Michael Harkin's Speech at Grant's Conference

My last idea also brings me round again to Anatoly Rybakov, who claimed whenever you wanted to hide something from the KGB it was best to leave it face up on the center of your desk. The neighbors would never think to look there. At this odd moment in capitalism, so much value is lying in plain sight, and we think Google is an example. Google makes more money than all the other internet companies Value Line lists in its internet section combined. The internet has been a remarkable destroyer of business models, but not much of a profit generator. Google steps in to that void. Google has $32 billion in cash on hand, which they got the right way. They didn’t borrow it, they have no debt, they didn’t sell something and the cash is the residue, it isn’t lying around from the IPO. This $147 per share is money that they made, and in only 9 years and a bit as a public company. Now I know there’s been some writing in the New York Times that maybe we should give the cash lying around at tech companies some kind of discount, perhaps because it’s not all in dollars and parked in a U.S. bank, or because it hasn’t been all taxed at American rates. But I would like to pose a question to the Timesmen. If you don’t like cash and the rapid accumulation of more if it, what is it you do like about business? This is silly quibbling from the Times, and if you subtract out the $150 in cash per share, and they earn the $31 a share or more I think they will, you just bought yourself a great inflation hedge at effectively 13 times earnings. And look at that record. Buffett and Munger went on and on at last year’s Woodstock about what a moat Google had, and while we’ll note Microsoft’s Bing has made some inroads, it still is hard to compete with these guys. I don’t know what new act in tights Google will come up with next, although last week’s news articles about how Google is looking to nurture old media content providers by stuffing pillows over their heads left me somewhat perplexed. I’m no great seer in this regard, but do you spend your days like me toggling back and forth between the Google page and the Bloomberg machine? This is nothing like insider knowledge, but can you imagine a morning when Larry Page gets out of bed and says, “I wonder if there is anything more in the financial space for us to do?” About two hours later Bloomberg will look like the Quotron machine did twenty years ago. The Bloomberg is some piece of expensive, archaic, annoying architecture, that looks ripe for the taking, and it would move the needle, at least for a year or two, even at mighty Google.

Full Speech

David Poppe of Sequoia Fund

Burbank Contrarian Bets

As a hedge-fund manager who thrives on turbulence in the commodities markets, John Burbank couldn’t have done better than the first week of May.

The prices of oil, metals and other raw materials nose- dived the most in two years as investors retreated from emerging markets amid surging inflation in China and India and political upheaval sweeping through the Middle East and North Africa. For Burbank, the founder and chief investment officer of San Francisco-based Passport Capital LLC, the sell-off is an opportunity. He’s looking to add to the heavy bets he’s made in the frontier market of Saudi Arabia, Bloomberg Markets magazine reports in its July issue.

The Saudi monarchy’s decision to roll tanks into neighboring Bahrain to help quell an uprising -- as well as the rebellions in Libya and Syria -- may give some investors pause. Not Burbank, a hedge-fund manager who made his name by earning a 220 percent net return in 2007 after shorting subprime mortgages.

He sees little chance that the Saudi regime will be overthrown or that crude prices will collapse. As the insular kingdom opens up to foreign investors -- it didn’t permit outsiders to buy Saudi stocks until 2008 -- Burbank says now is the time to plow into the country’s petroleum-rich economy.

He’s acquiring stakes in publicly traded petrochemical companies, banks, construction firms and even health-care providers. The Saudi investments made up about 11 percent of Passport’s $2.1 billion flagship fund, Global Strategy, as of May.

Unorthodox Methods

“The crisis isn’t affecting the long-term reality that this is where the oil is,” says Burbank, 47, a beefy man with a full beard who looks more like a longshoreman than an elite money manager. “We want exposure to the Saudi economy because the prices are very cheap and there’s going to be a lot of growth and higher returns on capital, and that’s something that’s likely to play out over a number of years.”

Burbank’s Saudi trade is right in character for a money manager with a knack for using unorthodox methods to exploit the globe’s scarcity of raw materials. While the commodities market’s two-year rally skidded in the second quarter -- crude dropped almost 15 percent and silver shed 28 percent from April 28 to May 9 -- Burbank says the ongoing development of emerging economies will convert little-known raw material producers into money machines for years to come.

Prospecting Skills

Burbank has little interest in trading commodities themselves, which are subject to price distortions as speculators move in and out of markets. Instead, he wants to make a 10-fold return on his investments by purchasing equity in undervalued companies such as oil tanker operators that are poised to grow as long as demand for raw materials steadily rises.

That often involves unearthing small firms that discover mother lodes of highly sought resources, ranging from potash in Kazakhstan to coking coal in Mozambique.

Passport’s investors have profited from Burbank’s prospecting skills. The Global Strategy fund has delivered an annualized 23.6 percent net return since its inception in August 2000, according to data obtained from Passport investors. The HFRX Global Hedge Fund Index gained 4.3 percent in that span, and the Standard & Poor’s 500 Index rose 0.6 percent.

Burbank is racing to beat multinational companies in Australia, China and India that are hunting for new sources of ore, metals and minerals. Passport reaps big dividends when these large players purchase the output of one of the hedge fund’s companies or, even better, the entire enterprise itself.

138 Percent Return

In 2007, Passport started buying shares in Riversdale Mining Ltd. (RIV), an Australian firm developing deposits in Mozambique of coking coal to be used in making steel. Last year, Riversdale was Passport’s No. 1 holding, even though it had yet to mine any coal from the find in Mozambique and lost $799 million.

