Actual photo.

So after long ago buying tickets to JB’s “Under the Big Top” tour — assuredly putting me on some sort of watch list — I decided… not to go.

Various reasons, among them:

• (a) I didn’t want to hear — in the far from pristine environment that is Jimmy’s actual voice — the post-1987 music I’ve yet to encounter,
• (b) I frankly didn’t want to hear the handful of songs I actually like equally butchered by the man who gave them life, and:
• (c) despite 16 albums of preparation I wasn’t ready to surround myself with the Buffett aesthetes who’ve practiced for this their entire lives.

I ended up there anyway.

After selling my tickets early in the week, I found myself last night, inexplicably, in a car with the Mrs. Brothers and some incredibly indulgent friends — who wish to remain anonymous (as, in retrospect, do I) — mere meters from where JB himself stood. It’s hard to explain, but once Jimmy set foot on Bay Area soil the gravity was inescapable: there was no way he and I weren’t going to share some bad music together — along with 40,000 of his drunkest friends. (Suffice to say that now I know what Vader felt whenever Luke approached the Death Star.)

So there we were. 9pm. (Jimmy went on at eight — it took me a while to motivate.) Idling at the curb, outside the concert. Semi-sober.

Problem One: Tickets.

Here’s a trick for all you future concert-goers. Apparently if you’re willing to:

• (a) show up more than an hour late,
• (b) sweet talk the honeys in the VIP entrance (this was key — and wasn’t me — thanks SJ), and
• (c) “donate” to the specious charity fronted by the guy with the keys to the arena

…you might find yourself with some tickets.

Problem Two: Parking.

We had tickets! We could hear Jimmy. (Win some, lose some.) And to the strains of “It’s My Job” — seriously — we encountered a parking attendant decidedly doing his: no way he was letting us into the lot.

Luckily for us, the next attendant was not so inspired by the lyrics. Seconds later we backed into a spot a short walk from the entrance. Next stop: beer concession.

Problem Three

None. (Unless you count “having to listen to Jimmy sing” a problem.) We were in. And there HE was, destroying “Cheeseburger in Paradise” as we found our seats. The sea of parrotheads was alive… blowing a collective .14 but alive… pulsating with every hit of the steel drum… and singing too off-key of its own accord to notice that the emperor had no tone.

I will say this for Jimmy Buffet fans. They are tremendously accepting — which makes sense given what they tolerate as music. In our short time there the crowd around us was willing to participate in numerous impromptu high-fives; to ignore my generally stilted concert demeanor and cries of distain whenever Jimmy talked or ad-libbed his way through a chorus; or to literally give one of my partners-in-crime the stuffed parrots off their heads, and the leis off their necks.

Come Sunday…

We didn’t last long. “Cheeseburger…,” “A Pirate Looks at Forty” (which I made sure to loudly proclaim was not about a real pirate), “Woman Going Crazy on Caroline Street,” “Margaritaville.” Check. A couple of other songs younger than the 16 albums I’ve devoured, and that I quickly wiped from memory. The crowd loves them some “Margaritaville,” which is fine (I don’t mind that song). But “Pirate…” sucks.

And then, as quickly as the evening had evolved, it was over. We were in the car, beating the traffic home. And rightly so. Jimmy’s worth a conscripted “donation” perhaps, but not worth an hour of bumper cars with parrothead motorhomes, boat trailers and other vehicular novelties.

But, come this morning, I was surprisingly wistful. “Fins” — which assuredly was to come in the encore (it did) — would have been fun. I was ready with hand gestures. “Wonder Why We Ever Go Home” was not on the set list (and I imagine never is), but I would have enjoyed. Likewise “Last Mango…,” “Lady I Can’t Explain,” and “Trying to Reason with Hurricane Season” — all were not performed, and probably not missed by the Landshark-Lager-goggled crowd, but that I’m left wanting anything measurable at all from a Jimmy Buffett concert says a frightening amount about how this project has changed me.

Like that when Jimmy sets his 2011 tour dates, I might find myself again on the ticket pre-order list.

How is that possible?

I don’t wonder why we ever go home, Jimmy, but I do wonder what the hell you’ve done to me.

Thanks completely to the TBB support-crew/entire-readership that made the night happen. Next year we wear our own parrots!

And of course this is in spite of Warren’s yearly bluster about the impossibility of any future BRK growth. (He does it even more in 1989, this time predicting an imminent loss in shareholder value.) He’s a fiscal Ralph Kramden: “One of these days, investors… POW! Right in the kisser!”

(Did I just date myself? Reveal that I am actually an 87-year-old man? And did you know Jackie Gleason recorded a Christmas album of “lounge” music? I have a copy.)

Anyway, before we head straight to the moon, four segments in 1989′s letter. Let’s break it down, Berlin-Wall-style:

(Are you humming Jimmy’s “Come to the Moon?” Why not?)

Thank the government for not taxing your paper gains
In a long section re: tax liabilities, Warren details the investor’s benefit of only owing taxes when an asset is sold — it’s effectively an interest-free loan that renders the eventual levy a simple “transfer tax” when funds are moved from one asset to another.

He uses an extreme example to validate the benefit of staying put and taking advantage of this governmental largesse:

1. Two scenarios. Both start with $1.
2. Scenario One: we pick a winner in year one, double our investment, and promptly sell. We manage to repeat this process every year for 20 years. And each year we pay 34% to Uncle Sam.
3. Scenario Two: we pick a single winner that itself manages to double annually for 20 years. Only then do we cash out.
4. In Scenario One, we’re left with $25,250 and the government $13,000. Look what you can get for a buck.
5. In Scenario Two, we’re left with $1,048,576, and the government with $356,500.

(See what happens when you sell all the time?! This is why we can’t have nice things.)

Warren contends this isn’t why he holds forever, rather that Berkshire finds good people and mates for life. “Like seahorses. Wealthy, wealthy seahorses.”

