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JBird

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    Should Repurchases be counted in FCF/yield per share?

    in General Discussion

    Posted

    The shareholder merely needs to make 28 cents worth of sales, each and every quarter.

     

    I don't follow here.

     

    Well, the shareholder is no longer getting a 28 cent per quarter cash dividend any longer (it was cut to zero).  Let's say the shareholder has 100,000 shares.  In the old days, he would get $28,000 of cash dividend each quarter.  Under my regime, the company will be using that very same $28,000 (28 cent per share per quarter) to repurchase shares.

     

    Now (under my regime), he just sells shares each quarter amounting to $28,000 cash proceeds.  He might not even owe any tax on this (depends on his cost basis).  Potentially he sold for a capital loss and can actually take the $28,000 distribution completely tax free, as well as reducing his capital gains tax bill from other sales.

     

    Compared to the world where he's automatically paying tax on $28,000 of dividend, that's a huge leap forward for mankind.

     

    Eric, I'm still in agreement regarding dividends vs. buybacks.

     

    There's one consistent statement of pushback I receive regarding capital-gain-income over dividends: "If you sell shares at any kind of loss, you're just taking principle." In other words, in a falling market the strategy doesn't work.

     

    I would love to hear your thoughts on that.

     

    My take is that you can only take as much income from a stock as the company earned in profit attributable to you. If it earns $5 in profit attributable to your holdings (look-through earnings) then you can take $5 from the stock as a dividend or by selling $5 worth of shares. If it doesn't earn, you can't take. Therefore, the stock price being up or down from your cost basis is really not a factor regarding your income withdrawals from the stock.

    Reduction in Equity Hedges to 50%

    in Fairfax Financial

    Posted

    This reminds me of the joke about the guy on death row down in Alabama who was about to be lethally injected. Staring at the guy as he was strapped in the gurney awaiting his final moments, the Warden asked him if he had any last words.

     

    The prisoner thought about it for a minute and in his slow southern drawl finally said..."You know, Warden, I do. I just want you to know that I'm gonna learn a lot from this."

     

    LOL-- Thanks for sharing that

    Pabrai q2 letter

    in General Discussion

    Posted

    Your 2 part response gets 2 questions.

     

    1. why did you answer my post?

     

    2. a) does that include government subsidies?

        b) with what probability do you think that 20% margin on 500,000 cars will happen?

      c) has Tesla made a profit margin on a single car in the past?

     

    1) I thought I'd give you the 9 word explanation on how Tesla will make its investors rich.

     

    2a) Yes. The first 200k Model 3 purchasers will get a fed tax credit of $7.5k (50% of the 2018 Model 3 production). Tesla will also receive from Nevada a transferable tax credit of $12,500 per permanent full-time job, up to 6,000 jobs as well as transferable tax credits of 5 percent for the first $1 billion and 2.8 percent for the next $2.5 billion investment (source: Forbes).

     

    Don't know how this is relevant though. Accepting tax breaks is not bad business practice and is also not unique to Tesla or the auto industry.

     

    b) Somewhere between 0 and 100.

     

    c) Since we're talking about the future I don't know how this is relevant either, but now we've come full circle on your not reading too much about Tesla. Is the selling price of a Model S today more than its cost of production? Yes. They have negative net income because they're making all the investments and R&D expense required to grow a car company that produces 600 cars a year in 2010 to one that produces 500,000 in 2018.

     

    If you're curious to read more about Tesla: www.tesla.com

     

    Disclaimer: I've never owned TSLA shares.

    Pabrai q2 letter

    in General Discussion

    Posted

    I haven't read too much about Tesla

     

    Respectfully, this is a conversation disqualifier.

     

    Disruptive technologies are great, but this is an investing forum and I have never had heard a succinct explain how Tesla will make its investors rich.

     

    By selling 500,000 cars in 2018 at ~20% margins.

    Berkshire Hathway: Second Quarter Financial Results

    in Berkshire Hathaway

    Posted

    My take on the Berkshire buyback scheme:

     

    (1)  He doesn't want to buy back any shares  (He will...but he doesn't want to...no matter how cheap he thinks they are).

     

    (2)  He implemented the buyback as a way to guarantee meeting his "beating the S&P metric" -- a dollar retained is worth more in "market value" than in book value...at least 1.2x.  Why?  Because, he doesn't want to pay a dividend and he doesn't want to buy back any shares...the threshold works for these purposes.  But, he's committed to doing some combination of those things if Berkshire's market price doesn't keep up with its growth in BVPS.

     

    (3)  He doesn't want this obvious set-up to be gamed so he is warning the smart money that, say, in a market crash, your put options might be put to you because he might let the price drop to .9x book (or whatever) for a relatively short period of time, i.e. long enough for most options to expire worthless and/or destroy the people trying to game him.

     

    What is all this based on?

    Berkshire Hathway: Second Quarter Financial Results

    in Berkshire Hathaway

    Posted

    YOY Quarterly net earnings up by a Billion. That's north of 15% growth, run rate.

