Some articles you may find interesting, along with my thoughts...
- Martin Whitman 4th quarter commentary (thanks to traderashish for original mention): I've not read it fully and if I get a chance, I'll make a separate post on this but quick items I noticed include his additioanl purchase of GMAC bonds and MBIA surplus notes, and sales of MBIA and Ambac common shares. He still seems to feel that the Asian property managers are trading at huge discounts.
- Bill Miller 3rd quarter commentary (thanks to gurufocus.com for pointing it out): Bill Miller is having a terrible year and a lot of so-called "value investors" have written him off as a value pretender. I haven't read his commentary fully but he touches on some important points including the situation with Fannie and Freddie (Bill Miller was a big shareholder so he lost a lot.) I am in the minority camp that believes that the Bush administration, and Hery Paulson in particular, made a huge mistake in seizing Fannie Mae and Freddie Mac simply due to alternative accounting standards and their belief of what may happen. There are a lot of people who say that letting Lehman Brothers fail was the biggest mistake of this administration but I think it is their actions towards the GSEs. As Miller correctly points out, once the government seized the GSEs, even though they were about stautory requirements using the accounting they were using, it was all over for all other financial institutions. There is no way anyone was going to invest in any of them given the threat of seizure at will. For instance, there was nothing to stop the government from taking over Goldman Sachs (before it turned into a bank) based on what it may or may not do. Some brave souls with favourable terms, like Warren Buffett, may take their chance but no one else is going to inject any capital into common or preferred shares. The proper thing for the government would have been to seize the GSEs only when they breach any regulatory conditions.
- Jim Chanos CNBC Interview (CNBC; thanks to valueplays.com): Todd Sullivan runs an interesting value investing website but it crashes my browser sometimes so be careful if you click on that link. Anyway, it's always good to get a short-seller's thoughts. The last video is interesting in that he is turning bearish on healthcare companies. There are quite a number of value investors who are bullish on healthcare so it'll be interesting to see how this plays out. In my opinion, healthcare is a disaster in the US. As Chanos alludes to, you have a system that doesn't cover everyone regardless of their wealth, yet it is one of the costliest in the world. The fact that healthcare has been growing faster than GDP for a while likely means that it will slow down substancially. Jim Chanos makes the insightful observation that healthcare opponents were limited to consumers and left-leaning individuals in the 90's but now consists of employers as well. If employers, who are half the system in the US, want to bring down costs, it's going to be rough for the healthcare industry. The fact that there will be a huge baby boomer retirement may not be enough to compensate for the pressure that will start being applied on profits.
- Can China avoid a nasty recession? (The Economist): Pretty good article looking at all the different elements to the situation faced by China. As far as I'm concerned, the only hope for China is a deflationary boom. They seem to have overcapacity in manufacturing and fixed infrastructure. This will push down prices and China somehow needs to capitalize on that. Not an easy task.
- Basic advice from Warren Buffett for investors (fortune.com): An excerpt from Jeff Matthews' book Pilgrimage to Warren Buffett's Omaha. Haven't read the book but the excerpt touches on one of the suggestions for newbies: read.