RRJ

Fair enough point, Myth. And I always remember that, and I feel blessed. But I also earn that money, every day. And I worked a long time, making much less, or even nothing (in school, in junior positions for many years building skills, intellectual capital, and reputation in the community, etc.), to get in a position to do so. It is easy to say that someone makes more than 94% of Americans. That sounds like they're in a high place. They're not. I'm not trying to make it personal or about me -- , but I'm saying $250k is really $140-150k after taxes, and after all the expenses, you're lucky to be able to save $50k a year. That's saving at a high rate too. No one gets "rich" saving $50k a year, when it takes $1 million saved to equal a basic level government pension in actual retirement income. If they know how to invest, they might have a decent retirement off that $50k a year, after saving for 30 years. But it's not "rich". No way in hell. And remember that what made America great is the ability to seek one's fortune -- to get really rich, by one's own devices. Stop that engine, and you are hacking away at one of the major pillars of American entrepreneurialism. This class divide stuff to raise taxes just to fund government programs that do little good is a recipe for disaster. Just read The Road to Serfdom. Good intentions (and I absolutely know you have them) do not make good policy. In Europe, class mobility is much dampened. That's not good. That's consigning people to a life they were born into. Meritocracy, even a very imperfect one, is better than redistribution and levelling of results as an organizing principle. Equality of opportunity, not equality of results.

I'm with Bronco. $250k a year is not "rich". Rich to me means you don't have to go to work if you don't want to to live at a very nice lifestyle. Most people with families in America that make $250k have to go to work every day because to (1) pay a total tax rate of around 40% or more (state, federal, local, property, sales, hidden "fee" and "license" taxes), (2) live in a nice, not ostentatious house, (3) pay for private school (because the government schools in many areas are not up to par), (4) pay for college at ever increasing rates, (5) take a decent family vacation, (6) save for retirement (enough that you don't have to rely on social security, which may or may not be there), takes far more than $250k. If you say they can do without those things -- okay fine, but those are the basics of the good old American Dream, so if you want them to do away with one or more of those, then you're proposing changing the standard of living of most Americans. There are arguments to be made for changing Americans' standard of living, but I don't buy them when you're doing it to redistribute wealth and spend it on wasteful government programs. I can make far better decisions on spending my money than politicians, who just want to buy votes with it. For the record, I make $250 a year or so, live in a 2 bedroom condo, drive an 8 year old Toyota, save a lot of money rather than spending it, and have no kids. I can assure you, I do not feel rich, and I would far prefer fewer or no services from government other than the basic ones they are not providing currently, like protecting our borders and good infrastructure.

Guy's my role model all over again. His words and long-term view are like soothing balm to my tension-filled head. Despite admitting that our generation has huge problems to solve. . . Interesting that he is for a Value Added Tax and would not reform Social Security, but admits that unfunded entitlements are a huge problem.

This was exactly my analysis in buying the Wells Fargo tarp warrants. High chance of upside, with no limit to upside; low chance of zero return, with downside limited to warrant price. Also hold WFC common, but this is the better investment at this point in time.

I understand why you might have said this, but I don't see this as market timing -- more like taking some profits out when you've gotten them right, and preparing for possible opportunities. I claim no ability to predict when they will come, but I do think having ample free cash on hand is wise. Market pricing, not market timing. On APP, I understand looking for investments where the first reaction is "ugh", but on a quick perusal I can't see much that is attractive right now. What am I missing?

And, to be clear, I'm not sure what I just said is at all inconsistent with what you were saying, other than the fact that I think macro, while usually almost irrelevant to good value investing, is less irrelevant now, because it's such a huge wave to fight against.

I really appreciate the Japanese research, rick_v. I tend to agree that this is a time likely to have better than average and more than average value opportunities, but don't think it makes macro totally irrelevant in this environment, for a few reasons. First, one lesson I learned from the Q1 2009 period is to always maintain a bit more cash than you think you'll need, in case even better opportunities come up. I was already fully invested, and had to do the hard play of selling $.75 dollars to purchase $.50 or $.40 dollars. That was hard, and I still feel like I missed opportunities from having been too early. Since I see the strong possibility of similarly low market levels at least once or twice in the coming few years, I intend to keep more of a cash balance on hand and raise my standards to waiting until there are $.50 dollars that I can clearly identify, rather than jumping in as soon as I see $.75 dollars out there (though I have some of those too of course). Obviously risks to this as well if the market never dips that low during this period. Second, I consider the macro here to make this an exception to the normal rule of buy and hold, because I see plenty of opportunities for "round trips" in stocks -- buy low, watch them revalue up, but then watch them fall back down. I think there is something to Katsenelson's theory of us being in a "range bound market" over the next decade overall. You can make money in this market, but you need to watch for downward revaluations of the multiples as rising interest rates and inflation actually make the real value of securities go down.

