Myth465

StubbleJumper you sound like me. I got MSFT OS for free via a developers conference and a $10 copy of office 2010 via work. Where it not for this I would probably just use other options. When I get my Netbook the first thing I plan on doing is running Linux mint. I actually dont bootleg much software these days because the free options really are as good and it beats dealing with all the DRM type stuff. I know I am a nerd and a cheap bastard, which makes me a bad sample. But the masses are catching on. My bother is Maced out, and everyone else just wants to get on the net and doesnt really care too much how it happens. Once you have used an Android phone, an Android tablet isnt too much of a stretch. Whats next is an Android OS for your Netbook, and then you move the Desktop over and thats that. Mac has done the same with their suite of OSes.

I honestly hope they discontinue Yahoo Finance. I waste quite of time on that site but cant stop. :)

I think the threat is not from Apple. A usable Linux is the ultimate threat. Cheap devices which are basically web portals, ebook readers, and dvd players. Linux is no longer nerdy and weird. People are now developing it to be usable and users are now becoming more open to non Microsoft devices and portals. Mac OS and Android are based on Linux I believe. Android is a big hit, Google will continue to basically give away products that MSFT makes money on. That sucks. You make something and people use it. Your major competitor comes in and designs something just as good and gives it away from free. MSFT OS for Phone, MSFT Tablet OS, both will be non starters due to Android. They may exist, but not at a dominating 50% plus market share. Search is slightly protected for Google so they can continue to develop and give away free products. People are also having less and less of a reason to buy Office with Open Office and Google Docs. Big business is the last refuge, and I dont know how you break the Dell / HP / Microsoft / Intel cabal when it comes to businesses. We still use XP and all machines come preshipped with MSFT at work. It will be interesting to see if or what breaks this trend. Currently I cant think of anything. But companies are having to adapt IPhones because business leaders are demanding it and they make the decisions. My CFO has one and we are opening up to it at an S&P 500 company. What happens when the CFO uses Mac Products, Open Office, an Android Tablet PC, and various other things at home everyday.

Honestly you dont need numbers. He is saying they could lose their dominate position. This wont show up in the numbers until it happens. Lotus had great numbers until they didnt. I would argue its very easy for them to increase cash flows and profits by cutting R&D and closing all the unprofitable business units. Then the numbers would look great for a while but the future would be mortgaged. The moat is clearly under attack, you have to look at things qualitatively. INMO they have but 1 deep wall left. Thats the Corporate space with regard to Windows and Office. With netbooks and smartphones people will open up to other operating systems. People are used to Android and Apple. People will begin to use tablet Apple OS, and Android, then they will open up to the desktop space. Open Office and Google Docs are getting better each day. The last shoe to drop is Corporate, which drives home users, and schools. If Corporations open up then whats really left to justify the market cap. MSFT is cheap, has a monopoly, and an ok Moat, but its foolish to think they are guaranteed to always be around in the PC space, or that they are for sure to be around in the same capacity in 2020 / 2025. Big blue probably had great cash flows and profits for a while while Apple and Microsoft dominated the "mindshare" With that said I think investors now will make money.

I agree but I dont think thats the focus. For a decade or two MSFT was tech, it was where the best and the brightest went, and everyone wondered what they would do next. Will they become corporate business men who are focused on draining cash from viable businesses and ROIC (IBM), some how I doubt it. I think Balmer has alot to prove and dont see them giving up so easy. Similar to Yahoo, I think they want to be hip and desired. People literally love Apple and Google and want to know whats next. MSFT is more like the phone service or SAP. You hate them, literally but its the only option and the switching costs are too high so you muddle through. That has to suck on some personal level and I think Management will aim to turn it around. They will continue trying to buy their way into Search, Mobile, Cloud Computing, Social Networks, and what ever else is cool / trendy. I would own at least 10% of MSFT (portfolio wise), but I dont think they are focused on making cash. Instead I think they want to reclaim the cool, innovative mantle. This is all one mans rant, and perhaps I am projecting something that isnt there (maybe its more how I feel, and Bill and Balmer really dont care), but if you want a tech company with ton of cash, great FCF yield, focused on ROIC, I would and have done WDC. They arent building an empire. Just cashing checks, banking stock options, and going home. Exactly what I want my Management team to be doing.

Frustrated at the Fed yes. Confused, far from it. He seems to know exactly whats going on.

Its amazing that they rebuffed the MSFT offer. I guess Yang wanted the 125 per share back.

I think they have done a good job but would have blown a chunk of money / stock buying Yahoo if Yang wasnt such an idiot.

From a business perspective I can see where you are coming from, though I think he was right about Apple and Tivo. There are better products then Apple but Apple sold the Ipod the best way inmo. That got them in the door. I thought it was most interesting in relation to passion (Wright Bros) and more importantly politics / mass movements - Obama did the same thing as King, instead of staying I have a plan, he said yes we can. Its very interesting inmo and can be useful when it comes to getting buy in.

Munger you should stop quoting Buffett and start quoting Jeremy Grantham. He is saying the same thing you say, but so much better. Perhaps its the English accent. http://www.gurufocus.com/news.php?id=113554 Something to munch on. I agree with him on commodities.

I really enjoyed this.

