JBird

Did not see that one coming.

It appears the answer is yes and yes, and that separate brokerage accounts make no difference. http://www.irs.gov/publications/p550/ch04.html#en_US_2012_publink100010601

Does he mean price graph? And financial data?

What's the upside with the LP fund you don't get with the SMA structure as an RIA?

A fair point. I do wish our culture would further encourage individuals to give much of their wealth away; in essence, promote meritocracy.

This is a very perceptive observation

Bare in mind Elon does not run SolarCity.

I have had a comical time researching these Hyundai preferred's. Hyundai doesn't have investor relations so far as I can tell. So I've called every corporate office on this continent asking about the economic rights of the preferred and the call features. No one knows anything. One guy had the naivety to refer me to a local car dealer. It appears from the statements that the preferred have the same economic rights as the common, plus the added dividend. Does anyone have info to the contrary?

Yes. I don't use it for Berkshire but I do for my only other holding, Lukoil. Look-through earnings last year were ~25%.

Where do you not want to live?

I've been trying to think about this on a probability basis, using an expected value to answer the question of how far to project. With a simple example, say we're looking to purchase $1 billion of float run-off that will last 1 year. We know the policy book. The question we have to ask is, how much float are we likely going to have throughout the year? It'll start with $1 billion but just how fast will it taper off? Absolutely nobody knows with precision how fast it will diminish. So we do all we can do; judge the probability of the different possible outcomes. For simplicity, say there are 2 possible outcomes, the first being that we have an average amount of $750 million, second being that we have $500 million. We estimate the odds are 60-40, respectively. So on a probability-weighted basis we'll have $650 million of float. Now it's only a matter of deciding what you're willing to pay for $650 million of float for 1 year. I'm not suggesting this process be done with precision or that it must be laborious, but I think it may yield a useful answer. My thesis is that you should project float out for as many years as you can judge the probability-weighted amount there will actually be. Clearly this is easier when looking at an insurer like GEICO that has a strong competitive advantage. But if you're interested in projecting their float out 5 decades, what's your expected value for Year 40? Year 50? Those seem like a tough questions. Just consider how far away that really is. There are so many variables and unknowns. If we can't estimate the odds that far out, maybe it's safer not value those years. I'm not saying it's unconservative to value that far out, just that from my perspective it looks tough.

"We don't formally have discount rates. Every time we start talking about this, Charlie reminds me that I've never prepared a spreadsheet, but I do in my mind. We just try to buy things that we'll earn more from than a government bond - the question is, how much higher?" -WEB I believe him when he says he doesn't write them out. Can he do them mentally? 1) We're talking about a man who can calculate compound annual return figures in his head; I think the mental math ability is there. 2) I am not suggesting the DCF is done with precision. He's noted before that others would be surprised at just how imprecise he is. The more I do these DCF calculations in Excel the more mental shortcuts I find. With enough practice I don't think doing these without Excel is so far fetched.

1. The risk-free rate or anything above it. 2. Same as 1 3. I want to earn more than the risk-free rate. In order to do that I either have to buy below PV of future cash (margin of safety) or use a higher discount rate. 4. I share Buffett's view that DCF is the only logical way to measure the relative attractiveness of assets.

Flip to 38:30, and then notice his emotion over the next minute. This is why you want your CEO as a shareholder.

Fantastic. And finally, how far out can we project real-world float in the future and still stay within the bounds of conservatism? 20 years out? 50? 100? If it depends on the quality of the insurer, how far out can we go for the highest quality insurer's float?

Yes, in his personal portfolio.

If historical data is a useful guide for judging future probability, and I have no reason to think it is, then the answer to your question in the subject heading is ~14.5%.

87.2 m is the present value but you must account for inflation and sovereign risk. Probably something around 75m. This example is in a sphere of unreality; so no inflation and no sovereign risk. I'm curious how you arrived at $87.2 million?

Can't vouch for accuracy here but it's something: http://seekingalpha.com/article/221706-the-daily-journal-equity-portfolio-and-valuation

Brk guy, did you have a link to 2010 or 2011 meeting notes?

In my view, the answer to the first question depends on the amount of investment income the float will generate over time, and when it will be generated. The second question is rhetorical, we all know the answer.

Good discussion. I'd like to pose one more hypothetical. $1 billion of cost-free float that must be paid back after 50 years is for sale. The float can only be invested in risk-free assets. The risk-free rate is 5%. Your required return rate / discount rate is 10%. What's the maximum amount you're willing to bid, and why?

Another good question for the real world. Let's say 10% real risk-free. Inflation is at 0%.

A good question when dealing with the real world. But for the sake of simplicity the float doesn't even have to be from insurance. There are no constraints on your ability to invest it. It can be 100% in equities if you want.

Float is money held but not owned. The question is, how much are you willing to pay for it? 1. $1 billion of static float that is both cost-free and enduring (it will never be paid back) is for sale. The risk-free rate is 10%. What's your maximum bid, and why? 2. $1 billion of static float that is cost-free and must be paid back in full after 100 years is for sale. The risk-free rate is 10%. What's your maximum bid, and why?