bmichaud

Sorry I don't have the chart, but Moore you must have seen at some point in your career a chart of record high buyback programs at market peaks, and record low buyback programs at market lows. I am not smart enough to know the correct TIMING of when to buy stuff - what I believe I am smart enough to know is the correct VALUE of where to buy stuff. I like to adhere to the following....time an investment or value an investment, don't try to do both. If one looks at the long-term valuation of corporate America on a cyclically-adjusted PE basis, one can reasonably conclude stocks, as a whole, are not a screaming buy here. IMO, the fact that corporate America is buying back stock in droves right now is actually confirmation that stocks are not a screaming buy considering corporate America's prior track record of buying back stock.

CSCO, YHOO, HPQ (if it were to continue), IRM, BP (really, really wish they would), PEP, MSFT, are all very attractive buyback candidates, whereas companies such as COH, UTX, CAT, DE, XOM, CVX, OXY, TJX, are not given that they are near cyclical highs. My only point in highlighting that article is that corporate America, as a whole, is not the most efficient capital allocator of all time as evidenced by the high positive correlation between buyback programs and S&P 500 stock prices (i.e. large programs when stocks are high, and small programs when stocks are low). I do not at all agree with XOM, for example, buying back stock no matter what the price is. Nucor is very shareholder friendly - they issued stock near its peak back in 2007 I believe, in order to raise cash for the oncoming recession.

http://www.bloomberg.com/news/2011-08-11/buybacks-headed-for-third-biggest-year-as-s-p-500-plunges-valuations-fall.html# Corporate America is not exactly a capital allocation stalwart when it comes to valuing its own stock. If they were operating under shareholder-friendly principles, they would be distributing record cash levels in the form of special dividends at these levels and buying back stock at lower levels. Or better yet, stockpile (no pun intended) cash at high stock prices and buyback at low prices (the more tax-efficient practice).

Great article detailing why the Euro is inherently flawed, and demonstrates what would happen to the USA didn't have a central treasury mechanism available to counterbalance inevitable trade imbalances among states. http://pragcap.com/germany-is-also-to-blame-in-the-euro-crisis

The key difference between MMT and Austrian is that MMT believes current deficits are not high enough to the slack in the economy, whereas Austrians believe the current deficit is too high and we are at risk of a hyperinflationary death spiral if we do not cut the deficit sooner rather than later. Yes headline inflation has been uncomfortable over the last three years, but core inflation (whether we like it or not, the best gauge of inflation over time) has been tame and the current 30-year treasury rate has proven quite definitively over the last three years that the USA is A) nowhere close to running into a funding problem, and B) nowhere even close to a hyperinflationary death spiral. I won't even address the "arrogance" and "rude" comments after the abuse anyone with a differing opinion took a month ago on the "what a lovely frickin day....for reducing risk" thread for not swinging a large enough "line" in the market. All I would like is for everyone to take the time to read everything on MMT then step back and look at the bond market action over the past three years for currency USERS (i.e. the eurozone) and currency ISSUERS (i.e. USA and Japan) and reassess the outlook for inflation in the USA and the apparent need to reduce the deficit ASAP. If one reads MMT carefully, you will see that the imbalances you refer to, such as trade imbalances with China, are a natural result of global trade. By definition, for every trade surplus country there MUST be a trade deficit country - i.e. global trade is a zero sum game, unlike your recent comment that global GDP is a zero sum game, which literally makes no sense. I'm not going to continue debating this, because the debate will never end. All I want is for people to take the time to reevaluate how they look at how the economy works then come back and look at the Austrian side, which has been more than substantiated by you on this board (not a bad thing) whereas the MMT theory has not been discussed nearly as much.

