73 Reds

This discussion demonstrates some of the issues involved with "value investing". As prior posters have mentioned, proper sizing is important, along with properly discounting management that may have a history of not always acting in the best interests of minority shareholders and/or failing to unlock value. Personally, I own shares of Fairfax India but few enough shares that capital allocation by management or the timing of an IPO is not terribly important. For me, there are times when parking money in these types of investments is superior to riskier investments where there is a significant opportunity for loss and capital impairment.

Yep, but an interesting prospect nonetheless. In any event Ajit certainly advised Buffett of the sale in advance.

The far more interesting question would be if Berkshire was the buyer of Ajit's shares.

Agreed. Not sure why so many folks pay so little attention to the legislative branch when it comes to new tax legislation. Odds are slim to none unless one party sweeps Executive and Legislative branches of Congress. And it really doesn't take the geniuses on this board to recognize that Berkshire is trading at a price above its historical valuation. So what? Ajit Jain sold a block of Berkshire - capital gains taxes and all - that represents a significant portion of his net worth for one or more purposes that he chooses to remain private. Personally, I believe that this does have something to do with estate planning, i.e., ultimately reducing the size of his taxable estate but otherwise, it really doesn't matter and it says nothing whatsoever about the long term prospects of Berkshire going forward.

Back in the day OTC stock commissions were hidden in the "spread". And frankly, its not that different than going to your doctor and then getting a bill for the "uninsured" portion.

I'd take the other side of that bet. He knows Berkshire as well as anyone and unless he is planning on retiring (or even if he is), doesn't believe that Berkshire will not be more valuable in the future.

Selling stock to then give the proceeds away to charities makes no sense. He may want to start giving away his fortune to individuals/non-charities in increments less than the equivalent of an A share. Does he have a large family or non-charitable (501c) causes that he supports? Estate planning = reducing the size of your taxable estate.

But then why sell the stock and pay CG taxes rather than donate the shares directly?

LOL, one would think he'd have no trouble qualifying for a mortgage. Or Berkshire would lend him the money. Do we know what else he owns besides BRK shares? My guess this is part of an estate plan.

"Just waiting around to leave town until after the storm so we can check the properties." Yeah, know that feeling all too well.....

If hedged, one might anticipate a rather dramatic drop in the price of the stock when the TRS is terminated. BTW, you are in New Orleans, right? Stay safe.

The most compelling feature seems to be that Fairfax can put a floor on the price of the stock as long as the price remains cheap and the company has enough cash to continue repurchasing shares. The biggest concern (to me at least) is that Fairfax has the power to terminate the TRS if and when desired for little or no added cost. Also, the identity of the counterparty(ies) would be good to know; unless the TRS is hedged, this has not been a good bet for any such counterparties.

Thanks @TwoCitiesCapital. Can Fairfax terminate this transaction at any time? Otherwise, how long does it last? I would think that if the company anticipates an operational rough patch of any duration it might want to terminate the TRS in advance.

The irony is, the more stock Fairfax repurchases at ever-higher prices, the more the TRS grows in value. I'm not entirely comfortable with that relationship. Also there is at least one counterparty - do we know who is on the other side of this bet and what control, if any they may have? Given that the TRS is now one of Fairfax's largest equity positions, the details are worth knowing. I'd imagine there is a written contract somewhere but is it available to shareholders?

I think it is more reflective of the "haves" and the "have nots". Auto financing appeals to folks who cannot afford to pay cash for a vehicle, the rates tend to be high and the asset depreciates the minute you leave the dealer lot. Home mortgage rates for most current borrowers are historically low whereas it might cost some homeowners more to rent and/or sell and repurchase another residence and the underlying asset continues to appreciate in value.