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The bottom line continues to be that the loan portfolio is increasingly less meaningful to investors and the brokerage business is slowly taking precedence.

Here it is:
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We have talked a ton about this here, reducing the “noise” you are subjected to. For myself, it is a rare day I watch any of the financial networks and when I do it virtually always is Bloomberg as the tone is more conversational vs confrontational screaming. Their interviews also tend to be longer than 45 second giving those on the show the ability to provide a coherent thought process rather than spewing talking points at full volume.

This is the beauty of the twitter/stocktwits combination. It is an instant filter that allows each of us to eliminate as much or as little noise as we want and receive that which interests us or is in our area of focus. The rest never reaches us. It gives us the best of the TV in that we get instant news and information and eliminates the worst, the lemming investing mentality Hussman speaks to below.

In a strange way it actually encourages more independent thought in that I follow people I respect for a wide variety of reasons. When they post something of interest, I investigate it more. If it contradicts what I think, I pay it more attention because I am familiar with them. Contrast this to the TV in which we know very little about most folks on there so contradictory thoughts can be easily dismissed with a “he is a dip shit” comment. The people I follow IMO aren’t so I do pay attention when they think differently than me. This causes me to dig deeper to either confirm or alter my thoughts on a subject.

I can also get a question answered on a subject usually in less than 5 minutes, no matter how arcane.

For reasons those alone the stocktwits medium is invaluable.

From Hussman:

I’ve thought about this a great deal, and I suspect that just as the experience of patients is determined by the quality of information they get from their doctors, the behavior of investors is likely to be only as sound as the quality of the discourse and advice they receive from investment professionals. In reflecting on why the past 15 years have been so riddled by irresponsible speculation, it is impossible to ignore the rise over that same period of widely-viewed financial programming that is equally riddled with cartoonish content that encourages short-term thinking and speculation (buy-buy-buy! sell-sell-sell! boo-yah!). When we observe a clear change in the quality of analysis on the financial news, and the departure of its more speculative elements, I suspect we’ll also see greater emphasis on fundamentals and better allocation of capital, while speculation will be less effective in the face of overvaluation.

During the late-1990’s bubble, it struck me that the discourse on CNBC was remarkably similar to the sort of discourse that I had read from news archives preceding the 1929 crash. As I wrote at the time, what was surprising was the extent to which investment professionals, who ought to have known better, were fully endorsing valuations that were clearly inconsistent (at the time, and certainly in hindsight) with prospective cash flows – even if one assumed that economic activity, earnings, and dividends would achieve and sustain the highest growth rates ever observed in history.

Many investment professionals have developed a habit of forming expectations based on nothing more than extrapolation of short-term trends in the data, even when those extrapolations are inconsistent with market history or well-established economic relationships. This was a key element in creating the housing bubble – no price was too high and no bubble was recognized, because all that mattered was that prices were rising. The focus of analysts on the short-term ups and downs of economic and earnings reports has become such a mainstay of financial news that it’s not at all clear to me that investors even recognize how devoid the current financial discourse is of real analysis.

To analyze a company or the market, you have to think carefully about the long-term stream of cash flows that investors actually stand to receive, and how they should be discounted to arrive at an appropriate price. Instead, the only question today is whether earnings and economic reports are delivering “surprises” versus what “the Street” estimated the day before the data was released. The quality of earnings, the cyclicality of profit margins, dilution from option and stock grants, the implied total return reflected in the stock price, the return on retained earnings, cost of entry, competitive structure, market saturation, the potential for organic growth from reinvested capital – all of those things matter over the long run. But to watch a half hour of CNBC today is like watching an old episode of Gomer Pyle (“Well, surprise, surprise, surprise!”).

As Benjamin Graham and David Dodd wrote following the Great Depression (Security Analysis, 1934),

“The ‘new-era’ doctrine – that ‘good’ stocks (or ‘blue chips’) were sound investments regardless of how high the price paid for them — was at bottom only a means for rationalizing under the title of ‘investment’ the well-nigh universal capitulation to the gambling fever… Why did the investing public turn its attention from dividends, from asset values, and from earnings, to transfer it almost exclusively to the earnings trend? The answer was, first, that the records of the past were proving an undependable guide to investment; and secondly, that the rewards offered by the future had become irresistibly alluring … The notion that the desirability of a common stock was entirely independent of its prices seems incredibly absurd. Yet the new-era theory led directly to this thesis.”.

