Send Message
View as an RSS Feed
  • How To Get A Piece Of The Increased Spending On Luxury Fashion  [View article]
    I just did a brief analysis on LVMUY not an indepth analysis and made an interesting observation. At least 1/3rd of the brands are golden. Right now they are all expensive consumer retail items with a limited retail base of customers . That is now and not later. Imagine if coka cola cost $15 for a 16 oz bottle and imagine it really had no competition and those who could afford it would pay for it and those who could not afford it would like to . Well then imagine the company reduces the price while increasing production for a larger base of consumers. You see that with one brand in US shopping malls called Saphora. The company might have a lot more value based on a certain algorithem where high valued brands can just be held off the market long enough to keep the price and profit margins higher than say PG or Coke mean brands. With apple computer these days margins are exceptionally high so long as new releases keep coming out . Old releases can fall in price with the competition. That is not true with a super sublime producer and in some cases direct retailer like LVMUY. I would love to own internatinal brands where a high profit margin can be maintained for a few centuries while production can actually go up with of course new chinese consumers added to the base daily. COH is not diversified the way LVMUY is. Lvmuy can spit into 5 different profitable separate companies with ease and even increase value to shareholders. Most of their brands are marketable and they have the ability to artificially limit supply by witholding production from the market simply by having control of any secondary market which never materializes with specialized agents.
    Oct 15, 2012. 10:07 PM | Likes Like |Link to Comment
  • The Irony Of Knight Capital's Decline  [View article]
    There is something very wrong about the Knight Capital mess and what is clear is that Knight is not fully responsible. When I saw the eye popping story that the SEC would not let Knight correct the computer errors that caused the errant trades the first thing that came to mind was the word corruption. This is the same SEC that let Bernie Madoff run as long as they did and the same SEC that seems powerless to do something about a horrible total fraud like what happened at MF Global. Talk about crony capitalism and corruption. My word is my bond on wall street just as Knight's is but the fact of the mater is every day in my life on line I like everyone else experiences some kind of computer error. If the error was not intentional why should the firm be held responsible as if it were and why not allow it to undo the trades? What got stolen at MF global was intentional and look at how the darling bs artist who ran it is still being coddled because he was once governor of New Jersey. Oh it is also true that Bernie Madoff was a big democratic party supporter. Now we see LVS being persecuted for possible money laundering by third parties in their casino just after Sheldon Addelson gives big bucks to Romney. Solyndra turns out to be a big money give away with no net value and there are higher salaries going out to execs there to settle the bankruptcy and the SEC is pleased but now the SEC sees communist full spectrum red when there is a computer error in a world increasingly full of computer errors. What is clear is that the country and the markets are probably better off or just as badly off without the SEC as with it. When Jon Corzine gets life in prison for fraud and bunks with Bernie Madoff I think i might slightly change my opinion. This idea that accidents are intention goes on and on where ever lawyers are making the rules. Here in Oregon the weather beaches a ship and the state prosecutor goes after the ship owner for polluting the environment demanding "clean up costs" What? The same state of Oregon will sink a ship for a reef and charge no one for the cost of that . Welcome to the Soviet States of America. And one more thing about computer errors costing you money. The government and the lawyers will aim those rules at deep pockets almost exclusively which has a sort of ring and jingle to it like a Mexican police shakedown for cash. Capital should be fleeing the US as it might be as safe now down in Mexico or China with advantages of maybe being able to have a compture error without being held liable when it could otherwise be fixed. All things being equal the SEC and it's behavior should be the cause for a Knight Capital lawsuit just because the way this was done was unfair. Computer crashes are not like car crashes unless we decide to make them that way. I have mistakenly made trades I had to pay for and fixed the problem on occasions . As I said we can expect more computer errors and pile ups in the future and I don't think we want to live in a financial world where inadvertent mistakes cannot be corrected. What happens when the power grid goes off line or if hackers sabotage the systems? Are we all going to be stuck with portfolios we did not create or manage? The SEC is full of it. This behavior is as bad as when they looked past dealing with Bernie Madoff as someone worthy of an investigation before he had a 60 billion dollar ponzi scheme going.
    Aug 6, 2012. 10:44 PM | Likes Like |Link to Comment
  • Coca-Cola: Have A Coke And A Smile, Or A Pepsi And A Frown  [View article]
    the charting services do a fairly lousy job at going back in time with companies that spin off units. the old sears corporation spun off things like the discover card, coldwell banker, dean witter and maybe more so if you look at the present sears stock charts easy to find online they don't really tell the whole story. something like that just happened with Conoco Philips that spun off Philips 76. The long term chart for conoco disappeared just as the long term chart for the older philips petroleum may have also disappeared. another company that does not show all data is philip morris international and atria. spin offs included a lot more than meets the eye with the chain of present numbers.
