merkhet
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Posts posted by merkhet
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The moat that I find most fascinating is brand. In "Poor Charlie's Almanac", Munger gives a great description of how Coke's brand has been bootstrapped over the past 100+ years. The short version is that Coke plows its earnings back into marketing, continuously rebuilding its lead in customer mind-share. By always spending more than its competitors on marketing, Coke maintains its lead and makes better profits because of it.
Another good example of this is Tylenol. It's so interesting that a product that has cheaper and equally effective competitors on the same shelves manages to own 35% of its market. Unlike Coke, the recipe is public knowledge and can be readily produced. And yet, people still prefer to pay the premium for pain relief.
(1) I'd say that Coke doesn't just spend more than its competitors -- it's spends more intelligently. (http://www.nytimes.com/1990/01/26/business/company-news-coke-disney-pact.html) Children in the happiest place in the world think back and think of Coca-Cola.
(2) Tylenol's spending was arguably front-loaded while it was under patent and created a brand name effect. In other words, it's sort of like the Tiffany's blue box effect.(http://www.neurosciencemarketing.com/blog/articles/is-branding-dead.htm) People may perceive the brand to provide more pain relief specifically because of an association to the Tylenol brand name and not to, say, CVS or Walgreens brands.
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Left or right, the Country is being held hostage by a minority which makes no sense.
HOLY CRAP! You guys have a QUEBEC too??? :o
LOL!
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I'll be at the AM.
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Thanks for the independent verification!
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Didn't M. Smith screw over the MFC shareholders when TTT folded MFC into itself? (Or was it the other way around?)
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txlaw, I called the number at the top of the press release and was told that the "Afternoon with Charlie" will not be held on May 4th, 2011. They are still going to do it, but they just haven't decided on a date yet.
Perhaps someone else would like to make a secondary call to confirm? (I say this only because the nice lady on the other end did seem a little confused between the Annual Meeting and the Afternoon with Charlie -- but that could have just been that she was busy fielding calls all day.)
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But by definition, wouldn't you expect the price of stocks rise to keep pace with inflation? And with the same thought, cash becomes devalued.
That is what I would think. Deflation you would want cash to buy cheap. Inflation you would want to be fully invested, because cash will loose value where caeteris paribus stocks should keep pace with inflation.
--Eric
Check out Charlie Munger's performance during 1973 and 1974 the last time we had stagflation. Presumably, he was invested in good businesses that were trading at a fair discount to their intrinsic value. (After all, it is Charlie.) However, that was no buffer for the concomitant drop in stock prices.
Now, if you mean inflation outside of the possibility of '70s stagflation, then you should be invested in companies that have pricing power commensurate or greater than inflation -- but I think we're not in a period of normal inflation.
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I would think you'd want cash.
Inflation: (assuming something like '70s stagflation) stocks fall, you'll want dry powder
Deflation: (assuming something like '30s deflation) stocks fall, you'll want dry powder
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Absolutely significant. Warren is a Carnegie disciple, so he's very careful about praising individually and criticizing categorically (or even never).
I think both Warren's choice of words and Munger's recent slip differentiating Munger's long-term BYD stake are both indications that while Sokol may not have strictly violated any insider trading laws, Sokol skated too close to the line and possibly violated Warren's ethical ideals.
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ValueCarl,
I think the high valuation in 1H2010 was goosed a bit by Warren's purchase, no doubt. However, I think a lot of it also had to do with going from 100,000 units of auto sales to 450,000 units of auto sales in a year. Now, the market did what it normally does -- and overreacted on the upside. However, I think it's a step beyond to say that "[Munger] and Lu NEEDED Buffett's endorsement..."
Also, the Chinese government has returned the BYD real estate seized in last October for a nominal $9 million fine. I believe the press release came out this week. Price of doing business in China.
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I would bet my last dollar that Munger is above reproach.
ValueCarl, I think CONeal is correct. Munger owns about 50% of Li Lu's fund which they established years ago. Li Lu then was the person who initially found and invested in BYD. LL Investment Partners (Li Lu's fund) owns 2.5% of BYD -- maybe it's 3% now, I don't know.
Berkshire picked up its ownership in BYD through the MidAmerican subsidiary. Berkshire did not invest in Li Lu's fund.
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I love Netflix's CEO... I just wish I saw value in the shares so that I could let him manage a business with my money.
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Out of curiosity, when you're reviewing 10 years of 10-Ks, do you start from the most recent year or ten years back. And why?
I like reading from ten years back so that you can get a feel for the development of the company.
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Sokol also mentioned that Munger owned 3% of BYD before Berkshire acquired it, but I suspect Munger had his shares much longer.
Sanjeev,
Any idea whether Munger owned his 3% through his own account or through his investment in Li Lu? If Munger held his shares through Li Lu or even picked up shares near when Li Lu first started picking them up, then he would definitely have had them for a few years before Berkshire had even heard of the company.
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I hate Squawk Box, but I'll be watching for sure.
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I think it's very interesting the way that Warren said the prior two times, they tried to talk Sokol out of resignation -- but this time he didn't.
I think that's as close to a "firing" at the upper echelons as it gets at Berkshire Hathaway.
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I still can't understand why Buffett shows up on CNBC. Cheers!
Warren wants to reach more people. CNBC has a larger viewership than Bloomberg. Specifically, CNBC has a larger viewership in lay people than Bloomberg, for sure.