     

    Earlier in this letter, I pointed out some numbers that Charlie and I find useful in valuing Berkshire and measuring its progress.

     

    Let’s focus here on a number we omitted, but which many in the media feature above all others: net income. Important though that number may be at most companies, it is almost always meaningless at Berkshire. Regardless of how our businesses might be doing, Charlie and I could – quite legally – cause net income in any given period to be almost any number we would like.

     

    - 2010 Berkshire letter

    If American - which presidential candidate will you vote for?

    in General Discussion

    Posted

    What in your mind makes Clinton more fit to be POTUS than Trump?

     

    Merely being Secretary of State and a Senator. I don't know that she accomplished a damn thing, but I think that alone makes her more fit.

     

    Trump consistently demonstrates a breathtaking ignorance of the world:

     

    HABERMAN: What kind of change could you make in terms of Nafta without fully withdrawing from it? How could you?

     

    TRUMP: You’ve got to be fair to the country. Everyone is leaving. Carrier just announced they’re leaving. Ford is building a massive plant. I have a friend who builds plants, that’s what he does, he’s the biggest in the world, he builds plants like automobile plants, computer plants, that’s all he does. He doesn’t build apartments, he doesn’t build office space, he builds plants. I said to him the other day, “How are you doing?” He goes, “Unbelievable.” Oh, great, that’s good, thinking about the United States, right, because he’s based in the United States. So I said, “Good, so the country is doing well.” He said, “No, no, not our country, you’ve got to see what I’m doing in Mexico.” He said: “The business there is unbelievable, the new plants we are building. People moving from the United States.” That’s what he does. One-story plants. You understand?

     

    Trump wants to be President the same way kids want to be Tom Brady. For the image.

     

    NY Times: But according to the Kasich adviser (who spoke only under the condition that he not be named), Donald Jr. wanted to make him an offer nonetheless: Did he have any interest in being the most powerful vice president in history?

     

    When Kasich’s adviser asked how this would be the case, Donald Jr. explained that his father’s vice president would be in charge of domestic and foreign policy.

     

    Then what, the adviser asked, would Trump be in charge of?

     

    “Making America great again” was the casual reply.

     

    Trump in 2013, "Sorry losers and haters, but my I.Q. is one of the highest–and you all know it! Please don’t feel so stupid or insecure, it’s not your fault."

     

    That is not exactly the type of humility I'm looking for in someone meant to be negotiating with congressman and foreign heads of state.

     

     

    Anyone do any meditation?

    in General Discussion

    Posted

    I practice mindfulness meditation regularly.

     

    There are four things I've gotten out of it:

     

    1) Mindfulness meditation by its nature is an exercise in concentration. The practice frequently gives rise to states of mind that are intrinsically pleasurable to me. I have no causal explanation as to why this is.

     

    2) I am significantly more cognizant of thoughts and emotions as they arise, and no longer mistake my identity for a thought or emotion that I'm experiencing. To give a brief example, I had a client on the phone last year yelling at me for something out of my control. As he yelled I looked down and held my palm against my chest. As I felt my heart pounding I became aware of the agitated emotional response I was feeling and the urge to yell back. I thought to myself, I don't need to feel this. The emotion was gone in just a few moments. That was a formative experience for me.

     

    3) I found that happiness comes not from having everything, but from wanting nothing.

     

    4) An insight into the nature of consciousness itself. I'll explain more if you ask.

     

    I have not practiced TM. I know little about about it, but given the extremely high costs associated with it, remain very skeptical. To illustrate the contrast, the TM course on tm.org is about $1,000. I did a 2-day mindfulness meditation (vipassana) retreat in Flagstaff a few months ago. The cost was $0.

     

    Here are three links that influenced my interest in meditation:

     

    Happiness experiment:

    https://www.youtube.com/watch?v=5C3JcAYXF8E

     

    Effects of meditation:

    https://www.youtube.com/watch?v=O2tEQPNG198&feature=youtu.be&t=2m26s

     

    Sam Harris is a neuroscientist, philosopher, and author:

    https://www.samharris.org/blog/item/how-to-meditate

     

     

    If American - which presidential candidate will you vote for?

    in General Discussion

    Posted

    When I hear someone say they support Trump, I don't know what it is they're supporting.

     

    We haven't heard any of his actual policy positions. We've heard 3rd-grade-level solutions to current problems. Extremist Islam is a problem? Ban Muslim immigration. Mexican immigration is a problem? Build a wall. US Debt is a problem? Refinance it.

     

    "I am the king of debt. I do love debt. I love debt. I love playing with it," a moron once said.

     

    I get it when people say it's entertaining. It is entertaining when there's nothing on the line. But this is the guy you want meeting with world leaders? This is the guy you want signing legislation?

     

     

    Space X

    in General Discussion

    Posted

    So the question could be turned around... how can the existing industry leaders survive long term under this newly higher level of ambition and execution?  How are they going to reinvent their cultures?

     

    Good thinking

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