shalab

Best wishes for a healthy, prosperous new year in 2011 for all. Special thanks to Sanjeev and other contributors who have made this board very enjoyable and educational. cheers! Shalab

I was re-reading chapter 48 in security analysis. It discusses corporate pyramiding and I think it is relevant to Biglari as well. The security analysis book discusses "Van Sweringen Pyramid" - which started with control of the relatively unimportant railroad and then rapidly developed into a far flung railroad. The characteristics of this scheme from the 30's is similar to the one Biglari is deploying. 1. Form a private corporation to acquire control. 2. Use resources from one controlled railroad to acquire control of others. 3. Formation of a holding company to contrl an individual road with sale of holding companies securities to the public 4. Formation of a general holding company to acquire control of unrelated businesses. All this while the Van Sweringens held relatively small equity or financial interest in the capital of the enterprises controlled. Biglari has been doing the same with about 2% personal stake in Biglari Holdings. The difference from the "Van Sweringen Pyramid" is the compensation scheme.

Govt has filed a case against AXP which they are fighting in court. I think the odds of govt winning is low but it still helps depress the stock.

From 1990 - 2009, US population increased by 23% whereas the Japanese population increased by just 3%. Since economic growth is a function of population growth as well, continued population growth in the US will imply less memory of the great recession as time progresses. Any other thoughts on this? chart comparing US, Japan and German population growth. http://www.google.com/publicdata?ds=wb-wdi&met=sp_pop_totl&idim=country:JPN&dl=en&hl=en&q=japanese+population#met=sp_pop_totl&idim=country:JPN:DEU:USA

I don't know if Biglari's return is before or after fees. Here are different returns of the super investors from Warren Buffett's the Superinvestors of Dodd & Grahamsville. Walter Schloss over 28 years 21.5%, limited partners 16.1% Tweedy Brown over 15 years 20%, limited partners 16% Buffett partnership 12 years 29.5% limited partners 23.8% Sequioa 17.2% after fees of 1%, total 18.2% Charles Munger, 13 years 19.8%, limited partners 13.7% Pacific Partners 19 years 32.9%, limited partners 23.6% Perlmeter 23%, limited partners 19%

In MA/V case, they are like toll booths don't think there is an alternative for this in the near term. Paypal is kind of an alternative that has global presence. Google tried to displace paypal ( google checkout )and is not working out well. I have never used a debit card despite its popularity. I don't like prepaid but always use credit. I get rewards from my card company. Looking at the rail traffic, looks like the number of transactions will be higher this year compared to last. US also had a mini baby boom in 2005-2008 before the recession which will only increase demand as the parents are now into buying things for kids. In addition, the big growth is coming from Asia where transactions are up close to 20% year over year.

This bloomberg article says V derives 20% of its revenue from US debit That is correct but debit involves other things besides the transaction fees alone. Also, the banks will take the bigger bite on this. Although the fed proposal is done with good intentions ( atleast in appearance ), doesnt look like this will work out that way in practice. Either the debit cards will become less popular, or will have other fees attached to them or other forms like prepaid cards will come into vogue.

I am assuming he is a shareholder - so he will do fine.

some of its operating divisions after Buffett and boy-oh-boy will the media love to cover these issues and it won't be as kind as the Net Jets stuff. The NetJets thing was made up by Alice Schroeder for the most part. I had a friend who used NetJets recently ( last few months ) and he said it was the best flying experience he ever had. And this guy flies a lot to Europe and Asia on business. If BRK is able to reinvest its vast cash hoard in more acquisitions ( GE is paying back, Swiss Re is paying back and soon cash will be at 40B+ ), it could be a great buy. I have eliminated my BRK holdings in non taxable accounts but I won't bet against the best capital allocator there is.

My final thoughts. I find BH has a superior business structure to most companies. I find BH has an adverse compensation structure (who doesn't!) I think around $350 I may be interested in jumping back in based on cash flow and balance sheet. Is Biglari a good allocator of capital? We'll see. I think his most impressive accomplishment was the FCF generation of SNS. I agree with you on the final thoughts - however, I will add one more: Does BH have management that is trustworthy? I don't think so. Also, did the FCF include the trading income? It is not clear to me. If trading income/investment income is attached ( some may say it should as it is the biglari premium ), it will distort the valuation metric. This is the reason I took out FCF from my valuation of BH. I think a reasonable value is around 300 and not 350.

