Txvestor

After the PCP deal, Berkshire is not as cash rich as when it entered the 2008/9 crisis. In fact they are borrowing some money to do the PCP deal. Besides some of their subsidiaries like BNSF are unlikely to produce as much cash in a down turn as recently. So i seriously doubt that they will buy back any significant amount if shares.

I'm surprised with the relatively modest underwriting results at Berkshire recently compared to the other historically good underwriters in the industry.

The last time I got a loan, they asked about my household debt outstanding but nobody put my government's debt outstanding into the underwriting equation. You can stop working at 65 without worrying about whether you've paid off your government's debt. Household debt is extremely different as compared to government debt. IMO. Gov't debt creates a grey cloud, when it is excessive ala Greece. It can also lead to required cuts in gov't spending and all of this can be deflationary when it happens. As to stop working when you're 65, even that can be negotiated!

I voted my shares endorsing the increase in voting rights for Prem late last week. My reasoning was that he has always acted in shareholders interest and arguably even when that meant perhaps being content with less than he could personally otherwise get. Fairfax obviously means a lot more to him than money alone, and seems to me he is deeply desious of taking his shareholders and employees along for the ride than ride on them. If there were a hypothetical $1000 offer on the table for fairfax, some posters seem like they might jump at it and rationalize etc. For those of us that think of the fairfax shares as permanent holdings that will serially compound for the next 15-20 yrs not so much. That buyout is the scenario that this eliminates.That is fine by me in the case of this owner/operator who has earned rather than grabbed at my trust.

I think he is referring to the top level ie PM, Cabinet, and so on. Of course the habits of bureaucrats and the sclerotic effects of corruption on society will take a lot longer to improve but any change has to start somewhere. One thing is certain for me. India is a massive market, with a young population, with very entrepreneurial people, decent and nurturable links to the global economy, who have elected a PM who has little personally to gain and everything to lose from any whiff of corruption coming from anywhere close to him. To be sure the obstacles are very high. Time will tell how much progress can be made. I suspect India can generate 6-7% growth over the next decade and that might be far better than most economies. I believe Prem is in India to look at a few opportunities. He said he expects to complete one before year end. I doubt he would say that unless he had a couple of good leads. Thus far the acquisitions they have done there via Thomas Cook have been brilliant.

Probably a worthy read for those of you invested in this, Watsa talks about his long view and shares some general themes. http://m.economictimes.com/opinion/interviews/corruption-at-highest-levels-in-india-has-disappeared-says-prem-watsa/articleshow/47535814.cms

According to Charlie Munger. Diversification is insurance against ignorance. He sure has a way with words.

Another angle of viewing this is a lesser light is that he is advocating that gov't subsidize the low wages of some of the largest corporations. This is a rather difficult problem and one bound to get even more difficult as automation gains stream with advances in AI, Robotics and other advanced technologies. One other area of interest in this article is the point about collective net worth of the Forbes 400 going up 2400% vs a 180% increase for lower wage earners. From my observation that is always how it goes. If the bottom 10% is at 1 and the top 10% at 10, and some policy will take them to 2 and 100 respectively, why is it wrong on the basis of increasing inequality? Isn't everyone better off( even if some more than others). A lot of this equality argument tends to prefer a world where in that same example, the guy at 1 goes to 0.8 and the person at 10 goes to 5. They are perhaps happier in that scenario claiming to have 'reduced inequality'. I have never quite understood that argument especially from those that have beenfitted the most from capitalism.

With that sort of time frame in mind, if you move that money into a LIRA and split it is 4-5 ways and buy companies like FRFHF, MKL, BRKB etc. and look back in 30 yrs which is when you will need the $$, i suspect you will come out much further ahead than 3.4%. If you don't get 3.4% with the likes of those, then I suspect your so called assured pension would not be so assured either! Your advantage is the certainty of not needing that capital for such a long period of time.

I did not purchase the property. As time has progressed, it is apparent that Michigan has even MORE problems than what I initially thought. Crime is terrible. Taxes are bad (income, property, gasoline, sales). Auto insurance is 6.5X what I was paying in Texas, and is the highest in the country. It is highly likely that gasoline tax will increase $.40/gallon over the next 3 years resulting in the 2nd costliest gas in America. Most public skewls are a joke... The demographics are terrible. Winter is silly/brutal. People still believe/think of global warming? It was SNOWING during the tigers game on April 23rd. And to top it off, I missed getting killed by 5 minutes the other day. A truck plowed into the lobby of a business that I had been in 8 minutes earlier. One of the wildest things I've ever seen! I am seriously considering leaving the state at the end of summer/fall. Time for me to move! Sorry to hear that things are not getting any better over there. We need to have some sort of special economic zone there where there is a federal tax exemption for any start up or sub 100m annual revenue business for the next 10 yrs. the infrastructure is built, it just can't be maintained etc. Lots of social problems that have roots in economic problems. Interestingly the western part of the state is doing fine, more like a Wisconsin economy. Very pretty as well.