I would encourage all who are interested in understanding how the modern monetary system actually functions from a mechanical perspective to A) put aside all prior thinking on the economy with regards to China "funding" our deficit, the potential for hyperinflation due to money "printing", and the USA eventually running into Greek-style funding issues, B) ignore anything Moore has said on the topic, and C) take a month to read anything on pragcap.com regarding how Cullen Roche, Warren Mosler, and other MMT proponents believe the monetary system actually works. After those three steps, come back and reevaluate your prior beliefs and understanding, and revisit Moore's posts. I'm not trying to stir anything up or be combative. This is a healthy debate and it would be much more instructive if most if not all members at least read through the MMT view point, as oppose to Moore dominating the conversation without actually refuting MMT on a point-by-point basis. It's very easy to adhere to the notion of "money printing", hyperinflation and the USA spending its way to a greek-style crisis without actually thinking through mechanically how our monetary system works.

Perhaps, but their call relied more upon their "long term leading indicators" in conjunction with ST leading indicators. Last summer, in the face of a sharply negative ECRI weekly leading index, they came out and said no double dip due to the configuration of their long term leading indicators.

I would go so far to add that perhaps the root of the problem should be addressed... Based on my experience, it is very psychologically uncomfortable to hold a large position in something that one must continually monitor - i.e. a business with a very uncertain economic future. Continuous monitoring is the result of needing to justify the investment every single day. The primary symptom of such a problem is irrational defense of the position - i.e. not seeing the other side of the debate, not defending the position with mathematical realities but rather hyperbole of potential future outcomes with no historical precedent, seeking out research that only confirms one's thinking, relying on experts who are of the same thinking, and most dangerously, relying upon the positions of other large investors to justify a position when in fact it may be a very small portion of their portfolio. I have been guilty of all the above, and have found the stress relief from reducing or eliminating the position to be simply amazing. Like WEB says, no position is worth it if it leads to even 5 minutes of lost sleep. Ben Graham, I would strongly encourage you to reduce the size of your LVLT position to a point where you can sleep at night. I think the offending posts that annoy every single board member would discontinue not because you want them to, but rather you won't feel the need to justify such a large position in LVLT on a daily basis. And better yet, you will have more capital to allocate to other investments!! There's more to investing than speculating on the highly uncertain future of a single telecom company. Part of the fun is the challenge and thrill of evaluating many businesses, even if you don't end up investing in 90% of them. You will learn so much just from the process! Ben

I think it was someone on this board the other day that WEB probably gave Rose a blank check for building upon BNSF's moat - when I saw this article this morning that's exactly what I thought of. Has to be one of WEB's more brilliant moves - not only is it an automatic investment for his successor (i.e. capital will automatically flow toward BNSF due to capital needs, etc...) but it puts BRK directly in line to benefit from global population growth. BNSF's competitors must be so PISSED that BNSF has the ability to invest nearly unlimited amounts without having to worry about quarterly reporting. Phenomenal!!

Agreed. Should have said, "...let alone a high-growth company CEO"

http://www.wired.com/magazine/2011/11/ff_bezos/all/1 I find the following quote to be highly impressive for any CEO let alone a tech CEO (perhaps not an accident Bezos is a former HF manager): I would love to be a shareholder alongside Bezos, but just can't get comfortable with the valuation here. Something tells me though that some one-on-one time with Bezos (ala Buffett and Geico circa 1951) and some deep-dive industry research may reveal a Google-like economic moat protecting Amazon. Ultra-low margins, IMO understate true economic earning power if one likens Technology & Content spending to marketing and/or R&A for a Kraft/Coke/Pepsi or Intel, respectively.

