Maybe you should be a vulture too

See the G&M article from Reuters below.

Whenever WB says that there is an "unusual amount of money to be made" I think we should take notice...

I'm still trying to get my head around the bond market and am coming to realize that small retail investors are at a considerable disadvantage v.s. institutional investors concerning research and opportunities to buy and sell distressed debt.

I'm taking the opportunity to invest in expertise in this area by buying Chou's Bond fund. He is a well priced and highly practiced vulture with an amazing track record. I've discussed Chou's management style in prior posts. He keeps huge cash reserves (up to 40% of the fund!) to take advantage of times were in now. He is extremely conservative and I like that.

Onex OCX.TO, another Canadian mid cap company also discussed before, has set up an entire subsidiary arm specializing in investing in distressed debt. They have a pile of cash to mobilize and apparently have been since last August. They are moderately aggressive and moderate risk management style.

Finally, Prem Watsa, the highly profiled CEO of Fairfax Financial FFH made a massive fortune for the company over the last year (1.1 billion in Q4!!) betting against the mortgage insurers with credit default swaps-- these derivatives pay when debtors default. His aggressive, high risk management style is a bit too much for me and I don't like his inflexible hyper-bear outlook; however, it's a bit tough to argue with his results-- both long and short term. The valuations of the company are interesting although may be distorted by this one time huge windfall.

I can anticipate the question, "Why not just buy Berkshire?". It's a reasonable thing to do. The only downside is that BRK has gotten so huge that the law of large numbers presides. This opportunity will hardly budge the needle on BRK's amazing performance.

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