value-is-what-you-get
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Posts posted by value-is-what-you-get
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Definitely one of the smarter Presidents in our time. I remember he gave an address at a Federalism Conference in 1999 when Lucien Bouchard had the separatist agenda rolling along at full steam and it just took the wind right out of their sails. He looked right at Bouchard and basically said there has been untold bloodshed and strife around the world for a century where people are trying to achieve a peace, prosperity and civility approaching what you already have here in Canada under your Federalist model, and for some reason you are trying to dismantle it. It was beautiful!
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In response to a question about people following brk and Buffett into stocks, Charlie Munger said that it wouldn't necessarily work out badly (classic Munger!). He also said that they went through their stock purchases over time and found that in fact anyone could have beaten market returns simply by buying what they sold!
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Don't believe me? Take one from our own book as value guys. How many of you crawl into annual reports and don't trust what a bunch of the WS analysts say for forward P/Es and such? How many times do you find that people freak out about things they shouldn't, but don't have an appreciation for dangers that are very apparent to you when dealing with stocks?
My guess is pretty often. By extension, that is the same thing that I see with houses in my hometown. I don't think that it is too different from different places in the US, but, could be wrong. All I am saying is that I think there is a significant number of people that don't know what they are doing, and that they will get burned at worst and at best, will pass along a house to a greater fool at some point in the future....
Thoughts?
I would say you have either been a landlord or have very good intuitive skills because you have described very accurately what it means to be a rental property owner.
I would add that a structural problem with landlording is that you are trying to earn a return off an asset by renting the asset to someone who can't afford/qualify to buy it at these discounted prices either.
The tailwind for landlording right now is of course demographics. Many Boomers who have insufficient savings/pension will be renting in the near future and of course will greatly reduce turnover because that is a one way street under the circumstances.
A rental property is an investment, but it is also a part time job (per property). That's the part people fail to realize, they just look at the numbers.
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She’s one of four children in a home whose monthly income is roughly $50.
According to Narain’s application to Pabrai’s Dakshana program, her family lives in a small flat without a refrigerator, television or computer (though they do have cellphones).
WOW - that says something about the order of things one will do without/basic human priorities!
Especially now that "cellphones" are incresingly becoming televisions and computers too.
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Guy Spier tells a good one in a Manual of Ideas video interview. A value investor and an EMT Economist are walking down the street and they see a hundred dollar bill on the sidewalk. The Value Investor says hey look, a hundred bucks and promptly picks it up. The EMT Economist shrugs and says it cant be a real hundred dollar bill because if it was it wouldnt be lying there!
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Well if they really put their noses to the grindstone, they can be like us Canadians where 100% of households receive some sort of government benefit.
Another well-crafted headline designed to make us believe things are terrible.
The numbers in the Blog include Medicaid and Social security. So here in Canada it's 100% of households.
The number of respondents living in a household where at least one family member received unemployment benefits was 2%.
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When Fairfax got into the insurance business in India, it was mentioned that insurance is really not that prevalent and so there is room for a lot of natural growth. It seems to me that greasing the wheels with travel insurance and insuramce against loss of funds while travelling etc. is a great way to further ingrain the concept with the more affluent travelling market.
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I found Hester's initial reply to be spiteful and provocative. Criticism is one thing - taking a cheap shot like that is something else and says more about Hester than it does about Chou. Some personality types feel better about themselves when taking others down a notch.
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This is a brilliantly simple proposal and certainly an improvement for the Eurozone going forward.
So simple and obvious in fact that it is notable that this wasn't included in the Eurozone in the first place.
The only two hurdles I see are:
1. The "profligate idiots" (Kyle Bass term) must admit they are profligate idiots which leads to . . .
2. We can no longer point the finger at others and now must pay our own bills going forward and the massive credit card bill that's still outstanding.
Those are really big hurdles for the politicians.
