ShahKhezri

He did, but different logic. PFE was sold because of recurring non-recurring items.

I know this sounds crazy...but I think Congress eventually "get's it" and the next form of stimulus will be some form of repatriation of cash and using balance sheets that have cash (company's) vs. balance sheets that don't have cash (the US Gov.) to stimulate the government.

Sign of things to come? http://www.reuters.com/article/2011/06/02/sears-idUSN0226864620110602?feedType=RSS&feedName=cyclicalConsumerGoodsSector&rpc=43

Was going to post this on Viking's USB thread, but this one is newer. I work at WFC. Obviously, heavily invested as a team member. Was 100% money market in my 401K, since the stock has been under $28, every other day, move about 2% to the stock. I wish I could offer some insight, but it's business as usual. Two other banks I own are PNC and BAC, both the tarp pref. Surprised there isn't talk of PNC here, they run a good shop. Everyone talks about BofA-Merill-Countrywide, JPM-WaMu-Bear and Wells-Wachovia...but rarely do I hear PNC-National City. Five years down the road, that might be regarded as one of the better transactions. PNC also owns 20% of BlackRock. Management team is solid, Rohr is well respected. BAC is interesting, I don't expect a resolution to the legal situation(s) this quarter. I think when Gary Lynch officially joins the company, you will see one of those quarters that puts much of the uncertainty behind for good. Was really excited to hear about Lynch joining, the guy is exactly the right candidate. They sold their BlackRock stake and in the process of selling other non-core businesses this quarter, which is why I expect 2H11 to be Lynch's show. FY12 should be share repurchase/dividend reinstatement. They still have such a valuable franchise.

Re: Regulatory risk- I think it will always be there with these two, but I think that in a preverse way that enhances the moat (lack of new competitors) and allows for the duopoly. In regards to Durbin, my reading is that, in it's current form, it will not be passed. Some changes will be made, recently the Fed commented they are looking at increasing the .07-.12 cap. In the V and MA calls, they talked about moving consumers...for example the higher end from debit to credit, and the lower end from debit to prepaid. Furthermore, there is now talk of $ caps on debit cards. At the end of the day, I think earnings risk is 12-18 months because the pie is growing. Re: V vs. MA- V dominates the debit business in US, MA in Europe. V has a "put option" on Visa Europe that at some point may be purchased by V down the road. I don't think they do this option if someday down the road they didn't envision "V-E" to be a part of V: We have granted Visa Europe a perpetual put option which, if exercised, will require us to purchase all of the outstanding shares of capital stock of Visa Europe from its members. Visa Europe may exercise the put option at any time. The put option provides a formula for determining the purchase price of the Visa Europe shares, which subject to certain adjustments, applies Visa Inc.’s forward price-to-earnings multiple, or the P/E ratio (as defined in the option agreement) at the time the option is exercised to Visa Europe’s adjusted sustainable income for the forward 12-month period, or the adjusted sustainable income. The calculation of Visa Europe’s adjusted sustainable income under the terms of the put option agreement includes potentially material adjustments for cost synergies and other negotiated items. Upon exercise, the key inputs to this formula, including Visa Europe’s adjusted sustainable income, will be the result of negotiation between us and Visa Europe. The put option provides an arbitration mechanism in the event that the two parties are unable to agree on the ultimate purchase price. At September 30, 2010, we determined the fair value of the put option liability to be approximately $267 million. While this amount represents the fair value of the put option at September 30, 2010, it does not represent the actual purchase price that we may be required to pay if the option is exercised. The purchase price we could be obligated to pay 285 days after exercise will represent a substantial financial obligation, which could be several billion dollars or more. We may need to obtain third-party financing, either by borrowing funds or undertaking a subsequent equity offering in order to fund this payment. The amount of that potential obligation could vary dramatically based on, among other things, Visa Europe’s adjusted sustainable income and our P/E ratio, in each case, as negotiated at the time the put option is exercised. Given the perpetual nature of the put option and the various economic conditions which could be present at the time of exercise, our ultimate obligation in the event of exercise cannot be reliably estimated. The following table calculates our total obligation assuming, for illustrative purposes only, a range of P/E ratios for Visa Inc. and assuming that Visa Europe demonstrates $75 million of adjusted sustainable income at the date of exercise. The $75 million of assumed adjusted sustainable income provided below, for illustrative purposes only, is based on Visa Europe’s forecasted financial results for the year ended September 30, 2010. However, this does not represent an estimate of the amount of adjusted sustainable income Visa Europe would have been able to demonstrate at September 30, 2010 or will be able to demonstrate at any point in time in the future. Should Visa Europe elect to exercise its option, we believe it is likely that it will implement changes in its business operations to move to a for-profit model in order to maximize adjusted sustainable income and, as a result, to increase the purchase price. The table also provides the amount of increase or decrease in the payout, assuming the same range of estimated P/E ratios, for each $25 million of adjusted sustainable income above or below the assumed $75 million demonstrated at the time of exercise. At September 30, 2010, our estimated long-term P/E ratio was 18.8 and the long-term P/E differential, the difference between this ratio and the estimated ratio applicable to Visa Europe, was 3.5. At September 30, 2010, the spot P/E ratio was 15.7 and the spot P/E differential, the difference between this ratio and the estimated spot ratio applicable to Visa Europe, was 1.6. These ratios are for reference purposes only and are not necessarily indicative of the ratio or differential that could be applicable if the put option were exercised at any point in the future. Re: Moat/Scalability- I think the moat is their slogan "everywhere you want to be" They have a fixed advertising budget, whether they issue 1MM cards or a 100MM that's where the operating leverage comes from. Using the commerce toll road logic (don't think about market share) but V owns the toll road going to NY, and MA owns the one coming out of NY. Going forward, the commerce tollroad for V/MA is like the NY tollroads in the 1930's, where as the NY tollroad is fairly mature (I don't think there will be an increase in the # of cars going in and out), the move from paper transactions to the services (card, mobile, health, employment, unemployment) offered through V/MA will grow. I went to the World Cup last year, didn't take much cash (for safety reasons) and got away with using my V card everywhere. Last week, V announced their intentions of setting up an office in Kenya to serve Africa.

