Parsad

I also read somewhere on these threads that Sardar said 6 M per year. If most of the company-owned stores are monetized through refranchisement, then a low capex number can be used. My assumption is based on the existing company-owned stores staying within the company...in which case my original number of $6M per quarter works out to about $58,000 per store annually. That's probably a bit high, but I would rather be conservative. New stoves, dishes, roofs, paint, furniture, tills, etc. can add up. I would think a busy store would need a minimum of $25-30K per year in maintenance costs. That would work out to about $12M per year, or double Sardar's estimate. If he can do it for $6M, then all the power to him, but that will be tough to keep a decent looking chain over the years. I'm not sure I agree with this analysis. The $19.686M of operating cash flow includes $7.073 of cash from working capital. This is clearly a one-timer and can't be thought of as part of annual, recurring cash flows. You can stretch out your payables to vendors to the tune of $5m as SNS did in this quarter once but not every quarter forever. In fact, it could easily reverse next quarter and be a drain on operating cash flows. The question is where is that change in working capital occurring? Restaurant businesses usually operate with negative working capital. In the case of the 1st Q, you had an increase due to changes in accounts payable. In the previous quarter, you had an increase due to changes in receivables and inventory. The net cash provided by operating activities is still between $15.5M and 19.7M. You can't really use the previous year numbers because store traffic, cash flows and operating costs have all changed dramatically. I would guess that the $19.7M number is probably closer to reality...but even so, use the $15.5M number over 12 weeks and you get $67M per year before capex. Cheers!

My question is what does one do personally? Follow Jim Roger's example and move to Singapore? Even Munger has no idea how long it could take. While we may have seen as Munger said a few years ago...the apex of a great civilization...the downfall could extend well past your children's lifespan. Cheers!

Another article: http://blogs.forbes.com/billions/2010/02/22/steak-and-cherry-coke-with-warren-buffett/?partner=yahootix Cheers!

Canadian investment company Salida Capital will enjoy its charitable Lunch With Buffett today. Cheers! http://journalstar.com/news/state-and-regional/nebraska/article_00f068f4-1fca-11df-97ac-001cc4c002e0.html

Mungerville and Sdev, use the 1st Quarter 10-Q as your guide: Cash flow from operations ($19.686M) - Capital expenditures ($2.357M) = $17.329M Divide that by 12 weeks and multiply by 52 weeks = $75M in free cash annually Remember though that Steak'n Shake's Capex is probably understated right now. That cost will depend on how many stores remain company-owned and how many are refranchised. If they remain company owned, and I believe Sardar said something previously about using $7-8M a quarter for capex long-term, then you have about $28-32M that you have to subtract. I actully think Sardar is overstating that, as it is likely some stores will be refranchised and capex costs will no longer be Steak'n Shake's responsibility. I think $5-6M is more reasonable quarterly. So you have about ($75M - $24M) or $51M in free cash flow for this business annually. Subtract the $70M in cash and investments from market value ($500M) and you get $430M. Divide by the $51M and you get about 8.5 times owner earnings. Not cheap, but not expensive. It is priced closer in line with many other high quality fast food chains. Valuation will increase as cash flows grow and retained earnings are reallocated to other ideas. Cheers!

Story on how Greece is said to have arranged swaps with 15 different investment banks: http://www.bloomberg.com/apps/news?pid=20601087&sid=aViC_3fxSWK8&pos=3 How is it possible that the world allowed a derivatives market of $60 trillion dollars and there was no oversight, regulatory body or clearing house? What the hell was everyone thinking! Cheers!

Bloomberg article discussing hedge funds betting on Japan's problems, in particular David Einhorn. Cheers! http://www.bloomberg.com/apps/news?pid=20601039&sid=aPBaV.B6hdS4

The NY Post in December reported that Steve Cohen had a story by Reuters on SAC Capital's insider trading killed. It's towards the bottom of the article: http://www.nypost.com/p/news/business/st_wife_clubbed_lwGOexXj3UOFOGCQKCMGvM#ixzz0cUIiHW5J On another note, and I don't really care about his personal life, but the article starts by discussing Steve Cohen and his wife's appearance in 1992 on a daytime talkshow where they candidly discuss their personal life. Very strange for a guy who maintains such a private life for the last decade. Cheers!

