bargainman

I think that if you had every company try to pass off an investment in technology as an asset Sears probably would not be that far ahead of anyone else! I mean compare them to amazon, target, walmart. Do you think any of those companies are investing any less in technology? I seriously doubt it. That said your point is one that is brought up in the book "It's earnings that count". If I remember he looks at earnings as defensive and enterprising (I think). The enterprising earnings he capitalizes R&D and marketing efforts to some degree. That's an 'aggressive' way to look at the earnings. It also assumes that they'll somehow be able to derive significant future benefit from that technology, and with technology it's always a toss up.. You never know if those millions you spent on web servers will be worth a lot or will be a lost cause... Especially for a company like Sears which really does not have a history of tech wizardry.

I think some of this article sums up the complexity of this argument very well: http://www.nytimes.com/2002/07/07/magazine/what-if-it-s-all-been-a-big-fat-lie.html?pagewanted=all&src=pm Scientists are still arguing about fat, despite a century of research, because the regulation of appetite and weight in the human body happens to be almost inconceivably complex, and the experimental tools we have to study it are still remarkably inadequate. This combination leaves researchers in an awkward position. To study the entire physiological system involves feeding real food to real human subjects for months or years on end, which is prohibitively expensive, ethically questionable (if you're trying to measure the effects of foods that might cause heart disease) and virtually impossible to do in any kind of rigorously controlled scientific manner. But if researchers seek to study something less costly and more controllable, they end up studying experimental situations so oversimplified that their results may have nothing to do with reality. This then leads to a research literature so vast that it's possible to find at least some published research to support virtually any theory. The result is a balkanized community -- ''splintered, very opinionated and in many instances, intransigent,'' says Kurt Isselbacher, a former chairman of the Food and Nutrition Board of the National Academy of Science -- in which researchers seem easily convinced that their preconceived notions are correct and thoroughly uninterested in testing any other hypotheses but their own. What's more, the number of misconceptions propagated about the most basic research can be staggering. Researchers will be suitably scientific describing the limitations of their own experiments, and then will cite something as gospel truth because they read it in a magazine. The classic example is the statement heard repeatedly that 95 percent of all dieters never lose weight, and 95 percent of those who do will not keep it off. This will be correctly attributed to the University of Pennsylvania psychiatrist Albert Stunkard, but it will go unmentioned that this statement is based on 100 patients who passed through Stunkard's obesity clinic during the Eisenhower administration. Personally I think it's a number of things at work. - genetics - different people will react differently to different diets. Some will tolerate wheat without a problem, others will have a major auto immune reaction (and to varying degrees.. some will tolerate small portions others large). - exposure - having to do with portions. If you are healthy and eat a bit of crappy food, your body can tolerate it, but the large the portions the larger the problem. - food industry - Ever heard of pink slime? look it up. The food industry is incentivized to get you to eat more food! They do it very successfully. Not sure what the answer is here. Regulation of crappy food in schools might help, so would education. - sugar and fructose in particular (see the earlier post about its toxic nature in anything more than token amounts). - exercise I think that due to the complexity of the problem, it's almost like religion, or economics! The dismal science. I mean, any complex open system is going to be provably impossible to explain. I think there are just certain limits, and when you bump up against them you run into problems. I think of all the research I've read, the only thing I think that is indisputable is that sugar in large quantities is very bad for you. White flour and carbs too. Everything else has proponents one way or another.

Here's an interesting blog post about 2 studies, comparing the outcomes of high carb vs high fat diets: http://www.fourhourworkweek.com/blog/2008/02/25/the-science-of-fat-loss-why-a-calorie-isnt-always-a-calorie/

Interesting research at MIT: http://www.process.org/discept/2011/11/17/draco-death-to-the-virus/

I've read some mixed things on cooking olive oil. I think because it's mono unsaturated that the fat itself is relatively stable at higher heats (it has a highish smoke point since it only has one oxidation point "mono"). But I believe the other compounds in olive oil, the phenols in particular are damaged at pretty low temperatures. So you may want to reconsider cooking that olive oil since the phenols are apparently responsible for a lot of olive oils healthy qualities. On the other hand I've read articles saying that it has a low smoke point like this: http://www.whfoods.com/genpage.php?tname=dailytip&dbid=261 But then wikipedia puts olive oil's smoke point around coconut oil's, which doesn't make sense since everyone says coconut oil is good for high heat!: http://en.wikipedia.org/wiki/Smoke_point Then again there seems to be a difference between the virgin and refined coconut oils! More confusion! Another thing I read about coconut oil is that it too can grow mold and hence mycotoxins. I put mine in the fridge as soon as I open it. it's a pain because it solidifies, but I just scrape some off with a knife when I need it. Looks like grass fed Ghee has a really high smoke point as well which might make it good for cooking.

