Uccmal

Nope, I will wait until there is a significant insurance event, pounce and tie in a higher yield.

Scott, You posted about Walmart. I have pointed out the pluses and minuses (mostly minuses) of WMT as I see them. Its not a personal attack! Many times I have posted here and heeded the criticisms of others, and other times I have ignored it both to my benefit and detriment. As for me: I am mostly selling right now: SPY leaps, SBUX leaps, some AXP leaps, some FFH Calls. Holding my GE Leaps (tripled at this point) and most FFH leaps Have bought lesser amounts of Seaspan, Precision Drilling, Norbord, SFK pulp fund but have maxed these positions now. Each one of these has the potential to go up by 2-10 times as the recession ebbs. I am having alot of trouble figuring out the Coiled Spring of Walmart. It has a market cap of 200 M. How high can it go, really... 300 M. That would make it more valuable than MSFT, GE, and XOM. I am sorry but they are not in the same league as any of those companies. It is fully valued now. As for Walmart in other businesses I would suggest that Walmart competing in banking or insurance puts them into a business that is out of their core skill set which is logistics.

1) Not kidding. The dividend at 2.1 % is cheap considering the shares have moved nowhere for ten years. If they were really shareholder friendly they would raise it to the 4% range, if they could. 2) 15 Billion buyback on stock (if fully executed) is only 5% of the high end market price of the stock. A buyback in place is not a buy back executed, yet. Unless buybacks take out a meaningfull number of shares IMO they are just posturing. 3) Of course they must become more shareholder friendly. The shares have done nothing for 10 years. Walmart is in a severely competitive business. It is not an operation that "an idiot could run". Someday an idiot will be running Walmart and then what. You will see capital fly out the door on an endless assortment of stupid projects. Its too pricey, and in too competitive a landscape for me to even think about it. As I said, if the shares were at a PE of 6 to 8 I would probably buy it.

I agree. The stores are packed now... so where is your growth going to come from? At some point there is a growth limit and I think that limit is close. There is no significant downside baked into the stock price to reflect that. Peter Lynch probably describes it further better than I can in "One up...". Todays fast grower becomes tomorrows slow growing stalwart. WMT is well past the fast grower stage now. If the share price moves nowhere for 10 years that is a loss of 30-40% plus opportunity cost. If it was 70% cheaper I think it would be good value. I would like to see them feed some of that cash out to shareholders as well. For a cash machine it sure is a stingy dividend. If it only goes to 75 you break even in 10 years.

I am trying to think how WMT will grow any faster than the GDP of the US going forward. Expansion into other countries has been met with extensive competition, and effectively stalled. e.g. Sam's Club, after a huge foray into Canada has withdrawn, completely, by the looks of it. Growth to this point has been driven by: 1) First mover advantage exploiting the cheap Asian labour force. This allowed them to have the Lowest Price is the Law. 2) Rapid expansion - and expansion into non-US markets. 3) Inability of competition to keep up on the logistics front. 4) Demand for ever more stuff. I would suggest that: 1) This advantage is gone now. Labour is getting more expensive, internal markets in these countries are growing, taking away Walmarts price advantage and margins. 2) Expansion into markets outside the US is very limited now. In every country they go into, the competition is entrenched making it harder to get the cheap growth they are accustomed to. 3) Homegrown competition has learned logistics. Also the logistics machine was partly based on their ability to move into new markets rapidly and have very quick deployment of stores and goods. This strategy has reached its limit in nearly ever new market available. There is no advantage of putting the huge logisitics machine in place in a market where Sam's club and the grocery expansion have failied. If fact, it becomes a disadvantage on the cost front. 4) I think that consumers are exhausted. I also thinking a prolonged recession pushes people to buy better quality because it lasts longer. Walmart is not reknowned in this department. Now, on this I may be underestimating the conditioning of the American public. Other: When your business relies on the less well off in society to maintain its moat it had better be a real good moat. Macdonalds and Coke have such a moat. I see people going to Mcd for the experience or drinking a Coke for the experience. I am having a hard time conceiving why Walmart would have a moat at all as a brand. It's moat rests in having the lowest price which is no longer its advantage. I would suggest that buying stock in Walmart is dead money at best. At worst it could experience actual drops in earnings and PE compression which could completely crush the stock. The potential for a 70-80% inflation adjusted loss is very great with this company.

Oldye, I used a calculator and got 20% CAGR; 2.5 x. My head isn't always that reliable. :-). A.

BTW - Dont do intrinsic value calculations... Cant imagine they are ever accurate.

