Parsad

Hey congratulations Tariq! That's terrific. You've truly joined a great team. Cheers!

Then there's also cash in my wife's RRSP, around 50% so there's that too. (Parsad, I wish Corner Market had an RRSP eligible fund.) Me too! Maybe at some point, but not yet. Need to grow the existing funds. Cheers!

I've personally spent the day in violent panic. If the Dow can fall 400 points in one day, what's to stop it from falling 4000 the next day? Checkmate. Long Gold, T-bills, GNI, and dinosaur bones. Hester, you remind me of the times when I was in the chess club in elementary school, and we'd all be yelling checkmate, even though it wasn't really checkmate. The other shoe to your above comment is if the Dow can rise 400 points in a day, what's to stop it from rising 4000 the next day? Now, checkmate! Sold all my gold, T-bills, long financials and I pick my teeth with dinosaur bones! ;D Cheers!

But certain businesses require a sense of macro conditions. In the most recent interview with Charlie Rose, Buffett suggested that months sold in housing might be overstated (he actually just referenced inventories but I am making the leap) and that improved residential spend and home prices would lead to greater than anticipated growth. To make that statement, he probably has some estimate of mortgage roll rates, cures, and other factors related to the speed of the wind down of the shadow inventory. Correct. Buffett has a better idea of the housing market condition than virtually any fund manager, investor, etc. He probably has a much better idea than even Prem or George Soros. Why? Because that industry is core to some of the businesses he owns, and he gets the numbers weekly...Acme Brick, Benjamin Moore, Clayton Homes, Johns Manville, Jordan's Furniture, Nebraska Furniture Mart, Larson Juhl, RC Wiley, Shaw Industries, Star Furniture, Scott Fetzer (some companies within), Marmon Group (some companies within). Between all those businesses, as well as the 2nd largest real estate broker in the country (Home Services of America), he's got a better idea of consumer sentiment and changes in housing than probably anyone else in the world! I don't think he's pumping the tires or raising confidence when he believes housing will turn and unemployment will drop quickly. Any change in housing and he sees it on his bottom line in real time. Cheers!

Until my cab driver starts chatting up gold or I walk into the bookstore and it's all "Get rich now investing in gold", I don't think we're there yet. (Yes, there are gold ATMs, etc but they are still curiosities, not ubiquitous) Mark, you're in Toronto right? I don't know about there, but it is getting crazy in Vancouver. You can't read the paper, watch tv or listen to the radio without some ad for a gold exchange, article, story, etc. Alnesh's brother-in-law's best friend started a gold exchange in Vancouver...had about $1M in revenues in the first 4 months! Now all their buddies want to start one. People who were heavily into the "forex" craze a couple of years ago, have now filtered into gold, silver, precious metal exchanges, etc. Those that lost small fortunes on forex are now into gold. Family friends are always asking me about gold now..."Do you think it will go up more? Should I buy some and put it away?" Crazy! Same sort of behavior I watched during the tech bubble. Resource industry participants (CEO's, CFO's, directors, investors, newsletter writers, etc) all believe that it will continue to go up. When you have such herd behavior, then it's time to completely step aside. Funny thing is, one of the smartest exploration company CEO's I know that we do some work for, has sold all of his properties or optioned them out. He continues to hold his gold inventory, and has no intention of selling, but his company is very liquid now...perhaps ready to pick up bargains at some point. They run their firm like a family business. Probably one of the finest run little companies I have seen at their size, especially in the resource sector. When a guy like him gets liquid, then things may just be getting frothy. Cheers!

We've been buying...it does look "purty" again! Cheers!

Salesforce should sell for less than $75/share at best. Unfortunately, I've sold our puts as there are "long" bargains available. The upside on the puts is limited, but the upside on some of the stocks we continue to buy are unlimited. Had to make that choice! Cheers!

Because Fairfax is leveraged 4 to 1 asset to equity and has over $2B in debt. They cannot afford a 25% drop in their portfolio. If that happened they would never be able to write business again! Cheers!

You know the markets have been volatile for the last three weeks, but it has not affected my life in any measurable way. My net worth on paper fluctuates, but the truth is the actual underlying investments I own are significantly cheaper than anything I've owned since the bottoms in 2008/2009. Many of those businesses are in better shape, have larger market shares, continue to generate cash, have less debt and better standards in their day-to-day operations. What am I going to worry about? If the world collapses tomorrow, the last thing I'm going to worry about is my portfolio or even my home. And if the world didn't collapse during the Great Depression, or in 1942 or during the Cold War, then I'm not worried about Europe's banking system having to pay for their mistakes. The U.S. banking system paid for their mess, now it's Europe's turn. At some point it will be China's turn. That's life and we all move on day by day. A young, terrific fund manager had lunch with me in Vancouver last week, and this business is a struggle for everyone. So of course there are some headwinds and challenges he's facing. I asked him one simple question: What's the worst thing that could happen to you tomorrow if things don't go well in the fund? Would his wife leave him...no. Would his children be ok...yes. Would his health deteriorate...no. It's the same question I asked Alnesh when he got divorced. It always feels like the end of the world, but the truth is the end of the world only comes once for all of us. After my father died, I eventually realized that you can always stumble and work your way through this world. Only the end is inevitable...everything else is manageable! This day in the markets too shall pass! ;D Cheers!

