See’s Candies, Sanborn Map, and Inflation Article

SeesA Nor’easter is coming my way (up to two to three feet of snow with high winds) so I may be out of contact for two or three days.  But push on we must. We continue to study Chapter 3, in Deep Value and Buffett’s investing career.Sees 2

The best investment article I have ever read of Buffett’s is:

Buffett & Inflation Highlighted plus if you wish to read all that Buffett has said about inflation then Buffett inflation file.

A key case for you to focus on is See’s_Candies_Case_Study. Combined with Buffett’s Inflation Swindles the Equity Investor (Fortune Article: Buffett – How Inflation Swindles the Equity Investor), you will see a leap in Buffett’s thinking. Both are important to understand and complementary to each other.

Finally, Sanborn_Map_Case_Study_BPLs is another case mentioned in Chapter 3 of Deep Value.

Hopefully, students will discuss in the comments section.

Time to bring out the snowshoes!

It’s not entirely clear what will happen in the near term, but the financial markets are already pushed to extremes by central-bank induced speculation. With speculators massively short the now steeply-depressed euro and yen, with equity margin debt still near record levels in a market valued at more than double its pre-bubble norms on historically reliable measures, and with several major European banks running at gross leverage ratios comparable to those of Bear Stearns and Lehman before the 2008 crisis, we’re seeing an abundance of what we call “leveraged mismatches” – a preponderance one-way bets, using borrowed money, that permeates the entire financial system. With market internals and credit spreads behaving badly, while Treasury yields, oil and industrial commodity prices slide in a manner consistent with abrupt weakening in global economic activity, we can hardly bear to watch..   John Hussman, Jan. 26, 2015

5 responses to “See’s Candies, Sanborn Map, and Inflation Article

  1. See here for an article about See’s Candies from the September 3, 2012 Fortune issue:

  2. Pingback: Q&A: Case Study of See’s Candies | Hurricane Capital

  3. Could someone please clarify why “if business was able to base its price on replacement cost, margins would widen in inflationary periods” (Warren Buffett’s article on inflation)? Maybe I misunderstand something, but if say a business sells good X with a 50% net margin and the costs double from 50 to 100, then being able to charge a constant multiple of cost would imply the business doubling the price from 100 to 200. But the margin then stays at 50%. Maybe we assume some costs do not rise as quickly (say replacement cost doesn’t include all costs)?

  4. Great article. Love to see the jump in thought from net net to high return on capital business or low capital intensive business. The explanation was very helpful. Profits can double and just a little capital needed to do it. Whereas, high capital intensive business cost its owers lots of money. So instead of paying a lot more to expand, you can just stick the money in your pocket or borrow less.

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