Yeah, sorry I should have been more specific about the ratio of Omega 3 vs 6 being the real problem. The thing is that given that we're in the US it's such an obvious issue, like you said (15-25 to 1 ratio), that saying omega 6's are bad for you was easier and more self evident in the US. Wow, someone else who puts coconut oil in their tea! Amazing :) I actually take it with green tea, although sometimes I'll just take some off the spoon before mixing it in. I've tried some pharmaceutical grade MCT as well but I didn't notice it as much as the Coconut oil. Maybe the taste of the real coconut oil has a psychological effect or something? I would be careful with omega 3 eggs. What I've heard is rather mixed. One source claims that the chickens are fed flax seed and maybe flax seed oil, which is *not* suitable for human consumption (ie the crappy stuff that won't make it onto store shelves), something that is not part of their natural diet. Apparently Flaxseed oils tend to get rancid fairly quickly, meaning that the stuff that ends up in the omega 3 eggs isn't necessarily high quality, and in fact is less DHA than is implied: http://www.cspinet.org/new/200706211.html With regards to nuts apparently one big issue I've learned is that they are a stomping ground for mycotoxins, which are produced by mold. Rather, mold can grow on them, which can produce mycotoxins which are very dangerous poisons. I get my nuts and put them in the refrigerator right away. Wrt ALA though, I've read some interesting research specific to walnuts, which are high in ALA. As you said ALA is very difficult for our bodies to convert to DHA/EPA.. however somehow Walnuts have been shown to increase cognition: http://www.sfn.org/index.aspx?pagename=news_110507b With regards to fish, only get wild caught fatty fish since farmed fish can have the same crappy omega ratios as grain fed animals. And you're totally right about grass fed vs grain fed from what I've read... I know of some people who eat grass fed butter by the tablespoonful! Oh, and to make things more confusing, grass fed butter is high in a transfat.. but a *good* one! Yes folks, apparently there is a good transfat. It's called CLA, and has been shown to reduce stomach fat in humans, and have anti-cancer properties! Food is soooo complicated :-)

The problem with a lot of the high fat studies is that they often don't talk about the kind of fat. Was it transfat? omega 3? 6? Medium chain triglycerides? Saturated LCT? Oxidized? lard? It's sort of like saying "minerals cause x problem" What kind of minerals? There was a long thread on high fat diets and that book good cals bad cals a while back.. There's so much we don't know. There was a recent study that apparently showed an increase in the rate of prostate cancer from higher omega 3 consumption! Yes, the good fat..

From a guy who doesn't know much about this space at all, I've been looking at putting some money into VCVSX, which is vanguard's low cost convertibles mutual fund. As is usual for a Vanguard fund, it's the low cost one in the space (0.59%), and morningstar ranks it as a "gold" pick. Looks like it's subadvisor is Oaktree, which I have heard quoted on this board on several occasions. Looks like they are trying to go from 15->30% foreign exposure. Yield is listed as 3.95% which isn't much compared to your 9%+ ;). But I suppose it's a good way to get some general exposure to convertibles... Minimum is 3K which is pretty low...

The interviews I've read say that Buffett stopped taking her calls and basically stopped talking to her at all after the biography came out, and *after* his relatives said they disliked it. Notice that Buffett himself apparently did not dislike the book and he did supposedly read it before it came out. (If I'm remembering the interview/article right, it's been a while). But he reacted only after people close to him reacted to the book. So as much as I admire Buffett to me, he did bring this on himself *to some degree*. If he had maintained a more cordial relationship with Alice even after the book came out I doubt she'd be writing such one sided articles. I really didn't like that article. I think she missed out on a lot of important points and counterpoints. That said it is true that Buffett, like many other public figures, does tell others to do as I say not as I do, with some shades of gray. I think that's just a natural outcome of being quoted so many times, and generally being superior intellectually and otherwise to us mere mortals. (I say that honestly and sincerely, even though it might sound tongue in cheek :-) ). All said I think Alice could exercise some better judgement and maybe present both sides of the argument more clearly. That said a lot of journalism these days is designed to be click bait. That's how medias gets paid these days, so things have to be inflammatory otherwise they don't get enough clicks to attract advertisers. It's a sad reality of the world where everyone wants their media and news for free..