Also, how has HWIC been able to generate such a high return on its fixed income portfolio? Based on their AGM presentation, they appear to have blown out many well regarded funds such as Pimco's various total return funds. Is it because they have significant fixed income investments outside of the U.S.? Could it be that they have the best bond guy around? Period. i.e) Last fall and winter when everyone was piling into US treasuries what was FFH doing? They did the same thing in 2002, 2003. and undoubtably before that.

23% over 23 years - 1985-2009 - sounds familiar eh?

Another significant book value item I overlooked for some S&P companies is mortage assets, loans, and insurance policies. I have no idea how large these would be relative to PP&E. Another way of doing this is to look at past comparisons to S&P value to GDP and determine the average ratio. GDP is down a few percent this year. Bring the S&P to the long term average value and adjust for the temporary US GDP decline. I have no idea what this will reveal. I have nothing hedged right now. I am hedging by selling my higher price and closer dated options on the S&P, FFH, SBUX, and AXP. Actually sold out my SBUX option position. Have sold about 65% of my S&P option position and only hold 70 and 75 Dec. 2011 strikes now. They are so deep in the money they are trading like stock now. I am keeping cash to buy in when there is a correction - tax loss selling perhaps?

Well Ben, Use long term p/b ratios or some kind of asset based equivalent. I would say we are about 20% below average for the S&P 500 (1200 to 1300 would be the average). It needs to be determined on asset values. Asset values have dropped temporarily but not significantly since they are primarily made up of Property Plant and Equipment. Therefore the Book Value is not too impaired - maybe 10% maximum across the S&P 500 Universe. while the price side of the equation is way down. Long term Price to Book Ratio for the S&P 500 (Ned Davis Research is 2.4). The chart I located only goes to October 17 2008 which is almost exactly where we are now. So another 30% upside to AVERAGE! http://4.bp.blogspot.com/_m3CQF7whYY4/SQI-Ko558zI/AAAAAAAAA68/2XRczpkUVeA/s1600-h/spy.JPG

As an FFH shareholder I feel I have at worst broken even in the short term. This is a major plus long term. The extra capital coming to the parent can be put to many uses. There will be internal savings, and tax sharing at multiple levels. This company compares better to Luk p/b=1.7; Mkl p/b=1.3; pwf-t = 1.8; mfc=t=1.4; brk=1.4; ffh=1.2. June 30th numbers; And, every one of the above is trading cheaper than they have in a while right now. p.b in the range of 2 is probably more justified especially with the ever growing annual dividend. 615/share US if this was "normal" time period

I have made my share of mistakes along the way. Buy and holding crap has to be one of the biggest ones. Buying at prices that were too high. Buying high fliers such as FFH at 385 Cdn in 1997. The worst is probably buying things I dont really know. By this I mean not knowing how they make their money. One can invest in Intel at the right price without knowing much about semi-conductors because it is relatively easy to indentify how they make money. Nortel on the other hand never made money. The same would apply today to companies that make solar systems, electric cars etc. I have made this same mistake in different guises. Fortunately I have avoided gross errors. I dont consider sfk.un to be an error at $6.00 for myself or FFH. Management was honest and capable - the economy worked against them. Regarding the share issuances by FFH. The ones since 2003 were at poor prices but we understood why. The one last week was at a price that in my estimate is less than the asset they will receive - ORH I am acutely interested in how the DIP will work out with Abitibi. FFH should come out as a major shareholder of a very valuable, financially restructered going concern just as business starts to pick up.

I think my first shareholder meeting was in 1997 and Prem remarked that FFH stock was as good as cash. There was alot of hubris back then. There were no conference calls, virtually no press releases, and minimal information. You were meant to glean a whole year of development based on the Annual Report. To that point the results had been so good that no one questioned him. Then came the big miscalculations: TIG and C&F. At the same time the asbestos comp claims heated up and the results were the near death experience by 2003. I would suggest that Prem has learned a great deal and been suitably humbled by the experience as has everyone in the organization that went through that ordeal, including the shareholders who beleived they could do no wrong. The risks they take now are much smaller relative to the capital involved, with higher potential payouts. The CDS for example originally cost 300 M. I can tell you that If they committed 5 billion to a division of AIG or something similar no matter how well it may be run I would unload my stock the next day. I am sure I am not alone in that sentiment which of course basically means they wouldn't be able to raise the cash for such an acquisition. I forget the name Buffett coined for having so much cash in your pocket that you feel compelled to spend it. Anyway...

Yeah so is Becky Quick, Alice Shroeder... is there a trend here? ???

