Liberty

Do you think that paying a dividend instead of doing buybacks reduces the amount of shares issued for compensation?

Thanks for posting.

I don't have special insights into the culture of WFC or BAC, but I try to keep the Halo Effect in mind (http://www.cornerofberkshireandfairfax.ca/forum/books/the-halo-effect-phil-rosenzweig/). Is WFC succeeding because it has a great culture and strategy, or is it being described that way because it is succeeding? If it was to stumble, wouldn't people be able to find all kinds of bad things to say about them that would also ring true? Vice versa for BAC. I don't know.

I think Buffett is right that Wells is a better permanent holding. But that doesn't mean that within the next few years BAC won't make more money for shareholders. Buffett did get tons of BAC warrants, after all...

Yeah, the EPA's testing methodology doesn't follow real-world usage too closely (Japan's test cycle is even less realistic). They've revised it recently so that it's closer than it used to be (f.ex. it used to not take into account A/C), but there's still a gap (though there are also hyper-milers who get more than EPA numbers, but that's another discussion). Interesting trivia: Part of the benefit of hybrids like the Prius is that there's a big LCD that shows you real-time and historical MPG. It's a feedback mechanism that teaches drivers how to drive more efficiently (almost like a game, and you learn how to get the highest score). If we had screens showing fuel economy in all cars, I bet we'd seem much better real-world results. I certainly hope so too. This investment has certainly taught me all kinds of lessons, but I think the current lesson is patience.

I dislike the high compensation as much as anyone and think pretty much everybody should do what Buffett does and just be content with owning stock, but that's rare to find unfortunately. To play devil's advocate, I'd say that paying a bonus for finding and closing LSQ probably isn't that crazy if you ignore what the stock price has done (would people complain if the stock was at 45?). This deal could significantly increase the value of the company in the long-term and seems to have been done on very good terms, for what seems like a good asset, with a clever structure that gives welcome flexibility. Right now, everything is going wrong and macro is bad, but if things go the other way and DP stabilizes a bit higher, it's possible LSQ could be worth hundreds of millions of dollars. That might be worth a bonus. I wouldn't have paid it, at least not this much, but I also don't think it's entirely for no reason... I know, that's a small consolation...

Optsy, I like the way you are thinking about it, but I'm not sure it's that easy to model. Operations during the ramp up phase can be significantly different from operations once everything has been tweaked and figured out. It's a bit like the difference between driving in the city and on the highway; you'll burn a lot more gas per kilometer in the city (because you are constantly accelerating and decelerating) than if you were just driving at a steady speed in top gear for long distances on the highway. So if someone looked at fuel economy in the city and tried to model what the car can do on the highway from there, it could be tough. They could be producing smaller batches to test different recipes, with varying amounts of chemicals (trying to find minimum amount that still gives good results), various mixes of wood chips from different tree species, de-bottlenecking certain processes, etc. This could mean more workers around the plant because things have to be stopped and started more often, could mean that some machinery spends less time operating at peak efficiency, etc.. I don't know if they'll reach their targets, but I do think that it's probably very tricky to extrapolate from the ramp up phase.

Well, now that this is going, here's another good one (by Pandodaily):

Another hour+ long interview with Elon Musk (this one at the Computer History Museum):

http://cbs360.gsb.columbia.edu:8080/ess/portal/section/9aac273a-cf89-457a-8165-8a00db64e2f1 Found this on reddit and thought some here might be interested.

Paulson did a lot to make the CDS trade happen and had the conviction to see it through, but based on a book about it that I read a few years ago (can't remember the title right now), it was one of his analysts that brought him the idea and pushed hard to convince him at first. Once he was convinced, he did the right things, but still... I'd be more curious to find out where that guy is now and how *his* record has been since. Quick googling couldn't find his name, but I think it was Italian-sounding...

Thanks. I agree that those metrics are most useful to value projects (which I also agree is almost impossible to do). I'm just curious about that other metric to see at which point most miners start losing money on existing mines.

http://www.reuters.com/article/2013/04/15/us-jpmorgan-madoff-idUSBRE93E11E20130415

It doesn't have to be that complicated. The mine engineers are always building discounted cash flow (DCF) models. You make assumptions about the commodity price (3-year trailing average), what everything costs, and choose a discount rate. That is what mine engineers are taught in school. You plug your assumptions into a spreadsheet and get a net present value (NPV) figure. For an example of this, look at feasibility study technical reports on SEDAR (or on miners' websites). *Of course in practice not everything breaks down into a single number easily. The main problem is "garbage in garbage out". If you are overly optimistic about your assumptions, then the NPV figure will be ridiculously inflated. But if you are going to break everything down into a single number, then NPV is the most sensible figure to use. But it's not like anybody actually bothers to go to the library and read a mine engineering textbook to actually try to understand this industry.... **Nobody knows what the correct discount rate is. Riskier projects deserve a higher discount rate. Even miners behave like Mr. Market so the discount rate paid when acquiring/selling properties fluctuates. Unless I'm misunderstanding, you are talking about a forward-looking exercise. What I'd like to know is what is the average all-in cost per ounce for existing, producing mines. Once they add up all their costs (exploration, development, mining, refining, taxes, etc), what does it cost a miner to get an ounce on the market.

