twacowfca

Are we asking the right question? What if the crazy person had thrown a big Molotov Cocktail into a crowded room? Would we be talking about banning gasoline? Shouldn't we be talking instead about why it is so difficult to get psychotic and potentially violent people into secure, involuntary custodial care before they do something terrible, not afterward?

BRK has a very stable shareholder base. The turnover is much lower than for other stocks. Warren has said that he will buy back shares aggressively when the price dips below the preset level except that his purchases may flag in a big selloff. I expect that the repurchase level will hold unless we have people dumping shares to drive many stocks to bargain basement levels as we saw in 2008. If that should occur, we should see the writing on the wall and exit the trade before the fullness of that event.

What stock is this? Warren back stopped USG in 2006 when it exited chapter11 and then for a few months afterwards gratis at the same price. :)

Don't you think you should use a bow and arrow to give the burglar a sporting chance? That would also allow more time to determine if the burglar is in fact a family member returning late or coming back inside after sleepwalking. :)

Yes, this is almost a sure thing. :)

Being relatively new to options, I wondered if you wouldn't mind detailing exactly which LEAPs you're buying (i.e. strike and premium). Thanks! BRK isn't likely to become a rocket ship , despite the upside downside asymmetry. I have often been right about direction on very selective option trades and still lost money or wound up with small gains because the trade took longer to work out satisfactorily than anticipated. For example, last spring BRK was trading at my estimate of 110% of Q1 BV/SH. We loaded up with out of the money leaps, the Jan 2014 $85 strike. BRK is up about $10/SH since then, but that Leap is up only about 35% because of time decay and decline in the implied volatility of that option since then. In retrospect, we would have made as much on that trade if we had bought a well in the money Leap that had far less risk of significant loss from time decay if BRK had not moved up as much as it did since then. Normally, the deep in the money leap would be considered much more risky because one could lose much more on it if BRK's price went south. However, with the asymmetry of the situation, I think the risk of significant principal loss on a deep in the money leap is very low. If it takes longer than anticipated for BRK to appreciate, the deep in the money Jan, 2015 Leap should perform much better than an at the money or out of the money Leap. If the market should head south, we can probably unwind the deep in the money leap at almost no loss at the repurchase price because we bought it at a very small premium to parity when BRK has traded at about the repurchase price. :) We also have a lot of $90 Jan 2013 calls. These are purely speculative and will lose money if BRK doesn't trade up 2% above the repurchase price by expiration. We've had success with short dated, about at the money calls on BRK in the past, and on another stock that Warren backstopped a few years ago, when we bought them at about Warren's repurchase price, but this is no guarantee that we will make money this time.

That's right. By far the least likely scenario is that BRK will trade below $89.27 for any appreciable length of time. The current probability of a significant rise in price is many, many times the current probability of a significant decrease in the price. This is why it makes sense to consider using non recourse leverage if you ever do that.

Note the price action on BRK after hours. BRK closed today a hair below the new repurchase level. Then, immediately after close, 500K shares traded, and the B shares popped up above the repurchase level. We've been levering up with cheap in the money leaps. There is no skew in the near the money BRK options. Mr Market doesn't have a clue about the asymmetry of the trade. This is only one of many ways to take advantage of the opportunity. The easy way is simply to buy BRK at the repurchase price. As Yogi Berra says: "If it don't go down, it'll go up. :)

Yes. BV/SH is a good reference mark for IV, but proportionally lower. Imagine Coke's buying back shares with retained earnings at two times BV/SH. That would be a very good deal, although dilutive to BV/SH. :)

I posted on another thread that a drop in the corporate tax rate to 25% could lower the value of BRK's deferred tax loss by as much as 10.6bln. With 169bln of equity, this would be an increase of 6% in BV. With the new multiplier at 120%, the "put floor" will go up by over 7%, or $6 per B share. Yes. Also, even with a billion dollar plus hit from Sandy, we will likely see another increase in BV/SH this Q. Maybe that speculative 6% could be 8% or so at end of Q4. :)

Another very astute insight. Warren saw this way back when. An insurance company is ideal for avoiding the passive investment co tag. I think it even constitutes an absolute exemption. Plus, if you have the right regulator in the right state, he's not going to take it away from you at the drop of a hat the way the Feds could do with a bank Holdco. Margin of Safety, my dear Watson. :)

If it is is "business" then why did he not buy these shares on the open market? The next time he buys a subsidiary using BRK shares as currency, he can reassure the seller that his/her heirs will be able to unload them upon death. Classy way to treat the people -- just like agreeing to never trade away the company purchased. This cultivates better transactions in the future by showing the world that any business owners willing to sell their company to Berkshire will be treated well till death do us part. Yup. Plus, to meet safe harbor regs, a company can only buy back a certain % of average daily volume, except a company can also make one huge private purchase of a large block of stock per week or something like that.

