MKJ

Buffett Metric Doesn't Say It's Time to Buy

Buffett writes in the original article that the market/GNP metric doesn't tell you everything you need to know, but it is a good general guage of when you should/shouldn't be interested. He also talks about the importance of interest rates.

The ten year was at 8% at the end of 1969 vs. under 3% now. More importantly, the p/e based on an average of the past ten years of earnings was 15.9 (5% earnings yield) at the end of 1969 vs. about 15 now (about 6.5% earnings yield). So, in 1969 you could do better buying the ten year than stocks. This is not the case now. In fact, the spread between the ten year average earnings yield and the ten year is greater than it was in the 70s.

Ackman's Sears Sale: An Expression of His Activism

Anyone have any thoughts on some of the bonds trading at 50 cents on the dollar? They seem to be pricing in a modest probability of default in the next couple years. If you want to be long Sears for the long term, you have to make the case given the horrible economy (that Lampert certainly didn't anticipate when he got into this) that Sears will be able to pay its bondholders. That's the first step in today's environment. If you can argue that Sears will not default on its debt and will be around to catch the upturn in the cycle, then you have a case for Sears as a long-term, Berkshire-like holding. Can anyone walk through Sears' likely cash flows and debt obligations (including operating leases) in the next couple years?

Also, I saw a Sears press release on a couple different sites indicating that it bought about $4 million worth of Sears Canada stock on 11/12. Oddly enough, I cannot find this on Sears' website or in any filings. See www.newswire.ca/en/rel.... If this is true, a $4 million purchase last week does not reflect a company with cash problems. Any thoughts?

Finally, it's extremely easy for hedge funds to spread rumors about Sears given that it's retail, there's been top executive turnover in the past couple weeks, Ackman sold his position (even though he explained it somewhat innocuously), and the Company doesn't say anything in between quarterly reports. Add the fact that tax-loss selling is the #1 priority for PM's and that no one thinks Sears is going anywhere before next year and you have a great short over the past week.

Is XO Communications Taking Level 3’s Market Share?

Can anyone comment on the extent of XO as a competitive threat to LVLT? It's clear that XO is executing where LVLT has not. But does LVLT offer products/services (or lower prices, or larger network coverage, etc.) that XO does not? Assuming LVLT can get its act together and start executing, does XO represent a real threat?