Best cure for upset stomach...don't watch the markets. Go watch a movie or something if you aren't working today. S&P500 today is nearly the exact same level it was 13 years ago in 1998...13 years ago! It was overvalued then and it is undervalued today. All this volatility is simply preparation for the next bull market which is 1, 2, 5 years away...who knows. But you are buying hamburgers today and you will buy hamburgers next year, and the year after, etc. Cheers!

Yeah, that's pretty funny! I got my card from Sears today saying that my Xmas catalog is ready for pickup at my nearest catalog store. Sanj, while you're reading minds, care to delve into what Chou's thinking is with having a large stake in SHLD? Francis is a very positive person when it comes to people. He's a firm believer that someone smart doesn't suddenly become stupid. He also makes bets on ethical managers, as long as the price gives him a margin of safety as well. Francis will also hold the stock for a very long time if he believes in the manager and the investment. With Sears, it is cheap relative to the underlying assets and cash flows. I would presume to believe that Francis thinks Eddie will monetize those assets and redistribute those cash flows rationally. If that occurs, then the investment would pay off. Cheers!

Parsad, I stand by my comment that Mr. Buffet said this "tongue in cheek" as did Munger when he said that people who made money on gold are "Jerks" in his address at the University of Michigan. Buffet and Munger have lived through the gold standard and they were all very much against the demonetization of gold and silver. This is all supported by facts and historical press releases from Berkshire Hathaway. Here is the entire "tongue in cheek" comment by Buffett: “So there are two types of assets to buy. One is where the asset itself delivers a return to you, such as, you know, rental properties, stocks, a farm. And then there are assets that you buy where you hope somebody else pays you more later on, but the asset itself doesn’t produce anything. And those are two different games. I regard the second game as speculation. Now there’s nothing immoral or illegal or fattening about speculation, but it is an entirely different game to buy a lump of something and hope that somebody else pays you more for that lump two years from now than it is to buy something you expect to produce income for you over time. I bought a farm 30 years ago, not far from here. I’ve never had a quote on it since. What I do is I look at what it produces every year, and it produces a very satisfactory amount relative to what I paid for it.” “If you took all of the gold in the world it would roughly make a cube 67 feet on a side. So if you took all the gold in the world, we could have a cube that went down there 67 feet… 67 feet high and that would be the whole thing. Now for that same cube of gold it would be worth at today’s market prices about $7 trillion. That’s probably about a third of the value of all the stocks in the United States. Now, for $7 trillion, there are roughly a billion of farm— acres of farmland in the United States. They’re valued at about $2 1/2 trillion. It’s about half the continental United States, this farmland. You could have all the farmland in the United States, you could have about seven ExxonMobiles, and you could have $1 trillion of walking around money. And if you offered me the choice of looking at some 67-foot cube of gold and looking at it all day, you know, I mean touching it and fondling it occasionally, you know, and then saying, you know, `Do something for me,’ and it says, `I don’t do anything. I just stand here and look pretty.’ And the alternative to that was to have all the farmland of the country, everything, cotton, corn, soybeans, seven ExxonMobiles. Just think of that. Add $1 trillion of walking around money. I, you know, maybe call me crazy but I’ll take the farmland and the ExxonMobiles” Some other Buffett tongue in cheeks: “The problem with commodities is that you are betting on what someone else would pay for them in six months. The commodity itself isn’t going to do anything for you….it is an entirely different game to buy a lump of something and hope that somebody else pays you more for that lump two years from now than it is to buy something that you expect to produce income for you over time.” “Gold is a way of going long on fear, and it has been a pretty good way of going long on fear from time to time. But you really have to hope people become more afraid in a year or two years than they are now. And if they become more afraid you make money, if they become less afraid you lose money, but the gold itself doesn’t produce anything.” “[Gold] gets dug out of the ground in Africa, or someplace. Then we melt it down, dig another hole, bury it again and pay people to stand around guarding it. It has no utility. Anyone watching from Mars would be scratching their head.” "I have no views as to where it will be, but the one thing I can tell you is it won't do anything between now and then except look at you. Whereas, you know, Coca-Cola will be making money, and I think Wells Fargo will be making a lot of money and there will be a lot -- and it's a lot -- it's a lot better to have a goose that keeps laying eggs than a goose that just sits there and eats insurance and storage and a few things like that." Munger tongue in cheek: "I don't have the slightest interest in gold. I like understanding what works and what doesn't in human systems. To me that's not optional; that's a moral obligation. If you're capable of understanding the world, you have a moral obligation to become rational. And I don't see how you become rational hoarding gold. Even if it works, you're a jerk." Finally, just a reminder that during 1979-80, when gold last peaked and Buffett was very concerned with inflation and the government's printing press, he still did not buy any gold. Returning to present day, he still has not bought any gold. My thoughts are that his tongue in cheeks are his actual philosophical stance on gold. I'm not going to argue with him! Cheers!

