Viking

I have followed Hussman for years and do like him. If you like logic he certainly explains his view quite well. However, I find that he tries to get a little too cute in timing and he is very much a macro guy. Bottom line, I do not mind being early and do not mind buying when I find something cheap that I understand and like (regardless of market internals).

It will be interesting to see what he/Combs has been buying... my guess is more Mastercard. If correct, they are doing very well.

Here are some comments from Buffett from 2009 on buying back stock... the last time we were in a similar situation to what looks to be brewing... dealbook.nytimes.com/2009/01/22/buffett-hints-at-buyback-of-berkshire-shares/

With many re-insurers trading at very low valuations I would expect more consolidation to happen. The challenge for most aquiring companies is they would need to issue (undervalued) shares; BRK has cash. www.bloomberg.com/news/2011-08-07/transatlantic-confirms-acquisition-offer-from-national-indemnity.html

It will be interesting to see where we go from here. The press is going to have a field day with this on the evening news tonight. I wonder if people will think back to 2008 & 2009 and start to panic... I added to BRK (from 14% to 21% of overall portfolio). BRK reports tomorrow and I think they may disappoint. Should the BRK.B's fall below $70 I would be happy to buy and bunch more (and likely sell some ABT, MSFT etc). I am staying focussed on leaders with no debt and avoiding the speculative stuff (that is falling the most). As per usual I am lost when trying to come up with a plan to deal with currency issues (being Canadian) and liking US large cap the most right now.

I am sitting at about 65% cash; 35% stocks (mostly BRK and also smaller positions in MSFT, ABT, BMO, TEVA, GLW, GVC). Over the past couple of months I have gotten more defensive. It would not surprise me to see the S&P fall below 1,000. I will continue to buy more should the market go lower. For every 1,000 point drop in S&P I will invest about 25% of cash. Or if a company like BRK gets crazy cheap I likely will get more aggressive regardless of general market levels. If we do have a big sell off (i.e. S&P below 1,000) then I also will look to shift a little from defensive positions (like ABT) to more aggressive positions (perhaps forestry stocks like WFT or CFP). Should markets not fall that much I will sit on cash. Should things get ugly I will be in decent shape to buy on the cheap. My guess is things will continue to stay pretty volatile the next few months unless we get an external shock of some sort.

tombgrt, thanks for posting the links. The seeking alpha article has some good comments attached to it. BRK is now my largest holding. Should it fall under $70 I likely will get very aggressive.

I think continued growth from China will keep the train on the rails. The US looks to be hitting a soft patch; too early to call a double dip. Europe; no opinion. At present, I see BRK as a solid buy. If it continues to fall I will continue to add to my position. Nice defensive holding. I also like GLW (Corning); stock has already been killed. I am also going to dig into DELL now that it is trading back under $16; I like the CEO and I like where it is headed.

BRK is well positioned for those who want exposure to: 1.) insurance/re-insurance: market looks to be in the process of bottoming 2.) peak oil: BNSF will benefit should oil prices continue to go higher 3.) US housing: many BRK op co's will benefit when things improve Bottom line, BRK looks cheap based on current earnings; given the types on businesses BRK is exposed to earnings should grow nicely over the next 3 to 5 years. Looks like a solid holding (in place of a bond). For all the talk about the risk of Buffett and his age, I am surprised more people are not talking about Ajit and the size of the business he manages... what if Ajit is hit by a bus one day (god forbid of course!)?

I think residential construction will be the key to a number of things moving forward. Both Buffett and Calculated Risk feel that construction will be the ket to future GDP; once it picks up then GDP and employment will improve. A couple of plays I am paying more attention to are the two large Canadian lumber producers: West Fraser (WFT.TO) and Canfor (CFP.TO). Both players are very efficient producers and should profit in a big way once conditions improve. They also have low debt. Something to also consider is the pine beetle issue in central BC; in a couple of years we could see the allowable cut shrink at the same time housing in the US picks up. Falling supply and rising demand = very large price increases = very profitable for WFT and CFP.