Read Full Letter Here

Confidential
March 5, 2010
General Growth Properties, Inc.
110 N. Wacker Drive
Chicago, Illinois 60606

Attn: Adam S. Metz and Thomas Nolan

Dear Adam and Tom:

To facilitate your request that Pershing Square, the largest economic stockholder of General Growth Properties, Inc. (the “ Company ”), consider providing a commitment for equity capital to fund the Company’s plan of reorganization, I hereby resign my positions as a member of the Board of Directors of the Company (the “ Board ”) and as a member of any committees of the Board, effective upon your acceptance of this letter by your signature below. It has been a pleasure to serve on the Board. I fully support the Board’s efforts to date and look forward to working with you going forward in a new capacity as Pershing Square considers its potential investment. My resignation is not due to any disagreement with the Company or its management on any matter related to the Company’s operations, policies or practices.

We have agreed that, in this circumstance, our letter agreement, dated June 5, 2009 (the “Letter Agreement”), is no longer appropriate and is hereby terminated; provided, however, that (i) the obligations in Clause (1)(ii) of the Letter Agreement shall survive with respect to any confidential information received during the term of my service as a director, and (ii) Pershing Square continues to agree that it will not, and will cause its controlled affiliates not to, bring any claim, suit, or action in its own name, and will not join in any claim, suit or action brought by any other party, against the Board for actions taken during my tenure on the Board, as and to the extent initially contemplated by the Letter Agreement.

Sincerely,

/s/ William A. Ackman

William A. Ackman
On his own behalf, and on behalf of Pershing Square
AGREED:

/s/ Adam S. Metz

Adam S. Metz

Chief Executive Officer

General Growth Properties, Inc.

Private & Confidential

March 8, 2010

General Growth Properties, Inc.
110 N. Wacker Drive
Chicago, Illinois 60606
Attn: Adam S. Metz and Thomas Nolan
$3.925 Billion Common Stock Commitment
for Stand-Alone Plan of Reorganization

Dear Adam and Tom:

As you know, Fairholme Capital Management, LLC (“ Fairholme ”) is the largest unsecured creditor of General Growth Properties, Inc. (the “ Company ”), holding approximately $1.83 billion in face amount of unsecured indebtedness, and Pershing Square Capital Management, L.P. (“ Pershing Square ”) is the largest economic owner, with a 25% economic stake in GGP equity (including approximately 7.5% of the common stock outstanding) and $434 million in face amount of unsecured indebtedness.

You have asked if we, as your largest debt and equity stakeholders, are interested in making a commitment to subscribe for new common stock of the Company upon the effectiveness of the Company’s anticipated plan of reorganization, with the proceeds to be applied to redeem existing unsecured creditors at par plus accrued interest and to provide funds to pay for emergence costs and working capital needs after emergence. You have asked us for a commitment that is designed to be consistent with the parallel equity investment proposed by Brookfield Asset Management Inc. in their letter of February 24, 2010 (the “ Brookfield Proposal ”), but is also capable of being adapted as circumstances change.

In response to your request, we would like to propose to commit, severally but not jointly, $3.925 billion of new equity capital at a value of $15 per current share on the terms and conditions described in the term sheet attached as Annex A. Our proposal includes:

• a commitment to purchase $3.8 billion of common stock of the reorganized Company (“ New GGP”), after giving effect to the distribution of General Growth Opportunities, at a price of $10 per share;
• a commitment to provide the currently unfunded $125 million of capital to backstop a $250 million rights offering by General Growth Opportunities at a price of $5 per share.

