bargainman

Not sure if someone posted this before but I haven't seen it.. Looks like they got the recommendation from an outside firm? http://www.sec.gov/Archives/edgar/data/93859/000092189510000848/form10q07428_04142010.htm from the 10Q: " The Committee engaged Towers Watson to assist in formulating an appropriate incentive compensation arrangement for Mr. Biglari. The Committee considered data provided by Towers Watson regarding the total remuneration of chief executives at a peer group of 36 companies, consisting of restaurants, asset managers, and diversified holding companies, with responsibilities similar in scope to Mr. Biglari’s. The Committee determined that book value gain was the fitting benchmark for calculating Mr. Biglari’s incentive compensation, for growth in book value (adjusted for accounting and other noneconomic factors) is the best proxy for value creation because it incorporates earnings/loss as well as unrealized gains and losses on investments. Without factoring in the benefits of the Biglari Capital acquisition, the Committee recognized that the incentive compensation formula it selected would provide Mr. Biglari with generally competitive compensation, as compared with the peer group’s remuneration when annual book value growth is between 8% and 18%. However, Mr. Biglari’s compensation would rest in the lower ranges of the peer group when annual book value growth is below 8%; when book value rises above 18%, Mr. Biglari’s compensation would be in the higher ranges of the peer group. The Committee believed that this structure creates a powerful economic incentive for Mr. Biglari to increase the Company’s per-share book value over the long term. In addition, the Committee believed that the compensation structure is in accord with the Company’s entrepreneurial culture of pay for performance."

txlaw, nice summary. For those who haven't seen here is Bruce's interview about C: http://www.morningstar.com/cover/videoCenter.aspx?id=324901 He makes about half the points you just made in the interview.

Oh my.. Opihiman, are you serious!? You're telling Ericopoly something like "it speaks volumes"!? Ericopoly has been around this board since the MSN board days, and has spoken volumes, let me tell you! Volumes of incredible insightful information and spot on calls! I'm not sure how long you've been lurking, but your profile says you've posted 8 times. Now I'm a relative newbie and am in awe of some of these guys, but let me post my newbie opinion... No one said anything about only being able to post questions about valuation on this board. In fact there are posts about taxes, cross country currency issues, brokers, arbitrage, ticker symbols etc etc etc. On the specific topic of options, options are a technically challenging beast, and asking for a walk thru on a trade is nothing out of the ordinary IMO. You need to understand the mechanics of the trade before you can take advantage of any valuation insight. There are many here who 'trade' on valuation, and hence are 'traders'. To me the distinction between a 'trader' and an 'investor' is mostly semantic. (with some exceptions for chart reading and tea leaves). Anyway, you may want to take it down a notch, and not tell senior members of this board what not to talk about. And please don't make snippy snooty comments like "speaks volumes" to the senior members of the board that we all respect and enjoy commentary from. from an Ericopoly fan.

Hmm, I'm not so sure why this is considered a 'trader's' question. Buffett used Puts to get into KO years ago. He also recently sold a pile of index puts he was much maligned for. Others on this board have often spoken of options trades, both puts and calls, on stocks they've fundamentally analyzed. I'll just mention a coupe of things. When you sell puts, you are taking all the downside risk and getting a limited upside gain. It's kind of like a bond where you have the risk of default, and only get a fixed payment/max profit. So it's important to look at companies you think have limited downside. You may also want companies you don't think will run away on you. If you sell a $20 put on a $23 stock, and say you get $1, and then the stock goes from 23 to $50, you get to keep $1! That's it. So there is the risk of losing out on gains.

If you're really itching to get gold, just get some GLD call LEAPs or something no? That way you limit your downside. If GLD goes up then you can roll them up and lock in some gain but if it crashes you only lose a smaller investment.. probably the best way to ride a momentum 'stock'...

TWACOWFCA, where do you get the WSBASE information from? Is this your own custom PDF/XLS graph, or is it available publicly? Thanks, bargainman.

Does anyone know for sure if this compensation agreement replaces or is in addition to his 900K salary? I've read opinions either way and haven't seen it spelled out one way or the other. Anyone have the scoop?

I don't know, the thing that bothered me is his statement about Buffett. He went on about Buffett's investing prowess overshadowing his other attributes like the way he treats his family.. Uh.. did he read Snowball? From everything I read he was a pretty mediocre, even lousy, father. I mean his friends would have to remind him "those are your kids you know Warren". I'm not sure why Pabrai would make a statement like that.

Wow, looks like they agree with Bruce from FAIRX.

Right, I didn't say they had a moat based on the mp3 format, they don't. That said, until recently sales from the iTunes store were in Apple's proprietary format, so at the time they did have a lock on the format. Ie if you bought a lot of songs from their store, you would be stuck buying iPods into eternity. That changed a while ago. But... what I was referring to was the iPhone and iPod Touch, and iPad. They have a ton of applications. 10s of thousands or more. (maybe hundreds). People buy applications on their iPhones, they want to keep using them the next cell phone they get. Developers want to sell to high end consumers like iPhone users. Apple creates and owns the distribution network. That == moat.

