Rabbitisrich

Cwericb, if I'm reading you correctly aren't you basically saying that you can only determine a gold price peak, and presumably trough, by observing the global indicators Mark jr. referenced? In other words, you aren't pegging gold prices to dollar prices with quantitative relationship, but rather with a qualitative one? Gold prices are worth more than the current value because we still have global indicators occuring, and they will be worth less when some set of opposite indicators occur. If the above interpretation is correct, then how do you relate the timing of gold price movements to global events?

Thanks for your thoughts. My second glance was not as exciting as my first. Regarding cash flow, keep in mind that the company is in an expansionary mode having opened 101 retail stores from '06-'09, a warehousing construction project to consolidate existing warehousing operations, and 5% and 15% annual sales increases for domestic and international wholesale revenues, respectively. Regarding the moat, to some extent I agree, but gross margins have been pretty stable and healthy despite the downturn. For example, retail gross margins still come in at 65.7% in 2Q compared to 60.7% last year and 61.5% in 2005. What I missed at first glance is the operating leases of almost $70 million a year, which busts the net cash valuation that got me excited in the first place. You also have to consider that the Greenberg family effectively controls the company with a dual voting structure; this is likely to be a trend given the 10% dilution of passive shareholders for management compensation since 2006. None of this means that the company is not a buy, but it isn't an easy buy and will require actual homework.

I won't be able to dig into the company until later today, but this name caught my attention with the 18% drop on earnings. It seems like Skechers overestimated demand for 3Q, and ended up with too much inventory, which will result in margin pressures over the next 6 months (per management guidance). On the hand, the balance sheet appears to be very clean, and the stock appears to be cheap on an earnings basis net of cash. Anyone have more insight into the name?

Thanks for the Newegg referral. I have been overpaying :'(.

Nodnub and Cwericb, where are you getting these laptops for under $300? Any durability issues to consider? I used to be a fan of Apple laptops, but after two breakdowns on two machines, I'm calling quits. Like Cadillacs, they are wonderful until everything falls apart.

That still doesn't answer the question of how to benchmark gold pricing to some "fair value". I recently attended a lecture where the speaker claimed that gold would retain value in the event of a broad global currency devaluation. Why would people agree to this principle that gold should be able to purchase %X more of Y over Z period? And how would we know that a 1.5(%X) move is irrational? It seems like the only mechanism to realize overvaluation is when the sellers find that they can't move product, which puts valuation in the circular position of being realized by people who are guessing about people who are guessing, and so on...

The Einks are not expensive if you have a large backlog of books. Purchase 20-30 books at discounts to retail of $5-$10 and you will quickly recoup your purchase.

I wonder what happened there. Seems strange to have had such a change of heart. Yeah, I have no idea either, but the whole announcement of Li Lu was handled rather indelicately. Lu's public debut conspicuously lacked Buffett's support, and his track record didn't appear in public records. The BYD purchase dominated what little information could be found, which gave the appearance, perhaps unfairly, of a one-hit wonder. My guess, based on possibly trivial information mind you, is that Buffett did not want a scaled up version of the BYD bettor. He may have required that Lu limit his bets to the type of situations described in his Columbia University lecture.

Are you talking about BAC? According to the last 10-Q, they have a Texas ratio of 21%

Citi is working through their credit issues and they have plenty of dry powder for foreign lending operations, but I'm not yet comfortable enough with Pandit and co. to entrust them with the execution risk of expanding in emerging markets. Now that they have shed the asset management and brokerage segment, are they going to aggressively improve their deposit franchise, or will they focus upon ROA targets, as they did in '05-'06, leading into the recession. Ironically, much of Citi's recent revenue growth comes from North American operations, and more specifically from loans to other financial institutions. It just seems like they are in a transitional state with respect to foreign markets where they aren't expanding their lending activities, deposit base, or cross selling, despite sufficient capital. Normally banks trade around 20%-30% of deposits, so a lot of fear is embedded in the price. I'm just worried about things like the fact that only North American deposits really grew during the scary parts of '08-'09, and that overseas Citi just doesn't seem to have a deep relationship with depositors. Something like Citi is a pretty good candidate for a LEAPS play.

I agree with you on this - Bank of America scares me, quite frankly. Just to preface my comments, these are concerns, I have no idea whether they're valid or not, but they worry me enough to keep me from investing. I think there are other banks out there that are a heck of a lot safer, with (possibly) marginally less potential performance. With regard to Wells having a high interest rate margin, part of this stems from just how aggresively they are actually making loans, almost every penny they have on deposit is lent out. Now, this is all well and good during boom times, but when the business environment is poor and there are bad loans everywhere, then you've got to be absolutely sure that the loans you're making won't default. Given that Wells' NPA's are still rising - I have serious concerns here. While net interest rate margin is important, I think that the level of loans to deposits as to be looked at in tandem with this. In my opinion, sometimes it's best to be safe, rather than sorry. If you can't find suitable credit risks, then it's best to simply take the hit to the net interest rate margin and invest in lower yielding investment securities. Secondly, you talk about Wells returning to normalized earnings. When will we see this happening, months, years, will they ever? I have no idea, but I think it's silly for anyone to take a stab at guessing. With that said though, instead of investing now for the turnaround, why not look at other banks out there that are doing better ROA and ROE than what Wells are doing? Who said the war ended? ;D There's still a heck of a lot of bad loans out there and more deleveraging to come. WFC still has a large commercial mortgage portfolio and they will probably have a bit more trouble with some of Golden West's loans despite aggressive purchase write-downs. But when you can borrow at 0.5% you are equipped with a pretty remarkable deposit franchise, which helps to explain the loan to deposit ratio. Compare that to Citi which has an ~80% loan to deposit ratio but pays almost 2x on deposits and has 13% of deposits in non-interest accounts versus 22% for WFC. Everything you read about a bank has to be viewed in relation to the deposit franchise. Regarding normalized earnings, sometimes the best purchases are made at high trailing P/Es. You either believe in a business model or you don't. Anything else is simply overweighting data points in an arbitrary time period.

