longterminvestor

Saw this and don't know if it was previously posted on cobf. Video uploaded in 2020. cheers!

Just got off phone with trading partner who told me they placed a $5M Primary with Berkshire (50% participation), Lloyds (40% participation), and another market (10% participation) for $900K Premium (17.5% total commission for retail/wholesale brokers). So to break that down for Berkshire's P&L/Balance Sheet - thats $2.5M of "all risk property" exposure on Berkshire for $371.25K premium for a very short tail risk. I do not pretend to know what the exact amount Berkshire actual places on liability side of the balance sheet however max exposure is $2.5M - unless they bought facultative reinsurance (FAC) to reduce the risk from a third party. There would be an expense attached to FAC reducing the amount of premium however highly doubt at these rates Berkshire is buying FAC. 3 years ago, the entire placement ($60M TIV) traded for $200K premium. There's probably more to this story (claims, ect) but that is a extracting a pound of flesh for sure. This is a risk in Tri-County Florida. Crazy times. At these rates, I am VERY surprised why I am not seeing them more and more on these placements. What is keeping them (and others) on the sidelines?

I am a retail agent in FL. Market is really tough for Florida Property/CAT Wind. Coastal Condo placement I just heard went from $400K premium to $1.3M Premium and broker still hasn't placed the top layers for the 5/31 renewal date. I have personally seen/placed accounts with 100%-150% premium increases. Counterparties comparing this market to buying Terrorism post 9/11. Have not seen any Berkshire paper on a retail placement for large deals, they last quoted in 2013-2014 but pulled out because market was getting too soft. Excerpt from article linked below. I am not a reinsurance expert, but the "one reinsurance company" has to be GenRe and clearly they are getting their price. For context, I do know these reinsurance placements are largely on homeowners business and some residential condos. “Market reports are that most domestic carriers have placed less than 80% of their required external placements prior to the Memorial Day weekend, and many far less than that. In one case, as of early Friday: zero. The current shortfall is well over $10B of unplaced limit. Their brokers are hard pressed for solutions,” says Stonybrook, a specialist strategic advisory and investment banking firm focused exclusively on the insurance and reinsurance industry. The firm goes on to note that it’s aware of at least one large reinsurance company and one large catastrophe fund that are actively quoting new limits, albeit at unacceptable terms. https://www.reinsurancene.ws/well-over-10bn-of-unplaced-limit-at-june-1-further-downgrades-expected-stonybrook/

Mr. Buffett addresses this question specifically in below videos. Mr. Buffett has also intentionally "lodged" the operating businesses inside the insurance companies so spinning off would have additional hurdles not mentioned here.

new Bloomstran Podcast: https://podcasts.apple.com/us/podcast/410-chris-bloomstran-semper-augustus-buffett-berkshire/id1128955736?i=1000558885829 on youtube:

Charlie Rose interviews Mr. Buffett. came out today. https://charlierose.com/videos/31221

As a broker, we write cargo policies with "world wide coverage" - some policies have war/confiscation exclusions and some do not. I have received some mid term endorsements excluding Ukraine and war/confiscation recently. None of these accounts have direct exposure to Ukraine - they are US distributors who source product from Asia. Berkshire is not the primary risk bearer on these cargo deals (unknown if they participate on a reinsurance basis) however trying to provide some color on this question. Unknown on the carriers who underwrite 1st party multi-peril (property insurance) in Ukraine - not my market.

In other random news, Yahoo Finance got the boot! CNBC is now hosting the live feed via internet. Wonder what caused that change. Daily Journal had Becky doing questions with Yahoo doing the feed. Just an interesting note, obviously no financial implication to the business.

I understand the thought/sentiment here and find it curious that Mr. Buffett is ruthless when buying assets he finds at a discount however he has mixed feelings when it comes to buying Berkshire. Still looking for the lesson - there's usually a lesson to learn with Mr. Buffett's actions. $27B in buy backs for 2021 and $24B in 2020. For context, largest deal in Berkshire history was Precision Cast for $37B (admittedly overpaid) followed Apple at $36B - purchased over 3 years and lastly BNSF - $34B (debatable to come up with ultimate cost - partial ownership at acquisition and paid for with cash+stock). Energy Business is another place Berkshire is stuffing capital. Was hoping for more buybacks but I'll take it.

Bloomstran says letter is going to clients now and will be posted to "soon".

