bmichaud

You guys should take a look at WPX Energy (WPX) - currently trading for less than $19. BV is $28 per share after deconsolidating Apco Oil & Gas. Apco is worth $5 per WPX share assuming $70 trading price and a 30% liquidity discount. Net debt less than 1x EBITDA, 18% of capital. The Company is shifting capex towards liquids plays, but gas is still projected to be 60% of production in 2012, so you have a nice call option on rising prices. The Rails are an interesting way to play gas as well, since rising gas prices will reduce the speed with which utilities convert to gas.

My bad - you guys are right, Tilson does double count. He's even more of an idiot than I thought. Further - on page 19 he says that BRK generates $12 billion of free cash flow, which assumes the $3.1 billion "Change in Insurance Reserves/Liabs." is actually sustainable cash flow.....very deceiving.

I will never be the first to defend Tilson, but in this situation he is right - pre tax earnings do NOT include insurance earnings. Look at any of Buffett's letters - he tracks non-insurance EBT and investments both on a per share basis. Tilson adds zero originality to the analysis, he just copies Buffett.

+++1 I think that every frickin time I hear him. I just heard him say the other night that with the Dow at 13,000, individual investors will now have the "all clear" that it's ok to get back in the water. Pretty scary when you think about it.

If you look at shares out as of quarter end for the last three quarters, they've actually been coming down. See attached. WFC_Quarterly_Balance_Sheet.pdf

Speaking of Buffett haters, did anyone see the clip on CNBC of Cramer bashing Buffett's stock picking and buyback philosophy? The clip is still up at http://www.cnbc.com/. Cramer says that Buffett is essentially a hypocrite because he espouses buybacks at prices below intrinsic value yet he "won't even buyback his own stock" - completely ignoring Buffett's rule of 110% of fair value. What a fool. Then he goes on to note that Buffett missed Apple. Unbelievable.

It is my understanding that, should we see "particularly weak markets", the market will offer him even better ways to allocate capital elsewhere. Makes sense! I was thinking about it like he would deliberately stop buying in weak markets, perhaps to preserve liquidity. But this makes more sense.

I thought it was interesting he said with regard to buybacks that, "....our bids will fade in particularly weak markets." What does that mean? Does not sound very Buffett-esque, but as usual, there is probably a much deeper meaning than I realize.

Book value growth has been less than 10% nine times since 1965, two of which were in 1973 and 1974.....

Except you happen to pick a stock, such as McDonalds, that is in a secular growth phase. Absolutely ridiculous. Why don't you use Apple or Priceline for that matter? The general investing public, which has a portfolio largely tied to the performance of the S&P 500, would have been better off selling back in early 2008 when the ECRI came out with their call and the S&P was at 1,300, then getting back in when ECRI said growth is set to resume in early 2009. Had the general public invested against the ECRI's call in early 2008 as you would recommend, they would have barely broken even through right now. Seems to be a pretty darn good way of avoiding a market decline, IMO.

Makes sense. Would be an interesting study to see how much refis have boosted consumer spending since FYE 2008.

Purely my opinion, though I'm sure there is data out there that specifies how much of the overall consumer deleveraging is due to actual paydowns versus charge-offs. Yes the pop in jobs is weird (Though I think it is explained by an unseasonably warm winter, or perhaps....the data is wrong - see the first paragraph of page 6 of the attached document), but isn't job growth suppose to lag spending growth? If so, then wouldn't it take a little while for job growth to decline if spending is just now starting to decline? Employers have experienced increased consumer spending over the last quarter of 2011 thus they don't feel the need to shed employees. Just now consumer spending is starting to decline, so won't employers only just begin laying off workers right now, then accelerate it as spending declines even further? Who_Took_My_Easy_Button.pdf

So due to 5 months of declining disposable income consumer spending is now set to decline, which a slowdown in job growth will follow. Makes sense to me, perhaps I'm reading it wrong? IMO, since the overall debt load is too high for the private sector as a whole, we're reducing our spending in order to pay down principle, thus negating the effect of how cheap it is to simply service our debts.

Yes he wasn't pounding the table. He simply presented the facts. Here's a video from early 2008 - tell me it does not sound eerily similar to what he was saying now: http://www.bing.com/videos/watch/video/making-your-money-work/3x7ta1ym Of course the economy isn't as bad now as it was back then. But you don't think there will be negative consequences for market participants when economic data begins turning negative? Look at what happen to the equity and risky credit markets back in August when we had a "0 job growth" print. But as value investors none of this information is pertinent since we're buying with a margin of safety.

http://www.businesscycle.com/news_events/news_details/5047 I'm not seeing the spin here. he lays out a pretty coherent case for why the economy is weakening and why recent strength in the data does not negate their call. We'll see what Dr. Buffett has to say on Monday.....

For someone that doesn't care about economic projection, you're johnny-on-it this morning. FWIW - YTD, rail carloads are up .3%, intermodal is up 2.2%, and ton-miles are up 1.3%. See attached. 2012-02-23-railtraffic.pdf

Agreed. Starting to think HFs are more of a contrarian indicator than anything. I read a great quote today by Ned Davis that does a superb job of explaining how group think like that of Paulson almost never works:

http://www.bloomberg.com/news/2012-02-15/paulson-says-euro-will-probably-unravel.html Will be interesting to see if all the HFs out there reducing risk (however that may be defined) and not loading up on BAC will end up being right over time. A lot of the HF selling of financials over the last six months of 2011 was due to concern over the Euro - were those funds the "crowd" that overreacted or will they end up living up to their "smart money" name over time?

It really is amazing the natural capitlist juices that drive our economy Buffett always cites - even when one particular sector such as housing is down, the natural gas industry is doing its best to pick up the slack. Or like you're saying Parsad, with a weak remainder of the world, others will begin to flock toward American-made products and American companies will bring jobs back here.

Glad you posted this - wonderful interview. Makes me question Berkowitz's thesis that this banking cycle is like the 90's...we could be in for a long deleveraging period that will very much delay the banks returning to "normal". Though I think BAC could be a different story given that it is a restructuring thesis selling far below BV.

Interesting divergence from recent improving data here: http://www.ceridianindex.com/userfiles/file/Index-Report-Jan-2012.pdf Gotta love this here as well: http://www.calculatedriskblog.com/2012/02/sf-fed-president-williams-vital-that-we.html. Let's just keep inflating assets in order to make consumers poorer over time via lower prospective returns and over-spending as a result of the wealth effect.

OECD Area -2% YOY China -2.4 Euro Area -5.7 USA +.6 The US economy is behaving like an absolute rockstar in the face of what is now looking like a wretched call by the ECRI. Buffett/Parsad/Burke/Moore et al were spot-on dismissing the US recession claims - wonderful call! OECD_Leading_Indicators.pdf

Well said Merkhet - this is actually a very useful discussion, and it certainly has me thinking.

Just finished with the report. Very basically, if OPAP revenue relies upon Greek citizens gambling, isn't that a risky proposition in a depressionary environment? The counter to that would be those generating revenue for OPAP are non-Greek citizens - but I do not know that from the annual report. Revenues are declining at the moment, and why would they not continue to decline in this environment? They do have two new lotto games potentially coming online, however.....

;D ;D Why only BAC? It's my only long position. My only short position too (short term put hedges purchased recently). Wow!! That is awesome, seriously. Love the conviction. 8)