twacowfca

Anybody wonder if now is the time that Buffett finally pulls the trigger and buys out USG He has held the stock for a decade. He never sold even at $120 per share which makes me think this was always more than just an undervalued stock to him He now has a much larger position with the debt swap He may finally be ready to simply offer to buy the whole company Nope. USG would then lose their NOL's Warren's basis on his 2000 purchase of USG was about $15/ SH, a so so return, but better than the market average return. He also got a "dividend" of about 3% of the market price of the USG shares for most years to date as he lent those shares to the short sellers who have heavily shorted USG's stock most of the time since the year before they went into Cpt. 11 in 2001. BRK also got a fee of $57M(?) or so to backstop USG's rights offering in 2006. However, the shares he bought through exercise of those rights plus a relatively small number of additional shares soon thereafter, were in the $40+/SH range. The decline on the price of those shares nets out most of the gain on the shares he bought in 2000, but he still got the "dividend" and the backstop fee. The return on his more recent bailout is almost 100 percent on the exercise of his conversion plus the high interest rate on the security to date. :) Warren's operations with USG is a classic example of how he turns something that almost certainly would be a total loss for most fund managers into a saving construction that produces a modest gain. All things considered, that's not a bad outcome for an otherwise good company that had to go into chapter 11 to protect itself from mostly bogus asbestos claims and then had to give up about all it's net asset value to resolve those claims while floating a rights and stock offering to repair the hole in its capital. Not to mention experiencing the biggest collapse in its repair and construction market ever. One of Warren's understudies, Ted Weschler, had a similar and even more difficult situation working through WR Grace's Cpt. 11. BRK will be in good hands when Warren hangs up his spurs.

Yes. Buying puts on broad indexes is a way to hedge liquidity risk because sales of the more liquid, large stocks is a quicker way for funds to raise money than by selling less liquid stocks in a stressed environment. Therefore, broad indexes aren't immune to big sell offs in panics. Puts on broad indexes are generally less pricey than puts on less liquid stocks or indexes, and may have tax advantages in the US.

