shalab

My opinion on this topic is as follows - so far there is no evidence of a double dip recession (despite all the ranting by different folks). This is not to say that it wont happen, it could happen if all the governments apply the breaks, raise interest rates etc. The indication thus far is that several countries (India, Indonesia, China) are tightening the screws to prevent overheating. The real estate prices in these countries have reached/surpassed the pre-crisis levels. In the U.S, the balance sheets of companies/consumers has generally improved but people are not willing to lend recklessly like before or spend recklessly like before. The unemployment is still high which isn't great but is probably needed for the adjustment. cheers!

Interesting article - Munger's ( not the real one, but one that has taken the real life hero's name on this board ) hero Pretcher is predicting that the dow will go to 1000. According to FT: "...Robert Pretcher, the leading interpreter of the Elliot Wave principle and pioneer of "socionomics", which tracks cycles of social mood. Pretcher attained guru status in the 1970s and 1980s by predicting the bull market and later warning his clients to dump stocks just before the 1987 crash. Although he has tens of thousands of newsletter subscribers and numerous best selling books, Mr. Pretcher's painfully premature bearishness has hurt his popularity. Undaunted, he now predicts that the Dow will fall to 1000 - a drop that would exceed the great depression. He gives a socionomic explanation for public scepticism..." http://www.ft.com/cms/s/0/9660d020-b7a2-11df-8ef6-00144feabdc0.html

How likely is the double dip when India is expected to grow @ 8.5%, Brazil @ 7%, China in the 7-8% range? We will see food and clothing inflation next year because of drought and high prices for cotton.

Can Garmin get into the smartphone market? Probably. What is the chance of nuking profits in going after the smart phone market? Remains to be seen...

Let us start a poll to see how we are doing individually. While this is no proxy to the country as a whole but it should give a rough idea where things stand. Personally, I and my family are significantly better off compared to where we were in December 2008. I would say the same about my friends - even the ones that lost their jobs are on their feet now. My debt level is less by about 20,000 dollars ( it would have happened anyway inspite of the financial crisis ). I plan to spend more in capex on my house and checking up my car so it can run for a while longer. cheers! shalab

Rohitc99 - I like your analysis. Despite the iPad, Windows still owns 94% of the market share. Apple has the first mover advantage but unless it can move to the lower end, I dont see it displacing Microsoft. It will be interesting to see if we will see a windows version of the tablet - I think we will in the near future. The biggest risk with Microsoft is capital allocation ( or lack there of ) by management.

XBox is leading the console races for the second straight month... http://www.techflash.com/seattle/2010/08/microsoft_xbox_360_tops_us_console_market_for_2nd_straight_month.html

RIMM is going to get toast in this race - their app store model has been a flop and the devices will get cheaper over time killing RIM margins. Don't see a reason for any of the players to be buying RIMM. The big three will be Apple, MSFT and GOOG as the smart phones are more tied to other features ( search, itunes, windows/office software ), the need for RIMM diminishes. Apple will be the BMW of smartphones and doesnt seem to have any inclination to produce the Ford model. GOOG will use Android to power mobile searches and google apps. Microsoft will also use smartphone for similar reasons. It is not clear where RIMM fits in.

One thing to be careful about the warrants is the deflation scenario - if the deflation plays out as Hamblin/Watsa is betting as in Japan; the bank stocks may not work out the way people project.

Eric is right - can't buy options through fido. Not sure how Buffett got around to buy options in Munich Re - I wanted to do the same, couldnt...

