Parsad

Article on Ross' investments in distressed regional banks. Cheers! http://www.cnbc.com/id/38144823

I think Prem should consider adding Jeff Stacey of Stacey Muirhead to the board. Jeff's been a long-time Fairfax shareholder, supporter, and he's on the University of Waterloo's endowment committee. Jeff's a very good investment manager, knows Fairfax intimately, is honest, ethical and a damn fine Canadian! As a Fairfax shareholder, I would be very happy to see Jeff represent shareholder and company interests. Cheers!

Article on both David Einhorn and Van Hosington's opposite views on inflation...yet both are betting on hard times for the U.S. Cheers! http://www.theglobeandmail.com/globe-investor/investment-ideas/betting-on-hard-times-for-the-us/article1632571/

A few videos of the Huffington Post interviewing Buffett. Just keep watching after the first video and the commercial...it keeps going. Cheers! http://news.yahoo.com/s/yblog_upshot/20100708/bs_yblog_upshot/buffett-recounts-the-best-advice-hes-ever-received

Kudos for getting out and setting some standards! Cheers! http://www.cnbc.com/id/38134090

Sanjeev, I seem to have missed your earlier explanations surrounding this compensation structure's fallacies. I am also not able to garner too much from this comment. Please explain. tia <that the capital is captive inside a corporate structure.> Hi Carl, Sardar's main argument for implementing the new compensation package is because he sold Biglari Capital and the Lion Fund to BH, and he would be giving up the potential income that he could have generated with his reputation from those businesses, for a $900K salary which he was now earning at BH. The problem is that in his hedge fund, the investors could pull all their capital if they were unhappy, and he would have to look to raise new capital from other investors. In the corporate structure, the capital is permanent...shareholders can sell their shares to others, but the capital Sardar has to work with is now permanent or captive. That means he can take a long-term view when allocating capital without facing large scale redemptions. That is a very significant advantage relative to managing capital within the hedge fund structure. If Sardar had a higher hurdle and lower incentive fee, then I would have less of a problem with the compensation plan. I think a 10% hurdle and 15% incentive fee would have been fair. The other issue that I think is very significant in a corporate structure, but not in a hedge fund structure is what effect will this type of compensation package have on the culture of the company. If I was an executive who worked hard for Sardar and helped manage most of the enterprise with him, I might have a real problem five-ten years down the road watching him reap huge incentive fees, while my work is rewarded with a fixed salary. This could create a problem with succession if something ever happened to Sardar. If you alienate all your best employees, who is going to run this thing if something happens to you? I think some of the top executives will want to go do the same thing at some point. At Berkshire or Fairfax, the CEO is paid far less than some of the other key employees, but they own a significant amount of the stock and votes. This culture tells the executive team that the CEO values their work, but leads them by example...if I'm working for $600K as CEO, then you should be happy with $1M a year! It may not seem like much, but it works. And with their large ownership stakes, it teaches the executives to be owners with shareholders, not simply employees. Little things, but they mean so much! Cheers!

It looks like the shareholder meeting for the compensation proposal is on August 13th, and is open to shareholders on record as of July 12th. Sardar said he was going to write the proxy circular himself, and he lays out his case. No mention of my biggest concern against the proposal...that the capital is captive inside a corporate structure. I'm guessing this thing will pass, but certainly it won't be anywhere as unanimous as it was on the name change. Cheers! http://www.sec.gov/Archives/edgar/data/93859/000092189510001065/pre14a07428_07062010.htm

Here's a very good article on Microsoft and some of their problems over the last few years: http://www.theglobeandmail.com/news/technology/microsoft-calling-anyone-there/article1628349/ I really think Microsoft is at a juncture where it needs to stop wasting capital on certain lines of products where they are not going to gain any advantage, like Smartphones, tablets, etc. Focus on their core business, including gaming systems, and possibly cloud computing, then redirect the cash flows into other lines of established businesses that are leaders in their fields already. There is nothing wrong with them taking equity stakes in younger versions of Google, Facebook, et al. It would probably be smarter than trying to develop these lines themselves, especially when they are not attracting the new, young, innovative minds that don't want to be involved with an old, established company like Microsoft. Cheers!

