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Strategies & Market Trends : Value Investing -- Ignore unavailable to you. Want to Upgrade?

To: Paul Senior who wrote (29376)	12/22/2007 12:47:55 AM
From: Jurgis Bekepuris	Read Replies (2) \| Respond to of 78476

You see that's exactly the situation where book value is not important while trust is. And you are being disingenuous comparing well known issue of nontransparency of financial/insurance balance sheets to "reading any 10k where they list all the potential bad things that could happen to the company". Most of those are really remote or possible to evaluate while we are sitting in the middle of one of the largest blowups of the financials throughout history. And you have the chutzpah to claim that it's not a big deal. Brushing off very legitimate concerns is not competence whatever you claim. my opinion is nobody should be investing in these companies, because nobody outside the company will ever know the assets well enough to actually and factually know if the company reserved enough - amen to that. Unless you really trust the management to be clean and know what they are doing.

To: Paul Senior who wrote (29376)	12/22/2007 10:15:53 AM
From: Jurgis Bekepuris	Respond to of 78476

After thinking about it a bit more, I guess there are couple points that I may not have expressed clearly, so let's try again: - What's on the asset side of financial companies. IMHO, investor should at least try to understand this. It might be easier for some companies (WSC and BRKa fall there, btw, since a lot of their assets are publicly traded equities fully disclosed) and harder for others (NWLIA is IMO harder case). I disagree with your approach that you mentioned couple times: "do not dig deep, since it's hard or impossible or takes too much time and diversify instead". Information is the most important thing to have in investing and deliberately refusing to go for it is IMHO not acceptable. - Insurance premiums, risks and reserves - i.e. how much the company got paid for what. This part we can agree that it is pretty much unknown and should be taken by trust or a person should not invest in company at all. It is similar for banks and credit card companies although maybe more transparent and shorter term: we don't know who the bank lends to and at what rates, so that part we have to take by trust. Banks may report part of this, insurance companies pretty much escape this IMO since they use proprietary models that would be tough to understand anyway. - Valuation matters. Sorry if I seemed to argue against. At half book value any company is less risky than the same company at full book or two times book. - Trust is very important. IMHO much more in financials and insurers than in other companies, but perhaps it is not much of a difference. - Buying a basket of companies or index on sector valuation or macro thesis. This may work. IMHO, it's not the best way to invest, but well, you pay your money and you make your choices. Good luck and sorry if this became more heated than needed. :)