And he admits that a capable investor could overcome this transfer tax by moving intelligently. But to me — incapable of doing anything intelligently — it reinforces that I should not be selling BP, even though I am a hero in investing circles thanks to the purchase, and I would like a Playstation.*

The usual back-patting and attaboys

Everything’s amazing with Berkshire’s holdings. I won’t bore you like Warren did me with the quantification. The one highlight is the Blumkin Family Schism. Remember the Blumkins? Nebraska Furniture Mart?

Well, see if you believe this. Rose frickin’ quit.

Seriously. 200-year-old Rose quit her own family business — ditching her (presumably) 90-year-old sons. Over a disagreement about the prominence of carpet in the mart!

The best part? She promptly went and opened a competing store.

My guesses on the new store’s name, in decreasing order of likelihood:

• Rose’s Rugs
• Old Lady Carpets
• Come and Sit. And Buy Some Carpet.

Stupid Bash Brothers.

Insurance is… insurance-y as ever. Warren adds an aside about Berkshire’s evolving role in catastrophe (CAT) insurance, the business of reinsurance: insuring the insurers (and other insurers who insure the insurers — really). These are short-term contracts against single catastrophic events. And in 1989, in the wake of Hurricane Hugo and the earthquake that killed the frickin’ San Francisco Giants’ momentum, CAT covers were hit hard. Reinsurers had less cash with which to insure, rates went up, and Berkshire jumped in to the tune of $250M.

Why would you insure against catastrophes? Shut up and I’ll tell you:

1. Berkshire can afford it. Worst-case, it can absorb a $250M loss. “Though that is far more than Berkshire normally earns in a quarter, the damage would be a blow only to our pride, not to our well-being.”
2. Warren can handle it. Unlike most CEOs, he doesn’t fret about single-quarter results. But most company chiefs, with their lizard-like thin skin, “do not want to expose themselves to an embarrassing single-quarter loss, even if the managerial strategy that causes the loss promises, over time, to produce superior results.”
3. “When rates carry an expectation of profit, we want to assume as much risk as is prudent. And in our case, that’s a lot.”

Berkshire also invested in Gillette and Coca-Cola this year. Good CEOs and all that. I’m grasping for a combination Coke-and-Mach-3 joke, but nothing comes other than a weak one about shaving while caffeinated, which I’ll spare you. (Half-spare you, I guess.)

Good News! I shaved.

Zero-Coupon Bonds

I can’t — for both lack of legitimacy and simple energy — do this part justice, but Warren offers forth a fantastic history and overview of the zero-coupon security. Never thought I’d write that phrase.

These are bonds that only pay when due — versus a coupon on a semi- or annual basis — and started off legitimate (e.g., savings bonds) but have been corrupted by certain investment bankers, who use the zero-coupon instrument to accrue debt beyond a company’s real ability to pay. If you’re interested I’d suggest you read it your dang self.

The only item worth highlighting and that I barely understand is Warren’s description of EBITD (earnings before interest, taxes, and depreciation), which has been accepted by many as a measure of a company’s ability to pay interest against issued bonds, as an “abomination” in ignoring depreciation — a very real cost. “Capital expenditures that over time roughly approximate depreciation are a necessity and are every bit as real an expense as labor or utility costs.”

Warren Makes a Mistakes

1989 marks 25 years of what is now known as Berkshire-Hathaway, and Warren ends the letter with a summary of the mistakes he’s made during that time. It’s a good read, not wholly surprising altogether, and his lessons boil down into a series of aphorisms:

• Don’t be a “cigar butt” investor — availing yourself of cheap, but dying, businesses. Warren’s example — of which he claims many — is the Berkshire textile business itself. You may get a puff, but invariably they are dying for a reason, and not worth the risk. (You’ll also get gross germs. Have you seen how dudes smoke cigars? All bitey and spitty. Cigar butts are medical waste.)
• Good people cannot rescue a bad business. (Good people can however rescue a bad swimmer.)
• Difficult business problems are often difficult for a reason. Solve easy ones. “In both business and investments it is usually far more profitable to simply stick with the easy and obvious than it is to resolve the difficult.” (Incidentally: also true for the SAT.)
• Institutional — i.e., corporate — dynamics will trump individual strengths. These include organizational inertia; the oft erratic internal absorption of any excess equity; the de facto support of a leader’s idea by his underlings (no matter how foolish it may be); and the automatic, “mindless” imitation of competitors. (Gillette Mach 3, meet Schick Extreme.)
• Go into business only with people you like, trust, and admire. (And don’t mind the smell of.)
• When writing a blog project about someone’s annual letters, feel free to skip a few years. Who’s counting?

Warren finally puts forth a promise that in 2015 he will reveal his mistakes from the next 25 years. I will be here — probably only on 1994′s letter by then anyway — waiting. Hamana hamana!

* One circle. It includes my children. They would like a Playstation too.

Go buy this album instead. Or any other album.

So the past few weeks I’ve devoted the bulk of my listening to Brian Wilson Reimagines Gershwin. It feels a little dirty, but I’m halfway through Jimmy and I deserve a break. Call it the 16-album itch.

Or a palate cleanser. Though it is a little unfair to Jimmy — like rinsing with Lafite Rothschild after a course of Old Milwaukee.

(I had to Google “lafite rothschild” to make sure it was what I thought it was, but rest assured Old Milwaukee I had down.)

And I’d rather write about Brian than Jimmy. Floridays is particularly un-notable and… somehow… just doesn’t stand up to perhaps the greatest pop songwriter of all time, doing frickin’ Gershwin. And say what you will about Brian’s thinning, sexagenarian vocals, the novelty aspects of this particular album, the thematic heavy-handedness inherent in his latter-day efforts, his inability to recapture the magic of Pet Sounds, etc., but Brian wouldn’t be caught dead in the same league as Jimmy.

Or so I thought.

Because as part of my listening to BWRG I went back and dabbled a bit in Wilson’s other solo projects, among them Imagination, his forgettable 1998 (and true first modern-era solo) album. And what — what the HELL — do I find?

