The next Buffetts

• Prem Watsa Fairfax Financial Toronto

Who is he?: The 56-year-old CEO of Fairfax Financial Holdings has often been called the Buffett of the North. He’s run his insurance holding company since 1985 and has grown its share price by an average of 26% a year during that time.

• Tim McElvaine McElvaine Investment Trust Vancouver
  

Who is he?: McElvaine, 44, is a native of Kingston, Ont., and a graduate of Queen’s University. He qualified as a chartered accountant and earned his Chartered Financial Analyst designation before going to work for Peter Cundill, the famed value investor and fund manager, in 1991. Five years later, McElvaine set up the McElvaine Investment Trust.

• Dr. Michael Burry Scion Capital Cupertino, Calif.
  

Who is he?: Burry, 36, studied economics at UCLA, but despite a long-standing fascination with the stock market, stuck to his original plan of becoming a doctor. In 1995, as he was finishing his training at Vanderbilt Medical School, his father died and Burry began investing a small amount of trust money. Two years later, he launched his own website and began to write about stocks in the only time he had free — between midnight and three in the morning. His dissections of value stocks attracted a following and in 2000, Forbes magazine named his hobby site as one of the top investing destinations on the web. By then Burry was in the third year of a residency in neurology at Stanford University Medical Center and he figured it was time to choose between medicine and money management. He set up a hedge fund, named it Scion Capital, and became a full-time investor.

• Ian Cumming Leucadia National New York
  

Who is he?: Cumming is a decade younger than Buffett, which puts him at a sprightly 67. He’s a Harvard MBA who has been chairman of Leucadia since 1978. Together with partner Joe Steinberg, who serves as Leucadia’s president, Cumming has built a long-term track record of investor returns that is actually slightly better than Buffett’s. He does it primarily by looking for broken down, unwanted companies that he can fix and sell for a profit.

The Article

Thanks to Sanjeev from MSN BRK Board for the original reference

Commodities Prices

An insightful article by John Mauldin.

Direct Link

Another article about commodities prices.

Link to the article


Testimony of Michael W. Masters before the Committee on Homeland Security and Governmental Affairs United States Senate

Link to the Presentation

Warren Buffett's European Tour

Warren Buffett held a news conference in Switzerland today on the second stop of his 4-day European tour.

Most of the questions were about the trip itself, which is designed to raise Berkshire Hathaway's profile among large family-owned businesses that might be looking for a buyer who won't make a lot of changes. Buffett told reporters he doesn't expect to go home with a done deal in his pocket.

Video - Part 1

Video - Part 2

Video - Part 3

Frankfurt News Conference

Managing Mindset Articles by MARTEN LUNDAL

What I will aim to do in these articles is to try to unmask some of the hype and illusion surrounding management, point to some of the vast dysfunctionality so prevalent in modern business life and also dare to give my own two cents’ worth of advice to the reader.

I will try to avoid management jargon, lingua and slogans, and I will try hard to not give you the five-step roadmap to anything.

In the space of this column, I will explore some of the most established truths of business life, hopefully challenging some of the assumptions we all live and work in, all-too-often unaware.

I will travel into many broad and narrow topics and, hopefully, some will end up with a slightly renewed perspective on business life and maybe even some aspects of life in general.

1. Management demystified
2. Ties that do not bind
3. Tearing down the walls
4. Meeting of open minds
5. Overlooking the obvious
6. Re-learning the basics
7. Redefining corporate responsibility
8. Designing management fabric
9. The competing country
10. Time waits for no one

Why Investors Fail

You should read these and see whether some of them are familiar.