I've been looking at these for a while, and tend to agree with Aberhound. I do recognize the risk that inflation will squeeze banks, but I also keep reading (from Buffett among others) that banks tend to match the terms of their assets and liabilities to minimize this. Might the squeezing depend on the rate of inflation, or more precisely the rate of change of inflation? Help. I look at these warrants as a fairly decent hedge against inflation, and with a slight possibility of deflation making them expire worthless. Haven't bought yet, but have been tempted.

Yes, is the problem solvable (I think it is, and they are already attacking that, as they have other problems in the past). And two, will this have a lasting negative impact on the brand. This one is a little harder, but JNJ knows the lesson -- take the hit, spend the money, and turn lemons into lemonade by actually using this to increase the public's confidence in their products in the long term. Likely to end up a replay of the Tylenol scare of the 1980s, which solidified JNJ's quality in the public's mind. At least that's what I hope will happen. I think they are smart enough and long-term thinking enough to pull that off.

I like Amex to hold its own in a high inflation environment, because they get about half their fees as a percentage of the transaction. Inflation is an incentive to spend today rather than tomorrow as well. They can raise their annual fees to match the inflation too.

shadowstats.com is the one I know of. He does a good job, if a bit more paranoid than me. He's economist trained from what I gather.

Definitely a reaction to the 13G. I can picture the heated call to corporate counsel and subsequent fire drill to get the plan in place. Law firm charged double for the quick reaction time I bet. My law school professor told me in M&A class that he had a rights plan he could get enacted in 24 hours if a company wanted, but they'd pay a high premium for that quick a reaction -- requires moving several lawyers at once from other deals is one reason-- but mainly because the firm can charge that much in those circumstances so it will. Typical flip over / flip in rights plan. Attempts to makes acquisition costs too expensive to be done through any method other than a negotiated deal. This forces a conversation, and thereby buys time, usually resulting in better deals for shareholders to get board approval to waive the plan attributes. It'll work too. Sorry Sardar. With corporate cash balances increasing to high levels, I've been wondering whether we might see a revival in hostile takeovers like in the 1980s, and a concomitant increase in poison pills and classified / dead hand board provisions. I think it's likely. Gordon Gecko redux in real life, along with the movie sequel? Sardar Biglari certainly is doing his part to revive the hostile takeover. Good summary of current state of hostiles and poison pills in US and foreign firms is here: http://www.bnet.com/article/what-is-a-poison-pill/215585 The tension between shareholder rights and board's ability to defend is always in flux. Sardar's too low hostile bids are actually a good example of why poison pills are sometimes helpful to shareholders (the exception that proves the rule, perhaps?). If hostiles become more common for small cap companies, we might start to see the pendulum swing more in favor of the board's ability to defend against hostile takeovers. Delaware case law on this is incredibly fact specific and nuanced, and often inconsistent depending on the Chancery judge and business atmosphere at the time. One intersting side note: Other states are slowly working to provide some variance from the Delaware model by revising their corporate codes to be more board friendly, while others work to remain more shareholder friendly than Delaware. To date, there has been only a little headway made into taking corporations away from being headquartered in Delaware, but that is changing a bit over time. Delaware is charging higher filing fees, increasing franchise taxes that are paid every year based on net assets or number of shares outstanding -- things that could slowly kill the golden goose. They are still by far the hegemon in incorporations, but that could erode a bit over time. Not so much that it'll hurt them I wouldn't think. Talk about a durable and wide moat -- Delaware's got one there!

Thanks, I hadn't seen that yet. Haven't digested it fully, but does this shed any new light on how book value will be affected by acquisitions? Wouldn't issuing shares for acquisitions, for example, increase book value for the company, but potentially reduce book value per share? Doesn't this just leave the decision of whether to include that in book value up to the discretion of the Compensation Committee, but strongly imply it would likely be included?