    Aug 6, 2012. 05:52 AM | Likes Like |Link to Comment
  • Coca-Cola: Have A Coke And A Smile, Or A Pepsi And A Frown  [View article]
    which is more valuable having the frintos and lays potato chips at subway restaurants, all 30,000 outlets , or the beverages? Don't be too down on Pepsi. Pepsi is more than it seems if you go back in time and re-chart the company proformance including spin offs like YUM brands--the company is not so bad. Coke was better when it looked worse in the past but try spinning off the beverage unit at coke and see what you have left....
    Aug 6, 2012. 05:47 AM | Likes Like |Link to Comment
  • A Look At How PCP Inflates Earnings Through Acquisition Accounting  [View article]
    Yes they inflate earnings by retaining earnings to make acquisitions rather than pay out dividends. There is good reason to believe that a lot of commercial planes around the world will need to be replaced because they wear out. What could be catastrophic might just be missing expectations by a penny or three cents. Not. What would be catastrophic is if the Chinese managed to steal their business. With a truly catastrophic decline in share price shareholders would probably find their shares converted to Honeywell, GE or some other aerospace conglomerate like UTX so there is always a safety net.
    Jul 26, 2012. 02:33 PM | Likes Like |Link to Comment
  • Coca-Cola (KO) CEO Muhtar Kent says the company will start tapping into its $13B stockpile of cash, with a focus on capital expenditures at the top of the list. Strategic bolt-on acquisitions could be in the offing and investors could also see a higher dividend payout along with share buybacks.  [View news story]
    It is more complicated than that. Shareholders are being asked to increase the number of shares issued in a very big way. Is the company moving in the direction of very low finance borrowing costs from equity dillution when they can be borrowing at historic low rates with bond issues/ bank loans? Is coke doing what other large us companies are doing--building a mirror image in china/asia that may ultimately break away? When GM promises 600 new dealership franchises in China you buy the stock....at rock bottom prices per share....Not sure what Coke's plans are to raise so much more capital by issuing more shares in such massive numbers and hope this is not some plan to over compensate management/ employees.
    Jun 19, 2012. 03:15 PM | Likes Like |Link to Comment
  • So Aflac (AFL) wants to be a player. The company brings on Timothy Stevens to head its newly created post of global head of trading. Stevens - formerly of BlackRock - will report to CIO Eric Kirsch, who came over last year from Goldman Sachs. Also joining is Brad Dyslin - who worked with Kirsch at Deutsche Bank - to be global head of credit at Aflac's just-opened investments office in NYC. (PR)   [View news story]
    They always were a "player" Insurance companies have two sides one is the Insurance policy side that assesses risks that they insure and the other side is the side that assesses risks and rewards of investing the contract float money. They may or may not be in trouble now with euro denominated debt which may mean they had bad outisde player advice and may need to cut some losses. The Euro is a little speculative now. Warren Buffet uses the insurance business for the float and is definately a "player" he will buy commodities and curriencies on occasion. Aflac might be better off hiring the types of managers that Warren buffet is testing now. If Aflac is really hit by a euro failure it could become a berkshire hathaway company with buffet recapitalization in exchange for control. It appears Aflac was taking more risk to get its higher annual returns than some other insurance companies because of real higher risk that are only now exposing themselves. There is clearly a lot of investment competence at Aflac. The risk they will take huge permanent losses is probably low. I had been worried about what a catastrophic earth quake in Japan would do to the company and was happily supprised to see that they could survive and continue to thrive after one actually happened. The quake did not hit Tokyo which would have been a much larger shock. It is clear that Aflac can take big shocks and survive because they manage risks effectively . A lot of that may be due to contractural coverage for earth quakes. It is easy to get euro risk insurance too by legitimate hedging means with financial contract exposure. It the yen or euro collapses then the company can counteract losses making the cost of the contracts worth paying. when currencies are hit usually they recover later. Japan is the most in dept country per capita so they do have risks there too.