Do you have to file at the 5% mark? This seems to have pushed them right over 10%. Maybe they spread the purchases around to avoid triggers and had to file when they hit 10%. This is fairly significant if you add the converts and I am thinking they may have participated in the private placement. Think about what this does for the subs. Getting a 7-9% yield in this market is amazing vs. tbills and corporate bonds. 9 AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON 44,015,048 10 CHECK IF THE AGGREGATE AMOUNT IN ROW (9) EXCLUDES CERTAIN SHARES (SEE INSTRUCTIONS) o 11 PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (9) 10.1% ---- Perhaps I am misreading the filings.

I really like the fact that Prem owns in his personal accounts. 1. Following the transactions reported herein, 277,000 Common Shares are held directly by V. Prem Watsa and the remaining Common Shares are held by subsidiaries of Fairfax Financial Holdings Limited, including 5,849,400 Common Shares held by Odyssey America Reinsurance Corporation and its subsidiaries.

Ward isnt buying but Prem is :). Looks like we have good company. http://www.sec.gov/Archives/edgar/data/915191/000095012310103978/o66448sc13g.htm http://www.sec.gov/Archives/edgar/data/915191/000120919110054282/xslF345X03/c08266_4x0.xml I am wondering why they didnt buy the converts for the insurance subs.

http://www.newswire.ca/en/releases/archive/November2010/10/c2723.html Still annoyed I sold. Up 20% since. Still want to buy back but anchoring on the past.

People still want 2x BV for it though. Interesting times. I think alot of people have an ownership bias.

Could you explain why? Yes just about everyone thinks the stock is overvalued. When your stock is too high. You have to close the value gap. You can buy assets with it and as long as the assets are cheaper then your stock the value gap will be closed or you can issue a ton of shares for cash as well. Amazon should be using pricey stock to buy not so pricey assets. If they are using cash then they are just paying a boat load of money for assets. If you pay 20x earnings for Zappos then you are only getting a 5% return on your cash unless Zappos grows significantly. Henry Singleton was the best at doing this when he was at Teledyne.

Using cash is such a bad idea.

mvalue those are good questions. I prefer to look at things from the eye of the CEO. The stock is probably overpriced. The moat is being assaulted due to the digitization of media. Strong competition with Apple, Google, Netflix, Wal-mart, Target. We may win in books but may not. What do I do. Well I could use the overpriced stock to buy other assets in the eretailing space or wait and see how it all works out and when WS realizes the game is up watch my stock collapse. I agree they need some sort of strategy but I think they have one, we just dont know it. I wouldnt own the stock but if I did, I would want him using it to roll up the etailing space vs. sitting around hoping dvds stick around for a bit longer.

This is actually shaping up to be an informative thread. Also you do realize Buffett held Coke and a few other names at up to 55 times earnings and a good chunk of his portfolio has done nothing for a decade. Relatively and Absolutely they were overvalued. He has said so himself. Again I think you quote Buffett when it works with your mental model and dismiss all else. I think most people do this though so its not such a big deal. Buffett has also said cash is the worst of all assets and he hates holding it but will when he cant find much else to do. I hold some cash but am no fool. I know its a terrible asset class and will be worth less in years to come. I hold it because its a good hedge, and allows one to purchase more when the right opportunity comes up. I do not however act as though its the optimum asset class. When you have permanent capital you have to do something with it. Especially when you have $60 billion dollars. We dont all have the ability of collecting 1%-3% in Management fees to hold cash, or returning cash to shareholders every 2 or 3 years cause we have fears about the market. We are paid to manage the money through the cycle. Grantham is excellent at pointing out some of the flaws in value investing thinking. If everyone did it nothing would ever happen. No new businesses, no risk, no nothing. It doesnt make sense for pension funds, insurance funds, hedge funds, and mutual funds to collectively hold cash or dart in and out of the market. They are all competing against each other with different goals, risk tolerances, time horizons, and skills. Thats what makes a market. It makes sense for an insurance company to move from cash. They have bills to pay, as do pension funds, and other types of pools of capital. Not everyone can sit around making macro centered bets. You can afford to wait and wont be pushed by low yields. Thats great. II have the same ability and have a similar stance. But realize not every Manager, Endowment, Insurance Company, or Pension fund has that ability. They arent fools or greater fools, just doing what they have to do. Choosing between a bunch of crappy choices.

I know it helps. Almost stopped by target prior to ordering one but took a leap of faith due to the quality of the board. If someone picks one up for 5 minutes they will be sold inmo. Having them at BB and Target can only help.

Great post, I think Parsad was right on the social thing. You sound much more reasonable when its not in lecture format. I think many on the board share your concerns (I do but have resolved to let it ride with 10% - 20% cash) and it appears that you and Parsad own a few of the same stocks and hold similar amounts of cash. Who would have thought? Sam Zell makes a good point in the article I just read - He said for the first time investors in the US have to invest with political risks. I agree. It should be interesting.

Aw but Munger. Is cash not just another asset that is likely overvalued with a low yield? We are always choosing between assets. Buffett agrees with that. You seem to think cash is the best game in town and most people on this board and probably in the industry disagree with you. Only time will tell.

I would prefer some loose integration (same backoff, logins, payment schemes and all that) and would prefer for them to keep buying using only stock. Other then that I wouldnt bet against Bezos.

Cash flows may weaken but it may also be the lessor of 2 evils. I would rather hold Zimbabwean hard assets & stocks vs Zimbabwean currency though neither look appealing. Call me crazy, but I dont think its a mania to move out of dollars, when the person who exercises considerable control over its value is telling you that its going to go down unless you move out. It seems quite rationale actually to probably move along. You may benefit by staying in while others are scared out, but that doesnt mean they are fools.