Saturday, February 25, 2012

Warren Buffett, Mercenary

 Well at least Buffett laid off the politics.
 His 2011 letter, which is available here and should be read in its entirety (instead of via the thousands of recaps currently going up all over the Internet), is classic Buffett: a review of 2011 (busy), some self-flagellation (not much, mainly some bad bond purchases), props to Berkshire managers (and Brian Moynihan, of all people), lessons for anyone interested in the art of investing (pages 17-19), and the big headline news: Buffett finally has a successor approved by the Berkshire board (no doubt triggered by last year's Sokol Affair).
 Along the way there are plenty of good lines, in the Buffett fashion, and finally (after decades worth) no nagging wife-sort of jokes.
 And no politics, either.
 But our favorite line comes during the discussion of the Berkshire share buyback, when he cautions investors that he has no interest in doing anything goofy like most public companies that buy their stock, come hell or high water, in order to fulfill the mantra that they are 'returning value to shareholders':
 “You should know, however, that we have no interest in supporting the stock and that our bids will fade in particularly weak markets.”
 That’s why Buffett got so rich in the first place: when it comes to investing, he’s strictly a mercenary.


Wednesday, February 22, 2012

Hell Freezes Over: Eddie Needs Wall Street

 There it is, plain as day, on my conference call alerts calendar, but I don’t quite believe it:
 Q4 Sears Holdings Corp Earnings Conference Call            2/23/12            8:00 a.m.
 There’s a phone number and a password, so it’s gotta be real.  If it is real, and it does take place, it’ll be the first time Sears has deigned to hold an earnings conference call during the Lampert years, as far as I can recall.
 Hell, it appears, has frozen over.
What might it mean?  Why now?  Well, let’s think about this once-in-a-career announcement for a second.
For starters, the fact that Sears is holding a conference call means the news is probably not very good.  After all, good news takes care of itself, but bad news needs explaining.
Still, that’s nothing the market doesn’t already anticipate—the bid/ask on the Sears Acceptance Corp credit default swaps is a whopping 1475/1583 on my Bloomberg at the moment.
More interesting, perhaps, is that the call is scheduled for 8 a.m. E.S. T.
That’s well before the market opens in New York, which means the news is really probably not good at all, since companies with bad news generally don’t hold calls during trading hours, since they don’t want to have their stock bouncing around while the conference call is going on.
 I could be wrong, of course.  The news could be great.  Eddie could be announcing that he’s finally decided to spend a little cash on the business itself, rather than its stock, and is hiring somebody great—like JC Penney did when it hired Apple’s retail genius, Ron Johnson, a move that’s already proved worth every dollar for that faded department store brand—to turn the business around before it’s too late.
 Either way, good or bad, the call does mean one thing: Eddie needs Wall Street now, and he needs it more than Wall Street needs Sears.

Jeff Matthews
(eBooks on Investing, 2011)    Available now at

© 2012 NotMakingThisUp, LLC
The content contained in this blog represents only the opinions of Mr. Matthews.   Mr. Matthews also acts as an advisor and clients advised by Mr. Matthews may hold either long or short positions in securities of various companies discussed in the blog based upon Mr. Matthews’ recommendations.  This commentary in no way constitutes investment advice, and should never be relied on in making an investment decision, ever.  Also, this blog is not a solicitation of business by Mr. Matthews: all inquiries will be ignored.  The content herein is intended solely for the entertainment of the reader, and the author.