Noooooooooooo, there was no agreement by investing guru's or us common folk that financials were going to blow. Sure I heard of people like Einhorn and Whitney, but there is always people on the fringe. Buffett didn't see it, Bernenke didn't see it, so how could I? But you know, even Hollywood knows how wall street works. In the movie Margin Call, the head honcho says after the meltdown, "Nobody knows what's going on, we just react". Buffett got rich from the crisis, because he had a cash cushion, that cash he always had on hand. So he could take advantage. The key is once you have a cash cushion, know to use it. I kept saying to anyone who would listen, this is a once in-a-lifetime opportunity. Because I looked at the DJIA of the last 100 years and I saw that 1932, 1974, 1982 were golden opportunities, I kept thinking man if I could get back to the 80's and bought MSFT. Well I can imagine myself saying the same thing about the market in 2009 if I don't act. Appreciate that insight - thanks. Were financials, in any case, easy to avoid? Not because they were selling for P/E of 100, but more like dividend stocks today? Yielding a pittance for the risk taken. I think the biggest takeaway (even for those who avoided financials) is the blowback and the spillover effect the financials had on all other sectors of the economy. I suppose the only lesson that can be drawn (especially for those running concentrated portfolios) is to have appropriate level of sector-based diversification. Diversification would have made a difference but at what point would you have committed money to 10 year bonds or cash when the interest rates were so low. Sitting for 3 years with no income would have been torture. I do recall a discussion well ahead of the meltdown on the old board about when the crash was going to happen but the magnitude, and the secondary, and worse crash, in March took everyone by surprise. Hell, I had a small position in Washington Mutual in Sept/2008, thinking the worst had past. There was literally only a handful of people still working on wall street who had ever experienced anything of this magnitude before (irving Kahn comes to mind). Dont forget the homebuilders collapsing, and Bear Sterns two hedge funds in early 2007 all preceded the financial meltdown. The mortgage meltdown preceded the liquidity crisis. Nearly everyone thought it was contained. The financials were the final chapter. Everything else had gone to hell by the start of 2008, which incidentally is when the retrospectively dated. The markets kept on going as if very little had happened until rumours of the Lehman liquidity crisis. Those who predicted it, such as FFH, Michael Burry, and the guys in the Big Short, predicted something but had no timing in place. FFH and Burry were years early. Unless one is a permabear, and always in waiting for the next crash then there was no way to be right on that event. The problem with the permabears is they missed the upturn as well, and the greatest bull run since forever. I was in Mexico on vacation during the March crash. I would go to the paid internet service two or three times per day to sell stuff and buy other/better stuff cheaper. I remember that Canadian idiot Kevin O'Leary on Tv saying that Ge broke $10 it was going to zero. I bought GE Leaps that day. Addendum: I will add that bravery would have looked like the ultimate stupidity had things not turned back up so quickly. To that end I kept buying SPY puts to protect my gains for some time as the market recovered. These lost money. I saw everything coming, but not the extent of the panic, built up a very large cash position, and still blew a golden opportunity to make money. Here are some good things I did and some not so good things ( actually some really stupid things ). The writing was on the wall in 2007. The only question was when, and the answer to that question was almost certainly : not long. I kept pestering the managers of our largest holding to watch out for the big sell off of anything having to do with mortgage SPV's no matter how rated and anything else low rated. They sailed through the crisis without any losses other than an insignificant half a percent loss in Q4 of 08, mainly thanks to their paranoia about losing money rather than my advice, despite the fact that their assets were almost entirely financial. I bought FFH, but then sold it for a small profit and missed most of the run up during the crisis. I had a large workout in HD's Dutch Auction that produced a small loss because large banks welched on their financing commitments for a sale of a subsidiary to a private equity company that was to provide the funds for their share repurchase. That was a bad omen of shakiness in the balance sheets of the financial sector so I bought a huge number of S&P 500 puts. But things took longer to unravel than I thought, so I closed out the puts at break even and missed the the market decline in January of 08. The rest of 08 was like that. I was right, although the magnitude of the panic surprised me, but either too early or too late to take advantage of my insights. At the end of 08, my only consolation was the lame thought that I wasn't down nearly as much as the market averages. ???

+1 2 3 4 . . . N. :)

Marc has functioned as a de facto COO, holding all the CEO's of the subsidiaries accountable for ethics, financial oversights and ROC targets. However, after pushback a few years ago, Warren asked the CEO's of the major subsidiaries to report directly to him. thus, when Marc spotted the ethical lapse by Sokol, Warren had to deal with him. Greg and Matt are certainly on the short list because they are managers of large subsidiaries and are young enough to fill the CEO role for more than a short time without becoming superannuated. Ajit (who enjoys his job more than he would being manager of a conglomerate) and Marc, who would be very capable as CEO were he not being called to manage superstars who are paid 20 times as much as he, are in their early 60's. They would not be perceived as being in the role for more than a brief term. Matt's stepping down as BNSF 's CEO, suggests that he's the man . I would not be surprised to see Charlie step down as Vice Chairman at or before the AGM with Matt replacing him and becoming the heir apparent to Warren.

That reminds me of an undergraduate history course I took during a brief stay at a university. I knew the material cold, but received a disappointing B+ on the first test after carefully wording my essays. It was a 150 student classroom, and the papers were graded by TAs. I asked one of the TAs how he graded the papers, and he told me that he had been instructed to put a check mark by each factoid he saw when reading each paper. Then he counted all the checkmarks on each paper for each student. Then these totals were entered into a program and graded on a curve. I needed to settle down and make good grades, so I determined not to barf all over the TA. After all, he was just doing his job. My answers on the next test had no insights or literary merit, but lots of factoids that I threw on the paper. Of course, I got the highest grade in the class on that test and each test thereafter. But I wasn't proud of my work.

