ERICOPOLY

My thinking is that if you purchase and live in a single family home that would otherwise rent at a cap rate of 7%, then you have a 7% real return. The stock market does not return 7% real.

Amongst those getting the math wrong are the authors of that article. Perhaps if they move out of their grandmother's basement they would realize that people who don't own houses need to pay rent.

I'm not a Johnson&Johnson heir. Given the station in life I was born into, I think my fair federal tax burden is right where it would be if I were still employed at Microsoft. I took a huge risk and I feel strongly that the reward is mine. Nobody would have shared in my losses. I may need to start employing games like purchasing deep in the money calls for leverage in my RothIRA and an offsetting amount of deep-in-the-money puts in my taxable account -- so that on the whole I'm not leveraged, and over time the gains flow disproportionately to the tax-free account. Could be done with safe things like BRK-B to ensure the gains don't flow to the taxable account.

It just looks better than it really is. They could very easily put my tax rate up to 40% in their soak the rich campaign because the voters don't want to pay their own way. Wow! 6% compounding. I'll pass. Just too much opportunity cost. So I would either use the income to cover the cost of call options, or would be happy to buy 10% bonds in a non-taxable account (where I would use the proceeds once again for call options). This way at least you can have equity upside with bond downside.

For me, it's 5% compounding after taxes if no bond price increase. I would rather go with the FFH stock -- 5% is low hurdle rate. However, it might be a safe way to play the market right now since volatility is cheap -- buy near the money calls, to be paid for with the earnings from the bonds. If market crashes in deflation, you likely make a gain on the bonds price. If no deflation, you could do well on the calls.

Like a lot of these global US large caps, they'd likely get hit with more tax if they paid out 100% of FCF. I hope the tax code gets cleaned up soon so that this sort of thing can be more likely. Right now MSFT is yielding over 5% counting the buybacks. Most of the rest is likely earned abroad.

IE9 asks you if you want to allow Bing to make recommendations. So when you start typing an URL in the address bar, it helps you type the rest. It always did this before, however it was based on your previous browing history, not a search database.

I've been a chatterbox lately because I've been stuck in the house recovering from foot surgery. I think though you can safely ignore me.

There was more support for home buyers last year via the free government giveaway to "first-time" homebuyers. Next twelve months will be interesting as it will be a more fair comparison (no-free-money vs no-free-money). One would tend to expect the slope of decline to ease. At least, that was the argument made last year (in reverse).

And here is a headline from April 18th: (Reuters) - Citigroup Inc's first-quarter profit fell 32 percent as shrinking loans and poor trading results pressured revenue while expenses surged. It's clever how they can spin the asset sales of CitiHoldings into "shrinking loans".

Citicorp's growth: 6% consumer loan growth YoY 16% corporate loan growth YoY It's a bit strange. I would consider that material, interesting information, however when you find the typical article about Citi in the media they speak only about declining revenue: http://news.yahoo.com/s/nm/us_citigroup

Hopefully if they are hell bent on raising cash flow per share they will instead make what is the best decision for shareholders. Which is to buy shares back instead -- it carries no financing risk, and yields the same returns as buying new ships. But no, that doesn't serve his ego, or his pocketbook.

At $18 we are getting a cash-flow return of about 20%. Because the fully diluted cash flow per share is about $3.60 after existing contracted ships delivered in 10 months from now. But you don't get 20% returns on new ships just by financing 100% with cash. You have to lever them to the hilt just like the existing fleet. And then there's financing risk, which is the only problem they ran into before (the newbuilds dropped in market price which made their lenders require more cash down payment upon delivery). So what's the point? Give up 20% returns on the stock in order to get 20% return on new ships? Meanwhile taking on the same sort of newbuild financing risk that led to dilution recently? Sure, the equity raise might happen at $25. But based on that they're giving up a 14.4% yield in order to get a 20% one. Okay, that's accretive but not the world's finest growth rate in terms of what it will mean for cash flow per share. The only exciting way to grow the cash flow per share is not by share issuance, but rather by retaining the cash flow for new ships. Thus, my pessimism for the willingness of them to give us our dividend.

I believe people (like myself) find the idea of using retained cash flow to seek new growth as repulsive. The thesis is to get the stock price up in order to profit on the trade. Cutting the dividend in 2009 ostensibly to fill in a cash hole has morphed into keeping it low for longer than it needs to be in order to fuel empire building (IMO). Hole filled, dividend back please! I really don't care if Gerry has nothing else to do. The reason why I sold 60% of my stock was because I expected them to behave this way once they announced their new joint venture plans. I take it a lot of other people weren't as pessimistic as me and rode the stock up to 20+ thinking the dividend would soon come roaring back. Now it's back to slightly below where I made my last sale. The reason why I don't want them to reinvest in new ships is that it's just pointless. If I want more ships at that yield I can just buy more shares at this price (price is approximately where you buy the existing fleet for the same economics as they buy new ships). To get that to change, raise the dividend! Then we can take the money and buy things like HPQ that are better (IMO).

