Carvel46

Also...interest rates were high and the market's valuation was low in the late '70s.

twacowfca, good points! I have learned a lot from VII and Tilson's writings (although, more from this board with its diverse viewpoints). The financial and teaching duel roles make me uncomfortable. It's hard to serve two masters! I realize this a standard value investing thing--to practice and to teach. Warren being the model for this...a kind of public apprenticeship.

Good article. "Mr. Outside," I like that. I tend to distrust a fund management that spends any time marketing. Tilson's constant media appearances suggests an asset gathering mentality. Does marketing help investment returns? At big shops I suspect it hurts returns (a few big shops even have marketing bans). At small shops maybe there's a small benefit to idea generation through networking.

Calonego, what's the Philadelphia Consol story?

Thanks, that's what I thought. Some life insurance companies are selling no-lapse, variable universal life policies... pricing seems to vary widely. A few companies have competitive pricing. Anyone have thoughts on or experience with no-lapse VUL policies? AAII.com had a decent article on VUL policies: Variable Universal Life: Astute Management Required [it's behind a pay wall]

Parsad: What do you mean by? "But the Japanese life insurers also wrote far fewer variable life policies unlike North American insurers who favored them...we are already seeing the initial effects of these policies." What are the effects on American life insurance companies of a high mix of variable life policies?

Great thread. I tend to vary between 1-5% position size (although 10-30% in retirement accounts). I find myself not wanting to own something unless I can see myself building 2.5-5% position. This confidence usually comes down to management's capital allocation, valuation, industry structure/business quality The 20 hole punch idea is challenging... but a wonderful metaphor. What do others look at for getting confidence for 5-10% + position size? Great article about Michael Price and how he handles position sizing: http://www.gurufocus.com/news.php?id=105074 "What do we do to give us conviction? 1.) Find compelling bargains, not slight bargains. 2.) Test everything with sensitivity analyses. 3.) Prepare to be wrong. It’s not courage, it’s arrogance, when you buy something, you’re saying you’re smarter than everyone else. We realize we have lots of smart competition and temper our arrogance with humility to realize that many things could go wrong. Our own confidence matters, and we’re highly disciplined buyers and sellers to avoid round trips and take advantage of short term sell offs." - Klarman (May 2010)

I agree with Parsad that this is standard recession behavior by the consumer. UK club culture will be just fine. Although, I did read an interesting article about Japan (I hope it wasn't already posted): http://www.nytimes.com/2010/08/22/opinion/22kato.html I don't mean to start a big discussion about the macro similarities and difference between Japan and US. I just thought it was an interesting op-ed.

Awesome blog. It looks like the RSS Feed is the same...is that right?

Watching Lampert's capital allocation skills at Autozone was a thing of beauty. When Lampert moved into AZO, I worked at a buyside shop and our retail analyst totally missed the '01 move. What Eddie was doing didn't fit into his major mental model. He lived in the standard retail paradigm--comps, square footage growth and over-investment in stores. The false god of growth (growth with low ROIC). biaggio: Interesting comments. The tight fisted capital allocation to stores and the importance of the brands (vs. retail) confuse many retail analysts. Autozone has great store economics.... Sears doesn't, but maybe this doesn't matter because the brands could go elsewhere in a full or partial wind-down!? Plus, there is the current FCF and the RE. Thanks for the discussion... especially on valuation!

Retail founders gives me the creeps... Maybe it's the militaristic roll out model inherent to retail. Retailers faces a lot of operating challenges in growing square footage. Rick_V: Is EBITDA depressed? If so, what's normalized earnings look like? What are your thoughts on Charney? Wikipedia has some basic: "In 2004, Claudine Ko of Jane magazine published an essay narrating multiple sexual exchanges that occurred while spending time with Charney. The article alleged that Charney consistently propositioned his employees. Charney admitted that he repeatedly referred to women as "sluts" and "cunts" in front of employees, in a deposition on another sexual harassment case, and denied that "slut" was a derogatory term. The article's publication brought extensive press to the company and Charney, who later responded that he believed that the acts had been done consensually, in private and outside the article's bounds." http://en.wikipedia.org/wiki/Dov_Charney

Parsad: How can I pull up info on Dine Out in Frankfurt?

