Parsad

A board member messaged me and asked this question, so I thought I should post the response to everyone, since others may be wondering: Hi Sanjeev what dose the new "Lifetime Member" on our profiles mean ? Thanks At some point, I'm going to close membership to the board and start charging new members a small annual fee...it's simply going to get too onerous. I get some 400+ membership registrations a month, and only about 30-60 are legitimate. The rest are robot spam registrations and I'm spending an inordinate amount of time filtering them. I have a spam filter and CAPTCHA built-in, but that only catches about a third. So along with just normal monitoring, hosting, and support service, I'm spending a ton of time weeding out memberships. When I eventually do start charging new people to use the board, which will also get rid of all of the spam registrations, all members up until that point will be Lifetime Members (grandfathered) and will never ever be charged to use the board...so if you haven't joined, you probably should. You all have contributed immensely, and as such it's as much your forum as mine...so the board will always be free to you all who have built it. I've just started to switch some of the more heavy users over to that membership...trying to figure out how this will work, and exactly what changes I will need to make to the database. The fee for new members will go into effect January 1, 2013...it will probably be like $25-35 annually. Once I figure out the changes, I will get Paul at Watermelon Webworks to help modify things if necessary. Cheers! Sanjeev

To quote Parsad from Feb 23rd: Yankee only post on political threads which is unlike any other poster here. Even Ben Graham and that other guy post about LVLT..." Actually, it wasn't me who said that. I believe Myth said that. It was in the quote frame that I excerpted...you've got to go back to page 6 of that thread to see who said it originally. Cheers!

I've never seen anyone take a stab at defining the rate at which we should be growing at this point in the recovery. Normally the people who I hear making your comment are people like Mitt Romney himself, in other words people who are inaccessible to me. However you are accessible so you get the question. What rate of growth do you use as what it "should be", and what is your method of determining this rate? To me it seems such a difficult task, as we've got historical comparisons to Japan yet they had the rest of the world growing to help drag them along. Or we've had the numerous comparisons to past recessions, but they all had different contexts as well. Yeah Eric, this is what drives me nuts too. I didn't agree with significant amounts of money spent by the government, in particular much of the stimulus spending, but alot of other things were absolutely necessary to just keep the gears from completely rusting over. We've just been through the worst period in U.S. economic history since the 1930's, and everyone wants things to improve overnight. Well, the hard truth is they don't improve overnight and not even over several years in such circumstances. If it takes the average American family probably about 8-10 years to deleverage from a 120% debt to income ratio, then exactly how long would it take a sovereign nation...four years...please! As Eric stated, Japan had the rest of the world carrying them and it's been almost 25 years! Tell them about how fast their economy should be growing...they've pretty much done everything under the sun to try and get things moving. Unfortunately, Japan isn't too keen on immigration, and their demographics have forced them into the very predicament they've feared. Who the hell is going to buy houses in Japan to reflate assets? You don't have the same problem here. Housing is recovering, corporations are generating record profits, banks are the best capitalized they've been in 50 years. You don't have a credit crunch anymore, but a credit glut...too much capital everywhere and no one wants to use it. Small businesses are still finding it difficult to get funding. Venture capital is still difficult to find. M&A's are still slow. Fear is driving the credit markets right now, not actual fundamentals. Is there substantial deleveraging still going on...yes, it will continue over the next few years...but there is no real reason why capital markets in North America should remain tight. It's fear! And unfortunately, no administration is going to fix that. It only happens with time as people forget and move forward. As their lives start to recover. The U.S. will recover, and it doesn't matter if it's Romney or Obama. Cheers!

It is the debt load that is crippling the economy. It's not the debt load that is causing the problem. The economy wasn't suffering when everyone was acquiring debt, nor when debt had reached proportions slightly less than they are now. Corporations are achieving record profit margins. It was a credit crunch that led the economy to slow down, and then the subsequent deleveraging which slowed it further. You then had asset prices deteriorate and consumers naturally decreased their level of consumption...in other words the engine stalled. The government then tried to prime the pump and fire up the engine, but it's not working very well because you have engines stalling all over the world. And how did all this come about? Because of various levels of past stimulus, either through tax cuts, interest rate cuts, lax lending policies to appease various groups and inordinate amounts of capital flowing through the hands of idiots! Both democratic and conservative! Romney and Ryan, or Obama and Biden, will all continue their rhetoric. They will have very little influence on what actually happens going forward. The system will eventually work it's way through the process, and things they do may speed the process or impede it...think Japan! But they have no idea what to do, and neither does anyone else. They are simply capitalizing on Obama's vulnerability, just like he did with Bush (not too hard), and none of them will make an ounce of difference. If things improve in the next four years, whichever party wins will get the credit, but in reality they would have done little. The U.S. succeeds in spite of their politicians, not because of them...the system works because capitalism is self-correcting. Cheers!

