Fairfax Financials (FFH) Watsa has gotten quite a bit of press lately. Here he is giving a talk at the Ben Graham Center for Value Investing.
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Roubini Still Pessimistic (video0
From Bloomberg Europe..
Part 1
Part 2
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This is a good speech by Schiller and worth watching..
Part 1: Why is this a surprise and why did this happen?
Part 2: We thought “buying a house anywhere was a good investment”
Part 3: Solutions….
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Part 2 is titled “Silver Linings and Lesson’s Learned”
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The title of this part is “Reaping the Whirlwind”.
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Friday’s Links
Thank you, Ackman, CNN, Citi Field
– Thank you for the mention
– A good take on the General Growth Properties investment
– Why watching the MSM is no way to learn about the crisis..
– Not bad, $400 million of tax dollars to name the Mets new stadium…
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This is truly great stuff. Mr. Berkowitz talks about Lampert & Sears (SHLD), the current economy, the case for HMO’s and defense companies and more. This is one of the best one of these I have ever heard.
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Charlie Brown Thanksgiving… (video)
Here is the full video..
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Still have not listened to the earnings call yet but will get to it. Had to go pick up the 34lb. turkey for tomorrow. Anyway, had this great idea emailed to me today from JB..
“What would happen if Pershing Square guaranteed all of Borders (BGP) debt (maybe for a small fee). The stock would skyrocket wouldn’t it? The reason the stock has been hammered in addition to the slowing consumer/macro environment is b/c of the heavy debt load. Eliminating a major concern should get the equity moving significantly. Keep in mind that all of BGP’s debt is a credit facility with no restrictive covenants until they are 90% borrowed…Considering they have $518mm of an available $1,125mm outstanding it seems awfully flexible in this environment.
Why would Pershing square do this? Well I doubt that they believe that BGP will default on this debt and they would benefit from both a small fee on the guarantee as well as a significant appreciation in their equity holdings. It’s not as if BGP management will stop managing the business prudently and they likely will continue to pull as much costs out of the business as possible and pay down debt on a continuing basis.”
I can’t poke a hole in this…anyone have any comments?
Disclosure (“none” means no position):Long BGP
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Citi (C) CEO Pandit…..don’t know. I do know this. I am glad I no longer own shares. Listening to him I just get the feeling this is not over yet..
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Would still not be a buyer of Berkshire (BRK.A) here, i think it may go lower. That being said, the fear and sell off in the stock is ludicrous. Did Warren sell the put at the top of the market? Close…but it it does not matter. Listen to Tilson’s explanation.
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Any guesses on when he stops buying? $$
After over a million shares last week, Gate’s on Monday added another 300k shares through his Foundation and Cascade Investments
Gates now has 19.057 million shares
Disclosure (“none” means no position):Long AN
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GMO’s Jeremy Grantham (video)
One of the hedge fund world’s most successful managers talks and is now finally bullish on stocks.
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Sears…A Reader Submission.
Reader Justin submits: Why Sears (SHLD) is NOT going bankrupt?
In this volatile market, anyone can say anything to put downward pressure on a stock. In many cases deserved, in some cases absurd, and in the case of Sears a little of both.
Let’s start with the deserved part. Obviously, retail is doing terrible this year as an investment. However, the woes at Sears go beyond the macro environment. They have made bad decisions in some cases, suffered from management turnover, and communicated very little beyond what’s required by a public company. On top of that, they recently lost a well-respected, activist shareholder, Bill Ackman. Bill has taken an absolute beating on his investments in Sears, Target, and Borders, so he may have had about all the fun he can handle in retail. In short, it hasn’t been all that pretty, but the shares reflect much worse.
The absurd is the idea that Sears has some kind of solvency risk as some have floated. Why is this absurd? Here’s my case:
1. Last quarter Sears generated FCF (free cash flow) of over $400 million. Target, a “good” retailer actually had no FCF last quarter, they burned over $900million. In fact, Target hasn’t generated FCF in the last 3 quarters. Over the same time frame Sears generated a staggering $1.5 BILLION in FCF. So yes Sears is making money hand over fist in this environment even with mediocre execution.
2. Eddie Lampert’s investment fund ESL owns over 50% of Sears. And Sears makes up over ½ his fund. And his fund is still making investments in other equities. Now if you are thinking that ½ your fund may evaporate into insolvency or you are worried about investor redemptions then you preserve cash if not generate cash by selling positions. What you don’t do is make more investments, which is what he’s doing.
3. Sears announced the purchase of additional shares of Sears Canada in November. Why spend your cash on buybacks and now additional shares in Sears Canada if you are worried about your cash position?
4. I’ve been to several Sears and Kmarts in recent weeks and they are all hiring.
In conclusion, Sears is hiring people, buying shares in, generating FCF, and ESL continues to make investments. None of these indicate to me that there’s any solvency concern by the controlling shareholder.
Disclosure (“none” means no position):Justin is long SHLD
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Wednesday’s Links
Home, Geithner, Geithner, Buffett,
– More folks eating here than ever before
– Not everyone likes the choice
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