He finally bought after more than 80 years of observation (BG and WEB combined). I guess IBM's long term competitive advantage has now been satisfactorily established after a century of successful operation, as the other long term holdings mostly have a 100 year track record with excellent returns. Interestingly, my brother in law used to work for IBM. He says that IBM's new CEO is the very best manager he has ever seen. I'd classify its revenue history as more lumpy than flat as a result of steering the business in a more service-oriented direction. Here is the last ten years of revenue: 2010: $99.9 billion 2009: 95.8 2008: 103.6 2007: 98.8 2006: 91.4 2005: 91.1 2004: 96.3 2003: 89.1 2002: 81.2 2001: 83.1

In mid 2007 we had this as well, TED was elevated, CDS were going up but equity market ignored all this and kept going up. This might be rear view mirror thinking but I cannot help thinking how close the parallel is between the two. Hopefully, we have an equally wonderful volatility this time. Vinod This is exactly what I've been thinking, Vinod. Paulson et al were calling for a housing bubble well in advance of the market top in October 2007, Bear Stearns mortgage hedge funds blew up in July 2007, Watsa was shorting the market/buying treasurys - all the while, the market climbed to all time highs while investors ignored the burning house. My guess is that folks were saying that a housing market crash or an investment bank failure wouldn't affect their individual businesses....

They were buying when it fell below $3 back in August (http://sec.gov/Archives/edgar/data/1138995/000090514811001451/efc11-461_fmsc13g.htm). What's ur point? You argue in circles. arguing with you is going around in a circle. they haven't bought since August. it crashed right? they haven't bought any more. Like I said it's Tiny. It's minuscule for them. That point has nothing to do with your assertion that I am not considering the downside in the investment despite the fact that I said I would buy it at 50% of what I deem a conservative distressed valuation. I stated how I looked at it from a probability-weighted standpoint and you came back with, "the position is immaterial for Glenview". I'm not following. And as I'm sure everyone else is, i'm done wtih the conversation.

They were buying when it fell below $3 back in August (http://sec.gov/Archives/edgar/data/1138995/000090514811001451/efc11-461_fmsc13g.htm). What's ur point? You argue in circles.

For the love of God how am I not concerned with the downside? Why would I be trying to buy at a 50% discount to a BK valuation if I wasn't concerned about downside? Obviously the valuation can be debated, but obviously we can't debate unless you bring something valuationwise to the table. I've done my own analysis on CLWR using a myriad of sources, and citing those sources. Again, you have brought nothing to the table. Glenview did not emphasize one over the other, so I'm assuming that is your emphasis. Glenview doubled down in the equity back in August and now owns over 5% of the equity - they currently DO NOT SHOW UP on CLWR's list of debt holders. Hmmmmmmm. They must be speculating though. Again, a 2% position is by its nature speculative - thus you approach from a probability weighted standpoint. So if there is a 25% chance for a 10x return and a 75% chance of a $0, then the expected return is 2.5X versus just over 3X for the debt with a 100% probability. Everyone uses different probabilities. I would give the position a coin flip, i.e. a 50-50 chance of $0 or $10, so the expected return is 5 times. And you know that Glenview would move on to the debt though, right? You know that? Kind of like you know that Buffett did not intentionally allocate his portfolio between Generals and Workouts according to the general level of the market? I love the authority to which you speak - you talk to the board as if we were your children. It's quite nice.

Post #1 from you on this thread. You lead off discussing how UNP goes from $78 to $101. Post #2... Your wording would lead one to believe you were buying UNP.....my bad if you were not. ..... You mean the market perceives it to be worthless....If one believes in the long-term value of CLWR's assets, but at the same time believes there is a possibility for a distressed situation, why not buy the equity, which could be worth $10 to $15 in the event of a sale down the road, at a good discount to a likely BK valuation? I'd rather take a 2% position in something that has 10 to 15 times upside, versus 3 times. Again, have seen nothing from you on valuation despite speaking with apparent authority on the topic. You think those guys don't embed economic analysis into their margin of safety calculations? How about Watsa and Friedberg? Buffett saying we are absolutely not going into a recession is an oft-cited quote on this board as to why we should ignore general market overvaluation and the economy - no different than me citing an economic authority (ECRI) in order to defend my rationale for being cognizant of the economic environment when assessing securities and demanding an appropriate margin of safety.