I own V. Think it's a little cheaper. There is a moat, tailwind of paper to electronic should continue for several years and they track inflation rather well. For example, gas prices are up 33% YOY, in V's call, they talked about how the oil component purchases went from 8% to 10% (up 25% YOY). Rather impressive. Zero debt, do about $70-$80MM in Capex, but there is huge operating leverage. Moreover, the cash coming in goes towards repurchase of stock/dividends. I would buy MA if it was on sale. Both should do well (think KO/PEP). When I made the purchase, I thought about how Buffett looked at KO (it's been a long time, but at the time 11 out of 64 ounces of consumption was KO products)...in the States, the average person has 3 cards...I think I read that in India it's at .3 I took all my cards out of my wallet (debit, credit, and healthsavings) and all had a Visa logo. They do every type of transaction: unemployment cards, gift, prepaid, employment checks. The tranaction tollroad logic goes a long way.

I'm in the minority, I like the acquisition. If Google or Apple would have made the same acquisition, most would say "that's why they are ahead of Microsoft" The possibilities/capabilities of Skype within the Microsoft platform are interesting. They purchased a widely used verb for $8.5B. Instead of getting into hardware, they teamed up with Nokia. Google made a bid for Groupon for $6B, word around that Goldman was telling they could IPO at $16B. Not that I agree with that valuation, but the reality is, MSFT with Skype could destroy CSCO and put a dent in search vs. Google. Most thought the money they spent on the small piece of Facebook was dumb, but they are 6x up on that investment as of today. They pretty much took the paper gain on FB and used a chunk on Skype. Cash earning very little overseas and Skype can be accretive within year one.