Read this article: http://www.time.com/time/magazine/article/0,9171,1118384,00.html It gives a lot of insight. I like the concept car parable.

Also what are the issue around owning a home in a different state? I presume there are a number of tax issues on top of the pain in the neck real estate management issues?

There is a difference between denting BH's overall IV, vs denting Biglari's potion of BH's IV, vs denting the minority shareholder's portion of BH's IV. Your statement holds when applied to the first and the second, but not to the third of those. We can only invest in the third, so that is what we have to evaluate. Note that given the incentive structure, the third shrinks as the second grows.

Does that date take into account the recent 3D Tri-Gate transistor tech? http://newsroom.intel.com/docs/DOC-2032 Anyone know much about this?

Sanjeev, the link you sent discusses the profitability not the energy required, if I read it properly. But I did some more research and I'm probably wrong: http://en.wikipedia.org/wiki/Oil_sands#Input_energy looks like the number I was looking for was EROEI http://en.wikipedia.org/wiki/Energy_returned_on_energy_invested and it looks like it has turned >1 for oil sands. I must have read that it was <1 many years ago...

Right but with oil sands doesn't it still require more energy to get the oil than the oil produces?

The iPhone and iPad don't. Check the number of sales of macs vs iPads/iPhones in Apple's 10K and you'll understand the importance of that. Also, there probably aren't many Android or Windows phones that do either. Not saying Intel isn't a good buy, but just make sure you understand where we are and where we're going. And most of all what is Intel's competitive advantage?

Speaking of reinvestment, one comment that WEB made was that the capital investments in Burlington and the utilities was greater than depreciation, then he waxed poetic about doing good for society. I guess I was curious about this. He didn't say anything about the maintenance capex vs new, but I must assume that if they are putting a lot of money towards capex, that maintenance capex must be smaller since he surely would not agree to invest unless the ROI on the new deployed capital was good. Any thoughts on this?

The one wet blanket to all this talk of accelerating cycles and innovation is energy. Gates talked about it recently and it sounds like the problems are just not like the tech sector. In part because of regulation and infrastructure, but also just the scientific challenges and underfunding.: http://www.smartplanet.com/blog/smart-takes/bill-gates-us-energy-research-underfunded/23521

A better faster calculator that can be used for massively more interesting and useful purposes, in a much cheaper fashion than before. For an example take a look at this TED talk: Moores law for genetics. Soon we'll be able to sequence our genomes for a pittance. And by soon I mean within the decade or sooner. With regards to combusting to become a living being? That's a tough one. There are several theories on that. I think Ray Kurzweil thinks that it's all about the number of connections, and theorizes that computers will have the same number of connections as the brain sometime around 2035 if i remember correctly. Also worth reading is this: http://singinst.org/overview/whatisthesingularity/ But there's someone else who thinks Kurzeil radically underestimates the number of connections needed. I'm really not sure whether there will be a singularity or not. The reality is that today 'greater than human intelligence' already exists IMO. Think about how smart someone with a computer is vs without. Think about how smart someone who has access to the latest technology of any sort is vs someone like this: http://thecnnfreedomproject.blogs.cnn.com/2012/02/13/hope-for-vietnams-children-of-the-dump/?hpt=hp_c1 Today we've already seen years of exponentially growing intelligence. Computers are designed with computers. Then those new computers are used to design the next breed, which leads to exponential advancement. So there are two forces that pull on eachother I think. The people who have access to technology get smarter and design better technology and pull away from the 'have nots'. But then there's the other effect where things keep getting cheaper and more accessible to everyone, preventing the 'have's' from pulling away too far. Think of how cheap it is today for someone to have a smart phone which has more tech in it than mainframes did maybe 50 years ago! But the pace keeps increasing. There are things like this: basically 3d printing is becoming more and more accessible, even for biological tissue. There's also talk that some company has figured out how to take your cells and convert them back to the precursor to stem cells (pluripotent stem cells) with full telomeres in place (resetting the time clock basically) http://www.investorsinsight.com/blogs/john_mauldins_outside_the_box/archive/2011/02/28/want-a-new-cardiovascular-system.aspx So people may not need stem cell donors they may be able to reuse their own cells. Lots of stuff to be both excited about and fearful of as well! But as someone else pointed out the food vs growing population part is a bit scary. It sounds like yields are no long increasing at the same rate as before, and top soil continues to be depleted.. Not sure how much further technology can help there..