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The distressed real estate investment to rent out seems good by the numbers however the reality is that you purchase the investment and then must incur capex and maintenance charges. Furthermore, to get income from your investment while perhaps waiting for the market to turn and realize a capital gain, you rely on one customer per unit - who, by the very nature of the relationship, is unqualified to purchase same building/unit even at distressed prices.
Having been a landlord several times with multiple unit buildings I found the best possible tenant was an approaching or at retirement age single person. Turnover's low, rent gets paid, small issues brought to your attention before they become big issues, no property destruction.
All-in-all, it's a good way to get a levered investment when you don't have much money but it is not passive and some personality types are just not suited to it.
I prefer discounted stock in companies.
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Well I'm going to have to invoke Munger here and invert . . .always invert. The inverse of the argument is that the market has not accurately priced Berkshire (as evidenced by daily fluctuations in price) therefore proving the flaw in the argument. ;) Everything is always mis-priced, it is merely a question of by how much and in which direction.
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Liked the comparison of buying productive assets with the total value of all gold. Some quick math really drives home the point though. Supposing you had all farmland and 16 XOMs and a trillion dollars walking around money, the earnings from your holdings would generate enough income to buy the gold anyway over a 10-15 year period - assuming not dipping into the trillion!!
Of course one also wonders what one could charge for admission to view and fondle the cube!! ;D
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So? Did he also include a detailed and comprehensive calculation to support this statement, for all to see? To my understanding Berkshire's management also stated that they will delay sharing profits with its investors for as long as possible, company investors should also expect a slow down of future growth because the company is becoming too big and that current CEO has already chosen a successor but it's a secret. And this mystery successor -- who cannot really replace he who cannot be replaced -- will have to take care of this mammoth of a company. I'm not a long term investor in this company, but if I were I'd be pushing for a change.
No, he didn't do your homework for you! The data provided gives a very clear estimate by how much each business segment BRK owns is undervalued when comparing book values to intrinsic values. If you pick up a calculator and add these amounts to the stated book values you get as detailed a calculation as you need. Could probably do it in your head. I learned a lot from this letter. Particularly the way insurance float affects the book value/intrinsic value comparison.
If you were a long term investor in this company you wouldn't be pushing for change.
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I was struggling with the complete lack of understanding the author has of our culture by implying that low market price to book value (which is less than intrinsic value in this case) is the cause of some sort of frustration! I usually don't get frustrated by such opportunities! Fortunately, the WSJ lightened the mood in short order by demanding I sign in to continue reading . . .LOL good one WSJ!!!
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Any predictions for the annual letter?
Mine - Buffett uses stronger than normal terminology to indicate Berkshire is undervalued. Hell, he might even say Charlie would be mildly interested at this price!
Others?
Hopefully the strongest terminology of all - Berkshire repurchased ?????? shares of it's own stock in the open market!
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I like field research too - I use it to look at potential investments.
I have to be careful about putting too much emphasis on it as I am just one set of eyeballs in one economic area seeing one or two locations so I take it all in context but sometimes stuff just begs further research.
One example I recently looked at was Coach (COH). After observing my own family of two daughters and my wife pulling their Coach wallets out of their Coach purses in the Coach store to buy another Coach purse, after waiting in a lineup of similar situations pursuing similar ends, I just had to look into it. It's a phenomenon to be sure and when the music stops that's that and on to the next thing, but until you actually observe that process playing out, no financial statement or filing encompasses it.
The skew I had to place on my observation was that this was occurring in an outlet mall in a small market so I concluded that the big phase of growth is probably passed, however I should add that on a micro-scale all three of my market research subjects claim that they are particularly nice to use (not so much digging around required) and I can vouch that they are very well made. I could easily see them becoming like shoes where there are a seasonal purses etc.
Disclosure: Don't own any COH stock but do have a growing COH inventory!