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Harry's argument is right from this point of view. But Sanjeev's argument has great merit if the analyst is very good and very careful.
I think it just boils down to how most people view the world. For instance, when I was in law school a criminal procedure professor boiled down the entire subject into one phrase - "you either trust the cops or you do not."
On Harry's side, he is correct that if you cannot a priori sift through "value" stocks with some granularity and determine the "best" ideas, then wider diversification (in the sense of more positions and possibly industries) will protect your downside while not necessarily limiting your upside to a degree that would keep you from outperforming.
On Sanjeev's side (and Mungers), he is correct that if you can a priori sift through "value" stocks and with at least some confidence determine an order to stocks that ranks them based on some "best" criteria, then it is in fact irrational to put more money into your #20th+ position than to add more money to position #1.
So as the criminal procedure professor would say, "you either believe in a priori stock picking ability or you do not."
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I'm curious about this as well.
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http://cornerofberkshireandfairfax.ca/forum/index.php?topic=2753.120
Continuation of discussion from the above link.
"There is just no way, that you can consistently get better results from your 20th to 50th best idea, than from your 1st to 10th best idea. Not on a regular basis. And if those 10 ideas are not correlated industries, you will do perfectly fine over the long-term. In my opinion, better than any other method that can actually be replicated by more than one person! You don't have to take my word on that...just take it from Buffett and Munger:"
Again, check the Validea link. It's not even a debate. 20 stocks perform better than 10 in Graham's system.
You're right, it shouldn't be about someone's "word," it should be about evidence.
Remember, Harry, when you say that "20 stocks perform better than 10" in Graham's system, you're saying that the 20 stocks in the 20 stock model portfolio performed better than the 10 stock model portfolio. I know it seems obvious that you're saying this, but you have to think about the assumptions you've made:
(1) That the ordering of the stocks is based somehow on the ordering of the stocks in between the two portfolios. For instance, best ideas #1-#10 are in both portfolios whereas best ideas #11-20 are only in the 20 stock portfolio. This may be true from a quantitative standpoint (there's some arguments against that as well), but you're neglecting any qualitative assessment of the stocks in either portfolio. In other words, what if the "best" idea was actually in the 20 stock model portfolio but not in the 10 stock model portfolio?
(2) I might be making an assumption here, but I think that in using the 10 and 20 stock model portfolios in your discussion, you're assuming that if 10 stocks are good and 20 stocks are better, then your 100+ stocks are even better. Of course, taken along its logical trajectory, one would assume 1000+ stocks would be the best, though that would fly in the face of common sense because the more stocks in your portfolio past some point, be it 100, 500, 1,000 or 3,000, the more likely you are to be modeling an index.
Oddly enough, despite what I just said, I don't disagree with the argument that a portfolio with 100+ names can outperform. I just think it's much harder to outperform with 100+ stocks than with <10 stocks.
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Previously 8 positions (some concentration in resources), but I'm now down to 1 position (non-resource) as of a month ago.
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To answer your question, yes. I'm buying everyday. Consider that Warren Buffet as far back as October 2008 was willing to shift from treasuries to stocks when the S&P was at the exact same spot as today.
No opinion whether it's a good time to buy stocks now or not. (Sort of depends on the individual stocks.) However, I think you might be a little off on your S&P levels in October 2008.
Warren published his Buy American piece on October 16, 2008 -- http://www.nytimes.com/2008/10/17/opinion/17buffett.html
On October 16, 2008, the S&P opened at 909.53, hit a high of 947.71, hit a low of 865.53 and closed at 946.43. October 1, 2008 opened at 1164.17 and closed at 1161.06. On September 22, 2008, the S&P opened at the 1255 level before falling to a close at 1207.
Remember, Warren is very precise in the way that he speaks and/or answers questions. His exact words are: "So ... I’ve been buying American stocks." and "If prices keep looking attractive, my non-Berkshire net worth will soon be 100 percent in United States equities."
The only conclusions that we can draw from what he wrote in that New York Times Op-Ed are that (1) he had bought American stocks prior to October 16, 2008 (-- possibly as early as September 22, 2008 but uncertain) and (2) as of the date of publication, if stocks continued their fall, he'd be 100% in U.S. equities.
Of course, as of the date of publication, the price of the S&P was roughly 28% lower than the current level. So, if we're using October 16 as the reference date, then Buffett's Wilshire to GNP metric would be sub-70%. Also, if we're using October 1 as the reference date, then Buffett's Wilshire to GNP metric would be sub-80%. (Rough numbers, and I know that total market cap is different than Wilshire...) I think we're still at 90% or so, and if I remember Buffett's metrics correctly, sub-80 is where he indicated broad markets would be undervalued.
Again though -- it's the cheapness of the individual securities that are within your circle of competence that matters and not the broader level of the markets.
FWIW, I was actually fortunate enough to be worried about oil prices two weeks ago and went 87% cash. (Better to be lucky than smart.) So far, I've seen a few things that are intriguing, but they haven't been cheap enough for me to pull the trigger.
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It's too bad the regulatory agencies are toothless. I agree with cwericb that this is a story that needs to be told, but I wish we didn't need to spend shareholder money on it.
Greece's debacle
in General Discussion
Posted
http://www.calculatedriskblog.com/2011/07/greece-update-s-says-proposed-greece.html
Oops. This makes things a little tougher for the "kicking the can down the road" crew.