link01

yes, assuming he has the cash to cover the sale of the put...i suppose i should have assumed he did. but that 3 atm purchase of the protective put, assuming its 100% time premium, still equates to an 11% annualized interest cost on the $27 of proceeds rec'd if its 1 year out...1% money market rates on $27 earnes him 27 cents during the same time. $3 - .27 still equates to $2.73 cost, or 10% annualized.

looking at that as a kind of loan is dicey : you're essentially betting that the price of the security goes up. you stand to gain a max of 27 if it does, or if it goes down, you stand to lose a max of 3, the amount of the time premium on that 3 atm protective put. and thats assuming you dont get exercised and have the stock put to you....BIG IF on a put so deep in the money that there is essentially no time premium as per your theoretical example. its a potentially costly prospect too ...the transaction costs & the bid/ask spreads on options can be nasty if you need to keep rolling them over or swapping the stock assigned you for more deep itm put writes. especially on longer term options or LEAPS where the higher option prices carry wider spreads & less liquidity than the front months. not quite. you'll be paying margin interest rates on your "loan" & only collecting a paltry money market rate on the 27 proceeds. where ever margin rates stand currently, thats sure to be a costly negative spread. add in the theta or the cost of the time decay on your atm 3 put & things get even more costly if the stock doesnt move enough quickly in your favor. and, besides, in the shorter run stock prices are kind of a random walk. so you'd be rolling the dice unless you were dealing with LEAPS at least a year out. and if you're confident about the stock why not just buy a LEAP or the stock itself?

fantastic interview. many thnx.

hmmmm. i've always been ok with my favorite long term investments trading at a discount to intrinsic value. if you've held it long enough & it has grown & compounded at high rates of return (the ostensible reason why a stock becomes a fav LT holding), then the 20% discount or whatever to intrinsic value kind of diminishes in importance once you've got a 2 bagger or more in 5 yrs or so. and it affords you the ongoing opportunity to keep adding to the position over time.

web got the loan because he's not running the railroad, the bni team is. and they have loads of experience. web also has 40 plus yrs of a highly successful- not to mention a very visible & PUBLIC- track record of investments in a broad range of industries. that track record has generated the kind of trust & goodwill others can only dream about.

i bought my first stock in 1988, and that was berkshire. i didnt know diddlely at the time, but i sensed web & brk was something special, a breed apart. i own only a token amount now, but web & brk will always be the first one i turn to for perspective, uncommon common sense, rationality, & inspiration that goes beyond investing. looks like warren finally bagged his elephant!

hmmmm... the website is not blank when i click it. you're the 2nd person, tho, that's said this. try again? harry long also has a buildfremont dot com blog where he interestingly recounts his meeting with fremont mngt re his stated governance concerns: http://buildfremont.com/blog/ he's been quiet since that meeting, his last post on fremont being aug 12th. maybe he got spooked & sold based on the alarmingly cluless responses to his concerns, as well as some frankly bizarre behavior he encountered...IF his account is to be believed in the first place. the principles at chanticleer have said in no uncertain terms that they disagree with harry longs views, having done their own due diligence on fremont, invested in them, & spoken to mngt themselves. but knowing that biglari has stated that sns would primarily invest in activist situations, my guess is that he too has some issues with fmmh governance or execution.

some more interesting perspectives on the V shaped recovery: http://seekingalpha.com/article/160181-what-if-it-is-a-v-recovery http://seekingalpha.com/article/149598-perhaps-there-are-unseen-green-shoots#comment-594523 then there's the contra view of of pimco's Mohamed El-Erian. he gives more weight to "levels" rather than "rates of change" favored by others, including, probably ECRI. http://www.ft.com/cms/s/0/1551b95e-ac59-11de-a754-00144feabdc0.html?nclick_check=1

and yet there's very few investors who became billionaires on the same scale as buffett. in fact, buffetts long term record leaves everyone else in the dust. not so much his 40 year record of plus 20 percent annual gains, tho thats nothing to sneeze at. but the fact that there are so many others who have comparable annualized gains of plus 20% over time & yet somehow dont havent benefitted from comparable wealth creation as buffett, either for themselves or for their investors. clearly, there's something to be said for for a buy & hold philosophy, & even more to be said for his 'favorite' (& where many of the pundits/commentators get it wrong is to quote web on this as IF 'favorite' meant it were his ONLY investment strategy) buy & hold forever one...if you can find enough stocks at the right price to fit the bill. compounding tax free at high rates of return gives you a huge edge over long time frames. compounding with relatively few taxable events over long stretches is the next best thing.