I started building a positing in MSFT...thought this was interesting from Bill Fleckenstein (from friend's subscription): It's All In Everyone Else's Head Recently I have received a number of emails on the (seemingly unrelated) subjects of silver and Microsoft. Some of the silver emails have bordered on giddy, although others have taken me to task for not believing in the manipulation theory (myth) that has been floating around for years, which I have debunked many times. Similarly, every time Microsoft swoons I get a batch of messages wherein readers tell me their thesis as to why it is weak. In thinking about those emails, I realized they were connected and illuminate a very important subject when it comes to investing, that being the power of psychology, which is the "force" that persuades people to hate what is cheap and love what is expensive. Today, silver is popular and quite frothy, while Microsoft is somewhere between loathed and forlorn. As recently as 2004, silver changed hands for a little more than $4. Thus, in the last seven years, it has appreciated eleven-fold, although at that time it was regarded even more pitiably than Microsoft is today. People can at least acknowledge Microsoft as a viable investment. Silver in 2004 was thought of as barely even an "industrial metal," one whose price was destined to decline as photography went digital, thus why would anyone ever want to own it. Conversely, though off its 2000 high, Microsoft changed hands at twenty times earnings in 2004, though that was approximately the same $25 the stock sells for today. Since then its earnings have doubled, from around $1.26 per share to something north of $2.50 this year; thus, the price-to-earnings ratio has been cut in half. Microsoft stock trades as it does not because of some enormous flaw in its collective business strategies, but because it has become unpopular, for a variety of reasons. The biggest of these is probably cloud computing concepts, followed by mesmerization with all things Apple. People are enthralled with Apple's doodads even though life in the business world could easily go on without Apple, while it could not without Microsoft. But MSFT is not alone. Other large-cap tech stocks also trade similarly, I just focus on Microsoft because I think it is positioned so much better than Intel, Cisco, or other comparable companies. Still, the madness of crowds is what makes the investment business so difficult (and why it is called investing or speculating, not winning). Sometimes it is quite straightforward to ferret out what a company may do, but how that will be perceived is often anyone's guess. That is why conventional wisdom argues for diversification: one can't really know how the other wildebeests on the plain will react to a potential change in the wind. In any case, I hope that discussion of two ideas that seem so disconnected -- i.e., silver and Microsoft -- helps folks navigate future fluctuations in ideas or asset prices that they care about. As unsatisfying as it is to say, on a short-term basis psychology matters a hell of a lot more than underlying company fundamentals. The Company You Don't Keep What people seem to fear could be the case with Microsoft actually is true for Research In Motion. Various readers have emailed me trying to make the case that RIMM was cheap because it, like MSFT, was trading at ten times earnings. In fact, it is a classic example of a company that looks inexpensive but actually isn't, because its business is in the process of imploding and management is not to be trusted, for reasons I have pointed out over the years. The fact that RIMM stopped giving out certain individual bits of guidance a couple of quarters back was one signal that it was in trouble. However, it was hard to be short it due to money printing (it is one of the potential shorts that has "worked," barely). RIMM's tablet won't save it and the stock is headed much lower in my opinion. It is a closed-system commodity hardware maker and history is littered with such companies ending up on the trash heap. In any case, Microsoft is not RIMM, but some variation of that seems to be what people are afraid of (even though RIMM itself has gotten the benefit of the doubt time after time). Thus, the former continues to be unable to get any traction. Most of big-cap tech is priced similarly; however -- as I have said many times -- I think Microsoft is much better positioned, and cheaper, too.

Through the Closed-End fund CET. Someone floated the idea of taking over a CEF and taking advantage of the NAV discount/premium...CET/SOR/GAM are models. I have no doubt there is enough capital on this board for 2 to 3 people to run a CEF and do well.

I currently sell puts on Dell, WMT and Visa. With WMT, not a great return, but I have a high % confidence in it. There is that $15BN bid under the stock with the annual share repurchases. With Dell, selling $14's for May, will get you the stock at the same price Michael Dell bought in December ($13.50's). I did a little on EBIX two weeks ago, April 20's were at 8.75% return ($1.75/$20)...I bought them back at .60. (Currently 0 exposure to EBIX). As a rule, I only sell puts on Company's that 1) I want to own, 2) cheap, 3) have a very strong share repurchase program and/or tons of cash on B/S.

Haven't posted in a long time, but I think this is worth noting. Coverage renewal in Japan is 4/1 (Japanese FY ends on 3/31). While it's early to put a number on losses, from an insurers standpoint and depending on how many renewals/new business is bound (enforced), this represents an event shock that can morph into a less soft market. Earthquake coverage is provided by the gov. through JER Co., most of the exposed/covered losses by insurers will be commercial/industrial. Kobe (1995) resulted in economic losses of $100Bn, and insured losses of $2.4BN. This isn't Kobe.

You don't have to get comfortable at 20 P/E (not that should make a difference it growth is higher). The Company, right now is at 13-14 FY11 P/E. With V and/or MA, there is definitely a moat. The capital allocation decisions are pretty interesting, dividends/buybacks will grow. On the acquisition front, I don't have a concern. For a better understanding of the business, I would look up the Sequoia Funds investor day transcripts the past few years. I own V.