Highlights

We would like to highlight the following items in our proposal:

• Ample Liquidity . When taken together with the Brookfield Proposal, our commitments would provide a total of $6.3 billion of committed equity capital for New GGP in addition to $250 million of committed equity capital for GGO. Combined with $1.5 billion of unsecured indebtedness, for which we expect a commitment can be available shortly, New GGP will have $7.8 billion in cash proceeds, sufficient (i) to pay in cash all unsecured creditors at par plus accrued interest, (ii) to pay exit costs and (iii) to provide appropriate working capital for New GGP upon emergence, without requiring the asset sales contemplated by the Brookfield Proposal. GGO will also be fully funded with a $250 million rights offering backstop from Pershing Square, Fairholme, and Brookfield.
• Flexibility to Manage Cost of Capital . Our $3.8 billion of commitments with respect to New GGP may be cutback by the Company in favor of future equity capital raises at a lower cost of capital, subject to a minimum purchase by Fairholme and Pershing Square totaling $1.9 billion. In addition, as with the Brookfield Proposal, we would be willing to permit up to $500 million of incremental equity capital to be raised by New GGP on terms that are mutually acceptable to all parties. In light of the fact that New GGP will likely be the second or third largest REIT as ranked by equity market capitalization upon emergence, we believe there will be a large demand for New GGP stock, even at values higher than $10 per share.
• Funding Certainty . As your largest stakeholders, we are familiar with the Company and, more importantly, our interests are aligned with yours. Accordingly, there will be no due diligence condition to our commitments and we will work to keep other conditions to a minimum as described on Annex A. We anticipate no regulatory or antitrust concerns. We do not believe any proposal from a third party without significant current interests in the Company can provide similar certainty of funding.
• Confirmation Certainty . The Investors include both the Company’s largest equity owner and two of its largest creditors. We expect broad support from all of the Company’s main constituencies, including employees and business partners. Since creditors will receive par plus accrued interest under any expected plan of reorganization, stockholder support is the key element for any plan confirmation and any capital raising or change-in-control transaction. We believe that the Brookfield Proposal (or any similar proposal), when coupled with our commitments, provides substantially higher short term and long term value than a sale of the Company now and will achieve overwhelming shareholder support.
• No Exclusivity; Complete Freedom to Take Better Proposal . Our proposal leaves the Company completely free to pursue better alternatives. The proposal includes no overbid protections, break fees, exclusivity provisions or similar “deal protections”.
• No Cash Fees . We seek no commitment fees, ticking fees or other fees, other than reimbursement for our out-of-pocket expenses. In exchange for its approximately $2.78 billion commitment, Fairholme will received $15 strike price warrants on GGP. Pershing Square will receive no upfront commitments fees or warrants for its approximately $1.15 billion commitment unless and until its proposed commitment is funded.
• Speed . As you know, we are deeply familiar with the Company. We are prepared to execute and deliver definitive documents for submission to the Court for approval as soon as practicable, preferably by next week. We can proceed at the same time as the Brookfield Proposal or before it, as you wish.

Suggested Next Steps

We believe it would take no more than a week to reach agreement on definitive documentation for submission to the Bankruptcy Court for approval. As discussed above, we require no exclusivity agreement, whether during this initial period or afterwards, and are willing to proceed in parallel with any other proposal you are considering.

Once our commitments are reflected in definitive documents approved by the Court, we also are flexible on schedule for consummation of the plan of reorganization. We support a prompt exit but have structured our commitments to provide the Company with the option to extend through December 31, 2010 as necessary.

There can be little doubt that this is a poor time to sell a newly relisted REIT. GGP has suffered from the worst recession since the Great Depression and from the last two years of its financial distress, including bankruptcy. We are convinced that GGP’s operations will improve when it emerges from bankruptcy and benefits from an improvement in the economy. We respectfully submit, as your largest stakeholders, that the long-term value of GGP is significantly greater as a stand-alone company than the proceeds generated by a sale to a third party. The newly reorganized GGP, with the benefit of strong sponsorship and with the longest dated, lowest-cost, non-recourse capital structure in the REIT industry, offers extraordinary potential for intermediate and long-term investors.

* * * *

Please understand that, notwithstanding anything to the contrary contained herein, this letter is only an expression of our serious interest and is not intended to, and shall not, constitute a binding agreement of either of us or any of our respective affiliates, or an offer by either of us or any of our respective affiliates to enter into a binding agreement, or create any legal obligations on the part of either of us or any of our respective affiliates with respect to any of the matters set forth herein. Please also understand that we defer entirely to the Company with respect to how and when to solicit stakeholder acceptance of its plan of reorganization. Any solicitation of a plan of reorganization must be made only after appropriate disclosure and in compliance with applicable laws and, accordingly, this letter is not intended to, and shall not, constitute a solicitation of any holder of claims or interests.
Thank you for your time and consideration. We look forward to discussing our proposal with you. If you have questions, you are welcome to contact either of the undersigned or external legal counsel Andy Dietderich at Sullivan & Cromwell LLP (212-558-3830; dietdericha@sullcrom.com ).

