posts. Pages 1-6 are archived files and PDF's. After page 6, you get to the original thread posts with all replies that were posted under "Comment". The only downside to doing this is that there is no good "Search" feature for the posts. But at least the posts are preserved in their entirety, and they are visible, in order with original dates, and nothing is missing if it was written outside of HTML. Cheers!

That's rubbish! I'm not sure what those "peers" have told you, but I'm guessing alot of it has to do with C&F and TIG's impact over the last few years. Northbridge and Odyssey have outstanding underwriting standards and history. As does Fairfax Asia. The biggest problems were with Fairfax's U.S. insurance business and that was almost entirely attributable to C&F and TIG. It is also highly unlikely you will ever see a large property-casualty insurer get you underwriting profits of 5-10%. That just doesn't happen. Even Berkshire's historical underwriting profit has been only about 3.5-4%. And I don't think that can be sustained either, because as soon as one big earthquake hits the West Coast, National Indemnity is going to take a significant loss. Alot of people like to throw Markel's name out there, but much of their business is in specialty lines. In general, a property casualty underwriters long-term goal is to have break-even underwriting, with gains from invested float accounting for profit. The business is just far too competitive on pricing to allow any sustained underwriting profit for insurers. Thus the short, swift cycles we see all the time. Cheers!

Wonderful letter! Thanks very much!

Ok guys, no problem according to Godaddy.com. I set it to zero, and now you should be able to get full feed. Cheers!

Here's another of your twenty punches. My friend John Zemanovich and I were talking yesterday, and we think we are now getting very close to the same point in time when Buffett last issued a statement that he would be buying back shares. My estimate is that in the $72-75K range would put it in the same ballpark as in 2000, when the stock was in the $43-45K range and Buffett announced the buyback offer. The next time it gets this cheap will be sadly when our dear Warren leaves this earth. We'll see if Buffett says anything in the letter this year if prices stay where they are. Cheers!

Let me call Godaddy.com's technical support and just ask them. If there is no issues, I'll turn on the full feed and post that it is on here. I'll do it in the next 30 minutes or so. I'm just catching up on the morning emails and stuff. Thanks!

Ok guys, I've found the setting, but it says "to disable, set to zero". It then says setting to zero would be a bad idea? Why is that? Would it slow down the board? Would it cause any problems with the posts or board? Any other tech-savvy guys who can give me some idea why the program says it is a bad idea? Is it just that it could increase the costs, but then we have unlimited bandwidth and data, so I don't see how it would. Thanks very much!

Hi Omagh, Can you explain to me exactly what RSS Feed is, does and allows the user. I know a little but I thought I might get more details. As far as extra operational cost, I don't think it will cost anything more, because in my package I have unlimited bandwidth and unlimited data. If you explain what it does exactly and how users can utilize it, I'll have a better understanding of how to turn it on and any other controls there are for it! Yes, I'm not that tech-savvy! Remember, I already crashed the whole system once! :o Cheers!

If you own a bank that is in decent shape, or are starting one, the spreads between deposits and loans are fantastic. Banks that are growing their deposits like Wells, M&T, etc. are going to do very well going forward, even if they do have the occasional hiccup from their loan portfolio. I think the really tough time was a couple of months ago. Going forward with the options banks have, the spreads they are getting, the quality of business they are now forced to write, the industry should start to do better. Cheers!

Hi Wescobrk, I've never talked to Sardar about that, but I can add that question to the John Linnartz interview and see if he can provide any insights. I certainly don't think it's a far-fetched idea. It works very well for Western Sizzlin, and I don't see why it could not work at Steak'n Shake. The only issue is that I think he would need to make sure he has a fairly close knit controlling shareholder group. One that would trust his judgement like Buffett has at Berkshire, and what Sardar has at Western Sizzlin. Or at least a board of directors with significant stakes that like his efforts and goals. Cheers!