You believe CLWR equity will receive nothing in BK, and I believe it will receive $2. I sold into strength and will buy back at 50-cents on what I deem to be a dollar of CLWR value. Last I checked I haven't seen ANY valuation math regarding CLWR or UNP from you. CLWR is an inherently fluid situation, and as any rational individual can tell from the thread, the valuation and circumstances are not nearly as set in stone as a typical investment. I didn't even need to disclose that I closed out my CLWR position. I just found out yesterday for the first time that bker_guy has been in and out of LVLT over the past decade (via his excellent long response over on the LVLT thread) - does that change my opinion of his analysis or thinking on the company? Of course not. Regarding humor - I routinely find myself chuckling out loud at the authority with which you speak on practically every topic that comes across this message board.

Burke, I'm hoping for the sake of your company (assuming you are in fact a CEO) that you're complete misunderstanding of the article I posted was due to perhaps the lack of a cup of joe or simply waking up on the wrong side of the bed. Perhaps you were thrown by the following from paragraph #5: One lacking an eye for detail would skip the link in the article, and thus conclude the author is faulting Achuthan for not giving a date for when the recession will hit (IMO, a BRILLIANT move by Achuthan - very much akin to Buffett not EVER giving a date as to when the market will turn around, but rather simply stating that stocks are a good buy at current valuations, as demonstrated by Buffett's "Buy American. I am." op-ed). So venturing down into paragraphs 6 & 7, we read: So there you go Burke. Yet again, you are sitting at your computer firing off responses to each and every topic posted on this message board with zero credibility or logic to any of them. Just admit, you are a trader NOT an investor. Otherwise, you would provide a much more logical response to my original post on this topic than simply stating you happened to catch UNP at $80 and since it rose to $100 there is no recession. Not once did you state why UNP was a good buy at $80. Why was it? What is your estimate of intrinsic value? What discount to intrinsic value do you like to buy at? What is your take on the FACT that D&A for railroads FAR outstrips maintenance capital expenditures due to the "old plant trap"? What are normalized earnings for UNP? It's unbelievable to me that more value investors do not seriously take into account the ECRI's forecast - as value investors, shouldn't we be celebrating the possibility of going back into recession? Shouldn't we be excited about the possibility for good business selling far below intrinsic value? Shouldn't we be excited about the hamburgers we all crave become cheaper to buy? I couldn't be more excited 8)

http://interloping.com/2011/11/07/liesman-vs-achuthan-and-why-investors-should-be-terrified-of-certainty/ Couldn't say it better myself.