• "Fear of Regret - An inability to accept that you've made a wrong decision, which leads to holding onto losers too long or selling winners too soon." This is part of a whole cycle of denial, anxiety, and depression. As with any difficult situation, we first deny there is a problem, and then get anxious as the problem does not go away or gets worse. Then we go into depression because we didn't take action earlier, and hope that something will come along and rescue us from the situation.
• "Myopic loss aversion (a.k.a. as 'short-sightedness') - A fear of losing money and the subsequent inability to withstand short-term events and maintain a long-term perspective." Basically, this means we attach too much importance to day-to-day events, rather than looking at the big picture. Behavioral psychologists have determined that the fear of loss is the most important emotional factor in investor behavior. Like investors chasing the latest hot fund, a news story or a bad day in the market becomes enough for the investor to extrapolate the recent event as the new trend which will stretch far into the future. In reality, most events are unimportant, and have little effect on the overall economy.
• "Cognitive dissonance - The inability to change your opinion after new evidence contradicts your baseline assumption." Dissonance, whether musical or emotional, is uncomfortable. It is often easier to ignore the event or fact producing the dissonance rather than deal with it. We tell ourselves it is not meaningful, and go on our way. This is especially easy if our view is the accepted view. "Herd mentality" is a big force in the market.
• "Overconfidence - People's tendency to overestimate their abilities relative to individuals possessing greater expertise." Professionals beat amateurs 99% of the time. The other 1% is luck. The famous Clint Eastwood line, "Do you feel lucky, punk? Well, do you?" comes to mind. In sports, most of us know when we are outclassed. But as investors, we somehow think we can beat the pros, will always be in the top 10%, and any time we win it is because of our skills and good judgement. It is bad luck when we lose. Commodity brokers know that the best customers are those who strike it rich in their first few trades. They are now convinced they possess the gift or the Holy Grail of trading systems. These are the people who will spend all their money trying to duplicate their initial success, in an effort to validate their obvious abilities. They also generate large commissions for their brokers.
• "Anchoring - People's tendency to give too much credence to their most recent experience and to show reluctance to adjust their current beliefs." If you believe that NASDAQ stocks are the place to be, that becomes your anchor. No matter what new information comes your way, you are anchored in your belief. Your experience in 1999 shows you were right. As Lord Keynes said so eloquently when forced to acknowledge a shift in a previous position he had taken, "Sir, the fact have changed, and when the facts change, I change. What do you do, sir?" We expect the current trend to continue forever, and forget that all trends eventually regress to the mean. That is why investors still plunge into index funds, believing that stocks will go up over the long term. They think long term is two years. They do not understand that it will take years - maybe even a decade - for the process of reversion to the mean to complete its work.
• "Representativeness - The tendency of people to see patterns within random events." Eric Frye did a great tongue-in-cheek article in The Daily Reckoning, a daily investment letter (www.dailyreckoning.com). He documented that each time Sports Illustrated used a model for the cover of their swimsuit issue who came from a new country that had never been represented on the cover before, the stock market of that country had always risen over a four-year period. This year, it is time to buy Argentinian stocks. Frye evidently did not do a correlation study on the size of the swimsuit against the eventual rise in the market. However, I am sure some statistician with more time on his hands than I do will brave that analysis. Investors assume that items with a few similar traits are likely to be associated or identical, and start to see a pattern. McQuill gives us an example. Suzy is an English and environmental studies major. Most people, when asked if it is more likely that Suzy will become a librarian or work in the financial services industry, will choose librarian. They will be wrong. There are vastly more workers in the financial industry than there are librarians. Statistically, the probability is that she will work in the financial services industry, even though librarians are likely to be English majors.

Link to the Article

Berkshire Hathaway Annual Meeting & News Conference

Warren Buffett's Q&A With Shareholders (Morning Session)

Warren Buffett's Q&A With Shareholders (Afternoon Session)

Warren Buffett News Conference

One on One with Carl Icahn, Chairman, Icahn Enterprises

Perhaps more than anyone else, the person associated with leading proxy fights these days is Carl Icahn. He calls himself a shareholder activist. He uses funds from his firm, Icahn Associates, to buy stock in a company that he considers undervalued and pressures management to take measures he thinks are necessary to turn it around. If they don't, Icahn often tries to get his own directors elected to the company's board.

I sat down recently with Carl Icahn and began by asking him how he rates his chances of success in proxy fights over the next couple of months, now that hedge funds and mutual funds are joining with him.

Interview Transcript

One Guy Who Has Seen It All Doesn't Like What He Sees Now

Peter Bernstein has witnessed just about every financial crisis of the past century.

As a boy, he watched his father, a money manager, navigate the Depression. As a financial manager, consultant and financial historian, he personally dealt with the recession of 1958, the bear markets of the 1970s, the 1987 crash, the savings-and-loan crisis of the late 1980s and the 2000-2002 bear market that followed the tech-stock bubble.

Today's trouble, the 89-year-old Mr. Bernstein says, is worse than he has seen since the Depression and threatens to roil markets into 2009 and beyond -- longer than many people expect.

Mr. Bernstein, whose books include "Against the Gods: The Remarkable Story of Risk," sees two culprits. One is the abuse of securitization -- the trend for banks to hold fewer loans on their books and instead turn them into securities that were sold to other investors. The other is simply years of overborrowing by financial institutions and consumers alike.

Mr. Bernstein is hopeful that Federal Reserve intervention will prevent deflation and depression, but he says there is no guarantee.

Excerpts of a recent interview