GE has no tangible equity in light of a huge balance sheet and tons of various financial exposure. How is it a no brainer? Where do you get the idea that GE has no tangible equity? Those revenues and earnings from the various lines of business, most of which they are #1 or #2 in, come from somewhere. Just because their financial assets dwarf their operating assets, and a standard ratio isn't defined by their intangible assets, doesn't mean that the core earnings generating power from the various businesses isn't there. They are as tangible as Berkshire's businesses. Cheers!

Well Whitney may be correct to a degree. Wells Fargo won't completely avoid fallout, nor will their stock stay up if the entire sector is brutally hammered. But market price is very different than a business going under...Fairfax is a perfectly good example of that, and also one that Whitney shorted. If you look at the entire banking sector, Wells will get hit on occasion as other companies and the economy suffer, but they will be one of the few left standing in an industry where enormous consolidation will occur over the next few years. The other thing about Wells is the their management, and their ability to cross-sell to their clients. No customer for any other bank uses as many company products. The average is like 2.6 industry-wide, while Wells Fargo customer's is 5.6. Their clients are locked in. They use too many products and get too many deals by using them to go to another bank. That ability to cross-sell, combined with their ability to weather the storm, will allow Wells to increase market share. And they are already doing so, as customers from other banks flee to them. But that doesn't mean the stock won't continue to get hammered or suffer some losses from different markets like California or Texas. Our only concern should be what their actual results are long-term, and do they have the ability to weather this storm. Buffett seems to think so. Cheers!

Sanjeev, Why do you feel so striongly that he has been buying WFC? I kow he bought it last summer for his personal account, but I believe he sold it based upon the NYT Op Ed piece Cheers Ish It's just a no-brainer! As is GE. There's two of your twenty life-time punches smacking you in the face right now. You don't need Buffett, Watsa, Pabrai, or the MPIC Funds. I haven't had two ideas this cheap since Fairfax was below $100/share, and at that time Fairfax deserved to be cheap. These are two market leaders that will increase their share for the forseeable future. They have huge competitive advantages that will not be surpassed over the next decade or two. Buy it and just put it away! In regards to WFC, Berkshire filed an amendment a few minutes ago, so that answers that question...they've added shares, and I'm certain they will add considerably more at these prices, as long as they don't face any restrictions. Virtually every Berkshire subsidiary pension trust now owns Wells Fargo stock! http://www.sec.gov/Archives/edgar/data/72971/000119312509031272/dsc13ga.htm I bet you will see a filing for GE in the next few months if not sooner. GE will never be at these prices again in our lifetime! Absolutely ridiculous! Cheers!

I would expect there is probably at least a couple of positions Buffett is/has bought that are confidential at the moment. I'm almost certain he has been buying more GE stock and Wells Fargo. Cheers!

Folks, That 13-F is till the end of December 31, 2008. While broad market prices are fairly close to the lows hit November, some individual stocks are trading far cheaper. Things like GE at $11, or WFC at $13.50 are just plain stupid! We said it in our quarterly letter, and I'll say it again here...I don't expect to see these prices for some of these great companies again in my lifetime! These prices may be available to us for some time, but this era will probably be the bottom for me, as I turn 40 this year and if you assume another 25-30 years of life for me...well that's about it. Some of the deals on distressed debt are also unbelievable! Extraordinary times! Cheers!

Hi Jb, Yes, it's almost certain the Yellow BRK'ers are having an annual gathering: http://yellowbrkers.blogspot.com/ For some reason, the date on top of the announcement says 2006, but I think that's a typo. Shai Dardashti is organizing, and his email is on that site. Just email him and make sure the details are correct. There are tons of things to do in Omaha during the weekend. With the sheer size and scope now of the number of people attending. If you go to any event, you can probably make a few friends and sneak into other events with them. Not that I'm suggesting that...I just heard that those things perhaps happen! ;D As well, there are all the shareholder events, Nebraska Furniture Mart, Borsheims, the Old Market Area, the casinos across the water in Council Bluffs, Boys and Girls Town, Eppley Airfield, etc. It's a blast! Cheers!