AZ_Value

Holy F@$#... What state do you live in? Actually let me Google that... And what do they consider to be "a child" exactly? And my answer would be if they're going to allow a child to be given away for marriage, why do they draw the line at the gender of two adults wanting to get married... Crazy

If I may, I think the question was never whether or not Biglari would have his personal interest and net worth tied to BH's performance. It is kind of obvious given that he will be controlling more and more of the company overtime. I think the mistake you make in your reasoning is in this statement: " Your argument draws the direct correlation between Sardar's IV and everybody else's IV because Sardar's net worth is tied to how the company does. But this is wrong, Sardar and the rest of his shareholders don't have the same IV. Sardar's IV is not impaired at all by the transaction... You're right on this. But all the other owners of the company need to consider their IV impaired, permanently impaired, because through the incentive compensation, they will be transferring 25% of the increase in BV of their company to Sardar over time, and a portion of that will be done by transferring ownership to him because it will be in stock. So I personally don't see how you can be an owner of BH (other than Sardar) and not consider your IV impaired since you know 25% of what belongs to you is sure to be transferred to him. Like many said before me, there really isn't an argument to be made for this kind of compensation structure, if the dude wants to be entitled to 25% of all future growth of the company then he should buy 25% of the company that's it!

http://video.cnbc.com/gallery/?video=3000075505 I think this is what you're referring to. When I listen to this load of BS, first my ears bleed, second I remember why I haven't watched CNBC in a long while.

WTF?? :o ???

Wow. I didn't even know Taleb was giving book reviews himself on Amazon. Thanks for compiling the reviews. All I remember seeing as far as book recommendations was this page on his blog where he lists his favorite books http://www.fooledbyrandomness.com/favbooks.html They're all literary books though. Interesting list. Thanks again for posting.

Thanks for the link. Per note 14: So looks to me like on the fee part it's still the same as investing in his hedge fund. But like Hester said it might be interesting to get the added liquidity of a stock as well as the insurance float for Einhorn to invest.