Came out last year on Friday night, day before BRK posted full year earnings and Mr. Buffett's letter. That's when I'll look again.

Found this audio and transcript regarding Financial Crisis Inquiry Commission interview of Mr. Buffett. Audio below and transcript attached. http://fcic.law.stanford.edu/interviews/view/19 2010-05-26-Transcript-of-Interview-With-Warren.pdf

more Lou Simpson. attached. Learning from Lou Simpson — Investment Masters Class.pdf

Insurance Companies have lots of tools to get more premium in both regulated and non-regulated markets. If a carrier wants to get an increase, they will find a way to do it. And the smart one get off the risk if they can't get the rate they want for the account. Insurers "rates" are regulated by individual state insurance commissioners - this is called the "Admitted Market" or standard market. Carriers can get rate in other ways if regulators do not approve increase in rate. They can increase the insured values on property for "inflation" and then the "approved rate" is based on an inflated property value = higher premium even though the rate stayed the same. However there is another market that is growing fast - Excess & Surplus Lines Market - known as E&S or non-admitted market. Same game here with inflating values to get more premium. I have seen carriers increasing building values due to increased cost of construction. this is helping the insurance market get more premium in an already very hard market. "Double Whammy" for insureds. The rate is up AND the value of building is up. I have seen 60%-75%-100% increases in property premiums where we do business - Florida. Everyone is complaining about no capacity available in marketplace. and personal lines in Florida is as bad as I have ever seen. Clients are getting crushed.

Mr. Munger just looks annoyed the entire time Mr. Buffett is talking. Great clip.

@ValueMaven Will be doing the same. See attached 1970-1985 breakdown showing the rate as calculated using formula now. This period is considered the most inflationary time in history so I wanted to run the simulation. For the rate to stay above 7% in 2022, the March 2022 CPI-U has to post above 284. Which would be a 7.22% increase for 12 months. From 1970 - 1985, the annual change from March to March was above 7% 5 years out of the 15 year period. My Mr. Buffett "And then what" analysis leads me to be optimistic about short terms prospects for this instrument however long term (beyond 3-5yrs) it becomes less interesting. I see it as a good place to stash cash and earn decent, completely safe return. 1970-1985 NUMBERS.pdf

see attached spreadsheet that checks out with formulas to track. IBOND SAVINGS CALCULATION.xlsx

AND THAT LADIES AND GENTLEMAN IS WHAT I CALL THE BLINDING FLASH OF THE OBVIOUS!! THE CODE IS CRACKED.

First off, I should be looking for great businesses to buy. But since I can't find any, I am here, chasing down CPI-U index in the US Bureau of Labor Statistics. To say that I am annoyed I have not cracked the code on how the interest rate sets is an understatement. I pride myself on cracking the code when problem solving. Been looking at all the CPI data I can find, using percentage changes YOY on numbers however can't seem to get the math to check out. My work has been mainly focused on the below paragraph: We set the inflation rate every six months (on the first business day of May and on the first business day of November), based on changes in the non-seasonally adjusted Consumer Price Index for all Urban Consumers (CPI-U) for all items, including food and energy. weblink: https://www.treasurydirect.gov/indiv/research/indepth/ibonds/res_ibonds_iratesandterms.htm My thoughts as of now....and hoping someone can take this a step further or help me with what I am missing. Looking for the blinding flash of the obvious. 1. The "we" is the Treasury? - dont know exactly who the "we" is 2. the key word above is "BASED ON" - could be arbitrary, may not be science. maybe they just base it on CPI-U and make a call on where to set rate 3. the "non-seasonally adjusted Consumer Price Index for all Urban Consumers (CPI-U) for all items, including food and energy" leaves a ton to un-pack. The best I can find is "All Items" with a footnote saying not seasonally adjusted. 4. First business day in May and Nov means to me they would have to use data from the previous month that is posted in current month to use for the following first business day. For example, The Sept numbers for 2021 were posted on Oct 13, 2021 for use on the "first business day in November" The closest number I could find is 5.4% increase from Sept 20 to Sept 21 defined as "all items". https://www.bls.gov/news.release/archives/cpi_10132021.htm 5. I am not concerned with when the interest rate starts ticking on the bonds I bought, I am 100% focused on trying to find the number that tracks the interest rate. I am probably gonna call some 1-800 number I find and get directed to the department of agriculture who re-routes me to the bunker in Nevada where there's a couple guys who are like "um...I can't help you however I am looking for my stapler....."

