farnamstreet

Now updated for 2011 (based on your feedback.) http://goo.gl/vKEcK *If you have any suggestions for books I've missed, please let me know.

http://goo.gl/T8ap5

Has anyone read Competing Against Time, the book the B/W articles references that Apple CEO Tim Cook is passing around to Apple Execs?

Interesting article in Business Week on the nuts and bolts of Apple: Operations. This is the world of manufacturing, procurement, and logistics in which the new chief executive officer, Tim Cook, excelled, earning him the trust of Steve Jobs. According to more than a dozen interviews with former employees, executives at suppliers, and management experts familiar with the company’s operations, Apple has built a closed ecosystem where it exerts control over nearly every piece of the supply chain, from design to retail store. Because of its volume—and its occasional ruthlessness—Apple gets big discounts on parts, manufacturing capacity, and air freight. Tim Cook (the new CEO) has been known to give colleagues copies of Competing Against Time,* a book about using supply chains as a strategic weapon in business. *Amazon affiliate, you know the deal.

https://twitter.com/#!/biglariholdings/status/131083133436178434 I'm sure one of you would love to have a lot of fun with this :)

I thought the core of this story applied to investing as well. Albert Speer did very bad things. Although you’ve probably never heard of Speer, at one time he was Hitler’s chief architect and second most powerful man in the Reich. But that’s not why he’s interesting. Speer is one of the few Nazi elite not to be hanged after the Nuremberg trials. In fact, Speer was outspoken about Hitler’s regime and willing to accept responsibility for his role. In the words of Margaret Heffernan, “The hard part for Speer was seeing what it was that he took responsibility for.” Speer’s biographer, Gitta Sereny, said “Speer didn’t see anything he didn’t want to see. I think he would have liked to have that capacity, but he just didn’t. Speer was in fact a highly talented man, highly intelligent, but studied obliviousness was his defense. And the defence was there because he somehow knew there was something wrong.” How could Speer be so blind? Continue Reading @ Farnam Street http://www.farnamstreetblog.com/2011/10/ignoring-the-obvious/

What did Steve Jobs read? Interesting to compare that to what Bill Gates reads.

When Cisco Stock was >$20 a share, Cisco management was buying back shares. So when Cisco stock dropped to $15 why didn't Cisco repatriate some cash, even taking a 30% tax haircut, this still would have made sense from a shareholder view. What am I missing?

http://goo.gl/a9Xc2

I did a long review of the book here: http://www.farnamstreetblog.com/2011/07/is-everything-obvious-once-you-know-the-answer/

"All shares of common stock, par value $0.01 per share (“Common Stock”), of Bank of America Corporation reported in this Schedule 13G are held in the form of warrants exercisable by the Reporting Persons within 60 days."

Just to stir the pot a little on this one. I sure hope the CBRL people keep digging. With that in mind, I've made it easy for them. I hope they read this board (or someone passes their PR people these links!) There was this hilarious parable (joke only, any resemblance to actual events is purely coincidence): http://cornerofberkshireandfairfax.ca/forum/index.php?topic=2347.0 and of course there was this... they are overpaid but I'd pay them more... ...The current compensation arrangement, if applied retroactively to prior Steak ‘n Shake management, would increase the very rewards Mr. Biglari claimed were already excessive in light of their poor performance. We suspect Mr. Biglari’s thinking towards compensation has changed now that he’s in charge. How else could he desire a pay package that violates his own, purported, tenets?... (source: http://www.noisefreeinvesting.com/blog/2010/05/letter-to-the-board-of-biglari-holdings/ And this thread... with a lot of info. http://cornerofberkshireandfairfax.ca/forum/index.php?topic=2331.0 And someone might want to look closely at this and determine if anything improper transpired -- http://www.sec.gov/Archives/edgar/data/93859/000092189510000667/form8k07428_04302010.htm :)

Buffett's op-ed in the NYT Published: August 14, 2011 "...Only action that is immediate, real and very substantial will prevent that doubt from morphing into hopelessness. That feeling can create its own reality." http://goo.gl/LCgpX

slide 11 details AIG's capital structure as of q2-2011 http://www.aigcorporate.com/investors/2011_August/2Q11_EarningsPresentation.pdf

Re: some of the BOA comments on this thread and the other Berkowitz thread... Bank of America Corp. (BAC) Chief Executive Officer Brian T. Moynihan plans to answer questions from “skeptics” among fund manager Bruce Berkowitz’s investors after shares of the biggest U.S. lender fell to a two-year low. Berkowitz’s Fairholme Capital Management LLC will hold a 90-minute conference call with Moynihan on Aug. 10, the manager said today in a statement. The event will help investors of Fairholme, with 92.6 million Bank of America shares as of March 31, understand why the firm is a core holding, Berkowitz said. http://www.bloomberg.com/news/2011-08-03/bofa-s-moynihan-to-answer-skeptics-in-berkowitz-conference.html?cmpid=yhoo