Sears still publishes a physical paper catalog? Seriously, I had no idea. I haven't seen one of those since I was a kid in the early to mid 80's probably. I was born in 1972 and wouldn't think to shop at Sears either online or off for anything. One exception is that my wife will go there to look at the Land's End clothes sometimes, but that is about it. I agree that it is a dying brand. To me Kenmore just means some other company's appliances re-badged to say Kenmore. Why not just buy the Whirlpool or whoever really makes it? --Eric Yup! I've been getting the old Sears Christmas Catalog every year for the last 20 years! And before that my parents used to get it. I only occasionally order anything from the catalogs, but they probably cost a pretty penny to publish, as they are pretty thick. They also send out smaller 50-60 page seasonal catalogs. This should really all be eliminated now and moved online. They should just send out a reminder with the weekly flyers that the new catalog is online or something. Stuff like this should have been done a long time ago. I'm sure there are tens of millions in other annual costs savings they could easily find. Cheers!

Gold is money and is a medium of exchange that has been used for 5,000 years. To try and say that if you add up all the gold in the world it would fit into an 18 meter block and it just sits there is misleading. As the alternative is to take all the fiat money in the world, sure it would probably fit into a few thousand Olympic sized swimming pools but it too wouldn't do anything as it's just paper. If humans had a choice of what they wanted to use, when buying or selling Exxon Mobile, or when selling goods or services, they would naturally choose Gold since it's so scarce. You're assuming that gold has some sort of utility as a currency because it has been used as such historically. If the world were out of water, then would water not have the same utility as currency? Could you not trade water for virtually every other necessity? Gold has been used as a form of currency because it is rare, is transportable, had some utility and was easily transferrable from one society to another. I'm not sure that would be an issue in today's world. You could as easily carry platinum, silver, diamonds, oil, uranium or other commodities that have some utility. Electronic settlement systems make the familiarity of gold relative to foreign currencies moot. The world isn't going to hell in a hand basket, so why would Buffett hold something that has little utility for him personally, when he can buy something far more productive such as farmland where crops could be generated regularly, or a business like Exxon Mobile which regularly spews a very utilitarian commodity. The argument isn't tongue in cheek. Buffett's analogy was to portray his beliefs in as simple terms as possible. That he would much rather own self-propagating businesses, rather than cash or gold. Cheers!

3 stocks FFH owns. Care to elaborate? I'm not the one you asked, but I'll make a quick analysis of the three. - LVLT...FFH owns the notes, so they will make their money back one way or another. - RIMM...I think it will get taken out...MSFT should spend the money and buy it (more patents)...cash flows are good, but tough business and getting tougher for them. - DELL...I don't own it and not going to buy it, but they are betting on Michael Dell's overhaul of the business, as well as the cash flows generated. Cheers!

Yes, a trap for shareholders, but not noteholders who are getting a pretty penny in interest. In fact, in a couple of years, Fairfax would have recouped their cost from interest alone. If LVTL defaults, then they get a chuck of that $10-12B fibre pipeline. So yes, equity holders...value trap...bond holders...good investment. Cheers!

They've spent $1.6B over the last three years on capex, so if he's not pouring it into the stores, where is it going? Sears Canada was better off than Sears USA, but it is going to run up against stiff competiton for the forseeable future. Buying Sears Canada may prove to be a poor decision, when that cash could have been invested elsewhere. Instead, they're burning through the cash in Sears Canada too! Revenues keep dropping, shareholder equity keeps dropping, debt has increased dramatically...slow burn! My opinion remains: Pour money into investment ideas or other businesses; runoff the underperforming stores; sell off properties in bulk as values stabilize or start to increase; license core brands to other retailers (Craftsmen, Kenmore, etc); eliminate paper catalog business and move everything online; decrease store footprint and reduce number of inventory items; reduce operating expenses to the bone. Cheers!

Hi Zarley, I also had the same feelings with Sears for many years (owned it briefly a couple of years ago, but replaced it with SHLD debt in 2008). The cash flows have been robust. The brands have some value, as does all of the real estate. If the credit crunch happened a couple of years later, and Eddie had been able to liquidate some of the property before the crash, then it might have been a different story. Instead, they've poured a couple of billion into share buybacks and revamping the stores. It hasn't worked. They still could salvage the whole thing by reallocating cash flows and selling off assets over time, but they haven't indicated that they plan on doing that. So far, they think the department store business can be restored. I have a hard time believing that. Cheers!