Is the growth coming from acquisitions or are they organically growing? In other words, are they just buying growth? Both. As long as the return on capital over time is adequate, it doesn't matter if it's organic or purchased. How much growth at Berkshire is acquired or organic...it's both. CEO's should always be concerned with return on capital, not simply the legacy of their business or growing at any cost. Cheers!

In value investing, you do best when the "smart money" has pulled out and then the "dumb money" has also pulled out after following the smart money in too late. Dell is getting to that point. No one really wants to own it and even other value investors are looking bad, because you tend to come in a bit early...so they are even second-guessing themselves. I love it when people start to throw something away. It could very well get cheaper, and that is fine by me. Cheers!

Romney's speech was far better than Ryan's. Condoleeza Rice seriously should have been chosen as VP to get the minority and female votes...I think she's more capable than Ryan too. I like Romney...don't like Ryan as VP. Romney will be a hell of a lot better than anything the Republicans have given us in a long time too! It's going to be a close election. And if I ever hear another American talk about fanatical religious groups around the world, then they've got to simply look at the Republican Party...God Lord...excuse my hypocrisy! I felt like I was being recruited by the Jehovah's Witness or something during the telecast. Even one of the commentators on CNN said something like..."I've always found those that believe in a higher power to be humble, giving, sincere and honest people." So atheists and agnostics are evil, lying, cheating, egomaniacs! ;D Cheers!

True. People were saying the same type of things about RIMM's valuation..until the earnings started going away. I follow what Prem does very closely, and I've never touched RIMM. At our AGM in April in Toronto, attendees at our AGM asked me what I thought of RIMM and at what price I would buy it...I said "Maybe 5 bucks!" It was trading around $13.50 at the time and never got there. I still have no real interest in investing in RIMM...they have really two businesses (hardware & services)...and both are completely intertwined with nothing in development that would allow them to grow. Unless they do something significant at RIMM, it will eventually be a liquidation play, and five bucks is all I would pay! But DELL is not in the same position. You have multiple lines of business growing, while their formerly core business (PC's) is deteriorating. Still very profitable, but everyone can see clearly that the business will decline significantly going forward. I also did the same sort of analysis as the Seeking Alpha article. What is the worst case scenario here? What is the company worth without that PC business? And that is where my thinking changed, because I had not paid attention to Dell in nearly two years. I did not notice the changes that were happening in their other businesses. If the price keeps falling, it will be our largest position at some point...very, very cheap. Cheers!

I always like Francis' frank dissection of his mistakes. Like Buffett, he makes much more of his mistakes than any successes...tremendous humility. Cheers!

That would be smart. They are better off letting Michelle Obama speak. I did really enjoy Condolezza Rice's speech though, and I think the Republicans would certainly attract alot more people with her running as VP instead of Ryan. Ryan reminds me too much of John Edwards...gosh, schucks...wink, wink, nudge, nudge...oh did I do that? Cheers!

Buffett pledges more to charity, including his children's foundations. Cheers! http://blogs.wsj.com/deals/2012/08/30/warren-buffett-celebrates-birthday-by-loving-his-children/?mod=yahoo_hs http://www.bloomberg.com/news/2012-08-30/buffett-pledges-3-billion-more-to-children-s-foundations-1-.html?cmpid=yhoo

I understand the frustration with Obama, and the disagreement on various policies, actions, etc, but is Paul Ryan going to be any better as Vice-President to Romney? This guy loves twisting facts to fit his agenda. I trust Romney far more than I trust Ryan! http://news.yahoo.com/fact-check-ryan-takes-factual-shortcuts-speech-070905927.html Cheers!

Article on Berkshire, Buffett & Omaha. Cheers! http://finance.yahoo.com/news/buffett-near-82-reflects-staying-201302516.html

Sanjeev, for clarification, by book value do you mean tangible bv or regular bv? Of book. As the company gets stronger and they run off litigation and losses, then book becomes a pretty good proxy for the value of the company. Presently, I would prefer if they just bought at tangible book or less, but as the issues around the company disappear over the next few years, they could go up to 90% of book on buybacks. But when the company gets up there, then I would prefer if they just started paying larger dividends, as many investors could then allocate it for better returns even after tax. Cheers!

Unfortunately, I think you are correct...that is the message, whether they want to convey it or not! I think they'll be able to return the equivalent of about 50-60% of earnings because of the litigation and loan loss overhang. Once they settle some more cases and housing is in full recovery, that will increase to 80-90% of earnings that could be returned as long as they maintain their fully-phased in Basel III status. As long as they stay under 80%-90% of book, I'm more than happy to see them buy back shares. Or if they decide to go the 50/50 way of buybacks and dividends, I'm ok with that too. At 90% of book or better, I would prefer if they returned far more in dividends than buybacks. Cheers!

