KinAlberta

I expect some big changes are in order under Buffett's influence. In a radio interview this morning the father said he didn't want money, just an apology or "we're sorry". Instead he got a legal letter and money. The radio station then phoned and was told the communications person was no longer there and was directed to the U.S. head office which said 'send in the product'. The product had been sent already long ago. :-) Right now Heinz comes across as a big bureaucratic company disassociated with their front lines and sitting ready to trash their own brand franchise. Cockroach found in Alpha-Getti spells frustration for Edmonton-area family 'I looked at it, and I put it back and went, Mom what is this?’ CBC News Posted: Apr 23, 2015 11:36 AM MT Last Updated: Apr 23, 2015 2:02 PM MT http://www.cbc.ca/news/canada/edmonton/cockroach-found-in-alpha-getti-spells-frustration-for-edmonton-area-family-1.3045903

This is a great thread. It's been very rare that the debate over dividends vs buy backs vs capital allocations gets beyond the simplistic investment discussions (tax efficiency, etc) and gets into the reality of people's lives, ages, retirement needs, etc. For a long time I didn't care whether or not a dividend was paid. (Bought BRK in the early 1990s, etc.) However, the fact that I've aged and got closer to retirement, and witnessed what has happened to the Japanese market has made me realize that if I do plan to make withdrawals from my accounts in say the next 20 years, then I do need to care about cash flows. I may not be able to count on a rational market properly pricing shares at fair or higher valuations when I need cash flow. Now, if you don't need cash flow and will pass your whole estate on to the kids or donate it... Some clarity here... Capital Recycling at Elevated Valuations: A Historical Simulation Posted on April 12, 2015 by philosophicalecon@gmail.com "Because share buybacks are functionally identical to reinvested dividends in terms of their effects on total return, and because the Total Return EPS index assumes that all share buybacks are conducted at the same valuation, the index effectively tells us what the Total Return to investors would have been if the effect of changes in valuation had been completely removed." http://www.philosophicaleconomics.com/2015/04/recycle/

Any companies with poorly valued resources on their properties? Say timber?

Thought this comment was interesting...

A bit more trivia - Chou has picked up Dundee.

Future opportunity?...

Textbook example of mental biases at work here... you don't correct one mistake by making another. With regards to this, I enjoyed these blogpost I stumbled upon a few days ago: http://awealthofcommonsense.com/the-psychology-of-sitting-in-cash/ http://abnormalreturns.com/2013/02/04/cash-is-a-drug/ Interesting. Thanks for posting. So who is buying bonds now? In equal allocations to what they are buying in equities. If people are avoiding bonds right now, are they not "market timing" and so destined to fail? :-) That said, I always have problems with comments that "market timing" fails, is a mugs game, etc. We all "market time" whether we like it or not. Age, career stage, debt free status, etc. all impact one's timing with respect to longer term trends and amounts invested. Few people dollar cost average into markets over their lifetime using the same amounts of money from their 20s to their 60s. Right now Buffett is suggesting that his heirs invest 90% in equities and 10% in cash. No exposure to bonds. That is non-diversified investment advice and so is thus market timing. Also, "market timing" where an investor builds significant cash maybe once or twice in their investing lifetime can be criticized for market timing, but investors like that tend to be able to buy and hold until market conditions or their assessment of risks exceed even their longstanding tolerance for staying the course. (Think: people avoiding bonds now for the first time ever. Though, I guess, if we go into deflation they will wish they didn't market time.)

About 50% cash across my accounts now.

I read this earlier and immediately fired it off to a few friends. A must read! I included this quote as a teaser in sending it to my friends:

I was quite surprised that my search for Intrinsivaluator only turned up three references to it on this forum. I'm wondering what people's thoughts are about the quality of its various estimates. Berkshire Hathaway Intrinsivaluator http://www.creativeacademics.com/finance/IV.html

A very odd sounding quote...