I think people have bought into the "Fed is going to raise rate => rates are going to rise" idea so much that, its very possible that the 10Y actually collapses sub 1% after the first rate hike. Just look at the German 10Y Bunds (7bps), Japan 10Y (30bps).....the UST 10Y at 188bps looks artificially high! Fed doesn't control the 10Y, only the overnight rate. I am in the camp that long term rates aren't going anywhere but down in near future absent a stupid US govt crisis. Now, compare the SP500 index dividend yield against this rate backdrop. I don't understand how people are so confident about a general market overvaluation. Dividend yields have been rarely below 10Y rates and we are in an environment with one of the lowest dividend payout ratios... So basically what you are saying is 'We are Japan'.

I disagree. Consider this. Prem bought the position in 2011 at EUR 0.10. He sold 1/3 of it at EUR 0.33 in 2014. This means that he incurred capital gains tax around 0.075 EUR per share. His next investment will have return 30% just to get back to even with his investment had it remained in BKIR - that doesn't even include whatever value accrues to BKIR over that interim. Looked at another way, he could have incurred a permanent 23% drop in BKIRs stock price before being on par with selling and incurring capital gains tax. The transaction was done again this year selling at EUR 0.36. The numbers are similar to the above. EUR 0.09 per share in tax means that the next investment needs to return 33% to break even (not including returns that would have accrued to BKIR) or that Prem could withstand a permanent loss of 28% on the investment from current prices to be on par with selling. Now consider that the position in question a bank with a captive market with limited competition. Banks in this environment have historically generated returns in the mid-teens on their equity (which is higher than normal). So, by selling and incurring capital gains tax, you already place yourself at a disadvantage for your next position to outperform, but it has to outperform a business that has a very good probability of being above average itself meaning that your next use of capital had better have extraordinary opportunity. I'm not saying it doesn't make sense to sell ever. I'm saying that the higher the proportion of your deferred capital gains to your position value, the higher the bar is for you to sell that position in favor of another one. With deferred capital gains, the bar for Prem is extremely high. I'm not sure it was met in 2014 and I'm not sure it was met with this sale either. If he's concerned about the size, he could've hedged the position for less money. If he's concerned about the market, he can take solace in the fact that it would require a significant double digit, permanent loss (and no correction in current currency value) to impair him more than selling would. If he needed the cash, it would have been better to issue equity above book value or debt at low rates as opposed to incurring the loss of $100M in capital gains tax. Unless you have losses to offset, and/or somewhere great to put the proceeds. The problem is that we passive investors often do not know this except in retrospect.

I've seen him say this more than once, but is this really true? Looking at http://www.berkshirehathaway.com/letters/2014ltr.pdf , 2008 shows 9.6% book value drop, 2001 shows 6.2% book value drop. Are these not related to portfolio drops? (I guess they might be operating business goodwill writedowns - 2001 could be GenRe, I'd have to look up...). Also didn't he have Washington Post drop over 50% as he was buying it and wasn't that a large part of his portfolio? It is still very surprising that he never suffered higher than 2% loss per year in his portfolio - if that's what he means. I don't think there's anyone else who has this kind of record... I think he is referring to a loss recorded at sale as a percent of BV. He wrote about this in his annual letter, i beleive when he was referring to Tesco which loss amounted to something like 1/3 of 1% of Berkshire BV when sold.

He said on CNBC, that Berkshire will own 320M of the 1.22B shares outstanding after the deal is completed. So roughly 26% of the new entity, which along with 3G they will control 51%. Price Paid: 9.5B or roughly $30 per share! So another 5B of the cash pile gets allocated wisely. The stock is trading at $81 right now, of which $16.5 will be going out as a special dividend before Berkshire gets their shares. So effectively their cost basis will have more than doubled with KRFT at the $65 range and Berkshires stake will have exceeded 20B in a company with great brands, wonderful management and a forever holding. Classic WEB.

A few notes after reading the letter this evening. I must say, i thought they were a lot more underwater in greece than they actually are. By my calculations only about 15% underwater and all due to Eurobank. Sounds hopeful but not too sure about the new greek gov't. Also, phenomenal work by Andy Barnard across the entire breadth of insurance operations. Finally a good defense of the recent capital raise for the Brit acquisition. It is accretive in the net in all relevant measures. I'm astonished at the acquisitions made in India since 2012 and their growth rates. You just cant buy that kind of growth at a sane price in the developed world, and I'm glad he is finding that for us over there. Though from a small base the runway is very long. I'd much rather be invested there than uber or one of the high flyers mentioned. The recent eastern European acquisions appear to have been done at steal prices. Sounds to me like Samsung did approach them and Watsa etc. wouldn't sell! Him specifically mentioning they wouldn't sell sounded like that for me.

Agree the west side of Michigan is actually more like Wisconsin. Prettier too.

