ragu

Kiltacular, The subtraction of goodwill is not inconsistent with Buffett's idea that the insurance businesses are worth more than they are carried for on Berkshire's books. Goodwill (for the insurance businesses) = Price Berkshire was willing to pay for those businesses' float-generation capabilities If you adjust book to reflect the economic value of float, then you must necessarily subtract goodwill so that you don't end up double-counting the value of the float. Best, Ragu

My understanding is that none of the 4 mentioned in the 2007 letter is currently in the running. As for who it was, there is plenty of evidence to suggest that Li Lu of Himalaya Capital was one of the 4. Don't know who the other candidates might have been. Best, Ragu

compoundinglife, Thanks for that reference. My recollection wasn't quite accurate enough. Still, that quote ought to scare away anyone that's interested in a value approach to investing. Best, Ragu

Agreed. And they are completely inappropriate when the activity in question is not only illegal, but also indicative of a prevalent culture. Best, Ragu

I remember reading an interview with him where he was asked how he knew when he was wrong. His answer (paraphrasing): When I can no longer get a quote. That did it for me. FWIW, I've felt that Seth Klarman's barbs at "value pretenders" in his Margin of Safety was directed, amongst others, at Bill Miller. Best, Ragu

(emphasis added to original post) Mephistopheles, WEB isn't shy of the the occasional innuendo, but I doubt he'd go that far. :-), Ragu

1993 letter: 1993 year-end BV/share: $8,854 Closing market price on February 28, 1994 (the day before the letter was published): $15,450 Price/book: 1.74 Of course, Berkshire itself has changed since then with the acquired operating businesses growing to be a significant portion of the company's value. Also, with the change in the accounting rules surrounding these acquired businesses (goodwill is no longer amortized annually, but only tested for impairments), the difference between book and intrinsic value isn't as wide as it might have been under the old rules. Best, Ragu

racemize, FWIW (presuming my historical figures are correct), WEB is on the record implying that a 1.75 multiple of book for Berkshire as "not inappropriate" in a world of long-term interest rates between 6-7% if per-share intrinsic value increased annually at a rate of 15%. Best, Ragu

I suppose the emphasis is on the bear as opposed to credentialed. The last I remember reading of him was when he accused WEB of "style drift" in late 2008 for having written those index put options. He didn't seem particularly conversant with either WEB/Berkshire at the time, so his impeding presence as an invitee at this year's meeting is odd. Best, Ragu

racemize, I imagined as much. I didn't mean to doubt your homework, just suggesting a few potential pitfalls (of which you were likely well aware). I suppose it comes down to a difference in approach. As Charlie reminds us: There is more than one way to investing heaven. Good luck! Best, Ragu

Rabbitisrich, Not at all. All of the above information with respect to Citi's involvement was known to Buffett/Berkshire at the time of the press release announcing Sokol's departure. Best, Ragu

racemize, Thanks for the response. Some comments: a. "Growing" is a dangerous word in the investment business that is mostly used to justify high(er) prices. The very fact that business has grown revenues/profits by x% in the most recent quarter (year) is not meaningful in and of itself. b. Unless you have evidence that suggests that earnings are temporarily depressed, multiples based on a single year of earnings will highly likely overstate true business value for the vast majority of businesses. A conservative stance dictates the usage of normalized earnings. c. While qualitative business analysis is important, the numbers have to make sense. Especially so for a 30% position. From your comments, I don't see a number that clearly stands out and reflects underlying value. I don't mean to criticize. My comments are in response to your request for feedback. Best, Ragu

Heh. I except that you aren't alone in thinking that way. Best, Ragu

hyten1 and netnet, From the same press release (pg. 1): (emphasis supplied) Best, Ragu p.s. netnet, I have not offered an opinion on Sokol's actions on this forum yet. This is simply a discussion with respect to Buffett/Berkshire's official position in this matter.

netnet, And yet, this is what Buffett had to say when he announced Sokol's resignation (pg. 2): (emphasis supplied) Sokol effectively got thrown under the bus as a result of the fairly vocal outrage over his trading in Lubrizol following this disclosure. Munger admitted as much in an interview (CNBC, I think) following that year's Annual Meeting. Best, Ragu