    Jun 7, 2012. 03:47 PM | Likes Like |Link to Comment
  • Kraft: Spin-Off To Spread Shareholder Value  [View article]

    These spin off deals can work out very well. Kraft was a spinoff I remember from Philip Morris MO... Philip Morris is actually the best preforming company over the long term in terms of a number of different measurements of success. I am not sure how it compares to Microsoft, Cisco , Intel and other companies that grew at an astronomical rates in their time of growth spurt. Philip Morris spit into Philip Morris international and Kraft and both of those sub units have appreciated the way you can anticipate the kraft spin offs to do the same. The Kraft spin offs are also bait for other companies to aquire because they are smaller more financially bite size chunks. Companies like Unilever and Nestle may still be interested even with big euro problems because they have huge us business with US dollar accounts for reinvestment. Private equity may also be interested with bank loans for aquistions with debt and tax advantages . Kraft could me worth more as the sum of it's parts. The down side might be too many new managers taking a cut out of gross income per share. The upside maybe efficiency in greater specialization of each component spin off. When the spin offs happen there are also refreshed point of origin accounting for each spin off and this can appear to enhance shareholder value. When the COP / philips petroleum spin off occured recently. There was a lot of confusion . Eventually once both parts of that company pay a separate dividend people will have an immediate sense of how they value the spin off shares which originally had a strange unknow stock symbol and no financials going back half a century or more like the original company and added to that no known dividend return--as a result those new shares were selling for less than they are probably worth for a period of time and maybe still
    May 24, 2012. 12:18 AM | Likes Like |Link to Comment
  • Notes On The 2011 Berkshire Hathaway Annual Report, Part 3 (On Acquisitions)  [View article]
    There are TV commercials on the financial news channels that use the word "Aquire" and the the word "Gold". Think of how that compares with aquiring Lubrizol, IBM, or Burlington Northern Santa Fe. The aquiring gold commercial really bothers me because they should be saying purchasing or buying not aquiring. When Carlos Slim purcahse millions of onces of silver maybe that was an aquisition?
    May 6, 2012. 05:46 AM | Likes Like |Link to Comment
  • Berkshire Hathaway Is Not Mispriced  [View article]
    It may not be mispriced for today but it could be for tomorrow. Cash Flow is something that evolves over time. Estimates out in the future can give you a range of prices with a range of returns on the purchase of shares. Mispriced buying is in relationship to alternative investments available at the same time.
    May 6, 2012. 05:41 AM | Likes Like |Link to Comment
  • Berkshire Hathaway Is Not Mispriced  [View article]
    It may not be mispriced as you say for today but it maybe for tomorrow.
    May 6, 2012. 05:36 AM | Likes Like |Link to Comment
  • Why I'd Avoid Buying Berkshire Hathaway Now  [View article]

    There is more calculus required to figure out how the dividends of underlying companies verse buying Brk shares directly benefit the owners. One is that dividends are taxable and the brk shares are one of the most tax advantaged "mutual funds" you can find because the company neither distributes capital gains nor dividends or interest to common shareholders. If you believe the shares are under valued it also may not make much difference except then you might be right to avoid them because they will remain undervalued relative to component parts of the company that independently trade on the markets. There is no other way to buy shares of BNSF but you can buy the competition which is Union Pacific instead. Where I live in the columbia gorge there is one of each rail road on either side of the columbia running east and west and I wouldl not bet against either of those two. There were people invested in BNSF long before Berkshire Hathaway became intersested at lower prices per share maybe on an aboslute value basis as at one time the shares came with large land holding that became i think Plum Creek the reit and a big gold mining outfit and a big oil and gas outfit. Warren Buffet missed out on those goodies being a late comer. The company profile is more preditable now with a solid transportation focus and less difficult to quantify assets. Maybe I am incorrect and the sum of the parts is lower today because of inflation than it seems and Buffet did a longer term analysis but that is not his style when it comes to looking at return on capital and basis fundimental valuation. Confused at what interest rates are to base a fundimental valuation on now? It is tricky because inflation of commodity prices and even the US dollar overseas and on this continent too could be masking deflation based on different ways of measuring it.. Warren Buffet might have bought BNSF based on a 3 to 5 % current interest rate environment which gives his original investment x number of years to compound to an expected level of appreciation which has to run out at least 5 years if not 20. That means that the BNSF purchase might not even be reflected in the share price of Brk shares certainly not at the present market quote but given time they will float the share value higher and probably do so effortlessly like magic boyancy.