I'm with you ValueMaven. When discussing this instrument, everyone is like - well its not fixed and the rate will go down over time. What I have been thinking about lately is "what happens if the CPI-U actually INCREASES?" and the rate goes from 7.12% to 8%-8.5% (even higher???). Could be my confirmation bias creeping in. But I think its actually possible, even likely.

I opened 1 for my wife, 1 for me, and then inside mine I "linked" minor accounts for both our kids. We have 4 total accounts with 2 separate logins - the minor accounts are accessed through the log-in with my account. Little annoying but its definitely set it and forget it. Will be re-loading in Jan for the full amount.

its somewhere in the US Bureau of Labor Statistics. I haven't found the actual number yet but when I do will let you know. https://www.bls.gov/news.release/cpi.nr0.htm

Instrument comes SALT Free! Not subject to state/local tax - didn't mention cause I live in SALT Free Florida.

I did an analysis on this - poke holes in it if you can. Thanks! VIDEO: Beck Quick Video: https://youtu.be/0bLP7F-UWSQ ATTACHED: Bloomberg Article NY Times Article John Lim article (guy from Becky Quick video) Basic Info on I Savings Bond from treasurydirect.gov FAQ on I Savings Bond Tax Consideration Rate Calculation Formula OPPORTUNITY: Save $10K per Family Member now till 12/31/2021 and $10K additional window available from 1/1/2022 thru April 2022 Family of 4 can lock up max $80K in next 5 months (discounting the additional $5K available thru tax refund) at floating semiannual rate of 3.56% (7.12% annualized if CPI stays flat in May ’22) Rate Formula (component of fixed + inflation with fixed at 0.0%): Fixed rate: 0.00% Semiannual inflation rate: 3.56% Composite rate = [fixed rate + (2 x semiannual inflation rate) + (fixed rate x semiannual inflation rate)]: [0.0000 + (2 x 0.0356) + (0.0000 x 0.0356)] Composite rate: [0.0000 + 0.0712 + 0.0000000] Composite rate as percentage: 7.12% OPINION: Good option to put money in a safe place rather than bank earning 10 beeps or less Additional $5K thru Tax refund is not appealing– more paper work and the tax refund option is issued as a paper bond – different than electronic bond available in $10K bucket. Paper bond is money good, just gotta keep paper records - redeemable in person only at local bank. TAX - Like the option to defer tax to maturity rather than paying tax annually PROS: Inflation adjusted in a time where inflation risk is real 30 year bond maturity with 1 year lock up (if withdrawn within 5 yrs – the last 3 months of interest is deducted as “penalty”) Unlike TIPS, the bond value cannot go down – the rate cannot go negative US Gov Issued – indisputable best credit available Interest compounds semiannually Tax Advantaged if you defer taxable event to maturity Frictionless - no transactional fees CONS: Floating rate subject to CPI semiannually – May & Oct Consumer Price Index (CPI) has its flaws Money locked for 1 year Too small, $10,000 per yr max cap does not move the needle (uncertain if this product will be offered post April 2022) Gotta purchase thru treasurydirect.gov – set up account, attach bank account, set up additional account for spouse, set up minor accounts linked to parent account. Little annoying but the juice is worth the squeeze. Best Savings Rate_ U.S. Government Series I Savings Bonds Offer 7.12% - Bloomberg.pdf I Bonds, Offering a Safe Space for Cash, Get a Big Rate Bump - The New York Times.pdf John Lim - Opinion_ This simple investment can earn you more than 6% with no risk - MarketWatch.pdf Individual - Series I Savings Bonds.pdf Individual - Series I Savings Bonds FAQs.pdf Individual - Tax Considerations for I Bonds.pdf

Mr. Buffett bought preferred shares of GE back in 2008. Considering GE has been a powerhouse business for half a century - he has been studying the business since he was in the womb (exaggerating but you get the point). If there is anyone on the planet qualified to purchase shares or an entire business unit - its Mr. Buffett. I'm curious like all of us could he/would he buy some assets from GE. I sleep easy thinking that if there is an opportunity at our price, Mr. Buffett will execute. My hope is Mr. Buffett is discussing his thoughts on transaction with Gregg and/or Ajit. Thinking in terms of perpetuation. The GE spin off is a great learning opportunity for managers to see - complicated and complex with tax implications. Interesting to ponder - no doubt they got a call on something GE related.