Not yet, that's round 2. I need to pull all the individual annual reports for that, I want to look at proven & probable reserves, total cost per ounce, etc. This is vague, but gives an idea: http://business.financialpost.com/2013/04/15/gold-price-miners-canada/

http://www.insurancejournal.com/news/international/2013/04/09/287721.htm

Don't know TBV, but afaik it's Indian law that foreigners can't own more than 75% in a public company in the country.

The bathroom was fine, with a regular sized shower. There was a small closet in the corner with (I think, not sure) a small TV on top, an ironing board behind the door of the bathroom, a small coffee maker, etc... Everything was clean. My main problem was that the bed was a bit too small for me (I'm 6'1", so my feet kinda dangled at off the foot of the bed), but even that wasn't a big deal. Soundproofing didn't seem that good, but I don't think there were too many other people in the rooms around me so that wasn't a problem. It could be if you go there during a very busy time, though.

Mark, have you looked at the changes in all-in production costs since 2008? (not just the cash costs)

Thanks Lance. I'm actually standing around in the background on one of your photos. But I won't say which one :) I also posted a few photos here: http://www.cornerofberkshireandfairfax.ca/forum/fairfax-financial/fairfax-agm-events/msg112304/#new

I had the pleasure to attend the pre-dinner meeting in the railcar (thankfully, I didn't have to do it new-delhi style ;) ), the dinner, the AGM, and the MPIC meeting, and they were all great, as were the people that I met. I want to thank (again) Sanjeev and everybody who helped organize these events. It was my first time attending anything investing-related, and it'll be hard to beat! I also had the pleasure of meeting many board members (and more lurkers than I expected -- come on guys, share your thoughts with us!). Everybody was very nice, and because I'm bad with names and not used to meeting so many people within such a short period of time, I remember the people but there are some names I can't recall right now (sorry! I feel bad about it). But it was awesome to meet all of you (Biaggio, Txlaw, VAL9000, Paul from Ottawa, NormR, Alvin, finetrader (briefly), and many more). Here are some pics (if your browser window is narrow, you might have to scroll to the right to see the whole thing -- they're a bit wide for low-res screens): http://i.imgur.com/Z6poWEZ.jpg A few superstars dropping by the pre-dinner meeting. Francis Chou, Brian Bradstreet, and Tom Russo. http://i.imgur.com/pKYlTKz.jpg The actual dinner later that night. Hard to see, but that's Prem on the podium with his guests on the left. http://i.imgur.com/iyPI9Y0.jpg This is at the end of the dinner from farther back. Wanted to show how nice the room was. Right after this I stepped outside and joined the 20 people surrounding Francis Chou. He was so generous and answered everybody's questions (I just listened, though). http://i.imgur.com/e6odNCz.jpg The next day, Prem on stage at the AGM. He too was very generous and answered questions for hours. http://i.imgur.com/HM8MKoN.jpg On the train on the way back, the train stopped for some reason and right next to my window was this BNSF car. I thought it was fitting... :D So we're all frugal value investors, right? Can anyone beat my 75$ broom closet hotel room? :) It was within two blocks of all the event locations, so it wasn't just cheap, it was very convenient -- a good value. http://i.imgur.com/d7V10u1.jpg If you're having trouble seeing them, you can go directly here: http://imgur.com/a/PhTAk

Hear! Hear! *applause*

Agreed on the Buffett chapter. I think it's probably been put in there because some of the book's readers won't be Buffett disciples, so it can serve as an introduction. But for anyone who's been following Buffett, it was pretty unsatisfying. I kind of wish they had a chapter on Prem Watsa instead. Maybe in the next edition :)

I agree, but I don't hold it against the book. Most of the important things in investing are really obvious ("simple, but hard to do", as Munger would say), so after a while, it seems like everything I read is kind of redundant. But I still feel like I get value out of it because it reinforces what I already know and keeps me on the right path (at least, I hope). It's a bit like Free Capital. Another book of profiles that I quite enjoyed, but if you're looking for lots of non-obvious investing concepts, probably not the place to look.

http://brooklyninvestor.blogspot.ca/2013/04/jpm-2012-annual-report.html