Munger_Disciple

Charlie's annual meetings (Wesco, DJCO) have always been open to public. You do not need to be a shareholder to attend.

This does not change the fact that paying dividends leads to sub-optimal capital allocation at Fairfax. Given his net worth, I figure Prem can sell a few shares every year to pay for his lifestyle and this should not change his control of the company. Buffett has been giving away 5% of his stock (he converts them to B shares first) to charities for several years now, without any effect on his ability to control Berkshire. I am sure Prem can do something similar w/o forcing a penalty of additional share issuance on all shareholders.

I don't understand why Fairfax pays dividends to shareholders. They are issuing more stock at the same time they are declaring dividends. This part of capital allocation does not make any sense to me. Also, if they need cash to pay for the hedges, then why not use the cash for that instead of dividends?

Excellent work, AZ_Value!! One of the best posts I have read in a long time.

Very strange letter for a portfolio manager. No discussion of any of the securities the firms owns or recommends. Just repetition of quotes from others.

Palantir, Buyback can be thought of as a tax-efficient way to pay dividends to shareholders. If the stock buyback is done below IV, then you are increasing the per share IV of the remaining shares. If taxes were zero, you can do your own buyback if the company paid only dividends.

Yes, you have to exclude share repurchases from FCF yield because the share repurchases contribute to the FCF per share growth. If not, you are double counting the effect of share repurchases.

Congrats!!!

May be. See page 18 in the proposal: http://www.whitehouse.gov/sites/default/files/omb/budget/fy2014/assets/strengthening.pdf "The Budget would limit an individual’s total balance across tax-preferred accounts to an amount sufficient to finance an annuity of not more than $205,000 per year in retirement, or about $3 million for someone retiring in 2013."

Looks like Obama is proposing all kinds of new taxes including higher estate taxes: http://www.bloomberg.com/news/2013-04-11/obama-squeeze-on-savings-of-wealthy-muddles-estate-plans.html

I think there will not be another BRK in our lifetime.

I read it many years ago. Great book.

Happy New Year to all & thanks to Parsad for this fantastic site.

Carol Loomis's article on the buyback: http://finance.fortune.cnn.com/2012/12/12/berkshire-buffett-buyback/ Sorry if it is already posted.

Ericopoly, Doesn't the estate still need to pay estate tax to the govt?

I totally support cuts in defense as well as in entitlements.

Rimm, I don't know what others' arguments are and that someone else you referred to is not posting here. So let us stick to the merits/flaws in the argument presented w/o name calling. Anyhow, the main point made is still valid: an investor in a corporation still pays (indirectly) corporate income taxes. So, he/she is not paying zero taxes even if there is no dividend income or capital gains. By the way, I have been a shareholder of Berkshire for more than 10 years, and I deeply admire & respect Buffett. I happen to disagree on some (but not all) aspects of his arguments. In general I favor a more balanced taxation/spending approach with tax increases being part of the solution. I also think current lower dividend/cap gains taxes get a bad rap (when compared to ordinary rates) as if those are the only taxes an investor pays. I realize that reasonable people may disagree.

Do not keep making statements like this as if you know what motivated my posts and keep the discussion civil.

Rimm, I respectfully request that you keep personal attacks out of this superb board.

The issue is that Buffett is comparing taxes on investment income (in general unearned income) of an individual with earned income of an employee. So it only only fair (for apples to apples comparison) that he takes into account all the taxes paid by an investor either directly or indirectly. Especially since he takes into account the payroll taxes paid by the employee in addition to income taxes paid by the employee to arrive at the total taxes on earned income. For the record, I am not against higher tax rates per se, but I dearly would like to see the sending cuts materialize. Otherwise, if one wants to know what will happen to the US, he/she simply needs look at California (I live here). We have the highest income tax rates and sales tax rates in the country, and we still have huge state & local budget deficits because our politicians simply do not address the spending issue.

I thought the best question Stewart asked Buffett was about the argument of double taxation. In other words, if you own stock in a company, you are basically paying your share of corporate taxes (paid on your behalf by the company) in addition to any dividend and capital gains taxes. I thought Buffett's reply was evasive and did not really answer the question. The question was a general one, and not about capital gains paid on bonds.

Did anyone understand Berkowitz's take on Sears? He says that it is worth multiples of its current price, but does not back up his thesis with any meaningful data. Similarly, he says BAC's normalized earning power is $4 per share(!) without any backup data. It must seem high for even extreme optimists on BAC.

Thanks Txlaw. The last quarter 10-Q says that credit facility expires in 2016 & the 1.25B LT debt issued in 2010 matures in 2018. And these are carried at favorable rates. So it seems like SHLD still has a reasonable time window if they decide to put most of the retail business into runoff mode and become a real estate play. But Lampert has to act fast. My guess is that 2011 Q4 to date sales at Sears are bad because of their emphasis on home appliances in addition to the fact that not many people go to Sears anymore for clothing & electronics. If (and this is a major if) the housing recovers in 2012, it may finally help Sears' appliance sales.

Does the holding company guarantee the debt of Sears domestic & Kmart? From what I can tell, the domestic credit agreement and the LT bonds are asset backed by the inventories of Sears dom & Kmart only.

I still cannot print these notes.