Ian Cumming is the Chairman of Luceudia Corp., he and President Joseph Steinberg has been managing the company since the company was founded 30 years ago. This team has achieved an average return on equity 20.8% during the past 29 years, which is only slightly lower than Berkshire ’s 21.4%. These are his commentaries on Commodities, Globalization and China and secrets of success.
On Commodities, Globalization and China
"We have been thinking a lot about China, but not doing much about it. We observed from the sidelines its tremendous growth and are believers in its continuing potential. One of us has been there several times, the other not. However, China is very far away, and we have a well founded skepticism towards investments in places where the rule of law is not well developed. We have successfully invested in some difficult and strange places, among them Bolivia, Argentina, El Salvador and Russia, as well as some pleasant places such as Barbados, Spain and Australia."
"Prior to the emergence of China as a turbocharged economic growth engine commodity prices were pretty much in the doghouse during the latter part of the last century. In our readings it came to our attention (and to many other investors, some sooner and smarter than we) that China is consuming an ever increasing amount of the world’s resources. Some analysts and pundits think China is the country version of the old Pac-Man® video game and will devour the marginal production of all commodities, which will, for the foreseeable future, push up prices as China demands more and a greater share of the world’s commodities. It is also not surprising that China, an economy with 1.3 billion people who are beginning to discover the delights of a consumer society, wants and has the ability to consume more and more every year. Its demand for everything is likely to increase, both consumer goods and raw materials. In the meantime, as a low cost manufacturer of all the things that we no longer make here in the U.S.A., China has assembled an unspent cash hoard of over a trillion dollars and is busy spending part of this vast sum on soy beans from Argentina and Brazil, oil from the Middle East and iron ore and copper from Australia and other places. China is also in the midst of building a new infrastructure, i.e., railroads, highways, factories, etc., all of which requires lots of copper, iron ore and energy. Prices for all of these commodities has risen dramatically over the last ten years, with copper going from $1.09 per pound to $3.00 per pound, Australian lump iron ore from $.37085 per dry metric tonne unit to $1.0264 per dry metric tonne unit and gas from $2.60 per mcf to $7.53 per mcf. With our investments in copper, iron ore and oil and gas drilling, we are riding the wave of commodity price inflation and vicariously enjoying the roller coaster ride of China’s booming economy. Certainly we can expect a bust one day, but we hope not too soon."
Ian Cumming's Rules of the Road (Secrets of Success)
1. Don’t overpay, no matter what the madding crowd is up to.
2. Buy companies that make products and services that people need and want and provide them as cheaply as possible with consistently high quality. Lower cost and higher quality is a relentless and never-ending task.
3. Earnings sheltered by NOLs (net operating loss carryforward) are more valuable than earnings that are taxed!
4. Compensate employees for performance and expect hard work and honesty in return.
5. Don’t overpay!
To read his latest annual shareholder letter, click here: http://www.leucadia.com/C&P%20Letters/C&P2006.pdf
Also check out:
On Commodities, Globalization and China
"We have been thinking a lot about China, but not doing much about it. We observed from the sidelines its tremendous growth and are believers in its continuing potential. One of us has been there several times, the other not. However, China is very far away, and we have a well founded skepticism towards investments in places where the rule of law is not well developed. We have successfully invested in some difficult and strange places, among them Bolivia, Argentina, El Salvador and Russia, as well as some pleasant places such as Barbados, Spain and Australia."
"Prior to the emergence of China as a turbocharged economic growth engine commodity prices were pretty much in the doghouse during the latter part of the last century. In our readings it came to our attention (and to many other investors, some sooner and smarter than we) that China is consuming an ever increasing amount of the world’s resources. Some analysts and pundits think China is the country version of the old Pac-Man® video game and will devour the marginal production of all commodities, which will, for the foreseeable future, push up prices as China demands more and a greater share of the world’s commodities. It is also not surprising that China, an economy with 1.3 billion people who are beginning to discover the delights of a consumer society, wants and has the ability to consume more and more every year. Its demand for everything is likely to increase, both consumer goods and raw materials. In the meantime, as a low cost manufacturer of all the things that we no longer make here in the U.S.A., China has assembled an unspent cash hoard of over a trillion dollars and is busy spending part of this vast sum on soy beans from Argentina and Brazil, oil from the Middle East and iron ore and copper from Australia and other places. China is also in the midst of building a new infrastructure, i.e., railroads, highways, factories, etc., all of which requires lots of copper, iron ore and energy. Prices for all of these commodities has risen dramatically over the last ten years, with copper going from $1.09 per pound to $3.00 per pound, Australian lump iron ore from $.37085 per dry metric tonne unit to $1.0264 per dry metric tonne unit and gas from $2.60 per mcf to $7.53 per mcf. With our investments in copper, iron ore and oil and gas drilling, we are riding the wave of commodity price inflation and vicariously enjoying the roller coaster ride of China’s booming economy. Certainly we can expect a bust one day, but we hope not too soon."
Ian Cumming's Rules of the Road (Secrets of Success)
1. Don’t overpay, no matter what the madding crowd is up to.
2. Buy companies that make products and services that people need and want and provide them as cheaply as possible with consistently high quality. Lower cost and higher quality is a relentless and never-ending task.
3. Earnings sheltered by NOLs (net operating loss carryforward) are more valuable than earnings that are taxed!
4. Compensate employees for performance and expect hard work and honesty in return.
5. Don’t overpay!
To read his latest annual shareholder letter, click here: http://www.leucadia.com/C&P%20Letters/C&P2006.pdf
Also check out:
