sfwusc

Well. I don't think shareholders get anywhere close to a fair shake on exc pay. Also, there is no way the pay packages are fair. The revenues and profits created (if any) by the CEO for the most part don't make the package worth for the shareholders. There are some that do, but for the most part they don't. Any one think Ken Lewis is worth what he makes? There are a lot of people that can run these companies. It isn't like say finding a defensive SS or 3rd basemen that can hit 40+ homeruns as your pool is very small. Plus that person brings in enough money to justify his pay. So if they aren't worth it, then why do they make it? Well, bc there is no check and balance on it. The board doesn't face reelection. Yea they send a proxy out, but it always has 9 people for 9 seats. Funny how those 9 always win unless someone sends out another proxy on their own dime. So think about it..... The company shareholders spend money to reelect the current board, but if shareholders want to fight for a different board ---- they have to pay for the company proxy and their proxy. How is that fair? It isn't. The system is crap. You can sell, but the stock might still be a good investment. Why should be you be happy about having a good investment if people are still robbing you and screwing you. If some secretary is getting pushed by some executive to sleep with him, then we don't tell her --- You can either leave the good job or put up with it. That is the point. The company is owned by shareholders not the board. If the shareholders want to do something, then the board needs to do it. NRG is a good example over 50% of the shares have been tendered to EXC, but NRG's board won't even talk to EXC. How the heck does that work? So now they are going to have a big proxy fight and maybe cause the debt to come due. Why, bc the NRG board can do what they want and say screw the shareholders... until another big cat said no screw you. Any shareholder should be able to put forth a person for the board assuming some level of ownership say an amount equal to the amount of the smallest ownership % of a current board member. The proxy shouldn't have a slate already picked out. The shareholders should pick without having the current boards say just reelect all of us. -SWUSC

Here is the difference!!! Those athletes and coaches are for the most part paid with private funds. The revenue is self supporting the Athletic department or organization. The executives are not generating enough extra revenue to equal the pay package. Example: Some over leverage companies and make bad decisions to boast short term performance for their pay package. The major problem is the board of directors is just a group of buddy buddies. How do you get directors that are pro shareholders? The fund managers don't care, and they hold a lot of shares due to the financial planners pushing mutual funds. The answer to disagreeing with management is always just sell. Well everyone selling doesn't change the company. Any shareholder should be allowed to submit their name for the board of directors. Current boards should be allowed to push current directors. Each shares should get one vote per seat, so that if there are 9 directors...someone with 11% of shares gets one seat as they would hold enough shares to elect one seat by themselves. 51% ownership shouldn't get you the whole board. It should get you the majority of the board. The next time is public interest business should be restricted from enter locking funds between subs or non public interest businesses. AKA AIG FP should have been put into bankrupcties with no risk to current policy holders. If the future of the company tanked, then so be it. Current policies should have been protected without taxpayer funds. Same with banks. If the banking sub gets into trouble, then FDIC just takes the banking division. If you don't want FDIC insurance then don't agree to it. Good luck getting deposits. People need to know their deposits are safe, and taxpayers need to be protected from this crap. Basically if people have a fair shake and everyone shares the risk equal to the reward, then let everyone sink or swim on their own. The problem is the system was unfair to shareholders and taxpayers. The exec made off the shareholders on a risk to reward and the shareholder made off the taxpayers who had nothing but risk pretty much. -SFWUSC

I like how he said low PEs only happen during high inflation so they won't happen, but then one of his examples was 1932. I stopped reading right there. If he think inflation was high in 1932, then we have been in high inflation since 1932. Who knows what is going to happen. You can be bullish or bearish. You can think we are going to have inflation or deflation. Yet, using some chart rule to show we aren't going lower is nuts to me. I don't think we have hit bottom yet. I didn't think we hit bottom in 2002-03 either when the markets went back up to new highs on the DOW. I don't know what is coming, and I don't think the charts know either. Historical margins with a reasonable PE vs GDP/Sales analysis will scream over valued to fair value right now even after the huge drop. -SFWUSC

http://www.nytimes.com/2009/03/13/business/economy/13norris.html?_r=1&ref=business -SFWUSC

Lehman and Bear deserved to die. They played with fire and got burnt. That is life. I think the uptick rule is way over valued, so it really doesn't matter to me either way. Mark to Market was a good thing, but again it made things more clear. When you are highly leveraged then you want things murky and clear as mud. When things are clear, then it is easy to see that you are swimming naked. When it is known that you are swimming naked, then those short sellers and bailing longs will drive your stock to IV aka zero. I think we are trying to blame the problems on the messengers. The problem is/was an unhealthy amount of leverage and bad underwriting standards. If things would have been better without the messenger, then it is because people would have been less informed of the problems. So they would have over paid for those businesses. If you would rather be lied to then fine. I would rather know the truth. "Mr. Corleone is a man who insists on hearing bad news immediately." If Mr. Corleone would have been in charged, then the bubble wouldn't have gotten as bad. They would have stopped writing crap loans in 2005 or 2006 if they ever wrote them to begin with. Mark to Market has a down side when thing are overly negative, but no one complained about mark to market of equity securities in the late 1990s. Discount cash flow method is crap. (Who said crap in crap out...well they might have been talking about the DCF method) I was an auditor, and I am telling you that most managers look through rose colored glasses. They would pull up some historical crap about CA only have default rate of x % since 1995 and use that number until actual defaults were twice that. Then they would argue that some of those defaulting would sell the house for a profit, so they should count those...etc and etc. I have seen AR allowances with only reserving 10% of stuff past due over a year. Oh they will pay..they are just having some cash flow problems right now. Ok, for the past few years, but they are good for it! So who do you want to get your valuation from? The market or management? I am sure that Lehman executives would have been real good valuation guys..... Didn't they say there was no problem right up to the Chapter 11 filing? -SFWUSC

Well, you go to enough message boards related to value investing, and finding people all in on Berkshire isn't hard to do. Buffett isn't given almost perfect view like he doesn't make mistakes. He is way smarter than me in business, but he isn't perfect. I am not saying that the black swan will happening, but I think it is very different than anything else ever underwritten by Berkshire Hathaway. They were paid through the nose for it too. I mean no one else could write such a policy and the buyer think they would be able to pay off on it. Yes, an A bomb or mass natural events could have done it as well. Yet after 9/11 they wrote all contracts to avoid acts of war/terrorism. I was still poor pre 9/11, and didn't have money to invest :). So that was before my time. The puts are very correlated to other investments. If we had mostly treasuries like FFH did, then it wouldn't have been so bad from a risk point of view. We are debating a massively rare event. I think saying that people going super overweight in Berkshire now is more crazy than before due to the puts. Still, if the puts kill them, then only gold, silver, guns, ammo, and food are likely to be winners. Mostly, the ammo and food :). -SFWUSC

So it was the lost of the uptick rule and not the over leverage and bad loans? -SFWUSC

Depending on what you call liquidation value. It has different means for different people. If you are using liquidation as a sum of the parts, then Berkshire has trade at range of its sums for years. Some times it is near 100% and sometimes it is 150%. It is what do you value the parts at that matter. I don't think Berkshire Hathaway is a ton cheaper than the general market. Entry price has to be evaluated against all possible options. X can be 50% of IV, but Z might be at 10%. Then again Y might be 150%. So it is all up in the air now like it always is.... You make your "bets" and hope for the best. =SFWUSC

Isn't the uptick rule an attempt to rig the market to the upside? I have never heard of a down tick rule for long positions! I think shorts effect on the general market is way overplayed. Some small cap sure...but big/large caps no big deal. -SFWUSC

Hey, I do risk arb, so I am all about taking risk. I just think a lot of people use Berkshire as an index replacement. There are a lot of people that have 100% of their net worth in Berkshire Hathaway and are old enough that rebuilding isn't going to be easy or possible. The put options make this not such a great idea anymore due to the total wipe out risk. Losing X% on a wonderful bet is ok. Losing everything on a wonderful bet isn't so smart (unless you are young and net worth is a low compared to future earnings) What does the owner's manual say... they wont risk what they have for something they don't need? In the past.... I couldn't think of an event that could sink the ship. Now there is an event that could. That is a big change. -SFWUSC

