zarley

I've recently been reading the Aleph Blog after adding it to my RSS feed. It's a great blog, written by an advisor named David Merkel. In the last couple days he's posted a bit about the corporate structure at Berkshire. Part 1: http://alephblog.com/2014/03/12/on-the-structure-of-berkshire-hathaway/ Part 2: http://alephblog.com/2014/03/14/on-the-structure-of-berkshire-hathaway-part-2-the-harney-investment-trust/ There's an interesting bit in Part 2 which discusses the structure of National Indemnity and something called the Harney Investment Trust . . . Now, I was reading quickly, so I didn't think anything of that the first time through. But after finishing I went back and looked at the quoted part in that section again and followed the link he was helpful enough to provide. Which lead me to a thread right here at the corner: http://www.cornerofberkshireandfairfax.ca/forum/berkshire-hathaway/insider-quarterly-article-on-ajit/10/ The globalfinancepartners noted in the post is, of course, a regular here. Although somehow, I managed to miss that particular thread. The two part discussion at The Aleph Blog are well worth reading for owners of BRK. the circle-back reference to this board was just a nice cherry on top.

Please don't get me wrong. This sort of choice is very much an individual choice and very dependent on the specific circumstances of each person. In my case, I've convinced myself that I am adding value over just buying and holding the index, but for a few reasons, the prospect of quitting my day job and/or running OPM doesn't make sense for me. There are certainly people on this board who I would consider if I needed an investment advisor (Ben Hacker for one). Perhaps I'm too cautious, which causes me to see parallels between now and 1999 when it's inappropriate. Mostly just thinking out loud that year 5/6 of a raging bull market is a dangerous time to project out your 5 year investment returns as part of an early retirement plan. That may work out just fine for some people, but . . . again, I'm pretty conservative.

Congrats Ben. I've followed boards you've been active on for quite a while and have always been impressed by the quality of your thinking. Good luck to you. Like many here, I've considered a similar path, but at this point haven't followed it. I'm not at all certain that investing as a full-time endeavor would be better for me financially than working full-time and investing as a hobby. Investing part time over the last 6-7 years I've managed to beat the VFINX by 2-3% per year. A balanced asset allocation leading into 2008, good timing on SHLD and BRK, and buying lots of WDC in 2011 account for most of the outperformance. I'm quite pleased with that result, but I'm not sure if that would have been +5% or more per year if I was doing it full time. Honestly, I doubt it. Plus, having OPM to deal with may have changed my perspective on risk taking (I'm already rather conservative) and left me with much more pedestrian results. I'd have a hard time charging x% of assets if I'm not doing much better than the index. Barring economic catastrophe or serious health issues for my family, my status quo trajectory is quite good. Sure, I'd rather quit my job and spend my days reading and researching stocks, but it's not clear that I'd improve my lot much, if at all. One final observation (directed at no one in particular): this thread reminds me quite a lot of the cubicle conversations I'd hear back in 1999. Everyone was just one more good year on the NASDAQ away from retiring early. This is a savvier group of investors, but the sentiment doesn't seem all that different.

Interesting. I was under the impression that the saturday release practice ended in 2012. In any event, I apologize for the bad information. Looks like I'll read it with my coffee and not a glass of wine. ;)

I think Friday after market close is the base expectation. Friday of the last week of the first quarter is the standard, IIRC.

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. :)

Outstanding link. Thanks for sharing.

Are you associated with the brooklyn investor blog (http://brooklyninvestor.blogspot.com/)?

What's wrong with sticking it into a single index fund and forgetting it? As for 2008, it was not a predictable event that a naive investor could have planned for and adjusted his allocation to deal with. A naive investor that can follow one or two simple asset allocation rules could prevent being 100% anything at the worst possible moment. I'm not talking about predicting 2008, but adjusting your holdings for your time frame. Being 100% stock at age 28 is different from being 100% stock at age 58.

Why? Apart from 401k's and other stuff that I don't understand being non-American I would say this is excellent advice for 90% of all people. Just pump excess money in a Vanguard targeted retirement fund (or something similar) and forget about it. Well, his specific suggestion was an equity index, not a fund of funds target retirement fund. So, I should qualify my original reaction. Using a target retirement fund wouldn't be a terrible choice, certainly better than a straight stock index. My biggest objection would be the "forget it" part. Just ignoring your savings/investments is how you wind up nearing retirement in 2008 with all your assets in stocks and wondering why half your money disappeared at such an inopportune time. Any advice that doesn't include suggesting someone be actively engaged in understanding what they're investing in and why is incomplete at best.