Chou Associates purchased most of its position in 2007 at ~$11, so this investment has been a very modest winner.

Same. Days like today I get to watch my unfilled orders run away. You have to be like the character from the Dos Equis commercials, "Stay greedy, my friends".

Thanks for the link.

Brox, I don't think the distinction between a financial asset and other asset categories is useful to this thread. Personal net worth should utilize accounting methods that most closely represent economic reality, as opposed to GAAP which prioritizes clarity and uniformity. That notional value may be difficult to measure does not eliminate the economic reality of the asset. If accuracy is your goal, it is no more conservative to understate an asset's value with a cost basis than it is to overstate the value. It would be more accurate to separate the liability from the asset. In the case of a house, you can create a contra account or a liability account for the PV of expected expenses, while also accounting for the PV of expected realized value, or the current market value. This method provides for a range of expected outcomes instead of stuffing those outcomes into the asset or liability side based on the direction of cash flows over some arbitrary period.

:o I misread the use of cash. Management used expensive capital indeed to buy back $39 million in debt. Is there any scenario that will pull the sell trigger for the FBK holders on the board? Does the thesis rely upon 2009 pricing as an exceptional trough, or is the takeover scenario necessary? I'm so tempted to buy the company on a replacement value basis, but that seems like a roundabout way of hoping that someone will bite the takeover bait, since one could probably pick up the company cheaper if a suitor doesn't emerge and pricing reaches 2008 levels.

Do you know why the market is so skeptical about the transaction? It's trading at a 22% discount to the offer price. By the way, Sanjeev, your patience with people like Rick_V is way beyond my capabilities. Bayside doesn't have any disincentive to cancelling the agreement. From the merger agreement: This Agreement may be terminated and the transactions contemplated by this Agreement may be abandoned at any time prior to the Effective Time by Parent if: (a) there has not been any event, condition, change, effect or development that individually or in the aggregate has had or will have a Company Material Adverse Effect; or (b) prior to receipt of the Required Company Vote, (i) there shall have been an intentional material breach by the Company of its obligations under Sections 6.02 or 6.05; (ii) the board of directors of the Company (or a committee thereof) shall have failed to include the Recommendation to Shareholders in the Proxy Statement or shall have withdrawn, modified, qualified or amended, in any manner adverse to Parent, the Recommendation to Shareholders (or publicly announced any intention to do so); or (iii) the board of directors of the Company shall have approved or recommended any Acquisition Proposal (or any committee of the board of directors of the Company with authority to do so shall have approved an Acquisition Proposal). In other words, Bayside can cancel the agreement, penalty free, if there is no material adverse effect. The extension/waiver language from Section 8.07 may enable Bayside to push the closing date and observe the loss developments. Given that Lancer Financial is described as a principal member of Bayside, there doesn't appear to be much pressure to complete the agreement. The proposal is more of a free call option for Bayside than a future agreement.

The creator of this site, Nick Webb, collected some of Buffett's and Munger's best quotes and organized them by topic: http://buffettfaq.com/ Also, Buffett is going to guest host on Squawk Box tomorrow.

Maybe the KIPCO deal included a share issuance as part of the private placement. It's a pretty hefty discrepancy.

One thing RickV missed was that alpha doesn't describe an absolute return. If you ignore the mean-variance assumptions behind the CAPM model, alpha is basically an attempt to match return to some measure of risk. RickV's point is well taken if there are boardmembers with a 30% allocation to Fairfax who are expecting 25% returns from today's prices. But I think most boardmembers have a much more realistic appreciation for the likely range of yields, and are comforted by management's rigorous attempts to mitigate failure while looking for risk adjusted returns.

I checked out MAJC when it traded around $0.70 and it certainly didn't appear to be an easy win. Even as the new CEO, who was the former CFO, desperately tried to cut costs, the loss reserves didn't seem to be significantly overstated, and the assets seemed unlikely to outgrow the liabilities. I can understand RickV's intent, though, since a capital infusion could have restored a lot of value, but it's really a situation that required face to face time with the likely principals.

Thank you to the people at Fairfax for being conscientious stewards of hopes and goals!

Has management discussed their tax asset valuation given recent profitability? If you assume a 35% tax charge on future earnings, then at $850 NBSK and $650 RBK against $59 per tonne distribution and $20 MM SG & A, the current market cap seems less absurd. Fibrek seems to have a pretty decent balance sheet now with about $80 MM in cash, but I would rather see a dividend issue than a buyback given the inherent volatility of the business.

http://www.nytimes.com/2010/09/07/health/views/07mind.html There are some interesting ideas in here: - Testing reinforces learning - Varying your study area helps recall - Spacing your study periods supports retention - Focusing upon distinct yet related activities aids performance

I'm still finding a lot of values if the economy is nearing a trough and will schlump around for a bit. But I'm not finding values that can withstand major inflection point scenarios like what Klarman and Watsa are hedging against. I have a few liquid stocks like KMX, AN, TU and SPLS that seem to hold up compared to the overall market so I've shed some of my weaklings like CBS, NARA, EIG, and JACK and migrated the funds to companies who should take market share over time. I might actually get out of TU as it's had a good run lately and I'm less comfortable with its 10 year prospects than my other companies. Hopefully, I am in spots that will continue to take market share in a favorable economy, but that will allow me to sell 50 cent dollars if everything else falls to 25 cent dollars.