I don't understand who they think is going to win. Apple not priced like it's going to.

But actually Einhorn paid those same prices. There was no flaw from Einhorns perspective -- if he thought those buyback prices are crazy then HE IS THE ONE WHO IS CRAZY for not taking the money and running. Thus, if not crazy then he loved the prices.

I know what I saw in 2008-2009 but I don't know how much of it was due to dollar demand for repayment of debt or just outright panic and pandemonium. Everyone was worried about being laid off at that point and were delaying purchases -- if we all do that the prices will need to fall. But then there was also the debt repayment that you mentioned.

Bronco, you complain about the buyback debates but then you just keep restating your case. Do you want to leave the topic alone or what?

I was watching a video with Poppy Harlow interviewing WEB that was given post-AGM. He says that he has to raise prices to keep up with rising input costs. This despite idle manufacturing capacity. I think idle manufacturing capacity is central to the deflation argument?

Here is what Microsoft is saying regarding free Office online model. I'm not sure I quite believe it will make 2-6x more money for Microsoft, but wouldn't it be interesting if they get just some of that? http://newenterprise.allthingsd.com/20110418/office-365-hits-public-beta-today-so-microsofts-ron-markezich-gets-seven-questions/ With this you’re making fundamental changes to how a key Microsoft franchise that has brought in billions upon billions of dollars is sold. Can this new model ultimately catch up with and supplant the old one? It’s even more than that. We’ve made a version of Office that anyone can use online for free. But as a business model we see this as something that can be beneficial to Microsoft in a couple of ways. One, every customer that has bought BPOSS, we see their total software spend with Microsoft go up. Even that customer I told you about that saved 50 percent, they still are spending far more than they did before. For one, they were just buying Exchange Client Access Licenses. Now they’re buying Exchange CALs, plus spending some money for the service. Now we don’t make as much profit margin, but we make some profit margin on that. But the biggest reason is that most of the time, they buy other things from Microsoft. They buy new versions of Office, they might be buying Active Directory if they didn’t have it before. They might not have had Sharepoint or Lync, and now they’re buying those. So every one of these customers, we see their total spend with Microsoft go up anywhere from 2 to 6 times what it was before. The other thing is that if you look at the total industry spend, most of it is on activities where there’s no value added. Every dollar you spend on software from Microsoft, you spend $6 trying to get it to do anything. What we’re trying to do is drive that six dollars to zero.

That's a low risk investment. The Crossroads Shopping Center is where I ate many, many lunches. It's just 5 minutes from the Microsoft main campus. A large food-court drives traffic to the center of the Crossroads mall. Driving route: http://tinyurl.com/3rk2yjz And everyone at Microsoft is getting a raise: http://seattletimes.nwsource.com/html/microsoft/2014841923_microsoft22.html

Dell is finding new higher margin niches like (cloud or not) services to mid-sized businesses. It has and is cutting fat to the max and it is cheap. Dell himself seems to consider his stock as not a value stock yet (by opposition to growth)... Smart man! HPQ also following the growth through services route. For those of you who hold DELL and no HPQ, was it a conscious choice in lieu of HPQ or was it simply that DELL was cheap and you liked the price and the CEO, and that you didn't evaluate HPQ? Competitors in several areas.

Oh, you mean iPads and other iStuff? I hadn't seen that yet. The main iMac/etc line has been intel for some time. Though that doesn't make sense to me...unless they just mean that Intel manufacturing is going to make the Apple owned processor designs. They bought a lot of IP for that, and the manufacturing is a low-margin business so I wouldn't get too excited about profits there. Intel doesn't have a chip that would suitable for iPads and mobile devices (power consumption is the issue). This announcement today is with regards to the iMacs. For the new iMac, Intel's chip had been previously recalled due to a flaw. However, there is meant to be a project for mobile devices like the iPad: http://finance.yahoo.com/news/Will-Intel-Build-Chips-For-siliconalley-959310540.html?x=0&.v=1 On last month's earnings call, Intel CEO Paul Otellini said it would announce in May a major technology advance that lets it make chips with circuitry just 22 nanometers apart -- about 50% thinner than the 32-nanometer technology it uses today. Those chips would be smaller and use less power than today's, making them perfect for low-powered mobile devices. The A5 that Samsung manufactures for Apple's iPad 2 uses a 45 nanometer manufacturing process.

Here is the operating income breakdown for the 9 months ended March 31, 2011: Windows & Windows Live: $9,338 Server & Tools: $4,834 Online Services: ($1,829) Microsoft Business Division: $10,506 Entertainment & Devices Division: $1,192

I have INTC calls so I'm happy to see Apple now choosing to go with Intel chips for iMacs. Other interesting news today -- RIM announcing that Microsoft BING will replace Google search and maps in Blackberry.