Wednesday, August 22, 2012

2 Important Posts You May Want to Check Out Today

Has it been a while since I've posted here?

It has. It has.

But I've been busy and as you can see not with this site.

What I've been working on is a site that's focused in large part on collecting quotes from or writing reviews of books by great writers such as Nevil Shute and Joseph Mitchell.

Fear not, however.

I came back to share a couple of links that I know readers of this site will be interested in.

For example, there's a post on what counted as money before even gold and why that may matter to your financial security today. And there's an earlier post, which you should actually read first, that is a review of a book called Paper Money Collapse on the coming monetary breakdown.

Will you like them?

I don't know.

Love them?

I also don't know.

But if you're interested in this site because you're concerned about gaining more wealth and all the freedom it provides, you'll definitely find something of value over there, particularly in the two posts linked to above.

Check 'em out then and I'll be back here at some point with more links to the news you're looking for (most likely, judging by the traffic, on David Einhorn).

Wednesday, July 18, 2012

Third Avenue Hires David Resnick

So, according to this report from Morningstar, David Resnick will be joining Morningstar in September 2012.

Who is David Resnick?

Resnick "made his name as an advisor on bankruptcies and restructurings for many years and who in fact had worked with fund-family founder Marty Whitman on Public Service of New Hampshire's restructuring in the late 1980s."

What does his hire mean for fundholders?

Again according to the report, "In the tight-knit network of bankruptcies and reorganizations, Resnick's rolodex and expertise...should come in handy for many years to come. Overall, it's a positive development for a firm that has succeeded with distressed investing in the past."

Tuesday, July 17, 2012

3 Short Quotes from Ken Heebner

So, Ken Heebner hasn't been getting the best of returns of late. In fact, as this article points out, he's been getting rather bad returns--and for a while.

Nevertheless, as these three quotes show, Heebner hasn't changed his general strategy:

1. "“Most people think this is the worst time in the world to be optimistic, but my portfolio is positioned for strength in the U.S. . . I am functioning in a contrarian mode.”

2. "[Negative sentiment] historically has been associated with maximum points of opportunity for investing."

3.  "I am completely outside the mainstream. I see the mainstream in the distance."

Will Heebner's fund come back yet again? Or is an investment in the banks ultimately a doomed strategy?

My own view is that if anyone can pull off a successful investment in them from here that man is Heebner--but even so I wouldn't want to join him in the bet.

Saturday, July 14, 2012

How to Play Poker (or Invest) Like David Einhorn

In some circles, David Einhorn is admired as much (or even more) for his poker abilities than his investing skills. But as Einhorn himself points out in this article his strategy with both is similar. 
Einhorn has said his approach to poker resembles his approach to investing: He doesn’t play a lot of hands. When “the situation feels right, I put in a big, aggressive raise with a marginal holding,” he said in a 2006 speech. “It is very hard to describe how I know the ‘feel,’ and sometimes I get it completely wrong. But to do well in a poker tournament, you have to recognize a few non-traditional opportunities and you need to get people to sometimes fold the better hand. I think we invest similarly. By this, I mean that most of our investing lines up nicely in the disciplined, traditional value camp—very low multiples of book value, revenues, earnings, etc., but occasionally we are opportunistic and invest in situations that are difficult to justify under traditional criteria."
The article contains some inaccuracies--for example, Einhorn wasn't bluffing and thus couldn't have been out-bluffed--but in addition to the above it contains how many millions Einhorn won playing poker this time and how Einhorn felt doing so.

Saturday, May 19, 2012

How Warren Buffett Earned His Billions

At one of my new blogs, which both focuses on how to read a book the 80/20 way and helps you to do so, I share a quote from The Dhandho Investor on how Buffett achieved his billions:
...Minimizing downside risk while maximizing the upside is a powerful concept. It is the reason Mr. Buffett has a net worth of over $40 billion. He got there by taking minimal risk while always maximizing returns. Most of the time, assets trade hands at or above their intrinsic value. The key, however, is to wait patiently for that super-fast pitch down the center.
While I have qualms about recommending the book wholeheartedly, as I say at the end of that post, the above point is dead on, and the book itself is definitely a worthwhile read. 

To see for that yourself, however--or at least to screen the book much better--check out the 8 quotes on achieving high returns with low risk that I share from it.