Having three kids who love to go to movies I have some experience with this topic (large Cineplex in greater Vancouver). To get in, kids pay $9.50 and adults $12.50. Large popcorn is $6.00; large fountain soft drink is $3.00; I think the kids pack (small popcorn, drink and candy) is $6.00 Snack lines are ALWAYS jammed full. Most people (from what I can see) DO NOT bring snacks into the theatre (not cool). My read is theatres charge crazy prices for food/drink because they have a captive market that is (obviously) willing to pay. PS: we actually buy our Cineplex tickets at Costco: $9.50 for 1 kid admission (price includes $6.00 kids snack pack) $24.50 for 2 adult admissions (price includes 2 drinks and 1 large pop corn)

I agree that pricing in Vancouver is at bubble levels... I am not sure that a 25 or 50 basis point move in rates by the Bank of Canada will be enough to bring about a large decline. I am thinking that the most likely scenario is a sideways market for a decade or more; inflation at 3% per year will start to bring things into line. Should interest rates increase dramatically or should China experience a major hickup (causing commodity and stock markets to tank) then Vancouver could be in for a hard landing; these look to be pretty low probability events right now.

Berkley talks about fear being a key driver in the turn to a hard market... at some point the jig will be up and those who are under reserving will have their Jesus moment.

33% stocks (mostly US large cap BRK, MSFT, ABT etc) and 66% cash. I have been very cautious the past 15 months or so.

I have had a hard time deciding what to do with insurers/re-insurers... There is still too much capital on balance sheets and until it is eliminated we will not see a hard market. The problem is large catastrophe losses will result in a big drop in BV. Perhaps the best thing is to buy BRK at current levels (the operating businesses provide some nice diversification to cushion any underwriting losses).

Yes, it was disappointing to see Vancouver lose. However, I do not think the Canucks need to psychoanalyze things too much. They had a great season and they have a great team; they proved that in spades this year. The bottom line is the Stanley Cup is a marathon and the teams are so close in talent the winners need to have depth and hope the injury bug does not bite too hard. Vancouver was playing without Hamhuis (top D), Rome (top 6 D), Samuelson (top 6 forward and PP guy), Raymond (top 6 forward), Malhotra (3rd line & top face off guy) came back in game 2 from eye injury but clearly was not at his best; others had severe injuries (Erhoff - top 4 D- 2 broken fingers), Kesler (2nd line centre - groin?) etc. And yes, Boston was banged up too (Horton out etc) so both sides had adversity. Marchand was the player from Boston I was most impressed with; Boston was the better team.

Jobs in his key note explains things very clearly: 1.) 10 years ago Apple had the vision that the PC would be the digit hub for consumers: where they would store and access their music, photo and video. 2.) given the proliferation of devices (smartphones, tablets, laptops, desktops, game consols AND FUTURE DEVICES) the PC as the digital hub is terribly inefficient. 3.) starting now 'the cloud' will be the new digital hub and any content you own will be available to any device you have. By moving your hard drive to 'the cloud' you also enable any number of new devices (in your car, in your kitchen, in your living room etc). Do you think Apple has interesting new devices to launch once 'the cloud' is in place to drive consumers to their brand? This is why Microsoft is moving to one interface with Windows 8 (same swipe motion for smartphone, tablet, computer AND FUTURE DEVICES). To me the specific details of what Apple has announced are noise. The real news is they are officially launching the move of the consumer's digital hub from the PC to the cloud. Game on. My guess is there will be lots of winners as this happens (i.e. like MSFT, Corning etc). Globe & Mail explanation: http://www.theglobeandmail.com/news/technology/tech-news/apple-sets-sights-on-cloud-control/article2049641/?from=sec501

What is a little surprising to me is how BRK is selling off at the same time it appears insurance/re-insurance rates may be in the process of hardening. Lets hope both those trends continue (as I only have a small position in BRK and would be happy to make it larger). :)

Over the past 10 years MSFT has continued to grow earnings at a pretty decent pace. Bottom line is the business has become more valuable each year. Moving forward earnings growth may slow but should still be positive. MSFT has lots of irons in the fire and looks to be positioned reasonably well to benefit from future changes. The multiple (what Mr Market is willing to pay for MSFT) has compressed over the past 10 years. Probably felt like a value trap for those who bought at higher prices in 1998. Should management continue to grow earnings I have a hard time seeing how the multiple continues to compress (only possible in my mind if the whole market sells off aggresively).