    Mar 11, 2012. 08:29 AM | Likes Like |Link to Comment
  • Why I'd Avoid Buying Berkshire Hathaway Now  [View article]
    Berrkshire Hathaway is a mature company. Apparently Warren Buffet has his own private portfolios outside of Berkshire Hathaway as he does not tend to buy his own shares and he does not have much of a record of building castles or places with real moats like Larry Elison types do. When he gets his money back from investments outside of his Berkshire Hathaway holdings he is not usually buying shares on a personal basis. Clearly he as the right to some diversifaction too. Apparently he did buy back some shares in the last market dip but in that case it was I think Berkshire Hathaway buying back it's own shares or just a few of them . Maybe it was an over hang of sellers getting rid of the B shares since so many got issued with the purchase of Burlington Northern? One can see from this that maybe the company might be better off spit up into sections with smaller capital pools to invest from and some limited independence. Management after Buffet will certainly consider all options as time goes by. These is also evidence that Warren has creates some investment pools that are separate. Geico , Mid America, and the Reinsurnance units all have semi independent investment portfolios and more recently the people he has been considering for future management possitions maybe running his own separate portfolio or parts of the Berkshire Empire on what internally might look like a separate investment portfolio for each. If you want to hire someone who has a record of investing that is one thing but then to bring them on , you don't want to give them independence but try them out first. Berkshire Hathaway is not going to collapse and disaapear anytime in the near future. When you think about how big Standard Oil would have been had it not been broken up you can just put together all the separate pieces most of which have grown ever since the break up and you find the whole is larger than at the time of the break up. That appears to be true when you start putting Ma Bell back together too. You just add Verizon and ATT and thats much larger than large cap right there without adding the other parts . That maybe a cause ot analyze companies that broke up into smaller units because maybe the whole of Berkshire Hathaway is instantly worth a lot more than the whole that way although some components of the company broken off would have a much faster growth rate than say the Utilities parts including the railroad. That depends on whether the railroad business does become a growth area. When The former denver owner of BNSF sold out he figured that the company had totally matured and went into the entertainment business among others instead. That left it open to a Buffet aquisition and who would have expected that He wanted the whole thing. The reason is it may transform into a growth company with low cost co generation nantural gas powering it on the rails instead of diesel and trucking going from being interstate to local and rail with trucks also becoiming hybrid electric gas generated power vechicles. There is also an issue of Chinese exportation of coal and other resources that mean rails like those that hit pacific ports don't have to send as many empty train cars back to the coast after they deliver the chinese goods to the heartland and no wider panama canal is going to change those facts although there is the issue of the erie canal and if it is for sale cheap again.
    Mar 11, 2012. 08:11 AM | 1 Like Like |Link to Comment
  • Why You Don't Want To Compete Against A Berkshire Company  [View article]
    A "mote" is a euphamism for a 'natural monopoly'. Carlos Slim winks at Warren Buffet knowing that he has the passion for the same sort of companies with unbreachable motes . What is interesting is the types of companies that have monopolies in Mexico because of government protectionism mainly might not be companies with natural monopolies in the US. There is a difference between Mexican telephone business and the greater competition seen in the US. One has to wonder just how long Slim's concentrated telephone monopoly power would exist in Mexico if there was free competition the way there is in the US. In Mexico and other countries that mainly have a single national phone company , companies don't have to immediately plow more capital into new systems just to compete and they don't have to compete as much on price. Companies with natural monopolies irrespective of the government in Mexico are easy to pick out including beer manufacturing, soft drinks, and cement distribution and manufacturing which via Cemex even has some natural monoply powers across the border here. Government controlled Pemex is no natural monopoly in oil and gas there which includes the Mexican gulf drilling areas. Pemex is an inefficent subsidized industry that should have been broken up for the benefit of Mexican financial progress. The interesting thing about Pemex is that either Slim or Buffet could buy it and turn it into a cash cow in a way the government there can't the way the Russian billionaires made out like bandits buying ex soviet collective industries for pennies on the dollar. There are all sorts of American companies that have natural monopolies powers but not necessarily an inexpensive price tag to purchase ownership of these. Burlington Northern Santa Fe is one such natural monopoly that was priced at fair value when Buffet made his offer to buy it . It was fair value based on the companies contemporary numbers not it's future value based on speculative assumptions about the future. It is a lot cheaper to put good on a train car than on a truck bed maybe even so after trucks come out with hybrid engines the way the train locomotives work converting diesel and now natural gas to electric current that more efficently turns the wheels. The future of the rails especially giants like BNSF might be public loading terminals where smaller cargo trailers the size of uhaul vechilces can be loaded on trains to move people cross country as one example of something that does not happen to offen yet but may. i can imagine starting a new cargo business with much smaller cargo boxes that snap together on top of each other and then on train bed cars. I could even imagine RVs and homes being created that could be moved whole. The rails have the right away and just watch how hard it is to get a right of way for a pipeline from canada these days.
    Mar 8, 2012. 11:01 PM | Likes Like |Link to Comment
  • Regulators are taking the fizz out of a report from a consumer group finding that Coca-Cola (KO -0.7%) and Pepsi (PEP -0.8%) contain a chemical that causes cancer in animals when given in large doses. The FDA disputes the conclusion that the sodas pose a health risk.   [View news story]
    Congress should take a hard look at the asbestos trust created to aid victims because it appears that there are far fewer victims than estimated and the funds left should be returned to the shareholders of the companies the attornies bankrupted. There is a chemical in Alcohol that will kill a mouse if put a mouse in a bottle of vodca or rum. Now a days sugar alone is being considered as a dangerous addictive drug by the same idiots who keep pumping this stuff out in the media. Now that the miso asbestos commericals are coming on the air every moment of every day saying that asbestos lung cancer is essentially the same thing as lung cancer we know that attorneys are just crooks trying to get their share of the miso funds. The air is dangerous , the water is dangerous and an asteroid with coke and pepsi advertised on it is heading toward earth. Yeah right just like peak oil which turned out to be a total crock.
    Mar 7, 2012. 01:57 AM | 1 Like Like |Link to Comment