Has anyone bought FRFHF.PK in odd lots? If so, what broker?

omagh, care to give us the quick 1-2 paragraph 'pitch' on why you think WRB is a good company/investment?

Sony walkman didn't have a lock on the cassette format. Nor was there a distribution moat since you couldn't connect to them all via the network. Here's the thing. Apple has 3 big businesses: Computers, iPods, iPhones. The first it owns 3-5% marketshare, the second it dominates, the third it has a lot of smartphone market share, but that's a small small percentage of the total mobile market share. ie. In spite of it's size, there's still room for growth.

To figure out AAPL's moat, just ask, what was MSFT's moat? Users and Applications. They have the high end user, and they have developers writing applications for them. One guy I know wants to get rid of his iPhone but can't cause it has the applications he wants. On top of that there is design, and the fact that they are the only company that builds the whole widget. That's a huge advantage in consumer electronics since they can control the whole experience.

A few things: I think it's a bad idea to short stocks period. Pabrai and others say "100% upside, infinite downside", vs long ideas "100% downside, infinite upside". It's a really really *really* bad idea to short a strong company based on valuation. For shorts you should go for optimisticly valued crumbling businesses with a catalyst that will bring them down. Netflix has quite a few good things going for it. Subscriber (recurring) revenue base with low attrition rates. Reed Hastings as CEO (very techie background). Ex-postmaster general on the board, to help with massive distribution of DVDs. Technology in place to efficiently order and route DVDs to people all throughout the US in optimized manner. Relationships with studios to use DVD content, and also now for streaming content. Very strong technical leadership and background. Really Netflix is a technology company in a content field. I'm not saying they aren't expensive.. But they are probably an acquisition target at some stage. They destroyed Blockbuster, and fended off both Walmart and Amazon from their turf. That should give you an idea of the quality of the company. Not maybe companies beat on Walmart and Amazon. As to where they can grow? I don't know, but their recent deal with Akamai indicates that for international they are probably thinking streaming. Anyway, I'm sure there are many, many *crappy* companies with sky high valuations and crushing debt. Those would be much better candidates for a short... Shorting great companies is just a bad bad idea, at any valuation... IMO.

I think that he came up with that checklist item after losing almost everything in CCRT, and maybe DFC (although I'm not sure about DFC). He put a lot into CCRT and lost pretty much all of it. I'm really not sure that I would draw the conclusion he did, ie that he shouldn't invest in companies where they 'are win-win for the ecosystem'. There is a lot to be said about high rate credit cards, and a lot of people defend them with good reason. I'm not sure that CCRT was engaged in activities that weren't 'win-win' for the ecosystem, but I guess everyone had moral judgements and it's up to each person to deal within their boundaries...

Um, and what would you call the investments they made with wintergreen and Bill Ackman, with the purpose of learning about other investments?

You could always sell some puts and earn some income while waiting for a lower price...

Has anyone bought LRE using IB? Can you get them directly on the LSE?

Well in this testimony today he seems to be taking his mea culpa all back...

Greenspan hasn't claimed no fault, to my knowledge, but has claimed that low interest rates did not significantly contribute to the credit bubble. He actually has a decent argument involving correlations between short-term rates, the 10-year treasuries, and overseas savings. However, that is not an argument to absolve the Fed given the regulatory powers that Greenspan squandered in his Fountainhead fantasy. http://finance.yahoo.com/news/Greenspan-defends-record-at-apf-712700185.html?x=0&sec=topStories&pos=main&asset=&ccode= "In his opening remarks, Greenspan blamed a litany of other parties and historical events for the meltdown but accepted no responsibility for himself or the Fed, which he led from 1987 until early 2006."

"The former Fed chairman responded that my insights had been a “statistical illusion.” Perhaps, he suggested, I was just a supremely lucky flipper of coins." Unbelievable. What's the old expression... "those who do not learn from the past...". I guess it doesn't matter with Greenspan since he'll be dead when the next fed caused bubble comes around...

Bronco, sorry, let me clarify my question. I guess I was asking "why the discrepancy between BV and FMV?" I was mostly curious at how they were tracking the 3 public companies on their books. Did they buy them at a cheaper price and have them at a much lower value on their books? Just curious if anyone has done that research. Thanks.

Can someone answer this: "On February 24, 2010, the aggregate market value of Loews’s ownership interests in our three publicly traded subsidiaries totaled approximately $15.2 billion, or $36 per share of Loews common stock. Other assets attributed to Loews common stock include our two wholly owned subsidiaries, HighMount and Loews Hotels; our 100 percent ownership of Boardwalk Pipeline’s general partner; holding company cash and investments net of holding company debt; CNA senior preferred stock; and Boardwalk Pipeline Class B units and subordinated debt." What I don't get though is why they say: "Book value = $39.76 at year-end 2009".. does that mean that their other own subs are only 3.76/share? Or is does the market value of their public subs not make it directly into the book value calculation?

Hmm according to 550, "If you are not in the business of writing options and an option you write on stocks, securities, commodities, or commodity futures is not exercised (or repurchased), the amount you receive is a short-term capital gain." So why are you concerned about the short term tax penalty? Doesn't matter if you sell leaps or not, you'll get short term tax rates..