I have mixed feelings about VIC. In late 06, we went to a meeting where an outstanding value investor with a no longer small fund was recognized for having the best documented record of all 2000 +funds that had been tracked by a service since Y2K. I punched Tim and said that our record had been better than his. Then I got a big head and said that I wanted to submit an idea to VIC and get some satisfaction or recognition. My idea was for a company we had bought in the summer of 06 that had by then become our largest position: Lancashire Holdings: it was selling for less that what I projected their forward NAV would be the next time they reported. Plus, It was practically a net net because they had high quality, short term assets and had had almost no losses and hardly any reserves in consequence. My submission was brief because VIC said the maximum word count could be no more than 500 words. I didn't hear from them, but then a few months later, I discovered that they had accepted an analysis of LRE that had been submitted a few weeks after mine. In fairness, that other submission was outstanding, much better than mine. Even so, I was a little ticked because the other poster had been allowed about 2500 words for his submission. Later in 07, I spotted changing conditions that I thought would lead to a turnaround in Star Gas, a previous posting on VIC that had tanked and been reorganized after the original post. After loading up, I sent my thesis to them, but again, it was ignored, even as that stock doubled in the next few months. Both of my submissions referenced BV\SH and increasing earnings available for stockholders rather than EV/EBIT which was not the best metric, given their capital structures and where the value lay in those two companies. Go figure. ???

He wouldn't rat before his conviction. Lets see what he does now when he's faced with a long sentence vs a possibly much shorter sentence.

yes. :)

Look out below!

Carvel46: I hope our society STARTS to think of education as an investment. At this point in time, a LOT of education is a VERY POOR INVESTMENT. In fact, some education is a life ruining investment...Please see the thread I started "For Love or Money?". I can give this board a second example...A good friend's daughter started her studies this Fall at a well known state university. The school is good, with solid reputation. The girl is bright and hard working...but not bright enough to qualify for a scholarship. She would have got one at the local city college, but not the State U., which is where she wanted to go.... She is studying to be a nurse. In 3 years when she graduates, will nursing be a good choice? Probably...but who can say for sure? So here is the rub...the family & girl are borrowing at least 90% of the cost of her tuition, which will be at LEAST $100k by the time she is done. So this girl will graduate with $100k+ in debt. That is assuming she succeeds in her studies (highly likely, but not a certainty), that she graduates in only 4 years, not 5. What happens if she takes 6 months to find steady work after graduating? What if she works part time and takes a YEAR to secure full time employment? The interest ALONE on her debts will probably be $500 a month, perhaps more... So is this a good investment? From an economic standpoint, perhaps not... She will probably have a good time, make friends, perhaps even find a spouse, so it is hard to gauge simply on economics. How do you put a price on the intangibles? So I would argue that she is taking a TREMENDOUS economic risk. If there is any problem, any bump in the road, and she will be in very serious trouble. The cost of education is going to shrink the middle class tremendously. Heck, it has already started... Absolutely. It baffles me to see friends/family go to private universities and get loaded with student loans when the state universities offer cheaper tuition. I guess people think there's a large difference in going to a 'name brand' school versus a public state university. Funding higher education is a salient example of what happens when government spots a good thing and then ruins the returns by throwing too much money at it. Graduates with BA degrees are now earning substantially less than graduates with half as much debt who have completed a shorter trade school education -- not to mention the legions of unqualified and unmotivated ex students with substantial debts who dropped out without completing their courses.

Exercise your skills as a man of leisure and be prepared to invest as conventionally as possible. :)

We are thinking the same way, I just wasn't careful in how I described my example. yes, two shares of upside. two dividends missed. twice we "borrowed" $18. Thus, 1 missed dividend per $18 borrowed. Therefore, the missed dividend of 1.08 (per call) is 6% of the "borrowed" amount of $18 per call. I get that 1.08 / 18 is 6%. I just don't understand why we would think we should get the 1.08 in the first place. If we had bought $18 of shares, we would have got a 3% yield, or .54. If my choice was to buy the common unlevered or to buy the call, or some combination, nothing was going to give me a 6% yield, so why would I be missing that unattainable 6%? Example 1: Using portfolio margin Let's say I only have $18 to my name and I buy 1 share of common stock for $36 using $18 of money borrowed on margin. I get dividend yield both on $18 of my own capital tied up and on $18 of the borrowed money Example 2: Using calls I don't get a damn bit of dividend on my own $18 of equity, neither do I get a dividend on the $18 worth of synthetically "borrowed" money. In Example 2, I not only miss out on dividend yield from the $18 borrowed, but I also miss out on the dividend yield from the $18 of my own equity that I contributed. So that's why it's 6% cost and not 3% cost. Because you synthetically borrowed only 1/2 the price of the stock, but you gave up the dividend on the entire thing! Your own money got no yield. Normally, if you invest your own $18 into the stock you get a 3% yield. But that vanishes when you add $18 of "borrowed" money to the deal. So you multiply it by 2, and thus it becomes a 6% cost of having added $18 of leverage. Yup. But if the writer of the call borrowed money as in example #1 and used it to write a covered call, that double dividend would influence him to charge less for writing that call, especially compared to writing a put where posting a compensating balance would earn almost nothing --- thus leading to demanding a higher price for writing an equivalent put.