Track 3: “South American.” Written by Brian Wilson, Joe Thomas, and JIMMY BUFFETT.

I kid you not. JB managed to not only a) insert himself into the tentative first steps of Brian Wilson’s public recovery from decades of mental illness and psychotropic drug addiction, but b) insert himself into one of my few musical bastions I thought sacred and safe from the likes of Buffett. I swear, Jimmy is this wandering Gulf Coast Zelig, spewing trite lyrics and other novelty-song offal throughout everything I’ve ever held dear. Next I’ll find out that his Caribbean lifestyle influenced Coppola’s approach to the Cuban subplot in the Godfather Part II, and his beachfront antics shaped the character of the Bluth family in Arrested Development.

Before he gets the chance to ruin something else, I’m going to remind Jimmy where he stands, which is nowhere with Floridays. This album sucks with a single exception: “Creola,” whose lyrics are so idiotic it defies public listening, but whose indulgent, supple groove is just reminiscent enough of Barbra Streisand’s (really, Barry Gibb’s) “Guilty” to keep it on the playlist.

Seriously though, these are the first words of the song:

Creola,
In my soul-a.

I promise promise promise you: “In my soul-a.” (He follows later with “on my Victrola.”) There are no rhymes with “Coca-Cola” or “ebola,” which I can only assume would strike Jimmy’s sensitive audience as “inauthentic.”

If you haven’t listened to “Guilty” lately, here, enjoy some pleasure courtesy of the Brothers Gibb:

And then our brother Buffett:

Close enough, right? It also has a surprisingly relaxed steel-drum solo somewhere around six minutes in. (It’s a freakishly long song by Jimmy standards.)

It was either this or Babs in a bikini.

But otherwise I don’t even want to discuss the rest of Floridays. I’ve listened to this album twenty times in the past two weeks and can’t name a single song off the top of my head besides “Creola.” Floridays, frankly is notable for just two things: one, for marking Jimmy’s departure (yet again) from country — despite his previous two albums having produced actual “listenability” — and for featuring Carrie Fisher (yes, Princess Leia) as a cowriter on “I Love the Now.” Otherwise the songs come across as pale, wayward imitations of his previous two albums… almost interesting, but, really, if “almost as good as Jimmy’s other 1980s albums” is the benchmark, well, we’re a ways from Pet Sounds territory aren’t we?

(Aside: if Six Degrees of Jimmy Buffett were ever explored it would provide the media industry a horrifying wakeup call to the influence and impact he appears to wield within their ranks.)

Honestly, I’ve sat here for 30 minutes trying to wring individual commentary out of any of the songs, but I can’t. I will list them all to be comprehensive: “I Love the Now,” “First Look,” “Meet Me in Memphis,” “Nobody Speaks to the Captain No More,” “Floridays,” “If It All Falls Down,” “No Plane on Sunday,” “When the Coast is Clear,” and “You’ll Never Work in Dis Bidness Again” (yes, “dis bidness,” thanks Jimmy) — they all bite.

Or, as George would have put it: Floridays’ got plenty o’ nuttin’.

(That’s a Gershwin song. “I Got Plenty O’ Nuttin’.” It’s on the Brian Wilson album I mentioned up there. Did you get that? Are you even paying attention?!)

My song ratings from iTunes:
A “3″ means I would be okay hearing the song again.

Average iTunes Rating: 1.3

I Love the Now [1]
Creola [3]
First Look [1]
Meet Me in Memphis [1]
Nobody Speaks to the Captain No More [2] (this is a courtesy “2″)
Floridays [1]
If It All Falls Down [1]
No Plane on Sunday [1]
When the Coast is Clear [1]
You’ll Never Work in Dis Bidness Again [1]

I also have a responsibility to these guys. Don't we all?

Yeah, still here.

Back when I jogged there was a saying: “go out hard, die like a pig.” (It’s probably still a saying.) The point was that if you start out too fast, you’re… liable to die squealing on an electrified killing floor?

That can’t be it. Stupid quote. Why not “afterburn out, burn out after?” Or “go out sprintin’, come in limpin’?”

The point is I’ve maintained too great a clip here. Warren and Jimmy are exhausting. And the past two weeks I’ve dreamed of nothing but turning this project into sweet slices of Buffett bacon. (Smithfield-processed, no doubt.)

But, ultimately, I have a responsibility to my readers. No, not you. My future readers. Specifically my kids. Because one day they’ll end up Googling their father, find this project — unfinished — and discover that Dad is a quitter.

They don’t need to know. So: onward we go, at a conversational pace. The kids can learn about me later, from another project I abandon. But first they’ll learn some glib, superficial finance “lessons” from decades past.

Just like you. (See how I did that?)

Let’s go.

Warren’s problem in 1988 is one we can all relate to in 2010: too much stinking capital. (Or is that just how I feel with my BP purchase? Shazam!) Thanks in part to a 20% return in 1988, Berkshire to maintain a 15% annual return over the next decade will have to profit $10.3 billion. (Recall that the same 15% annual return rate of starting capital back only in 1984 would necessitate profits of a mere $3.9B.)

WB uses this point to highlight some subtleties around corporate accounting — specifically the creative ways in which, let’s call them lying jerk companies, ensure that their “earnings” always rise — and that GAAP (generally accepted accounting principles) never sufficiently tell the whole story of a company.  Warren’s advice, yes actual advice, to investors is to seek three answers (beyond GAAP) from company financials:

“(1) Approximately how much is the company worth? (2) What is the likelihood that it can meet its future obligations? and (3) How good a job are its managers doing, given the hand they have been dealt?”

Also, “(4) Ever seen a grown man naked?”

Why couldn't I have done the Brothers Zucker???

(True story: on a plane recently my son was invited into the cockpit — pre-flight, of course — and idiot I am I was unable to restrain myself from asking him that question aloud. For whose benefit? His? Of course not; he’s never seen Airplane! The pilots’? My own? What’s wrong with me?*)

Warren gives the usual overview on Berkshire’s amazing holdings — all of which are the apples of his large, apple-stuffed eye — and a lengthy description of the insurance climate. It’s all mildly interesting, but this blog isn’t about mild interests, it’s about action.