Agree that Microsoft hasn't spent their cash wisely. If you look at a utility vs Microsoft; Microsoft looks better - I would like Microsoft to increase its dividend so that the excess cash flow can be returned to the investors. Their G&A costs are astronomical as is the R&D/marketing cost. Microsoft's biggest negative is that they got the incentive wrong - As Munger says (paraphrasing), show me the incentive and I will predict the mans behavior. In Microsoft's case, it has altered the group behavior. This is also the reason I think Biglari is headed to the basement. cheers! shalab

Agree Microsoft is cheap - I think it is worth $30/share atleast given the strength of its windows/office franchises. XBox has finally turned around - looks like the new kinnect is a winner. Don't think the phone is a lost cause - it seems to me that this market is nascent and it is still possible to gain share quickly. Android is a case in point. Microsoft can build a solid business around phones if its software can work with XBoX franchise well as well as do office apps well. Microsoft can also do the app model better as Android's apps will not work on all phones because of the fragmented hardware market - ala Unix. Search market share - the yahoo deal is something worth watching. 30% market share is worth something - IMO. Also, Google has been forced to do catch-up with Microsoft in recent days - like image search, travel search etc. It is an uphill battle but it may turn out to be eventually cash flow positive. ( like MSN vs AOL - the dialup business was a profitable #3 in the US ). cheers! Shalab

One should read Ben Franklin's autobiography about currency and his thinking about this topic. Franklin thought about this problem and came up with a solution. A lof the arguments made by hacks today can't match the genius of Franklin, a great polymath and practical person who lived in the 1700s. He started the first franchise ( printing press ) in the US, understood the magic of compounding, the importance of education/training, a rebel who fixed the errata in his life, a true democrat who had no trouble inviting the imam from istanbul to Pennsylvania, who gave away his inventions without patents for the good of the world, figured out the monetary policy, learned several languages and is in the world chess hall of fame! Anyone who is an investor must read Franklin's autobiography and his biography - a remarkable person who achieved much and stands out among the founding fathers of the United States. cheers! Shalab

Surprised these guys didnt go after Biglari. May be the pot is not big enough.

I guess Buffett didnt endorse her book and pretty much ignored her after the book came out. She was expecting Buffett to say great things about her as a writer? Her expectation was to become a writer with great renown which didnt happen. Just IMHO.

As a shareholder, I would rather netjets shutdown rather than continue to waste capital. What I am seeing is that it is profitable finally and hope it can continue to generate adequate returns for the owners.

To me personally, it's a God-awful shame, because he had the stuff to be one of the great ones! Still can, but most definitely not with the same shareholder base...they've been scared off! Agree with this and also that Biglari will pass his compensation package through. He lost his reputation and as someone said, it is like putting the toothpaste back. He is scaring off every company in which he is investing - I like the way Sanjeev dealt with Itex; it was gentlemanly.

http://www.chicagotribune.com/business/ct-biz-0822-simpson-confidential-20100822,0,2220225.column

The inversion theory the way it works in math is that you take the final solution and work backwards to the original hypothesis to prove its correctness. e.g: mathematical induction. For instance, you prove that the series of prime numbers is infinite by proving that the series of prime numbers is not finite. The main hypothesis here is double digit dip recession for which the root cause is deflation. Let us take some samples to see how things are going: 1. US trade with big economies Generally higher than 2007 and definitely higher than 2009 2. Income gain in the US Increasing this year even though at a slower pace compared to historic levels 3. Inflation Food and clothing prices are trending up world wide - anyone has checked the price of commodities ( coffee, meat, wheat, rice, cotton, sugar, pepper, orange juice and gasoline ) compared to 2009. 4. Growth in Asia Solid growth in Asia with inflation. India is expected to grow at 10% for the next 10 years - this may be the next big growth story. China will continue to grow as the overall base is still low in that country. 5. House/land prices in developing countries on par with the US In many developing countries around the world, the housing prices are comparable to that in the US. The US interest rates are so cheap that makes payments cheap. 6. Demand for computer products Continues to increase with shortage of electronic components as many vendors in Asia have gone to just in time manufacturing model 7. Saving rate in the US Has gone up. The public and the corporations have deleveraged and have record amounts of money on the balance sheets. This is witnessed in the treasury auctions where > 50% of the trasuries is bought by the US public. 8. Quality of life in the US Has gone up since 2000 - with HDTV, streaming technology, broadband internet, social networking, cheap phone calls, mobile phone, mp3 players, wi-fi... I would even say that the quality of life has improved since 2007 : - ). For all the dooms day predictions, most of these inventions have come from the United States. 9. Population growth The U.S population continues to grow at around 1% a year. This equates to roughly 10% of Canada's population and an economic activity of about 140 billion dollars. Even at reduced rates, we are looking at around 420 billion of additional economic activity since 2007. 10. Reconfiguration The previous system was not sustainable, it will take time to reconfigure but the US system will reconfigure. The odds of deflation? Low in my opinion. Double dip - yeah, please sell your shares to me at low prices, thank you very much! Predicting the future - I dont and can't predict the future. cheers! Shalab

