jay21

Taiwan having similar problems with the changes in FX rates and their central bank is intervening to try to assuage the problems http://online.wsj.com/article/SB10001424127887324767004578488682893945140.html?mod=ITP_moneyandinvesting_1

I made a thread similar to this awhile ago ( http://www.cornerofberkshireandfairfax.ca/forum/general-discussion/must-read-annual-reportsshareholder-letters/msg103480/#msg103480 ) Someone put together a nice Google Docs sheet summarizing the posts. That's probably the best place to start.

You're right. I should have quoted Parsad.

Unless its floating rate debt, I don't get the logic of #1. Why don't you get the logic of #1? Given that defaults are low because of low interest rates, it naturally follows that continued low interest rates lead to continued low defaults. The low rates have been low for years now. The loan portfolio is seasoned such that the remaining credits in the aggregate loan portfolio is either of low rate or they are hardy seasoned credits at higher rates (the weaker credits having already defaulted). I don't understand why there is a correlation between low rates and defaults? Is it because debt service would be low? Weren't rates considered low during 2007?

Unless its floating rate debt, I don't get the logic of #1.

Credit has been pretty tight until last year and now things are thawing/loosening (mortgages are still probably the tightest). Defaults usually occur a few years after the debt has been issued so they lag current underwriting standards. You can also think of it as 2007-2009 was a real stress test and almost everyone who was going to default in a stress scenario did default. All those bad debts were replaced with very good debts so it makes sense that we are in a low default period.

This is great. Thanks so much.

Thanks. Yes, I am, but the sizing is much different with most of the weight towards BRK in the Trust. I saw that Cascade can have as much as $80 billion AUM.

What are the rules for 13F filings? Why doesn't Cascade have to file one?

WSJ: Pickups: America Falls Back in Love http://online.wsj.com/article/SB10001424127887323744604578471500160694538.html?mod=ITP_marketplace_0

IDK about calling it a hidden champion, but one name that caught my eye recently is Ecolab. Its an interesting stock with a history of earnings growth/compounding. It may be a little expensive, but its another stock and industry to study. Michael Larson owns a good chuck so it probably isn't "hidden" by any means, but something that I came across recently.

The WSJ had a good article on Israel's rate cuts and FX buying program (title: Banks Rush to Ease Supply of Money ) http://online.wsj.com/article/SB10001424127887324216004578481283977918230.html?mod=ITP_pageone_2 Is there any other time in history where something similar has happened? I am trying to get a sense for the potential outcomes of every major central bank cutting rates and devaluing their currency. It also makes me wonder about the efficacy of central banks if other central banks are forced to adopt offsetting policies due to distortions in their economy.

Pabrai raising cash as well? He sold GM last quarter. http://www.dataroma.com/m/holdings.php?m=PI

Imagine how more tantalizing a "Berkshire - Bank of America - Leucadia" thread title would look. I would be thoroughly disappointed if this article appeared in a thread like that. Good job tempering my excitement by using KeyCorp as the first company.

I am scanning through this. I was hoping they would detail the competitive positions of the subs a little more, but it is still a nice attempt. I am reading Part 4 right now and one thing they have to be careful on is the after-tax return. A good chunk of the equity returns are deferred which makes the cash tax rate lower than the GAAP rate. It's hard to model what the after tax return number should be.

I think the bond market is more out whack than the equity market. It's not like every single stock I am looking at is that expensive. I am worried that lending standards are weakening and yields are at historic lows (spreads are approaching lows). Every market except mortgages seem to be thawed and the market is probably bordering on (or is) loose.

Not as common as demutual investors think. The demutuals have been on an absolute tear recently. Is there a way to screen for demutualizations? I think plenty of investors (like Klarman and Einhorn) made a bundle on demutualizations in the 1990s. The way they explained it, it seems like free money.