Their 7 year projections were spot on for a long period. I think the Economist once looked at them. Granthams bubble research is pretty good too. However, his other predictions of what happens in the next months to year does not seem to be better than other observers. Yeah the long term prediction assessments I've seen over the years have often been shown to be quite good - not perfect of course. As for his host term predictions, I don't know, but one thing, in about late 2007 to mid 2008 I recall him essentially saying: run for the hills. That was pretty accurate. Worst case would have been some opportunity lost had the market turned back upwards but best case, as it actually turned out too, was to sell pretty much everything and wait for an opportunity. I think he even got the bottom fairly right too. Maybe someone could dig back to verify. BTW, I created the Jeremy Grantham page on Wikipedia, thinking he didn't get the attention he deserved. It would be great to post more info on it in terms of his performance, quotes, etc. In GMO's April 2010 Quarterly Letter Grantham spoke to the tendency for all bubbles to revert to the mean saying: “ For the record, I wrote an article for Fortune published in September 2007 that referred to three “near certainties”: profit margins would come down, the housing market would break, and the risk-premium all over the world would widen, each with severe consequences. You can perhaps only have that degree of confidence if you have been to the history books as much as we have and looked at every bubble and every bust. We have found that there are no exceptions. We are up to 34 completed bubbles. Every single one of them has broken all the way back to the trend that existed prior to the bubble forming, which is a very tough standard. So it’s simply illogical to give up the really high probabilities involved at the asset class level. All the data errors that frighten us all at the individual stock level are washed away at these great aggregations. It’s simply more reliable, higher-quality data.[8] ” In his Fall 2008 GMO letter, Grantham commented on the underlying causes of the world credit crisis: “ I ask myself, ‘Why is it that several dozen people saw this crisis coming for years?’ I described it as being like watching a train wreck in very slow motion. It seemed so inevitable and so merciless, and yet the bosses of Merrill Lynch and Citi and even U.S. Treasury Secretary Hank Paulson and Fed Chairman Ben Bernanke — none of them seemed to see it coming. I have a theory that people who find themselves running major-league companies are real organization-management types who focus on what they are doing this quarter or this annual budget. They are somewhat impatient, and focused on the present. Seeing these things requires more people with a historical perspective who are more thoughtful and more right-brained — but we end up with an army of left-brained immediate doers. So it’s more or less guaranteed that every time we get an outlying, obscure event that has never happened before in history, they are always going to miss it. And the three or four-dozen-odd characters screaming about it are always going to be ignored. . . . So we kept putting organization people — people who can influence and persuade and cajole — into top jobs that once-in-a-blue-moon take great creativity and historical insight. But they don’t have those skills.[9] http://en.wikipedia.org/wiki/Jeremy_Grantham

Here's some news on cash rich tech, but from my experience they will do little with their cash in a downturn... (maybe that's smart where tech buyouts are concerned.

Time magazine had this piece last year on fat. Ending the War on Fat June 12, 2014 http://time.com/2863227/ending-the-war-on-fat/

I think it's like we all worry about various scenarios occurring but we should act differently and hopefully based on more rational, or maybe I should say, more historically based future expectations. In my opinion, extreme scenarios to the positive or negative though are always worth thinking about and reading about so that should the world move closer towards one scenario or the other, one has already done a bit of thinking about the range of potential outcomes. As such I seek out such pessimistic concerns like Klarman was stating a couple years ago, circulated Warren Buffett's WMD article in my former place of employment, took a serious note of Prem Watsa's "perfect storm" comments in his 2002 letter, collected doom and gloom articles on the US housing and credit conditions in the mid 2000s, etc. Additionally, to temper one's own views I think it was in Fooled by Randomness that the author mentioned how people generally have a too positive outlook and don't realize the frequency that bad things like war etc occur within an investing lifetime.

I'm wondering what companies people have encountered that are employing various hedging strategies in anticipation of a significant downturn of some sort. (eg. Hussman's warned of major market retracement.) Also companies that have large cash balances are always interesting but my experience in buying such companies in the lead up to the 2008/2009 crisis was that this was a wasted effort as few such companies seemed to actually do anything with that cash when that opportunity arose. I did better buying them in the depths the crisis doubling up on them, than buying in advance of that market dip. I'm not normally a big fan of buying into such companies but would love to see a list to ponder over if a market started to slip. Of course, I'd consider Fairfax Financial as one such company.

Funny, exactly what I thought as I read the above post. I greatly admire Buffett and have no problem with people changing their stripes over the years as they learn and see the world differently. so I also have no problem with someone acting in a seemingly hypocritical fashion over time by blasting someone else for what they themselves did. On the KO issue though Winters clearly bumbled his approach, created new enemies, etc. but if you look at him as just the messenger of a possible point of real fact, if you look at the issue he is raising and not his personality, investment performance, math ability, ethnic background, skin colour or whatever, people have to decide if the actual issue he is raising is legitimate or not. For investors to be easily distracted by such diversionary tactics is disheartening (both in my respect for Buffett and my expectations of other investors with skin in the game). I don't own KO except through BRK so it's more of an academic issue to me but like the vast sums of money that have enriched executives via seemingly "innocuous" options grants, is the ability of a board to issue unlimited numbers of shares to executives (as Winters claims) a valid threat to existing shareholders? Please note that when Buffett brought out his WMD article, Buffett was severely criticized, repeatedly, as being a hypocrite and not understanding derivatives etc. and on many occasions I dragged out his article to point out to people that he clearly stated he used derivatives and that his article was about their "daisy chain" risk and not simplistic minded views towards ownership or not.