My strategy has two key features that I like: 1) you can move up the strike price of the hedge as the share price rises (you can sell the original hedge to harvest some of the value) 2) tax advantages (if this becomes a long term holding you don't get to take a tax loss on the call option volatility premium until you sell). But the put premium can be deducted as soon as it expires (or you sell it) Scenario (call): 1) You bought the $5 strike 2014 call in December when it was trading for $2. 2) Stock moves to $10 and you want to move up the strike price of your hedge? Can't do it. Scenario (margin+put) 1) You buy the common with margin at $5 per share in December and the put costs you $2 to hedge 2) Stock moves up to $10 and you want to move up the strike price? 3) Answer: Buy the $10 put and sell the original $5 put Well in the call scenario you change the hedge by selling the 5 strike calls and buying the 10 strike calls. it's just put call equivalence after all. Anything you can do with puts one way you can do with calls the other. But the tax advantages are the real difference. If you sold the calls to a higher strike you'd get hit with taxes. No great way around that. (other than buying puts at that stage...)

This is one of the most interesting parts: "The settlement, if all states participate, will also include $3 billion to lower the rates of mortgage holders who are current." Everything so far has been to try and help the people who are foreclosed on or close to foreclosure. (in many cases because they shouldn't have bought that expensive a house in the first place!). I've been reading a little here and there about this deal potentially allowing people who are current and underwater to refinance. That would allow a whole new neglected demographic to refi (arguable a more responsible demographic). But it also sounds like that deal would be DOA in congress. (Not sure if that is the same as this deal Parsad linked to) http://www.washingtonpost.com/business/economy/obama-to-announce-new-housing-refinance-plan/2012/02/01/gIQAw8YghQ_story.html "almost anyone who has a credit score above 580 and has been paying his or her monthly mortgage bill on time for the past six months be able to refinance.... Christopher Mayer, an economics professor at Columbia who has gained attention for his mortgage proposals, said he’s “a big fan of what the president has proposed for refinancing government-guaranteed mortgages. . . . The program really says for the first time everybody is eligible.”"

Yup this is his own fault for not closing the fund to outside investors when he had the chance. I wonder if he'll learn his lesson and close it next time he has a good run. Or maybe he'll switch to JOE and make a deal with Eddie to close up shop at Fairholme. He still has a lot of money though. Still about as big as YACKX for example... As a shareholder I'm kind of upset by his refusal to close up shop back in the day...

Sanjeev, I find this amusing coming from a sterling hedge fund manager as yourself. We all know that great managers can suffer terrible years, but it doesn't make them bad managers, and they aren't worth firing just cause of a bad year or two (especially in the investing world where a lot of returns over short term time horizons can be luck) :-). I generally agree with the philosophy of honest and fairness though, but as tombgrt alluded to, it sounds like Pattison practiced it with a bit too much rigidity for my taste. Jack Welch did something similar with GE (and many companies now follow his practice or a variation of it). He famously forced everyone to identify the lowest 10% every year. Most of the time the low performers left on their own accord, or were place on a 'performance improvement plan, so he said. As tombgrt pointed out, everyone has rough days, months, years. You don't throw out a star just cause he's had a bad streak. But what do I know about car sales? :-) And maybe car sales aren't anywhere as random as investment results can be in the short term.. I guess if you get really good with the closing techniques maybe it's easy to perform at a high level all the time...

Speaking of Target and Walmart I think this has been posted before, but it's an interesting visualization of their growth over the years: http://projects.flowingdata.com/walmart/ http://projects.flowingdata.com/target/ also one for costco http://projects.flowingdata.com/costco/ Walmart: How many stores does Walmart have? Walmart reports unit counts each month and the most recent can be found by clicking here. At the end of fiscal year 2010 Walmart has over 4,300 stores and clubs in the U.S., and more than 8,400 units worldwide. Target: Today, Target operates nearly 1,750 stores in 49 states, including more than 240 SuperTarget® stores that include an upscale grocery shopping experience Costco: As of September 3, 2010, Costco has 572 warehouses Sears: There are 870 full-size Sears stores in the U.S. and 188 in Canada Kmart: As of January 29, 2011, Kmart operated a total of 1,307 (6 closing by early 2011) Kmart stores across 49 states, Guam, Puerto Rico, and the U.S. Virgin Island

IIRC Pattison had the reputation of firing his lowest grossing car salesman every month at his dealerships regardless of their past history. Like Buffett, just cause he's charming doesn't make him any less of a shark :-)