scorpioncapital

80% LUK 20% BRK-B

that one is over my head, no idea :)

there is something called eligible capital property for certain types of intangible assets, they can be amortized at 7% per year up to something like 75% of the principal amount.

This article drives home to me the point that there is risk in succession. Despite the quibs about running Berkshire from beyond the grave, there is a real risk when you pass the reins on to the next generation, maybe not so much in managing what is already built, but in growing forward.

For the record, Bruce has been wrong and/or contradictory from time to time. He sold Berkshire, then bought it back. He held Pfizer as the largest holding while speaking about how Berkshire was "too big" to get the kind of returns he wanted (Pfizer was even bigger than Berkshire at the time). So everybody can make mistakes from time to time.

My point is it's University, whether you answer a question or not, no big deal ,move on. It ain't high school I remember my teachers saying in University nobody cares whether you do your homework or not, skip class or show up, pass or fail and it's true, at least in Canada.

I thought his temperament got a bit out of hand when the students didn't answer his questions, he even seemed to get angry and said something like, 'Bruce what are you teaching your students' and Bruce is a very competent instructor. It may be nothing at all, but I watch for every clue about a person's personality.

this is scary, I saw the Greenwald lecture with Li Lu and there were some things that I did not like that were said by the speaker. If this is true, I'm dumping a % of my Berkshire shares, but he may only be one of several managers.

Is there any reason to believe these investments are within the circle of competence of FAIRX? Was the stated competence of FAIRX companies that pump out free cash flow?

I would like a tool like this: "Buffett never discusses this publicly and certainly not at his annual meeting. But we do know he likes companies where the CEO talks to investors like partners. Over the years, Rittenhouse Rankings, Inc. has developed a model to analyze which CEOs do the best job in this department. We award points for certain topics so we can quantify the amount of positive candor and negative FOG (Factless, Obfuscating, Generalities) in an executive communication. We total these points to get a score and then rank order the 100 companies in our survey on the basis of these scores. Over the past 8 years, we have found that high-scoring companies outperform low-scoring companies. " http://www.rittenhouserankings.com/2009_Rittenhouse_CEO_Candor_Survey_Rankings.pdf

Don't lose the forest for the trees. When building a position in a very tiny company, illiquidity is a given, meaning an investment decision is one you make for an extended period of time. Expect to lose money flipping or changing one's mind too many times. Secondly, presumably small cap companies like these are mis-priced and whether you get a few cents here or there isn't going to make a big difference. If you think it's selling for 1/2 or 1/3 intrinsic value, I would go so far as to put orders *above* the ask price as well.

Why is everyone thinking so short-term? The US market has been at a loss for 12 years and counting! This is not by any stretch "a new thing" that began in 2008.

LUK is an extremely simple company to understand. I have no idea where this stereotype came from that they are "too hard." As for circle of competence, one of the reasons for their success has been that they are hardcore believers in operating within their circle of competence and boy are they focused on it! It's fascinating how there can be so much divergence of opinion on it, from one extreme to the other which is why there is a great opportunity for hidden value.

It's a good article but I would disagree about this point: 'Berkshire Hathaway is a company centred on Buffett’s grandfatherly persona, he observes. “Companies that are about one person, it’s not a good thing,” he says. “Jack [Cockwell] became a brand in his own right, and it became a problem for him and for the company.” I think people underestimate how *independent* of Buffet Berkshire has become. The only logical conclusion is that Buffett is the alpha-capital allocator but then what is Flatt saying? He's saying capital allocation can best be done in groups (notice the hundreds of people they sent in on any given deal and the 15 at the top). But some would argue against this, some would even say Flatt was instrumental in many of the decisions. I like BAM, they even publish a measure of the intrinsic value of their stock each quarter. I am not sure, however, what sort of return I should expect from it in relation to other big conglomerates, Berkshire included.

http://www.bwob.ca/industries/real-estate-industries/a-perfect-predator/ Another worthy conglomerate

Does he say what he means by high quality US stocks (it is neither small nor large cap) in the graph? Consumer franchises? Commodities?

there is also a tax benefit to using margin, you can deduct the margin interest paid and further lower your borrowing cost.

"Other considerations?" The most important one - your capital structure, for individuals this is mostly the source, nature, and quantity of your investment funds.

They called it a mistake. I think it was initially a bet on Ackman himself who did the exact "same type" of deals before with Wendys and other firms - a sort of pattern of active investing to realize value from these large franchises. They even said he was a kind of genius. Unfortunately, this one blew up and Ackmann profusely apologized that it was the worst blunder of his career. Too bad the LUK guys were caught in that blunder.

let's talk real returns not nominal. If inflation is very low, as it is now, then whatever return your business gets is a real return - as low as that may be. 10% return is real in a zero inflation world. It is actually 11% in 1% annual Deflation. So sure your assets may come crashing down (they already have) but you can build them up again. If inflation is higher, then you have to substract it from your real return and your assets, while higher in price, also buy less. In the end, what matters is your real return, everything else is noise.

"i wish they would stop placing so much of their excess funds with 3rd party money mangers & do it on their own. and a few more cash generating operating subs would be nice." They've been starting to address this issue over the past 2 years. They have pretty much wound-up the 3rd party investments, except for 1 - pershing's fund invested in Target. Likewise, they said at the last meeting they have some durable operating subs with cash-flow in the pipeline, they were looking at 4 and Berkadia is in fact such a cash generating sub.

At these prices, I hope to make it a 100% position soon :)

"can't afford the current debt load, we are restructuring and everyone gets $0.50 on the $1" Because the buyers of that debt made the purchase under the assumption of price stability, mildly inflationary with prices creeping up slowly over time. Things like default turn those expectations on their head and you definitely get Japan and deflation in America.

"Japan is also different because they mostly owe money to themselves" The US also owes most of its debt to itself. Foreign holding of US debt is miniscule in comparison.

I don't know if I buy the argument that those with cash will lose while those with debt will win. Inflation is no picnic for anybody, look at the 1970s. No picnic for businesses, no picnic for individuals. The argument is that retirees depend on bond income. But those same retirees, presumalby have not been sold 10 year bonds, so they can easily take their cash and put it in a bank account paying interest. I did a study that showed that simple interest on short-term government bonds returned 2x the inflation rate so few have lost money except the mattress holders.