It's very simplistic view. You are ignoring the enormous benefits the government is granting by allowing a corporation to exist as a free standing legal entity. If a corporation produces a dangerous product or goes bankrupt then the investors receiving dividends are not on the hook. Investors share the risk of their invested capital but it stops there. Government is allowing transfer of all other risks from investors to society as a whole. This transfer of risk should not be free. Some price has to be paid and that price is corporate tax. I don't have any opinion on rate but it can not be free. Investors can form partnership and avoid paying tax at corporation level. Corporate status is voluntary and investors consider the benefit of corporate status to be worth the price. It's not double taxation. Tax is paid by two separate legal entity. If Investors are not getting enough benefit by having two separate legal entity then they are free to keep only one and assume all the risk. It is understandable that investors would want to get benefits from the government at no cost but it is not practical. Pass through entity having legal status is recent development but this double taxation argument is very old one. I think you are vastly overstating the benefits of incorporation. For most companies the cost of liability insurance would be a fraction of what they pay in taxes. As an investor it is not something I see as worth the price at all. Rather it is just the way it is. Fort eh super wealthy they are paying a high price for liquidity. I would argue it is unfair to tax the person/entity twice for the same benefits. I used to work for Peter Kiewit Sons, a private employee owned company. This is the same Kiewit where Buffett has his office. It is also compounded book value faster than BRK. Anyways, in 2002 they were going to convert to an LP due to the cost of double taxation. They even stated that if they were starting today (2002) they would not incorporate. At the time they had $4 billion in annual revenue from heavy construction (bridges, highways, treatment plants) and also coal mining. All industries with significant risk yet they were willing to do it. While never publicly said, they reason was due to the likelihood of the tax rate on dividends being raised if Gore beat Bush in the 2002 election. Since Gore lost (sorry to bring up a sensitive subject for Democrats) they cancelled the plan. Businesses aren't stupid. If the US raises dividends to the same level as earned income there will be consequences. Companies will convert to S-Corps or partnerships to minimize taxes. LBO's will be more attractive. Why pay 35% corporate tax and then have dividends taxed at 45% when you can borrow and the interest is deductible? The irony is that changes based on "fairness" will probably cost the Treasury tax revenues. I think the same way you're accusing rranjan of overstating the benefits of incorporation you're also vastly understating its benefits also. Inherent to the corporation form and its existence as a separate legal entity is the fact that it can raise vast amounts of cash through the capital markets. Do you see a world where the big capital providers, the pension funds, mutual funds etc. buy shares in companies where they will be held accountable for the manager's mistakes and their own assets will be on the line every time, due to bad management, a company goes bankrupt? I personally don't think it's plausible and I would be interested in finding someone who can prove me wrong. As long as companies feel the need to go public so that the Mark zuckerbergs of the world can put on their resumes that they're running a company valued at $100B+, I reckon the people providing them with billions will want it to be a corporation. I don't have the data, so I'm just going with my opinion here, but I would think a pretty big chunk of the dividends paid by S&P 500 companies are paid by the big boys in there. So can you tell me what companies, in say the S&P 100 group, you see converting to Partnerships if the dividend tax regulations are changed? But even if we put all this aside, one thing that is constantly missing from the arguments those on the right make is that they have nothing to prove what they are claiming the taxes will cause is based on any sort of facts. Please remember, it was only in 2003 that the Bush tax cuts were introduced to us. Can you show us any empirical proof that prior to 2003 companies were converting to partnerships en masse because dividends were taxed higher? It should be fairly easy to prove if it was true, we're only talking about 2003 after all. And yet, this is what you're claiming will happen. The bottom line is this, the tax cuts only contributed to exacerbate the deficit and the nation's debt because they happened at a time when the Bush administration was increasing spending significantly and we all agree on spending cuts to solve our problems but tax reform also needs to be part of the solution and I for one don't buy made up arguments like corporations will turn into partnerships if we change anything, why weren't they partnerships before 2003 then?

Yes!! And I'm waiting for him. I really want to carry these in one file. Anybody knows his phone number so I can wake him up? ;D

LOL... That dude was just bizarre man... I'm sorry, I mean : THAT dude was just bizarre 8)

Thanks for the letters everybody.

Nate, Just want to say that I really enjoyed your write-ups on COR on your blog a few months back: http://www.oddballstocks.com/2011/07/looking-at-hidden-champion-corticeira.html http://www.oddballstocks.com/2011/07/hidden-champion-corticeira-amorim-part.html I don't have a position myself, mostly because at the time I think I was buying a few other names but one thing your blog posts did was make me buy that "Hidden Champions" book, and I think I really should have COR on my watch list. Another thing is your blog made me want to start my own blog, seems like it will force me to be more disciplined and write down my investment thesis on various stocks in a blog post format.

I'm also seriously getting tired of people, who otherwise seem pretty smart, thinking that "Just write a check Warren!!" is anything more than a childish and useless answer to Buffett's proposal. Given that WEB's proposal revolves around the fact that in order to get its fiscal house in order, the country will soon be enacting policies that will inflict some serious pain on sections of the population, take for example retirees who will undoubtedly see their social security and medicare benefits take a serious hit; and WEB's point is that since you're asking all those people to bear the pain of balancing our finances,why not ask the richest of us like him to shoulder some of that pain and pay more than 16% in taxes. If you all allow me, I would suggest that WEB offers this as a rebuttal to those idiotic "write a check Warren!!" arguments: "Since you want to make it the country's policy that, I will shoulder some of the pain of righting the American fiscal ship only on a voluntary basis, I will go ahead and write a check to Geithner that will take my taxes from 16% to 30% ONLY if you also make it that the coming cuts to social security and medicare are on an "opt-in" basis! Meaning retirees will have to voluntarily opt-in for their social security payments to be cut." I wonder how that would go... ::)