ItsAValueTrap, From the news release pertaining to the 2010 ruling proposing a salvage award to PRXI for the 1993 and later artifacts (the pre-1993 artifacts and intangibles make up the remainder of the value totaling $189 million): (emphasis supplied) It'd be odd if the Court set a price without accounting for any possible covenants/conditions. It's the first time I've heard any reservations about management integrity at PRXI post Arnie Geller. I suspect that most of the reticence with respect to information is because the courts are involved, but to each his own. The assumption implicit in that thesis is that the Consortium for this bid was in place at the time of the auction. I am not sure that is a given. I expect we won't have to wait long to find out. Best, Ragu

racemize, I'll go out on a limb and predict that it will. Good stuff (and that doesn't even include the returns). I tend to stay away from financials where I don't know that management is trustworthy with respect to the numbers, so I have just the one comment re. Cirrus. To me, when someone says they bought at a price/earnings multiple of x and that their investment philosophy emphasizes the safety of invested capital, they are implicitly saying that the business will earn at least those earnings for the next x years and that those profits won't be either be squandered away or allocated intelligently by management in the meantime (unless you have sufficient reason to lean one way or the other). In Cirrus' case, that seems hard to reconcile with the price paid (12x earnings) and your commentary that you can't project earnings beyond the next 5 years. How do you think about about a valuation based on earnings when earnings themselves are highly uncertain? Best, Ragu

ItsAValueTrap, From the 10-Q (excerpt also posted by onyx1): (emphasis supplied) The odds of this being made public without there being serious interest, given that Mark Sellers is PRXI's Chairman of the Board, are somewhere between zero and none in my opinion. With respect to timing and other obstacles that may stand in the way of this deal, it'd be worthwhile considering the implications of this announcement. Seeing as it is virtually at the independently appraised value, I don't see why it seems high. Possibly, although why that matters in a deal about 6 months later is unclear. That's true only if the buying party was identified during Davino's employment period. If it takes longer (from the employment contract you posted): Quite. Best, Ragu Disclosure: Long.

Cevian, The question is whether the poison pill can only be triggered by an act of the acquirer and not by an act of the entity that's protecting itself. I'd imagine the answer to that question is yes. Best, Ragu

Kuhndan, I am not an accountant by any means, but I doubt BH would be able to do it, especially with Sardar not on the board. AFAIK, the numbers are guidelines, it is the level of influence that is the real arbiter. I'd imagine so. I hadn't thought of this before, but it is possible that the 20% threshold is met via CBRL repurchases and the poison pill is not triggered in that case. I know you didn't ask the question, but Sardar cares far more about economic reality than he does about accounting appearances. Best, Ragu

While I wait on a clarification on the latter part of your post, I thought I'd address what you say below about this case. Indeed, but there seems to be some misunderstanding about the issue that Fairfax actually obtained a private letter ruling from the IRS on. Apart from the unwinding, there were two transactions that were part of this arrangement: 1. The initial issuance of the Notes in March 2003 2. The refinancing of the same in late 2004 Ernst and Young asked for a ruling on the refinancing from the IRS. From page 57 of the report: (emphasis supplied) Section "VIII. CONSOLIDATED RETURN REGULATIONS" of the Kleinbard report, beginning on page 55, discusses the refinancing and the implications for consolidation of Odyssey Re in Fairfax's tax returns. From page 58 of the report: (emphasis supplied) HTH, Ragu

And, looking at the prices, the rest of it paying for it:). Best, Ragu

Dazel, I'll be happy to respond if you'd be kind enough to clarify what you meant by this. Best, Ragu

MrB, It's too bad you stopped reading there. If you believe the terms of his compensation prejudice his analysis, I'd love to hear rebuttals. As I said before, he makes a pretty compelling argument based on the facts, especially the terms of the 2003 Notes issued originally by Fairfax in connection with this transaction. Best, Ragu

Thanks for posting this. I hadn't really understood what the underlying issue was in this case up until I read this. The link to the Kleinbard report is in the post linked in the OP. However, Kleinbard makes such a compelling case that I thought it was worth linking to it directly. I wouldn't bet on a favorable ruling for Fairfax here. Best, Ragu Disclosure: No position in Fairfax.