bargainman

Mindshare is certainly one thing.. but there's another. That's servers, hardware, and algorithms. Bing still doesn't do as good a job as Google as far as I've seen and MSFT has thrown billions into it. Google by some estimates has more than a million servers. I think the only companies with as many are Amazon and MSFT. But MSFT's servers aren't as focused on search. In order to do search well you need many many servers all over the world with cheap energy close by to power them. It's at the stage where infrastructure matters.

Interesting that most of the replies here are about buying options. Personally I sell options more than I buy them, probably because I'm more conservative. But if I want leverage I do buy leaps. Selling Puts is a great way to get paid while waiting for a stock to hit your buy price. Selling calls is a great way to get paid while waiting for your sell price. But they are both low payout high risk scenarios, but that's offset by high probability profits, so it's all about what you want out of your investing. Generally if I want unlimited upwards potential I buy the stock, then maybe some leaps. But for monthly income selling puts or calls (in an unleveraged manner suits me).

Sorry, what does Sears Canada have to do with anything?

More than anything this whole thing is very very sad. Sokol was considered a hero, one of the brightest stars of many stars, but still. He was the CEO heir apparent. It's kind of sad that BRK and Buffett is going after him now, and it's even sadder that Sokol dropped the ball on something so stupid. I'm not sure if it was an honest mistake or not, probably not, but the letter lays out a number of assumptions. Like it says, this is a potential gray area, and BRK wants to play in the middle of the court, but it's turning ugly for something in the gray area. Sokol definitely did put in 'indefatigable efforts' in the past and he did create tremendous shareholder value. He was Buffett's go to guy to fix things over and over again, everyone here and everywhere else was singing his praises until a few weeks ago. Everyone here is going to side with Buffett for sure and that's fine. But after reading Snowball it's 100% clear that Buffett is no saint either. The fact that he's taking no responsibility for not having asked Sokol more about his share ownership kind of bugs me. He made a big assumption that the ownership was just benign, I'm not sure it's fair to place that entirely on Sokol, although Sokol should shoulder the majority of the blame. It's clear Buffett wants to make an example of Sokol. It's very sad to see a star get demolished like this... (now I'm sure I'll get flamed for this by all the Buffett groupies... but remember I am a Buffett groupie too.. so be gentle :-) )

Swizzled, why would you say this? "I just can't make myself invest in oil companies when I see $100 oil prices" given the conclusions you outline it seems contradictory...

So we all know that there are smart people on both the inflation and deflation side of the debate/trade. My question to those here is... Being that I'm just a small investor and have no idea what the economy will do from a deflation inflation standpoint, what are some investments that will do well in *either* scenario?? Would love to hear anyone's ideas..

Well Sanjeev, I take it you read the snippet from the latest annual letter right?? Looks like they're coming around... "While our primary objective is to expand our insurance and reinsurance operations worldwide, our investing skills could provide us with opportunities to buy, in whole or in part, excellent companies in other industries which generate strong free cash flows and will contribute to our objective of achieving a 15% per year increase in book value per share over the long term. For entrepreneurial founders who have built their companies over long periods of time, Fairfax will be an excellent owner, allowing the founders to continue to run their business, unfettered by the head office, and we are open to these opportunities."

Hmmm.. Maybe this is the only way to 'regulate'.. The companies that are attacked and survive have to sue and fight back. I say this after having read that recent rollingstone article about the unbelievably cozy relationship between the SEC and the investment banks (presumably also the Hedge funds).. I guess the SEC would rather go after big criminals like Martha Stewart than after bankers..

Here's something worth reading regarding what Sanjeev said about the Chinese influx: http://www.vancouversun.com/business/real-estate/Chinese+investment+surge+hits+Metro+Vancouver+housing+market/4352746/story.html Couple that with what Prem said about the bubble in Chinese real estate... And for your amusement let's bring back the classics... Always good for a few minutes of play time.. http://www.crackshackormansion.com/ http://www.crackshackormansion.com/part2.html

Wow that's brutal, I can't believe they just took the $10,000 and refused to address the problem!... What's more brutal is that the comptroller didn't do anything about it. I just reminds you how small we are vs the giant corporate entities. That's probably why I'm paranoid and have accounts in 10 or more institutions..

