LC

I think the only reason to sell these days is #6 on twacowfca's list. I'm about 20% cash, but I want to increase that to about 30-40%.

This comment got me thinking about how to "average up" into investments. If an investment goes from a 6x to a 3x you would average into it, despite the price having just doubled. Averaging down seems easier compared to averaging up for investors. I know for myself, if nothing has changed value-wise, I will average down after a 20% drop. But buying more after a 20% rise is more difficult. Using Pabrai's framework makes it easier psychologically to average up!

I figured it might be a good idea to list some scuttlebutt techniques to use to get an alternative perspective of a business. I personally always take a look at the "careers" page of a company. I think it gives a glimpse of what business areas management wants to strengthen. For example I am looking at Materials Science Corp (MASC). They provide acoustic materials for a variety of customers, and on their jobs page, they are looking for sales-relates positions. Taking that information in conjunction with their financials I can piece together that they are looking to improve their sagging top line. This obviously works better with small/mid sized companies than a huge company like Exxon.

I second "The Elegant Universe"! An excellent read regarding modern physics!

combined ratio in the p&c industry

Wish I had put some more money into these....any idea how to value the preferreds going forward?

My first question: how do the economics of FIZZ look in terms of the next 21 years?

I think I'm around 15-20%.

If we take Vinod's 3-tiers of business classifications, I first off try to avoid #2s...I'm either looking to load up on #1s at reasonable prices, or #3s at really cheap prices. So #1s I usually average down after about a 20% from my cost basis. #3s I rarely average down as I usually just take the Graham approach and put a little bit in a lot of them, and sell once a catalyst emerges to bring the stock to a reasonable value. In other words, I have no problem averaging down on good businesses, but I hate averaging down into bad businesses!

I'm on the opposite side of the fence here...I actually think he should NOT give away his wealth to charity. Wait, Wait! Before you stone me, hear me out! :) My thinking is this: if you look back at history, trade and industry have caused the greatest increases in the standards of living for humanity as a whole. What Warren Buffet can do is brilliant: he can effectively siphon the "excess" capital from developed societies and re-allocate it as he sees fit. 10% of everyone across the world who has excess capital and spends it on a can of Coke, he now owns that 10%. He owns the capital of everyone with excess who spends it on Sees candy. Etc. etc. etc. for all his businesses. So he sucks in the capital from all these excesses, and he can redeploy it to whatever area he sees fit, usually in some "undervalued" area. So what has he done? He's taken the excess capitol that people spend on Coke and chocolate and he invests THEIR money in railroads, solar power, and battery technology. These things will increase the standard of living for all of humanity. Buffett is using capitalism to redistribute wealth from the "rich" to the "poor". Let the man keep doing this! And I hope he finds other investors out there who can keep doing the exact same thing. History has shown that investments (and advancements) in sensible technology and industrial improvements are what hold the promise to feeding the hungry and sheltering the homeless.

http://www.cornerofberkshireandfairfax.ca/forum/investment-ideas/bac-wt-bank-of-america-warrants/msg104086/?topicseen#msg104086 I'll tell ya, there are some brilliant people on this board :)

So there IS a reason he sold his BAC.A Warrants! Damn, too bad he couldn't get back into them at a better price!

I don't think this amendment says much about Buffett's opinion on whether GS is undervalued or not. According to the original terms Berkshire would pay 5 billion and get 43 million shares of GS in return. According to the amended terms, Berkshire pays nothing and gets 9 million shares or so (depending on the GS share price in October). I think the article Jay quoted is wrong when it suggests that GS will now be paying in stock rather than in cash; there was never going to be any cash payment from GS, as I understand the warrant terms. If anything, this indicates to me that Buffett would rather own a modest position in GS than a big one. Not so bullish for GS stock, perhaps. But as a GS shareholder, I am happy that the dilution will probably be less than I anticipated (assuming GS is still trading under IV in October). I think this post hits on the biggest points. 1. Buffet is receiving less shares than if he exercised. 2. This probably tax efficient. Not sure what his basis is, but this should be a taxless transaction and he would owe a good chunk of taxes if he converts to cash. 3. The dilution to the common is less than anticipated. #3 I find the most interesting because I am wondering if he will do something similar with BAC. If i were a GS holder, it would say to me, he would rather own $x of GS than receive $(x-y) in cash. y being taxes. It must be for tax and simplicity reasons....GS could in theory issue all 43mln shares to BRK and then immediately buyback & retire 34mln to leave BRK with the 9mln...it's just a whole lot easier (and again, probably tax efficient) this way. Either way, nothing is stopping BRK from simply selling their stake, or selling the warrants before they exercise. So either WB wants a stake in GS, or there is some mutually beneficial tax issue which I'm not aware of.

