gfp
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Around 19:08 Buffett said he made a lot of money on Freddie Mac and Fannie Mae mortgage pass throughs.
(1) What the heck is a mortgage pass through? CDO?
(2) Anyone know anything about this trade? It sounds interesting.
It's just agency backed MBS, nothing exotic. He did it years ago and apparently made a big capital gain as well as the income.
Thanks. How can someone purchase one of these? Something you'd have to buy through a prime broker? (not something I want to buy now, just curious)
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Around 19:08 Buffett said he made a lot of money on Freddie Mac and Fannie Mae mortgage pass throughs.
(1) What the heck is a mortgage pass through? CDO?
(2) Anyone know anything about this trade? It sounds interesting.
It's just agency backed MBS, nothing exotic. He did it years ago and apparently made a big capital gain as well as the income.
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I'm a buyer of BRK at these prices, in addition to what I already hold. However, it occurs to me that something like this might be a preparation for a soon to be announced reduction in Buffett's responsibilities at Berkshire. At this point, with Buffett's retirement at least partially priced in, a removal of that uncertainty might well help the price, but I would still bet on a further drop in price if and when he reduces his responsibilities. I guess I'm just mentally holding some cash in preparation for that further opportunity to up my BRKB holdings to what I consider the full holding.
Of course, pretty much everyone on this board knows that a reduction in Buffett's managerial duties (as opposed to capital allocation duties) would be pretty much meaningless to the company except for symbolic.
I thought the exact same thing. Considering this is the first buyback ever, I don't think this is a simple buyback due to general undervaluation. This is a purposefully built floor for something major. Maybe Warren reducing his duties; maybe a tax-free distribution of huge equity positions (KO, WFC, etc.) But I find it hard to believe Warren just decided to do a buyback after all of these years.
Maybe this was an idea pitched by the new portfolio managers?
Have you seen Buffett lately? He is not preparing to give up managerial duties, despite what Alice and the rest of the press seem to think. He is still at the top of his game. Berkshire isn't going to spin out equity positions either.
Warren was responding to the market price of Berkshire - he has stated many times that he views investments per share as having the utility of equity, so when we traded down to investments per share (much of which is not funded by float but owned by BRK outright), the market was valuing 75 non insurance subsidiaries for pennies. Burlington Northern alone would sell for $40 Billion on a desert island today.
Everyone wants to read into this announcement - but it's all in the press release. Buffett picks his words very carefully and he's been saying for a long time that Berkshire's IV is far in excess of book value. Last week was the cheapest Berkshire has traded in the 15 years I've been paying attention - that's for sure.
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I guess this means I won't get a chance to buy BRK-B at $65?
You could still get a dollar a share for the October 65 put today, if you'd like $100 to make the offer...
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In terms of opportunities, I still think that Buffett should take a close look at AIG. I see a lot of value that could be created under the Berkshire umbrella with this really large insurance business. Float returns improvement, lower cost of funding and the ability to say no to poor underwriting would do wonders. This thing could be acquired for book, maybe less.
Cardboard
If BRK bought all of AIG, my understanding is that all of the tax assets would be lost - which represents a big chunk of value in the current AIG. Is that correct?
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Is there a dollar amount limit to what they will buy back.
Will they keep on buying till it reaches 1.1 BV and start buying back again if it drops less than 1.1 BV
It is indefinite and has no cap on dollar amount or shares retired. It appears permanent and will continue under Ted and Todd and whoever is CEO at BRK.
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Does anyone have a link to the interview? Thanks!
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This was a pleasant surprise this morning. They had announced they were exploring strategic alternatives but I wasn't expecting something so close to book so quickly. I wonder why Ace wants this at this price?
I think we have Brad Radoff to thank much more than Sardar on this one. Brad's been in there talking with management for a lot longer.
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Why not sell all of CCB? It's non-core after all.
I believe there is a lock up preventing them from selling the rest of the stake until 2013
Lock expired this month on their entire stake. I think they are not able to find a buyer for their entire stake.
Vinod
It looks like only 2 Billion of the shares are still locked up. From the most recent 10Q:
"At both June 30, 2011 and December 31, 2010, the Corporation owned 25.6 billion shares representing approximately 10 percent of China Construction Bank (CCB). Of the Corporation’s investment in CCB, 23.6 billion shares are classified as AFS. Sales restrictions on the remaining two billion CCB shares continue until August 2013 and accordingly these shares continue to be carried at cost. At June 30, 2011, the cost basis of the Corporation’s total investment in CCB was $9.2 billion, the carrying value was $19.6 billion and the fair value was $20.5 billion. At December 31, 2010, the cost basis was $9.2 billion, the carrying value was $19.7 billion and the fair value was $20.8 billion. This investment is recorded in other assets. Dividend income on this investment is recorded in equity investment income and during the six months ended June 30, 2011 and 2010, the Corporation recorded dividends of $837 million and $535 million from CCB. The Corporation remains a significant shareholder in CCB and intends to continue the important long-term strategic alliance with CCB originally entered into in 2005."
