snailslug

Wasn't specifically asked, but he did say that they were openminded to sub-leasing the space to outside operators (i.e. leasing the space to Levi's, for example) or changing the way that they allocate the space between the business units. It kind of makes sense why he's so high on the mygofer idea though, because that could generate a lot of incremental sales without having to spend a lot of money remodeling. Whether they can actually make it work or not though is the question.

Yes, one more thing Lampert did say is that the business of the future is not going to look like the business of the past and may be considerably smaller.

Munger said at the meeting that pretty much every investment manager that he follows and admires/thinks has a sensible approach "got creamed last year". The two also said that they would be troubled if the possible successors had gone to an all cash portfolio, because they think it's very difficult to make that kind of macro call and be correct on a consistent basis. Those aren't the types of people they want running Berkshire's portfolio.

Re the buyback, he said that of course they wish they had waited but he feels they were at least as well off having done the buyback at higher prices than any alternative thing that they would have bought. Seemed confident about being able to renew the credit line. Said they were in negotiations with banks as reported in the press. When asked about possible acquisitions, said something like they are always looking and they have seen lots of things, especially lately, but wanted to focus on getting the customer experience / operational issues right first and that was their main focus.

Online businesses seem to be doing well, albeit from a very low base. Either traffic or sales (can't remember) were up 100% year over year and that would be the best for any big brick and mortar retailer. Said that they were not Amazon, and Amazon is very good at what they do, but have other capabilities (in-store pickup, home services) and have to figure out how to leverage the group of capabilities that they have. Re brands, didn't sound like they were really doing the licensing thing anymore. Seems like the economic environment also derailed that. Said he wanted Kenmore, Craftsman to become aspirational brands, said to be like Apple or Nike (he said probably a stretch). Also, thought they felt further along than the results had showed. Said if the economy was better he thought it would have given them a better picture of how well they were doing.

Other points, they have reorganized into 26 or 28 operating business units, each with their own P&L, so that the pricing is transparent and people start to make decisions that are based on profit instead of previously, where the merchants only made decisions based on increasing sales. Called the previous system a "socialist" system, where everyone runs as slowly as the slowest runner. Have attracted a lot of new talent lately (half the business unit leaders are new in the last year). Whether this is good or not remains to be seen...seems like they have a retention issue (my observation, not Lampert's comment). Lampert was really excited about the mygofer idea, that they are testing in joliet illinois, where you order online and drive thru to pick up your stuff without setting foot in the store. Was saying it would save a lot of time for things that you are not excited about shopping for (toilet paper, etc). Thinks it might be a new paradigm for shopping. Also excited about my sears community, which is an online place where customers can give feedback.

I went. The focus seems to be 100% on the retail turnaround at this point. There wasn't too much discussion about total return swaps, real estate liquidation, or any financial types of activities. Some random thoughts...I didn't take detailed notes. They are trying all sorts of experiments. Looks like bringing back layaway at K-Mart was a huge hit and they got the timing just right with the economic environment (Walmart got rid of layaway in the past year or two). One interesting slide was same store sales comps by quarter...the same store sales declines at sears have been pretty steady (say, about -4% a qtr). Whereas, for many competitors, the bottom fell out in Q4'08, especially specialty retail. Lampert commented that compare a -4, -4, -4, -4 to a 0, 0, 0, -26 (abercrombie) and you'll see Sears relative performance actually improved over the year compared with other retailers. Also, they gained relative share in appliances (up to 36% in Q4 '08) compared with the low 30s for the 1st few qtrs, and gained share in every quarter. Of course, the absolute number was down, just like everyone else.

BTW, I didn't see this posted anywhere, but Buffett solved the mystery of the price spike in Berkshire's CDS earlier this year. He said that the companies they sold puts to were required by their "risk management" people to buy CDS to hedge against a Berkshire default. This was made worse by the drop in the global markets -- the more that the markets dropped, the more the CDS cost them. He also stated that they already modified one of the contracts so that the duration was shortened from 18 years to 8 or 10 and the strike price was reduced to 900-something, and he thought that was a direct result of having to buy CDS as ever more expensive prices. He said if anyone else wanted to modify their puts, he'd be happy to do so.

I'm going

Since dengyu is no longer here to talk about traders, I'll fill in. Ray Dalio at Bridgewater (a quant fund), did quite well in '08: http://money.cnn.com/2009/03/18/news/economy/okeefe_bridgewater.fortune/ Last year, when 70% of hedge funds lost money and the average fund fell 18%, Pure Alpha generated a gross return of 14%. Jim Simons' Renaissance, another quant heavyweight, also returned 84% (!) after fees of 5/44 http://www.forbes.com/2009/04/08/wall-street-highest-earners-business-wall-street-earnings.html The exception was his Medallion fund, which grew a staggering 84%, even after deducting its steep fees--44% of profits and 5% of assets (the industry standards are 20% and 2%). Of course, not all of us are smart enough to do this kind of fancy math and programming, so those results may be of limited value to the value investor.

It's really interesting to hear straight up how buffett thinks about banks. Contrast to, for example, Roubini (who I have a lot of respect for btw), who says all the banks are insolvent, nationalize them all. It's interesting that through the buffett lens, if you mark to market everything on wells book, it could technically be mark-to-market insolvent (which it's not, but just hypothetically), but according to buffett, that makes no difference as long as the bank can earn its way out of the hole. Such a simple yet different way to look at things. Buffett never ceases to amaze me.

You are right about the MIX in housing sales being different. However, pretty much every house in CA has experienced credit distortions. It's just taking longer for those houses in more desirable neighborhoods to wind those distortions down, since their owners presumably have more assets or cushion before they have to "face the music".

In the $ today, albeit briefly. Incredible, to me, at least, that this would happen so soon.

Also, on a lighter note:

Thought this was interesting. From the CNBC interview with WB this morning:

Eddie Lampert's Sears Holdings Letter is out: http://www.searsholdings.com/invest/

net net -- Let me guess, Piedmont, Rockridge, Montclair or Oakland Hills?

I'm only familiar with CA, but many parts of CA have already bottomed (mostly the less-desirable neighborhoods), places like Riverside, Oakland, etc. Many houses in these neighborhoods are selling at 1995-1997 nominal pricing. The more desirable neighborhoods like San Francisco and West LA probably will still fall 50%, but given that CA experienced some of the highest runups in the country, I think it very unlikely that the pricing will be -50% across the board from here.

http://www.sec.gov/Archives/edgar/data/1067983/000095013409003064/v51307e13fvhr.txt sold a lot of JNJ (about $2bn?) otherwise not a lot of changes other than adding BNI which we already knew

http://finance.yahoo.com/news/Sealed-Air-completes-private-apf-14292263.html

Isn't it interesting that you see WEB doing all these deals with coupons that convert rather than buying common, at least for brk, which should mitigate the "too early" issue. Seems to be heads I win, tails you lose to me. Also, for his personal account, a point that I think neither buffett nor the media have made strongly enough (i.e. headline reads buffett says buy stocks) is that it matters *which* common you are buying. Obviously WEB is not buying index funds for his personal account...