They're not mutually exclusive but if your going tech why not go with Dell which is much cheaper company and spits out more cash. I think Dell's business is going the way of Sears over time. Every facet has deteroriated over the last decade...margins, debt/equity, inventory turnover, cash flows...you name it. Microsoft's business has been impinged upon by the likes of Google, Apple, etc., yet the deterioration there is nothing like Dell's...infact in many facets, Microsoft has become far more efficient. I'm actually surprised Fairfax has so much in Dell. Cheers!

I don't really see Red Robin as having the same type of brand loyalty os Chik-Fil-A. While I'm not the biggest fan of Chic-Fil-A's food, they do have a bit of a 'cult' type following, similar to In-and-Out Burger. I just don't see that with Red Robin. I think Sardar's comments about Red Robin had to do with their sit-down style of burger restaurant and the execution on the customer service side. I would presume that he felt SNS could develop a cult-like following like Chik-Fil-A or In & Out, and the price-point was closer to where SNS would be. From everything I've seen, SNS does have a cult-following, but probably not as well-known or widespread as Chik or In & Out. What are the main things you like about Red Robin? With only a 6% stake from biglari, what type of role will he be able to play in any turnaround? I don't want to say too much about what I like about it, because everyone has to do their own homework on it. I think you should start with their cash flows...they are tremendous. The risks are that they have overexpanded, and unless someone starts cutting back and redirecting cash flows, you could see diminishing returns from those cash flows on the bottom line. We are already seeing that, and in this type of economic environment, Red Robin will have a tougher time since their price point isn't in the discount restaurant range. They also need to drive traffic back to their stores. I don't think they can do this with price increases and they actually need to go the other way. Cheers!

I know Sardar really likes the Red Robin brand. In fact, he used Red Robin and Chik-Fil-A as two examples of what he thought SNS could be like. With the Clinton Group in there, and Sardar owning 6.1%, and the search on for a CEO, there should be some progress in how capital is allocated. I agree with you Txlaw, I can't understand why CEO's and boards focus on rapid growth rather than the highest return on equity...probably because many of them get fat bonuses on rapid revenue and earnings growth. We see this happen all the time with good companies. Most recently it was Starbucks, and Howard Schultz had to come back to rein in growth. Cheers!

I don't understand this statement in the context of what has been going on. Are you saying that you want Biglari on board at Red Robin? I don't care if Sardar is on a board, as long as he's not compensated any differently than anyone else. Whether I agree or not with Sardar on compensation, he will be an agent for change in the way the company allocates their cash flows. As ragnar states, Biglari has filed a 13G , therefore he will not be allowed to sit on or influence the board. While he hasn't filed a 13D, there is no reason why he cannot make a tender offer for the company at some point, or file an amendment to his 13G converting to a 13D. Cheers!

Because he's one of the biggest idiots on television giving investment advice! ;D I saw that same segment right now too, and God is he the dumbest guy I've ever listened to. I thought he was stupid when I talked to him about Fairfax 4-5 years ago at the first VIC, and it seems he's gotten dimmer as time has gone by. I quickly flipped to Bloomberg immediately after that! I'm not sure why Buffett goes on CNBC rather than Bloomberg. The reporters on CNBC are mostly Wall-street type morons, whereas the reporters on Bloomberg are actually quite a bit more knowledgable. Cheers!

