prunes

The press release this morning specifically talks about the potential of porting skype to Windows phones. This idea I love. The notion the telcos promulgate that voice and data service are different is so false. It's all data! It's inevitable IMO that eventually they will be treated equally.

The Austrian economists have an interestin view of deflation: they view it as a normal reaction of the economy to it's previous exuberance. I think a moderate amount of deflation is OK and that the fears people talk about are overblown somewhat. It is harmful for people (and countries) that are overleveraged though. I think the Fed is afraid enough of deflation that politically it is impossible, but Japan experienced it despite massive intervention so what do I know?

Apple's success, in my opinion, is largely due to Steve Job's design aesthetic of simplicity and sleekness. I don't argue that Apple isn't a great innovator but I might liken it to running on a treadmill. You can't stop. Contrast Apple's moat with Microsoft's, all else being equal. Whose moat would you rather have? For companies that are such darlings of Wall Street, I am surprised when I see the relatively low multiples that AAPL and GOOG are trading at.

How did you evaluate the $60 vs the $65 calls? The $60s seem like a better deal to me although I don't know as much about options as I imagine you do.

I think the ending of the anti-trust settlement is being completely discounted by the market. Think about the potential, with its preexisiting user base, if MSFT wanted to compete against NFLX, the iTunes store, etc. MSFT has been afraid of throwing its weight around.

-emerging markets penetration, reduced piracy -monetization of bing (currently a $2 billion drag on earnings) -the anti-trust settlement with the US Govt ends in May Another possible idea would be to consider potential spinoffs, although I don't have any specific ideas in mind. MSFT is large enough that it is difficult to manage effectively.

The rumor mill is talking about MSFT incorporating Kinect technology into Windows 8. Done right, that would be a game changer: http://www.winrumors.com/microsofts-kinect-integration-spotted-inside-windows-8/

The value line survey for HPQ is actually free: http://www3.valueline.com/dow30/f4341.pdf To say that HPQ is very cheap by historical standards would be an understatement.

Per Value Line: Rev. as a % of total (and of op. earnings) in Q1’11: Imaging & Printing, 21% (27%); Personal Systems, 32% (16%); Enterprise Storage & Servers, 17% (20%); Services, 27% (33%); Financing, 1% (2%); Software, 2% (3%).

The majority of Apple's earnings come from phones and music sales. Windows and the office suite have an enormous moat. In this regard MSFT seems to have much safer earnings to me. HPQ's stock is priced so cheap, but it is in a bad industry and has no competitive advantage. I don't know how you handicap it.

James Grant ran a fund that had tried investing in Japanese net-nets that shut down in 2010 after having operated for 10 - 15 years due to the inability to realize the value of its holdings. I think he talked about this either in his stint on King World News or Wealth Track.

Per Barron's:

At my local library its available in the reference section and can't be checked out. Not surprising when used copies sell on Amazon for nearly $1,000!

Can you elaborate on that last statement? Are you going to buy shares or options of MSFT?

The idea is compelling. The biggest risk seem to be speculation prior to the reweighting, but this seems to be more of a risk with INTC than MSFT. The other thing I note is that with BRK, I think more shares were purchased (4% perhaps) than with MSFT and INTC (only approximately 0.4%). Is this enough to move the needle significantly? Are there other ETFs that track the QQQQ that will also bring buying pressure?

Thanks I had actually been meaning to rewatch this. I've never heard of Greg Alexander and know very little of Li Lu. Do you know of any good resources on those two?

I am reading some of the free material published by Grants over the past few years and I love it. I would like to subscribe but it's cost--nearly $1,000 per year--puts it outside of what I can afford. I also have seen some of the material in OID and think it is a high quality publication as well. At $300, this is more affordable, but it doesn't seem to be very active these days. Are any of these newsletters actually worth subscribing to an amateur? Will he amount and quality of the ideas outweigh the cost? What do you subscribe to?

I suppose you're right. Jan 2013 calls on TBT don't seem too terribly expensive.

Unfortunately the profit potential isn't there using the 2-year options. Also just a bit of warning, I actually made a math error above so the potential profit is a little less but still exists. Also, in my mind, the risk of rising inflation on REITs dwarfs any benefit from hedging inflation in my mind. Of course, it's impossible to know whether this risk is already priced into the market (judging from how stupid the market's price action has been the last few months, I don't think this is the case).

Many commentators are speculating that June 30 will mark the end of QE2. In advance of an anticipated rise in Treasury yields, Bill Gross's flagship Total Return Fund sold all its Treasury holdings and is now net short. In his latest letter to clients, Gross speculated that Treasury yields are at least 100 - 150 bps too low. The big question that should be on everyone's mind is, if the Fed does stop buying Treasuries, who will step in? The only way demand will pick up is with increased interest rates. Anyway--I've stated several times on this board that REITs are very unattractive to me because of interest rate risk. With a defined date for the potential end of QE2, I'm thinking about buying REIT puts. Some back of the envelope math: Simon Property Group's (SPG) dividend currently is $3.20, or 2.91% at a current share price of $110. If we assume that the 100 - 150 bp increase in Treasuries will flow through into demanded yield on REITs, SPG should need to yield 3.91% - 4.41% after QE2 is over. If earnings don't increase, this would translate into a decline in share price of 26 - 34%. On the conservative end we're talking about a share price of $82. $105 Jan 2012 SPG puts are $8.65. If the price of SPG falls to $82, you stand to make nearly 125%. If SPG falls to $73 (the less conservative end), the potential gain increases to 225%. The biggest risks in my mind are timing--how long would it take the end of QE2 to funnel into the stock market--and, more importantly, whether the Fed will look to a QE3.

Very clever, SD :D

Oh I nearly forgot to mention. I want a manager who has a substantial portion of his and his family's capital tied up with mine, like Buffett did when running his partnership, and like Bruce does now. Also, can you really search for a manager based on prior performance? I think a lot of studies show that the best performing managers one period are the worst the next. That doesn't seem like a good way to evaluate in my opinion.

I'm really young and have a lot more money than most people my age, primarily as a benefit of living at home and saving while making $60,000 a year straight out of college. Unfortunately, all this money has been gaining practically zero interest thanks to the Fed and I don't see many good investment opportunities at the moment. I'm comfortable managing a portion of my portfolio but I feel like it might be a good idea to have a professional money manager handle the rest--say 50%. I guess you could say I'm looking for help finding an investment manager. Obviously I want someone value oriented. I'm OK with my money being tied up in illiquid / unusual securities. I respect guys like Bruce Berkowitz, etc., but I don't think his Fairholme Funds are nimble enough due to their large size. So what I'm trying to say is I'd be comfortable investing with someone smaller and less well known as long as I was certain of their integrity, risk aversion (demanding necessary MOS), etc. Any thoughts / suggestions?

Can you give me the one paragraph summary on why you like ROIC? As of 12/31 they owned 17 properties and a bunch of cash. Why do you find that compelling?

Which professional investors would you say are the best at special situations investing of the type espoused by Greenblatt in his first book: merger securities, spin-offs, restructurings, etc.? I know that Klarman would probably the first pick on most everyone's list. Who else?