I'm at 70%. Been as high as 120%. I would sell to buy more of what I want, thus far ive only found two other large caps. Fairfax it is, for me.

I've been thinking about MSFT as well. I just fear a large acquisition...like KFT. Yes, stock is cheap. I think RIM is one of the few acquisitions that makes sense, and if that was the purchase, I'd be more inclined to purchase the shares. OS on PC's and Mobile is quite a moat.

Transcript was really helpful, this is nothing like the financials in '08. They have adequate EBITDA (with oil hedges through 2013) that should take care of their issues. They will have $139MM coming in 3Q10, and another $200-$400MM before FYE11. (all from asset sales that have no EBITDA attached). This should take care of some of the debt. What's driving the stock down? -Institution selling, with stock below $5, (it's not fundamentals, it's liquidity) -A lot of people that owned thought they were getting a nat gas company, but now they are getting 70% (as a % of revenues) oil. -They removed their nat. gas hedges (since then, nat gas has gone down +10%) and some of the investment community might be thinking they are speculating. Ward explained that oil is in contango, and natty is in backwardization, and that removing hedges is not something they do often (the only other time was in 2006). -Costs were higher, someone here mentioned this was a kitchen sink quarter. Overall, I'm convinced this Company will report a lot of hairy results (just because of their movement from oil to gas, depending on the respective ROIC). I'm not convinced that Ward is a great jockey, I'm indifferent on him; however, the Company does have assets. I wasn't invested before Arena closed because of the debt issue, after Arena closed I purchased a small position because the debt issue was taken care of. I look forward to adding, but I'm looking for some stability in the shareprice.

I don't think the description of the exterior does any justice to what Sonic's main strength is. They do really well with refreshments/drinks. In seasonally warm areas of the country, this is the DQ of refreshments/drinks. The exterior works well for what they do, as I'm not a big fan of their burgers. Haven't looked at the % of rev's and what drinks represent. But I imagine margins are high because of their strength. I don't own SONC.

Yup, and at this stage, for him to move the needle, he would have to take a 2x Paulson position. It wouldn't make sense. However, I think most value investors, in the most simple way of categorizing the group, are ROIC and FCF screeners. Before I get responses begging to differ, I understand I'm making a very generalized blanket statement. The point I'm trying to get across, is simply Gold is senseless and downright foolish based on ROIC and FCF metrics. You have to be breaking value investing commandment rules to invest in gold if you're a value investor; hence the reason I rarely talk about it. Also, in my experience, owning gold is equivalent to being a gold bug, clearly I am not. Given the choice, Gold at $1,200 vs. JNJ, WMT, and some of the world-class franchises out there, I wouldn't put a dime in gold. Trust me. S.K.

It's viewed at useless in the States, but trust me, some of the rest of the world considers it money and vs. the dollar and other currencies with no control at the printing press, it has not been a poor use of my capital. I do plan on selling some at some point and purchasing my dream home (one physical asset to another physical asset). S.K.

I think the last time I commented on Gold, it was on the old message board, I purchased gold at $394 (physical) various coins graded MS-11 , MS-13 and Silver at $7. At the time (2004), Kudlow and Cramer (when they were on together) stated, "shorting gold below $400 is a no-brainer." With that said, the people on this board are scary smart, with an uncanny ability to spot bubbles short term and long term, when oil was $100+ and approaching $150 level, a lot of smart people here rightly placed trades that were subsequently in-the-money. For me, gold is an ideology passed down from my father (jeweler in Iran) and his father. I know gold is considered money, I've seen it first hand in the Mid. East. It's also one of the few assets that has no liabilities in it's physical form (but not in equity). At Grant's conference, John Paulson put it best, "What I'm looking at is not where gold is going to be tomorrow, one week from now, one month from now, three months from now. What I'm looking at is where is gold going to be vis-a-vis the dollar one year from now, three years from now, five years from now. And I think, with a high probability at each of those points, gold will be higher than it is relative to the dollar today. That probability increases the further out you go. So when I look at what the risk is, the risk to me is far more staying in dollars than it is in gold at this point." Paul Tudor Jones in his most recent letter stated, ""I have never been a gold bug. It is just an asset that, like everything else in life, has its time and place. And now is that time. The economic and political comparisons to the late 1970s are too numerous to ignore. And as such, gold is at the center of our thinking as a store of value during a period of potentially large and persistent global portfolio shifts. The temptation to directly, or indirectly, monetize rising fiscal deficits globally means gold could have a bid for the foreseeable future." I didn't buy based on Paulson or Jones and I don't know where gold is headed tomorrow or next year. I do think that in a World that is increasing debt to pay off debt, asset classes with the lowest relative debt can and should thrive. Overall, I do think value investors have a lot of problems with gold, and correct me if I'm wrong, but the basis for that problem is Mr. Buffett's view. S.K.