Yea it does. I still think the puts change Berkshire balance sheet though. Before the puts, then something wiping out Berkshire was near impossible. The puts create a chance though very very small. If SP500 is way down in those years (say 100-200), then Berkshire is going to have to pay out cash. That cash outlay is likely larger than cash on hand, so we will be selling assets in a huge down market. A SP500 at that level 10 years from now would mean the economy has been very bad for a very long time. That economy would mean AXP, WFC, and other equity positions are likely to be way below current levels with some maybe being zeros. I am not saying it was a poor decision, but Berkshire assumed a lot of risk (with a small chance of happening) that a lot of shareholder seem to disregard. They were very well paid for it, but the risk is there. To put it another way... we shorted a lottery ticket and were paid way above the IV to short it. Yet if it hits it big, then we could be royally screwed. I would not put 100% of my money in Berkshire due to those puts along with other reasons. It does little good to be the last man standing if everyone ends up dead. Again very very small chance of it happening, but I am not a big fan of taking chances that can sink the ship. -SFWUSC

http://www.federalreserve.gov/releases/h41/Current/ There you go! What most people consider money is actually a noninterest bearing IOU from the Federal Reserve. That is why it is called a note. This is also why it is Constitutional (the whole thing about Congress being in control of the money weights and such). Legal tender laws basically make it only a debt replacement for other debt. So the Federal Reserve prints/creates these notes by buying assets. Another thing to remember.... The Federal Reserve is defacto owned by the U.S. government. I hear people on the street thinking it is some private bank which says a lot for our education system. Federal Reserve has issued member banks a preferred stock that yields 6%(I think), but the real profits go back to the U.S. Treasury. Figure in the leadership of the bank is appointed by the President and approved by Congress, then you have profits and control belonging to the U.S. Government. Just think they get paid interest on the U.S. government debt to cover the bills, but any extra goes back to the taxpayers. What is the IV of a piece of paper? Not much What is the IV of a non interest bearing non maturing note? zero The IV comes from legal tender status stating it is good for all debts public and private, since the U.S. government is a better credit risk than anyone else. Yet, the chance the U.S. government will ever make good on all these debts is near zero. Printing is basically just making the debt non interest bearing (which causes inflation because no one wants to hold non interest bearing notes...they want goods or interest/profit earning assets) -SFWUSC

The little bit I have caught from CNBC wasn't giving up hope either. It seems they have a lot of people telling people to buy stocks for the long term. Money Mag... had a piece on saving more and putting it into your low cost mutual funds. People have been to well conditions to think markets always bounce back. All hope isn't lost at 6500. Just like all hope wasn't lost in 2003's bottom which wasn't the bottom after all. All hope is lost when people don't think it can ever come back. This could be the bottom, but it doesn't feel like a bottom. The SP500 still has a double digit PE ratio. If this is the bottom, then it wasn't as bad as the 70s or the 30s for sure. The dividend yield isn't all that great either. -SFWUSC

I am mostly cash, but that is normal. I am mostly cash/arbs in good and bad times. I do mostly/all deal arbs, so I am always like that. My nonarb plays are Berkshire Hathaway (purchased in 2003) HSY (about 30% of the Berkshire in size) Foot Star (liquidation play, but it is about run its course) Then some random stuff in my retirement accounts. All are very small plays, so I really don't care what happens to the market... just so deals/tenders/reorgs keep happening. -SFWUSC

I think assuming fair of the SP500 is 900 is iffy. It isn't like you have one company that you are trying to value. The IV of one company is a range and the IV of that index is the weight sum of 500 ranges. Using the SP500 for the whole stock market is iffier still as there are lot more than 500 stocks out there. Some are way overvalued still and some are undervalued. I am not trying to call a bottom or anything like that, but I think everyone might be getting excited about the 50% off sale. Just because it is 50% off doesn't mean it is a good buy. It is a better buy that it was, but that might not mean to much in the long term. Just remember this quote: Most stocks trade above IV for most of there life. Take a collection of sold, liquidated and bankrupcty companies, so you know the total cash outflow to investors over their life, and discounted it back in a chart to compare to the stock quote over the total life cycle to see a true IV to price relationship. You will see most companies traded over IV for a large part of that cycle. Those that did trade under IV likely gave investors unreal returns. -SFWUSC

I agree, but the chance of WFC being a zero is real. Not saying it will be, but the chance is there. So just assuming it is going to be a homerun is not smart. It might be, but the future isn't known on that either. I think the hit to Berkshire for WFC has already been about $100 a share since 9/30/08...there isn't that much left damage left to do at $10 a share. I think the total position isn't worth, but about $65 a share now. All this assuming we still own 290,000,000 shares. -SFWUSC

What if WFC become a zero due to nationalization? What does that do for IV? -SFWUSC