He takes an opportunity though to contrast the phenomenal performance of his own managers with that of many CEOs. Lots of paragraphs to make a simple point: CEOs are routinely bad, but hard to fire — for lots of reasons (board coziness; amorphous measurements; no true accountability; handsomeness). It’s a more specific way to reiterate his investing principle to know and trust thy management team.

As a non-MBA-wielder I also enjoyed Warren’s aside about Berkshire’s lack of managerial age limits:

“We do not remove superstars from our lineup merely because they have attained a specified age… Moreover our experience with newly-minted MBAs has not been that great. Their academic records always look terrific and the candidates always know just what to say; but too often they are short on personal commitment to the company and general business savvy. It’s difficult to teach a new dog old tricks.”

Arbitrage

WB has a section on arbitrage, a subject about which I knew nothing — and probably still know nothing, only now I no longer realize that. Anyway, in 1988 Berkshire-cum-arbitrageur netted $78M pre-tax from $147M invested, a return that would make one sit up and take notice if one hadn’t fallen asleep reading this section on the train. (These are 1988 dollars, I remind you. In 2010 dollars it’s approximately ninety-one trillion.)

Anyway: arbitrage at its simplest is buying and selling something in different markets and taking advantage of any discrepancies between the market pricing. But in more modern use it means taking advantage of an “announced corporate event such as sale of the company, merger, recapitalization, reorganization, liquidation, self-tender, etc.” Berkshire’s big win of the year was a good, mildly complicated example:

1. Arcata (printing and “forest products” company) is owed some money from the government and currently embroiled in a legal battle around how much exactly.
2. KKR (leveraged buyout firm) agrees to buy Arcata for $37/share plus 2/3 of the eventual government settlement.
3. Warren has to make a bet on whether a) the deal will happen at all, b) it will happen at the agreed price point, c) it will happen on time, and d) the battle with the government will bear any fruit. Lots of ambiguity.
4. Ultimately: BRK accumulates 7% of Arcata at prices from $33.50 to $38; the KKR deal stagnates but another buyer swoops in at $37.50 per share; the government lawsuit settles in favor of Arcata at five times the initial amount. Long story short: the effective sell price per share: $66.98. Not. Frickin. Bad.

Your crib notes on what to ask when arbitrage appears:

“(1) How likely is it that the promised event will indeed occur? (2) How long will your money be tied up? (3) What chance is there that something still better will transpire – a competing takeover bid, for example? and (4) What will happen if the event does not take place because of anti-trust action, financing glitches, etc.?”

Warren then drives home a point about the Efficient Market Theory (EMT), a stupid one that says the market is always correct in establishing price/value. Warren’s counter is his fat bankroll: his decades-old track record (and that of his teachers before him) of consistent successful arbitrage declare that while the market may be “reasonably efficient most of the time,” it is clearly far from perfectly so. In the 63 years he tracked his small group’s behavior, the market returned just under 10% annually; Warren’s cronies exceeded 20%. The difference between 10% and 20% from $1000 over 63 years ago? The market: $405,000. Warren: nearly $100 MILLION.

Daaaaamn. EMT? I think you need an EMT — to shock you back to life. Wooo boy.

Just like this blog — probably a couple more times. (See how I did that?)

Out for now. Roger, Roger.

* The first officer loved it.

My excuse: either I’m becoming more like Jimmy by the week, and simply don’t care about your Regular Society expectations; or I needed a serious reevaluation of everything in my life after my overwhelmingly glowing experience with Riddles in the Sand.

Either way, let’s move on… to Last Mango in Paris, Jimmy’s worst titled, and chintziest designed, album to date. This is one I suspect even parrotheads are embarrassed to display in their CD racks.

(Note: I wanted to type “gun racks” right there instead of “CD racks.” You can’t really blame me, right?)

Last Mango picks up where Riddles left off, steamrolling toward Nashville. Only here Jimmy’s rolled too far. I am choking back bile as I write this for about seven different reasons, but there’s not enough “gulf coast” in Last Mango.

Here’s the best example (we’ll get all of the hard disclosures out of the way first): The title track, “Last Mango in Paris,” is near the end. When it finally comes around it’s a major departure from the rest — it is, if not head and shoulders, at the very least a head above every other song here. A good pop track leaves you wanting and this fits the bill — its choruses are too short, but too jubilantly good, to hear just once. (They make up for relatively benign verses that sound frighteningly like those of Coconut Telegraph‘s ”It’s My Job.”)

And it’s only when “Last Mango” was fading out did I realize why it stood out. Steel freaking drum. This is song eight on Last Mango, but it’s the first song to have any steel drum. And that’s the right way to describe the entirety of Last Mango: it’s Riddles in the Sand, but with way less steel drum.

And. Somehow. Yes. That’s a bad thing.

(The only one other song with noticeable steel drum is the embarrassing “Jolly Mon Sing,” which has Jimmy affecting a faux-Caribbean accent. I’m not even going to discuss it here.)

Other highlights on the album: “Everybody’s On the Run” is a synth-pop plus country combo that actually works. It’s in the same 80s vein as “Fins” and “Where’s the Party,” just more country than those were. It turns out I’m fine with a little bit of Jimmy synthesizer experimentation.

“If the Phone Doesn’t Ring It’s Me” gets credit for its title, whereas “Please Bypass This Heart” loses major points for same. Both are country through and through, but only “Phone” is really tolerable — even then it’s a stretch. “Bypass” is repetitive and dull, and the perfect counter-example to “Last Mango,” thrusting its simple chorus at you time and time again until you’re sick of it.