Where are the details of this test disclosed? I must have missed it. I think WEB should remove the ceiling on his buyback plan. I understand that he wants to be fair to shareholders, but he should also be fair to shareholders who do not want to sell. At their size, it is a mistake not to be buying shares here. There are very few current opportunities to deploy significant sums at high rates of return and buying shares is one of them.

I was just thinking about doing some fishing for some banks that are trying to roll up community banks for cost synergies and, lo and behold, I see a Barron's article giving some names to look into. Here are some snippets from an interview and the article title is in the thread title. "we are destined to have improving and benign credit comparisons for the next several years. For surviving institutions, credit quality is now a tail wind. We consider the crisis to be over, from a credit-quality point of view" "our concern is less specific to housing and mortgages and more generalized to the unintended consequences of excess liquidity and low interest rates. " "the trend we are most excited about is that we see a strong likelihood of a big consolidation in the community-bank business in the U.S. The country is overbanked and overbranched. Consolidation has actually slowed down a lot since the crisis hit. So this isn't happening yet. But the regulatory response to the crisis is going to cause consolidation to pick up again as banks are now feeling increased costs and burdens of the new regulatory regime. So it is especially bad for small banks, which have seen their fixed costs lurch up but whose costs are spread over smaller asset bases." http://online.barrons.com/article/SB50001424052748703591404578453060091541262.html?mod=BOL_twm_fs#articleTabs_article%3D1

if you have to dive in and take a close look he's not interested. he wants an investment to be obvious. he understands the numbers by reading the annual report. his accumulated knowledge means there is nothing new under the sun for him. that's why when someone wants to sell him a private business he can make a decision in hours based on his knowledge of the industry, the business, and a quick run through of probably 10 years of data. What I meant by diving in was that he reads the annual reports front to end, 10-Qs, conference calls, and competitors reports as well. I agree that the accumulated knowledge from doing this for his entire life can mean that he can now make many decisions without doing much research AT the time of purchase. Nevertheless, I bet he takes a very close look at SEC filings and conference calls of all his major equity positions, whenever they are released. This is how he discovered that Wells Fargo takes a $1.5 billion GAAP amortization charge that should not be counted as a real expense. From an interview with John Stumpf: —Warren Buffett is your biggest shareholder. (His conglomerate, Berkshire Hathaway, holds an 8 percent stake in Wells, about $14 billion worth, according to financial data provider FactSet.) Tell us about that. He reads everything. One time I talked to him on a Monday, we'd put out our 10-Q (a quarterly financial report) on a Friday, and he said he spent all day Saturday reading it cover to cover. I said, 'Warren, you do that often?' He said, 'Oh, I love Q's.' He was asking me about some esoteric asset — I was blown away. http://bigstory.ap.org/article/wells-fargo-boss-talks-bank-fees-economy-taxes

The question was on screening, not due diligence. They don't use quantitative screens like PE PB etc. Instead, Warren just reads every report of every company he thinks he understands (plus some he doesn't understand), tries to find huge moats, and then waits for the right price.

Your not only with your recommendation. I think Richard Handler also recommended this and it's on my reading list.

Here's the link for those not at the meeting: http://blogs.wsj.com/moneybeat/2013/05/04/live-blog-berkshire-hathaways-annual-meeting/?mod=yahoo_hs

I'm probably buying more BRK this week as well. The discount to my estimate of IV is still meaningful.

Agreed. The one advantage Buffet has is that he has companies spitting out tons of reliable cash flows. The market is there to serve him because he can start reinvesting those cash flows into the stock market if it offers a higher return than the businesses' retained earnings. Most other insurance cos don't have this luxury and MTM losses are more real to them. A very real scenario that equity heavy insurers like MKL and FFH have to worry about is a huge drop in the stock market, rising interest rates, and a hardening insurance market. A lot of capital can be washed away and they won't be able to write insurance or invest unless they have adequate hedges or risk control. I prefer MKL's strategy of shortening duration and keeping more cash and cash equivalents around as opposed to using derivatives. Question to FFH holders, how badly would an inflationary and rising interest rate environment hurt FFH?