@biaggio -- Thanks for the compliment. Rather than try to spend as much time as I can reading, I really just try to avoid things that take up time with little benefit to me. That leaves a lot more time than you might think. I don't have cable. I don't spend a lot of time talking on the phone. I don't spend a lot of time commuting. I also try to take Munger's advice. At the morning with Charlie, a questioner asked for Charlie's ideas on "ideas of self improvement," saying "in a meeting a few years ago, you mentioned that when you were younger you sold the best hour of the day to yourself." I thought Mungers response, which he's said many times, is worth considering. I'll quote the response from the transcript. Munger: Yea, I did. Questioner: Would you define that and flesh it out.... Munger: Well I'd come into my office in the morning and I'd stay that was a very good hour for me—the early morning hour. And I'd said well my most important task is improving myself so I'll use that hour for myself and whatever self-improvement I was engaged in and the rest of the day I sold to clients. I'm not saying that is the correct answer for everybody but that's what I did. Most people would not admit it if they did it. Particularly to clients. @jjsto -- You can almost always find a source reference at the bottom of my posts. Exceptions are made when I write the entire post myself or I forget.

He has some pretty interesting energy book recommendations that seem useful to investors. Another book he liked was Physics for Future Presidents? Has anyone read that? http://goo.gl/WRzD7

Talking about the financial crisis @Wharton. http://goo.gl/QoUmm

If you're looking for a complete (unofficial) transcript of the morning with Charlie look no further—I've (painstakingly) transcribed 21,296 words—that's 45 pages!! However before you shell out $9.95 for a copy of the transcript, I think most your hunger will be quenched by the free notes that Ben Claremon put together and Munger's Parody. If, however, you're a die hard Munger fan that couldn't make the meeting—and need to know every last Mungerism, this is for you. http://myinvestingnotebook.blogspot.com/2011/07/morning-with-charlie-transcript.html

Securitization is not new. This excerpt from Fault Lines: How Hidden Fractures Still Threaten the World Economy details one of the earlier examples: When the French Monarchy was strapped for money in the eighteenth century, it found more and more creative ways to raise funds. One of these was to sell annuities—government bonds that paid out a fixed amount until the death of the person on whom the annuity was written. Annuities were very popular with the public, for they offered beneficiaries a guaranteed income for life in a time before they were old-age pensions. The monarchy liked them because it received the payment up front. The monarch targeted these annuities at wealthy men—typically in their early fifties—who had the means to buy an annuity and who, given low life expectancies at that time, typically did not have very long to live. Annuities were priced so that they were a fair deal for such mean. However it was possible for the buyer of the annuity to make the payments dependent not on his own life span, but on that of someone else. Perhaps this loophole was not inadvertent, for it increased demand for the annuities: for example, it might have made annuities attractive to a wealthy merchant who wanted to settle his daughters for life. But it did mean that the clever investor could make money off the government. He could pick as beneficiaries healthy young girls (then as now, women lived longer than men) whose family history suggested a genetic predisposition to long life, and who had survived early childhood (infant mortality was very high in those times) as well as the dreaded smallpox. He could then buy annuities on their lives from the French government. A carefully selected, healthy ten-year-old girl would have much higher odds of surviving for a long time than the typical beneficiary of the annuity, and the payments received during her lifetime would far exceed the cost of the annuity. This is indeed what a group of Geneva bankers did. They selected groups of thirty suitable girls in Geneva and purchased a life annuity on each from the French government. They then pooled the annuities so as to diversify the risk of accidental early mortality among the girls and sold claims on the resulting cash inflows to fellow citizens of Geneva. This early form of securitization thus allowed the bankers to create a virtual money machine, buying policies cheaply from the French government and reselling them for a higher price to investors. The investments were popular—especially because the bankers were reputable and the underlying annuities were claims on the government—and sold well. However, buyers had not reckoned with the risk of government default. When the French revolution broke out in 1789, the monarchy was overthrown, and the revolutionary government soon fell behind in its annuity payments. It eventually made the payments in worthless currency. The Geneva bankers, who owed investors in harder Swiss currency, did not have the wherewithal to pay, and they defaulted, as in turn did many of the investors who had borrowed to invest in the "sure" thing. from http://myinvestingnotebook.blogspot.com/2011/06/early-form-of-securitization.html

Sergey Brin commenting on Google possibly buying Skype when it was a fraction of the price Microsoft is paying "This is the dumbest shit I’ve ever seen." This is out of the book that Charlie Munger recommended, by Steven Levy, In the Plex: How Google Thinks, Works, and Shapes our Lives. A great read. Levy's post on the subject is here.

Buffett Explains: Of course, price means nothing unless you are sure of the quality of what you are getting. When products are branded, such as watches and chinaware are, comparisons are simple. But jewelry is usually a "blind" item - and that puts virtually all purchasers at the mercy of the seller. http://www.borsheims.com/borsheims/CustomerServices-Buffett.aspx

Prior to Western Sizzlin being taken over by Steak n Shake, Western Distributed the shares of Steak N Shake to its holders. I noticed on my T5 that CIBC classified this distribution as a "dividend" which is (painfully) very taxable. Is this the correct tax treatment? (I hope not, my tax bill is insane!).

Buffett's memo, sent most recently last May, and in place for over 10 years http://bit.ly/dOKN0W

It pays to agree with the CEO!