jay21

Isn't this supposed to be one of Tracy's jobs? To make sure the smaller subs run smoothly after WEB is gone? Ajit was able to recruit some A+ talent as well. I'm not too concerned right now.

I am starting to do some digging on Gundlach and I wouldn't say he is doing macro. Since the credit crisis he has an almost barbellish portfolio that mixes non agencies (credit sensitive) and agencies (non credit sensitive), which can offset inflation and deflation scenarios. He also says he doesn't try to predict rates. Although, I think he will occasionally add an inverse IO or support bond if he thinks rates/prepayments have over shot and they offer good relative value. I am trying to look for a good HY fund (I'm thinking closed end to avoid redemption issues) to invest in for the next inevitable down cycle.

DoubleLine for bonds? It appears Gundlach has done a good job navigating the credit cycle.

I thought this gave a pretty good model of leasing/corporate finance: http://brontecapital.blogspot.com/2008/06/whats-nice-girl-like-you-doing-in-place.html

Do you have any nominations? :) If you want something close to Berkshire in structure and philosophy but without the size, I'd probably say Markel. I don't think they're quite at the level of brilliance of Buffett (who is?), so I don't think they'll have a similarly spectacular long-term book value growth record when all is said and done, but they should do very well nonetheless. +1 - Markel is the closest thing I have found to a BRK copy. Float growth can give them very high returns. The meaningful buybacks assume a lower than current multiple. Why do you think BRK will be able to grow operating earnings at a double digit rate? They can take their earnings and just keep building utilities where the ROE is in the low double digits. IMO, 10% ROE is their floor. Bolt-ons, other companies ROEs, purchasing marketable securities all probably have higher returns than 10%.

Generally I do not like government subsidies, but housing subsidies that encourage ownership may help people save. Obviously, too much will result in another financial crisis, but I don't mind small, reasonable subsidies. Also, in the boom time, rising house prices rose boats of investors and consumers alike. Now after the bubble, its investors cleaning up the foreclosure and distress mess and reaping the gains of the recovery.

My theory is that wages are local markets and are facing competition from globalization. Why would anyone pay someone a high wage to someone when they can pay a lower wage to someone else to do the same job? Technological advances are only making working remotely and globally easier. The wage differential between developing and developed markets will continue to narrow over time. I do not think I am saying anything insightful, but I feel developed markets will continue to face wage headwinds even after a recovery.

The most compelling thing I have seen in awhile suggesting that deflation can be a very big problem: http://blogs.ft.com/andrew-smithers/2014/03/a-world-awash-with-debt/ Are we much more levered than we think? I don't know much about these charts and there could be a good reason for the increasing ratio. Maybe the charts here showing assets, liabilities, and equity to GDP show a different story? http://www.businessinsider.com/america-is-not-drowning-in-debt-2013-4

1997 Freddie Mac Jumps into Subprime Mortgages "Chairman Leland C. Brendsel said Freddie will begin buying lower-quality loans over the coming year and proceed further down the credit spectrum in 1999. "We will buy all the loans we can that meet our parameters and can be priced profitably." Freddie Mac will deal with mainstream lenders as well as companies that have traditionally offered subprime products, he said. Freddie Mac will first buy so-called A-minus-quality loans and then move on to the B and C credits of more challenged borrowers, Mr. Brendsel said. He declined to discuss how much buying Freddie Mac would do. All told, the subprime industry originates about $125 billion annually, with A-minus credits accounting for about 10% of volume, according to industry estimates." http://www.americanbanker.com/175/freddie-mac-jumps-into-subprime-mortgages-1041664-1.html

Some things that have me worried about retirement are healthcare inflation and education inflation. Unless something changes, I expect these to be much more expensive in the future and they can be more important to me as I age and if I have kids (especially more than 1). I think that a few people I work with are working just to put their kids through private colleges that can run you a total of 200k+ per kid! I'm not sure what "my retirement number" is. I hope I can find a job I like that pays well and gives me enough time to read about investments.

