Parsad

Hi Bronco, Yes, all three are great businesses. For us, it's always about what is the alternative and the opportunity costs involved. Do we buy low-yielding fixed income instruments, keep zero-yield cash, or buy quality businesses with dividends greater than the best yields of high quality corporate bonds? In this case, the choice was somewhat obvious. It doesn't mean the price won't fluctuate and it doesn't mean we'll hold these stocks for a long period of time. We will hold them until other investments offer a higher potential return relative to their inherent risk profile or investors bid them back up closer to fair value. That's it. Whether Prem or Warren buys, or the world is falling apart won't matter. We have to go by what we see and have available to us, and where there is a mispricing of risk. Cheers!

While I agree with you for the most part, I am getting skeptical of these stocks. They keep salivating about them on CNBC. Many many hedge funds have loaded up into these stocks as part of their "de-risking". And are they that far from fair value? Southeastern has a very good chart in their last quarterly letter of the spreads between Dow stock yields at market lows and high quality corporate bond yields. The spread has widened considerably and probably alot further than listed in the chart, as corporate yields continue to shrink. While this may continue for some time, the gap is very large. I have to disagree with the comment about CNBC...I don't think that may people are actually talking about this, since CNBC and everyone else keeps talking about Japan and deflation. I've only read a handful of people who agree with the disparity in large-cap quality...Hawkins, Grantham, Miller and a couple of others. Some people are starting to catch on, but the general market is still sitting on treasuries. Cheers!

Well, I'm glad to see Buffett added a shitload of Johnson & Johnson...so did we! Cheers!

This guy is the golden child. Everything is pointing to him running the operations side and he's got the ability and demeanor to do it. Cheers!

Also disagree with Parsad, who suggested that the country is in a far better position today than in 2006. Not country...corporations. Multitude of general risks (housing bubble, credit derivatives, stock and commodity bubbles, trade deficit, corporate and consumer debt leverage) has also been reduced. Actual risk has been transferred from corporations to government. Buying shares in Coca-cola is a safer bet than buying U.S. treasuries over the next ten years. Cheers!

It is certainly not a value play, it would be more riding a trend. However, since it offers protection against insanity by central bankers, I think it is still worth a look by conservative investors. A 5% allocation or buying options while seeing it as an hedge or insurance is the way to go IMO. Everything has some value at some price. But I think gold the way it is being utilized, as a hedge against armageddon, has had a significant bull run. There isn't a block in Vancouver that doesn't have some gold exchange store, nor can I watch 30 minutes of television without seeing an ad for gold. Every day when I pick up the paper, there is at least 2-3 ads for gold services. The whole endeavour of buying gold at these prices is pure speculation...what will somebody more foolish than me, be willing to pay for this even though I have no idea what it is worth? No one was buying gold at $300/oz a few years ago, but I did for my personal account. Why? Because like anything, I knew it had an intrinsic value higher than what others currently valued it at. In fact, all the central banks were moving away from gold and gold companies were hedging that it would fall below $200/oz. Guess what? They were wrong! I've sold all of it between $700-$1100 an oz over the last two years. Why? Now because I think it's worth less than what everyone else is valuing it at. Can gold go higher? Sure, manias always go further than you expect. Just like everyone floating into low-yield treasuries or corporate bonds, they will have to seek higher yields as time moves forward. And where are they going to go? High-yield, high-quality stocks with strong cash flows and dominant market shares. Putting 5% of my assets into gold right now, would be like putting 5% in fixed income because it "seems like a good idea". I can't do that. I buy whatever is cheapest and I'm willing to put alot of my capital into that. No speculation, no fears about what the consensus thinks is a good idea, no macroeconomic forecast...just buy cheap and then sell when everyone else prices it back up to fair value. Cheers!

Sanj - what you say is not wrong but WEB always says that one should wait for the fat pitches, and that one gets as many pitches as they want before they swing. I just think the pitches are going to be fatter 6 months from now than today...... I agree with you Zorro! My question is if you see 45-50 cent hamburgers, should you wait for 30-35 cent hamburgers if you are eating for the rest of your life? I'm not saying go all in. But if you are buying assets that are cheap, unwanted, and you believe they will be worth significantly more over time as other investors come to their senses, then you shouldn't shun the investment and be in 80-100% cash, buying hoardes of gold, 10 year treasuries paying 2.5%, or Swiss francs! ;D Cheers!

Incidentally, we made the same comments as Schiff in October 2006 at our very first presentation for a group of doctors in Bakersfield, California. The excerpted slides are attached to this post. While everything hasn't corrected itself, and many things will take some time to work their way through the system (housing supply, unemployment, governmental debt, etc), we are in a very different place from where we were in 2006: - Corporations in general are far healthier, with fatter bank accounts and less debt - Consumers are saving again - Interest rates have dropped like a rock - Home prices have fallen through the floor - Derivatives risk, while still present in some forms (interest rate swaps, currencies, etc), has been significantly reduced in others - A weaker U.S. dollar actually helps reduce the trade deficit Things won't be easy, and we will face shocks to the system, but all in all things are slowly improving. Ben Graham's theories and ideas got us through that, and they'll get us through the next 10, 20, 30 years! Cheers!