UNP was trading around below $60 in January 2008 when ECRI came out and said a "self-reinforcing downturn has already begun" (see: http://www.businesscycle.com/aboutecri/trackrecord). UNP then proceeded to climb above $80 per share in August 2008.... so what you're saying is that when unp was $60 about 3 1/2 years ago that these charlatans made TWO recession calls since then (scaring the living daylights out of people) and unp is over $40 higher now. A holder of unp should have bought their jan 2008 call just as they should have bought their late sep 2011 call. they are contrary indicators whose sole purpose as far as I can tell is to create buying opportunities for those who can see beyond the fancy forecasts that in the end have absolutely no predictive power over investments. I was certainly buying heavily at the time of their recent recession call. I should have finished my thought. UNP subsequently declined to the $40s by the time the recession actually hit. UNP is actually a great example. I don't see the margin of safety buying it even in the $80s back in October. It's near peak earnings and it's heavily tied to the commodity boom. Unless of course you label your purchase in the $80s a "trade", then that's a different story and I applaud your keen timing. But if you consider it an "investment" then I wish you well. oh so you are saying they would have told you exactly when to buy it and when to sell it. I am sure the "helpers" on wall street appreciate the business and US Government appreciates the revenue. As for me, I don't believe they can predict the future any better than anybody else can so I let the business performance and price dictate my buys and sells. Ps: hindsight is 20/20. which is all you have going for you when you tell me that unp went to $40. and I never owned it in my life. it just happens to be, along with brk hathaway, a better predictor of where the economy is going than these guys. Not even remotely actually - just pointing out that stock prices move independently of the economy and saying that the country is OBVIOUSLY not going into a recession b/c a railroad company's stock has rallied is patently absurd. I heard a market pundit say the other day that b/c Wal-Mart's stock is rallying that means we're not going into recession - are you serious?? If anything, you could argue WMT's stock rallying is a sign the economy is going into the tank and consumers are trading down. Burke, back in late 2008/early 2009, were you saying a recovery was not possible b/c stocks continued to decline from the point Buffett declared it a buying opportunity in October 2008 into March 2009?? At least come out and give some real world analysis on the situation - how about some quotes from the UNP conference call regarding their outlook on the economy and where they think things are going. At least give us something more than the stock price movement.... unp has been steadfastly bullish on it's conference calls. they don't understand the recession talk. of course you know Warren Buffett who has data from hundreds of different businesses says we aren't going to have a recession. Black boxes I guess are always "sexy" to people. It pays to have a black box at your disposal. October 20 Two top rail execs are saying the U.S. is in a "slow growth environment" but not a recession. "I don't see a double-dip," Union Pacific's (UNP +4.9%) Jim Young says; with inventory levels "as low as they've ever been," any spurt in consumer demand would pose an opportunity. CSX's (CSX +1%) Michael Ward says the economy even shows signs of life. Earnings: UNP, CSX. 8 Comments [u.S. Economy] August 10th, 2011 therecession.org Warren Buffett doesn?t Expect Double-Dip Recession On Monday the billionaire investor Warren Buffet declared that the economy won’t backslide. He told the Montana Economic Development Summit that he saw “our businesses” coming back almost across the board. In addition, Buffett gave his Montana audience some banking advice. http://www.newsmax.com/InvestingAnalysis/Cooperman-US-Recession-Stocks/2011/10/18/id/414835 Leon Cooperman: US Will Avoid Recession, Stocks ‘Appealing’ Tuesday, 18 Oct 2011 10:12 AM The U.S. economy will avoid a recession and American equities offer “appealing valuations,” according to Leon Cooperman, the chairman of hedge fund Omega Advisors Inc. “Stocks are cheap relative to history, relative to inflation, relative to interest rates,” he said today during a presentation at the Value Investing Congress in New York. “The recent facts suggest the economy is accelerating moderately. Well there we go, something we can work with. We'll see who is right over the next 24 months.

Their current forecast is inaccurate. UCLA-Ceridian pulse of commerce index is down 10% annualized -- symptomatic of a recession if you ask their chief economist: http://ceridianindex.com/multimedia/video/September-PCI-Falls/ Appears quite coincident to me...... http://ceridianindex.com/ Buffett's set of businesses is a better indicator of the whole picture. That's my view. I put that link to the ECRI in there because it's interesting. I have more faith in Buffett-vision though -- he's got reports from boots on the ground. Thus he can see what the ECRI guy is missing -- the actual results and sentiment of the businesses. Eric, I went back and looked at what WEB was saying back in late 2007/early 2008 when ECRI came out with their recession call, and WEB was saying that there was a high probability of recession. I will admit it will be extremely interesting to see who wins on the economic assessment over the next year or two - WEB v. ECRI. I would argue that Buffett has the best businesses in the country that would most likely, as a group, tend to lag the economy going into a recession (save for his housing-related businesses, which he has said continue to remain depressed). Perhaps WEB is right. It also may be a matter of time horizon - Prem and Friedberg are very worried about the environment over the near term, whereas WEB is looking out over the next 100 years. I'd be curious to pit Prem/Friedberg against WEB regarding the depression-era environment we're in. I think WEB would say the capitalist nature of our economy is healing our economy slowly over time and that there is a very small chance of a depression-type environment going forward - I think Prem/Friedberg would argue differently. As I've said before, that's the wonderful thing about this business, we can all be right at the same exact time just depending on the time horizon! Perhaps CEO Burke will be right over the next five years with his UNP purchase, but at the same time I'll avoid UNP and like investments over the near term due to the economic risk out there and end up being right over the shorter term by picking UNP and other investments up at 50 cents on the dollar at a later date 8)

In the video, Acuthan says it's not any one specific factor but rather a "contagion among the forward looking indicators." IMO that's pretty self explanatory, but obviously they are not going to come out and go into detail about what they're looking at - they don't need to, they have the track record to back it up, including their "non-call" last summer in the face of a hideous WLI.

