jay21

I should probably do more digging before speaking but it sounds like he is riding the biotech bubble right? Buying some orphaned pharma product and then ipo-ing it. Much more skeptical of this business model than VRX. But who knows, it might work.

This is the purpose behind the whole section we have on books. I would recommend that you post a book, analysis of the book, and recommendation individually in that section. That way it is far more useful and is permanent. This thread will get lost in a few weeks and will serve no purpose. Cheers! Sorry if my post was unclear. I meant it is a thread for asking for recommendations as that is not allowed in the book forum. Although, I think it would be a great sticky and all other posts could deal with individual books.

Starting a thread for all book recommendations. I would like to see if anyone can recommend good books on policy (non-monetary). Examples include: - Fiscal policy -> E.g. regulation, the New Deal, reaganomics, etc - The fall of mercantilism and rise of capitalism - Public Policy - Pensions Basically, I would some books that describe some debate and explores the pros and cons of each side and then describes the implementation of the victor's policy or a book that describes some shift in policy and the results from that new policy.

Cant think of anyone with more insight into PSX then someone just doing due diligence on a potential asset swap with them. WEB must have liked what he saw. Jurgis - very low chance T&T bought it due to the size of the position.

Other way around. They exited through an asset swap: http://www.bloomberg.com/news/articles/2013-12-30/berkshire-to-buy-phillips-66-unit-for-shares-of-refiner-s-stock Guess WEB likes it now. IIRC: WEB owned COP which spun off PSX. T&T bought PSX as WEB sold down. Todd exited through an asset swap. Now WEB is buying again.

If they spend a dollar on railroad growth capex, BV will increase by a dollar, it will be in the PP&E section. You may think depreciation charges exceed maintenance capex, but growth capex does increase book. You have $1 in cash and turn it into $1 in PPE. Its just a transfer, not growth.

Well the spread between IV and BV will widen. I don't know if it's right to think that it will be tougher to think of BV vs. IV. My view is that at some point maybe not too far away it will become wrong to think of BRK in terms of IV.* I'm a bit encouraged by the use of debt in the PCP acquisition. Maybe they're starting to use the balance sheet a bit. We'll see if that turns out to be true. I am usually too abbreviated on the internet. Obviously the link between IV and BV will be easy to think about b/c people have their estimate of IV and BV is a known number and they can compare the two. I was more thinking of the change in each. Will a 5% increase in BV be roughly equal to a 5% increase in IV etc.? It won't be a useful heuristic. *You mean BV where the asterisk is above?

Good pt. I guess it's a little tough though. If Warren retains a dollar and puts that dollar towards railroad growth CapEx, the BV didn't increase but assuredly the IV did. It's going to get tougher and tougher to think about IV relative to BV as time goes on.

Sorry - missed the look through part. Agree except it does not account for cash and fixed income balance changes (not sure if you are counting warrants and preferreds as well). Also with Ted and Todd managing a portion of the portfolio, there will be some monetization of security changes (i.e. they will be opportunistic relative to Warren). Also agree that 10% is a good conservative return estimate. I think that if Warren wanted to be more aggressive with the balance sheet, then low teens would be easy and he may even do better but it seems like the company isnt shooting for the stars anymore.

I think people need a stronger understanding of corporate finance when trying to estimate returns on capital deployed by BRK. For example in the PCP deal, if you arent considering the debt raised by BRK, you are making a mistake as the leverage will increase the returns on equity. A few other random things to consider: 1. Tax benefits and holdco leverage for the utility biz will move returns up to 13, 14, possibly 15% 2. A lot of people have mentioned that the earnings plus growth metric doesn't work because he retains all earnings to generate the growth. This is somewhat valid but doesn't consider the value he is creating that doesnt translate into earnings growth (e.g. buying equities). The right way to think about is something more like earnings growth + net change in securities/cash. 3. Low cost leverage - you see BRK buying IBM, preferreds, WFC, etc. You need to account for deferred taxes, insurance float, etc when thinking about capital allocation here. He may be getting a 8 - 12% return on those assets but its not all equity funding. (Also the preferreds are pretty cool in that they are taxed at 15% i think instead of corporate bonds being taxed at 40%) 4. Growth CapEx (particularly BNSF) - this isnt all equity funded. Its why you might see return on capital of ~10% but the RoE is probably north of 15%. Given the cash balance and overcapitalization, 10% is a conservative number but I wouldnt be surprised if the have another decade of growing IV in the teens.