<<First, the "jobless recovery." This has become the most common and perceived wisdom on earth. I question it, because, as my friend Michael Cembalist points out in his vital Eye on the Markets publication that I get as a client of JP Morgan, "the gap between manufacturing orders (high) and inventories (low) a predictor of goods/labor is at its highest level since 1975." Given that scenario, I cannot continue to believe that employment will stay low. That inventory differential is remarkable, just remarkable, and I cannot risk denying it. You have to incorporate the supply and demand in your thinking. It could lead to monster GDP growth and very big hiring.>> i'm not going to say where this came from cause the messenger is a well known knuckle-head market commentator. but he's only quoting someone else, who may or may not be a knuckle-head. in any case this is the sort of data i wish i could see for myself, as a counterpoint to the pessimistic stuff i read at sites like pimco, where there is no doubt about the credentials of the principle analysts.

i just came across this website set up by a small investor in fremont insurance (fmmh.ob). harry long, concerned blogger/investor, does a terrific job taking mngt to task for various corp governance issues. i thought some of you might like to check it out, especially those of you who might be investors yourselves, or investors in chanticleer holdings, which has a position in it. i've taken some small wait & see type positions in fmmh in the past, but ultimately punted . personally, this is the type of situation i tend to steer clear of until & unless i see the first glimmer of a catalyst for change on the horizon. http://buildfremont.com/ http://buildfremont.com/resource/press/SNLFinancial-April2-ShareholderDispute.pdf http://buildfremont.com/resource/whitepaper/HarryLong-RoadmapForExpansion.pdf

http://www.cnbc.com/id/32745449/site/14081545?__source=yahoo%7Cheadline%7Cquote%7Ctext%7C&par=yahoo snip <<The statement argues that a "healthy society requires healthy and responsible companies" working to achieve long-term goals. Instead, "boards, managers, shareholders with varying agendas, and regulators ... have allowed short-term considerations to overwhelm the desirable long-term growth and sustainable profit objectives of the corporation." The statement recommends: "Market incentives to encourage patient capital," such as lower capital gains tax rates for longer holding periods. Closer alignment of the interests of financial intermediaries, like mutual funds, and their investors. "Greater transparency in investor disclosures" to make it harder for activists and other investors to "use their influence to achieve short-term gains at the expense of long-term value creation." The Aspen statement calls for boards, managers, and "most particularly, shareholders" ... institutional investors .. to shift their focus to long-term goals and not push for "high-leverage and high-risk corporate strategies designed to produce high short-term returns." Not everyone will agree, of course. Activists like billionaire Carl Icahn believe incompetent or entrenched managements often cite the pursuit of "long-term goals" as a crutch to avoid making difficult changes that would help the company, shareholders, and everyone else. A few years ago, he told Business Week, "My critics say I am short-term-oriented .. My point is that a lot of times assets can be better utilized and enhance society when you put them in better hands than the current management." >> well, just as there are oft worlds of difference between so called "value investors" like buffett & bill miller for example, so too are there huge diffferences btween investors labeled "activists". sardar & carl icahn couldnt be more different, imo.

i enjoyed that article, farnamstreet. and your blog, too. thnx! its interesting how ms tavakoli has such a different view of tarp money & the big bank bailouts than buffett does, who she otherwise admires. she thinks there are too many "interested" (her term, another would be partick byrnes, "captured", tho that might be too strong here) appointees to important govt positions like bob rubin, paulsen, geitner, summers etc. she also mentioned cox's appointment to the SEC, & a former head of disgraced mortgage lender amerifirst being appointed ambassador to the netherlands as further examples. i think she hits the nail on the head, & her few examples of bob rubins behavioir as treasury secretary drives her point home. but with regard to TARP & some of the big bank bailouts i have to side with buffett. to have allowed them to fail would have risked setting off a kind of toppling domino effect & dragged even many sound credits down with them. i think we'd be looking at a repeat of the great depression without that govt intervention & coordinated federal reserve actions.

interesting to see brk & lik team up again. i remember the first berkadia venture with finova. was there another one after that, before this? wonder why is this called berkadia III?