Stick it in one fund and ignore it is pretty terrible advice. If you don't want to advise her directly about what to do, but still want to give helpful and actionable advice, encourage her to . . . 1) start contributing now to take advantage of her age and her employer's matching (stash it in cash for the time being or some sort of balanced asset allocation fund) 2) talk with her employer's 401k advisor about her plan's options 3) read Bogle's little book on investing 4) read up on asset allocation (e.g., Ferri's All about Asset Allocation) 5) own her financial future by being proactively involved in understanding and choosing her own financial path

The boglehead forum can be a great resource; I've been a member there for a while. I'm ambivalent about it though. So many posters there are strictly dogmatic about EMH that they can't even conceive of someone using a value approach to investing and achieving market beating returns (it's cult-like). For example, the perspective on Buffett there is mostly that he's lucky, using inside information, and/or otherwise doing things that individual investors can't (buying whole companies and doing GS or BAC type deals). Anything other than pure efficient markets and indexing is pretty much non-existent, or drowned out by sheer volume. There is great information there, but the blinders most choose to wear make it somewhat inhospitable to open discussion of anything other than indexing. In a way it's interesting that there's even a forum since it all boils down to choosing your asset allocation and then using some mix of ETFs and/or index funds to execute it. What's to talk about? May as well take turns quoting from Bogle's Little Book of Indexing.

Daily tracking of prices and overall performance vs. benchmarks is in a google spreadsheet. I use Feedly as my RSS reader with feeds for all of my existing positions, general investing and industry feeds, and companies of interest.

Great read. Thanks for sharing.

Probably best to think about it as AUM rather than portfolio size. I have several personal accounts (retirement, education, personal brokerage) and a couple family retirement accounts. While they tend to have different constraints and purposes, I'm managing them all, even if they have different types of assets.

The unintended irony of this bit is outstanding. ;D

One problem with the Coverdell's is the contribution limits -- $2,000 per year IIRC. But they do benefit from the flexibility. I've gone simple for my kids with 529's at Vanguard. Simplicity and higher contributions won out. Nothing stopping you from doing both, but I don't need two extra accounts to manage.

Ouch for the USA. Hoping Portugal will underperform and perhaps a replay of 2002 where the US won 3-2.

Great read - love Montier's writing. Thanks for sharing.

Josh Brown reproduces a note he got from an institutional investment advisor regarding the mentality of institutional clients. Interesting perspective on the forces driving the investment of huge pools of capital. One might think that illiquidity and high fees would make some of these "investments" non-starters, but it doesn't seem so. http://www.ritholtz.com/blog/2013/12/confessions-of-an-institutional-investor/ The author might be painting with a broad brush and projecting the decisions of a few onto the whole; but it rings true to me in a lot of ways. Interesting read.

Listen to Kraven and Onyx.

Good points. Although, it does depend on what measure of money you're thinking of. M2 as tracked by the Fed is certainly higher now than several years ago. Private estimates of M3 (since the Fed stopped officially tracking it a few years ago) are closer to what you describe from what I've seen (e.g., shadowstats). I think this takes it too far. One person does not have the power to do anything of the sort. If your one person is Ben Bernanke, he's the head of a board that has the power to influence things. Your immeasurably complex system works on both ends of the transaction. The Fed (not Bernanke solo) can push some levers in the system, but cannot control it in either direction. You can't have it both ways. But, none of that gets to why the misuse of the term inflation to describe monetary expansion is in any way helpful or anything other than misdirection.

I agree with everything you said. Regarding the bolded, I agree there are vested interests in selling gold investment products, but I think that is secondary to this criticism being 100% politically motivated - the usual "Evil government (and Obama) is debasing the dollar and inflating us into poverty!". I tend to agree with that as well. That's the bit about fear in my post. You and I hold what I would consider the conventional view of inflation. We probably won't disagree much on this particular issue. I think another way to put the conventional view would be to compare monetary easing to potential energy. Money growth isn't inflation, but it does provide some of the raw materials for inflation in the future. So, we can't dismiss the risks of inflation inherent in the system, but that is not the same as actually experiencing inflation. A drawn bow has potential energy, which can be released in the firing of an arrow at high speed. But, that is not the only possible outcome. The archer can relax his bow in a controlled manner, resulting in no fired arrow at all. So, standing in front of an archer with a drawn bow is not the same as actually being shot with an arrow. Even so, it's not a great place to stand.

This is the reason why there is so much confusion. A small group of people have decided to replace the generally accepted definition of a term 'inflation - a general rise in prices in an economy' with their own meaning 'inflation - an increase in the money supply.' Instead of just using a term like money expansion, they have co-opted a term with an accepted meaning and muddied the waters. If I were less charitable, I'd propose that this confusion is intentional so as to sell things like gold and gold funds and to maintain a level of fear in segments of the population when actual economic outcomes aren't what you expected. Is a general rise in the price level hard to measure with precision? Sure. But, CPI and the billion price project do a reasonable job of determining if there is a prevailing, general increase in prices. Sure, everyone's consumption patterns are different, so increases in one sector might effect me differently than anyone else, but that's immaterial to the notion of a high-level movement of prices over time. Is there significant inflation in the US economy at the moment? No, not really. Has there been a broad-based decline in purchasing power over the last 3-5 years? Not really. I haven't seen it. My cost of health care has gone up. my cost of housing has gone down considerably. Food costs are up in spots, but not egregiously so across the board. An expanding money supply isn't inflation if the velocity of money is declining.

Excellent interview. Thanks for sharing.