I guess were seeing your index effect GP and the increase in open sharecount.

I dont follow hockey much anymore but I have been following this sage. I cant figure out a couple of things: 1) Why is Balsillie so intent on doing this. 2) Why is the NHL so against Balsillie? 1) Maybe its just the same drive that has helped him and his partner build one of the worlds great tech companies. 2) He has too much money is my theory in game where money now buys the Stanley Cup.

I dont think people realize how long 20 years is in this game, and the degree to which hindsight is governing our choices of these names. Twenty years ago: MSFT Windows just launched no Google, Yahoo, no internet, no e-mail for the masses no China ( as a business center) berk was relatively unknown. WEB was not a household name Most PCs still used Word perfect with f1..f10 - mouse was just coming into use. bank cards in use for three years Secretaries and receptionists were commonplace Soviet Union was just crumbling Twenty years forward I am fairly sure that gas, oil, electricity, and money will still be in use. Aside from that I could individually pick apart the companies in Berkshire and show why each may not exist in 20 years, except Mid American Energy as I said above. Nuff said.

WEB sold AXP after it rebounded from the salad oil scandal then bought it again in the late 80s. Bablu is correct. Still my point is that WEB is actively managing the portfolio and would have sold any of these if they no longer met his criteria.

20 years is too long. In every case so far we are looking at hindsight. 20 years ago the only common stock Buffett held that he still holds in any amount is WPO. He had just started buying Coke. Absolutely anything could happen to a single entity within 20 years. If you "guess" wrong you have alot to lose. The best bet is probably a cross section of utilities, solid banks mixed with Euro, Canada and US long bonds: Enbridge, TCP, 3 US electric companies, A solid bank from each of England, Eurozone, Canada, and the US. Slow and boring growth but probably consistent. Brk: Creative destruction could hit the Berskshire companies (e.g. Buffalo News). Within Berk the only one I would bet on for the long term would be Mid American. Without Buffett the insurers may go awry after a couple of years. FFH without Watsa and his immediate team would be toast. A good chunk of FFH wealth is based on a few very carefully placed bets. Insurers are barely contained and without disciplined underwriting could deteriorate quickly. MKL - same problem as FFH LUK - same again - these guys are in their late 60s SNS - unproven - absolutely needs Bigliari to run KO - probably not a bad choice but too much concentration for my taste WFC - a few months ago people were predicting it was going bust. Within 20 years there will be a run on the banks again for some reason. Its cyclical - not Wells but a financial meltdown. JNJ - extremley competitive business. At one time the Montreal Canadiens could do no wrong. They literally won the Stanley cup a few times every decade. This even occurred after the biggest NHL expansions. Along the way there were game changers that made the richest teams the most successful rather than les Habitants. Buffett has stated that he likes businesses that even an idiot can run because eventually that will be the case. For a 20 year period I can think of no single business that I would want to own with all due credit to their operators. FFH almost went under a few years ago! As for countries my bet is that the west remains the place to be for now. Hot growth economies are always frightening. If things turn sour in China in a big way economically you can bet they revert rapidly toward martial law which will stifle the economy. The democratic traditions of England, Canada, a few longer term Eurozone partners, and the US will sustain themselves.

I expect it has to do with the volume. Thats what makes this so interesting. FFH is now large enough to attract big institutional investors.

Well tomorrow sees FFH getting the cash. I would think that the odds of an increase in the price of ORH must be getting less and less with each passing day.

I just sold out. Based on the after tax numbers it made sense to take my gains and be happy :-). 30% gain in three weeks... 360% annualized. Que sera, sera..... C'est la vie....

To avoid confusion I was not asking about the odds of ORH being taken out. To me that is now about 98%. I am just wondering if the price will go higher or not. Is it worth holding out for the higher price or locking in my 62.50 before everyone realizes this is the final offer. An interesting dilemna. 1) Worst case right now is a gain of 14000 on my remaining shares (60 takeout) 2) Live case this minute is a gain of 16400 3) Best Case? 19000-21000 (67-69) After tax: 1) 9800 2) 11500 3) 13300 - 14700 The last set of numbers is interesting.

I sold 1000 shares ORH at 62.39 just now. I still hold 1000 shares. By my way of thinking 62.40/share is betting about a 1 in 3 chance that FFH will up the price to around $67.00 closer to where it should be. By holding the 1000 shares I am betting that they will raise the bid further. If they dont I lose 2400 dollars right now. If they do I gain $4500 to my target of $67. What would you do? Interesting conundrum isn't it... I made 14000 on the first 1000 shares.