I don't worry about what Einhorn or anyone else says...so it's a non-starter. How much money would I have lost over the years...let's rephrase that...how much would I have not made, if I had listened to everyone telling me how wrong I am about my analysis. DELL is our third largest holding after today! Cheers!

And that is 100% the same issue as with the buybacks. So that noise just filters out and we are exactly as I described it. X equals X. This sucker is getting damn cheap! Crazy. Cheers!

Tombgrt, I don't know if you are a shareholder or not, but for what its worth I about jumped thru the phone at DELL IR the day of the announcement. I'm sure Longleaf was just in pure shock. I'm not and haven't been so far. That might change in the future. I'm sure they were in shock, just like Prem Watsa probably was. I just don't see how this can ever be a good move. Maybe someone can explain the rationale to me. I believe the company is quantitatively cheap but generally I look for certain qualitative elements. Great management is a plus and capital allocation is just one of the factors. I absolutely love owner-operator companies but they make mistakes too. Just look at DWA and what happened there with all the buy backs, total waste imo.. The dividend was done to emphasize the fact that they felt that cash flows going forward would grow. It wasn't the best use of the capital, but it reinforces their belief that this is a mature business, with regular, growing cash flows. They can still issue the dividend and buy back lots of shares. The dividend isn't going to stop their ability to do that, as they have a ton of liquidity and a ton of free cash coming in every quarter. Cheers!

It was a very good read! But after reading it, you realize that Steve is like all of us and other investment managers...no one has any clue exactly where things are headed...uncharted territories! Cheers!

The first time I heard the term value trap I could not understand what it meant. I think I can now define one specific situation for a value trap: a good company with a deteriorating profitability driven by external forces with a good management destroying value because they are fighting with a plan against the odds with the hope that it will succeed. You see, I don't agree with that description. Because there are a number of cases where this has not been true and some I've invested in. Recent ones...Steak'n Shake was a good example...why is it that it turned around under Sardar, but not previous management? Apple...how did it go on to become the most valuable company in history when Jobs took over again? Frisch...the Golden Corral acquisition and expansion was just plain dumb and hurt the company...they came to their senses and sold the business, and the company is in better shape than ever. I think almost in virtually every case of a story I hear about a "value trap", it's because management made poor decisions or sat on their hands thinking they were invincible. Dell has been incredibly proactive trying to change their business model. Cheers!

Ok, let me rephrase - why do you think Dell will execute? I don't think they will, I think they are doing it...that was the reason why I changed my opinion of them. When I examined DELL a little over a year ago, I originally did not think they would be able to make the transition quickly enough. Then when the stock tanked a few weeks ago, I re-examined the business and where their revenues were actually coming from...it looks like they are transitioning fine. Maybe not as fast as the markets would like, but they are generating more revenue from non-consumer related services and products. The more recurring income they generate from those services, the more consistent their future cash flows will become. The more contracts they hold, the stronger the moat gets. There are no guarantees, but I'm betting that like Microsoft, they manage to squeeze more years out in cash flow than the market expects them to. Cheers!

Why is Dell not a value trap? No such thing as a "value trap." There is execution and no execution. Cash flow or no cash flow. Net equity or deficit. The word "value trap" came into existence for a way for investment managers to excuse a mistake or for paying too much. At some price, Apple pre-Jobs was an opportunity, as the business eventually executed under his watch. It was never a "value trap". It was poor execution that brought it down, and it was fine execution that restored its lustre. At any time, any company can lose focus and start on a downward slide that may or may never be recovered. That's all it is. So Dell's future isn't exposed to the predisposition of Apple, Microsoft, IBM or anyone else. It's fate is ultimately decided by how the company executes every day going forward. Do they get better? Do they prolong their fate? Do they succumb quicker than anyone thought? The investor has to decide that based on qualitative factors, and then they have to decide if future cash flows or equity are adequate quantitatively. It's why investing is as much art as science. No such thing as a value trap. Cheers!

I see the current pessimisim around DELL to be nearly identical to the pessimism around Microsoft a couple of years ago. They may not be the companies they once were, and they may not be better 5-10 years out, but they trade or traded in the territory of deep value based on existing cash flows and their balance sheets. DELL will be trading for significantly higher than it presently trades 2-3 years out. Cheers!

Chuck's obituary: http://www.legacy.com/obituaries/sfgate/obituary.aspx?pid=159336303#fbLoggedOut He was a jazz aficionado and philanthropist. Cheers!

Some short ideas: Einhorn has some detailed presentations on JOE and GMCR. (I am short both.) At GMCR there may be some fraud going on. JOE is a bet against Californian real estate. But it's more than that. If Joe has sold off all its best land first, then what's left isn't very good. If Einhorn is shorting JOE as a bet against Californian real estate, then he's going to be very surprised...I believe all of JOE's real estate is in Florida. ;D Cheers!