CanadianMunger

It's strange that management would have the confidence to increase the dividend in January, only to face a potential debt covenant breech 6 months later. Lets hope my investment portfolio is not the Titanic that sinks on this Glacier :P -CM

I agree to your statement. Simply put, that is one of the biggest difference I find between this and the fate of yellow media. I should also state that the land is about $16m on their balance sheet or about 15% or so of mkt cap . The BV of that land is truly outdated. I recon the land value in itself is about half the the market cap. Good point. There is some down side protection here, lets hope management initiatives don't move.. well.. glacially :P -CM

It certainly is worth noting the McElvaine and Chou sales, these guys are as patient as you get. There is a possibility of permanent loss of capital depending on how you feel the CRA and debt situation evolves. I'm certain to regret this one - either I'll wish I should have really loaded up or wonder why I stepped out of my (small) circle of competence. Time will tell. -CM

If you combine all the debt and put a reasonable number to the pending CRA judgement the margin of error is that much narrower. Its a straightforward thesis, if you think they can avoid breaching their covenants, this could be a blockbuster opportunity as its trading at 25% fcf yield on a depressed free-cash flow number. They could do thinks like sales lease back of their RE or sell parts of their non-core RE to avoid disaster (which they did this quarter) or cut costs a lot more aggresively. With management having that much skin in the game, I would say the probabilities are weighted towards survival. -CM

This could be it. Although the company did get very close to breaching its covenant on its debt. They have quiet a few levers to avoid a run by the banks however: real-estate, further cost cutting (although its CEO runs a very tight ship). It seems that they are sort of facing a perfect storm : they levered the company up to buy Post Media asset and it hasn't worked off as they expected ... plus you have weakness in the national advertising creating all sorts of issues for them. Additionally, they have a potential $20-$25m tax hit due to dispute with CRA. If they didn't have a ton of debt, things would have been much easier to navigate. CEO and mgmt owns abt 33% .. .so they have a huge vested interest to make this work. My sense they will eventually pull it off. Berkshire AR 2012: Newspapers continue to reign supreme, however, in the delivery of local news. If you want to know what’s going on in your town – whether the news is about the mayor or taxes or high school football – there is no substitute for a local newspaper that is doing its job. A reader’s eyes may glaze over after they take in a couple of paragraphs about Canadian tariffs or political developments in Pakistan; a story about the reader himself or his neighbors will be read to the end. Wherever there is a pervasive sense of community, a paper that serves the special informational needs of that community will remain indispensable to a significant portion of its residents. Charlie and I believe that papers delivering comprehensive and reliable information to tightly-bound communities and having a sensible Internet strategy will remain viable for a long time. -CM

Good point. I agree it definitely could be a game changer, especially down the road with BRK generating massive piles of cash. I'm not so sure about selling though, I think I remember Buffett saying that Heinz is an ideal asset for Berkshire for the next hundred years. It looks like the 3G guys hold for the long term as well... -CM

Fernandes, the onetime partner at Garantia, says he’d bet money that Lemann will try to take over PepsiCo (PEP). (A spokesperson from PepsiCo declined to comment.) Very interesting speculation! -CM

Book at almost 123k. Anyone care to comment on current valuation? -CM

http://www.bloomberg.com/news/2013-07-24/munger-triples-publisher-s-value-with-panic-era-wager-on-stocks.html?cmpid=yhoo

Just noticed from my second reading of the letter that Berkshire's stake in Tesco increased by 600 million at cost.

Simple valuation from the 2012 lettter: Investments - 114k Pre tax earnings - 8k So, 114k + 10x8k=80k = 194k Sound right? -CM

Can't wait for this one. Taleb is brilliant. -CM

In 2007-8 I used to hold a 35% position in Kraft. I've been reducing ever since, allocation now at 4%. "Warren Buffett was unhappy with the move, calling it a bad deal – particularly the fact that Kraft was selling its pizza business at nine times earnings ($2.5 billion after taxes for a business with earnings of $280 million – and growing) to purchase Cadbury at a mid-teens multiple (and using stock that Kraft’s own directors were saying was significantly undervalued)." This quote from an article on a different site says it all. Management definitely cannot be trusted, especially Irene, and as a result I may liquidate MDLZ. KRFT may be worth hanging on to for now. -CM

Carol Loomis account: http://finance.fortune.cnn.com/2012/04/17/warren-buffett-prostate-cancer/?source=yahoo_quote

From WebMD: "Stage I prostate cancers are small and have low Gleason scores. They usually grow very slowly and may never cause any symptoms or other health problems."

Buffett's 55 year investing track record speaks for itself. Nuff said.

Thanks for the great comments. I should have clarified that I have no interest in the Canadian banks at the moment - I'm just looking to expand my circle of competence so I can be opportunistic in the future. Wells is 10% of my portfolio, and BAC and USB combined another 5%. Due to Berkshire being my number one position I would estimate that I'm in for 20% of the aforementioned names. I would guess the best way to invest would be the basket approach if they ever sold at distressed prices?

What Canadian bank, large or small would be the closest to Wells Fargo in terms of being rational, opportunistic and shareholder friendly? I have looked very superficially at the big 6 and I'm uncertain. I don't see their share counts decreasing (say over the last decade) and I see some questionable forays into foreign markets. Is there a Canadian bank that's quite content to stick to their knitting and work in the best interest in shareholders ie. if Buffett were to buy a Canadian bank, which one?

Any predictions for the annual letter? Mine - Buffett uses stronger than normal terminology to indicate Berkshire is undervalued. Hell, he might even say Charlie would be mildly interested at this price! Others?

Why wouldn't it be IBM? IBM is by far (at cost) Berkshire's largest equity investment ever. Warren and Charlie must feel pretty good about its future prospects.

http://www.theglobeandmail.com/report-on-business/watsa-no-stranger-to-betting-on-perceived-value/article2310993/

G&M Article: Say goodbye to the Buffett premium: http://www.theglobeandmail.com/globe-investor/investment-ideas/features/vox/say-goodbye-to-the-buffett-premium/article2246837/ In my opinion, David Milstead should not forget Graham: "In the short run, the market is a voting machine but in the long run it is a weighing machine." At some point, won't the market take into account the sheer earnings power of Berkshire, even on a post Buffett basis?

I believe that the Canadian housing market will experience mean reversion at some point, although I have no idea when. As such, I'm staying far away from Canadian banks loaded with mortgages and HELOC's. Besides, don't US banks like WFC and BAC look cheaper?

More Munuch Re?