twacowfca

I think Eric said he was or had been working for Microsoft before he got control of his 401K. If so, he may not have met the income requirements for contributing to a Roth then. It is amazing what can happen when there is no tax on compounding returns. In late 2001, I was able to self direct a close relative's 401K. At that time the funds were in a money market account with a balance of about $250 plus some zeros. That year ended with a gain of less than 10%. The following February, there was a contribution to the 401K of about six percent of the balance, and the year end balance again rose about an additional 10% by the end of 2002. After that, it was off to the races with mostly mid double digit returns plus one triple digit return, except for 2008 which was about flat in that account. Since 2008, the balance in that account has about tripled. The current balance is about 38 times the balance around the end of Q3 of 2001 when active management began. These returns have been generally unlevered. For instance, this account did not purchase any of the FFH calls in 2006 that were such a coup in most of the other accounts. This account held long positions in common stocks generally for a few years until sold as full value was approached. One to three stocks have accounted for most of the balance in this account during most years. The contributions to the 401K did significantly increase the returns in the early years of active management, but added only a fraction of one percent to the returns in recent years. This account was recently converted to a Roth account. It now can compound tax free through the next generation. :)

Are there decent businesses in Greece with low or no debt?

genius Genius +1 :)

Not very difficult to grow AUM when the best fund manager in the world upon retiring suggests that his investors place their funds with the best student he ever had. ;)

In my first Investors meeting with FFH everyone wore business suits, except one little man who came late, wearing slacks and a solid color, maroon shirt. Who was that guy? Mason Hawkins. :)

I'll have to go back and look this up but I think you may be wrong on this. I suspect WB did not "put almost all in"; rather he put in a substantial amount. If I'm not mistaken it was the great majority of the assets that were invested in stocks, about 85% or so, leaving only a small cushion of cash to pay current claims and expenses.

Your odds is the upside (100) divided by the downside (30). The probability as stated is 75%. The full Kelly bet is 67% of your capital at risk. It would be foolish to make a full Kelly bet under almost all circumstances for many reasons. I like to use the Kelly calculator at albionresearch.com The Kelly criterion can be used to maximize the geometric mean (the average percentage return) of the growth rate of capital in a theoretical sense, but even then the volatility is crazy. With full Kelly betting, there is a 1% chance that you will draw down 99% of your capital in a lengthy series of bets or a 50% chance that the draw down will be 50%. Sadly, if you overestimate the probabilities or the odds in your favor, as is often the case, The overbetting that results from using a full Kelly proportion guarantees that your capital in a series of bets will periodically crash forever to a very small fraction of the original capital. The power of Kelly comes into play when the probability of success is extremely high, like 99%, by an unbiased assessment. Then a half Kelly bet might be appropriate. For example, Warren put almost all of his insurance company assets into high quality common stocks in 1973- 1974 when they were selling for about one third what a private buyer would have paid to own them outright. :) Interestingly, there is another opportunity hiding in plain sight that has about a 90% probability to have a positive return in the short term with the downside risk almost certainly limited to a very low single digit percentage. We added to our BRK holding recently paying just a hair above 110% of their Q1 BV/SH reported this weekend. BRK closed Friday about 3% above that threshold, below which Warren said he would buy back BRK shares aggressively. At that price level, there is very little downside risk and enormous upside as a potential long term hold. This entry point and timing is quite asymmetrical for risk/reward. If the market tanks, Warren's more or less aggressive repurchasing of BRK's shares could result in a positive return or limit any loss to very low single digits for the next three months. As the end of Q2 draws near, 110% of BRK's Q2 book could be estimated and the position could be reassessed. Almost all scenarios with positive price action for the market during the next three months should lead to returns ranging from flat to very good. Owning BRK at the current price is like having a free put on the stock with a strike price 3% below the market price that will reset every three months with a new strike price based on 110% of the BV at the end of that quarter.

That's not exactly what I understood. I think what he was trying to convey is that the deal wasn't so great that it was worthwhile to sell some of his stockholdings to pay for it, although it would have been a better use of capital in this low interest rate period if they had had enough cash available to close it.