What a nice statement -- totally summarizes and refutes all the opposing arguments, so that really, you have no choice but to understand. But, Hmm. I'm not sure if it's deliberately not reading the other persons said, or just simply misunderstanding. It's hard to imagine that it's the latter, since hardincap explained it so clearly and concisely. My working hypothesis is that the right wing media, with its one-sided view and demagoguery, has made people believe that they don't need to make sensible arguments when discussing an issue, but that shouting down is sufficient. Hence, the Christie's comments and the response of some people on this thread. The really unfortunate thing is that there are actually good arguments against Buffett's position. It's just that nobody's making them. I think Munger summarizes the situation very well: +1

I think Mike Burry has credited her book [amazonsearch]Credit Derivatives Synthetic Structures[/amazonsearch] with being the tool he used to first understand credit derivatives and then come up with his big CDS idea. It's far from being free tho :)

I personally never bought Paulson's story. I remember reading "The Greatest Trade" and thinking "Why am I reading about some dude who apparently couldn't keep a job and seemed to be engaging in merger arbitrage trades he didn't understand while partying with people 10-15 years younger than him in the Hamptons?" No comparison to Mike Burry who was a value guy to start with and his CDS home run came after reading thousands and thousands of pages of MBS prospectus at a time nobody was doing it. The CDS coup was a lucky stroke for Paulson and now we are watching him revert to his mean. And as far as I'm concerned all he is doing is making market calls and buying gold right now. Heck, by now we know he is Mr. Market, he was selling BAC to us for 5 bucks or below.

Eric, What considerations if you don't mind us asking? Any new considerations that you didn't have this past fall when the stock was being crushed down to $5 or less? Or is it that you just want to be more careful given that you have so much of your money in BAC? Thanks.

Love this quote Eric. So true.

Agreed. We're reading about one guy who made it this way, how many blew up doing that? Always remember that quote "markets can stay irrational longer than you can stay solvent". So his parents put up their only asset because he received a margin call... What if the stock had continued to drop? Then what? I always liked the Buffett quote "Never risk something you do have and do need for something you don't have and don't need"; So just to juice up your returns from 2X to 4X, 5X or 6X you constantly run the risk of being wiped out entirely and taking your family down with you. It didn't work too well for the LTCM guys.

I agree. I looked at this briefly. Catching falling knives can be an interesting exercise, as long as you try to catch paper knives, and not butcher knives that are still 1/2 way through their fall, but it is hard to get it right. I would not touch this either for the simple reason that this whole mess touches straight to the core of their business. Actually, buying nuts from growers and selling them to us IS their business! So these funky payments made to growers are as big a red flag as you could ever get. For Olympus, investment losses that happened in the 1990's really had no direct relation to the fact that they control 70-80% of the endoscope market in the world today. I did buy Olympus and made a pretty awesome gain, not because I was comfortable with the company, but because I do believe like Ben Graham said that there is a price at which almost any asset is a buy (or a sell for that matter), hell there is even a price at which I would probably buy RIMM. Started looking at Olympus when it fell to 20, then was cut in 1/2 and I could tell those investment losses were not central to their franchise but a management that hides stuff is not one you want to be in bed with so I never got comfortable and didn't buy. But eventually the stock made its way to about $5 and at that price the market cap was slightly above $1B and their endoscope business alone generates almost $1B in net profits every year!! So I bought then.

Lol... This right here is some Buffettesque advice!! Listen up kids...