I have seen this man defended through thick and thin. Amen to that. People find all sorts of defenses - e.g: I have heard that Jamie Dimon took Wamu because he could, integrity be damned! I have seen people criticize Buffett/Munger in this board but if you look at the way they did acquisitions, kind of people they surround themselves with and dealt with people - it is remarkable and uncommon.

How about a corner market investment contest? Everyone gets to recommend five stocks by the 3rd of the new year. At the end of 2011, we pick up the winners of the stock contest. It is to educate, entertain and hopefully enrich ;D

Let the race begin - Biglari vs ? If you want publicly traded companies, there is BRK, FFH, LUK, MKL, WSC, DJCO. The entry price is important as is the case with BH. Now, if you want to work with folks who won't put their hands in your cookie jar and have high a degree of integrity, there are many options as well. We can start with MPIC Funds for instance. Then there is a third option where you can be your own money manager which may or maynot work.

Bailling - what is your IV estimate for BH?

Good performance at SNS and the plans look good. I think his plans at SNS are sound if they can be executed. However, it is not clear this will scale. The whole thing - BH, BCC and operating subs look convoluted even with Biglari stating otherwise.

Funny, the management philosophy changed after the fact, he got he was going to get with the current capital base, I bet he is going to amend the upper limit if/when the capital under management increases. Moreover, because I have full capital allocation responsibility with maximum latitude, we resemble a capital allocating vehicle (akin to a hedge fund with a similar incentive system) except that most of our assets will continue to amalgamate in companies we control.

http://www.techflash.com/seattle/2010/12/xbox-360-sales-soar-68-percent-on.html

I am assuming a low to moderate withdrawal rate of 2-4% per year for living expenses

One thing about Buffett/Munger and Hamblin/Watsa that is different from others is the high degree of integrity displayed in their business operations. One example that stands out is the dealing in Wesco financial - BRK owns 80.1% of the company and can take the company private anytime it wants. Yet, they are willing to wait for the majority vote on the remaining stock to take it private. Further more, they rescued a company that would have definitely failed and compounded handsomely since then. A lot of the other high profile investment managers today have been successful in making money but don't have the same degree of integrity. It is the feeling that if you leave your cookie jar with them and don't keep an eye on it, a few of them will go missing by the time you look again. Another thing to learn from Buffett/Munger in particular is the vitality they have even in their advanced ages. Value investors in general live long and my bet is for Buffett to run BRK beyond 90. I think there are several reasons for this: a. The level of integrity keep their mind light and free of stress. b. Buffett talks about tap dancing to work - how many of us feel the same way about work? c. Surround themselves with the people they want to work with - minimizes negative interactions d. Keep reading and keep the minds active - it is like exercising - keeps the mind active.

I am curious what you think is the value of the company

I do strongly believe Jamie is one of the best out there and I do not question his ethics. If he took advantage of the situation I am not sure; looking at the wsj blog and the court room drama, it seems anything but ethical. I dont see this happening with Wells or USB. There is a website that tracks the WaMu saga. It will be interesting to see how this ends. http://investorshub.advfn.com/boards/board.aspx?board_id=11133

He said something different (I think) Can't find the link to the article which said average car on the U.S is 10 year old.The below article in 2008 talks of the avg vehicle in use as being 9.4 years old. This is citing 2008 data and if anything that number went up. http://www.autoblog.com/2009/03/04/study-median-age-of-cars-in-u-s-increases-to-record-high/

Not sure where he gets his eight year number from - according to this article, avg life of a car in the US is twelve years. The newer models should last longer - hopefully they will run 300-400K miles without too many headaches. http://articles.moneycentral.msn.com/SavingandDebt/SaveonaCar/CarsThatLastAMillionMiles.aspx

How sleazy and corrupt is CNBC? I dont watch CNBC anymore - it is a show and they need to attract people to watch them. Recently, I saw the Tepper interview and it was not very impressive. I do think that Becky Quick appears somewhat ok compared to the others. I dont know why Buffett appears on CNBC but I will cut him some slack - the guy is 80 years old, has paid his dues to society and I like listening to him. I hope he continues to run BRK for another ten years or longer. The other day, we visited a family friend who is 77 and is in an adult home, he is suffering from dementia - he can barely recognize his own family members. If I can retain my faculties like Buffett at 80, I will be very happy.

Interesting article with quotes from Puggy Pearson http://www.ft.com/cms/s/0/cca24b14-f721-11df-9b06-00144feab49a.html#axzz16VXOxSIV