Libs

<In terms of the deception, control, restriction of freedoms and rights, etc, it's probably no better or worse than any Western democracy. > Chinese people are as free as American or European citizens? Is anyone telling us how many children we can have, or jailing / torturing journalists? Parsad, am I understanding you correctly?

I couldn't sleep on Sunday night, March 8, 2009, and lo and behold, I get up at 4 AM and there's Buffett on CNBC. He said something along the lines of, WFC has $40B of normalized pre- tax, pre -provision profit, and you could by it for 2 X ( or some such ridiculous number). I was 100% into BRK at the time, and sold half and put it into WFC at $10 on Monday. This is probably my greatest investment memory. Buffett himself had basically endorsed it. For me, the fear was in 2008. But by March of 2009 I was sure we were going to be ok, and I was filled with greed.

Is Berkshire shorting Dow Chemical? Dow Chemical’s Stock Action Works in Warren Buffett’s Favor By ANUPREETA DAS Sept. 1, 2016 10:11 p.m. ET 0 COMMENTS Dow Chemical Co.’s shares are showing clear signs of tinkering, according to an analysis by a Yale University professor. The shares come within cents of an important threshold—$53.72—pretty often, but they have closed above that level so rarely that there’s less than a one-in-a-thousand chance that​it’s happening randomly, according to the analysis. If the stock closes above $53.72 enough times, Dow has the option to buy back $3 billion worth of preferred shares from Warren Buffett’s Berkshire Hathaway. The Wall Street Journal reported last week that people familiar with the matter say that executives at Dow believe someone is selling its stock short—or betting that its price will fall—to keep it from rising above $53.72. In his analysis, Yair Listokin, who teaches contracts at Yale Law School and is a trained economist, picked 48-cent ranges for the daily closing price of Dow stock from April 1, 2014 to Monday. He plotted every 48-cent increment of the share price during this period against the number of times the shares have closed in that range. For instance, the shares have closed just below $53.72 more than 50 times. They have closed in the​$52.71 to $53.71 window 91 times. The number of times they have closed​in the window just above $53.72? Seven times.​ This week, the shares closed at $54.13 on Monday and $53.99 on Tuesday after the Journal story was published. Mr. Listokin’s histogram shows the dramatic drop-off. Even accounting for different methods, Mr. Listokin said the chance of this being a random occurrence is remote. “The probability that this would happen by chance is essentially zero,” he said, noting that his findings offer “pretty clear evidence of manipulation.” ​Mr. Listokin said he’s working on a more detailed paper and plans to make the Dow action part of his class discussion.​ Who would benefit from Dow’s share price being below $53.72? Berkshire comes to mind, since it gets a $255 million annual dividend from Dow for helping finance its 2009 takeover of Rohm & Haas. Kuwait’s sovereign-wealth fund also helped fund the deal and owns $1 billion of Dow preferred securities. When asked, Mr. Buffett declined to comment last week on whether he or his deputies at Berkshire were shorting Dow to exert downward pressure on the stock price. Under the original agreement, Berkshire was forbidden from engaging in short selling or hedging its preferred stake in Dow until April 2014. The clause ensured that Berkshire was locked into its investment in Dow and couldn’t reduce “the economic consequence” of ownership through a hedge. http://www.wsj.com/articles/dow-chemicals-stock-action-works-in-warren-buffetts-favor-1472782317

Berkshire is still quite attractive IMO. Below average risk, above average prospects, and priced well below the market. What more could you ask for? It's a 30% weighting for me. After that, I agree, it gets tougher.

He was really likable in 2012 when he told a black audience the Republicans were going to "put them back in chains." Amazing there wasn't hell to pay for that. ( That said, it is true he has relationships across the aisle, so in private he must be OK to work with).

I'm just grateful Parsad is getting in on the action, via Premier. Would be nice to cash in on a bubble for once ;D http://nebula.wsimg.com/c65f92956e487e536a15840eedd70b17?AccessKeyId=D9BC91A237FD97511E7C&disposition=0&alloworigin=1

CM hit it out of the park here. Great interview.

Thanks for posting - I thoroughly enjoyed it, especially the 1999 reprise.

What about CVX ( Chevron) at $95? The market is valuing them as if oil is already at $70. They lost $$ last Q at $42 oil. This Q won't be any good either. They are borrowing and selling assets to pay the dividend. LNG prices are depressed; I'm skeptical Gorgon will produce much FCF. Assuming oil between $45- 50 in 2017, and LNG contributes $3B in FCF, they will be close to even operating cash flow; and then have to come up with ~$20B in capex and $8B in dividends. How much can they borrow before their credit rating is impaired? How much sense does it make to borrow to pay the dividend? Seems like $179B is a very bloated valuation for a company with FCF problems like this. I see a variety of EPS projections around $4.20 in 2017. That's assuming $50+ oil, which is no gimme. Even then, with a historical P/E around 10, that would be a $42 stock. Here's the rub though: The dividend, unsustainable as it may be, is $4.28 a year. As long as it stays, that will prop the stock up. What am I missing....

Thanks for posting. Can someone explain what Buffett is getting at here? He's equating margin investing with buying, say, SPY calls? ------------------------------------------------------------------------------- And then we came along in 1982, and we, in a sense, opened up leverage to anybody in extreme measures and since that time –- it’s 28 years since then. I and perhaps others –- but I know I pointed out at least 20 times the really nonsense of saying — and still having the Federal Reserve telling people they can only borrow 50 percent against stock or whatever the margin requirements have been at various times, and then at the same time, telling them you can go gamble in S&P futures or something the 2 percent or 3 percent margin or whatever it might be. And to this day -– and I’ve talked to Congress about it. To this day, we sit there, with a system, where the Federal Reserve is telling you how much you can borrow against stocks and we’ve got this parallel system where people can gamble anything they want virtually, in terms of the most obvious one being the S&P futures. And I have seen no attempt by anybody to address that total contradiction.

