farnamstreet

Seth Klarman wrote about the lessons not learned in his 2009 letter. For those interested, you can find that here.

http://myinvestingnotebook.blogspot.com/2011/03/our-national-predicament-excerpts-from.html

I thought some of you would enjoy this interview with Jeffrey Pfeffer of Stanford on The Business of Power

An investment manager writes about the one question the Federal Reserve can't answer: "and then what?"

Raghuram G. Rajan, former Economic Counselor and Director of Research at the International Monetary Fund, wrote a fascinating paper: "Has Financial Development Made the World Riskier?" Ultimately, he concludes, the incentives of bankers and their willingness to seek out and take tail risks brought the system down. I think most investors-even most laypersons-would benefit significantly from reading and thinking about this paper. You can find a summary of the paper here. You can find the full PDF paper here. If you like the paper, he wrote an expanded edition here.

Brings to mind this article once more http://bit.ly/efOFT9 "Next time you go to an AGM, if you think there is cause for concern, ask the CEO during the Q&A if management could leave the room for 15 minutes because you have a few questions to ask the independent directors concerning executive compensation, and point out that it would not be appropriate for management to be present for such a discussion. Don’t be afraid. The meeting is for you, the shareholder. If the CEO gets defensive, that might be taken as a bad sign. If the independent directors get defensive, that could be taken as a really bad sign, because it would suggest that, in their hearts, they don’t represent shareholders at all."

http://boards.fool.com/daily-journal-meeting-notes-29076851.aspx

My personal favs are Max Bazerman's Judgment in Managerial Decision Making (this talks about not only biases but how they encroach on decision making and how you can make better decisions) and Mauboussin's two books: Think Twice and More Than You Know: Finding Financial Wisdom in Unconventional Places. I'm excited to read Bazerman's new book coming out in March called Blind Spots: Why We Fail to Do What's Right and What to Do about It. I'd also add: Yes!: 50 Scientifically Proven Ways to Be Persuasive (but i liked Influence better); Dan Ariely's other book The Upside of Irrationality: The Unexpected Benefits of Defying Logic at Work and at Home; Jonah Lehrer's How We Decide; and Nudge is also quite good. I have a comprehensive behaviorial economics reading list here that might interest you. Of course, I also recommend reading Farnam Street.

I know value investors can be notoriously cheap. Apparently the answer is Tuesday. http://www.farnamstreetblog.com/when-is-the-best-time-to-buy-an-airline-ticke

Thought some of you would like this Yale economist Robert Shiller argues that rising inequality in the US was a major cause of the recent crisis, and little is being done to address it. http://myinvestingnotebook.blogspot.com/2011/01/human-traits-essential-to-capitalism.html

:) -- http://www.farnamstreetblog.com/

To Sanjeev's point, I posted this on Nov 9 but thought it would be a good time to bring it out again *** The headline makes you think that 82.2% of shares voted in favour of the proposal. That might, however, be a little misleading. Only 79.5% of total shares (937,343 of 1,433,553) voted. Of those (that voted), Biglari controls 209,550, so only 727,793 non-biglari shareholders voted in support of the new pay package. Looked at another way, only 50.7% of non-biglari shareholders voted in support of the proposal (and of those, some are his friends like Cooley). *** Also, the proposal wasn't "do you agree with this compensation package" it was "To approve, for purposes of Section 162(m) of the Internal Revenue Code of 1986, the Amended and Restated Incentive Bonus Agreement with the intent of preserving the tax deductibility to the Corporation of the compensation payable thereunder" *** One other interesting point that hasn't drawn the attention I think it deserves was this statement in the proxy "Book value is akin to shareholders’ equity or net worth, computed as assets minus liabilities. Book value is a construct of the past, based on what shareholders have invested and reinvested in the business. This value represents the capital that management has to invest." --- You can read my blog at www.farnamstreetblog.com

The math is correct. We're using different denominators. You're using the number of shares that voted whereas I'm using total outstanding shares.

