thepupil

Is it wrong to think of these two capital intensive regulated businesses as alternatives to fixed income? Berkshire still keeps its float in cash and fixed income but much of that can quickly be invested in a new acquisition. Do not these businesses provide dependable steady above fixed income returns and allow Berkshire to keep a shorter duration fixed income portfolio vs that of other insurance companies? Yes I'd love all of Berkshire's investments to earn very high returns but when you compare the return on these businesses vs fixed income which comprises the vast majority of large insurance co's portfolios, their presence makes more sense.

We have two threads for one topic now, but to add to the diversification vs concentration discussion. I think having 1/2 or 1/3 of one's money in a single stock is a much different proposition than having that large of a percentage in one single property. At the risk of stating the obvious, a stock is an interest in a company which will presumably have diversification of operations within its industry across geographies or even diversification of industries. A small piece of land with a building on it is much more susceptible to total loss in an adverse event. A single fire/tornado/flood/hurricane/environmental event/lawsuit/municipal law change can not destroy a decent sized company, but a can certainly wipe out a real estate investment. Also a directly owned real estate investment is like owning a small business and can unexpectedly call on your liquidity and capital for a variety of reasons. In order to compensate me for all those issues, I would need require return greater than 8% and have a net worth sizable enough to spread my risk over several properties. The question posed doesn't provide enough information to gauge as to whether or not the return would be higher.

Regardless of the property's invesment merit in terms of commercial real estate quality, I think the first question is one of personal asset allocation. What % of your money will be concentrated in a single piece of real estate following the investment? What will your return be above more liquid, less management intensive publicly traded alternatives such as triple net lease REITs (not saing those are good investments, in fact they are probably overvalued with the rest of yieldy stuff) As David Swensen points out in Pioneering Portfolio Management, real estate combines both aspects of fixed income and equity. The fixed income component consist of the contractual lease oblications of the leasee and the equity being the residual value of the property left over from the lease. Would you put the same % of your money in a bond of the leasee?

10.5% 401K, 100% Company Stock (Global Megabank) 6.5% Everyday "Operating" Cash 83% Investment Portfolio 23% Berkshire 20% Loews 11% Granite Real Estate Co. 11% Cash 8% Brookfield Asset Management 7% Nabors 7% Lockheed Martin 7% BP 2% USO Puts 2% Safeway Leaps

Agree with everything you said. I prefer to use puts when shorting as well. JOE as just always struck me as very difficult. Einhorn can afford to make a cool speech and be his own catalyst but I don't understand the trade now that the cash bleed has slowed. It's jsut a big piece of overvalued land with a pot-committed guy that owns a big chunk and a hugely crowded short as % of float (used shortsqueeze.com for info, not sure if accurate).

The equity of a heavily shorted and illiquid stock that is a small holding of a dedicated long term holder with a ton of buying power is a VERY levered option-like security. Shorting JOE =/ shorting Florida Panhandle/Forgotten Coast Land 53 Days to cover What's the cost of borrow? What's the catalyst?

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http://www.smartmoney.com/invest/stocks/the-400-mans-new-big-bet-1332271348707/ Yet another value manager preaching to the choir...also glad to see Loews get some attention...