zarley

This is how I went through 2008. By mid-year I was 30% +/- cash and bonds with BRK and FFH as large positions. Turns out, in bad market conditions, even solid companies with wonderful balance sheets can still get killed. For the year I was down around 25% (vs. 37% for the S&P) and found myself selling cheap stocks to buy even cheaper stocks. I have less cash now (~15%), but I view all of my holdings as cheap, well positioned, and with solid balance sheets. Even though we've barely pulled back from the highs of the year, I find myself wanting to buy more of what I own even though I see the market set up for a serious correction. I'm just waiting for now, quietly hoping for a more significant pull back in the 2nd half of the year, but not wanting to sell anything I own.

People most certainly called Sony out for the PS3 launch. Despite great technical specs, the game selection was awful and the price-point was way too high. The Xbox360 and wii capitalized with better games and much more affordable systems.

You're not alone Ben. The LVLT infection had been well contained in the LVLT thread, but now it has spread. A handful of borderline spammers has chosen to post LVLT nonsense anywhere there is the even the slightest tangential link. It decreases the value of the discussion, but it's a tough nut to crack as politely asking them to stop doesn't seem to work and banning seems overly harsh. An ignore poster function has been discussed and rejected by the board host, so we're stuck with a nuisance. On the bright side, it's less disruptive than the trolls on the TMF BRK board.

Probably better to not post baseless rumors . . . certainly without a link or any context.

I really doubt Berkshire will do a buy back. Yes, BRK is cheap -- on a relative basis maybe cheaper than spring of 2009 (maybe). Heck it traded about a year ago at around $105k (vs. $110 right now). But, everything I've read about/from Buffett on the potential for buybacks has been lukewarm and largely hypothetical. IIRC, even his comments in early 2000 were framed as a hypothetical private transaction rather than a formal buyback plan as ordinarily practiced by other companies. Plus, merely the hint that BRK would initiate a buyback plan would probably move the market to revalue the company, so implementing it would be difficult if not unnecessary.

How can you listen to it anywhere? Do you carry around a 2TB drive with you? Slingbox

I really have to agree with VAL9000, peter_burke, and the other yawners. My ordinary response to Apple's product launches is: Oooh. Shiny, I want. But this cloud music idea is meh. Giving up my MP3 catalog to Apple so they can stream it back to me really has nearly zero appeal. I agree that a netflix/rhapsody style subscription is a better model -- certainly for me anyway. In fact, I'm a little skeptical of the benefit of most large scale cloud computing concepts. Yes it makes sense for some things and for some people/firms, but I really don't want everything I do subject to server and bandwidth constraints that are well out of my control, and subject to hacking/loss. Plus, I have way more data (music, movies, pictures, etc.) than I could ever want to host on a cloud. A simple, low cost, cloud based data back-up system might be appealing, but having standard storage options that cost $80 per TB makes it hard for me to even consider that, for now. I guess I'm meh on the whole cloud concept, Apple or otherwise. I'm pretty sure that just means I'm getting old. :)

one curious angle to the Greek debt story is the role of the borrowing/building spree leading up to the 2004 Olympics. How important is that little splurge to the problems the Greeks are currently facing? How many tens of billions did they spend leading up to that little party? Idle curiosity mostly.

LOL. My 5 year old loves Star Wars. And, even though he hasn't seen the movies (aside from the new animated series), he already knows that Han shot first.

The book is excellent.

I don't know LUK, so I don't have an opinion about that one. As for the others . . . I have the most certainty about BRK being undervalued. I think Tilson's approach is reasonable enough, not super-conservative, but not wildly optimistic either. But, BRK is cheap even relative to more conservative estimates. The range of potential values for MSFT is wider, and although it is cheap (I added to my position this week) there are more serious potential threats to MSFT, but also more potential upside. I think FFH is reasonably priced, but it is smaller and has much more room to run than the two mega-caps. I own all three, and like my chances for future compounding.

I'm nearly done with The Most Important Thing and it is very good. The concepts will be very familiar to any student of value investing -- lots of Graham, Buffett, Munger, etc. But, I think Marks has put the concepts together in a way that is really approachable and complete as a framework for thinking of investing. At the risk of hyperbole, I think it's fair to consider it a modern day Intelligent Investor.