Complete disconnect in what you are saying. Not only did he pay more by not buying in the open market, the purchase provides a huge tax windfall for someone who obviously does not need one. It wasn't business...it was charity for a long-time shareholder! The GE, GS and BAC deals were business...I have no problem with that. Cheers! The tax windfall was that at the time of death the US government resets the cost basis to present market value. Thus, all the BRK shares can be sold without any taxes at all. Warren really had no hand in helping anyone out here -- except that if he had instead paid a cash dividend then some shareholders would owe tax on the dividend. So he managed to return cash to all shareholders in a tax-efficient manner. The higher dividend tax never matters when you instead just buy back shares, eh Warren? You are an astute observer, Eric. The impending higher taxes on income and dividends will bypass long term shareholders whose holding period is "forever". :)

Most likely! And a nice public advertisement to any other large blocks of stock who now know they can lock in a 15% rate on a lifetime's worth of appreciation at 13x,000/share with a call to Omaha. I hope there are more in the next few weeks. this is a one off imo. in fact the media is going to roast buffett for doing this to help a friend avoid paying higher taxes. he doesn't want to buy back a lot of stock at these levels. this is a token amount. The optics don't look particularly good, but at the same time, if he can't find better investments than his own company, then you can't fault him. I just think the timing wasn't great. He could have bought the same 9,200 shares on the market for less...no reporting, nothing. The fact that there is tax savings for a long-time investor, after Buffett so adamantly stated that taxes for the super-rich should rise, is kind of hypocritical. Cheers! Raising the repurchase price makes perfect sense. Long term shareholders have been ticked off at Warren for some time for pumping for higher taxes on them. This is Warren's biggest Christmas present ever! Thank you Warren, and Merry Christmas to you and yours. May God bless you in the coming new year. :)

Yeah. A financial advisor probably told the heirs they should diversify. With the Buffett Put, BRK has too much up volatility. :)

A little bit of debt can help goose returns if an insurance company is a very good underwriter. Otherwise, debt can bite in many ways. Long duration and lack of covenants are very important. Prem is good at this game. He keeps rolling FFH's debt so that they won't be faced with much debt coming due in the near future. LRE recently increased the debt in their capital structure from about 8% to about 16%, still rather low. I'm OK with that because the debt is 10 years fixed at a low interest rate, and they are good underwriters. MRH recently rolled their debt and increased the amount with a longer duration. It's still a small percentage of their capital structure, and they are decent underwriters. I think they are sniffing out increasingly firming rates in catastrophe exposed lines that they can jump on. Companies that are mainly property underwriters like these two are better situated to use debt now in a low interest environment for investment returns than mainly casualty insurers which are more dependent on investment returns.

The bag of chocolate probably won't depreciate as fast as SHLD's brand & real estate. Chocolate covered cherries is the way to go. Internal diversification, just like BRK. :)

AIG reports$1.5B gross losses from Sandy. Most of their reinsurance coverage will not attach. Nevertheless, their net, post tax losses should be around $900M. Travelers gross loss is estimated to be @ $1.1B with net losses around $650M. Both companies retained most of their coverage, and very little of their coverage was ceded to reinsurers that will attach at those loss levels. However, much of FM Global' losses will be covered by reinsurance as will the NY Metro Transit Auth's losses. Bottom line for reinsurers: sizable losses for those with exposure at lower attachment points. Relatively low losses for reinsurers with coverage at higher attachment points. Allstate estimates auto losses of $500M. Geico's losses should be about that too. All in all, this looks like an "earnings event" (meaning losses that would probably not exceed one quarter's profits) for most reinsurers, rather than a "capital" event (a much bigger loss). The impact on primary insurers will be variable, larger for companies with coverage concentrated in the North East, smaller for others. Larger for companies with D&F coverage there; smaller for reinsurers in general. :)

More than half, I think.

You beat me to it. That same article also states that So Gen has advised their clients to pull their funds from SAC as soon as they can.