I think there's a chance (but who knows?). Decreased my liquidity by <15%. Still sitting on some cash to deploy. Actually thinking about harvesting some liquidity from a name that has a reasonable valuation, MKL. Bought: TV and LILA. These have been a little crushed from the highs.

Good one. Here's my list if books that are at least tangentially related to risk: Risk Savvy: http://www.cornerofberkshireandfairfax.ca/forum/books/risk-savvy/msg180760/#msg180760 Thinking Fast and Slow (risk of misthinking) Fortune's Formula (bet sizing)

I think he is fine with it. I feel like T&T have that "would I buy the whole company" mentality. How motivating is this to Ted? Wasnt the speculation always about DVA? I think he gets an elephant in due time as well.

You should choose based on your career not for general knowledge. Get an intermediate accting book if you want to learn accting. Also read financials statements as they usually explain their method of accting for certain relevant transactions. What if your career is full time private investor? Fwiw I'm a full time investor and got cfa lvl 1 and 2 (and hopefully 3) and thought that the first two level were pretty decent for someone without any relevant previous education in finance. Lvl 1 is very broad and general while lvl 2 has a lot of accounting, corporate finance and equity valuation. Lvl 3 is totally useless I would think there are better uses of your time (but obviously do what you want). Pick one of the topics you are most interested in and start reading the most recommended books and/or textbooks for that field. You can also probably use some online resources (Kahn academy and YouTube?) if you just want to pick up a few valuation tools like gordon growth or statistics. I am actually one of the people who thinks a good chunk of the CFA curriculum is relevant to finance. I see a lot of value investors talk it down but it does give a good overview of finance. If I was a private investor or not in finance, I would not attempt it.

You should choose based on your career not for general knowledge. Get an intermediate accting book if you want to learn accting. Also read financials statements as they usually explain their method of accting for certain relevant transactions.

The future of the auto insurance industry is more a function of expected auto loss than anything else imo. The biggest threat is driverless cars are better drivers than humans (great social outcome tho).

0% for valuation (except NAV for complicated entities like LVNTA) But I like reading the reports for industry/company background and primers on Fixed Income products. Usually very helpful.

I am interested, but that day might not work so well but still keep me in the loop. Thanks

I kinda agree. If you are valuing things from a BV perspective then obviously you need to adjust the DTLs b/c you readily admit they aren't worth face. Float from insurance/DTL/etc is kinda of irrelevant when you look at project planning. Almost everyone uses some sort of cash on cash RoE as a metric for project planning and the benefits of float would be captured there. There is an opportunity cost for insurance float though. You need to have X amount of equity capital per Y amount of float in order to write business. So you might want to consider that as well.

I always thought it was ridiculous when some value investors would completely dismiss the CFA curriculum. If you are interested in finance, at least 50% (and up to 75%) should be interesting and/or helpful.

I think I might be the only one who didn't fully enjoy Guns Germs and Steel. The overall thesis was interesting but I remember not being thoroughly engaged with the text (I can't remember if I disagreed with any of his points).

Quickly looked through - looks like a great list. Here are a few to add: King of Capital Once Upon A Car Pour Your Heart Into It The Prize/The Quest The Great A&P Outside of "business bios" above, I would recommend the following which haven't been mentioned: Engineers of Victory All the Devils are Here (traces causes of the crisis back to the 80s) A Splendid Exchange Also, I just started Catherine the Great as I think my knowledge is too western centric and it is very good so far (3 chapters in). Writing quality is on par with Chernow, who I think many have read.

The world is divided into people who do things and people who get the credit. Try if you can to belong to the first class, there is far less competition

Thanks guys. I know my statements were probably dramatic but I really do worry about college tuition if I have kids. The exponential growth there has always scared me. I know I can probably cut back more on expenses (living in NYC pretty much guarantees that I will always be able to cut back) but I think I am comfortable with my current savings. I'll read those links and try to plug any obvious holes/leaks.

Liberty - curious if you could go into more detail surrounding your decision to retire and the math you are running to support that decision. You dont need to throw out exact numbers but curious how you think about expenses relative to your current net worth, college, healthcare, etc. Im very young and it feels like retirement can be out of reach until I am much older (60+) even if I reach a multimillion $ net worth