Have you heard the phrase, "We eat our own cooking"? The point that Buffett made is that unless David Winters can earn his keeps with his own performance to earn his fees, he should not be go picking a fight with the KO board and drag Buffett in. I was in the room in the audience when David made his plea with Buffett, and Buffett had said to David and everyone that he had told the BOD of KO of his thoughts on the compensation and that was that. I have met David at a few times in Omaha and at Wesco; I think he is a very mild manner, good guy. I just think his activism with KO took to another level that turned the switch on Buffett. I've never met either. Over the years I've gone to pretty great lengths on various forums to clarify and defend Buffett / BKR from nonsensical and abusive claims. I've also watched a number of Winters interviews too. Both seem to be acting very uncharacteristically in terms of past public presentations. The fact that Buffett used Winter's own performance against him instead of addressing the new issue with KO failed disclosure is very disconcerting. Maybe they are now even in terms of inflicting repetitional damage on each other and can move on. Right now I think Winters is on to something that shareholders shouldn't just take in stride but should seek to fully understand the implications of future dilution of their ownership.

Can't see the video but read a quote. Buffett might be right on Winters but I really hate diversionary tactics like Buffett just used.

I think it's time for someone to grab Buffett's quote on using leverage from his latest letter. :-)

It's also littered with Kodaks etc. The thing about software and scalability though is that they can use it to throw mud at the wall and see what sticks - all for a relatively low cost - and using their instant ubiquity to get in front of everyone's eyes. At the very least they could do a lot of damage to the old guys. It's not like products like coke where Buffett has said the distribution system is near irreproducible...

I'm sure you understand this but some may not. You have intentionally oversimplified and I agree with your points. But just to be clear. Rate of book value growth is a bit more than return on equity. It is return on equity less dividends, less share repurchases, plus share issuances, +/- changes in comprehensive income, etc. So it is important to calculate book value on a per share basis. The goal of a firm is not to increase book value. You want to increase intrinsic value per share. You want to generate cash flow. You want to make money for shareholders. You want to have each dollar of retained earnings to generate a similar or higher ROE. The truly great business can grow without retaining earnings (increasing book value), and the incredible one can do it and shrink their equity. That is why great businesses trade at a multiple to book value. +1. definitely helpful, especially the part about each dollar of retained earnings generating similar or higher ROE. See that's the thing. Identifying low P/BV stocks doesn't even seem to be a good starting point for finding great businesses, just temporarily cheap businesses that may not be that good anyway. Low P/BV seems just seems like a regression to the mean play, one requiring high turnover and generating high transaction costs/taxes and maybe high diversification (think Ben Graham). Still, value investing using some pretty simple metrics seem to do pretty well. Take some of the findings in Tweedy Brown's old study... WHAT HAS WORKED IN INVESTING: Studies of Investment Approaches and Characteristics Associated with Exceptional Returns http://www8.gsb.columbia.edu/sites/valueinvesting/files/files/what_has_worked_all.pdf So should "value investors" adopt a split personality? Aiming to have a portfolio of short term 'seasonal sale' items (good for one last puff as Buffett explained) and a portfolio of 'permanent' growth businesses? (again think Buffett and his companies). The latter being a form of GARP investing. Maybe a third (EV/EBITDAs and possible takeouts). Analyzing Valuation Measures: A Performance Horse-Race over the past 40 Years. http://csinvesting.org/wp-content/uploads/2012/09/tev-to-ebitda-research.pdf Basically, really limit one's focus on P/BV.

I just came across this video on youtube. Glad to see it was has long been posted to this site. Anyway, does anyone have a chronological list of links to Buffett, Munger, etc. interviews, articles, etc? I'd love to just be able to sit at my computer and time travel from the past to the present with some of these people.

If you still receive hard copies, do you recycle everything or do you save or collect some annual reports? Which ones?

The quotes provided in the above links are great. eg “Our determination to prioritize capital preservation, while seeking strong, risk-adjusted returns when measured over the fullness of time, drives us to do many things unconventionally. In a business plagued by group think and conventional wisdom, we try to avoid consensus thinking. We don’t mind being out of sync with the herd, and we don’t let that get to us. While we enjoy the challenge of analytically complex situations, we begin by looking for low-hanging fruit while eschewing the ‘high-hanging’ kind. We prefer ‘no-brainers’ to ‘brainers,’ and we are willing to work diligently and patiently to find them. When opportunity is scarce and markets expensive, it is dangerous to force money into new investments. We are disciplined at all times, and when we can’t find bargains, we choose to hold cash–sometimes large amounts– as a residual of our bottom-up investment process. This is something few on Wall Street appear able or willing to do.” http://www.valuewalk.com/2015/02/baupost-group-q4-14-letter/