I would suggest that you feel this way because you don't agree with what he is advocating, and if his views and values were aligned with yours, you'd be cheering him on and wishing he spoke out louder. I have learned that these discussions don't lead anywhere. People have deep rooted feelings about these topics and I am yet to see one of us walk away with a changed opinion from our debates on these internet boards. For what it's worth I completely agree with Richard, and if some of us could put our personal bias aside you would realize that WEB has been fighting for equality for decades and decades and this is nothing new. Maybe he is getting more vocal because he feels the inequality has gotten out of hand as of late, and notwithstanding how I feel about it, if speaking out is what he feels can help bring about change, then I applaud him. At the end of the day, some people will never be happy paying any taxes because they feel they're single handedly responsible for their status in life even though they drive their expensive cars on roads someone who probably makes $40K a year had to break his back building... I personally disagree and do not mind contributing more to this society that benefits me so much than that guy who built the road I drive on; But at the end of the day that's what elections are for... At least the guy building roads and the guy shuffling money around for a living both get 1 vote in a democracy and they both have to live with the outcome. Edit: PS: I personally haven't seen anything that would lead me to believe that WEB is "losing it". And I kind of resent the fact that you would portray him as "losing it" just because his political opinion is not in line with yours. If WEB is "losing it", then I would suggest Sarah Palin, Michele Bachmann, Herman Cain etc.... are raving lunatics that need to be institutionalized, and the sooner the better.

Seems to be the party line, RIMM builds for business and iPhone/Android is for 14yr old kids playing Angry Birds. I was at a company meeting last night, 100 employees, I saw 0 Blackberrys, everyone had an iPhone or Android with one Palm Pre (that person making fun of themself in a presentation). Three years ago 75% of this crowd had Blackberries, those same people all ditched them for the fun phones. I've asked a few of these people and everyone of them said ditching the Blackberry was worth it and they wished they did it earlier. When you lose a customer like that it's hard to go back. I can't imagine any of these people jumping from the fun phone back to a Blackberry, the mindshare has been lost. None of this stuff is fluff business either, people doing spreadsheets, one guy did a presentation off his iPhone. One more anecdote, our company is moving into the mobile space in a large way due to customer demand. What do customers want? They only want iOS and Android applications, they've communicated clearly that Blackberry/Palm/Windows isn't worth the effort. This is all anecdotal but from my vantage point it's significant. I don't hold any RIMM shares nor do I want to, I'm not sure how you regain all those lost customers. Will be fascinating to watch. You're right! I started ignoring this talk of companies and their mighty IT departments only want Blackberry a while back. I credit it to people wanting to force reality to fit their book. I was at a lunch yesterday with people spanning over a 3-4 industries: myself and some colleagues of mine, our Ernst & Young auditors and a few others; and we all had the same story about how in each of our workplaces Iphones and Android phones were now being supported and everybody had moved from Blackberry. I was the only person at the table with a Blackberry by the way. My own anecdote, I asked one of our IT guys how many requests they had received for Blackberry phones since they started supporting Iphones and Android for company provided phones about 2 years ago, his answer: none! And he wasn't kidding!

Oh boy... I now own more RIMM than I ever wanted to being a Fairfax shareholder.

What story are you guys reading? Or put differently, what am I missing here? Here's what I'm reading: Einhorn is on the phone with the CEO who tells him all kind of bearish news, including that they will need to raise equity. There is nothing I'm reading that tells me that it was a public conference call where anybody could have just called in. After the call, Einhorn hangs up and immediately calls his trader to tell him to unload Greenlight's position before anybody else knows about the planned equity raise. Is this what you guys are reading also? So because he's claiming that he told the CEO he didn't want to sign any NDA that makes it OK?? I agree with Sanjeev, anything gray, just stay away from it; it's really not that complicated if you put morals and ethics first; But for me, this is some pretty darkish gray we're dealing with if you want my opinion.

To me as a young investor whose sole focus is to compound my money at a fast clip, I think AAPL unfortunately is limited by the laws of nature. No matter how much people want to dismiss it when talking about their favorite stocks, to which they have complete devotion, trees don't grow to the sky, they never did, and they never will! If I'm looking at my money to turn into a 10 bagger over time, AAPL would have to go from a $400B market cap to $4 trillion. I don't know how that happens. Even our beloved Berkshire at $200B cannot and will not reproduce past results. Now, this is not to say that they can never be bought, there are things like significant share buybacks or Fall 2008 - Spring 2009 that can throw some of these companies back at you at super low prices that will give you decent compounding potential.