I'm still waiting for the mysterious Exhibit A to the comp plan, which to my knowledge has not been released. This document makes the plan an undisclosed agreement in my opinion, as it includes all the "adjustements" the Board will make for stock issuances, redemptions and the like. If the vote is looking bad enough, Biglari and the Board, and the Board bears equal responsibility for this mess, might draft Exhibit A to reflect more of a "rise in book value per share" concept instead of book value of the Company. This would make it seem like it was intended to be shareholder friendly all along, but if that were the case, wouldn't they have said so up front. Not to mention that waiting so long to disclose Exhibit A, causing the stock price to plummet while Biglari purchases shares in bulk smacks so much of manipulation that I'd be shocked if he weren't subjected to a shareholder lawsuit, and/or an SEC investigation. In fact, I'm shocked already. I guess the SEC and plaintiffs lawyers are hesitant because since he took the helm, SNS / BH has had a decent to good recovery overall in the stock, which would provide a pretty strong defense on the damages side.

This is a very good point, and probably does have real relevance to the comparison. I would just add a few countervailing points to the mix: (1) just as most households today are 2 income households (or were), and so have some income coming in still, most households require two incomes to stay afloat, or at least two incomes to keep spending the way they were and savings a bit for retirement. So, losing one of two incomes probably means doing away with the saving, and drags out the housing situation because they have enough income coming in to keep the house payment up for a while, but like a structural deficit, will require selling the home long-term to downsize to a lower overall monthly payment; and (2) the way unemployment is calculated has changed so much over the past 15 - 20 years that it is probably way undercalculated today from how it was in the 1980s (i.e., the government keeps moving the line whenever it suits them with respect to unemployment and inflation, for political reasons). Overall, perhaps it's a wash?

Too funny. And put his picture up in every restaurant too. Like the Big Brother of Burgers.

Prem seems to have a similar take to Klarman at least as far as overall concern for the macro picture. I read that Klarman considers gold to be a decent hedge against currency devaluation risk (that is, high inflation) but a very expensive form of insurance. Klarman has also bought deep out of the money puts on bonds. And of course, he is at 30% cash or higher, which he also considers a hedge. It seems the most respected value investors around are hedging against both inflation and deflation. The question is whether an individual can use these strategies. I know individuals can buy gold, though this is hard for a value investor to fathom or make sense of. What about the puts on bonds -- it seems to me that for small portfolios this is not really viable as a strategy, but I really don't know enough to say. Would like some help there is anyone is versed in this strategy. What other hedges are there available to an individual investor? I ask this having read and agreeing with Parsad's comment that Fairfax needs to be much more hedged than individuals. I'm holding high quality decent dividend paying stocks, and holding Fairfax and Berkshire, keeping 30% in cash. How else to batten down the hatches?

Opihiman, Just checking here, but are you saying you believe anyone over the age of 50 has lived long enough, and therefore they should be afforded less healthcare than those younger? Doesn't that sound exactly like being in favor of "death panels"? How else would you determine the level of health care that these oldsters over 50 deserve to get?

BYDDY for an unsponsored ADR issued by Citigroup representing 10 Hong Kong shares per ADR. BYDDF evidently is also available. I was unable to get this through Schwab without paying the outrageous commission through their international desk, but someone else on another string on this board said that was in error, and that BYDDF is an American traded ADR. I haven't tried again. BYDDY seems to work fine. I've held for about 16 months.

I had a similar take on BYD -- seems like that rare Fisher stock to me. I also have thought a lot about a speech Munger gives where he suggests that finding that one promising approach to investing that he and Buffett had not done, but he considered promising, was to "find that one in a million entrepreneur early." Munger said if he was a younger man he might well take that approach, and considered it a valid one if used super selectively. I think Wang Chuanfu might be such a person. Like a Sam Walton or Bill Gates (or Warren Buffett) type, that is just in the right place at the right time, with extremely rare talent to grow a business from a small to a super large stage. I would point out that Munger had the vision to see Buffett like that early on so his vote of confidence is worth considering. Serious hurdles, but BYD's track record is really impressive. They get more done in a quarter than most companies in a year.

Bronco, I do all the same things, and have pretty much the exact same approach you do. What I think mrstockwell and I are suggesting is that it is possible -- not necessarily likely, but possible, that this is one of the rare times when a buy and hold approach may not work out as well, or at all, due to a mechanism of the market. I'm saying this is one thing that is very worth considering right now. I'm not running for the hills, but I have to wonder about the liquidity issue. I just don't like it that each time someone has attempted to raise the issue, people say "that's not value investing" and no discussion ensues about that issue -- may be just that no one has anything else to say, but it seems to squelch some opinions. No offense intended though. Holier than thou was not intended to imply pompous -- more like judgmental about whether someone is doing value investing. I promise I'm a value investor -- just one wondering whether this is not a time to ease up on buy and hold a bit. Maybe the rare time, during deflation and market manipulation and lack of liquidity, when a bit less Buffett and a bit more Klarman and Graham are in order. Peace.