Other notes on this album:

• There’s an abundance of spoken-word. “Gypsies in the Palace” leads off with a voiceover that is shades of Vincent Price in “Thriller,” only not good. (If I actually liked the song it would drive me crazy to have to suffer through the intro every time. Lucky for me!) “Please Bypass This Heart” has Jimmy intoning skating-rink instructions (“All skate!”) over the bridge.
• “Gypsies” also features a dialogue at the end between Jimmy and the Eagles’ Glen Frey. Glen co-wrote the song, a fact that has immediately lowered him in my esteem. (I always knew Henley was the talent there.) “Gypsies” I am sure is a drunken concert favorite, and it hit just north of 50 on the country charts, but it sucks.
• “Desperation Samba” is another one featuring a foreign language (now with Español) and parodying actual foreign music. Jimmy’s insistence in demonstrating his worldliness means at some pont I will have to pony up a song of my own that has, apropos of nothing, foreign inspiration. Mine will be called “Sangfroid Amidst Schadenfreude” and its choruses will be entirely in German. I encourage you to look forward to that.
• “Beyond the End” features Jimmy yet again backed by a huge choir. I really find these torch songs annoying, and outright refuse to ever be inspired by them. Hear it here first: I will not record a song for this project in which I am backed by a choir. It helps that I can’t fit a choir in my bedroom, but — even if I could — I probably wouldn’t.

Who am I kidding? Of course I would.

Want to be a part of my choir? Enjoy cramped spaces? Fluent in German? You’re in!

My song ratings from iTunes:
A “3″ means I would be okay hearing the song again.

Average iTunes Rating: 1.8

Everybody’s On The Run [3]
Frank And Lola [1]
The Perfect Partner [2]
Please Bypass This Heart [2]
Gypsies In The Palace [1]
Desperation Samba (Halloween In Tijuana) [1]
If The Phone Doesn’t Ring, It’s Me [2]
Last Mango In Paris [4]
Jolly Mon Sing [1]
Beyond The End [1]

Typically the new album experience for me is a painful gestation. It’s work. But as I mentioned earlier this week, Riddles in the Sand is miraculously… tolerable. In fact after my first listen-through I had to restrain myself from immediately posting my mild praise here, for all the world to see.

After a few days of further digestion and questioning every belief I’ve ever had, I’ll now validate that Riddles is indeed laudably consistent — as even-keeled, probably moreso, than even Changes in Latitudes, Changes in Attitudes.

Alright, fine. It’s good. Shut up.

Three things distinct in Riddles:

1. It’s little bit country, a lot less rock-and-roll. Unlike JB’s prior 80s albums, which were as experimental as his 80s parties must have been, every song here is pretty typical country.
2. Steel drum sobriety. This has maybe one-tenth that odious instrument as One Particular Harbour. It’s still almost too much. But generally, and I can’t believe I am writing this somewhere people might see it, the drums are used just enough — and deftly so, at that — to introduce the right amount of Gulf Coast into the album.
3. Jimmy didn’t write any of the songs himself. He’s a “co-writer.” Maybe that has something to do with it.

I’m sure JB regards Riddles as disturbingly middle-of-the-road. That’s probably true; none of the songs are that fantastic, or individually as good as his best from the 70s. Be that as it may: this is a solid album, restrained throughout, and one I could put on during a party without being utterly exposed.

Let me make sure that resonates, as my blood has just run cold: Buffett. On the LP. Around people who know me. On purpose.

(Although should anyone pay attention to the lyrics I might be in some trouble.)

Bernadette: Holy crap. Did you just hear that?

Me: What? (Shoves a canapé into her mouth.) I didn’t hear any–

Bernadette: The lyrics in this song’s chorus. They’re idiotic.

Me: Oh. That? I wouldn’t know. I haven’t been paying att–

Bernadette: Wait a second. Is this Jimmy Buffett???

(Can you believe I didn’t make it in Hollywood? I know!)

OK, let’s get through this, because I’m nauseous:

I’m not going to go song by song. Neither of us has the energy for that. So I thought about focusing on just the worst ones — that would at least make me feel better — but then realized that if I listed the “meh” tracks on Riddles in the Sand, I could really only single out a couple. That should say something. Like, that I’m probably drunk right now.

Even better examples of the significance of this album:

“She’s Going Out of My Mind” is slow/melancholy, bordering on overwrought. Common enough for Jimmy, but get this: it remains bordering. It doesn’t become maudlin. It’s good. And the lyrics aren’t even about Alzheimer’s.

“La Vie Dansante.” You know how I feel about foreign-language songs. This even features a woman wailing throughout the background of the (repeated x1000) final chorus. But damn if this doesn’t get stuck in your head anyway. And there was plenty of room here for a boy-choir to show up and sing an entire verse in full-on French, but… nope. Never happens. In fact the only words in French are the three of the title. And no boy-choirs make an appearance at all — on the entire album. Such restraint!

“Come to the Moon.” Now this song I like a lot — this is the best of the bunch — but I won’t give JB a pass on the lyrics (I suspect this is where he earned that “co-writer” title). The song is literally about interstellar romance, and as a result I can’t shake the mental picture of Jimmy prancing about in a glittery, skin-tight silver spacesuit. This begs the question of why in my mind spacesuits are glittery and skin-tight, but that’s my own issue.

It’s a shame that Jimmy — or whoever wrote this for real — takes the title literally. I’m going to help, but first have a listen to a painful sample from the chorus:

So come to the moon
The starship’s leaving soon
Until then I’m wishing on every star
That you will be here real soon
Come to the moon

I know. “Starship.” (And yes, that’s why Jefferson Starship was in my head earlier this week.)

I took the liberty of rewriting the lyrics to something more down to Earth and Buffett-ish, and this is what I now sing in my head:

So come to my room
The check out time is noon
Until then I’m raiding the minibar
Valet will park your car; come soon
Up to my room.

Better, right? That took me like thirty seconds, Jimmy, and it even has an internal rhyme. Call me.

My other favorite part is in “Knees of My Heart,” the most Caribbean of the songs on Riddles. It’s in the steel drum breakdown — I know, what’s happening to me? — where out of nowhere appears half of the theme from ”Under the Sea.” Listen up:

See you at Lobsterfest, jerk.