Burbank’s gamble paid off when Melbourne-based Rio Tinto Ltd. (RIO) made a $3.4 billion bid for Riversdale on Dec. 6 and later increased it to $4 billion. Riversdale shares soared 138 percent in 2010 and helped lift Global Strategy to an 18.2 percent performance after fees. Passport sold most of its shares to Rio Tinto in the first quarter. In early May, Rio Tinto held 73 percent of Riversdale and planned to delist the company.

Burbank, a somewhat rumpled man who shuns neckties and suits in favor of fleece vests and chinos, has long contended our era will be defined by the acute shortage of resources and the decline of debt-strapped economies in the U.S. and Europe.

Underestimated Damage

“I believe the West is bankrupt and failing and it’s just a question of when,” he intoned in his baritone voice to more than 1,700 attendees at the SkyBridge Alternatives Conference for hedge-fund investors in Las Vegas on May 12.

Burbank’s investment record and outspokenness have won him respect from peers who see him emerging as an elite name in hedge funds.

“He’s an original thinker, and he’s got guts,” says Kyle Bass, founder of Hayman Capital Management LP in Dallas, who was at the conference.

Even so, Passport investors have been whipsawed at times during the past decade. In 2008, Burbank almost lost his firm after he underestimated how much damage the global credit crunch would inflict on emerging-market stocks. Confident his long-term bullishness on commodities producers would be rewarded, he added shares of raw materials companies even as investors exited such positions in August and September.

Full Article

David Herro on Consuelo Mack WealthTrack

Berkshire Hathaway 2011 Annual Meeting

Berkshire 2011 Key Messages:

Notes

My Omaha trip photos:

Omaha 2011 Trip

Michael Burry's Speech at the Vanderbilt University

Warren E. Buffett, CEO of Berkshire Hathaway, Announces the Resignation of David L. Sokol

This press release will be unusual. First, I will write it almost as if it were a letter. Second, it will contain two sets of facts, both about Dave Sokol, Chairman of several Berkshire subsidiaries.

Late in the day on March 28, I received a letter of resignation from Dave, delivered by his assistant. His reasons were as follows:

“As I have mentioned to you in the past, it is my goal to utilize the time remaining in my career to invest my family’s resources in such a way as to create enduring equity value and hopefully an enterprise which will provide opportunity for my descendents and funding for my philanthropic interests. I have no more detailed plan than this because my obligations from Berkshire Hathaway have been my first and only business priority.”

I had not asked for his resignation, and it came as a surprise to me. Twice before, most recently two or so years ago, Dave had talked to me of resigning. In each case he had given me the same reasons that he laid out in his Monday letter. Both times, I and other Board members persuaded him to stay. Berkshire is far more valuable today because we were successful in those efforts.

Dave’s contributions have been extraordinary. At MidAmerican, he and Greg Abel have delivered the best performance of any managers in the public utility field. At NetJets, Dave resurrected an operation that was destined for bankruptcy, absent Berkshire’s deep pockets. He has been of enormous help in the operation of Johns Manville, where he installed new management some years ago and oversaw major change.

Finally, Dave brought the idea for purchasing Lubrizol to me on either January 14 or 15. Initially, I was unimpressed, but after his report of a January 25 talk with its CEO, James Hambrick, I quickly warmed to the idea. Though the offer to purchase was entirely my decision, supported by Berkshire’s Board on March 13, it would not have occurred without Dave’s early efforts.

That brings us to our second set of facts. In our first talk about Lubrizol, Dave mentioned that he owned stock in the company. It was a passing remark and I did not ask him about the date of his purchase or the extent of his holdings.

Shortly before I left for Asia on March 19, I learned that Dave first purchased 2,300 shares of Lubrizol on December 14, which he then sold on December 21. Subsequently, on January 5, 6 and 7, he bought 96,060 shares pursuant to a 100,000-share order he had placed with a $104 per share limit price.

Dave’s purchases were made before he had discussed Lubrizol with me and with no knowledge of how I might react to his idea. In addition, of course, he did not know what Lubrizol’s reaction would be if I developed an interest. Furthermore, he knew he would have no voice in Berkshire’s decision once he suggested the idea; it would be up to me and Charlie Munger, subject to ratification by the Berkshire Board of which Dave is not a member.

As late as January 24, I sent Dave a short note indicating my skepticism about making an offer for Lubrizol and my preference for another substantial acquisition for which MidAmerican had made a bid. Only after Dave reported on the January 25 dinner conversation with James Hambrick did I get interested in the acquisition of Lubrizol.

Neither Dave nor I feel his Lubrizol purchases were in any way unlawful. He has told me that they were not a factor in his decision to resign.

Dave’s letter was a total surprise to me, despite the two earlier resignation talks. I had spoken with him the previous day about various operating matters and received no hint of his intention to resign. This time, however, I did not attempt to talk him out of his decision and accepted his resignation.

Effective with Dave’s resignation, Greg Abel, presently President and CEO of MidAmerican Holding Company, will become its Chairman; Todd Raba, President and CEO of Johns Manville, will become its Chairman; and Jordan Hansell, President of NetJets, will become its Chairman and CEO.

I have held back nothing in this statement. Therefore, if questioned about this matter in the future, I will simply refer the questioner back to this release.

Berkshire Hathaway and its subsidiaries engage in diverse business activities including property and casualty insurance and reinsurance, utilities and energy, finance, manufacturing, retailing and services. Common stock of the company is listed on the New York Stock Exchange, trading symbols BRK.A and BRK.B.

Link

Nigel Marsh: How to make work-life balance work

2011 Annual Letter from Bill Gates

To download: 2011 Annual Letter

James Simons: Mathematics, Common Sense, and Good Luck: My Life and Careers