paying in shares instead of cash...if buffett agreed he must think GS is still undervalued?

Yeah I've got to say I really liked it too. Sorry to add to the confirmation bias :) Here's some questions I pose to the board: Where is the line between "trying too hard" and keeping it simple? Do I even need to do analysis? Deep dives of financial statements? If an investment is not simple, is it a bad investment? What does "simple" really mean? The COBAF thread on BAC is 200+ pages long, and yet the thesis is seven words long ("earnings power hidden by legacy costs").

So to recap the facts (in a slightly humorous manner): We have Mr. Gad, who has pled guilty to stealing $4K of company funds and siphoning another $40K of company funds through his non-profits for his own benefit, is now attacking Mr. Kidston, who is apparently grossly overpaid, has no real job function, and recently attempted to wage a proxy war that was labeled “disingenuous” and “wholly unworthy of support”... It sounds like these guys are all made for each other...

Oracle (ORCL) This is my weekend homework, thanks :)

Yes I sort of agree. I am reading Howard Mark's "The Most Important Thing..." and one section he characterizes risk as that being unobservable. He references Taleb and describes risk as the possibility that an alternate history which could have occurred but never developed. So can I envision a potential future where the market drops 20%? Yes, but it seems a lot of other people certainly are talking about this risk as well. Now that doesn't mean anything in and of itself, so I simply try to go back to the fundamentals...Market cap-to-GNP is about 104%. That I believe is fully valued. Additionally I am not finding any screaming bargains (is anyone else!?). Now, I'm not a professional and there are far superior investors out there who may be finding undervalued businesses...I've mostly been trolling for special situations to eek out some small percentages. On the flip side I don't see many radically overpriced businesses either. There's always a few of the high-flying tech stocks, but in terms of more traditional businesses, they all seem to sell around 20x earnings. So yes, that's somewhat overvalued, but not a screamingly high price (or is it? perhaps buyers are paying solely for the status quo and assuming a lot of downside risk). But I take a look at the "short ideas" thread...not too too many names mentioned. It's turned into the Lululemon thread. I am curious as to how everyone sees the corporate reinvestment environment going forward. Will it be cheap to reinvest? Will reinvestment be directed abroad? Is there some inflationary pressure on corporations which individuals are not experiencing? Sales and profits are high but I wonder if businesses will sustain those.

Well, Buffett's "indicator" of Market Cap to GNP is 104% (http://www.gurufocus.com/stock-market-valuations.php) Now, as to whether GNP is being artificially propped up by low interest rates...

Punny :)

Thanks for your perspective, boilermaker75. I think my parents, as teachers, would both generally agree were I to ask them. I would also encourage you to write a textbook!

Can Harvard etc. use their top professors to "teach" these classes, charge a fee for a "certificate of completion", and just slap the Harvard name of it?

Can you sell short something related? Not sure what that something would be given the special position Freddie/Fannie are in...

Kiltacular's post was important: namely the part that the best assets in an inflationary environment require little capital expenditure. So you can sell inflated goods without having to spend on inflated maintenance capex.

This is very insightful...you are right, I have no reason to assume that inflation will occur in a nice, linear manner at X%. That is Fed boilerplate thinking... I think I need to find an old timer and ask what the environment felt like during super inflationary times! Or at least, re-read Buffett's inflation piece.