twacowfca

A good point, Al. Failure can be a powerful factor leading to sustained success. Henry Ford went bankrupt twice before he finally got it right. Prem got out of Zenith at the perfect time because he understood their cycle, IMO. He bought the whole co close to the bottom of their cycle, again with profound understanding. :)

Web likes to get paid while he waits. Ex. He lent out his USG shares for a few years to the shorts during their cpt 11 , collecting an extra 3% or so per year, caring little for the market price of the stock in the meantime. He wrote the index puts because he got paid up front and didn't have to post collateral. Therefore, it's not surprising that he chose to buy solid, dividend paying preferreds with convertible optionality, rather than common during the financial crisis. :) I suspect that he also got a large number of Brownie points from GS, GE etc. While being paid to wait for the market to turn. Plus, buying preferreds is likely to produce less pressure for downgrades by rating agencies than buying more volatile common-- an especially sticky wicket in view of his equity puts that boomeranged and greatly constrained his flexibility during the crisis.

I believe WEB is saying that rapidly changing industries are unpredictable, not only for which companies will be the most successful, but for the aggregate profits of the entire industry if any. He looks for companies that have a long track record of producing substantial owner's earnings in an industry that is also conducive to producing substantial owner's earnings. This is WEB's open secret that few other investors focus on.

Hear Hear! I have nothing further to add, but CONGRATULATIONS! :)

Buffett's allusion referrs to the urban legend that secret messages will be audible when certain country or rock songs are played backward. Country music frequently concerns themes of loss and sometimes redemption. :)

Let's see. We stable a cow in our back yard. Then we attach a funnel with a hose to her rear end. Then, we vent the bovine's gaseous emissions to a holding tank connected to a high tech fuel cell that also receives explosive hydrogen bubbling up from electrodes in our swimming pool that are connected to solar cells on our roof. Oh, I left out the most important part of all. We scoop the poop produced by the cow (augmented by "honey pots" we carry down from our toilets after saving water by not flushing) and dump this into an anaerobic bacteria digestor tank that will generate ten times as much gas as we get directly from the cow. . . . Then we . . . Then we. ? ? ? Rube Goldberg, where are you? We need you now!

What an eye opener! I must confess I have been slow to get onboard the evil shortsellers conspiracy bandwagon, but now I'm convinced. Imagine, all these long/short geniuses have ties going back to Michael Milken and a number to Madoff! This article explains the background for one of the most astonishing occurrances: when Tilson put a pickled lawyer from Millberg Weis on stage to talk about how they trash companies with class action lawsuits. Now it all makes sense.

Sanj, why didn't you tell us that YOU had written an article about yourself in the same issue? You're much too modest! I found it on page 7 of The Onion. It's right beside the article by Barack Obama entitled, "Sarah Palin is My Secret Friend".

Thanks, ourkid8. :)

Can anyone help me understand STC. I bought some as a speculation earlier this week and then it took off. I must confess I don't fully understand it as a potential long term hold rather than merely a screaming apparent bargain. I need help.

What multiple of book did Fairfax pay for zenith?

FYI Stocks added to the S&P500 that had never been in another S&P index tend to rise another 15- 20% relative to the index in the months after joining. BRK's price action after admission has exceeded the average for the other rare birds that had never been in an S&P aviary. Stocks in this small subset of new admissions tend to drop more than 3% relative to the index in the days after the effective date; in contrast, BRK has kept pace with the index. This augurs well for the thesis that S&P500 admission is a slowly developing catalyst, finally releasing BRK to rise at least to parity with the relative valuation of the average S&P500 company.

Sadly, Paul Samuelson passed away last December. Interestingly, he owned Ford in the 1960's & 70's. It was incomprehensible to him why they didn't do better than GM during that era. He failed to appreciate the simple economics of the industry at that time. Ford was much more innovative than GM, but GM whipped the competition because they were the low cost domestic producer with their much greater economies of scale.

In the words of the poet: "One looks for thorns and finds them". :(

BS has proven to be rather faulty the longer out you go. That's what Buffett and Munger say and that's what it looks like if you value these warrants the way of value investor and not an academic would. Just make some reasonable assumptions on where you think JPM will be in 9 years. Very true! But, if you can buy 'em a lot less than the B/S value, you've got a nice margin of safety. :)

Actually, the index funds do most of their buying on the day the new listing joins the index. This will be Tuesday. There is no trading Monday. Tuesday may be even more interesting than Friday. Cheers!

Yes, but these additions to the S&P500 generally peak on the effective date which is next Tuesday rather than the last trading day before which is Friday. The average gain these two days relative to the S&P500 (the day before and the effective date) is about 2 1/2%, but BRK has been besting the average outperformance for a new S&P500 admission so far by a factor of three. Therefore, there may still be considerable upside from the buying pressure of this "long squeeze". :)

Could be short covering. The same thing happens in the final stage of a cpt 11 when the shareholders are going to get zero!?

The index funds and pension managers probably had to buy up BRK since it's now part of the S&P500, technically speaking. Bloomberg FYI - You know you could just type "GRAB" then press "GO" --> a screen will pop up and let you enter your email address, ---> type your email address then 'send'. This will give you your charts in a GIF or picture file. Instead of producing a pdf all the time. Thanks. We'll take the short cut next time. :)

Here is a log chart showing % change of BRK-A (Darker Line) vs the S&P 500 since the close of the market on January 19, 2010 (the day shareholders approved the stock split) through today’s close. Interestingly, BRK’s outperformance compared to the S&P 500 during this same period, which includes the January 26, 2010 announcement that BRK will be included in the S&P 500, has been +21.15%. :)

A word of caution. These warrants are fully priced according to B/S. The implied vol is rather high, about equal to the historical vol which is high because of the recent volatility associated with the financial crisis. Nevertheless, these could still be efficient if you like owning JPM long term. However, you'll have to forego the dividend if you buy the warrants instead of the stock.

This is a major interest . Can you refer me to some of his publications on this topic. Would be much obliged. I'm only starting to get into Taleb and colleagues' take on it myself, but this link is one I came across and appears to be a good starting point. I grabbed the Flash Video from that page partly to view it full size, and partly to remind me where I'd found it. http://knowledge.insead.edu/Dancingwithchance090504.cfm You can also look into their book via its own website. http://dancewithchance.com/ Many thanks, Dynamic. :)

Buffett's insurance companies are much more protected from the extreme event than most other companies. All of the industry policies have had a war exclusion almost forever. That would have excluded most scenarios of a nuke explosion before 911. Nevertheless, reducing risk is merely probabilistic not absolute.

Apparently, the exercise price is adjusted downward to reflect any distributions to shareholders except for the amount of regular dividends not exceeding $.38/quarter.

Yes, but his personal portfolio performance has not been as visible as BRK's, and he may not have shared these details with Schroeder. WEB may not have wanted the public to see how much better his personal account has done compared to BRK's in recent years, although this should not be interpreted as shortchanging shareholders because it's easier to outperform with a smaller portfolio. Nevertheless, the news media would have had a field day with this one. There has been a hint of this outperformance in a couple of remarks Warren made. Several years ago, he said that his personal portfolio was about 1% of his assets. More recently, he was quoted as saying that his personal portfolio was about 3% of his assets. :)