I can't avoid this guy if I try! ;D We've been buying Red Robin for about a month and a half now. It's our third largest position. There is also another hedge fund who controls a significant amount of Red Robin. The founder of Glass Lewis is also on the board and is working for the hedge fund. Now Sardar is there. They are already searching for a new CEO. Red Robin generates tremendous cash flows, but some of their expansion was too rapid. They've subsequently had to take back a number of franchisee stores. This is pretty much a Steak'n Shake turnaround again for Sardar, but one in much better shape than SNS was when he took over. He'll also find alot of support from some of the current owners, but hopefully they won't be put off by his compensation proposal at BH. Refranchise stores, close the underperforming ones, sell those assets, generate increased traffic and refunnel cash flows into better ideas while expanding intelligently through franchising. He's a big fan of Red Robin, so this doesn't surprise me. Cheers!

Excellent Op-ed piece by Intel founder Andy Grove. Cheers! http://www.bloomberg.com/news/2010-07-01/how-to-make-an-american-job-before-it-s-too-late-andy-grove.html

I agree! This whole thing really bothers me, yet none of the regulators, media, brokerages, etc. know what happened. How scary is that? Cheers!

I don't know if I'd bet on Wal-Mart being around for the next 50 years either as a sure thing. Retailers seem to have a short shelf-life (no pun intended). I don't think anyone was saying Walmart will be as dominant in 50 years. Just that they should be around in 50 years. Take a look at JC Penny's (1902), Nordstrom's (1901), Sears (1899), Macys (1820) & Hudson's Bay Company (1670). Their market share has withered with age and shopping preferences but they are still around. If you are projecting out cash flows, you can probably project out with some certainty that Walmart will be around in a fairly significant position 30 years from now. I'm not sure you can do that with Microsoft or most other retailers, including companies like Amazon.com. McDonald's will be selling more burgers thirty years from now...Coke will be selling more pop...and Walmart will be selling more merchandise. Why? Because of their dominant distribution system. Krogers, Circuit City and Walgreen's may have had good management, but they do not have dominant distribution channels. Cheers!

Yes. That's why I thought the article would be somewhat provoking, as I don't believe anyone knows exactly what is going to happen. Cheers!

Op-Ed piece in the NY Times by Paul Krugman on his belief that we will see a third Depression. Cheers! http://www.nytimes.com/2010/06/28/opinion/28krugman.html?hp

Why buy Microsoft when you can buy something as dominant, as cheap, and it will be around for the next fifty years...Walmart! I would not be surprised to see Berkshire take another big chunk in this company at current prices. Cheers!

I'd hate to be the trainer or laundry clerk who handles those two bags of shirts and shorts! ;D Or the shoes! Cheers!

I just think this idea of comparing him to Buffet's current salary etc. is silly. I agree with you on this. I was fine with Sardar getting the $900K salary HE proposed and got. I would have been fine if he added a bonus component at that time as well. The problem I've had with this whole thing from the name change and then the new proposed compensation package is that you can't reshuffle the deck whenever you like. That is what Sardar is doing. He's afraid of anyone displacing him at the helm, and this is the best way he can control more of the stock over time...rename the company and create an incentive plan where he will get more in intrinsic value and ownership than he originally proposed. That is the whole problem with this thing...not the compensation package itself, but the whimsical way in which he is implementing each of these components. Almost haphazardly, by gaining a step in reputation and then going backwards two with shareholders by some new idea. Each step he ends up controlling more, but shreds his reputation with the loyal shareholders who were hoping to grow with him. I respect his talent, but not the culture he is now building. Cheers!

It's almost like a 3-day cricket match! ;D Cheers!

I'm quite the tennis fan, and I'm following this match along on my computer at the office...23rd ranked U.S. player John Isner and unranked Frenchman Mahut have now played over 9 hours! The 5th set tiebreaker is at 58 to 57! Cheers! http://www.wimbledon.org/en_GB/news/log/index.html http://www.wimbledon.org/en_GB/scores/index.html

I agree RRJ. I think that self-deprecating sense of humor allows us to form a bond with the likes of such managers. They are human afterall, not gods! Cheers!