Your odds is the upside (100) divided by the downside (30). The probability as stated is 75%. The full Kelly bet is 67% of your capital at risk. It would be foolish to make a full Kelly bet under almost all circumstances for many reasons. I like to use the Kelly calculator at albionresearch.com The Kelly criterion can be used to maximize the geometric mean (the average percentage return) of the growth rate of capital in a theoretical sense, but even then the volatility is crazy. With full Kelly betting, there is a 1% chance that you will draw down 99% of your capital in a lengthy series of bets or a 50% chance that the draw down will be 50%. In real life, the series of good bets available is not often lengthy, and money lost is not often quickly recovered. Sadly, if you overestimate the probabilities or the odds in your favor, as is often the case, The overbetting that results from using what you think is a full Kelly proportion guarantees that the capital in a series of bets will periodically crash forever to a very small fraction of the original capital. The power of Kelly comes into play when the probability of success after an accurate assessment is extremely high, like 99%. Then, a half Kelly bet might be appropriate. For example, Warren put almost all of his insurance company assets into high quality common stocks in 1973- 1974 when they were selling for about one third what a private buyer would have paid to own them outright. :)

I think that's right. BRK closed about 3% above the threshold for "aggressive" buybacks. That's not a guaranteed floor, but close. If the market got ugly, it might take a little while to get back to 110% of BV, but probably not too long. BRK's future downside volatility at this price is likely about as low as any stock could be. Why wouldn't any fund manager with or without a value bent want to own as much of BRK as possible?

Did you add in the noncontrolling interests? Or just the NAV per BRK shareholders?

BRK's 2012 10Q1 reports BV is $175,997B up from $164,850B EOY :)

Join the party. We doubled down on our puts early yesterday.

Sure not, and it took me to this other video ... I could not stop smiling :) Lol, anybody took a look at that multimeter voltage at 1:31 in the video. I hope they find a way to harness that incredible 0.008mV! Yes! I can feel the power. There's electricity in the air!

They appear to be overhedged. In answer to a question, Prem said that they still had the same total return swap on now that they put on some time ago. But, the value of their stockholdings has gone down substantially. Therefore, it may no longer be a hedge worthy of hedge accounting, but a directional bet.

Thanks, Moore for that great appology for value investing. :)

It's happening. Got an unsolicited piece advertising a new opportunity to invest in the environmentally friendly "Ben Franklin" method of capturing enormous amounts of electricity from the air. ( Run a wire up on a balloon instead of a kite and voila! There you go: free electricity!) Now isn't that a good idea. Full disclosure: their chief scientist is a recent graduate with a BS degree from The Colorado School of Mines. ::)

Or detecting asset bubbles! He was the Angelo Mozillo of Fed Chairmen. Cheers! That's good! ;D

strange.. i think he probably got wiped out on this one? He bought after the decline, I believe around 6 CAD the article said... The II article on Chandler was great. He has a history of getting into situations with poor corporate governance and fraud and hanging in there, pushing for reform until things (usually) get better. Most of his successes have been in beaten down large caps with government sanctioned monopolies like banks, oil cos and telecos that have a lot of visibility where it's in the national interest for the government to help root out the fraud or where a change in government policy can turn the situation around as with a change in monetary policy.

lol, close the thread--this is the best comment, and we should go out on a bang. I'm out of here! Gone on a bike ride. :)

Practically, from the examples in Moore's link, that solo speed with no tailwind seems to require a slope of about 20%. that's way, way beyond grade. Dangerous doesn't come close to describing such a ride. Foolhardy is an understatement. Hitting a small pebble could be fatal. :-[

There was a remark on a closed thread about getting ahead of the competition in a bicycle race by racing at 60 miles per hour downhill. Presumably, that would have been solo. Interestingly, the fastest I've ever bicycled downhill on an extreme slope was 47 MPH in a tuck, and that was hairy. Wind resistance increases with the square of the speed with laminar flow. Without perfect streamlining, the rate of increase of resistance is even more as speed increases. Comments?

The entire P&C industry is selling at a cyclically low P/E multiple. Quality will out over time. The last time the whole market sold at bubble prices, FFH sold at something like three times book value. FFH is positioned to deliver very good value to shareholders no matter which way the market goes. :)

They should be able to do better than that. Property rates are firming, up about 7% to 8% this year on average and more on cat exposed insurance. This indicates a normalized negative cost of float. AIG and the other mega insurers and reinsurers appear to have finally got religion, repenting of their sins of yield chasing. It remains to be seen how long this will last, but the assumption that a company can afford to lose money on underwriting and make it up on investing going forward is no longer tenable in the current low interest rate environment.

It takes about five years for an outsider to learn all the ins and outs of a CEO's job in an unfamiliar industry, even more so with Berkshire. The only highly qualified person who knows everything that goes on in all the varied Berkshire subsidiaries and the headquarters is the number three corporate officer after Warren and Charlie. :) Also, Warren's statement about how familiar the Berkshire Board of Directors have become with the CEO In Waiting strongly suggests a long term Omaha resident who works in the headquarters. Realize that the previous number one candidate for the job, Mr. Sokol, took business trips with Warren and was frequently in Omaha where Warren could mentor him. Marc is the man. :)