This doesn't sound good. http://www.cnbc.com/id/41644085 This just sounds very strange... http://www.cnbc.com/id/41645307/ Can't say I've had good customer service experiences with WFC myself...

Wow. Well it looks like Joe's ex CEO is walking away with almost 8 million bucks. But from the comments about 'going around the globe to find partners to develop the land', maybe Bruce's earlier statement might become real... “When industry comes, which it will, to the area, because that area is in an aerospace corridor, it’s going to be one of the best places to live and work in Florida,” Mr. Berkowitz said in a Feb. 9 interview with the Wall Street Journal. “I want it to be a metropolis. I’m not just talking about a vacation community.”

There's another manager out there, sometimes mentioned on this board, who could certainly use that piece of 'advice'.

Here's some more info: http://www.bloomberg.com/news/2011-03-02/st-joe-climbs-as-quarterly-loss-narrows-on-lower-land-impairment-charges.html Greene’s severance package includes more than $4.3 million in cash and benefits plus 128,681 shares of stock and six years insurance coverage for potential lawsuits, the company said in a regulatory filing yesterday. He earned $2.8 million in 2009, when the company reported a loss of $130 million on revenue of $138 million, according to data compiled by Bloomberg. 130 million loss on revenue of 138 million! And the guy gets paid 2.8 million! jeesh!

Hmm.. sounds like a less than astounding victory... http://www.bizjournals.com/jacksonville/news/2011/03/01/greene-to-get-4m-st-joe-severance.html Wish I could lose 100+ Million a year then get kicked out and get a $4 million bonus, uh severance package! jeesh!!!

What do you mean by mark to air? Are you talking about the same strategy Singleton of Teledyne used.. issue high priced stock to get cheaper assets?

You'll want to pick up Tim Ferris's book "4 hour work week" or check out his website. He's a piece of work in some ways, but leads a very interesting life and advocates for mini retirements, which is what it sounds like you're doing. http://www.fourhourworkweek.com/

I'm surprised that all the directors didn't leave.. maybe he needed some to stay for continuity...

Thanks for giving me this very nice piece of advice. My wife and I actually have been thinking about this for sometime and there are several aspects of it make me undecided. One aspect is, of course, will we have enough assets? We live in Taiwan, where the living cost is somewhat lower than the States, so this part is much easier. However, what makes her uneasy is to have me being a fulltime "home maker." Here the society values "corporate titles" very much. When I told my wife I think I should eventually quit my job and manage our investment full time, my wife actually wanted me to form a small company, a small investment partnership, so that I can: 1) keep the "going-to-work everyday" routine and have a job title and 2) keep relatives from thinking I am lazy to retire when I am 45. I wonder whether other members who work for oneself full time have to fight this stereotype or not. What will you suggest me do? Quit worrying what everyone else thinks and do what makes you happy. I was laid off at the end of last year from a good job and used my extra free time to travel all of SE Asia, Japan, HK, and Bali for several months. Friends thought i was nuts. "Who does that?"But it was probably the best time i have ever had and I made great lifelong friends! Glad i didn't listen to them or worry about what they thought. Zippy It's clear that you care about what your wife thinks, and thank goodness for that! So i don't really subscribe to the comment about "quit worrying what everyone else thinks" since clearly her opinion is important to you. The idea of doing what makes *you* happy is a good one, but also seems to me to be more of a north american western individualistic concept that doesn't pervade all societies, and certainly not a lot of Asian societies. So ultimately there are actions and consequences and the most important thing is for you to be happy with the consequences ( and perceived ones, since maybe they wouldn't be what you think they would be. Often times we fear doing something, then after we do it we realize our fear was just in our heads, or our spouse's heads). You already have spelled out what you think the consequences will be, the question is whether you can live with them? that's only a decision you can make. In other words if you take advice from a board member that says "do what makes you happy", and the thought of other people close to you thinking bad of you doesn't make you happy, well then you should ignore the part about "quit worrying what others think" :-)

That is funny! I was also quite amused at the talk of Whole Foods in a Sears store! I mean Whole Foods? really? I guess it makes sense in that it's SHLD's answer to Target and Walmart's "supermarket in a store"? Kind of reminds me of was it la Quinta hotels? The famous Peter Lynch investment that decided to drop their hotel restaurant (hotel restaurants are almost always money losing parts of the business) in favor of providing space for a Dennys (I think it was Dennys). Definitely an interesting move. Lampert rarely talks about focus on giving customers the cheapest goods, always about delivering customer service, which makes me think Whole foods kind of fits into that strategy? Will be interesting to see how it plays out...