UNP was trading around below $60 in January 2008 when ECRI came out and said a "self-reinforcing downturn has already begun" (see: http://www.businesscycle.com/aboutecri/trackrecord). UNP then proceeded to climb above $80 per share in August 2008.... so what you're saying is that when unp was $60 about 3 1/2 years ago that these charlatans made TWO recession calls since then (scaring the living daylights out of people) and unp is over $40 higher now. A holder of unp should have bought their jan 2008 call just as they should have bought their late sep 2011 call. they are contrary indicators whose sole purpose as far as I can tell is to create buying opportunities for those who can see beyond the fancy forecasts that in the end have absolutely no predictive power over investments. I was certainly buying heavily at the time of their recent recession call. I should have finished my thought. UNP subsequently declined to the $40s by the time the recession actually hit. UNP is actually a great example. I don't see the margin of safety buying it even in the $80s back in October. It's near peak earnings and it's heavily tied to the commodity boom. Unless of course you label your purchase in the $80s a "trade", then that's a different story and I applaud your keen timing. But if you consider it an "investment" then I wish you well. oh so you are saying they would have told you exactly when to buy it and when to sell it. I am sure the "helpers" on wall street appreciate the business and US Government appreciates the revenue. As for me, I don't believe they can predict the future any better than anybody else can so I let the business performance and price dictate my buys and sells. Ps: hindsight is 20/20. which is all you have going for you when you tell me that unp went to $40. and I never owned it in my life. it just happens to be, along with brk hathaway, a better predictor of where the economy is going than these guys. Not even remotely actually - just pointing out that stock prices move independently of the economy and saying that the country is OBVIOUSLY not going into a recession b/c a railroad company's stock has rallied is patently absurd. I heard a market pundit say the other day that b/c Wal-Mart's stock is rallying that means we're not going into recession - are you serious?? If anything, you could argue WMT's stock rallying is a sign the economy is going into the tank and consumers are trading down. Burke, back in late 2008/early 2009, were you saying a recovery was not possible b/c stocks continued to decline from the point Buffett declared it a buying opportunity in October 2008 into March 2009?? At least come out and give some real world analysis on the situation - how about some quotes from the UNP conference call regarding their outlook on the economy and where they think things are going. At least give us something more than the stock price movement....

UNP was trading around below $60 in January 2008 when ECRI came out and said a "self-reinforcing downturn has already begun" (see: http://www.businesscycle.com/aboutecri/trackrecord). UNP then proceeded to climb above $80 per share in August 2008.... so what you're saying is that when unp was $60 about 3 1/2 years ago that these charlatans made TWO recession calls since then (scaring the living daylights out of people) and unp is over $40 higher now. A holder of unp should have bought their jan 2008 call just as they should have bought their late sep 2011 call. they are contrary indicators whose sole purpose as far as I can tell is to create buying opportunities for those who can see beyond the fancy forecasts that in the end have absolutely no predictive power over investments. I was certainly buying heavily at the time of their recent recession call. I should have finished my thought. UNP subsequently declined to the $40s by the time the recession actually hit. UNP is actually a great example. I don't see the margin of safety buying it even in the $80s back in October. It's near peak earnings and it's heavily tied to the commodity boom. Unless of course you label your purchase in the $80s a "trade", then that's a different story and I applaud your keen timing. But if you consider it an "investment" then I wish you well.