A bit late, but here are a few documents and links: http://www.cornerofberkshireandfairfax.ca/forum/general-discussion/chanticleer-holdings/30/ http://www.cornerofberkshireandfairfax.ca/forum/general-discussion/congratulations-to-chanticleer!/ http://www.cornerofberkshireandfairfax.ca/forum/general-discussion/chanticleer-holdings-puts-hooters-deal-on-hold/ http://www.cornerofberkshireandfairfax.ca/forum/general-discussion/chanticleer-holdings-947/10/ http://content.stockpr.com/chanticleerholdings/media/2d1acd72ac82097139bfde1c64a7b908.pdf http://ir.stockpr.com/chanticleerholdings/all-sec-filings/content/0001144204-12-029150/0001144204-12-029150.pdf http://www.sec.gov/Archives/edgar/data/1106838/000114420412035741/v316601_424b4.htm http://www.chanticleerinvestmentpartners.com/files/2012/02/1-Introduction.pdf http://www.scribd.com/doc/95454214/Chanticleer-Advisors-The-Case-for-Small-amp-Micro-Cap-Value-Investing-April-2012-Final http://www.chanticleeradvisors.com/files/107293/the%20manual%20of%20ideas%20-%20chanticleer%20interview.pdf http://www.valueinvestingworld.com/2012/06/chanticleer-holdings-inc.html http://www.fundinguniverse.com/company-histories/hooters-of-america-inc-history/ http://www.bizjournals.com/charlotte/print-edition/2012/07/06/chanticleer-offering-key-to-hooters.html From what I understand, HOTR/HOTRU/Chanticleer is a bet on the international expansion of Hooters. It's also a bet on the Chanticleer team. By the way, would someone smarter than me be so kind as to explain the difference between HOTRU and HOTR? I understand that one Chanticleer Holdings Unit (HOTRU) gives you one stock and one warrant. This doesn't sound too bad to me. You get the option of buying more of an illiquid stock. The price of HOTRU and HOTR is about the same, so you get the warrant for almost nothing. Maybe because Chanticleer wanted to make sure that the offering was successful, or am I missing something? Hi Hellsten, I think you have it right for the most part. As for HOTRU and HOTR, I don't think they wanted them to trade at par, but they expect the markets to arbitrage the difference. Unfortunately, to this point, the markets aren't giving any difference in value to HOTRU...nominal at best. Cheers! Right. As of today, you are basically paying 30 cents for a warrant that you have 5 years to exercise at $5 bucks. This is alone tempting; especially since the company raised a ton of cash in the offering. As I read it all this correctly, if the warrants all exercise in 5 years, there will be roughly 8.6 million shares out (compared to 3.7 million). This means there is basically a touch more than a buck a share in cash- more if they dont get above $5 bucks, but then you lose your 30 cents a share premium... As such, this isn't really being valued as a liquidation thing, but as you say, a bet on their international ops... in light of that, I am not really drawn in. thoughts? It's tough to make money in a competitive business like restaurants unless what you offer is superior. I have a friend who is president of one of the top fast food chains. 99.9% of their units succeed in the US. It was tough for them succeed in S. Africa, and their affiliate there closed down a few years ago.

Which is why, Eric, that when you say you are headed to the sidelines (clipping dividends from high quality, low risk stocks) after the next wave of wealth, I don't believe you! :) There is a lot of truth in the old cliche: "It is the journey, not the destination." I see it time and again including my personal experience. When I first started working I dreamed of making six figures annually and felt that a after a few years at that level I could walk away and live on easy street. Two years later I had reached that goal at the age of 27. I took me about a week to get accustom to my new "wealth" and realize there was more, much more, if I wanted to stay the course. I ended up working for another 20 years. And my income went up exponentially with over the years. By any objective measure I could have walked away anytime, but I couldn't break away from opportunity. It was just too exciting and fun. I stopped working for others five years ago at 47. I thought I would play lots of golf, travel on Netjets, and spend lots of time relaxing poolside in my new mansion as that is all easily in my budget. What actually happened? I live in a modest home, travel coach, and spend my time reading financial reports. I commit more energy to wealth creation now than ever before but enjoy every minute of it. It's just too fun and to walk away would be a setback to my level of life satisfaction. Right now you see it as a stressful rollercoaster and you want to get off, and sit on the sidelines in the shade. But as time passes you will remember the thrill and forget the anxiety which makes it very hard to stay away from a significant allocation of assets to the next "inevitable". I hope BAC rallies like crazy, and that you at least have a chance to prove me wrong, but until then I'm betting against because I believe wealth doesn't change our fundamental approach to life. onyx1, I am very impressed by what you have just written! It is just amazing how many fabulously accomplished people can be met on this wonderful board!! :) giofranchi I like to discover amazing or useful things and share them with others who find them interesting. I have had this strong motivation since I was eighteen months old. The accumulation of wealth has become a discomfiting source of imbalance in my life, taking time away from other interesting persuits. Were it not for the high level of interest on this board in common ideas, and the many expressions of encouragement I have received from many of you, I would probably devote much more time to collecting additional evidence to support a few epidemiological discoveries. Thank you for your interest in some of the things I have learned. I have benefited even more from all the things I have learned from you. It makes participation fun! It is hard for me to maintain interest in other areas where positive enthusiasm and useful, interested criticism is rare. That's why I like this board even though I usually move on to other interests when I have a fairly good mastery of a subject. Lancashire is too large a position by almost any calculation, but the remaining third of the portfolio would still be worth more than the entire portfolio was worth six years ago if Lancashire went to zero, a possible though unlikely event. Even so, this year may be the first time that the special Lancashire dividend may not be reinvested in the same company because of the huge over weight. In a way, this would be sad because Lancashire's prospects have never been brighter, nor tail risk exposure lower. We'll see. :)