Yes indeed.

I agree that AZO is probably the right template for thinking about ESL and SHLD. How good an operation was AZO before ESL got control? Because right now, SHLD is sucking wind as a retailer and it's hard to see how/when that improves in the near-term. I guess I see a repeat of AZO as a best case scenario, of which I'm a little less certain now than I was 12 months ago.

Sears did, up until last year that is. The timing of the liquidation of SHLD assets as a last resort wasn't much of a concern for me right up until their operating results went to shit. Up until FY 2011, SHLD was able to generate about a $1billion in FCF and had almost no path to insolvency due to a very modest debt load. In the past year FCF went to crap and they've added a little debt, so the whole operation looks a little less appealing right now. I'm still an owner, but I've reduced the size of my position and I'm less enthusiastic about it generally. /derail

If this discussion were about anyone other than Bruce, we would all be saying: What an absurd idea that a cash poor company with assets that are dead money would become a dynamic investment vehicle. Bruce or no Bruce, BRK seems a terrible comparison (as has been noted by others) and I'm not sure I buy the conglomerate/holding company concept at all in this case. Mostly, I think Bruce is trying to paint some lipstick on this pig and would accept any complementary comparison at this point. I think it's more like a SHLD with marginal land assets instead of marginal retail assets. It might work, but it needs to start with some stable cash generation. Maybe some day.

How does JOE produce float?

Story of a small village that built a defensive seawall to protect against tsunami: http://news.yahoo.com/s/ap/20110513/ap_on_re_as/as_japan_village_that_survived This made me think of one of the many Buffettisms -- Predicting rain doesn't matter, building arks does. $30 million insurance policy against total devastation seems like a pretty good bargain right about now.

The New York Times coverage seemed good. Includes a liveblog "transcript" . . . http://dealbook.nytimes.com/category/main-topics/berkshire-meeting-2011/ Between the NYT and twitter #brk2011, I had more than enough information coming at me on Saturday.

I was bit surprised by the $20 drop shortly after the open. I thought: Wow, that's a bit of an over reaction. But, didn't think much more than that. Back almost to even now . . . quite an odd morning.

Why would this portend an ESL buyout? Is that sort of thing typical in advance of a buyout? I do think ESL, or some other Lampert vehicle, taking it private is the ultimate goal, but how does this move that date forward? $500,000 for a year of consulting services is chump change to ESL and SHLD, so I didn't think anything of it. I suppose it would pay for some staff time and overhead for working out the details of a buyout. Just thinking outloud ... ESL taking SHLD private is the likely end-game New CEO has experience guiding business through buyout process SHLD pays ESL for consulting services that include mergers, acquisitions, etc. Hmmm . . . you might be on to something.

brker_guy, I understand the issue of increasing network use and streaming video and music. I do, I do all of it. But understanding that does not help me answer the question of what is it worth to LVLT. I have seen nothing that ties internet traffic demand to LVLT pricing/revenue/profit. Conceptually, yes it makes sense, I get it. But, I can't put a number or a date on it, so it's not very useful to me. Sure, all forecasting is speculation, but projecting that a profitable growing business will continue to be a profitable growing business is very different from projecting that profit that has never materialized will materialize in spectacular ways . . . some day. That's all. Perhaps I simply lack the creative foresight that smarter people have. That's fine. I'll live with my impairment and work with what I know.