Sunday, May 13, 2012

This year, for Mother's Day, David Einhorn gave his mom "naches" like you wouldn't believe

So let's review. This week, David Einhorn:
  • made a lot of money when Herbalife and Green Mountain crashed
  • took down the Fed in an article that used the Simpsons as examples, and...
  • won a poker tournament for Hillel.
I don't know if any Jewish mom can top that for naches this year, but I doubt it.

8 Tips on Investing The Third Avenue Way

In a recent report by Third Avenue Value, Ian Lapey discussed the philosophy which has led to Third Avenue's investing success. Here are eight tips from that report, that you might find helpful:
  1. "Focus on the balance sheet and readily ascertainable net asset value."
  2. "Only invest in common stocks issued by companies with strong financial positions."
  3. "Focus on the long term."
  4. "Worry about investment risk, not market risk."
  5. "Do not try to pick the bottom."
  6. "Avoid industries in secular decline."
  7. "Own the fulcrum security [in a company's capital structure]."
  8. "Pay close attention to a management team's long-term track record and incentives."
For more on each, click over to read a paragraph going into more detail on each. And then, having done that, I wish you the best in applying them for profit!

Ian Lapey Seems Very Happy with Third Avenue's Investments in Hong Kong

Morninstar recently interviewed Ian Lapey about a trip he made to Asia investigating the strength or weakness of Third Avenue's (real estate) investments.

In general, Lapey expressed being pleased with what he saw. In particular, however, he repeatedly noted the discount to NAV that the fund's Hong Kong investments are selling at, the speed at which they're compounding NAV, and the strength of store traffic at particular locations in HK.

Check out the interview for more. There's video and a full transcript, with highlights, at the fund's web site.

I have just one question, however: If Lapey is so pleased, why did the fund recently decrease its position in Cheung Kong Holdings (by 3.4 million shares), and Henderson Land Development Company (by 14.3 million shares), and Wharf Holdings (by 1.2 million shares)?

Perhaps it's just portfolio rebalancing. Holders of the fund should be on the lookout, however, to see if the trend continues.

Monday, May 7, 2012

Einhorn's Current Thoughts on the Global Economy

Although we're sure to hear more details of his macro thoughts, and soon, in the recent conference call discussing Greenlight Capital Re's Q1 2012 results, Einhorn noted being concerned of...

  • the structural debt problems in Europe and Japan
  • the slowing Chinese economy
  • high oil prices, and
  • general inflation connected to the Fed's 0% interest rate policy.
What is he doing about it?

Again, we're likely to get more news on this soon, but in the call he mentioned owning...
  • longs or shorts on an individual, non-macro, and compelling basis
  • gold bars,
  • gold miners, and
  • other macro hedges.

You can read a full transcript of his comments over at Seeking Alpha.

Tuesday, April 24, 2012

Seeking Alpha Article Quotes Marty Whitman

A post by Chuck Carnevale showed up in my news feed today because it contained quotes from both Warren Buffett and Marty Whitman (among others).

It's a good post, and one that that readers of this blog may enjoy reading in full. As an example of its value, here's the quote by Marty Whitman:
"I remain impressed with how much easier it is for us, and everybody else who has modicum of training, to determine what a business is worth, and what the dynamics of the business might be, compared with estimating the prices at which a non-arbitrage security will sell in near-term markets."
This, Carnevale says, basically means that "it's easier to value a business based on analyzing its fundamentals than it is to try and guess where the price of the stock may go over the short to intermediate term."

I agree with that, as well as some other things from the post. Here's the link for anyone who'd like to read it in full.

Monday, March 12, 2012

Marty Whitman Retires

Chuck Jaffe generously praises Marty Whitman in this short piece on his decision to step down from managing the Third Avenue Value Fund.

While I disagree with parts of it, Jaffe accurately identifies Whitman's admirable long-term track record--and the three words that Whitman's style boils down to: "safe and cheap."

The whole thing's worth a read, even for those of us who have been following the fund for some time and give Ian Lapey more credit than Jaffe seems to.

Saturday, March 10, 2012

The Headline that Made David Einhorn Smile

I have no inside information on this, but I'd be willing to bet that the following headline made David Einhorn smile:

I saw this in my Facebook news feed, prefaced by my friend saying, "This looks promising." Indeed it does--but especially for those short Green Mountain shares.