My first thought of course was sheer fury. “Look at this guy, thieving from Walt frickin’ Disney. La vie horrible!” Then I remembered Riddles came out five years before The Little Mermaid. Jimmy didn’t steal from Ariel; she and her subaqueous cronies stole from Jimmy!

Indeed, riddles abound in Riddles in the Sand. Who really wrote these songs? What kind of far-ranging influence does Jimmy wield in the Imagineering ranks? What tragedy befell the steel drummer? Since when do I offer canapés at parties?

And who, dear God, is Bernadette?!?

My song ratings from iTunes:
A “3″ means I would be okay hearing the song again.

Average iTunes Rating: 2.6

Who’s the Blonde Stranger? [2]
When the Wild Life Betrays Me [2]
Ragtop Day [2]
She’s Going Out of My Mind [3]
Bigger Than the Both of Us [3]
Knees of My Heart [2]
Come to the Moon [3] (really 3.5)
Love in Decline [3]
Burn That Bridge [3]
La Vie Dansante [3]

But this week is unique in that I am in the same state as I was three days ago: One, still liking Jimmy’s current album (more on that later this week — this warrants additional scrutiny), and two, deriving actual, if a bit rudimentary, value from Warren’s 1987 letter. For both Buffetts it’s a renaissance here in the mid-eighties. Not unlike [Jefferson] Starship in the actual eighties.

Come on: “We Built This City.” In your head? Give it a second. Yes? How about “Sara?”

Alright, Warren. Let’s do 1987.

Here’s what’s unique about this letter: I think Warren, having run out of diatribes for the time being, felt obliged to revisit some of his core investing principles. So they’re sprinkled throughout 1987 like the cookie dough in my ice cream. Raw, salmonella-laced cookie dough.

Know what I call the Internet? The Triple-Dub.

Buffett starts with a reminder that the fundamental figure — I call this the Double-F — of an asset is its earnings from equity employed. I call that the Triple-E. And in Berkshire’s case, 1987′s Triple-E is Exceptional: its seven major units employed $175 million in equity to produce $100 million in after-tax earnings. That’s a 57% return on equity capital, which Warren assures me is ludicrously amazing. (Is it as amazing as my one-month 42% gain in BP? You decide. Wait, no I will. Nope.)

Warren also mentions debt a few times throughout the letter. Debt plus equity is the basic formula to determine the Triple-E, and “really good businesses usually don’t need to borrow.” He proceeds to rub it in by pointing out that debt among Berkshire holdings is practically nonexistent: interest expenses equate to barely one percent of earnings.

Of course now I wish I’d paid more attention to the debt Smithfield (SFD) carries on its books — little piggy debt… precious trichinosis-laced piggy debt — though I read this year’s nascent efforts to pay down as a positive sign. But, again: what do I know?

WB moves on to break down the financials from each unit, which are outstanding. But he also points out that “there’s not a lot new to report about these businesses — and that’s good, not bad.” Whyever, Warren? Because despite the fervor that often surrounds “exotic-sounding businesses” (cough, Tesla) in WB’s mind the best investments — i.e., the best businesses — are those that are simply doing the same thing they’ve always done. Major change introduces major uncertainty, and often titillates the market, but as Johnnie Cochran might have said, titillation is not value creation:

“Economic terrain that is forever shifting violently is ground on which it is difficult to build a fortress-like business franchise. Such a franchise is usually the key to sustained high returns.”

(At least I’ve stuck to this one. While I have bought too many equities, and with a lack of logic that itself defies all logic, I’ve bought relatively staid businesses.)

This next section I found completely irrelevant. I’m putting it here anyway. The Buffalo Evening News in 1987 produced seven daily editions (WTF?), and “we redo the obituary page in every edition of the News, or seven times a day.”

WTF?

Warren uses this to underscore the point that the News prioritizes quality — i.e., the relevance of its community reportage, thus its relevance overall, thus its “goodwill” over the long haul thanks to a better consumer relationship — even though fewer editions would improve its bottom line. But to me it raises the question: how many frickin’ people are dying in Buffalo that it needs seven obit updates a day? Berkshire should have bought a Buffalo undertaker instead of its newspaper.

(Oh! I just thought of this: I’d call it the Buffalo Roam Funeral Home.*)

Near the end of 1987 WB describes some things about the stock market that he learned from Ben Graham, his mentor — and inventor of the crackers, probably. There’s a long allegory featuring a character named “Mr. Market” — Ben was not one for creative writing — but the gist is this:

• The market is like the unstable cousin you had to dance with at weddings growing up: “At times (Mr. Market) feels euphoric and can see only the favorable factors affecting the business… At other times he is depressed and can see nothing but trouble ahead for both the business and the world.”
• The market can be ignored. It will be around tomorrow with more quotes. Not acting is a fine choice for today.
• “Mr. Market is there to serve you, not to guide you.” Trust the market to be one thing: manic. So make up your own mind, and take advantage when the market is off its meds.
• “The market may ignore business success for a while, but eventually will confirm it.” Stick to your guns in evaluating a business. Then lie in wait. Like a fox. A leptospirosis-laced fox.

WB claims that this holds true even in the flashy, gadget-rich days of 1987:

“In my opinion, investment success will not be produced by arcane formulae, computer programs or signals flashed by the price behavior of stocks and markets. Rather an investor will succeed by coupling good business judgment with an ability to insulate his thoughts and behavior from the super-contagious emotions that swirl about the marketplace.”

(Of course, this was before the Triple-Dub.)

Warren also uses this point to beat a bit on the institutional investors he blames for 1987′s Black Monday (22% drop in the Dow in one day, holy crap!), through their myopic focus on other investors’ behavior — rather than, uh, hyperopic focus on business behavior — and the resultant automatic stop-loss sales of stock that triggered the crash. Idiots.

And finally, a quote that speaks particularly to me — or would have spoken to me, prior to my BP tour de force: “If you aren’t certain that you understand and can value your business far better than Mr. Market, you don’t belong in the game.”