Health books is our core line as a book publisher. Over treatment with no ultimate positive benefit is typically the outcome of our government's throwing money at the healthcare system. Dialysis is an exception. Generally, the more treatment by dialysis for kidney failure, the better for the patient. If donations of kidneys for kidney transplants were a negative option upon death in the US instead of a positive option, that would be even better. Inefficiencies abound in medical care. Efficient operations as measured by quality and quantity should have a great advantage. The healthcare sector has had the best returns of any sector for several years. With obamacare mandating the purchase of Mercedes instead of Chevys, that is unlikely to change anytime soon for efficient providers. An acquisition of DaVita by BRK would be a foot in the door to a profitable sector, but I don't have especial insight into which providers are the best, other than to stay away from businesses that provide obsolescent treatments or treatments that do more harm than good.

It appears to be an update of a study that was previously published in an earlier draft. The Buffett part was merely a small section of that study. The update appears to be that BRK over a long period ending 2012 had a Sharpe Ratio (meaning risk adjusted returns) better than any mutual fund or any S&P 500 stock had over any similar lengthy period of thirty years from 1926 to date. The authors also deconstructed his alpha better so that the Betting Against Beta factor that supposedly underlay his returns became far less significant when allowing for the value aspects of the low beta stocks he bought. :) that's not surprising because Ziemba has previously calculated that Buffett has definitely been King on the Mountain when his long term returns are calculated using Ziemba's modified Sharpe Ratio. :)

I think it would be meaningful to read the study instead of commenting on what the Bloomberg reporter said about it.

The latest issue of Consumer Reports reports that 99% of Tesla Model S owners say they would buy the car again. That's unprecedented.

