We had a wonderful meeting Romano’s Macaroni Grill! We had a total of 6 attendees: (from left to right) VJ Arjan, Ryan Zamora, Andrew Whatley, Kevin Day, Jeff Harrington, and Greg Bartell.
Osama Bin Gotten
The very day we had our meeting, we had the wonderful news of the death of Osama Bin Laden. I would like to throw this issue into an open discussion and would appreciate any comments on how his death would affect the future of the Al-Qaida organization and also the future of terrorism now that the “Gambino” of the terrorists is no more. I would also like to get some opinion on how this news would affect President Barack Obama’s presidency and re-election chances. So please make some comments.
Berkshire-Hathaway investors had some questions regarding David Sokol’s $10 million purchase of Lubrizol shares before pitching its buyout to Buffett. Some sources have said that Mr. Buffett knew of the existence of this purchase beforehand and did nothing about it. Right now, he is playing the “I wasn’t informed enough about the situation” scenario.
Mr. Sokol, one of the prospective successors to Mr. Buffett, would have been asked to go and seeing the writing on the wall, he resigned before this was done.
Kevin Day believes that although there will be short-term backlash for Buffett’s lack of vigilance regarding this issue, in the long-term this issue will be swept aside.Every corporation will have problems crop up, and, for the most part, life goes on for each one of them.
The Banking Sector
VJ Arjan noted how the earnings for the major banks have been very disappointing.Most notably, Bank of America’s earnings stood a full 10 cents per share short of analyst estimates.
Jeff Harrington noted that the banks that have been able to post profits have done so by “trimming the fat” and reverting loan loss provisions from an accounting standpoint (Every bank keeps aside a portion of cash in an account for loan loss provisions that is considered an expense. When they reduce this amount, it is accounted as an addition to cash flow.)
He further noted that the growth prospects for the large banks seems limited as well at least for the short-term. He still affirms that the long-term future for banks has tremendous upside potential.
The Silver Bubble?
Kevin Day noted how the price of silver has shot up 50% year-to-date. In his view, the continuation of this rate of appreciation creates a bubble like quality in terms of price action.
He believes that if there is a correction coming, it would be a drop in silver that would be the catalyst for this chain of events. (Literally the day after our meeting, the price of silver fell by 13%).
There would, naturally, also be a correction in gold and other precious metals as well.
Buffett’s Next Buyout Target
Jeff Harrington explained how Buffett has a boatload of cash on his books and, by U.S. tax law, he has to either do one of two things with that cash: pay out a dividend or pay taxes. Jeff further explained that he doesn’t want to pay taxes and will seek to reinvest this cash buy looking for another company to buy.
He feels that this could possibly be in the energy field, particularly natural gas as this commodity becomes a more and more viable alternative to coal.
Deficit Reduction Program
Congress has come up a few plans on reducing the federal deficit. Jeff Harrington noted that there only one problem: reducing the deficit will not actually lower the national debts. The deficit reduction plans only address the decreasing the shortage between income and expenses every year, but this still means that our national debt will continue to increase year after year.
Kevin Day still believes that the time will eventually come when the American people will say “enough is enough” and take on some severe austerity measure to balance our national debts. He believes that the resolve of the people is tremendous and that they will come through at the end.
Dividend Plays
Greg Bartell discussed some great dividend plays and we’ve listed them along with some other similar ones below:
· Cellcom Israel Ltd. (CEL) – 12% yield. Provider of cellular communications services in Israel since 1994.
· Partner Communications Company Ltd. (PTNR) – 11.4% yield. Provider of cellular communications services in Israel since 2001.
· Blackrock Enhanced Capital and Income Fund (CII) - 12.6%.
Other Investment Plays
Carbo Ceramics (CRR)
Encore Wire Corporation (WIRE)
The next meeting will be on Sunday, June 5th, 2011. For those who have not attended a meeting, but would like to attend, please email your wish to VJ Arjan at scarletkings@gmail.com.
Also I find that there are many domestic and international readers who are following our blog posts not only in the United States but all over the world including Europe, Latin America, and Asia. If you wish to be added to our email list, please email at scarletkings@gmail.com.
It's certainly odd celebrating someone's death, but I believe that people around the world will sleep better at night.
ReplyDeletePutting the media punditry aside, I'm guessing that there must have been a succession plan in place. They had 10 years to think this through and the question is will there be a continuation and resurgence of the Al-Quada organization or will it fritter away. An apt historical analogy that comes to mind is Hitler and his Nazi party. After his demise, the fell apart quickly. It is possible that this may occur with Al-Quada as well. Political infighting could result with more and more divisions.
As for Barack Obama's re-election, I believe this may have "sealed the deal" provided that no viable candidate can rival him in the GOP. I also do not think anyone in the Democratic party of substance would run against him. Time will tell.
- VJ