Wednesday, February 29, 2012

What's Ken Heebner Investing in Now?

Seeking Alpha has a post going over some of Heebner's current top picks. Worth checking out, even if (like me) you think investing in financials like Citigroup is madness.

You Can't Blame David Einhorn

As the recently released transcript of David Einhorn talking to the CEO of Punch makes clear, David Einhorn was right to sell out of the company. Here's an excerpt of the phone call:

PUNCH CEO: Well, I -- I think -- I -- I think the market sort of dictates this. I don’t think it’s a matter for the market to dictate that. We -- our view is simple, that is, that, you know, we have to make sure that we can preserve a sensible headroom to the covenant from a securitisation and -- and take out the convertible as the -- the maximum and minimum requirement of any discussion. But there’s absolutely -- if you go back over the history, and I know -- I -- and I -- and I perfectly respect that you’ve not been involved from the beginning, but when we originally floated the company, we did an initial public offering of 116 million pounds. We have only done since that time --, that’s 161 million pounds. We have only done, since that time, 175 million pounds [inaudible]. So, to be absolutely clear, I don’t -- I don’t look at the business from an equity perspective and if -- you know, and it’s not my intention to over-equitise this business whatsoever. The transactions that we’ve done, for example, we’ve shown, pretty substantially dispassion in what we’ve sold to ensure that we maximise value on the debt and, so this -- so it’s merely about making sure that -- and we can turn around to the shareholders and say, “Actually, anything that we do is sufficient to give ourselves a – headroom for a considerable period of time into the future and also addresses the convertible”. That’s the maximum and that would be the minimum that would be worth considering.

DAVID EINHORN: Mm hmm. So, would you -- as you pencil that out, what do those amounts turn out to be?

ANDREW OSBORNE: Something like 350 sterling.

DAVID EINHORN: 350 million sterling?

ANDREW OSBORNE: If you were -- if you were to roughly sort of work on the basis that you kinda took out the -- the converts, and that’s something that gives you, say, 10 percent headroom in within both of the covenants, filed covenants.

DAVID EINHORN: Wow, wow. That would be shockingly horrifying from my perspective. Can you sell half the company just at a buck and a half -- a Euro -- a pound and half? Oh, no.

ANDREW OSBORNE: So those proceeds are applied to buying back debt at say 60 in the pound and remember any --

DAVID EINHORN: Who cares -- --

PUNCH CEO: [inaudible].

DAVID EINHORN: -- who cares, who cares, after a year of going through this, now we’re going to dilute ourselves like this. Oh, no.

ANDREW OSBORNE: Why do you get diluted?

DAVID EINHORN: Because you doubled the share capital almost.

PUNCH CFO: Yeah, but [overspeaking]...
Consider what Einhorn just heard. He just heard the CEO of a company he owns a large amount of equity in tell him that he doesn't view the business from the perspective of an equity holder. Later on, the CEO doesn't even appear to understand how nearly doubling the share count will dilute current equity-holders.

I'd sell as many shares as I could after that conversation, assuming I owned any. To the point, however, Einhorn has no duty to other shareholders to not sell shares of a company when he learns something such as this affecting Greenlight's investment.

The only person in a fiduciary position here is that CEO. You can blame him for being an idiot many times over. But you can't blame Einhorn--or at least shouldn't.

Thursday, January 19, 2012

Marty Whitman Quotes (from Third Avenue's Recent Letter)

Third Avenue's latest shareholder letter is a great read.

At its start, Marty Whitman basically provides a condensed view of his book, Value Investing: A Balanced Approach--which serves as either a nice teaser for those who haven't read the book or a nice refresher for those who have.

Throughout the letter, a number of one-liners are made. Whitman points out, for example, that "analysts really ought not to use the word 'risk' without putting an adjective in front of it." Similarly, he says, "Economists have it wrong when they say, 'There is no free lunch.' What they should say is, 'Somebody has to pay for lunch.'"

Later, James Montier is quoted saying, "The idea that the risk of an investment, or indeed, a portfolio of investments can be reduced to a single number is utter madness." And Thomas LaPointe observes that, "A disorderly Italian default would be at least ten times greater than a Lehman Brothers event."

Anyhow, there's much more in the letter; you can read it here.