I agree, I think this 10-Q isn't as transparent, and it's tough to figure out exactly how much BH is being bought by the company and how much is being bought by Biglari Capital or the Lion Fund. I'm just wondering how happy Lion Fund partners are that so much of the fund is being shifted into Biglari Holdings stock. Are there any Lion Fund partners on this board? If so, and if you are willing to speak about your investment, how do you feel about what is happening? Perhaps you have other insights that this board doesn't have, since we seem to be quite pessimistic about the whole affair. Cheers!

I find these articles and prognostications always quite amusing. We've just been through a tumultous period, probably worse than any past recession, since the credit markets had completely seized. Schiff is suggesting bailing out of US assets and into commodities and gold...not like everyone else isn't already there! I'll tell you what, I'm just going to keep doing what I'm doing...buy cheap assets that other people shun, and then I'll sell them back to those same people once they bail out of what they are currently buying...which is treasuries paying nothing and gold that is overpriced and provides no income. Our investors in our US fund have seen their money increase by almost 70% in the last fours years versus the S&P500, and even our Canadian fund which struggled out of the gate in the first year and a half, has beaten the S&P500 (in Canadian dollars) by over 20% with currencies flying every which way around us through the last three years. Far too much noise by the economists and those that suddenly feel enlightened enough to act as economists. Stick to what Ben Graham taught and you'll come out of this whole thing fine over the long-term. Cheers!

Article on Wally Weitz. Cheers! http://finance.yahoo.com/news/Omahas-Other-Oracle-Goes-indie-109774139.html?x=0&.v=1

Another kick-ass quarter for Steak'n Shake and thus Biglari Holdings! Same store sales were up 7.5%, while guest traffic was up 9.6%! I love this brand and what Sardar's done with it. That's why it's such a shame he just didn't keep the company The Steak'n Shake Company. Cheers! http://www.prnewswire.com/news-releases/biglari-holdings-inc-news-release-100653034.html

Looks like Fairfax has sold their $320M+ in GE shares. Otherwise, no huge changes. Cheers! http://www.sec.gov/Archives/edgar/data/915191/000095012310077254/o64347ae13fvhr.txt

Also Parsad, I hope my comments didnt come off too rough. You have been on the right side of this issue from day 1, and have always been willing to vote with your feet or shares. No, not at all Myth. I was just making it clear that I'm not against an incentivized compensation plan, but the way it was thrown on shareholders. If compensation is settled with something acceptable would you be still be willing to invest in the company knowing what Bigliari is like? Can you trust him to look after your best interest? I will buy anything if it gets stupid cheap. Holding on to it as a loyal shareholder is a different matter altogether. I was once a loyal shareholder of Western Sizzlin, then Steak'n Shake and eventually Biglari Holdings. But they had no intention of rethinking this compensation plan, so I walked. Cheers!

Details of the poison pill: http://www.sec.gov/Archives/edgar/data/1171759/000110465910044068/a10-15720_18k.htm Cheers!

I think FMMH went way above and beyond what was required. Using a Senator to legislate and install you as a permanent dictator within a corporation is as unethical as you get. The only thing worse would be embezzlement. Cheers!

Probably both! ;D Cheers!

Red Robin reported its 2nd Q results. They are making good progress under the guidance of Spotlight Advisors and the Clinton Group. It looks like the company's focus is to pay down debt, buy back shares and be more cautious in its expansion plans. They are embarking on a progressive advertising campaign as well to restore same store sales. One interesting note, which I'm just wondering if it has anything to do with Sardar's 6% 13-G filing, but they've enacted a poison pill to protect from an unwanted takeover. Cheers! http://finance.yahoo.com/news/Red-Robin-Gourmet-Burgers-bw-2990535883.html?x=0&.v=1 The Company’s board of directors also voted in favor of adopting a shareholder rights plan to protect stockholders from coercive or otherwise unfair takeover tactics. The board determined, with the assistance of its legal and financial advisors, that a shareholder rights plan will afford stockholders appropriate protections and allow the board time to fully execute its fiduciary obligations in a thoughtful and measured manner. Cheers!