Totally true. But madness is doing the same thing over and over, and believing you will get different results. Eddie hasn't done anything different yet. Buffett did something totally different by reallocating the cash flows, as did Steve Jobs when he came back to Apple. Would the old Jobs have taken a cash infusion from Bill Gates? Nope! This one did. If Eddie wants to save Sears, he has to do something completely different. What he has been doing has done nothing to save the value of the company...and that's because the model as is will not be competitive. He should not pour another dime into the business other than the bare minimum necessary. Cheers!

For sure. I posted this in the SHLD thread a month or two ago, but my thought is for him to liquidate the retail stores and use the cash to build a portfolio of brands (to go along with their brands such as DieHard, Kenmore, Craftsman) and work on distributing theme through other retailers. They unfortunately own some bad brands to go along with the better ones. I was born 1969 and my brother was born 1981. I shop at Sears, and it's actually the first place I head to when I need a new appliance because of the Kenmore brand. But my brother does not really shop at Sears because of the brand at all, and he's unlikely to shop there unless I tell him to go there. And Sears Canada does a better job than Sears USA when advertising, promoting and reinforcing their brand here. I can only imagine how tough it is for Sears in the U.S. Target is only coming here now and Wal-mart had strict restrictions against them in various municipalities for many years. That is changing. Sears Canada is going to face the same competition that Sears USA has had to face. The generations after me have no inclination to shop at Sears. I still get all of their catalogues every year, but I know of hardly anyone else who still does. Either they revamp the model completely...which hasn't worked in several attempts...or they dis-assemble the pieces, reinvest the cash, and keep the core business in a scaled down model. They have to do something, because nothing else is remotely working! Cheers!

Value Trap? Sears Holding! Unless Eddie can liquidate some of the commercial land and other assets (Craftsmen), this one is a trap. Their department store business is dying. While it generates free cash flow, it is in a slow, deteriorating drop with it's core customers slowly disappearing...those born before 1970. Those born after aren't buying there anymore. Their catalog business has too much to compete with online. It's a cigar butt and has been for the last few years. But the last puff is one really long painful one! If he can take the cash flows and invest elsewhere, great! But so far he's overpaid for stock buybacks, and spent the rest keeping this sucker afloat. Buyer beware! Cheers!

Hi Folks, Paul and his team will be migrating the site over to their server in the dead of night on Saturday. The transition should be virtually seamless, and you should see a significant improvment in speed and lag once completed. Cheers!

I think Sam Mitchell said it best a couple of years ago at our AGM: "You just can't ignore the macro in some cases!" So my take is you pay attention to what is happening, but in general you stick to the fundamentals of Graham and Buffett...buy cheap, sell dear. If you start to see things that are unique in the macroeconomic environment, where the consequences could be dramatic, you price that into your margin of safety. That's really all you can do, since none of us can see the future and hindsight is always 20/20. Cheers!

I think older generations have more of an attachment...either culturally or historically-based. They held it for different reasons. 70 years ago, people thought the Nazi's and Japanese were going to take over North America. 50 years ago, they thought the Soviets were going to take over North America. 10 years ago, they thought Al Qaeda would detonate a nuclear bomb in North America. All of those things were possibilities but never came to fruition. Today they think that the U.S. will go bankrupt and the European union will dissolve. Both are possibilities, but I'm not sure either will come to fruition. Certainly not the former, and the latter is more likely to be the removal of a couple of countries in the worst case scenario and the addition of others. The Euro will exist, but just not in the form we've necessarily known. I'm not a fan of gold in the slightest. Buffett said that all the gold in the world ever found amounts to a cube 65ft by 65ft by 65ft. It would be worth $7T! But for that same amount of money, you could buy ALL of the farmland in the U.S., 23 Exxon Mobiles and still have a trillion dollars left to do with what you want. Which is the smarter investment? I owned gold in my safety deposit box about 7 years ago when it was $300 oz. I sold a long time ago at $700-800 oz on average. That'a all I think gold is worth right now based on supply and demand from utilization in industry and normal jewellry demand. The rest is speculation and fear! So I would not be surprised to see a 50% correction in gold at some point. I have no way to really value it outside of that supply and demand. And I don't invest in things based on what other people may be willing to pay. So I will not touch it, and I warn everybody I know that they should be careful. I have looked stupid for a couple of years, and more and more people (family members in particular) are reminding me how wrong I have been...so I think we are getting pretty close to the top. Then again, I thought rap music was a fad, so you may be seeking advice from a fool! ;D Cheers!

Good stuff Berkshiremystery! Cheers!