Oh, Single-S snap! Dang, Warren!

*If that’s not a song title I don’t know what is. Okay, maybe “Titillation is Not Value Creation.”

I, like Jimmy, have decided to phone in the rest of the decade, and will start here with One Particular Harbour. (One note: my simple goal for the rest of the 80s is to find just three songs that I want to listen to again. Just three, Jimmy.)

As we all probably predicted, OPH is not a standout album. However it does present the most likely candidate of all time for The Official Theme Song of the Brothers Buffett: “I Used to Have Money One Time.” Even more fitting than the title is its intricate refrain:

But who’s gonna tell a fool?
Who’s gonna tell a fool?
Who’s gonna tell a fool?
That he ain’t cool.

(This is the actual chorus.)

(And I ask you, readers: Who, if not you? I’ll take your silence/nonexistence as unilateral, eternal support.)

Here’s the other thing about One Particular Harbour: somewhere along the way Jimmy sort of lost the Gulf Coast: almost none of the songs here have anything to do with the sea, or islands, or manatees. Instead, Jimmy’s inserted steel drums into nearly every song as means of maintaining his oceanfront reputation. The drums are as pervasive as the background ladies were on Son of a Son of a Sailor, and just as inappropriately deployed. (But at least I got one thing right with my last JB-inspired song.)

Alright, the tracks:

“Livin’ It Up.” I actually love how this song starts, seamy and gritty and electric, full of 80s-era testosterone. (Or whatever hormone is appropriate for such a synth-laden track.) Listening to it you half expect Eddie Murphy to slide out from under a car into the middle of a shootout; or slide out from under a car and start breakdancing in the street; or slide out from under a car and just stand there, being Eddie Murphy, because that’s what this song sounds like: Eddie Murphy in a red leather jacket from 1983, back when he was cool.

(Also, he’s playing steel drums.)

“One Particular Harbour.” Ugh, the title track. Apparently people like this song, but I have an immediate and guttural reaction to songs in which western musicians trot out “authentic” chorales from native lands (or urban churches) to lend credibility to their recordings. I’m looking at you, Paul Simon. Or practically every other artist who needs to “challenge” or “explore” himself with his fourth album. In this case Jimmy features a Tahitian choir — in addition to actual Tahitian lyrics — to bolster his case. And the song is almost catchy, but really it only seems catchy. Because it lasts forever and they repeat the chorus like a hundred times, so you have no choice but to have it in your head because the song lasts that long.

Totally forgettable tracks: “Distantly in Love,” “California Promises.” A couple of others I already forgot. “Why You Wanna Hurt My Heart” sounds like Phil Collins, plus steel drums and another chorus of natives. Have I sold you yet?

Four of the eleven songs on OPH are covers, which to me seems like Jimmy’s attempt to spread the blame around. These include “Brown Eyed Girl” (yes, that one), a song I can barely listen to in general. Sorry, it’s not a bad song, it’s just tremendously overpopular for its actual inherent quality. Jimmy’s only contribution here is — I invite you to guess — yes, the addition of a substantial amount of steel drum. Seriously: this has become like the “More Cowbell” sketch from Saturday Night Live, only instead of Bruce Dickinson requesting cowbell, I envision Jimmy staggering drunkenly around the studio demanding “more steel drum.”

Coming soon to a T-shirt near you

(Incidentally, Van Morrison is with me on the unenthusiastic support of “Brown Eyed Girl.” His quote from an interview in TIME a couple years ago: “It’s not one of my best. I mean I’ve got about 300 songs that I think are better.”)

In addition to the covers, two other songs here sound like stone ripoffs of the same previous Jimmy song: “We Are the People Our Parents Warned Us About” is a slightly faster, stupider “I’m Growing Older But Not Up” — with more steel drum — and “Twelve Volt Man” is a slightly slower, stupider version of the same thing. (“Twelve Volt” even has a baseball-themed verse, like the original. It, however, is the one particular song on One Particular Harbour that lacks steel drum.)

And then suddenly the album’s over. Just… like……….. that. And it’s time for the sweet, warm embrace of fifteen thousand new words from Warren.

I used to have a life one time.

(0 of 3, Jimmy.)

My song ratings from iTunes:

A “3″ means I would “harbour” the notion of hearing the song again.

Average iTunes Rating: 1.54

Stars on the Water [2]
I Used to Have Money One Time [2]
Livin’ it Up [2]
California Promises [1]
One Particular Harbour [1]
Why You Wanna Hurt My Heart? [1]
Honey Do [2]
We Are the People Our Parents Warned Us About [2]
Twelve Volt Man [1]
Brown Eyed Girl [2]
Distantly In Love [1]

Montana? Part of the world. Ergo, mine.

Ugh. I’ve put off reading 1986 — too many painful Bill Buckner memories — for what seems like weeks. Actually it has been weeks.

(I really should have done this project in 1991. I’d be so close.)

Anyway, I finally muster the energy to read 1986 and what do I find? Nothing. As in: Warren basically took the year off and has zilch to impart beyond some ninny updates on his amazing holdings. (And some free verse poetry, and pictures of his kids; it’s a little weird.)

On one hand it sucks, because I had to read the whole letter anyway to find out. Thirteen thousand words I’ll never get back.* On the other, now I can do what I want with this post, which is:

1. Gloat over my BP purchase. Seriously. 40% in nine days. I am king of the frickin’ mountain. Tony Montana. Joe Montana. Hannah Montana. Pick a Montana, that’s how untouchable I am.
2. Redact what I just said in #1.
3. Remind you that I wrote a frickin’ song for you last week, so call your radio station or congressman or the guys at Pandora and demand some airplay. I’d like it the Official Song of the Gulf Cleanup by Monday. (Relief wells would be so easy if subsea containment wasn’t so hard.)

And I just realized there’s an Appendix here in 1986′s letter, so, fine, let’s talk a little bit about it.

(Really, I redact #1.)

(The world is mine.)

OKAY, 1986.

