aws

Nice, my quick calculation shows about a 20.00/sh value for the warrants. Makes the warrants worth about 1.6 billion and the preferred at 8.4 billion, so Berkshire will be getting about a 10% yield on the preferred portion if you think of it that way.

Did they say how long the warrants are good for?

I hope “There’s only 1,645,000 seats in our church” is an accidental overstatement, as there were closer to 1,641,000 seats left when the 10-K was filed.

I never knew exactly when I hit mine, but I think it was likely about exactly the same as you, slightly before my 31st birthday. To piggyback a little, a recently hit a milestone of finally owning an A share of Berkshire.

Sold all my COKE (the bottling company). Almost a double YTD and had to cash that in, then it went up another 4% after that.

I just cannot imagine any chance of that happening. It would just look shady to an outsider and I cannot imagine either party agreeing to that. Imagine you didn't know the parties involved and heard that: A CEO transferred stock to a private foundation and claimed a massive tax deduction, then using his control of a corporation negotiated buying back the same stock he personally donated, and the foundation despite supposedly being independent of both parties agreed to the sale outside of the market. It would look like a CEO is funneling billions of dollars of shareholder money from a corporation he controls but does not own outright, to a private foundation, all while claiming billions of dollars of tax deductions, and raising questions if the transactions happened at fair prices under the circumstances.

Unless he ends up buying back more than his foundations end up selling, which is on the order of $5 billion a year, then on a net basis he isn't even taking any shares out of the public float. I agree that I think it's going to be very low, maybe $400-500mm to put a narrow range around it. Obviously I'm hoping for a lot more, but the shares were so weak in the quarter and I would expect a big buyback to be more noticeable.

OID increases your basis in the bond, so if you were to sell you could claim a loss for the OID previously claimed in income and whatever loss you have on the original cost. Not sure if that's what you are asking about, so perhaps you could be more specific.

Chart says they received roughly half their purchase price back over the course of a five year period from 2010-2015. If the value when borrowed averaged around their cost then they would have received about 10% a year for five years. I occasionally had some SHLD shares lent out myself and I was getting around 60% rates, but only on a fraction of my shares and my broker took half. 10% realized is pretty reasonable.

The books are closed on buybacks on the quarter, but we still have about five weeks until we can see what he did. In terms of relative performance we are closed pretty much at the low point from a few days ago, 15.3% below the S&P total return YTD. I know a quarter doesn't mean much, but the disparity is still quite striking to me. Certainly seems like good buyback value to me and I hope he took advantage of it. Berkshire can probably stand a more aggressive buyback than most stocks without affecting the share price. It's underweighted in the S&P 500, I think by the percentage of Warren's holdings, so not as much index money flows into it. Also, the foundations which receive his stock sell roughly $5 billion worth a year which can help can soak up some of the buyback cash.

You can accidentally create a wash sale where the basis will be permanently lost. It happens if you buy shares in your IRA during the wash sale period where either you or your spouse had sold those shares in another account you own for a loss. The purchase requires you to zero out the loss on the original sale in the taxable account, but because the entity that holds the new shares (the IRA) is tax-exempt, when you later sell the stock in the IRA you can't do anything with the basis from the wash sale. It just disappears forever. Wash sales can also be triggered by actions in other types of entities you own like partnerships or corporations, but at least there you may not lose the value of it permanently. However, with all of these situations your broker isn't going to be reporting these to the IRS, most likely not even when both accounts are held with them, so it would be an issue that you would need to self-report or it would have to get picked up when you are under audit something.

Possibly, but if it is a material amount of tax you would be double paying by doing it that way. All the tax paid to another state can be claimed as a credit on your home state, but only if you actually file the return in that state, not just paying taxes after the fact. Most LPs aren't that bad, like oil and gas ones usually throw off losses anyway, but some hedge fund K-1s can be terrible.

I had a client who bought Canadian mutual funds in the 80s which he later found out were PFICs. However bad you think the tax rules can be for those, it gets much worse when you hold them a long time. All gains are assumed to be earned ratably over the holding period, so like if you held 40 years and had a 400k gain, it assumes you made 10k in each year. And then you calculate the tax for those 40 year ago earnings plus interest due until today. The way the formula works it can result in tax rates of over 100% which is bonkers. You can't even donate it or die with it either as both of those are considered taxable sales. The LP issue can also generate taxable income for you in a wide variety of states. Technically you might need to file tax returns in a dozen states to report $10 here and $50 there as a result of owning one. I doubt they'd really come after you if you didn't, but if you ask them they usually do want you to file even for a pitiful sum.