Appears to me that we are in uncharted territory; I wonder if the EU has the ability to sort out Greek/Irish/Portugal debt problems. Regarding Greece, it is clear to me the country will not go much further down the austerity road (i.e. slash spending, increase taxes); at least it will not do this on its own. Looks to me that the only real solution is for Greece to leave the EU and then to pull an Iceland. Problem with this solution is Ireland and Portugal would likely not be far behind. Perhaps the EU will do what the US did and first bail out the banks and then reduce the loan balances. Hard to see how this is solved without a severe shock to the system.

Here is an interesting perspective looking at Google Chrome and its possible impact on Windows. Summary: "Maybe some very cost-conscious schools and businesses might force users to switch to Chrome, but for the vast majority, as long as Office is not challenged, neither is Windows." http://mobileopportunity.blogspot.com/2011/05/can-googles-chromebook-break-windows.html

Yes, prices are high. The real driver is low interest rates. You can get a fixed 5 year rate for about 3.5%. $700,000 house; $140,000 down; $560,000 mortgage. Interest on interest payment = $19,600/year = $1,633/month. Most families can easily afford this amount. Also, to afford to live in the Lower Mainland many families have 'adjusted' and both spouses work (two incomes) and many, many houses have suites that are rented out to generate extra income to help pay the mortgage. Until commodities correct and unemployment increases or interest rates increase my guess is the market goes sideways (perhaps fpr 10 years). With inflation of 2 to 3% per year prices will come back into line. Having said the above, prices in Vancouver have always been at the peak in Canada and also have been VERY volatile (over decades) so people should not be surprised should prices decline substantially (or not).

Products the company has recently launched: Windows 7, Office 2010, Server R2, Kinect, Bing, Azure cloud, Windows 7 mobile. These launches are not pipe dreams; they are in the marketplace and most actually have exceeded performance expectations and will drive increased profitability in the near term. Looks pretty impressive to me. Regarding the cash, yes, I also struggle with how to value it. What I do like with MSFT is they do pay a decent (growing) dividend and also do meaningful buybacks every year (reducing share count) = 5 or 6% per year.

MSFT looks to be in the midst of its greatest new product cycle in recent memory. They also look to be poised to compete very well in the 'cloud'; further, their deal with Nokia looks to only have upside. The bottom line is over the past year the 'story' has gotten better and the stock has gotten much cheaper than it was a year ago (when I started this post), especially for a Canadian investor. Here is a recent (long) Q&A with their CFO: www.microsoft.com/investor/Downloads/Events/MorganStanley_Peter_Klein_030211.docx Here is a comparison of what I posted a year ago and how things look today... solid outperformance! May 27, 2010 May 13, 2011 Price = $26.00 $25.03 May 27, 2010 Est May 13, 2011 2010 Earnings Est = $2.05 to $2.10 Actual = $2.11 2011 Earnings Est = $2.20 New Est = $2.63 Dividend = $0.52 = 2% New Div = $0.64 = 2.6% Cash on hand = $5.00 per share Same with aggressive share repurchases Can$ = $0.95 $1.03

I do like articles that look at things from an historical perspective. Bottom line, accurately precicting the timing of large market changes in direction is pretty much impossible. In the coming months it will be interesting to see what the end of QE2 will do to stocks, bonds, commodities, US$ etc (if anything). At the present time, Mr Market apparently sees no big problems... everything is OK; move along please!