Sincerely,

FAIRHOLME CAPITAL MANAGEMENT, LLC

By:
/s/ Bruce R. Berkowitz

Bruce R. Berkowitz

Managing Member

PERSHING SQUARE CAPITAL MANAGEMENT, L.P.
By:
PS Management GP, LLC
Its:
General Partner

By:
/s/ William A. Ackman

William A. Ackman

Managing Member

ANNEX A
Indicative Terms for Equity Commitments
The following summary has been prepared to facilitate the preparation of a definitive commitment agreement on the terms below (“ Commitment Agreement ”). The summary is not binding, and any binding commitment will be reflected only in mutually agreed definitive documentation.

Investors
Fairholme Capital Management, LLC, on behalf of one or more of its managed funds or affiliates of such managed funds (“ Fairholme ”) and Pershing Square Capital Management, L.P., on behalf of one or more of its managed funds or affiliates of such managed funds (“ Pershing Square ” and, together with Fairholme, the “ Investors ”).

The obligations of the Investors under the Commitment Agreement will be several and not joint.

Stock Purchase
Each Investor will agree to subscribe for and purchase from the reorganized Company (“ New GGP ”) on or shortly after the effectiveness of the plan of reorganization of the Company (the “ Plan ”), its Pro Rata Share (as defined below) of 380 million shares of New GGP’s common stock (“ New Common Shares ”), subject to the terms and conditions in the Commitment Agreement. The subscription price for the New Common Shares will be $10.00 per share, net to New GGP, payable in cash in immediately available funds on the date of issuance.

The “ Pro Rata Share ” will be approximately 71.4% for Fairholme and 28.6% for Pershing Square.

The Company may, at its sole discretion, reduce the amount of New Common Shares to be purchased by up to 50% by irrevocable written notice to the Investors at any time prior to the 30th day prior to the date of issuance of the New Common Shares. Any reduction will be allocated among the Investors in accordance with their Pro Rata Shares.

GGO Rights Offering Backstop
Each Investor also will agree to commit up to $67.5 million to backstop a common stock rights offering by a newly formed company (“ GGO ”) holding the assets and properties described in the Brookfield Proposal at an initial value of $5 per common share, net to GGO, subject to a total of $250 million of backstop commitments being provided by the Investors and Brookfield Asset Management Inc. on the terms and conditions described in the Brookfield Proposal.

The Investors will be entitled to receive a minimum allocation of $50 million in GGO Shares from the GGO rights offering, and will receive back-stop consideration in an amount equal to 5% of their $125 million total amount of backstop commitments, payable in GGO Shares at a price per share equal to the price per share offered in the rights offering. The Investors intend to allocate backstop commitments and consideration between them on an equal pro rata basis.

Commitment Term
The Investor commitments will have a drop dead date of December 31, 2010, subject to extension rights as may be mutually agreed.

Adjustments
All share prices take into effect the January 28, 2010 distribution of Common Shares but otherwise are subject to anti-dilution adjustments.

Corporate Governance
The Investors would be entitled to appoint one member of a nine member board of directors of New GGP and two members of a nine member board of directors of GGO, with the remaining selected by the Company in consultation with the Investors.

Transferability
The common shares and warrants acquired as described herein will be freely transferable subject to applicable securities laws. A registration rights agreement acceptable to the Investors will provide them and their assignees with the right to continuous sale of those common shares and warrants off an effective shelf registration statement from time to time, to the extent registration is necessary for resale under applicable law and subject to customary exclusions and limitations to be agreed.

Participation Rights
In addition, the Investors would have participation rights on all further equity raises that may be conducted by the Company after the effectiveness of the Plan as may be necessary to maintain their then-current percentage ownership of New GGP and GGO capital stock on a fully-diluted basis as of the date of each such equity raise.