Look at David Sokol's comments in bloomberg - I feel he got it right.

This is a very non transparent 10-q, one of the more opaque ones I have read. The cash flow statements are interesting - they dont show the dramatic growth seen in EPS. However, they are also confusing as some investments are included in operating cash flows - not clear what these investments are. Fortunately, some of the items such as increase in franchise revenue are explained more clearly. SNS is doing well but the growth can't be sustained per Biglari.

The statement is difficult to understand as the number of shares has declined because of Lion Fund owning BH shares. However, they are not retired and have caused reduction in shareholder equity. At the acquisition date, the Lion Fund owned 76,421 shares of common stock of the Company and also $7,540 of the Company’s debentures. At the acquisition date, the fair value of the Company stock owned by the Lion Fund was $29,900, which was recorded as Treasury stock. The debentures owned by the Lion Fund were recorded as a debt extinguishment. As the debentures had just been issued by the Company 30 days before the acquisition, the fair value of the debentures approximated their cost, and no gain or loss was recorded on the debt extinguishment. The noncontrolling interest in the Lion Fund had a fair value of $44,193. and then: The lion fund bought 122086 shares from Apr 15 - July 7th.

I wouldnt blame RRGB folks - if you think of Biglari as a person that is out there to steal your business, throw you out of your job and whose integrity you dont trust - you do what FMMH and RRGB did.

I came across this news release which looks very similar to the one Biglari was putting out to oust managements at Friendly, SNS and FMMH. CHICAGO--(BUSINESS WIRE)--As a 2.5% shareholder of Biglari Holdings (BH), formerly The Steak N Shake Company, Oak Street announced today that it intends to vote AGAINST approval of the Incentive Bonus Agreement between Biglari Holdings and Mr. Biglari, the company’s CEO, at the upcoming special shareholder meeting scheduled for August 24, 2010. Oak Street opposes this attempt to redistribute shareholder wealth to Mr. Biglari. Oak Street is concerned that the proposed incentive compensation scheme fails to align Mr. Biglari’s interests with the interests of company shareholders. Book value increases are not always tantamount to shareholder value creation. We believe shareholders would prefer that Mr. Biglari’s remuneration be directly tied to share price performance in order to ensure that shareholders and Mr. Biglari benefit in concert. An Oak Street spokesman stated “This unusual compensation scheme creates potential conflicts whereby Mr. Biglari could enrich himself at the expense of other shareholders. We are concerned that Mr. Biglari and the board are not acting in the best interest of all shareholders and we condemn the Board for this potential governance failure. We believe Mr. Biglari’s proposal has resulted in a significant loss of shareholder wealth already, as evidenced by the $100 share price decline since the compensation scheme was proposed on April 30, 2010. We intend to rigorously defend our interests as shareholders.” I still doubt Biglari would be postponing the shareholder vote if he was winning - definitely there was no need for a modified proxy.

Thanks Sanjeev! Apparently, attacks against Sokol (noted below) are launched from Alice Schroeder website. I am surprised how Alice has transitioned - from being a promising analyst that got insurance right to Warren biographer to BRK basher. Rumors and anonymous charges against Mr. Sokol may continue, but Berkshire Hathaway shareholders are already benefiting from the dramatic restructuring he has put in place, apparently with none of the dire consequences for customer satisfaction that were predicted by former employees.