My thoughts exactly. Since the buyback restrictions was lifted, there hasn't really been a better time than right now to buy. It wasn't a slam dunk in December at cheaper prices because so much else was going on and he was supposedly in talks to bag an elephant. But now the elephant got away, everything else is more expensive, and Berkshire is much cheaper than prior prices he was buying at. If buybacks are going to be material, not even to reduce the net cash balance, just to slow the growth of cash, then how can he be doing it so slowly, or when would he think would be a better time in the future?

I'm surprised by the increasing gap between the performance of Berkshire and the S&P. It started on that big Apple drop day at the start of the year where Berkshire was down 5.5% vs. more like 2.5% for the market, and has continued through many days like today (Berkshire up 0.1% vs. S&P up 0.9%). The gap is as of writing 15.46% underperformance YTD. I decided to put this in a historical context and see how unusual this is. Berkshire has underperformed the S&P 500 by more than 10% in a quarter nine times since the B shares were issued. Five of them were in the late 90s when Berkshire was not participating in the tech bubble, and the Coke bubble they did participate in was starting to deflate. Seven of the nine were positive quarters for the S&P, so Berkshire tended to underperform on big up quarters for the general market. The largest was Q4 1999 when Berkshire had a -1.44% vs. a 14.88% rise in the S&P for a difference of 16.28%. This quarter is the second worst in history with a -2.32% for Berkshire vs. a 13.14% gain for the S&P for a difference of 15.46%. With just three more days to go we're basically one more day like today away from setting a record for underperformance. Hopefully in light of this we will see substantially more repurchases than we did in Q3 or Q4, but until we actually see it I'm quite skeptical. Here's the table of data for quarters of > 10% underperformance: Quarter Berkshire S&P Gap Q3 1997 -5.38% 7.49% -12.87% Q3 1998 -23.73% -9.95% -13.78% Q2 1999 -4.72% 7.05% -11.77% Q3 1999 -17.14% -6.24% -10.90% Q4 1999 -1.40% 14.88% -16.28% Q4 2002 -1.70% 8.44% -10.14% Q2 2009 2.70% 15.93% -13.23% Q4 2010 -3.11% 10.76% -13.87% Q1 2019 -2.32% 13.14% -15.46%

Apple: Sold Jan 2020 $200 calls against my entire long position after its pretty crazy run this week. 6% premium for 7% OTM call. Quite happy to get this opportunity after how much I was down on this stock 3 months ago.

If anyone is interested, I whipped up a quick spreadsheet comparing the CAGR of Berkshire vs. the S&P 500 Total Return index. I calculated the CAGR since 1988 for both, and also recalculated the CAGR if you started counting in each subsequent year, so since 1989, since 1990, etc. All are current up thru today's close. The summary is that Berkshire is a bit behind in almost every measurement period since 2008, and behind in 9 out of the 31 total periods. But a lot of that is because of the ~12% underperformance YTD. If I rerun the numbers cutting off at 12/31/18 then Berkshire is only behind for three measurement periods. berk_sp_total_returns.xlsx

Of course I know that he considers more than just the price of the securities in his portfolio when determining the value, but it would be crazy to assume he ignores it completely when deciding whether to buyback Berkshire versus apply the cash to another opportunity (like buying more shares in the portfolio companies). Taken to an extreme, if Berkshire was flat and his holdings were down 50%, it would be crazy to assume he would ignore that and buyback Berkshire stock. Berkshire is almost 40% the equity portfolio, so every dollar in repurchases is like allocating 40 cents to the equity portfolio and 60 cents toward everything else. If that portfolio were down 50% and his buyback were at the same price, it would instead be 20 cents going toward the equity portfolio and 80 cents toward everything else. He'd have to assume Berkshire was 1/3rd more valuable than it was previously to want to buy back it versus just spending the same amount of money to increase his stake in the portfolio companies. Put another way, if Berkshire's IV includes a prorata IV of each portfolio holding, then each individual stock as well as Berkshire as a whole is an opportunity to deploy capital at a discount. If the market value of his securities is down way more than the market as a whole, and is not permanently impaired, then it stands to reason that the discount to IV of many holdings has grown by a bigger gap than the discount of Berkshire overall. If he can deploy capital into a 70 cent dollar with one of his stocks versus an 80 cent dollar with Berkshire that would affect his decision.