Of course I put in bids, but only after checking every possible source to see if I was missing something. I can't push buttons as fast as HAL though, so each bid was met with higher bids before my bid hit my own quote screen. HAL sees my bid in nanoseconds with his colocated servers, and acts upon it before I even see my own bid come through. So I got a few thousand shares in the 12's by placing bids way above market. I knew it was a bargain, and I knew it was no company-specific issue causing the drop, but what about the average joe? He is going to see a huge drop and blow out of it. Although I am in the business, and I run my business FOR my clients, I always tell them that it is the biggest pickpocket business on earth. Someone extracts pieces of flesh at every step, and this is just another added step. I hate it. Average Joe has nobody looking out for him, gets hosed every step of the way, gets blown out, and leaves the stock market forever. Things won't change until we get a bigger wreck than the one day mini-crash, and I am certain that wreck will come. [end quote] I for one am very glad mrstockwell is raising this issue, which I think is extremely prescient. I find it frustrating and kind of annoying that some on this site take a holier than thou attitude about "who is the purest value investor" because he raises a pretty obviously important question about the very integrity of the market, and the long-term effect that will have on individual investors who are being hosed, and coming to learn of it through such episodes as the flash crash. Buffett talks about how he asked Graham once about why the market eventually realizes the intrinsic value in companies. Graham's response was that he did not know, but it just did. But it can take years -- even a decade or more, to do so, especially when the market's integrity is questioned to the point where the average Joe no longer believes in it. So you can make the best value buy in the world, and not get the proper return due to a lack of true value-seeking mechanism happening in the market with long-term buyers. I'm not saying this will happen, but it is possible under these conditions, and it is worth examining how likely that is. I have friends in the fund of funds business with regular contacts with Wall Street hedge funds. Many of those insider types are expressing the very same concerns, and talking about how they can only "play the next government intervention" etc. They talk about how the Supplemental Liquidity Provider program is totally voluntary, meaning that those very liquidity providers that are now supplementing the reduced role of the specialists, can simply opt out on any given day. Welcome to flash crash city, which triggers all the stop losses, leading prices lower, until there are literally no bids in the queue. The better part of me tends to avoid chicken little scenarios, and so I see this volatility and lack of true liquidity as a potential deep value buying opportunity. So I went to 35% cash and am only slowly buying on dips. But part of me cannot help but wonder -- if these volatile prices are caused by HFT's, and in a rough enough market, they can just turn off the machines, leaving no bids in the queue, how long should we expect the average Joe to continue to trust in this type of market? They'll just stop -- and many of the well-heeled with money in hedge funds will redeem as well. Perhaps not to return for a long-time. My "less financially learned" brethren are already talking about how they are taking ALL of their money out of the market. There was a time not so long ago when the average number of Americans participating in the market was not 60-70% as it is today, but more like 10%. That could happen again. Even moving back down to a 40% participation level would be pretty problematic I'd think, though I suspect a working market can be supported at a very low level of players. But it won't be the type of market any of us are used to. It might be the best thing that happened to kill the casino and reset it. But it would be painful as hell on the way down and through that. Just ask any of the investors that lived through the 30s. Oh yeah, there are only about 4 left. I don't know the answer, but I sure don't think any other buy and holders know either. And it's certainly worth asking the question.

I've used BYDDY and still own a significant position in this company. This is much more efficient through my Schwab account than BYDDF, which can only be bought through the international desk, which would require at least 500 shares be bought, and charge a $100 commission (compared with no minimal share purchase requirement and the normal $8.95 commission for the BYDDY unsponsored ADR). I have tried to find out if there is any negative to purchasing an unsponsored ADR, but have not found any disadvantages, other than Citigroup's $.02 per share per year as the fee for administering the unsponsored ADR. Does anyone have any counter-information on that: for instance, do unsponsored ADRs have qualities that make them more unstable (other than the obvious one of possible liquidity problems, which can largely be effaced by judicious use of limit orders when buying or selling). Thanks.

I don't think so -- though it had me going for a while. I think it is run by Millit Pandit. through two separate portfolios called Annapurna and Diamir A.

Anyone know if this has to do with the Supplemental Liquidity Provider program? I have a friend that tells me on good authority that the participants in this program can voluntarily suspend their participation, leaving the market open to sudden drops in liquidity, which led to the Flash Crash and this Citi anomaly. Someone please tell me this is nonsense and Wall Street is not this stupid. This is playing Russian roulette with the confidence in the markets. This cannot be true.