Berkshire-Hathaway Headquarters

Blah blah blah we have the world’s best managers, our wives are smoking hot, we made tons of money, etc. So much in fact that Warren doesn’t know what to do with it — like, literally, he apologizes for making only one tiny acquisition this year, and has no idea when they’ll do another one. Meanwhile he swims in Scrooge McDuck levels of cash.

Then a long section on the Buffalo Evening News, with so many references to “news-hole” and “penetration” and such that one — if one were a certain type — might find it juvenilely humorous (yes, “juvenilely” is a word). But we’re not that type so it was just boring.

See’s and Nebraska Furniture are incredible/fabulous/couldn’t-be-better. One fun quote re: the workaholic Rose Blumkin at NFM:

“It’s easy to overlook what I consider to be the critical lesson of the Mrs. B saga: at 93, Omaha based Board Chairmen have yet to reach their peak. Please file this fact away to consult before you mark your ballot at the 2024 annual meeting of Berkshire.”

2024 isn’t so far away now, is it WB? (Tony Montana laugh)

And then into insurance, which is as boring as it sounds and has always been. But before that a quick discussion on the company Scott Fetzer (yes, company, even though it sounds like a dude — it’s like “Charles Schwab,” or “Mr. Clean”). Novel about Scott Fetzer are its two star product lines: Kirby Vacuum and World Book Encyclopedia, which stick out as anachronistically as you’d think. (Oh, the naïvete. Who knew how the Internet would change everything for information… and vacuums. Remember vacuums???)

You don’t really want me to talk about insurance, do you?

There’s a long section on taxes, thanks to Reagan and his Tax Reform Act of 1986 (link goes to a World Book entry) which among many things — “Triple Tax Thursdays,” no tax on euthanasia, 3% tax-rate for registered Republicans, etc. — led to an increase in personal capital gains (20% to 28%) and a decrease in corporate ordinary income tax rate from 46% to 34%. The question WB attempts to answer in about twelve thousand words: “What is the impact on Berkshire-Hathaway?” (Also: “How do you keep your carpets so stunningly clean, Mr. Buffett?”)

The conclusions boil down to the following:

• Corporate tax cuts will benefit customers of a) strong franchises/businesses with heay regulation (e.g., utilities), or b) weak franchises/ businesses in highly competitive markets. This comes in the form of lower prices and would have thus little impact on the corporation.
• Corporate tax cuts will benefit corporations (and their shareholders) that are strong and unregulated. They will hold on to the bulk of tax benefits and trickle-down to their customers nothing but contempt. Warren likens it to a top brain surgeon or lawyer: “Do you really expect the fees of this expert…to be reduced now that the top personal tax rate is being cut from 50% to 28%?” (Of course not. Those DeLoreans aren’t going to buy themselves.)

As you’d expect, most of Berkshire’s businesses are of the latter variety. La-dee-da. But wait:

• Corporate capital gains tax is up from 28% to 35%, and much of BRK’s income — in time — will come via capital gains. An extra 7% of “billions” adds up fast. (Though not as fast as 40% in nine days, bam! World is mine.)
• And there are a whole bunch of special insurance related taxes that I can’t even believe I’m wasting this sentence on.
• And, of course, one little thing: that personal capital gains increase from 20% to 28%, which hoses any shareholder who ever sells.

Warren also bought a jet in 1986, which he very cutely addresses — he seems embarrassed by it, whereas I would have put a picture of my jet on the cover of the annual report.

"Suck it."

Finally, the Appendix. There’s a whole lot of hullabaloo about Scott Fetzer (again, company, not man) and accounting issues one has when buying companies. Not. Applicable. And then Warren simply points out that all too frequently folks (i.e., accountants — “greasy, thieving accountants” specifically) value “cash flow” as simply:

• a) reported earnings, plus
• b) depreciation/depreciation/amortization/charges

…without factoring in c) the subtraction of annual expenditures required to keep plant and equipment humming. Apparently this is acceptable from an accounting standpoint, but not so if you care to calculate the true “owner earnings.”

These expenditures are often hard to determine, but can be quite substantial. And if “c” exceeds “b” then you have a discrepancy between reported earnings and owner earnings.

Net: “‘Cash flow’ is meaningless in such businesses as manufacturing, retailing, extractive companies, and utilities because, for them, (c) is always significant.”

And then, the final word sticks it to those CPA-touting scumbags, whose job it is “to record, not to evaluate.”

“Managers and owners need to remember, however, that accounting is but an aid to business thinking, never a substitute for it.”

Daaaaaaaaaamn! You hear that, accountants? The world? Not yours. Mine.

–

* Just admit that you thought it. “Hey, that’s what reading THIS is like.” Jerk.

Also, of course, note the influence of JB’s last few albums:

1. Write profound-sounding lyrics. And don’t look back.
2. Non sequiturs are fine, so long as they rhyme.
3. To heck with grammar. (It should probably be “if it weren’t so hard,” but the parrothead in me says “wasn’t.”)
4. Jimmy’s apparent new favorite TV show? “I Love the 80s.” Me too, then.
5. You can never have enough background singers. Pretend mine are ladies.

Have fun. For this one I must say you can turn the speakers up. It’s my most dance-able so far!

But: the most Jimmy-esque thing of all is the malleability of this song’s chorus for commercial gain:

• “[Blank] would be so easy (if it wasn’t so hard)” I plan to license in innumerable TV spots. (“Backing Up would be so easy…” for hard-drive manufacturers; “Summer colds would be so easy…” for NyQuil; “Blood stains would be so easy…” for Tide.)
• “Lunch Would Be So Easy (If It Wasn’t So Hard)” is the name of my forthcoming frozen-meals product line.
• When I become a YouTube celebrity (along the lines of Justin Bieber, or cats who use toilets) I will hold the “[Blank] Would Be So Easy” fan-vid contest. You cannot exhaust the opportunities. My first submission: “George sure loved his Weezy but her voice was so harsh.”

Brave enough to suggest any? When we do the TBB: Remastered album I will record the best.