Some of these (and I am no doctor) sound like symptoms of asperger's, which Burry has been diagnosed with. That's what I was thinking. Asperger's Syndrome is an obsolete diagnosis now rejected as too vague. I once sat in a TQM training session in 1999 and watched an audio video feed of Buffet, Gates, Ted Turner, Richard Branson and Steve Case. After a few minutes, my wife poked me in the ribs and said, "Case is the only one who is normal". She was right. The other four were hyper excitable, bubbling over with synergistic insights they were eager to share as they lighted up with voltaic energy in the aura of their combined mental insights. Each one of the four who weren't normal stuttered slightly in restrained eagerness to share golden nuggets of wisdom. It definitely wasn't normal, but it wasn't pathological either. That must have been what it was like when Leslie Groves confined the greatest minds in theoretical physics on the mountain plateau of Los Alamos, NM until they hatched the bomb. :) :( It has been rejected and now the official diagnosis is just "Autism" -- of course, that's a spectrum so it is vague. The idea of Asperger's was just "high functioning Autism". We always understood that distinction before the term "Asperger's" was thrown out -- it's too bad, because at least before it was rejected it was implicitly understood to be "high functioning" -- now it takes extra words to explain that to people My daughter was diagnosed with Asperger's 6 years ago. While I'm not the world's expert on it, I've given it a good deal of thought. You can't put her in the room with other Autistic children and say "yeah, they all have the same thing". She's not the only one in the family to have similar traits, but we wanted the diagnosis so that we could get her an "IEP" in the public schooling system. Now she gets a lot of help from the public school that she can't get without the diagnosis. Before Asperger's was dropped there were also "high-functioning" autistics who did not qualify for the Asperger's diagnosis due to a delay in speech development. Other than that distinction, there is a lot of overlap between adult HFAs -- Asperger's or not. The whole spectrum is pretty vague and not particularly useful; I'm sure the diagnosis will be revised again in DSM 6. Some of these (and I am no doctor) sound like symptoms of asperger's, which Burry has been diagnosed with. That's what I was thinking. Asperger's Syndrome is an obsolete diagnosis now rejected as too vague. I once sat in a TQM training session in 1999 and watched an audio video feed of Buffet, Gates, Ted Turner, Richard Branson and Steve Case. After a few minutes, my wife poked me in the ribs and said, "Case is the only one who is normal". She was right. The other four were hyper excitable, bubbling over with synergistic insights they were eager to share as they lighted up with voltaic energy in the aura of their combined mental insights. Each one of the four who weren't normal stuttered slightly in restrained eagerness to share golden nuggets of wisdom. It definitely wasn't normal, but it wasn't pathological either. That must have been what it was like when Leslie Groves confined the greatest minds in theoretical physics on the mountain plateau of Los Alamos, NM until they hatched the bomb. :) :( It has been rejected and now the official diagnosis is just "Autism" -- of course, that's a spectrum so it is vague. The idea of Asperger's was just "high functioning Autism". We always understood that distinction before the term "Asperger's" was thrown out -- it's too bad, because at least before it was rejected it was implicitly understood to be "high functioning" -- now it takes extra words to explain that to people My daughter was diagnosed with Asperger's 6 years ago. While I'm not the world's expert on it, I've given it a good deal of thought. You can't put her in the room with other Autistic children and say "yeah, they all have the same thing". She's not the only one in the family to have similar traits, but we wanted the diagnosis so that we could get her an "IEP" in the public schooling system. Now she gets a lot of help from the public school that she can't get without the diagnosis. Before Asperger's was dropped there were also "high-functioning" autistics who did not qualify for the Asperger's diagnosis due to a delay in speech development. Other than that distinction, there is a lot of overlap between adult HFAs -- Asperger's or not. The whole spectrum is pretty vague and not particularly useful; I'm sure the diagnosis will be revised again in DSM 6. DSM 5 is an improvement because it allows for the entire spectrum of human behavior and disorder, without forcing a diagnosis into a certain label that prejudices a future reevaluation of that diagnosis. Eric, you may want to check out the work of the late Dr. Rimland's organization in San Diego that used to be called The Autism Research Institute. I attended a conference there in 2001. One of the most interesting exhibits was a chart showing the evaluation by about 34,000 parents of autistic or PDD children of which therapies worked best for their children. Way at the top of the list was a strict gluten free, casein free diet. :) Interestingly, Dr. Rimland's son, Mark was the model for the high functioning autistic spectrum character in the movie, Rainman, played by Dustin Hoffman.

My thoughts on legal issues are more like : "if you don't know jewelry, know your jeweler". Weschler in a sense owned Fresenius in the 1990's when he worked for and then with WRGrace. The legal issues then were a degree of magnitude greater than the issues DaVita has faced recently. Weschler has also owned DaVita for more than a decade. It appears that any large company that receives payments from the US government will have to put up with changing views of what is and is not acceptable. The current legal issues apparently are not considered serious enough to dissuade Weschler and BRK from continuing to buy DVA.

the put options were never dangerous. He takes money In and invests it. And if he loses, which was highly unlikely, he would have paid way down the line, a fraction of the net worth of the company. the media had a hissy fit about them. And that was so annoying that he probably wishes he never did it. Because it was annoying when people who did not understand what he was doing had a platform to misinform. The put options were safe because he knew what his total exposure was when he wrote them. Yes, but Warren stated before the financial crisis that BRK's AAA rating was extremely valuable to the company, suggesting its value was perhaps worth as much as $20B. Therefore BRK's internal compass for their true value at risk should have included the unstated value of that intangible asset, their AAA rating. The value of their AAA rating was certainly worth much more than the maximal possible gain on the puts they sold that was about $6B. If BRK had retained their AAA rating through the crisis, they would have stood alone among all financial companies, and the value of the AAA rating would have been even greater. If the puts expire out of the money as they probably will, the loss on the unstated intangible asset minus the gain on the puts will be perhaps $14B net. And, the contra factual result of what likely would have happened had they retained their rating at that crucial time would suggest the lost opportunity cost was in the tens of billions of dollars.