Myth465: How do you get to 1x FCF on LNET? On a quick glance, shouldn't you include the debt in there? EV is what matters, not MV.

watsa_is_a_randian_hero: Yes, it has the same effect... but depends on the size. Can the effect be quantified? Otherwise, this is just a theoretical discussion... unfortunately, the discussion is against a backdrop of huge amounts of lost shadow banking. Maybe the U.S. did take more drastic steps than Japan... I'm unclear on this. We do have a more flexible economy, younger with population growth. But it doesn't seem like we took our medicine, I suspect because we did not have the safety net that Sweden had in 1992. Not sure Japan's excuse? Maybe it's also cultural? It often seems to come back to culture... Nice job implementing your portfolio.

watsa_is_a_randian_hero: I agree. Yes, I believe deflation can be stopped with fiscal stimulus... as your tax credit example alludes to. The problem is that U.S. culture does not take kindly to fiscal pump priming (even when it's pro-growth like gov-funded, early stage R&D). And, QE, in our current context, simply seems to encourage speculation--pushing investor out on the risk curve. Although, eventually investors have to ask what multiple they are willing to pay in a slow growth economy with frequent recessions. I'm curious how do you think about inflation/deflation in regard to picking specific investments? Higher MOS? Income?

alertmeipp: How will the government make sure there is inflation? Jawboning? I believe monetary policy is broken I'm not a believer in QE. Even if it's bigger than Japan's, I don't believe it works in balance sheet recessions. As for fiscal policy, the mid-term elections will rule that out (I think). Cardboard: I am/have been in the deflation camp b/c we did not take our Austrian medicine, in regard to asset write-downs at banks. I don't buy the common argument that we're "earning" our way out... makes no sense from an economic growth perspective. Yes, the banks are "earning" their way out (over 10 years), but we, as an economy, are not... just look at the shape consumers are in. How is income growth?

Actually, Clinton repealed the Glass-Steagall Act. http://en.wikipedia.org/wiki/Glass%E2%80%93Steagall_Act Finance's ideology runs deep in both parties.

Great interview (27 minutes)... http://www.forbes.com/2010/05/27/greenwald-amazon-apple-intelligent-investing-video.html

Personally, I don't buy the inflation meme that is going around. If I were a regulator today, I would be desperate to encourage this meme. PragCap has an interesting article responding to Einhorn's NYT article. http://pragcap.com/talking-ourselves-off-the-edge-of-the-cliff

How common is a hurdle rate for hedge funds? I've seen Pabrai discuss his 6% hurdle, a la the Buffett partnership, but otherwise how common is it? Maybe it depends on the how much "skin in the game" a manager has. (Pabrai already had seed money from a business sale to start his fund.) What is Sardar's personal (rather than controlled) ownership in BH?

"... In finance, progress is cyclical." What a great line! I love the way he views asset management as a profession, not a business. Quite refreshing.

Sorkin on CSPAN http://www.c-spanvideo.org/program/id/215041 Interesting perspective on Buffett's political savviness...

Michael Norton, Jeana Frost and Dan Ariely (2007), "Less is More: The Lure of Ambiguity, or Why Familiarity Breeds Contempt". Journal of Personality and Social Psychology. Vol. 92, 97-105. http://web.mit.edu/ariely/www/MIT/Papers/less.pdf

This is what happens when the Lollapolooza Effect inflects in the opposite direction. It's in the too hard pile for me.

I remember a comment Krugman made about 9 months ago recalling his various ideas for Japan during the early nineties. The one I remember is to convince the population that strong inflation is coming... that this belief, if widely held, might cure deflation. Then, he laughed it off... uncomfortably. Curious... Did Japan do quantitative easing during the early 1990s?