Munger_Disciple

Any notes of the meeting?

I meant estimated growth rate over the next decade in my previous post. Sorry for the confusion.

Mpauls, Nice report. One suggestion is to add an estimated rate of growth in BV (or better yet IV) of Berkshire over the decade with some supporting evidence behind the prediction. Of course this number will vary from analyst to analyst.

Ericopoly, What is your current profession and is it easy to practice it in Australia if you decide to move there? From your discussion, Australia seems like an interesting place. I am a bit worried that it may follow the US path in the not too distant future just as the US seems to be following a European social welfare model with a lag.

It is obvious what the difference between value investing and buy-and-hold is. I highly doubt anyone (including me) on this board misunderstands the difference (one is related to buying securities at a discount to their business value, the other is related to holding period). Ben Graham paid a huge amount of attention to the balance sheet of the enterprise which does not appear to the case at least with some of Pabrai's investments.

How about Pinnacle Airlines, Harvest Natural resources, Berkshire (he calls it a cash substitute? why?), in and out of Fairfax, Cresud, Sears, Cryptologic, Horsehead Holdings, etc, etc.... ? One of his picks Delta financial went to zero.

The other thing that is weird about Pabrai is that he talks about Buffett-Munger principles, but acts totally differently. I am not impressed with his portfolio holdings in terms of quality. He also seems more like a short term trader (darting in and out of positions quite regularly) than a true value investor.

Ericopoly, I am originally from India and am a naturalized US citizen now. Like many on this board, I am also of the opinion that the US is on the wrong track. I came to the US as a 21 year old graduate student and since then noticed the increase in the entitlement mentality of the US population in the 23 years I have been here. I have never been to Australia and am wondering if they are still a free market capitalist society or also moving in the wrong direction like the US. It appears you travel there frequently, so your thoughts would be helpful.

I understand; that is my plan. I guess Florida, Nevada, Texas, Washington, NH are the options.

I currently live in CA (the state tax is ridiculously high), and thinking along the lines of Ericoploy's post, I hope to establish residency via a second home in a zero tax state in the future.

I would like to understand better why utilities/BNI are such a good investment for Berkshire (beyond the standard argument of zero cost float generating a fair return). Specifically what type of return on capital are they currently generating and what they are expected to generate in the future. For example, I don't understand why Buffett has not loaded up on stuff like KO, WFC and in stead opted to buy another utility (BNI). The stated reason of course is that he likes BNI because it can use capital that insurance sub generates.

I agree with this and thanks to everyone for the excellent discussion on Roth & regular IRAs. It certainly clarified my own thinking on this matter.

In effect the scenario Ericopoly is considering is not Roth conversion, but an additional contribution equal to the tax due. If that is the case, for correct comparison, one should consider the case of potentially making an equivalent contribution to a regular IRA if possible. Then the two cases are equivalent. If such a regular IRA contribution is not possible (due to limitation on the size), Roth is potentially better if tax laws do not change in the future to make Roth withdrawals taxable.

Ericopoly, I believe that your math on tax reserve for regular IRA is wrong for the following reason. The tax reserve is inside the regular IRA, not outside in a taxable account. Therefore it compounds tax free until withdrawals are made.

It seems to me that conversion makes sense only if the income tax rates in the future for regular IRAs are worse than they are now for Roth conversion. Moreover, there is a non-zero probability that Roth IRA will be taxed in the future in the name of making the "rich" (defined as anybody that can be taxed) pay their fair share. So, whether to convert or not is non-obvious to me. I may take the guaranteed tax deferral of regular IRA and let the chips fall where they may in the future. Besides, if you have future philanthropy in mind, you can always fund those efforts with IRA distributions effectively making the distribution tax-free. If there is a genius on this board who can tell us how to legally do Roth conversion non-taxable, then it would be a slam dunk to convert.

The article by Robert Miles does not make sense. Buffett says that over 98% of his net worth is in Berkshire (in 2009 annual report, released March 1st). It is impossible that <2% of Buffett's assets are worth $1.8B, because this would mean that Buffett's Berkshire holdings should be $90B, which is obviously wrong.

Hyten1, You are missing the point I was making regarding the 11th partner in the example. If realized gains are assigned to him, he owes taxes even if his total account value may not have increased. As Parsad rightly pointed out, these effects (positive or negative) average out over the longer term.

For example, income from March 1st to March 31st: 10 Partners each have $100K invested: Dividends $10K Interest $10K ST Gains $20K LT Gains $50K Unrealized Gains $100K Simply divide the income totals by 10 and allocate. April 1st...new partner puts in $100K...distributable income is now divided by 11 partners. Does not partake in any of the previous income except for the unrealized gains when realized. Yes, NAV is inflated by unrealized gains, but it does not impact investor unless realized or fund liquidated. Over a long-period of time, the effect is relatively negligible. Cheers! Parsad, In your example, if you realize the $100K gain (that was unrealized on April 1st) in April, 11th partner will be allocated a portion of the realized gain even thought his investment may not have gone up in value (i.e., similar to mutual fund situation). Is this correct? I do agree that over a longer period of time, this effect is negligible. And you are doing it way better than mutual funds anyhow.

Parsad and other managers, What is the annual cost (as a % of your net asset size) of audit, legal, book-keeping and accounting for your fund? If you can share the approximate fund size also (for example, a range like $1-3M would be ok if you don't want to share the exact fund size), that would be very useful to me and perhaps others. Thank you.

It seems to me that having the IT gene is a necessary condition, but not sufficient. If you don't have the IT gene, then forget about investing the funds yourself. Assuming one has the IT gene, he or she needs to grow up in an environment that exposes them to finance, markets and investing (As Buffett said many times having the IT gene a few thousand years ago would not have saved him from lions). And then that person has to work very hard to succeed.

Munger's views appear to be more pessimistic than Buffett's. I don't know if they are unusually more pessimistic or not. I am also curious what the board member think.

Looks like they have a 30% stake in a private insurance company Plymouth Rock. Does anyone have any information on Plymouth Rock?

The S&P 500 total return in 2009 is 26.5%, not 23.5%.

I don't understand why some of the message board members are excited about FFH dividend declaration. Why on earth did FFH sell more shares a few weeks ago and then declare a dividend now? It makes no sense whatsoever. Assuming they needed to sell stock to complete the purchases of subsidiaries, they could have sold less stock had they not foolishly declared dividends. This would have resulted in less share dilution to existing shareholders. And by the way, shareholders would have saved taxes (on dividends) had FFH retained the earnings.

Wabuffo, Can you recommend some resources for someone trying to learn how to analyze banks? Thanks in advance.