Alnesh, my brother and I were at Molson Hockey House on Friday for Wayne Gretzky Tribute night. There were at least 3000 people there. I got him to sign their Team Canada jerseys and spoke to him briefly. It was as fantastic as the first time I met Buffett or Prem! I've always wanted to meet Gretzky and finally did. One hell of a classy guy! I'm right in front of this cameraman: I remember his last game in Vancouver when he played for the Rangers. I took my brother to that game and the hard-core Canuck fans were booing him in the beginning. He went on to get a five point night, scoring the last (50th) hat-trick of his career. On the final goal, he skated around a Canuck forward at the centre-line, through two defensemen who collided and fell down, then drew Kirk MacLean way out of his net...skated right around behind...and polished off the goal by shooting into a wide-open and completely empty net! At which point the entire arena, including all those hardcore Canuck fans that booed him earlier, stood up and gave him a three-minute standing ovation! It's around the 1:00 minute mark of the video below: I'll never forget that game or meeting him! Cheers!

Haha Twa, I didn't even see it was written in The Onion! Yes, you got me! Ima Pazzo! ;D

Deepcapture does a story on David Einhorn's involvement with New Century. While I have no idea if Einhorn ever had anything to do with profiting from New Century's demise, I have always wondered why he never addressed the subject of New Century...not in presentations, nor in his book. http://www.deepcapture.com/how-activist-investors-david-einhorn-and-dan-loeb-brought-their-special-talents-to-bear-on-new-century-financial/ I asked Herb Greenberg in early 2007 why he wasn't covering New Century? If his relationship with David Einhorn was preventing him from discussing New Century, as he was writing vigorously about Novastar at the time. http://blogs.marketwatch.com/greenberg/2007/02/novastar_delinq/ No one ever wrote about New Century until now. Strange! The failure of the second largest mortgage lender in the U.S. received no press from all the journalists who were so vigilant on other companies that were heavily shorted...Eavis, Greenberg, Bethany Mclean, Joe Nocera, Fabrice Taylor...you name them, they didn't write a story! Cheers!

While quite humorous, that is probably one of the most bizarre articles/opinions I've seen WEB write. If he likes a shirt, he may just buy it? I hope next week he doesn't write an article for Money Magazine entitled "Top Ten Ways To Make Your Income Go Farther"! ;D I'm sure there are Buffetteers out there wondering if he's trying to stimulate the economy, by asking the average consumer to buy a shirt or something they like. Cheers!

Sanjeev, $22 in net income per share relative to a share price of 350 isn't such a great deal. I take it you are excited because the cashflow is much greater than $22 per share? Hi Mungerville, I didn't say it was a good deal. It's close to fair value at about 15-16 times earnings. I was just saying SNS is a cash cow with roughly $22/share in net income per year and virtually no debt outside of leases. It's now priced like the premium fast food chains it should be compared with. Cheers!

The banks aren't stupid. They will pass this on to consumers. Cheers!

The lawyers are circling on the Zentih deal They can stuff it! They're not getting a penny more on this deal. Prem is paying up already unlike the Odyssey initial offer. Cheers!

Swiss Re is planning on repaying the convertible debt Buffett bought. Cheers! http://dealbook.blogs.nytimes.com/2010/02/18/swiss-re-eyes-buffett-repayment/?partner=yahoofinance

AM Best sees no change in Fairfax's credit rating, and expects debt to total capital to be around 29% after all transactions (ORH, ZNT) are complete. Cheers! http://finance.yahoo.com/news/AM-Best-Comments-on-Fairfax-bw-3710926809.html?x=0

Congrats KFR! Good things come to those that wait. ;D Cheers!

Congratulations on the detective work guys! I'm sure there will be plenty to talk about in Toronto this year. Cheers!

It would be tough as Lorber and crew control about 28% of the shares. They are in good shape, making money and doing a pretty decent job. Could they do better? Yes, but I don't think there would be enough disgruntled shareholders to help an outsider win control. In Steak'n Shake's case, the company was doing a God-awful job and Gilman's board only controlled 5% of the stock. On average you get about 70-80% turnout for votes, so they control 28% (or roughly 35-40% of the possible votes) from the get go. Could someone buy or garner 51% of the potential votes? Possible, but probably not worth the costs of the proxy fight. If the SEC does change the rules for outside nominees to be included in the company's proxy circular, then you will see more battles, but at $150-400K+ per proxy fight, it's too expensive to wage a war without a high probability of victory. There are much easier companies to go after. Cheers!