And it is very sad if 21st century majority of America follow some kind of twisted version of a fairy tale written 2000 years ago in Middle East. You'd think humans would think and be rational. Nice comment...dripping with contempt. You just made Cardboard's point.

Nice comment....dripping with contempt......you just made Cardboard's point. And it is very sad if 21st century majority of America follow some kind of twisted version of a fairy tale written 2000 years ago in Middle East. You'd think humans would think and be rational.

http://www.theglobeandmail.com/news/investigations/the-real-estate-technique-fuelling-vancouvers-housing-market/article28634868/ Nice summary of the shenanigans realtors pull in Canada ( esp Vancouver). A) Realtor sells A's house to B. B ) Realtor invokes the assignment clause, and buys it himself C ) Flips to someone else at a profit. Legal, but scummy. Note the 500+ outraged comments to get a sense of how things are boiling over.

Hasn't demand continued to increase? Seems like cheap easy credit created excess supply (in all materials, not just oil), not that a lack of credit created a lack of demand? Demand is down over the last 5 years in the US, Europe, and Japan combined. It's only up in the aggregate because of the rest of the world. If China (and other EM's) rolls over and demand drops off there, aggregate demand will probably drop. No one is expecting this, but if it happens, look out. The oversupply problem will be far worse than expected.

How easy is it to get in, if you don't own shares ( or didn't as of 12/17, if I'm reading correctly).

Good god, no one is talking about shutting our doors and hiding. This is not an immigration issue, it is a national security issue. ISIS is at war with us and they have already admitted their desire to infiltrate the US via incoming Syrian refugees. Our own National Intelligence Director says he is "very concerned" about the risk, yet we feel compelled to demonstrate our compassion to the world and put our citizens at risk buy admitting 100,000 Syrian refugees? I have zero confidence that government bureaucrats have enough reliable information to complete any background checks. +1

Equity method accounting is for when you own 20-50% of a company. https://en.m.wikipedia.org/wiki/Equity_method So that's the accounting method. Buffett might view it differently for intrinsic value purposes. For example in the 2014 Annual Report, they owned 30% of USG but he lists it in his investments along with KO, AXP, etc and not as part of pre-tax non insurance earnings. Thanks.

The Kraft Heinz transaction is spelled out on page 11. Two questions 1) at the bottom of the page, earnings are shown as negative, but then totaled as a positive $110MM for Berkshire shareholders. Don't get this. 2) BRK is using the equity method yet only owns 26.8% of KHC. What are the ownership guidelins to use the equity method? I would have guessed you needed over 50%? Or in this case since we are partnering with 3G and the combined ownership is over 50% it's ok? Thanks in advance.

Cliff sounds like an amateur - that's not good for Cliff. “For a guy whose reputation rests on his investing in the stock market, that’s not good,” said Cliff Gallant, an analyst at Nomura Holdings Inc. “It’s been a tough year.” It's a fair comment, the stock portfolio has not done well this year. Buffett would be the first to own up to it. Honestly I see the stock portfolio as an anchor. I wish BRK could just spin the whole portfolio off to shareholders. Then the market would recognize BRK's terrific growth as an operating company, and give it a much higher P/E ratio. How many companies are growing this fast, with such low risk, and selling at such a low P/E ratio ( I think ~13X my 2016 estimates, haven't updated it fow a while). BRK's advantages as a hunter for operating Co's seem far greater than what we can do in the stock market. I believe Buffett said he can only look at maybe 300 potential stocks now, given BRK's size. Plus, BRK is stuck with the giant stocks forever. Come hell or high water, if Buffett wanted to sell KO, WFC, AXP, or IBM, it would cause a huge firestorm...could he even sell them without crushing the price? Heresy, all of this, I know.

Interesting on the FXI. Are the banks there as vulnerable as the US? The last time I looked there wasn't all that much exposure to apartment loans and I have heard that China has big down payments which protects the banks if real estate falls. I don't know any specifics about the Chinese lenders, I'm basing this on the tgheory they are constantly rolling over loans and the projects are not going to generate the funds to pay the loan off. Eventually this game ends. Michael Pettis goes into this at some length too.

I own some FXI Jan 2017 30 Puts. FXI is bank - heavy, and I agree with Anne Stevenson-Yang's prognosis that if and when China blows, the banks will lead the way.

TLT puts are still a cheap way to hedge against deflation.

Ummm what about the taxes on those operating earnings? That takes the 26.5bn down to 20.5bn. I think BRK is cheapish at these levels but 15.8x is different than 12.2x Everything in my post was after - tax.

Where are you optimistic - not on Heinz, not on PCP. Probably not on undistributed earnings from a/0 stocks. Is it your $18B up from $16-17 this year? If so, why assume earnings are going to go up? Would the railway not be having issues at this point with earnings given fracking? Should you just be assuming flat earnings? I haven't run these numbers in about 18 months. <Is it your $18B up from $16-17 this year?> Yes, that may be optimistic, as it assumes a modest underwriting profit and organic growth from the existing operating companies. I'm not that worried about Burlington ( assuming no recession) as they are turning around a lousy performance from 2014. They don't have the tough comparisons some of their competitors have.

+1 on the look - through method. Looking to next year, if you add $1.0B in KHC earnings ( 325MM shares X $3.22 EPS) $1.5B PCP earnings $18B Operating earnings from BRK ( up from ~$16-17B this year) 6B Undistributed earnings from a/o stocks 26.5B in earnings next year assuming no recession and normal Insurance results. Today's market cap is 325B So 12.2 X earnings. This may be a little optimistic but it's reasonable.