I was just thinking about that today! Basically sounds like someone throwing popcorn from the bleachers if you will. If he has an issue with these things he should become more involved politically. Maybe he is, who knows? The 'opinion' about Amazon not collecting taxes vs SHLD and others having to also sounded like an opinion piece. I mean if it's important to the business and I believe it is, there should be a call to action or a description of the actions that SHLD is or has taken no? But I do agree that his political opinions are kind of weak and out of place in an annual letter.

Here's another more recent one from Schwab's site: http://www.schwab.com/public/schwab/research_strategies/market_insight/investing_strategies/portfolio_planning/hedging_tax_traps_for_the_unwary.html Constructive sale rules The constructive sale rules arrived as part of the Taxpayer Relief Act of 1997. In a nutshell, certain offsetting transactions can require you to recognize the capital gain on your original position even though you haven't actually sold it. These rules severely limit the usefulness of an old standby, the "short-against-the-box" strategy. Importantly, a put option used by itself to hedge the risk on an existing position should not trigger a constructive sale as long as the exercise price is at or below the price of the existing position. And there are a number of other viable hedging and diversification strategies which, when properly structured, can help avoid constructive sale treatment.

It depends -- the rules of whether or not it is treated as a sale depend on a few factors, such as when the put is closed out, when you purchase additional puts or hedges on that stock after closing out the prior hedges, the strike price of the put (whether it protects any gain), etc... For individuals the date at which you close out your puts will at the very least become your new date of acquisition for long/short term capital gains considerations. For example, if you hold the stock for 20 years and then buy puts on it today, but close the puts out next week and then sell the stock the next day -- that makes the holding period short-term and you owe tax as a short-term capital gain. The tax people aren't stupid -- they understand that by purchasing a KO put to protect your KO gains you are avoiding just selling the stock. So they treat you as if you are doing just that. Indirect hedging will avoid the constructive sale rules. Prior to 1997 (when these rules went into place) you could just short the stock in perpetuity to lock in the gain on the offsetting long position without EVER paying tax! Combine that with naked short selling (no borrowing costs) and you are in tax nirvana. Hmmm.. are you sure about that? The rules I read on constructive sales have to do with a real 1 to 1 offsetting position.. see: http://www.irs.gov/pub/irs-pdf/p550.pdf On page 39 titled "Constructive Sales of Appreciated Financial Positions". It sounds like you have to do a short position or futures contract where both the loss potential *and* the gain potential is eliminated.. See here also: http://www.fool.com/school/taxes/1999/taxes990730.htm it's a bit old so not sure if it's out of date, but here is what they say: "Remember that the constructive sale rules were implemented to impact transactions that had the effect of eliminating substantially all of your risk of loss and opportunity for income and gain with respect to the appreciated financial position. That's the standard and it's very clear. Applying this reasoning, Congress intended that transactions only reducing risk of loss or only reducing opportunity for gain would not be covered under the constructive sale rules. Example: You hold an appreciated financial position in a stock. You then enter into a "put" with an exercise price equal to the current market price (an "at-the-money" option). Because such an option reduces only your risk of loss, and not your opportunity for gain, the above standard would not be met, and this would not be considered a constructive sale. Again, remember that the transactions the constructive sale rules affect are those that reduce both risk of loss and opportunity for gain. So, if you hedge only one end of the transaction, the constructive sale rules wouldn't apply."

A few questions: "Sears closed a combined 34 Kmart and Sears stores in 2010 and added 122 specialty stores." what specialty stores, does anyone know? With regards to buybacks and the new CEO: "D'Ambrosio's resume includes serving most recently as CEO at Avaya Inc., a telephone and software technology company, where he was instrumental in taking the company private in a $8.2 billion deal with two private equity firms in 2007." "He noted D'Ambrosio's technology background would be a strength as Sears builds a business that's more focused online. He also highlighted that Avaya's going private helped deliver "attractive returns to its shareholders," raising speculation that Lampert may be thinking about such a move for Sears." buying back to take it private?

It's funny how boiler plate all of this is.. special committee, strategic alternatives, careful examination.. It's all vague and lawyerspeak.