Thanks, this was short and sweet. I liked this quote: Some prices for non-investment grade bonds do not reflect the risks inherent in these securities. A company can float 10 year non-investment grade bonds with a coupon of 5.5% and investors will buy them at 100 cents on the dollar. Just a few years ago, a similar bond would be trading for 60 cents or less. In fact, there is a good chance that these debt securities may now be overvalued, and that the possibility of a large, permanent loss of capital is extremely high

Your 54b number is wrong. Their book equity is 34,612 and goodwill of 14.8b. A ROE of ~12% and a ROTE of ~20%. A few pages back, I finally stumbled into this and the acquisition finally looks genius. I believe I have seen ROICs listed as approaching 10%. Any amount of leverage will turn this into a very attractive return.

Bump. Any thoughts to share so far? I thought you mentioned off hand that you may have purchased a "compounder"

He did. He said "I'm giving away all my BRK shares to charity" implying that he will not give the shares to the trust. I believe he also said that index funds and BRK are good choices.

May or may not directly relate to income inequality, but I thought this was interesting: http://www.bbc.com/news/education-26373725 "Many parents paying more for childcare than average mortgage" "The trust says childcare in England, Wales and Scotland is becoming increasingly unaffordable with a 27% rise in costs since 2009, while wages have remained static."

"In 1986, I purchased a 400-acre farm, located 50 miles north of Omaha, from the FDIC. It cost me $280,000, considerably less than what a failed bank had lent against the farm a few years earlier." "As had been the case with the farm, the unleveraged current yield from the property was about 10%." I think you are calculating an all equity return when it's probably an asset that you leverage. Returns were probably better or could have been if he used even a low amount of leverage.

He is looking at FCF yield after a large decline in price. How's that macro?

Pretty sure the 90-10 was specific to the estate and the bonds were short term. Also, his graph might be misleading because if you rebalance every so often, you might be deploying cash in down markets and harvesting in up markets, which might make the returns look smoother and better (I am not 100% b/c I didn't do the math). Also, while the author may be technically right that indexing (or I guess any type of asset allocation by his logic) involves macro forecasting, I think that it does not contradict Buffett saying he does not discuss macro when making stock individual purchases.

Another excellent write up: http://ftalphaville.ft.com/2014/02/24/1777512/buffett-derivatives-feel-the-credit-quality/ I didn't know this: "In Q2 2009, Berkshire did just that and modified six put contracts, mostly referenced to the S&P. Maturities were reduced between four and ten years, and strikes were reduced between 29% and 39%. In the specific case of the amended S&P puts, maturities went from 18 to 10 years and strikes from 1500 to 990 (the index was below 900 at the time, so the original strikes were massively in-the-money; the original notional amount of those puts reportedly was $2 billion)."

Some Lines Say Maybe the Stock Market Will Go Down http://www.bloomberg.com/news/2014-02-12/some-lines-say-maybe-the-stock-market-will-go-down.html

Pretty sure the extra USG was from a Buffett bond being converted. Also, I believe Ted was the primary force behind their Rescap activities, which kinda flew under the radar: http://www.bloomberg.com/news/2012-10-25/berkshire-said-to-win-rescap-loan-auction-with-1-5-billion-bid.html

I'd highly recommend the blogs of FT (particularly Alphaville), which are free and have plenty of content.

As a very casual observant of FFH, this was always my issue. They call the equity and inflation positions hedges due to potential deflation. But if you combine those with a long duration bond book, you are making a directional bet. Not only this, but duration alone make the bet's risk/reward poor imo. You have to get the probabilities right.

That was my initial thought too. It might let Berkshire eliminate the position in Graham Holdings in a tax efficient manner and retire some BRK shares in the process. It's not huge numbers, but a billion here and a billion there . . . pretty soon you're talking real money. :) I'm hoping that he removes the floor due to him failing the capital retention test. I wonder if Tedd was running the show, would he take a page out of Malone's book and get more aggressive with repurchases?

Can you guys point me to any good resources if I wanted to get smarter on telecom, satellite, cable, and wireless technology? Thanks