The headline makes you think that 82.2% of shares voted in favour of the proposal. That might, however, be a little misleading. Only 79.5% of total shares (937,343 of 1,433,553) voted. Of those, Biglari controls 209,550, so only 727,793 non-biglari shareholders voted in support of the new pay package. Looked at another way, only 50.7% of non-biglari shareholders voted in support of the package (and of those, some are his friends like Cooley)

Interesting coincidence: It was two years from the time Buffett got control of Berkshire before he purchased his first insurance company ;)

Video interview with Sardar here. http://romenews-tribune.com/view/full_story/9618760/article-Steak--n-Shake--Open-for-business?instance=home_news_lead

Lot more pictures available here http://romenewswire.com/2010/09/22/steak-n-shake-opens-for-business/

One can train a man so that he has at his disposal a list or repertoire of the possible actions that could be taken under the circumstances...A person who is new at the game does not have immediately at his disposal a set of possible actions to consider, but has to construct them on the spot - a time- consuming and difficult mental task. ... http://www.farnamstreetblog.com/solution-by-recognition

Thought this was pretty interesting. http://www.farnamstreetblog.com/the-razorsandblades-myth

http://www.farnamstreetblog.com/how-apple-plays-the-pricing-game

I'd argue that the only way you're going to find companies that consistently invest with a 5-10 year time horizon, is to look for ones ones with large management ownership or a large and present shareholder. It should be pretty easy to see how they've done in the past and evaluate what's likely to happen in the future. Why is this so hard to invest for the long term? Well, one reason is that the incentives of a CEO are not necessarily those of shareholders. Although, given the average holding period is, what, 6 months? Can you really blame the CEO for trying short term solutions to long term problems? If I was willing to sell you a share in my company for $100, that was guaranteed by the government to be sold in 10 years for $300, most people would love that. But if I added a twist that for 3000 of those days the quotes would be below $50 with negative news stories, I bet most people and institutions would sell. It would be psychologically hard to hold onto that company, regardless of the rewards that holding would provide. Another reason is that it's really hard to change the culture of a company if you're an outside CEO coming in. It's hard to go in and do something unconventional. It's hard to say, no we're not going to do that. If you're promoted from within, this is only more difficult because you're part of the problem. Sears is a great example of what happens when you do something unconventional and why it's so rare. A lota smart people read my blog http://www.farnamstreetblog.com/, do you?

Yea, that's correct. anyone already subscribed got moved over, but people with bookmarks didn't .

I hope this isn't spam, as many of you read the farnam street blog. Just letting you know we've moved to a new url, and done in with the ads. http://www.farnamstreetblog.com/

I agree: things seem to be getting a lot less transparent. I think all of increase in treasury stock--reduction in shares--was from the LF purchases. I don't think BH actually purchased and retired any of its own shares. Among other things, the process of consolidating all of the incestuous companies reduced the number of outstanding shares, inflated eps, lowered 'reported' shareholder equity, and, my personal fav, removed some debt that is "legally" outstanding but no longer on the Balance Sheet. Treasury Stock (Perhaps someone with more knowledge can correct me, I was under the impression that if a company classified stock as Treasury and thus reduced the outstanding shares, they gave up the right to vote those shares -- can anyone confirm this? The implication here would be that he can't vote the Lionfund's BH shares because they are now classified as Treasury stock (It doesn't make sense that you can both reduce the share count and vote on the same shares you've removed...) I presume a company can purchase its own shares without classifying them as Treasury stock.) Debt Even the balance sheet is not as it appears. Check out this footnote, which reduces debt on the balance sheet (the BH debt the LF holds, which, when consolidated, apparently disappears from the Balance Sheet and moves to off balance sheet): In connection with the acquisition of Western, the Company issued 14% redeemable subordinated debentures due 2015 in the aggregate principal amount of $22,959. As of July 7, 2010, $15,225 of Debentures is included in our condensed consolidated Balance Sheet in Long-term debt. Debentures in the aggregate principal amount of $22,765 are legally outstanding. As discussed in Note 2, the Lion Fund owns $7,540 of Debentures and upon the acquisition of Biglari Capital those debentures were extinguished for accounting purposes but remain legal obligations of the Company.

While I appreciate the link to Farnam Street, I think the article you're looking for is here http://business.financialpost.com/2010/07/26/michigan-residents-turn-to-alternative-currency/