I'm happy to see this reiterated. This is a good reminder of how different the previous environment was compared to today's. Yes but also remember that when he was running smaller sums in his partnership days, he employed the Benjamin Graham cigar butt approach in the 50s and thats when he had his greatest returns, until size became a barrier to that. For us small fry(most of us on this board), if you read between the lines, he is saying if you are sufficiently skilled the cigar butt approach is your best bet. Now thats a pretty big caveat, but nonetheless a distinction worth making. I disagree completely. I often see folks pointing to Buffett's methods of the 50's to support their investment approach. First, even when he was relatively small in the 70's, he immediately switched after partnering with Munger (with a few relapses) to quality investing. Also, most of his wealth was created by a handful of investments (particularly, GEICO). Even WB stated before that if he just bought and held GEICO instead of all his other investments he would have created more value. I think you are trying too hard to fit their advice to your preferred approach. Either way, quality investing being better or worse has nothing to do with WB's opinion (though it certainly makes it worth researching), the math behind returns in general just doesn't defend your opinion. Cigar butt investing is nothing more than greater-fool theory, I don't know how anyone can view it as anything else. If a company has expect future growth of 0% then each day the PV of the company is decreasing. Thus, you may get your projected higher price multiple and still realize losses! On the new CEO, I think it's funny it's Jain and Abel as the final candidates, and I think Jain would be the wrong choice as the value he provides to GEICO is greater than the gap between him and Abel (if any) and Abel and his replacement. Insurance is hard and he has run circles around the industry! Every time I read about Abel I come away more impressed. Below from the letter: "My cigar-butt strategy worked very well while I was managing small sums. Indeed, the many dozens of free puffs I obtained in the 1950s made that decade by far the best of my life for both relative and absolute investment performance." I get the view based on the above that for very small sums numbering in the single digit millions he would still look there. He rightly gives the example of Sees candy as a quality business that he almost let get away, and rightly praises Charlie's influence on him in this regard. But his roots were classic Graham cigar butt investing, and that scaled him into the tens of millions. The environment you are working in also matters. A depressed stock market, less dispersion of public information, less investors in general, back then perhaps worked in his favor, and have probably made such net net situations a lot rarer now. Also i think getting a result also requires activism as some of those microcaps could be hurting the shareholders for the starus quo to benefit someone else. Anyway, thats what worked for him. And based on recent statements and even what he says in this letter, I suspect he would take this approach again were he starting over.

FWIW. I went to that website and signed up for a quote. I got 3 quotes, the lowest of which was about 15% lower than my current policy for 2 vehicles. As i've been with my current carrier for over 10yrs and have not had anything but great service from them and have other insurances like homeowners, umbrella etc bundled, and had never heard of the insurance company underwriting this policy. I decided it was not worth it for me to change. This morning I got a call from an operator offering to put me in touch with a broker offering to discuss my needs further. So this might be them positioning themselves as yet another middleman and collecting a toll for that. That is something they really excel at! :)

Anyone else get the impression after reading these letters that Ajit Jain is the name as the next CEO? He mentions that Todd and Ted will manage the investment portfolio and have a lot of latitude. He also mentioned that the CEO role will be separated from a non-executive chairman position that will be filled by his son to safeguard the culture and to be decisive on any board recommendations.. I did not see any mention of Matt Rose, and he semi skewered the performance of BNSF in this letter. Which for his usual standards of lavishing praise was pretty harsh.

I found this line about him and Charlie interesting. "When we differ, Charlie usually ends the conversation by saying: “Warren, think it over and you’ll agree with me because you’re smart and I’m right."

I'm happy to see this reiterated. This is a good reminder of how different the previous environment was compared to today's. Yes but also remember that when he was running smaller sums in his partnership days, he employed the Benjamin Graham cigar butt approach in the 50s and thats when he had his greatest returns, until size became a barrier to that. For us small fry(most of us on this board), if you read between the lines, he is saying if you are sufficiently skilled the cigar butt approach is your best bet. Now thats a pretty big caveat, but nonetheless a distinction worth making.

So far they have managed to steer clear of the monopoly argument, and avoid the attention of the feds. It is not entirely clear to me that this will be the case permanently. Were it not for the justice dept. case squashing microsoft's ambitions, i'm not entirely sure google would be where it is today. They have what like 70% of the search market? Where else is there that level of market concentration, and if they start to leverage that into other areas, it may not be long before they get the attention of DC.

I don't think this includes his european holdings. I don't see any other that Fiat on the list which is now US listed. I believe he has some european holdings as well.

Just remarkable genes. Most of our bodies just won't be as forgiving. That is pure luck, as opposed to his investing prowess which is not, and a clear affront to the efficient market theory.

I think a large institutional investor was trying to "comanage". His partner Ben mentioned that in one of the earlier letters. Specifically mentioned was an investment in overstock.com, that did not work out and they held on for far too long, losing other opportunities when Alan i believe wanted to cut that and move on.