Chou Funds 2008 Annual Report Available

Francis Chou has posted his fund family's 2008 Annual Report. Aside from reviewing his holdings, I look forward to his shareholder letters -- most prominently the letter for his flagship Chou Associates Fund.

You'll want to read the entire thing as time permits.

But I'll post some highlights. First on the economy and stock market:

The economy may get worse before it  gets better. However, I have strong faith in the strength and resilience of a free market system. In  the 20th century, the standard of living went up seven times in spite of the Great Depression, two  World Wars, the oil embargo in the 1970s, interest rates of 15% or more to combat inflation and  so on. The current financial crisis is severe, probably not as bad as the Great Depression, but  worst of all the recessions in the 20th century. One unitholder said, 'This market feels worse than  a divorce. You lose 50% of your assets and you still have your spouse'.

I couldn't resist bolding that last bit. Now moving on:

The good news is, if one wants to look at the current situation in a contrarian manner, most of the  bad news is already reflected in the stock prices. We don't know whether the stock market has hit  bottom yet but we suspect that when we look back at the current environment 10 years from now,  we will classify this as one of the best periods for buying stock and debt securities.

Interestingly, he says this about banks:

Banks that have not been affected by the financial crisis will do quite well in  the future. With the governments driving the treasuries to yield nearly 0%, the spread between  what the banks are paying for deposits and borrowings in the market (like FDIC insured), and  what they can lend at is enormous. For the first time in many years, banks are being paid  handsomely for the risks they are taking.

There's much more, of course. Be sure to see his section on the "Repricing of Risk." And he confesses to buying some stocks in 2007 that in retrospect, were bought at prices too high.

I can relate (to use a term from my youth).

Finally, Chou reports that in March 2009 his cash position in the fund stands at 1.8%.

Comments

[Philip]

Chou is one class act. His Chou Associates fund is the only mutual fund I own in my personal accounts. I sure hope he is rewarded for his integrity in the near future.

[John]

Philip: Wish we Americans could own his funds. And don't worry, I think he -- and you and your fellow unitholders -- will be rewarded over the long haul.