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It's on the Fairholme site now:
http://www.fairholmefunds.com/videos.htm
"These financial services companies are just dead center in what I believe to be my circle of competence and I've seen this Act before and I've seen the Play before I've seen this cycle before and you know how it plays out . . . I'm excited as I never thought I'd have another opportunity to take advantage of another cycle in financials"
another interesting note is that MBIA is suing BAC and that the resulting settlement will likely be very meaningful financially for MBIA and is probably already more or less reserved for at BAC (not damaging in any meaningful way).
with respect to Bank of America he says that at present it doesn't get any better for Value Investors with respect to the price you pay for what your getting and that the discrepency in price to value is due to the fact that generally investors are "tremendously overweight what recently happened to them in terms of pain and suffering and just forget about or tremendously underweight all of history"
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A word of caution on Efaxing - I have used a similar service in Canada for 7 years now. Great to have a toll-free number and can send out faxes to multiple customers easily and receiving faxes as emails is absolutely the way to go however . . . over time, I have noticed the number of customers blocking the service originators number (not my fax number!) due to them hosting spam faxers etc has increased to the point where I have to re-send up to 10% of faxes after sifting through a cryptic report etc. The problem is they do not send the fax from your number but from their server.
It's getting less reliable and more cumbersome over time thanks to misuse of the service by others.
P.S. and transactions like realestate sales and bank documents where you intial each page or similar are particularly fun - scanning in 30 pages, uploading to service etc. I just go to the UPS store for those!
All that considered, I still like the service especially receiving faxes in my email with most other correspondence these days.
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You know what they say: Those that can, do, and those that can't, teach!
Cheers!
in this case "can't" is literal - he actually tried his hand at banking and didn't get too far up the ladder by the looks of things:
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Seems like a majority of K-Marts I've seen around the country are in crappy locations and are poorly maintained run-down buildings. I don't think it would be as easy to sell a lot of these locations as some people think. Real Estate is only worth what people will pay for it. I do think that K-Mart is an awful business that should be shut down and liquidated though.
A few Kmart's that I know of are in shopping centers that are half empty so in factoring in the real estate value I'd maybe chop off 30% or so for bad locations and the length of time to sell.
I was actually in a Kmart this past weekend, it's one of the only places you can buy ginormous clothes (3x and up for a relative) and the store is quite sad. A lot of inventory that looks like it hasn't moved in years, the place just has this mishmash feel. One minute you're next to washing machines, then suddenly you're in the middle of a toy section, and a few steps later you're looking at $1000 TVs which are next to piles of cheap Christmas candy.
I second that observation - went into Sears and they have good stock but the overall impression is "tired" - the sales staff give the impression that they are doing their best "under the circumstances". There's no pinning a number on all this of course but I really have to scratch my head wondering what is the end game here for Lampert et al. If it's to use retail cash flows to buy back all the shares and then sell the real estate, wouldn't you want the real estate to be wearing it's Sunday best? Many of the Sears here in Canada are anchor stores and when they slide, to a certain extent the whole property/mall slides a bit too. I have two daughters who will drive 40 minutes to another mall with better stores, and the one here seems pretty good to me! My big nagging question is why would someone buy up all this retail when they clearly don't care that much about retail?
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Well done - thanks anders. I found the housing chart to be most interesting.
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It's like a broken record! WEB is still right on airlines! I am watching WestJet up here in Canada with great interest. Not touching it or any other with a ten foot pole but more as a student of what happens to them and when does the decline start.
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Wow! :o
Funny thing is if those wafflemakers were heavily discounted stocks they'd be dropping them like they were on fire!
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Here's a nice example of proactivity from our public service wrt public bailouts of banks:
http://www.vancouversun.com/Ottawa+seeks+final+foreign+bank+purchases/5760732/story.html
2012 YTD rate of return
in General Discussion
Posted
I think of options in a more fluid sense - I see it as managing likelihoods.
1. This still leaves you with the loss on BAC original position - if you sell your underlying position at that point. Selling the puts on WFC is an attempt to avoid having your protection move up and down in concert so if they do, it is more likely to be from Mr. Market and this presents an opportunity to sell profitable put position and buy more underlying.