Here is a link to the Fairholme conference call from yesterday. Bruce goes into great detail about FNMA, AIG, SHLD and a host of other issues.
Highlighted notes,
- The major reason that Fairholme sold AIG and BAC commons is because they were approaching tangible book value, also, the persistent low interest rate environment is not good for BAC earnings. Nevertheless, AIG and BAC are still undervalue and so it is worthwhile invest in warrants.
- Bruce’s ideas on AIG: side with Icahn for AIG to significantly cut expense, spin or sell assets, get out of SIFI designation
- Bruce’s idea on BAC: sell investment department; BAC’s CEO has done an OK job
- FNMA and FNMAS: it is not a binary investment, instead, there is no alternative outcome from Bruce opinion; during election year, FNMA probably will be released from conservation
- on Sears: we think our thesis still holds. We have a progress checklist for it – to check debt obligation progress, pension, balance sheet strength, spin off options, etc; also, we understand the constraints – pension will reduce if interest rate increases, but so far rate is very low; retail loss is voluntary and it will stop this year.
- invest in oil company: the two oil companies have strong balance sheet and they are the sector leaders. And yes, they are losing money, but they have strength to sustain current situation. In oil price – the current low price cannot sustain for too long so many companies will bankrupt with this price; in addition, the global demand on oil does not decrease, instead it consistently increase. Therefore, due to the balance of supply/demand, the oil price will come back eventually, even though nobody knows when.