<<Can anyone explain to me what the difference is between market making, "front running", and high frequency trading? I'd like to get some clarity on what's really going on here.>> thats a great question. very easy for the lines tp get blurred at the intersection of these 3.

i could be wrong cause i dont follow shld too closely, but the impression i get is that lampert has no intention of making shld his brk-like investment vehicle. one has to have alot of confidance in ones abilities to build the long term intrinsic value of a co you control & own a big chunk of using it as a major investment vehicle like brk, & which might also compete with his ESL hedge fund along with those juicy 2 & 20 fees. i'm sorry. i've always been skeptical on shld & lampert. thats despite the fact that i very much enjoy his shareholder letters & his fanatical focus on cash flows. it has always seemed to me that while he attempts to maximize the cash flows at sears here & NOW, its at the expense of balance sheet optimization, & FUTURE cash flow strategy optimization, which can only be safeguarded by an equally fanatical focus on your customer. i'm in uccmal's camp when he says in his anecdotal report below: <<The stock buybacks are being financed out of working capital somehow. My guess is the inventory issues I have highlighted are what is financing the buybacks. Now it strikes me that in a recession it is very smart to build customer relationships not desroy them, and lacking inventory and staff is a sure way to permanently impair them.>> and, btw: when sears closes underperforming stores, what have they been doing with do the the property afterwards? you'd think they would sell them & realize a big chunk of change, given the much balley-hooed underlying real estate values. i've clearly missed something as someone who only sporadically keeps an eye on shld.

well, you got a few sharp cookies on this board who think the opposite. bruce berkowitz at the fairholme fund likes it too. they seem to think the real estate value alone is worth the stock price & then some, giving a free call option on any successful turn around at the 2 main store chains. maybe so, but i'll pass. but as "iconic" a brand as sears is i cant help but feel the retail world has passed them by. too many lower cost retail chains out there eating sears lunch. no wonder traffic & sales are falling off a cliff. lampert is managing cash flows efficiently, tho i dont know about the wisdom of aggressively buying back stock & carrying the debt load that it has before a turn around has even been established. maybe thats where the underlying real estate values come into play.

i dont know if any kind of setiment indicator is actionable or not, but in general i think its important to watch what they do, not what they say. but as you note, people on CNBC are TALKING about a correction, & maybe their "all in" posture is heavily hedged with index puts, especially given the steep decline in option premium in the face of a 40% bounce from the march lows.

did you happen to see WEB's recent NYT op-ed piece? for politicians facing hard choices the path of least resistance & personal accountability is almost always the prefered path to dealing with problems. inflation is the supreme stealth confiscator of purchasing power including fixed rate debt values. you will probably get your wish, tho we should be careful what we wish for! http://www.nytimes.com/2009/08/19/opinion/19buffett.html?_r=1

according to merrill lynch global fund manager survey professionals are "all in": http://www.ritholtz.com/blog/2009/08/merrill-lynch-global-fund-manager-survey/

the official diagnosis for what ails jim cramer, from a guy that was in the trenches with him: bi-polar disorder. By Todd Harrison "Memoirs of a Minyan" is a first-person account that follows Minyanville founder Todd Harrison from a Wall Street trading career to the Internet media business, with some important lessons about the nature of money along the way. This e-book will publish each Wednesday over 18 weeks. http://www.marketwatch.com/story/riding-the-rollercoaster-at-cramer-berkowitz

yea, the pimco august commentaries from gross & el-erian are extra intriguing, coming as the markets have been furiously clawing their way up that old slope of hope, where green shoots can be seen blooming over the other side of the valley. but others see a recession thats unequivitably ending, citing a synchranized global surge just under the surface. so cast your votes! http://www.businesscycle.com/news/press/1481/ http://www.ritholtz.com/blog/2009/07/synchronized-surge-strengthens-since-april/

i remember reading comstocks commentaries frequently years ago, much of it via barrons. then they kind of disappeared off the radar. tho many of their bearish pieces proved precient my sense is that they have been generally too bearish (almost congenitally so?), & have therefore under-performed over full cycles encompassing both bull & bear markets. but they've been right at a few well timed inflection points where they essentially made their reputations. be that as it may their writings have always been thought provoking.

this isnt too surprising. for all jack welshes operational zeal & excellence it was pretty obvious that he wasnt above playing the wall street game of 'making the quarterly no.'s' at the corporate level. the finance/leasing arm was an especially "valuable" tool in that regard.

of course, you could apply this same perspective to all insurance co's...except that few truly excel on the either the float investment side or the underwriting side, & very very few excel at both. but a very nice post, t-bone.