Well, whether the downside in CRE is limited is not the question. It's the repercussions, which to date have been minimal vs. residential. In a situation where you can visualize a lower numerator (NOI) and a higher denominator (Cap Rates), it's not hard to consider maximum downside in equity. I like simple math, and the math with CRE and where the implied cap rate based on current equity prices doesn't make sense. Thankfully, two weeks ago GS published a positive view on most CRE leaders, volatility was low, and puts were cheap. S.K.

It's easy to see why their relationship is what it is. If you listen to her interview you can connect the dots. He allower her to become a part of his "inner circle," and she must have said/wrote a thing or two that turned him off. I don't blame him at all.

Sold my Jan 11, 300's today, along with 4.5% of holdings. A couple of things changed yesterday: 1. I currently don't hold any WEST or SNS, but the clarity yesterday re: merger, added a little more confidence in eventually taking a position. I didn't want to be face with the issue of selling one and buying the other sometime down the road, I want to purchase and hold. and, 2. I want to own a piece of Markel. Sitting on the sidelines the last few years while I worked at Travelers, reading their AR's, CC's, etc. Also, by selling FFH shares with the plan of eventually purchasing some MKL, I still get that large FFH exposure (their second largest equity holding after Berkshire). I still have 85% of my portfolio in FFH, the other 15% in SHLD. Selling additional FFH to purchase SNS and MKL wouldn't be that crazy.

Partner, I agree. Markel is doing what's good for Markel, the transcript was refreshing. Not trying to being a troll, but I'd like some of the same people that commented on FFH for their Q1 "adverse" and "F/X" losses to understand Markel's Q2 had the same problems (two losses from litigation costed $25MM). In addition, Markel premiums declined in the double digits (% wise), same as Crum. One thing I didn't understand was why they are paying down their revolver. That $150MM could be used elsewhere, but I'll reserve my opinion until I know more. As a potential shareholder, who has always admired the team, I'm pretty happy about the reaction. Although I don't work in the insurance industry anymore, I still have some contacts, and they are cutting premiums in the 30-40% range. I understand why people make the CR comparisons to the Chubbs, Travelers, and others, but just because you have a CR in the 80-sub-90 range, doesn't mean your a good underwriter, especially in a soft market environment. It just means you got very lucky, because reporting YOY -2 to -5% volume means that you are crediting the crap out of single accounts and writing a ton more. This brings me to the infamous cliche, "I'll rather be lucky, than smart." Not sure it applies to insurance. Better gauge of who is conservative is: -Premium/Policy Account. -YOY change in reserves. -Screw the ROE, the ROA is harder to manipulate. Sincerely,

You also lose out on the dividend, something Prem has provided higher guidance to. This discussion, to me, is really based on your tax situation. If you are in IRA, buy high, sell higher; if not and you enjoy paying double tax rate (short term vs. long term), you are inherently creating friction costs and if this really is a company where you think is in the upper echelon, you are playing with fire imo. Personally, I hold a core position (avg. price 238), when the price fell to 210, I purchased equal to 30% of core position in call options (jan 2011 @300) that I believe are "in the money" right now. I also have my eyes on purchasing another 30% at another strike price. I plan on selling the options, but the core position is not for sell. Off topic, since there were some changes in the equity portfolio 4Q08 to 1Q09, anyone have a guess what changes we'll see? Personally, I hope they sold some short term gains and purchased a JNJ like $ position in Berkshire and maybe COP at 40% off Buffett prices. Berkshire at this price and a $400-500MM investment is like reinvesting in some of our own equity holdings, and our own bread and butter, insurance. I am hopeful.

I think there are some fair counter points here: http://thedealsleuth.wordpress.com/2009/06/08/pershing-square-misleads-about-general-growths-equity-value/