I have sold out of the Fairholme Fund
I have sold out of the Fairholme Fund.
I knew Bruce Berkowitz was able and willing to estimate risk. I could live with his big bets on AIG and Bank of America. But now he is venturing into Fannie and Freddie, and he is taking on mountains of political risk. He is essentially speculating that the government will be willing to let the companies return to private status, or else that the government will be willing to let him buy whatever parts of the companies' operations he is making the offer on. Maybe he will come out ahead, possibly by hundreds of percent. But maybe he will come out with zero. I think the latter is more likely. If you want to speculate in Fannie or Freddie, buy a small position in the preferreds. I will pass, thank you.
His holdings in Sears have long caused me heartburn. I previously wrote that Sears is dead and that they might as well operate it in run-off mode.I also wrote that "some value could be salvaged." By that, I meant that Sears could salvage some money and possibly distribute that to shareholders, but people who have been investing in Sears probably will get back a lot less than they invested. People like Bruce Berkowitz.
Fairholme has been a profitable investment for me, but it has been very hairy, and these latest adventures are too much. Good luck, Bruce.