This is a very good post. zarley if you believe that something is worth zero because it has no earnings then this one is not for you. Similar to SD or a number of other securities. This is a turn around which may or may not be turning. You either believe in the turn or not. With most things in life timing is everything. I have looked at VIC and seen about 4 level 3 writeups all down between 85% and 95%, being early is the same as being wrong. Those who bought at 80 cents are looking quite smart. It comes down to the pipeline and when it gets filled. If you cant answer those, then I recommend putting it in the too hard pile and moving on to the other 6000 equities on the US exchanges. Its fairly simple in the 90s way more optic and capacity was lied. Anyone owning the companies who lied this pipeline were killed. L3 has held on, and we are finally growing our way out of the capacity due to increased data usage (lead by social media and devices), digital storage (healthcare and government / private sector), and digital downloads of video. Once the pipes are filled prices go up. When you see a $1 in earnings this will be a $10 stock. Im sure the ones on the board will be glad to sell you some at that time. Similar to SD, XEC, or FBK just deep deep value. Everything else is irrelavant. The past, the numbers, everything. Do you think the pipes will get filled, and will they be able to charge an adequate price? Thats the question you must answer. Once you have your answer please let us know and place your bet or move in the too hard pile. I am still working on this one, for me its not an if, more of a when. I started looking at $1 so that shows what I know lol. I agree with you 100% Myth. It is in my too hard pile, but I still want to clarify a couple points. Do I think something is worth zero because it has no earnings? Of course not. But, as you (and I) say, you need to know when that picture will change. It is not within my ability to see the when, or maybe even the how much. Will there come a day when network capacity is constrained and the money comes pouring into LVLT? Yes, maybe. But, when and how much? If you can answer those questions, then great, you can start to answer the valuation question. I cannot. I've moved on. But, I can honestly tell you nothing in this thread helped me answer those two questions either. It's all innuendo and code-speak. Best of luck to you on this one. I hope you get it right

What's your definition of owners earnings? Because a measure like operating cash flow minus capex has been mostly negative for LVLT for at least the last 10 years. Although the last few years have been less bad than 06, 07 or 01. Do you use some other definition that is very different from that? And, while history doesn't tell the whole story, it does tell a story. The last decade has been consistent in one regard for LVLT, it's been a financial disaster. Revenue flat since 2002. Reported Earnings flat, and hovering around $600-$700 million in losses per year. Shares outstanding diluted to the tune of 4x over the decade. Given the potential for future dilution embedded in some of their convertable debt, and a history of unprofitable operations and acquisitions, how can anyone say when they'll make money, or how badly the common gets diluted by the time that it matters? In the decade that saw the internet blossom into perhaps the most important communication tool on the planet, LVLT has derived exactly zero benefit from that growth. By how many orders of magnitude has internet traffic grown in the last decade? LVLT's growth has been zero. Why is that? When will that change? Their story is remarkably similar from year to year over the last decade, but they haven't actually been able to profit from any of it. How do you project cash flows in any reasonable way from the starting point of a decade of stagnation and mounting losses? Maybe you can. I don't know. I certainly know that I can't, and that's the real trick here. How can you say with any degree of confidence that the next decade will be significantly better than the past decade? Perhaps priced under $1 per share it's a long-shot speculation with good odds. But I can't see how it's much more than that. It seems like LVLT is how people used to describe Brazil -- it is the company of tomorrow . . . and always will be. The potential is so tantalizing -- a mirage of a monopoly toll-road for all internet traffic. Yes, there are some really smart people who are invested and are believers, but I don't see it and that's all that matters to me. Perhaps I'm just not bright enough, or haven't done enough research, but I'm looking at ten years worth of financials and it's fugly.

The more I read about this (including Sokol's comments this morning) the more I think this is much ado about nothing. Yes, it looks bad, but this isn't insider trading and I'm not sure it's really even front-running a Berkshire trade. Sokol on CNBC: Is any Berkshire executive going to be prohibited from buying stocks that Berkshire may be interested in? Should an executive who has found what looks to be a good investment be dissuaded from sharing the idea with Buffett (or any other Berkshire executive)? I think the answers are no and no. So, while this looks bad, and perhaps Buffett is upset because it looks bad, it's pretty plausible to me that Sokol really did nothing wrong at all. The resignation may simply be a result of his personal desire to do his own thing and not be "stuck" in a secondary role at BRK, or simply be carrying Buffett's torch once he's gone. Which gets me thinking about succession in terms of how many talented and enterprising executives will have the temperment to play second fiddle for a long while and then be content to carry the torch rather than build something of their own? Perhaps Ajit is the perfect candidate because of his close personal relationship with Buffett and what appears to be a perfect temperment for the job.