This is not an apples to apples comparison, but figured I would post it nonetheless out of interests sake... Hi Kyle, Remember that Hamblin-Watsa was made up of Tony Hamblin, Roger Lace, Brian Bradstreet, Chandran Ratnaswami, Francis Burke and Prem. Bringing in HW was needed to make sure compensation was fair to the other partners who didn't own as much of Fairfax as Prem, while maintaining their talents to manage Fairfax's assets. In Biglari Capital's case, there is no one other than Sardar. Someone proposes something utterly ridiculous (basically an ownership stack of 25% in a company that they own less than 5% of). Hi Myth, I've never been against a compensation package that would have been incentive-based for Sardar. In fact, I would prefer that to the $900K salary. What I've always railed against was changing this whole thing mid-stream and then implementing a package that is more generous than a typical hedge fund when evaluating the associated risks. I'm for his compensation plan structure, but would like it to be significantly tougher. Nothing to do with appeasing Sardar, but making sure his compensation structure is equitable for shareholders and to incentivize him to grow the thing. Cheers!

Ragnar does a nice job writing about BH. Although I would disagree with one important point that is the foundation of the article: http://seekingalpha.com/article/220193-defending-the-undefendable-biglari-never-claimed-to-be-buffett?source=yahoo The current compensation package has NOTHING to do with saving Steak'n Shake! Sardar had already implemented a $900K salary after the turnaround. That was his reward for saving Steak'n Shake. A salary that was more than double his predecessor's. The current compensation package has everything to do with reaping hedge fund like compensation from a corporate entity where the capital is captive. I think the argument that most detractors from the plan are making, is that Sardar decided to shuffle the deck in the middle of the game. The cards being dealt weren't to his liking and he decided to reshuffle. Nothing to do with Buffett, other than you would never have seen him do that. Prem's dividend plan was equitable to all shareholders when he implemented it. Cummings and Steinberg made sure they owned alot of stock. In Gabelli's case, his investors were already aware of his compensation plan. This is a cash grab pure and simple, with idealistic dialogue trying to support it! You want shareholder support for this plan...drop the incentive fee to 15%, increase the hurdle to 10%, drop the base salary to $450K, and lock in 30% of your after-tax incentive fee for five years in BH stock each year. I would support that! Cheers!

Sorry to hear that Value! Remember, crisis equals opportunity, so a change may be a welcome result. Don't know about St. Petersberg, but Vancouver is a fantastic city...as long as you are ok with rain. We're a big enough and cosmopolitan enough city for you to enjoy your life thoroughly, yet small enough where you will never be overwhelmed. CFA's are always in demand here, but the opportunities won't be as plentiful as say Toronto, Chicago, New York or London...or even Calgary for that matter. If you want to be involved with a start-up or launch a fund, then Vancouver is a fantastic place for that. We have terrific restaurants, night life, outdoor activities, shopping, etc. Renting is a heck of alot cheaper than owning. I've thought we've been in a housing bubble for 7-8 years, but it keeps going. I think the best way to figure out if you'll really like it or not, is to come out here and test it for a solid week...try everything, look at job opportunities, housing, etc. You've got the time now! ;D Cheers!

Hi Folks, I know we have a number of investment managers who run funds on our board. Just thought I would give you guys a heads up, if your attorneys haven't already, but the definition for accredited investor has changed slightly due to the new Dodd-Frank Reform Bill. The new definition is "$1 Million Net Worth, excluding their primary residence." If they meet any of the other qualifications ($200K income, $300K joint income, $5M trust/corporation/partnership, etc, they are ok, but if they are basing it solely on the $1M net worth criteria, then that has changed. The new rules are retroactive to July 21st, so any partners brought in since, also have to requalify. You should also update your subscription documents accordingly. Cheers! http://www.lexology.com/library/detail.aspx?g=9888d833-11cc-470c-8a53-23df8b986907

Biglari Holdings put out a press release indicating that they are delaying the special meeting of shareholders, and will be issuing revised proxy materials to address misinformation in the investor and analyst communities about the proposed compensation package. Cheers! http://www.prnewswire.com/news-releases/biglari-holdings-inc-news-release-100300819.html

Here is the transcript from Markel's 2nd Q conference call. Cheers! http://seekingalpha.com/article/219637-markel-corp-q2-2010-earnings-call-transcript?source=yahoo

Thanks Sanjeev! Apparently, attacks against Sokol (noted below) are launched from Alice Schroeder website. I am surprised how Alice has transitioned - from being a promising analyst that got insurance right to Warren biographer to BRK basher. Yes, Alice's blog often reeks of a spurned or spiteful former Buffett acolyte. I'm not particularly interested in anything she has to say anymore. There were portions of The Snowball that were thoroughly enjoyable, and as I mentioned in the past, vast portions that also really had no relevance nor the context in which she tried to relate the certain events. I heard her speak in Vancouver and it was the same rehash of Buffett's insecurities and neediness. Not sure why she has this insatiable need to do this, but I've become very put off by it. She's apparently researching what is happening at Netjets under Sokol's management and may or may not write about it. Not sure what she'll find...perhaps how a money-losing business for over a decade, with a stellar customer service and safety record, is now actually a profitable business with a stellar customer service and safety record! Cheers!