thepupil

Siddarth, IB has two stock lending programs. 1. Stock Yield Enhancement, which is managed by IB and automatically lends out your shares that it can do so profitably; they pass on some of this to you. 2. Stock Borrow /Loan is a self directed program where you transact directly with borrowers. For example, I own SHLD and I can see that the last rate agreed upon was about 14%. I go on to stock borrow loan and enter in a lend rate that I'm willing to lend shares; there is a bid and ask like a normal stock except far less liquid and not really transparent. I lend my SHLD at slightly below market rates because I don't want to keep having to re rate when my shares get returned to me if the. Market rate falls below where I am lending them ( also IB charges a $5 ticket fee for every trade, so I'd rather just get a less than optimal rate for my shares and transact seldom) I presume that you are signed up for the stock yield enhancement one and are simply not being paid the full rate by IB or their estimate of borrow costs could be wrong. If you don't want to direct your own securities lending I would suggest putting on a synthetic long via options market ( which should capture the cost to borrow)

A more reasonable argument would talk about how by buying Berkshire at current multiples of book and tangible book, you are, in part, buying KO, WFC, IBM, AXP, cash and short term fixed income at way above market levels Of course the whole 0% cost of float, deferred tax liability never to be realized, and acquisition pipeline ( what other company can take out Heinz using less than a years FCF) thing negate a lot of the premium you pay for easily replicable exposures, but I think that is the best reason to not buy.

Sahm publishes intensively researched writeups, was one of the loudest critics of Chinese reverse mergers, and seems to focus on smallcaps where he can get a real informational edge. He acknowledged that there may be monetary benefits to being a bit obnoxious. I agree with him. Maybe he is a one-hit wonder, maybe he is getting ahead of himself with his lavish spending, but I struggle to see how this guy is a joke. His posts on Seeking Alpha, VIC, and his own website are always of high quality. What's wrong with sharing ideas? Isn't that what we do here?

GLUX - Great Lakes Aviation VIC and OTC adventures were the sources of the idea. http://otcadventures.com/?p=495 http://www.valueinvestorsclub.com/value2/Idea/ViewIdea/97245 38MM of tangible equity, comprised of relatively liquid assets (current assets and planes) against a 10.5MM market cap. Priced for bankruptcy and maybe that happens. I just see it as a never expiring option that pays 3-4:1 in the event they start making money again, pay down their somewhat usurious financing and the EAS program doesn't get axed. Only a 2% position because of the risks but I like the risk/reward.

"I buy into a bond fund in the hope it can hold nav so that in the market panic I can switch to some fat equity opps. " I think one should consider this a "fat-equity opp" with equity-like downside, not insurance by any means. Also they lost a bunch in 2008 because they had an effective margin call (see below). They probably had to reduce leverage because of '40 act restrictions on leverage for CEFs and the like. From Morningstar This highly leveraged municipal fund is high-risk, high-reward. The fund typically generates its high distribution by venturing down the credit spectrum into nonrated and junk-rated muni debt, focusing on the intermediate and long portions of the yield curve, and by leveraging its holdings. Compared with other leveraged municipal funds the fund is taking on more credit risk. Though its interest-rate risk is high, it is about average for the peer group. This strategy has worked well in recent years but has not held up in down markets such as in 2008. Both sister funds, which have identical strategies but were forced to deleverage, hover around the bottom of the peer group over the trailing five-year period. The addition of star municipal manager Joe Deane means that investors are likely in good hands, though he has not significantly departed from this strategy since joining PIMCO’s muni team. Because of these factors, the fund gets a Morningstar Analyst Rating of Neutral.

These are interesting because of their favorable leverage. A lot of them use auction rate securities, a market that is permanently broken and are paying close to nothing and likely will be for some time. It seems like a more intelligent way to load up on duration than mREITs which are much more levered and dependent on short term repo and own negatively convex securities. But you still are loading up on duration, for better or worse, and also bearing more credit risk than an agency mREIT (and probably most hybrid mREITs). I think they are interesting too though. From PMF's website: <1 Year 6.00 5-10 Years 30.00 10-20 Years 33.00 20+ Years 31.00 Effective Maturity (yrs.) 15.52 Effective Duration (yrs.) 9.43 http://seekingalpha.com/article/1552562-hidden-treasure-in-this-7-tax-free-yield-play http://seekingalpha.com/article/932061-the-not-so-obvious-reason-why-pimco-cefs-trade-at-a-premium

Raleigh-Durham area could work. Lots of medicine (obviously), some finance around here. It's a nice mix of the South and progressive/academic environment.

http://en.wikipedia.org/wiki/Rule_144A Before you go to a lot of effort, make sure they aren't 144a bonds unless you have over 100mm. Ya never know on this board : )

There is a LOT of value hidden in Berkadia and while they may be over-earning as a result of the boom in multifamily refinancing being fueled by Ginnie, Freddie, and Fannie, they are also positioning themselves for a different rate environment. If anyone wants to learn a little more about the Agency CMBS market and Berkadia's role therein, feel free to PM me.

I actually have thought about this too, but not in terms of $1,000,000 A share price, which is probably closer to 20 years away than 10. Think about the implied rate of return on BRK's non-cash and non short term fixed income investments if you think you can get to $1MM in close to 10 years; it would have to be nucking futs. Then again, I hope you are right! What I have thought about is that each year more A shares convert to B shares, the A shares grow more relatively powerful since they have 6+ times the voting power. The conversion can only go one way so over time. More and more long term holders will die or diversify, Warren's donated shares will likely be converted to facilitate sale as the B's become more relatively liquid and the A's become an even more exclusive club. Institutional shareholders will gravitate incrementally towards the B's. Over time the ratio of voting interest relative to economic interest of the A shares will start to get interesting, particularly after Buffett dies. At the end of 2011 there were 938,244 A shares and 1,650,806 total A share equivalents. The A shares commanded a 56.84% economic interest and 89.77% of the voting power. By my calculations, conversions caused A shares share of economic interest to decline by 2.3% in 2012, but their voting power only declined by 0.91%. Hypothetically, if 1/2 of the A shares converted tomorrow, the A shares would have a 27% economic interest, but still command 71% of voting power, if I am doing my calculation correctly ( 447K A shares +1.8B B shares /10000 = 626K total votes of which the A shares would have 447K) At its most extreme, the A shares could convert to a point where a 13% economic interest commands 50.1% of the voting power. All this is moot and probably not worth thinking about since Berkshire is a controlled company and will remain so, but I just think it will be interesting to watch over the years. I wouldn't be surprised to see a meaningful premium develop in the A shares over time, since a liquidity discount can be arbitraged away and more long term oriented holders may see it prudent to preserve their voting power

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...