It seems as though some of Greece's woes spring from currency swaps they purchased from Goldman Sachs. I'm sure many people have watched that interview with Munger from last year at Stanford. I don't think Charlie's comments on accounting and the responsibilities endowed upon accountants could be any clearer. I think that should extend to politicians and financial institutions as well, and the financial contraptions they like to play around with. Cheers! http://www.bloomberg.com/apps/news?pid=20601087&sid=a5MJFT2dMyIU&pos=1

Also, I should mention that the tragic death of the Georgian luger yesterday really created a sombre moment for the games. The poor young guy who came here to compete and make his country proud had a freak accident. I saw the video on the news and it is just awful and disturbing. I'm glad his team-mates stayed to compete and make their fallen comrade proud. I hope they win a medal in every event they compete in! Cheers!

Everyone I have ever met who has been to Vancouver has remarked how beautiful it is. After watching the first part of the Opening Ceremonies broadcast, it's clear that those remarks were woefully inadequate. I'm sure that the next couple of weeks will be a wonderful experience for you city. Vancouver is most certainly one of the most beautiful and liveable cities you will ever find...as long as you can handle the rain! ;D We've got all the natural beauty, combined with your choice of the cosmopolitan lifestyle or the rural country lifestyle...whatever you please. Housing prices are insanely high, but that's part of the problem if you have a net immigration into the area for many, many years, and there seems to be little reason why that would stop over the next twenty-thirty years. It's not an old city with alot of history yet, but it is a great little city to live, raise a family in and do business. Yes, quite a buzz in the city. The opening ceremonies were actually quite fantastic relative to the money spent. Nowhere near the level of the Summer Olympics in China, but they do it much bigger and for a lot more over there...hard to beat the Chinese when they are trying to impress the world! It was mass hysteria yesterday near my office downtown as the torch travelled it's final leg. Wayne Gretzky was the final torchbearer and it was pandemonium on the streets of Vancouver when he was travelling over to the outside cauldron near the water for the final lighting last night. For the most part, they've done a fantastic job of putting the games together. John Furlong and the late Jack Poole deserve most of the credit. The province kind of railroaded through a bunch of stuff and it wasn't handled very tactfully in the years leading up...most notably, a number of small businesses suffered extreme hardship as construction projects and traffic closures killed revenues and ultimately forced them to close or move. But that wasn't Furlong's fault, who is one of the classiest and hardest working guys you will see. I see much bigger things for him! I hear that there are some drug and slum problems on the east side of the city. Yes, there is a significant problem...big city problems...in a eight block radius on the outskirts of downtown, known as Hastings and Main. About thirty-forty years ago, it used to be one of the main hubs of commerce and shopping in Vancouver. In the last 20 years, as the economic hub moved primarily downtown or into the suburbs, this area deteriorated and became a drug, sex and disease-infected area of the city. It actually has the highest rate of HIV infection in North America, and is easily the most impoverished postal code in Canada. Various municipal, provincial and federal governments have thrown money at the problem over the years, but there was no cohesive program to create social housing until about five-six years ago as the Olympics were won by Vancouver. Unfortunately, twenty years of poverty and influx of more drug-adled, strung out people cannot be fixed in five years. They've made some progress, but they've got alot more work to do. The area has also begun a succession of gentrification projects and that will eventually have an impact. The question is, will that simply push out the improverished or will they fund rehabilitation and social housing projects to aid those currently living there. It's become such a big mess that simple solutions won't work over the long-term. There has to be creative solutions to this problem. The other issue is that we now have people who have made it a career to exploit the poor, and use their plight to fight whatever other platform these charlatans want to build on. Right now we have balaclava-masked hooligans, fringe activists, who are tearing up store fronts downtown and forcing the police to don riot gear. Journalists that were photographing and following these fringe activists were pepper sprayed by them and beaten up. So these spoiled brats, and I bet half of them come from money, are out there spouting their socialist rhetoric, with their legal observers present and watching how the police interact with them. Yet they infringe on the freedom of rights that the media is granted and assault them...how uniquely Canadian! Yesterday, they disrupted the torch route going to a bunch of war veterans who were waiting for the torch lighting near their war memorial. They too had their rights for freedom of expression infringed upon, as they never saw the torch arrive at their memorial. And these guys gave their lives to protect the same rights these balaclava-masked jackasses are now exploiting! Cheers!

Article on BNSF CEO Mathew Rose and the purchase by Berkshire. Cheers! http://www.businessweek.com/news/2010-02-12/buffett-s-new-ceo-rejoices-at-farewell-to-analysts-hedge-funds.html

Cara Goldenberg, of Permian Capital, was invited to dinner by Warren Buffett after she sent a letter. Cheers! http://www.bloomberg.com/apps/news?pid=20601108&sid=aYWu1wIwp2vQ