Tuesday, November 03, 2009

BAGAKOAA November 3, 2009 Buffet takes the train


November 3, 2009 Buffet takes the train

Now I know those of you reading the blog realize just how influential I am regarding the overall market. But even I had no idea. About two years ago a friend of mine named Betty was at an event in Las Vegas where she spent some time with Warren Buffet and Bill Gates. (I’ve see the pictures so I know it’s true). Before she left for the NetJets event, I was talking to Betty about how to get from one place to another. In the course of that conversation, I may have said, “Then there is always the train.” I am confident that this tip must have made its way to Buffet as his initial investment in Burlington was weeks after the NetJets event. So there you have it. It must have been my tip.

The market is making big hay about the very unusual Berkshire stock offering for Burlington. Some are calling it definitive proof that the economy has absolutely bottomed. Anybody buying into that logic, only needs to read the 800 page 2008 Bio on Buffet called “Snowflake”. He never buys anything that is not dirt cheap, a great value with a great management team and where he isn’t guaranteed a phenomenal return. (3 Billion in GE was all in preferred status with a guaranteed 10% dividend.) So don’t read too much into the Burlington purchase other than Buffet doing what Buffet does best. In this case he is doing it for the Class A shareholders as it will be a challenge to get his money out of this purchase (They are assuming 44 billion in Debt) in the balance of his lifetime. But he makes no secret of that.

So what else is going on out there? The bears have taking a nice step forward over the last 3 weeks. If you track the CBOE Put to Call ratio, the 21 day moving average has gone from .79 to .59, a 33% change meaning that investors are buying more puts (Downward pressure) that they were 3 weeks ago. If you noted this blog last weekend, I initiated a position in VXX, a volatile play because no one really knows what is going to happen in the post earnings season. I can’t help but think of the advice my father would give to me in uncertain situations “Whatcha you Ass!” which I think he may have adopted from an Italian friend of his in Queens.

I mentioned my concerns about CHU, the second largest mobile carrier in China who has the first exclusive for the iPhone. It is not performing as well as I had hoped (Down 11.2% now). I read everything I could last night and it looks as though I got in a little too late. The Chinese government gave 3 3G licenses away in January. CHU was one of the recipients. Almost immediately AAPL gave the agreement to CHU, so this knowledge was on the street in April. I was way to late to the party. Now it appears as though CHU and the other to carriers have to gear up for the 3 G network. That means they have to spend a ton of dough and take on debt to build and wire towers all over China. China is a big place. Go to a wall map and look at it. I’ll wait. . . . See it. It’s that big county there that looks like a chicken, actually a rooster. Come on you must see it. You know the thing that hangs of the neck of a rooster, its called a waddle. Well the waddle is the Korean Peninsula. But I digress. Anyway CHU will be burning through cash and possibly getting in debt and the value of the stock might continue to drop. I am staying in until a 22% drop if necessary. This goes against everything I have done in the last 9 years of investing. Don’t do as I do, do as I say.

Speaking of gearing up for cellular, AMT reported this morning and met expectations, which were aggressive. As I mentioned here, I was hoping for 22 cents a share expectations were 17 and we got 17. I will be listening to the conference call tonight. It’s up about 3% today.

Salve Lucrum


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