Warrants
As a condition to the effectiveness of the Commitment Agreement and as consideration for the options of the Company thereunder, the Company will grant to Fairholme transferable warrants to purchase 60 million shares of existing common equity of GGP (a) at an exercise price of $15 per share (the “ Warrants ”), (b) having an expiry date of seven years from their issuance, (c) with customary anti-dilution adjustments (i.e. adjusting the strike price and number of underlying shares) covering all quarterly or other dividends (whether in cash or in kind) as well as other dilutive events, (d) with a redemption right for holders, upon a change of control or similar event, for an amount in cash equal to the Black-Scholes value of the Warrant, taking into account the remaining life of the Warrants as if the change of control had not occurred and using a Black-Scholes volatility input of 20% (provided that in the event of a change of control that is a public merger into listed common stock, the acquirer will have the right to maintain the warrants outstanding in respect of the merged entity, with customary adjustments), (e) containing other customary terms, (f) providing for a cashless exercise/net share settlement mechanism and (g) benefiting from registration rights for both the Warrants and the underlying equity securities. 1

Upon consummation of the Plan (which will include stockholder approval of the issuance of underlying common stock to the extent required by NYSE rules), the Warrants will be cancelled and the Company will issue new warrants to the Investors (a) to purchase 60 million New Common Shares at an exercise price equal to $10 per share, and (b) to purchase 40 million GGO Shares at an exercise price equal to $5 per share, in each case having an expiration seven years after the consummation of the Plan and other terms consistent with the initial Warrants. Warrants with respect to New Common Shares will be allocated among the Investors in accordance with their Pro Rata Share, and warrants with respect to GGO Shares will be allocated to the Investors equally.

Pershing Square has agreed that, unless and until the Plan is confirmed, no warrants will be issuable to Pershing Square.

1 To the extent required by the NYSE rules, the definitive agreement providing for the Warrants will provide that, until shareholders approve the sale of common shares pursuant to the Warrants, the Warrants will not be exercisable for common shares but instead will be exercisable for participating convertible preferred shares having terms to be agreed by the Company and the Investors with the goal that the value per preferred share will at all times be at least equal to the value per common share.

No Bid Protections
No exclusivity, no-shop provisions, overbid requirements, commitment, break or other similar fees. The Company and the Investors would agree to a formal ‘go-shop’ including matching rights and a three business day negotiation period immediately following the receipt of a new or modified superior proposal in which the Investors could make adjustments in the terms and conditions of their commitments for consideration by GGP.

Conditions
There would be no due diligence condition precedent. The Investors commitments would be subject to customary terms and conditions to be mutually agreed, including without limitation: (a) execution and delivery of the Commitment Agreement, other definitive agreements, documents and undertakings, and issuance of the Warrants, in form and substance satisfactory to the Company and the Investors, (b) the absence of a ‘material adverse change’ (to be defined identically with the similar condition in the Brookfield Proposal), (c) either (1) confirmation and effectiveness of the Plan on the terms described in the Brookfield Proposal and otherwise reasonably acceptable to the Investors (with such changes to the Brookfield Proposal and waiver of the conditions thereto as the Investors approve), or (2) confirmation of an alternative plan of reorganization that Investors agree in their sole discretion is no less favorable to them, (d) no issuance of equity securities of New GGP or GGO (or related rights or securities) at a per share valuation less than $11.00 per share for New GGP and $5.00 per share for GGO, in each case net to the issuer, (e) entry of final orders of the Court approving the Commitment Agreement and Warrants and confirming the Plan in form and substance satisfactory to the Company and the Investors, and (f) the accuracy of representations and warranties, compliance with covenants and other conditions precedent as customary for private placements of public equity securities by parties at arm’s-length and such other conditions precedent as either the Company or the Investors may reasonably request.

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Here is the latest speaker list with bio:

Valueplays reader can get a special discount by clicking here to register

I guarantee you leave the Congress with at least one actionable idea that is profitable….I have never left one without at least 3 or 4 that will make the registration fee many times over.

Just think about this. With everything happening with General Growth (GGP), you are going to have the opportunity to ask both Pershing’s Bill Ackman questions on managements perspective and then Bruce Berkowitz the unsecured creditor’s views. What other conference would give you that?

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