Please help me understand the basis for the valuation of their unproved resources of more than$9.00/SH. Are these solid or are these mostly leases that have to be drilled in five years or less? If so, could not the owners repossess the rights and lease those rights to someone else? So the acreage is as follows: Developed: 375,090 - the "Continuing Ops" valuation of $4 billion works out to be $10,669 per developed acre Undeveloped: 1,672,328 - the "Excess Reserves" valuation of $7.056 billion works out to be $1,288 per undeveloped acre Likely, a buyer with scale would pay more than $1,300 per acre, as demonstrated by JV transactions over the past several years between $5 and $15K an acrea. Your question regarding HPB is a good one though - this is how the Company breaks down its undeveloped acreage expiry: 12/31/2012: 208,368 12/31/2013: 603,372 12/31/2014: 635,004 12/31/2015 or later: 153,685 Other: 71,899 So about 87% of its undeveloped acreage expires by FYE 2014. All the more reason for a sale, or to put in place a credible development plan. Thank you very much, bmichaud. :)

Shalab, sorry! I don’t know how, but I missed this thread of yours! I find it extremely interesting… but you made me laugh!! I am really not a good investor!! Surely, I am not in the league of Sanjeev, twacowfca, valuecfa, Moore, uccmal, tariq, racemize, PlanMaestro, ERICOPOLY, Beerbaron, biaggio, berkshiremystery, yourself, and others who constantly write on this wonderful board! This is what I have written in a personal message to Bart this morning: Just a few words about the way I invest my firm’s free cash: I tend to stick with a bunch of owner-operators that I think I understand well enough, just because it fits my personality and I feel quite comfortable with it. I am also very risk averse: right now I am keeping a lot of cash in usd and gold, I also want to be market neutral, so I am shorting the indexes. Results, unfortunately, simply don’t care what I am comfortable with…! 2012 has been a terrible year: speculative stocks went up a lot, so I am losing money on my shorts, owner-operators went sideways at best, with FFH (by far my largest holding) that was down significantly from $410 to $350, so I am also losing money on my long positions, gold went nowhere and the euro appreciated on the usd, so I am losing money on fx as well… It really seems I got it completely wrong!! Viceversa, a lot of traders on the board are booking spectacular returns: I remember ERICOPOLY who said a month ago he was up 100% for the year! So, you see, on the board I just write about what I know, but that doesn’t mean it is the way to go, or even it has any usefulness at all… :( No, really, if you have the patience to bear with me, I’d really like to go on posting some thoughts on the board, because I enjoy the company of great investors!! But surely I am not one… not even a “do no harm” investor… “First, do no harm”: I am not even able to follow this basic and most important precept! :( But I will get better very quickly, learning from all of you! ;) Thank you, giofranchi Hang in there, Giofranchi. Realize that the poster boy for success on the board, Ericopoly, was apparently down last year much more than you are down this year, but he hung tough with his conviction on his leveraged position on BAC options, recovering his losses and winding up with a nice net gain. Best wishes,

Please help me understand the basis for the valuation of their unproved resources of more than$9.00/SH. Are these solid or are these mostly leases that have to be drilled in five years or less? If so, could not the owners repossess the rights and lease those rights to someone else?