I think there a three important factors to keep in mind when determining if Buffett will be making buybacks: 1. Berkshire's absolute price 2. Berkshire's price relative to the market 3. Berkshire's intraday book value (as adjusted for MTM gains and losses in their portfolio) Numbers 1 and 3 are both trying to get at the same thing - a calculation of discount to intrinsic value, while number 2 affects the attractiveness of Berkshire vs. other opportunities. I think too many people ignore number 3. While a sharp selloff in the market won't have much of an impact on the IV of Berkshire's operating companies, a buyback looks like less of a good deal if Berkshire is off 10% while its portfolio is off 20%. That was more or less the situation in Q4. On an absolute basis it was getting cheaper, but less so relative to the market and further reduced by declines to its portfolio in excess of market losses. His buybacks in August were at an average price of about 5% above the 1/1/18 price, the S&P 500 total return index was about 7% above the starting value for the year, and Berkshire's portfolio was worth about $219b (25b more than today). So even though the absolute price of Berkshire is 4% cheaper today than his average purchase in August, the after tax adjustment to their equity portfolio results in a 4% lower book value than back then. So then you're left with only the operating earnings since then which make Berkshire maybe 2% cheaper on an absolute basis. Also, on a relative basis the S&P 500 TR index is about 4.6% above 1/1/18 today and Berkshire is about 1% above, so on that basis too Berkshire is about 2% cheaper than August buybacks. With the combination of those factors, and the loss of that elephant which might have held back purchase in Q4, I would expect higher repurchases today than Q3. How much higher though I have no idea. We don't have any evidence that he intends to devote material cash to buybacks. $10b would be great, but I would expect 1.5-2b and hope to be surprised on the upside.

He did make the request for Wells Fargo but was told if approved it would limit the ability of Berkshire and its subsidiarys to transact with Wells Fargo in the course of their business.

Can someone refresh my memory as to what was the most recent home run that Buffett has hit with open market purchases? Meaning something that resulted in over $1 billion of gains which was also at least a double. He obviously had some great gains on crisis era investments in GS, BYD, later in BAC, but those were all private deals. Airlines and Apple have been decent, but nothing to write home about. Same with the banks, some WFC shares bought in 09-11 are roughly doubles but then so is most of the market.

I wouldn't even dream of filing a return this early. My 1099s get amended sometimes up to 20 times. Once as late as June. Plus I'm waiting for March 15th for k-1s anyway. Biggest issue I had with IB was last year two days before the tax deadline they reclassified 50k of STCG to 1256 contract gain. Made over 5k difference in my tax bill and could easily have gone by.

aws, Have you studied any of the data provided in this topic? What specifically are you referring to? I've skimmed the topic and seen a lot of speculation about maximum repurchase amounts, but that's clearly not been any limiting factor for them. No one really knows exactly what Buffett is going to do and when. The most useful data regarding buybacks has been the actual reports, and that shows that he's had little interest in buying aggressively. To me, it made sense, and I had contributed some spreadsheets showing that Berkshire market value during the dip was dropping much slower than the market as a whole, making repurchases less attractive than open market purchases of additional portfolio securities. Then we got the 13f and saw he didn't really buy anything there, so one had to wonder if it was him putting a floor under the price with a lot of repurchases. And today we got the answer that no, he wasn't buying much of anything in Q4. YTD that trend has reversed and Berkshire has underperformed a lot, but now everything else is also more expensive. Berkshire swung down less, and rebounded less, probably never putting IV that far below the bounds he would want for big buys. All we know for sure is that he doesn't like cash getting too much more than $100B, so he will begrudgingly buy stocks or repurchase shares if he can't find a better use for the capital. He likes Berkshire well enough in this range that it's been in to repurchase some, but has no desire to buy aggressively. Maybe he would have bought more of everything if prices stayed 15% down for more than a week, maybe he's waiting for 20-30% discounts to do that.

I don't know that I would go that far. It's a balance between buying back some of your own shares for a small discount against the hope of a future deal at what would hopefully be a much bigger discount. A great acquisition could add substantially more to the long-term EPS than a few percent in buybacks. However, as the years grind by without an acquisition the drag from the underperformance of cash means the acquisition in the end would have to be all the more valuable to justify the losses by waiting. At this point, at least in hindsight, he's probably waited too long. It's hard to imagine a $50B acquisition today having been better than just buying back $50B of stock over the past five years. The gap between their return on equity and the return on cash has been like 9% a year, so even if they buy something returning 12% tomorrow, the few lost years of compounding will take a very long time to make up. But no one knew in advance that this business cycle would go on this long, that M&A valuations would stay so high, or that some sweetheart deal wouldn't just fall into his lap. Overall, I'm much more comfortable with him being a little too conservative, than to go down the value destructive path of much of the market with buybacks and M&A regardless of the price.

I guess we shouldn't be too surprised that he wasn't that active during this dip, as it happened and was over so quickly. If Buffett sprang into action on every 15% dip, then he would never have any cash left for when things get really bad. I guess it was just the wrong type of dip. If prices had stabilized at a lower level then he probably would have been a much bigger buyer. My guess is he is still waiting for that super elephant that will cap his career, and he wants a huge amount of capital for that. Buybacks permanently take away capital even if it enhances per share intrinsic value, while cash stored in open market purchases can be sold to help pay for that super deal. The longer stocks and private business values stay elevated the less likely he will make a big deal. I guess he will just continue to spend dribs and drabs to avoid building up cash absurdly high, but won't be aggressively buying back shares.