Some of these (and I am no doctor) sound like symptoms of asperger's, which Burry has been diagnosed with. That's what I was thinking. Asperger's Syndrome is an obsolete diagnosis now rejected as too vague. I once sat in a TQM training session in 1999 and watched an audio video feed of Buffett, Gates, Ted Turner, Richard Branson and Steve Case. After a few minutes, my wife poked me in the ribs and said, "Case is the only one who is normal". She was right. The other four were hyper excitable, bubbling over with synergistic insights they were eager to share as they lighted up with voltaic energy in the aura of their combined mental insights. Each one of the four who weren't normal stuttered slightly in restrained eagerness to share golden nuggets of wisdom. It definitely wasn't normal, but it wasn't pathological either. That must have been what it was like when General Leslie Groves and Robert Oppenheimer confined the greatest minds in theoretical and experimental physics on the mountain plateau of Los Alamos, NM until they hatched the bomb. :) :(

Warren did quite well in 1999 -- the early oughties buying REITS that were yielding 10%+ FFO. :)

careforaids.org AIDS is no longer a death sentence in NA with lots of resources, effective meds and support groups, but that is not so in poor countries. In Kenya, people with AIDS, are often shunned as if they had Leprosy, especially women. Care for Aids is a Christian ministry that helps fund and organize physical support, medicine and compassionate care for those neglected outcasts, through local churches that are in close contact with those with great needs. We fund their accountancy, a difficult task in poor countries where funds are often diverted for unintended use.

Secondary markets support primary markets as a whole, but that doesn't mean that a great capital allocator is adding societal value! They are very different statements. Strongly disagree. Success in the secondary markets provides the true north signal for those in the primary markets to align their interests with what benefits society most. Even bubbles may play a role in jump starting the economy to focus on something that is an emense benefit to society. :)

I think you are mixing up Ed Thorp and Claude Shannon. Ed Thorp was princeton-newports architect, and was not a buy and hold investor (His success was achieved with lots of convert arbitrage and other long / short strategies... and he is generally credited for unlocking the value of the B-S option pricing formula and exploiting it before it was ever published). Shannon was a more long term hold investor who did well, but I do not believe he was directly involved in anything related to Princeton Newport although he was an associate of Thorp and may have been an investor in the LP. Feel free to correct... Yup. He and Thorp worked together at MIT as Thorp worked out the changing probabilities for blackjack. Shannon recognized the importance of the Kelly Formula for asset allocation, and he and Thorp developed a device, using the first miniaturized computer complete with audio output for quick decision making, to time the drop of the ball in roulette after experimenting with a real roulette wheel for many months. They developed skill predicting where the ball was likely to fall into certain zones on the wheel and determined that they should be able to make money with it in casino play. They took a vacation trip with their wives and demonstrated its success in casino play with much difficulty as wires broke and they felt paranoid about what they were doing. Their wives made strong objection to continuing to play in the unfriendly and potentially lethal confines of a casino, so they enjoyed the rest of their vacation and returned to academe where they shifted attention to the physically safer casino, called the stock and bond market. Shannon demonstrated a simple but amazing algorithm for rebalancing an imaginary index, practically after very large moves up or down, that would reliably make money in a volatile market that was ultimately flat. Singleton used a similar rebalancing system to awesome effect by repurchasing Teledyne shares when they were very depressed, but not necessarily net, nets as Graham had advocated, and selling shares when they were high. :) Shannon made most of his money as a buy and hold investor, especially in Teledyne while relying on Singleton to rebalance internally. Shannon, like Singleton and Fisher, had a nose for spotting small tech stocks with promise and holding them for a long time. He may have wound up owning them for a lifetime because he became senile in his later years.