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Why not sell all of CCB? It's non-core after all.
I believe there is a lock up preventing them from selling the rest of the stake until 2013
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With all the big name value guys who have been buying, the question I have is: who is selling at $25?
Well we know one guy:
http://www.sec.gov/Archives/edgar/data/789019/000122520811014766/xslF345X03/doc4.xml
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Interesting article, thanks for posting it.
Here's something recent that Richard has done (AU:EWC)
http://www.richardchandler.com/news/2011-06-11-Energy-World-Corporation.pdf
They have split their operations into:
http://www.legatum.com/ , http://www.legatumcapital.com/
and
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I have heard attendance was about half of last year's attendance.
Was it a secret that this was the last Pasadena meeting? I thought it was pretty well communicated.
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$3.2 Billion in Q2 outflows for Fairholme... Time to buy financials!
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Here's a link to most of them with original formatting. Always a great read -
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The canadian stock market is closed today. Don't pay the pink sheets any mind, the primary market is in Toronto.
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Cracker Barrel's retail side also operates a sort of books-on-tape library / rental service, where road tripping people can rent a book-on-tape (CD) at one Cracker Barrel and return it however many miles later at another. Little stuff like this has a cult following with some road trippers, which helps drive some incremental traffic to the restaurant. Also, a competitor in much of the US South is Waffle House, which allows smoking - giving Cracker Barrel a leg up with families.
I mean, with that audio book rental model, they should get NFLX's multiple - NO?
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While I agree that BNSF is worth at least $40 Billion right now, it is not correct to say that Buffett paid $40 Billion for it.
Buffett paid $32.5 Billion for BNI.
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He won't ever buy back a share. All he has to do is announce that he will buy back shares and the price will adjust, overnight. That's what happened last time he announced intentions. It quickly became more fairly valued. mission accomplished.
I agree that that's how it used to work - but the market is not too responsive to his valuation hints these days. It used to be that Munich Re would have gone up with folks learning that Buffett was over 10% and "it is intended to acquire more", but that didn't happen.
There used to be a premium in the stock price for the skills of Warren Buffett.
Now there is a large amount of supply every day and the general S&P index effects pushing it down on weak days for the overall market. I could see a buyback actually getting done with sentiment on Berkshire where it is these days.
A huge contingent of longtime Berkshire shareholders are in the philanthropic phase of their lives - that's a lot of supply.
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I'm buying shares here, but one thing you can count on is that Buffett won't announce any sort of share buyback while the WSC deal is pending. It would look too much like jawboning the share price up during the period when the average price determines the exchange ratio. He's definitely not happy about the price he will be issuing shares for WSC, though! And BRK had to eat WSC minority shareholders' share of the Q1 insurance losses.
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As for Carson Block and his Muddy Waters organization. Does it not seem a little sleazy to put out a research report on a company you hold to drive down the stock price?
My question regarding him is this: Did he sell his short positions today or is he still in it? If he has stayed in it he has conviction and is giving management time to prove him wrong. If he just drove it down to make a quick buck then he is in for a SAC type future with lawsuits and investigations wiithout the protection and capital base of SAC.
It all comes down to the quality and integrity of his research. If he's correct, there is absolutely nothing sleazy about it. Do you think it's sleazy of Whitney Tilson and T2 to put out powerpoint after powerpoint touting BRK.A and MSFT?
I know folks on this board dislike short sellers from the FFH days, but who else will effectively police the frauds in the securities markets? The last couple of years of China research was very eye opening for me. I had not been to China until last year.
I recommend the book "Mr. China" by Clissold as a classic for anyone thinking about investing in or doing business with China-based companies.
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It's Carson Block's China-RTO centered research website. He does extensive research, takes a short position/puts/whatever, THEN releases the report.
http://www.muddywatersresearch.com/wp-content/uploads/2011/06/MW_TRE_060211.pdf
Quality of BRK earnings worries analyst
in Berkshire Hathaway
Posted
On the new large equity purchases, Buffett has said they are an American company (or companies), but that their business in international. We know it fits into the category of Commercial, Industrial & Other and that he got permission from the SEC to keep it confidential for the time being. UPS has been sounding pretty Buffett-like recently... just sayin'