Deep Thoughts From Leucadia

Tyler Durden's picture

With Leucadia coming boldly from behind the shadows, where Ian Cumming and Joe Steinberg have always enjoyed operating, and joining Buffett in a deal over Capmark's loan-servicing and mortgage business, it makes sense to introduce readers with some of the very original thinking of the Leucadia founders (and very close friends of the mellifluously named Dick Handler). We present their most recent annual investor letter, which frequently is cited as among the best hedge fund (even though they don't like to be seen as one) strategy reading material. 


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JohnKing's picture

That's too truthy, feed me green shoots!

Anonymous's picture

No love for "Revolutionary Struggle" out of Greece?

I swear to God, these guys are Project Mayhem on steroids, and we don't even give them the time of day?

They just put the fear of God back into the banksters in Greece, and we need the same medicine here in North America.

spekulatn's picture

Revolution?? We don't need no stinkin revolution. 


KeyserSöze's picture


What amazes me from this report are some of the CRE holdings and also Resort Quest.  They essentially doubled down in Panama City, Florida and I have written about " CRE analyst" and "investment committees" this is a PERFECT example of analysis gone HORRIBLY wrong.

Resort Quest -What a joke, and they acquired it in 2007 at the height of the market?! To boot, the "708" acre parcel (the old airport in PC) laughable, you can find THOUSANDS of acres all owed by St. Joe (WAY better locations), nothing like availability to drive up land costs...oh it doesn't work that way does it?  I don't know much about their other CRE holdings but I know some of the holdings in their portfolio very well and they are dogs with fleas!  Alligators!

I can see now why they turned to Buffet...I can only imagine how much Buffet shook them down for....they need it and judging by some of their assets they deserve it. 

Anonymous's picture

I ken nary afford thee gold, nor the sillistocks of Mr. Dow Jones, und bonds is jus' what the misses gots me in. In fact, I'm happy just to hold a pint now and then. Getting what ken be got from the sea and the sun, in way of fish, fruit, and vegetationables is gud eno' fer meh. But nee tragedee is so full as to make abominable me mind as lack o'...
Indeed, when thee man comes fer me labour, wanten to make greater und better of all, err war upoun me neighbor. Then 'e better promise me the grog. Thee sivilization depends upon 'ee.

Rollerball's picture

Tax hedge fund ponzi scheme is what they are.  And Buffett is probably just "hedging" his GS portfolio of toxic GS assets.  I'd short BRK-A if I could get the borrow (and margin;).

chumbawamba's picture

Jim Willie thinks Buffet is bankrupt.  I think he's probably right.

I am Chumbawamba.

Anonymous's picture

FYI...Ian Cumming has been far more successful in finance and investment operations than 99% of the people who have ever visited Zero Hedge, or who will in the fuure. It is easy to be a critic. Until you have attempted to deploy large amounts of capital, one should withhold opinion...

Warren Buffett's record has been desrtoyed because his "terrible" investment in COP...?

An appropriate amount of diversification allows for individual errors. The best batter of all time hit .400.

chumbawamba's picture

My dad lost and then gained a fortune by investing in Leucadia three times over during the past three decades.  After the last drop I finally got him to sell his shares and put it into gold.  Now he'll live a comfortable retirement.

I am Chumbawamba.

chumbawamba's picture

Not sure.  My dad is bat shit insane.  But now his assets are secure so it doesn't matter.

I am Chumbawamba.

Anonymous's picture

ah leucadia - those boys spend more time flying in and out of Yampa Valley - at least they make good use of their G5

Rollerball's picture

Drug runners with a deep basement and laundry facilities.

Anonymous's picture

Wow. This letter is a bloodbath of investing acumen and the fact that even the "smart money" got stoopid this last go around. $20 says they're jettisoning equity positions like bad curry in this bear rally.

Ben Graham Redux's picture

I think highly of their approach to investment, but other than their mining assets, I hate the assets they own. Finance companies, wineries, and casinos are all assets of the last cycle.  These guys are stuck with assets that I expect to decline dramatically in value.  Sometimes smart and talented people make bad decisions.  My guess is that they'll figure it out and get back in the black.

John Self's picture

Don't forget the forest assets.  That's so 2006!

Anonymous's picture

You gotta be kiddin' me. These guys still have jobs?

Mediocritas's picture

@TD: are you really kissing Leucadia's ass this much or are you being sarcastic? I can't tell.

My eyes started to glaze over when I saw they were long FMG, oh dear. FMG. A company that bet the farm on an unbroken China boom and very nearly went down in March. It only survived by whoring part of the company off to the Chinese and that was held up for a long time by the Oz govt to the point where it was time to shut shop. Instead of blaming an overly optimistic and aggressive business model, Forrester had a big cry about us bears targeting the stock (because of its overly optimistic and aggressive business model) in its impressive fall from $13 to $1. I've subsequently done OK with a few short-term longs on FMG, but made far more on the shorts. (Edit: another thing to add here is that FMG's mining model *depends* on high iron-ore prices because they exploit lower % ore sites with an inefficient 'scrape it all' approach. FMG's model is a scavenger model, they picked up sites that more mature miners (who've been through tough times) wouldn't touch due to viability concerns, and were able to turn a profit due to high Fe prices. Prices fall too far and FMG is history).

If TSHTF again I'll be loading up the existing short even more on FMG regardless of what Leucadia have to say. Given their crapnalysis on FMG, looks like a few more short targets just popped onto the radar.

Iron ore in oz is tapped out for now. The export pipeline is slick and refined, able to service huge quantities of ore to a Chinese market that no longer needs it. There's a surplus capacity backflow hitting the oz Fe miners and the Chinese have already showed that they will simply break overpriced contracts and say "stick it" (very bad for FMG). Stay away and head for greener pastures. Much better target is oz LNG for export to Japan & China, the moves in that sector lately have been explosive. Still, even on that front, I took profits in August and am starting to flip to speculative shorts sprinkled through the ASX, especially the REITs, of which there are so many to choose from.

The Aussies are in for a nasty real estate collapse starting in 5...4...3...

Anonymous's picture

I've met Ian Cummings on several occasions. I used to be an IT consultant up in Jackson Hole, where he's got an office and a stupid huge house with a beautiful view of the tetons. He was an investor in the company that I worked for, so we got all his local IT business. He's got a couple of private jets and more money then god. I think I saw Dick Cheney's number in his rolodex once(Tricky Dick is also a JH resident). Ian's a smart guy... loved his mac powerbook and had a copy of richard dawkins "the god delusion" on his desk at his home office the last time I was at his house. We had a good conversation about atheism. Oddly enough he tries to portray an "invest in america" idealism(which is why he liked AAPL), even though LUK is invested all over the world. I think he's the richest person I've ever personally met, and definitely the richest person I've had extended conversations with. I've looked into investing in LUK but they're so all over the board that I didn't really feel like I had an understanding of how they're profitable or what risks were involved. Long story short he's a monstrously clever fellow, but I don't know that I'd throw any money at LUK anytime soon.

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